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Regulation of Rates for Water Utilities. Oregon Public Utility Commission. Oregon Public Utility Commission. Telephone. Power. Natural Gas. Water. Public Utility Commission.

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Presentation Transcript
slide1

Regulation of Rates for Water Utilities

Oregon Public Utility Commission

slide2

Oregon Public Utility Commission

Telephone

Power

Natural Gas

Water

slide3

Public Utility Commission

The Commission is charged with the duty to ensure safe and adequate water service at fair and reasonable rates. The Commission is chartered as a consumer protection and advocacy body. It is responsible to protect the customers of any public utility, and the public generally, from unjust and unreasonable exactions and practices, and to obtain for them adequate service at fair and reasonable rates.

The Commission balances the interests of the utility investor and the consumer in establishing fair and reasonable rates. Rates set by the Commission are sufficient to ensure confidence in the financial integrity of the utility, allowing the utility to maintain its credit and attract capital. The utility should be allowed to earn sufficient revenues for reasons of debt service and capital for reinvestment.

PUC STATUTORY AUTHORITY

° ORS 756.070 – 125 INVESTIGATORY POWERS

° ORS 756.160 – 200 ENFORCEMENT & REMEDIES

° ORS 757.005 DEFINES A PUBLIC UTILITY

° ORS 757.020 DUTY TO SERVE

° ORS 757.061 REGULATION OF WATER UTILITIES

public utility commission
PUC Authority

Regulate Rates

Regulate Service

Regulatory Obligation

Protect Customers

Protect Utility

Public Utility Commission
rate case filing
Rate Case Filing

Utility Files Application

Brief - summary of application

Direct Testimony - details of application

Tariffs include:

Rate schedules

Rules & regulations

slide6

Flowchart - Water Rate Case

  • 1. UTILITY FILING
  • 5. PREHEARING CONFERENCE

Utility files applicationdirect testimony, andtariffs to PUC

  • 9. REBUTTAL TESTIMONY

Adopt scheduleReceive petitions to interveneEstablish issuesIdentify PartiesCreate service list

IfNecessary

  • 10. EVIDENTIARY HEARING
  • 2. NOTIFICATION

Within 15 days of filing, utility notifies customers by an article in the newspaper or direct customer mailing

Enter pre-filed testimony into recordCross-examination of witnessesIdentify issues to be briefedALJ briefing instructions

  • 6. DISCOVERY

Data RequestsData Responses

  • 3. TARIFF SUSPENSION
  • 7. SETTLEMENT CONFERENCE

Commission orders tariffs suspended to allow time to review the utility’s proposal

  • 11. WRITTEN BRIEFS

Staff presents its Preliminary Results of Analysis to utility & intervenors who attempt to reach agreement on as many issues as possible

Briefs are submitted if requested by the ALJ

  • 4. OPEN HOUSE

Public comments taken Written comments may be submitted to the Administrative Law Judge

  • 8. WRITTEN TESTIMONY
  • 12. COMMISSION DECISION

Staff & intervenorsresponding to utility’s direct testimony

Commission issues order establishing new rates

customer notification
Customer Notification

Within 15 days of utility filing

Utility must provide customer notification

Newspaper article

Direct mailing

To receive copy of filing, call the utility

suspension of tariffs
Suspension of Tariffs

PUC 30-Day Response to Filing

Approve

Disapprove

Suspend tariffs

Generally request a 6-month suspension –allows investigation of rate proposal

open house
Open House
  • Opportunity to Communicate
      • Customer Concerns
      • Voice Opinion
  • Comments to Staff or Consumer Services
      • Phone
      • Written by mail or fax
      • E-filed to PUC Filing Center
consumer services
Consumer Services

Public Utility CommissionConsumer Services DivisionP.O. Box 2148Salem OR 97308-2148

puc.filingcenter

@state.or.us

1-800-522-2404

prehearing conference
Prehearing Conference

Purpose

1) Petition to intervene

2) Identify parties

3) Create a service list

4) Establish issues

5) Adopt schedule

who are the players how to participate
Who are the Players?How to Participate
  • Public & Interested Persons
  • Utility - Party
  • Interveners - Party
  • PUC Staff -PartyAssistant AttorneyGeneral
  • Administrative Law Judge
  • Commission
discovery period information exchange
Burden of Proof

Gather Information

Data Requests

Data Responses

Develop Position

Verify Facts

Revenues

Expenses

Utility Plant

Service Issues

Other Issues

Discovery PeriodInformation Exchange
settlement conference
Settlement Conference
  • Staff presents its settlement case

Only parties may participate

Customers may attend

  • Parties attempt to reach agreement

Stipulation

Partial stipulation

  • Contested case
testimony
Testimony
  • Written Testimony Filed

Stating the Party’s Position

Staff testimony

Intervener testimony

  • Rebuttal Testimony

(if necessary)

evidentiary hearing
Evidentiary Hearing

Contested Case

  • ALJ Presides
  • Testimony entered into the record
  • Cross-examination of witnesses
  • Briefs, identify issues if requested
alj drafts order recommendation
ALJ Drafts Order & Recommendation
  • ALJ reviews evidence in the record
  • ALJ writes draft order & makes recommendation to Commission
commission decision
Issues Order Disposing the

Rate Case

Establishes New Rates

Sets Effective Date of New Rates

Resolution of Outstanding Issues

Petition for Reconsideration

If warranted, Commission will review

Commission Decision
rate regulation
Allows company to recover its prudent and reasonable cost of service

Gives company an opportunity for a reasonable return on its investment

Establishes rates through rate cases

Rate Regulation
ratemaking formula
R = E+(v-d)r

Revenues (Revenue Requirement)

Expenses

value of rate base

plant depreciation

rate of return

Ratemaking Formula
slide21

Summary: Determining Rates Under the Rate of Return Regulation Methodology

1. DETERMINE REVENUE REQUIREMENT

The revenue requirement is the amount of annual revenue necessary to recover the annual cost of providing service and provide an opportunity for the utility to earn a reasonable return on its investment. The revenue requirement is based upon the formula:

R = E + (V-d) r

R represents revenue requirement. It is the amount of revenue required to generate a desired return on investment given a specified level of operating expenses and rate base.

E represents expense. This is the reasonable annual expense the utility incurs to provide utility service (also called the cost of service).

(V-d) represents the value of the utility's capital investment less its accumulated depreciation (and other required adjustments) necessary to calculate the utility's net plant in service. Working cash and materials and supplies inventory adjustments are then added to the net plant resulting in the utility's capital investment, called rate base.

r represents the rate of return that is achieved by adding the weighted cost of debt and the weighted cost of equity. The rate of return is then applied to the utility's rate base to produce a return on the utility's investment. The resulting amount is then included in the revenue requirement.

slide22

Determining Rates (continued)

2. RATE SPREAD

Rate spread is the allocation of the revenue requirement to the various classes of customers (residential, commercial, etc.). Customers with common characteristics are grouped into customer classes. If it is possible to determine the costs associated with the different customer classes, the costs should be allocated to the customer class that incurs the cost.

3. RATE DESIGN

Rate design is the determination of the rate or price structure for each customer class. The revenue requirement has already been determined and divided among the different customer classes. Now the customer service rate must be designed to provide for the recovery of the allocated revenue requirement within each class. There are several different types of rate structures that can be used. Rate design is to determine the most appropriate rate structure for each customer class.

water program staff
Water Program Staff

Kathy Willis

Sr. Utility Analyst

(503) 373-1003

kathy.willis@state.or.us

Brian Bahr

Financial Analyst

(503) 378-4362

brian.bahr@state.or.us

Celeste Hari

Utility Analyst

(503-378-6628

celeste.hari@state.or.us