WATER/SNR/TAC/LEP:jrb
PUBLIC UTILITIES
COMMISSION OF THE STATE OF CALIFORNIA
WATER DIVISIONRESOLUTION NO. W-4420
September 4, 2003
RESOLUTION
(RES. W-4420), BENBOW
WATER COMPANY (BWC). ORDER AUTHORIZING A GENERAL RATE INCREASE
PRODUCING ADDITIONAL ANNUAL REVENUE OF $26,633 OR 21.2%, IN 2003.
Summary
This resolution grants a general rate
increase in gross annual revenues of $26,633 or 21.2%, based on Test
Year 2003. This increase will provide a 12.9% rate of return on
a rate base of $346,087.
Background
BWC has requested authority under
Section VI of General Order 96-A and Section 454 of the Public Utilities
Code to increase its water rates by 56.6% or $71,093, for Test Year
2003. The purpose of the rate increase is to recover increased
operating expenses and to provide an adequate rate of return on an increased
rate base. BWC’s request shows gross revenues of $125,550 at
present rates increasing by 56.6% (or $71,093) to $196,643 at proposed
rates. BWC is requesting a rate of return on rate base of 13.3%.
The current rates were established
by the last general rate increase, granted on June 3, 1999 by Resolution
(Res.) W-4151, which authorized an increase of $35,450 or 37.35% for
test year 1999. BWC also has a State Drinking Water Bond Act (SDWBA)
loan of $100,000 authorized in 1981 that is being paid off by the customers
with a yearly surcharge ranging from $60 to $1,500 according to meter
size. The current balance on the loan is approximately $35,000.
DISCUSSION
BWC is a sole proprietorship owned
by Mrs. Vere Benbow. BWC’s service area is located approximately
three miles south of Garberville in Humboldt County. The service territory
straddles the Eel River at about 400 feet above sea level. The
system is sectioned into three zones: Zone 1 is located at the
lowest elevation and has a new 100,000-gallon tank which went on line
as the primary Zone 1 storage on 6/12/03; Zone 2 is located at an elevation
of approximately 900 feet and has a 6,000-gallon redwood storage tank
that serves approximately three customers; Zone 3 is located at the
highest elevation of about 1,200 feet and has two 6,000-gallon polyethylene
storage tanks which were installed in 2001.
BWC has approximately 25,546 linear
feet of pipe, comprised of a combination of cast iron, asbestos cement,
plastic and polyvinyl. BWC obtains water from an infiltration
gallery well with perforated pipes buried in a stream bed of the East
Branch of the South Fork of the Eel River. On June 29, 1989, the
Environmental Protection Agency (EPA) promulgated federal regulations
that required filtration and disinfection treatment of surface water
or groundwater under the influence of surface water. In order
to comply with this regulation, BWC installed the required filtration
system, which was approved by the Commission in September 15, 1994 (Res.
W-3879).
There is a 40-horsepower (hp) submersible
pump that takes water from the gallery and sends it to the 100,000-gallon
bolted steel storage tank located in Zone 1. An additional 10hp
submersible pump serves as a back up. Approximately 300 yards downstream,
BWC maintains a separate back-up facility, which could potentially provide
an increase flow in the event of an emergency. There is also a
submersible booster pump in the main storage tank that pumps water up
to 230 feet to feed a 6,000-gallon redwood storage tank in Zone 2.
Zone 3 has two 6,000-gallons polyethylene storage tanks that were added
to the system in 2001.
The system consists of 95 connections:
84 are small five-eights or three quarter inch services, 11 are commercial,
and one is a fire protection service. Most customers in the service
area are permanent residents who own their own homes. Roughly
80% of the residents are employed and 20% are retired. Income
levels in the area are moderate. The growth in the past has been
minimal and due to erosion and associated landslides, a modification
of the service area to reflect unserviceable areas was approved on June
3, 1999 through Res. W-4151. Ordering Paragraph 3 of Res. W-4151
stated: “After connection of the three pending and the three potential
customers in Zone 2 and Zone 3, a moratorium shall be placed on Zones
2 and 3.”
The BWC staff consists of Mr. Winston
Benbow, the general manager, who visits the facilities about once a
month, and a Grade 4 treatment plant operator, who oversees the daily
operation and maintenance of the water treatment plant and distribution
facilities, supervises contract personnel, performs water quality monitoring,
compliance, and reporting.
Appendix A shows BWC's and the Branch’s
estimates of the summary of earnings at present, requested, and recommended
rates. Appendix A also shows BWC's and the Branch's estimates
in operating revenues, expenses, and rate base.
Staff analyzed each operating expense
item and rate base item listed in Appendix A and disagreed with several
of BWC’s estimates. BWC was informed of the Branch’s differing
views of revenues, expenses and rate base and agrees with the Branch’s
findings.
In D.92-03-093, effective April 30,
1992, the CPUC adopted the operating ratio method of ratemaking as an
alternative to the rate of return method for Class C and Class D utilities.
Thus, two methods are available for Staff to utilize in the ratemaking
process: Return on Rate Base (net investment) and Operating Ratio.
Staff first calculates the revenue requirement utilizing the rate of
return method and then calculates the revenue requirement utilizing
the operating ratio method. Policy dictates that Staff will recommend
the method that produces the higher revenues.
In the operating ratio method, the
utility’s revenue requirement is defined as the sum of its operating
and maintenance expenses, depreciation expenses, income and other taxes,
and an operating margin. A 20% rate of margin has historically
been used to determine the margin over and above operating, maintenance,
and depreciation expenses.
Comparison of the revenue requirement
indicates that the return on rate base method produces a higher revenue
requirement than the operating ratio method. In keeping with policy,
Staff recommends the return on rate base method for determining the
revenue requirement.
The current workbook utilized for
Class D utilities (now a modified 3-page document) only allows the utility
to utilize the last adopted rate base figure and to add and retire plant
additions since the last rate case. There are no adjustments allowed
for accumulated depreciation on prior plant in service, working cash,
or materials and supplies.
BWC has made many system improvements
since the last general rate case: constructed a small office that
houses the utility’s control panels; installed a new submersible pumps
and controls in Zones 2 & 3; installed two new 6,000-gallon polyethylene
tanks in Zone 3; and installed a new 100,000-gallon bolted steel tank
(at a cost of $75,000). Branch has reviewed the additions to the
system since the last general rate case and found them to be reasonable.
BWC estimates $431,962 for Rate Base
for Test Year 2003, while Branch estimates $346,087. The difference
between BWC’s and Branch’s amounts is due to the following:
BWC did not average Plant in Service, Accumulated Depreciation and Contributions;
BWC did not take depreciation for Plant in Service since the last general
rate case; BWC did not deduct contributions since the last general rate
case; BWC used a full year’s depreciation for the new tank (which
was installed in June of 2003) and other improvements made to the system
during 2003, while Branch used a half-year depreciation for the 2003
additions to the system.
There are no outstanding Commission
orders requiring system improvements. The utility has been filing
annual reports as required. According to the Department of Health
Services, the utility currently meets all applicable water quality standards.
BWC’s tariff sheets have been reviewed by Staff and the following
sheets need to be updated: Preliminary Statement, Rule 10-Disputed
Bills, and Form 3-Bill for Service.
BWC is a Class D water company.
Decision 92-03-093 allows Class D utilities to recover up to 100% of
fixed costs in their readiness to serve charge. The rate structure
that the Branch recommends recovers 98% of BWC’s fixed costs in the
readiness to serve charge. BWC’s current rate structure consists
of three schedules: Schedule No. 1, Metered Service, Schedule
No.4, Private Fire Protection Service, and Schedule No. 5PR, Private
Fire Hydrant Service. Most of the 3/4-inch customers are residential
customers who have 3/4-inch meters rather than 5/8-inch meters because
of low water pressure. BWC requested to have the same price for
the 5/8-inch meter and the 3/4-inch meter size. Branch agrees
that customers who are forced to have 3/4-inch meters rather than 5/8-inch
meters should see some relief. Branch does not recommend doing
so at this time because making the two rates equal would have the effect
of a very large increase for the 5/8-inch meters.
The new rate schedules can be found
in Appendix B. A bill comparison can be found in Appendix D.
At the Branch's recommended rates shown in Appendix B, the bill for
a typical residential customer with a ¾ inch meter will increase from
$74.24 to $84.73 per month. A comparison of customer bills at
present and recommended rates is shown in Appendix D. The adopted
quantities and tax calculations are shown in Appendix C.
Notice and public meeting
A notice of the proposed rate was
mailed to each customer on April 5, 2003. The Branch received
two letters protesting the amount of the rate increase. Between
the years of 2000 and 2002, the Consumer Affairs Branch received one
complaint (in 2001). The Water Division has not received any complaints
during that time period.
A public meeting was held on Wednesday,
April 30, 2003 at 6pm at the Masonic Hall located at 783 Locust St,
Garberville, CA. A copy of the meeting memorandum is attached
to this report as Appendix E.
Findings
After consultation, BWC
agreed with Staff’s recommended Summary of
Earnings (Appendix A).
2.The Staff’s recommended Summary
of Earnings (Appendix A) is reasonable
and should be adopted.
3. The rates recommended by the
Staff (Appendix B) are reasonable and should
be adopted.
The quantities (Appendix
C) used to develop the Staff’s recommendations are reasonable and
should be adopted.
5.The rate increase proposed by
the Staff is justified. The resulting rates are just and reasonable.
6.BWC’s system meets G.O. 103 pressure
requirements.
7. BWC’s following tariff
sheets need to be updated: Preliminary Statement,
Rule 10-Disputed
Bills, and Form No. 3-Bill for Service.
Therefore it is ordered that:
Authority is granted under
Public Utilities Code Section 454 to Benbow Water Company to file an
advice letter incorporating the summary of earnings and the revised
rate schedules attached to this resolution as Appendices A and B, and
concurrently cancel its presently effective rate Schedule No. 1, Metered
Service, Schedule No. 4, Private Fire Protection Service, and Schedule
No. 5PR, Private Fire Protection Service. The filing shall comply
with General Order 96-A. The effective date of the revised schedules
shall be five days after the date of filing.
Benbow Water Company shall
increase its annual revenues by $26,633 or 21.2%, based on reasonable
rates for 2003.
Benbow Water Company shall
update the following tariff sheets: Preliminary Statement, Rule
10-Disputed Bills, and Form No. 3-Bill for Service.
This resolution is effective
today.
I certify that the foregoing resolution
was duly introduced, passed, and adopted at a conference of the Public
Utilities Commission of the State of California held on September 4,
2003; the following Commissioners voting favorably thereon:
WILLIAM AHERN
Executive Director
MICHAEL R. PEEVEY
President
CARL W. WOOD
LORETTA M. LYNCH
GEOFFREY F. BROWN
SUSAN P. KENNEDY
Commissioners
Appendix A
Benbow Water Company
Summary of Earnings
-- Test Year 2003
Estimated
Estimated
Staff
At Present Rates
At Proposed
Rates
Recommended
Staff
Utility
Staff
Utility
Rates
Fire protection revenue
1,250
1,250
1,250
1,250
1,250
Metered
water revenue
123,914
124,000
194,529
194,921
150,376
Other
revenue
300
300
472
472
472
Total
Revenue
125,464
125,550
196,252
196,643
152,098
Oper. & Maint. Exp:
Power
11,105
11,105
12,000
12,000
12,000
Other
volume related exp.
401
401
772
1,200
772
Employee
labor
7,200
7,200
9,600
14,490
9,600
Materials
3,361
3,361
2,529
3,500
2,529
Contract
work
5,075
5,075
4,035
12,350
4,035
Water
testing
-
-
1,200
1,200
1,200
Transportation
expenses
3,098
3,098
4,142
6,100
4,142
Other
plant maintenance
2,359
2,359
2,200
2,200
2,200
Office
salaries
-
-
-
6,000
-
Management
salaries
18,000
18,000
18,000
18,000
18,000
Employee
pens. & benefits
540
540
400
400
400
Uncollectibles
expense
-
-
200
200
200
Office
services & rentals
564
564
1,370
2,700
1,370
Office
suplies and expenses
6,926
6,926
6,750
6,750
6,750
Professional
services
5,223
5,223
5,600
5,600
5,600
Insurance
4,576
4,576
4,500
4,500
4,500
Regulatory
comm. expense
-
-
-
1,650
-
General
expenses
4,895
4,895
1,000
4,500
1,000
Total operating expenses
73,323
73,323
74,298
103,340
74,298
Depreciation
11,500
12,500
11,500
12,500
11,500
Taxes
Other than income
8,221
4,950
8,221
4,950
8,221
State
tax
2,866
800
9,037
6,705
5,134
Federal
income tax
4,433
-
19,936
11,548
8,236
Total deductions
100,343
91,573
122,992
139,043
107,389
Net Revenue
25,121
33,977
73,260
57,600
44,709
Average
plant
495,455
-
495,455
-
495,455
Average
accum. dep.
132,813
-
132,813
-
132,813
Net
plant
362,641
-
362,641
-
362,641
Rate
Base
346,087
431,962
346,087
431,962
346,087
Rate
of Return
7.3%
7.9%
21.2%
13.3%
12.9%
Appendix B
(Page 1 of 3)
Benbow Water Company
Schedule No. 1
METERED SERVICE
APPPLICABILITY
Applicable
to all metered water service furnished on a monthly basis.
TERRITORY
Benbow and vicinity, located approximately
three miles south of Gerberville, Humboldt County.
RATES
Quantity Rate:
For
all water, per 100 cu.ft…………… …$ 0.89(I)
Service Charge:SDWBA
Per MeterYearly
Per MonthSurcharge
For
5/8 x 3/4 inch meter…………… $62.50 (I)
$ 60.00
For
3/4 inch meter…………………...78.50 |
90.00
For
1 inch meter……………………..
142.00 | 150.00
For
1-1/2 inch meter………………..
284.00 | 300.00
For
2 inch meter…………………….
454.00 | 480.00
For
3 inch meter…………………….
848.00 | 900.00
For
4 inch meter…………………….
1,420.00 (I) 1,500.00
The Service Charge is a readiness-to-serve
charge which is applicable to all metered service and to which is added
the charge for water used computed at the quantity rates.
SPECIAL CONDITIONS
The Safe Drinking Water
Bond Act (SDWBA) surcharge is in addition to the water bill. This
surcharge must be identified on each bill. The surcharge is specifically
for the repayment of the California SDWBA loan authorized by Decision
93798.
All bills are subject to
the reimbursement fee set forth in Schedule No. UF.
APPENDIX B
(Page 2 of 3)
Benbow Water Company
Schedule No. 4
PRIVATE FIRE
PROTECTION SERVICE
APPPLICABILITY
Applicable to all metered water
service furnished to privately-owned fire protection services.
TERRITORY
Benbow and vicinity, located approximately
three miles south of Gerberville, Humboldt County.
RATES Per Month
For
each inch of diameter of service connections…$ 22.00 (I)
SPECIAL CONDITIONS
The fire protection service
connection shall be installed by the utility and the cost paid by the
applicant. Such payment shall not be subject to refund.
The minimum diameter for
fire protection service shall be four inches, and the maximum diameter
shall not be more than the diameter of the main to which the service
is connected.
If a distribution main
of adequate size to serve a private fire protection service in addition
to all other normal service does not exist in the street or alley adjacent
to the premises to be served, then a service main from the nearest existing
main of adequate capacity shall be installed by the utility and the
cost paid by the applicant. Such payment shall not be subject
to refund.
Service hereunder is for
private fire protection service to which no connections for other than
fire protection purposes are allowed and which are regularly inspected
by the underwriters having jurisdiction, are installed according to
specifications of the utility, and are maintained to the satisfaction
of the utility. The utility may install the standard detector
type meter approved by the Board of Fire Underwriters for protection
against theft, leakage, or waste of water and the cost shall be paid
by the applicant. Such payment shall not be subject to refund.
The utility undertakes
to supply such water at such pressure as may be available at any time
through the normal operation of its system.
All water bills are subject
to the Public Utilities Commission reimbursement fee set forth in Schedule
No. UF.
APPENDIX B
(Page 3 of 3)
Benbow Water Company
Schedule No. 5PR
PRIVATE FIRE
PROTECTION SERVICE
APPPLICABILITY
Applicable to all water service
furnished to hydrants owned by individuals other than municipalities,
organized fire districts, and other political subdivisions of the State.
TERRITORY
Benbow and vicinity, located approximately
three miles south of Garberville, Humboldt County.
RATES Per Month
For
each inch of diameter of service connections…$ 22.00 (I)
SPECIAL CONDITIONS
Water delivered for the
purposes other than fire protection shall be charged for at the quantity
rates in Schedule No. 1, Metered Service.
The cost of relocation
of any hydrant shall be paid by the party requesting relocation.
Hydrants shall be connected
to the utility’s system upon receipt of a written request from an
individual. The written request shall designate the specific location
of each hydrant and, where appropriate, the ownership, type, and size.
The utility undertakes
to supply only such water at such pressures as may be available at any
time through the normal operation of its system.
All water bills are subject
to the Public Utilities Commission Reimbursement Fee set forth in Schedule
No. UF.
Appendix C
(Page 1
of 2)
Benbow Water Company
Recommended Quantities
-- Test Year 2003
Offset Items
Purchased Power
Pacific
Gas & Electric Company
Effective
Date April 1, 2003
Schedule
A-1 Small General Service
Quantity
Charge:
KWh
used – Total: 79,025
KWh
used – Summer: 49,662
KWh
used – Winter: 29,363
CUSTOMER
CHARGE, per day
Single
Phase Service, per meter
$0.26612
Polyphase
Service, per meter
$0.39425
Total
Cost
$12,000
Total
kWh
79,025
Average
Unit Cost $/kWh
$0.1519
Payroll
Employee
Labor
$ 9,600
Office
Salaries
0
Management
Salaries
$18,000
Payroll Taxes
$ 3,271
Property Taxes
$ 4,950
Service Connections
Meter
Size
5/8 x 3/4”
31
3/4"
53
1”
5
1-1/2
2
2”
3
6”
0
8”
1
Total Metered
95
Appendix C
(Page 2 of 2)
Benbow Water Company
Recommended Quantities
-- Test Year 2003
Operating Revenues
$ 152,098
Expenses
74,298
Depreciation
11,500
Payroll Taxes
3,271
Property Taxes
4,950
Taxable Income for State
Tax
58,079
State Tax (8.84%)
5,134
Taxable Income for FIT
54,914
Federal Tax
8,236
Federal Tax Rate:
15% for 1st $50,000 of taxable income
25% for next $25,000 of taxable income
34% for next $25,000 of taxable income
39% for next $235,000 of taxable income
State
Tax Rate: 8.84%
Appendix
D
Benbow Water Company
Comparison of Rates
-- Test Year 2003
METERED SERVICE
Per Meter Per Year
Staff
Recommended Percent
Present
Rates
Increase
Rates
TY 03 (Decrease)
For 5/8 X 3/4 inch
meter $
46.10$ 62.5035.6%
For 3/4 inch meter
$ 69.20$
78.5013.4%
For 1 inch meter
$ 115.10$ 153.0023.3%
For 1-1/2 inch meter
$ 231.00$ 284.0022.9%
For 2 inch meter
$ 370.00$ 454.0022.7%
For 3 inch meter
$ 702.00$ 848.0020.8%
For 4 inch meter
$1,154.00$1,420.0023.1%
QUANTITY RATES
All
water, per 100 cu.ft. $
0.72
$ 0.89 23.6%
Comparison of a monthly typical bill
for residential metered customers with a 3/4-inch is shown below at
current rates and recommended rates for test year 2003.
Bills at
Bills at
Usage
Present Recommended
Amount of Percent
of
100
cu.ft. Rates
Rates
Increase
Increase
0
$69.20
$78.50
$ 9.30
13.4%
5 $72.95
$82.95
$10.00
13.7%
7 Avg $74.24
$84.73
$10.49
14.1%
10 $76.40
$87.40
$11.00
14.4%
APPENDIX E
(Page 1 of 2)
Benbow Water Company
DISTRIBUTION:
PREPARED BY:
F.
L. Curry, Chief
Elena Perez
A.
B. Jarrett, Supervisor
Date: May 5, 2003
Tatiana Cherkas,
Project Manager
MEMORANDUM OF PUBLIC
MEETING
Subject: Informal Public Meeting
Concerning General Rate Increase
Request by Benbow Water Company.
Held at: Masonic Hall, 783 Locust
St., Garberville, CA, CA 95542
Date: Wednesday
April 30, 2003
Time: 6:00 p.m.
Present:
NAMETITLEREPRESENTING
Tatiana CherkasProject ManagerCPUC
Staff
Elena PerezRegulatory AnalystCPUC
Staff
Winston B. BenbowGeneral ManagerBenbow
Water Company
Notice of the meeting was mailed to
the ratepayers prior to the meeting date. The meeting started
at around 6:10 p.m. and approximately twenty customers attended the
meeting. Benbow Water Company is a Class D company with approximately
95 connections.
APPENDIX E
(Page 2 of 2)
Benbow Water Company
Tatiana Cherkas started the meeting
and explained the rate case process and the procedures the utility follows
when requesting a rate increase. Winston Benbow, General Manager
of the water company, gave a presentation on the need for the rate increase.
He spoke about increased energy costs, about the upgrades in Zone 3
and other improvements made to the system including the 100,000-gallon
bolted steel tank that was ready to go on line at the end of May.
Mr. Benbow also indicated that he wanted to give his employee a salary
increase. He also said that he was interested in selling the company.
He said that other members of the Benbow family were not involved in
operating the system and that he himself was no longer living in the
area. Several methods of taking over the utility were discussed
such as turning it into a mutual water company. Mr. Benbow indicated
that a mutual company is not eligible for grants. He also discussed
annexing it to Garberville, but it was determined that Garberville was
a sewer district. A few customers wanted a sales price to purchase
the company, but Mr. Winslow said that if purchasing discussions resumed,
he would have a sales price. The owner of a local RV park indicated
that during the last general rate case, customers showed interest in
purchasing the utility but when it came time to making a decision, they
said the rate increase was not that bad and abandoned the idea.
The discussion returned to the rate
increase and how high it was. Several customers were under the
impression that they had the highest rates in the area. The owner of
the RV park indicated that if customers with a 5/8-inch or 3/4-inch
meters felt that they had high rates, they should consider what would
happen if the RV park pulls out impacting the rest of the residential
rates much more. She added that she needed to stay competitive
to stay in business and that the proposed increased was too high.
One customer wanted to know why there
were so many 3/4-inch residential meters. Mr. Benbow explained
that it was because of low pressure. After the meeting Mr. Benbow
requested that we look into the possibility of charging the same rate
for the 5/8-inch and the 3/4-inch meters. The meeting was adjourned
at about 7:15pm.
Resolution W-4420September 4, 2003
BWC/DRAFT AL/SNR/TAC/LEP:jrb
Resolution W-4420September 4, 2003
BWC/Draft AL/SNR/TAC/LEP:jrb
Resolution W-4420September 4, 2003
BWC/DRAFT AL/SNR/TAC/LEP:jrb
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