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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Oregon 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
Utility Files Application
Brief - summary of application
Direct Testimony - details of application
Rules & regulations
Utility files applicationdirect testimony, andtariffs to PUC
Adopt scheduleReceive petitions to interveneEstablish issuesIdentify PartiesCreate service list
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
Data RequestsData Responses
Commission orders tariffs suspended to allow time to review the utility’s proposal
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
Public comments taken Written comments may be submitted to the Administrative Law Judge
Staff & intervenorsresponding to utility’s direct testimony
Commission issues order establishing new rates
Within 15 days of utility filing
Utility must provide customer notification
To receive copy of filing, call the utility
PUC 30-Day Response to Filing
Generally request a 6-month suspension –allows investigation of rate proposal
Public Utility CommissionConsumer Services DivisionP.O. Box 2148Salem OR 97308-2148
1) Petition to intervene
2) Identify parties
3) Create a service list
4) Establish issues
5) Adopt schedule
Only parties may participate
Customers may attend
Stating the Party’s Position
Gives company an opportunity for a reasonable return on its investment
Establishes rates through rate casesRate Regulation
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.
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.
Sr. Utility Analyst