RULES AND REGULATIONS
Title 52--PUBLIC UTILITIES
PENNSYLVANIA PUBLIC UTILITY COMMISSION
[52 PA. CODE CH. 53]
[35 Pa.B. 3024] [L-00940096]
Updating and Revising Existing Filing Requirements Relating to Water and Wastewater Public Utilities The Pennsylvania Public Utility Commission (Commission), on February 3, 2005, adopted a final rulemaking order to amend the regulations governing filing requirements for water and wastewater public utilities for general rate increase requests in excess of $1 million.
Executive Summary
Section 53.53 requires a utility that is requesting a general increase in excess of $1,000,000 to provide extensive information through the use of data requests in relation to the company's income, revenues, expenses, taxes, rate base, depreciation and rate of return. On October 24, 1994, the Commission issued an Advance Notice of Proposed Rulemaking to solicit comments from water and wastewater utility companies that will be the primary active participants in future rate cases of this nature for the purpose of providing input as to how these filing requirements may be modified to lessen the amount of information needed.
The proposed amendments significantly streamline filing requirements. The proposed amendments also lessen the regulatory burden on all jurisdictional water and wastewater public utilities that request a rate increase in excess of $1,000,000.
On October 29, 2001, the Commission entered an order proposing to revise its existing tariff filing requirements relating to water and wastewater public utilities. This order was published at 33 Pa.B. 1106 (March 1, 2003). At that time, the only entity to provide comments to the proposed regulations was the Independent Regulatory Review Commission (IRRC).
On September 26, 2004, the Commission entered a Tentative Final Rulemaking Order giving interested parties 20 days from the entry of the order to provide comments relating to this rulemaking. The Tentative Order further provided that if no comments were received, the Tentative Order was to become final and the regulations were to be submitted through the regulatory review process. If comments were received, the comments were to be reviewed by Staff.
Under the Commission's September 26, 2004, Order, the Office of Trial Staff (OTS), the Office of Small Business Advocate (OSBA) and the Office of Consumer Advocate (OCA) submitted comments to the proposed regulations. This Final Rulemaking Order addresses both the initial comments to the proposed regulations submitted by the IRRC, as well as those comments submitted by the OTS, the OSBA and the OCA in response to the September 26, 2004, Order.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on February 19, 2003, the Commission submitted a copy of the notice of proposed rulemaking, published at 33 Pa.B. 1106 (April 3, 2004), to IRRC and the Chairpersons of the House Committee on Consumer Affairs and the Senate Committee on Consumer Protection and Professional Licensure for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC and the Committees were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Department has considered all comments from IRRC, the House and Senate Committees and the public.
Under section 5.1(j.2) of the Regulatory Review Act (71 P. S. § 745.5a(j.2)), on April 13, 2005, the final-form rulemaking was deemed approved by the House and Senate Committees. Under section 5.1(e) of the Regulatory Review Act, IRRC met on April 14, 2005, and approved the final-form rulemaking.
Public Meeting held
February 3, 2005Commissioners Present: Wendell F. Holland, Chairperson; Robert K. Bloom, Vice Chairperson; Glen R. Thomas; Kim Pizzingrilli
Updating and Revising Existing Filing Requirements Relating to Water and Wastewater Public Utilities; Doc. No. L-00940096
Final Rulemaking Order By the Commission:
On October 29, 2001, this Commission entered an order proposing to revise its existing tariff filing requirements relating to water and wastewater public utilities. These proposed regulations significantly streamline the filing requirements and lessen the regulatory burden of all jurisdictional water and wastewater utilities that request a rate increase in excess of $1,000,000.
The October 29, 2001 Order was published March 1, 2003 at 33 Pa.B. 1106. The only entity to provide comments to the proposed regulations was the Independent Regulatory Review Commission (IRRC).
On September 26, 2004, this Commission entered a Tentative Final Rulemaking Order giving interested parties 20 days from the entry of the order to provide comments relating to this rulemaking. The Tentative Order further provided that if no comments were received, the Tentative Order was to become final and the regulations were to be submitted through the regulatory review process. If comments were received, such comments were to be reviewed by Staff.
Pursuant to this Commission's September 26, 2004 Order, the Office of Trial Staff (OTS), the Office of Small Business Advocate (OSBA), and the Office of Consumer Advocate (OCA) submitted comments to the proposed regulations. This Final Rulemaking Order addresses both the initial comments to the proposed regulations submitted by the IRRC as well as those comments submitted by the OTS, the OSBA, and the OCA in response to the September 26, 2004 Order.
IRRC Comments
The comments filed by IRRC do not address concerns relating to the sum and substance of the proposed regulations. Instead, they address primarily language and clarity issues.
IRRC's first comments express concern with regard to ''Exhibit D'' of the new regulations and the use of the term ''test year.'' Specifically, IRRC was concerned that several different terms were used to reference time frames in Exhibit D. IRRC listed those instances where the term ''test year'' needed further clarification. In each instance noted by IRRC, with the exceptions of Data Requests VII.10 and VII.11, we have defined the term. Additionally, wherever the term ''test year'' is used, we have clarified it as either ''future'' or ''historic.'' In Data Requests VII.10 and VII.11, we have further defined the term ''test year'' as the actual ''Per Book'' test year.
IRRC also stated in its comments that the Rulemaking contains terms that could be subject to misinterpretation. In particular, IRRC states that the term ''significant'' is not sufficiently defined so that the reader would know what is expected.
To address IRRC's concern, in each instance where the term ''significant'' appears, we have either provided specific parameters or eliminated the term ''significant'' altogether. In Section II.6, the term has been struck and language added requesting explanation for variances greater than 15%. In Section X.7 ''significant'' has been struck and language added requesting explanation for variances greater than 15% of the total current asset accounts listed on the balance sheet. In Section X.9, we have eliminated the reference to ''significant'' items and, instead, required a breakdown, by category, of accounts payable to associated companies. In Sections VI.1 and X.11 the word ''significant'' has been deleted. Though IRRC lists X.10 as one of the sections that requires clarity because of the term ''significant,'' the word does not appear in this section.
IRRC also states that the term ''major'' needs clarification because it may be difficult to determine what distinguishes a ''major'' category from a minor one. We have deleted the term ''major'' in Sections III.8, III.9, III.12, IX.2a and IX.2b. In Section I.1 we have defined ''major'' as being any amount greater than 15%. In III.11 we have eliminated the term ''by major components'' and required that a schedule be submitted showing a breakdown by the expenditures associated with outside services employed, expenses, and miscellaneous general expenses associated with rate cases.
In its comments IRRC asserts that Section I., relating to Statement of Income, is not sufficiently clear. In particular, IRRC states that Data Request I.A.2 (now I.2), Columns 1 and 2 require a ''book recorded statement'' and that these requirements should specify ''income statements'' to be consistent with the other columns. To satisfy IRRC's concern about consistency, we have inserted the word ''income'' in Columns 1 and 2. For the purpose of clarification we have also changed the wording of Data Request I.A.2 (now I.2), so that that section now reads ''Prepare an Income Statement...''
IRRC also expressed a concern that Data Request I.A.2. (now I.2), Column 5 includes the term ''requested rates'' whereas Data Request I.4.c contains the term ''proposed rates.'' It was IRRC's position that one term should be used consistently. Pursuant to this comment, we deleted the word ''requested'' in Data Request I.A.2. (now I.2), Column 5 and inserted the word ''proposed'' so that the terms are consistent.
IRRC also commented that it was concerned with certain ''clarity'' issues relating to Operating Revenues (Section II). Specifically, IRRC stated that it was not clear what was meant by the term ''customer forfeited discount'' found in Section II.1.b. This term also appears in I.2.a. The account entry for ''customer forfeited discount'' is no longer utilized for ratemaking purposes because there are no longer such discounts in rate structures. Therefore, this term has been eliminated in both places.
With regard to Operating Revenues, IRRC was also concerned with the term ''various'' as it appears in Section II.3 where the regulation requires a utility to provide increases to customers at ''various monthly uses.'' Pursuant to IRRC's comment, the term ''various monthly uses'' has been defined as ''5,000 gallon consumption increments.''
IRRC also commented that Data Request II.12 does not specify what rates should apply to the term ''test year.'' As stated previously, we have inserted the term ''historic'' to define ''test year.'' Also, the words ''current rates'' were added to this sentence to address IRRC's concern that the sentence should specify which current rates the PUC will require.
In relation to Operating Expense (Section III), IRRC's comments expressed a concern regarding clarity in Section III.3. IRRC stated that the term ''sufficient supporting data'' should specify what supporting data must be provided. In response to IRRC's comments, the phrase ''such as explanation and breakdown of costs'' was added to Section III.3.
IRRC also expressed a concern regarding Section III.7 because it appeared that there were some words missing in the second sentence of that section. To remedy this concern, this sentence has been restructured to avoid confusion.
Finally, IRRC stated that the phrase ''regulatory commission expense'' found in Section III.11 should be clarified or defined. In response to this comment we further defined ''regulatory commission expense'' by identifying rate case expense as a separate item within that category.
With regard to Section V, which addresses Rate Base, IRRC was concerned that the term ''final completion data'' found in Section V.3 is unclear and suggested that the Commission provide examples of what data is required. To address IRRC's concern we have eliminated theterm ''final completion data'' and, instead, stated the necessity that each project must be detailed and that this detail must include ''a list of items needed to complete these projects (such as landscaping and fencing).''
IRRC's comment on Section VI voiced a concern that this section was requesting virtually identical information to the information requested by Chapter 73 of 52 Pa. Code. Therefore, IRRC questioned whether a utility, that is required to file under Chapter 73, can incorporate its annual depreciation report, by reference, to comply with Section VI. To this end, we have added a statement in Section VI that states that if a question has been previously answered pursuant to 52 Pa. Code, Chapter 73, the utility should so note and that it is not necessary for the utility to answer previously answered questions.
IRRC also expressed a concern that VI.4 required a company to provide a comparison of the utility's calculated depreciation reserve versus book reserve, by account, at the end of the test year. IRRC's concern is that if a utility has been using a book reserve for ratemaking, there would be no purpose for a calculated depreciation reserve. In relation to this comment we have explained the information required by stating that the calculated depreciation reserve is for ratemaking purposes and that the book reserve, by account as of the end of the test year, must be compared, if they differ.
IRRC's comments stated that with relation to Section VII (Rate of Return), Data Request VII.15.c requires companies to provide ''all SEC 10Q reports issued within last year.'' IRRC stated that the Commission should include a specific time period for these reports. Pursuant to IRRC's comments, we have specified that those 10Q reports that must be provided should relate specifically to the latest 12 months.
IRRC was also concerned that Section VII.20 states that a response ''should identify for each project issuance date ...'' IRRC questioned whether any or all of those categories are optional and, if not, the Commission should replace the word ''should'' with the word ''shall.'' Section VII.20 has been changed so that the word ''shall'' now appears in this section.
With regard to Data Request VII.25, IRRC had two concerns. The first concern related to the method by which the Commission would treat documents in a confidential manner while the second concern questioned how a company could request confidentiality. In relation to both comments, IRRC stated that the regulation should include a cross-reference to the Commission's confidentiality requirements.
To address IRRC's concern, we have added language to the regulation stating that the information will be treated in a confidential manner if requested by the company in writing. We have also cross referenced 52 Pa. Code § 5.423, which sets forth PUC's procedures for protective orders.
In reviewing Section VIII of Annex A, IRRC commented that Data Request VIII.2 should define the term ''special rate contracts.'' Pursuant to this comment, ''special rate contracts'' has been expressly defined in VIII.2 as any rate not contained in the tariff.
IRRC submitted three comments with relation to Section IX (Quality of Service). The first comment questioned whether the information required in Data Request IX.1 may already be in the PUC files under different venues and, if so, whether a utility could exercise 52 Pa. Code § 53.53(b) to fulfill these data requests. The information requested in Data Request IX.1 is not specifically provided in any other venues. Therefore, these sections have remained unchanged.
The other two comments that were submitted by IRRC relating to Section IX related to citations in IX.1.a and IX.2. Regarding IX.1.a, IRRC stated that the Commission's citation to 25 Pa. Code § 109.401 should read 25 Pa. Code § 109.407. IRRC also notes that in Data Request IX.2, 52 Pa. Code § 65.5(a) should read 52 Pa. Code § 65.6(a). Both citations have been corrected.
With regard to the title of Exhibit D, IRRC stated that the title ''A. Water and Wastewater Utilities'' appearing under the heading ''I Statement of Income'' is misplaced. This is because all of Exhibit D relates to water and wastewater utilities and, therefore, this title should be moved so that the regulation reads ''Exhibit D--Water and Wastewater Utilities.'' The Commission has reviewed this comment and changed the title of Exhibit D as suggested by IRRC.
IRRC also commented that, with regard to Section II, relating to Operating Revenues, Data Request II.6 requires an analysis of miscellaneous water revenues but is not clear as to what analysis could be done on miscellaneous water revenues. For the purposes of clarity, we have specified in Data Request II.6 that a detailed breakdown is to be provided of miscellaneous water revenues for the historic test year and the two years immediately preceding the historic test year.
In Section III, relating to Operating Expense, IRRC states that Data Request III.5.h requires ''any deferred income and consultant fee.'' IRRC queried whether the conjunction ''or'' should be used instead of ''and.'' After reviewing this comment, we have determined that the use of the word ''and'' is correct. However, to further clarify this section we have added the words '' paid to both'' to this section and have changed the phrase ''officers or employees'' to ''officers and employees.''
IRRC also commented that the regulation should specify what information is required under Data Request III.9.c where the abbreviation ''etc.'' is used. We have further clarified III.9.c by eliminating ''etc.'' and inserting the words ''rules and regulations.''
In Section IV of Exhibit D, relating to taxes, IRRC stated that Data Request IV.1 includes the phrase ''PA Corporate Tax Report'' and ''PA Corporate Tax Settlement'' while Data Request IV.15 contains the phrase ''Pennsylvania Taxes.'' According to IRRC, for consistency purposes, the term ''Pennsylvania'' should be used consistently throughout this section, as well as the rest of the regulation. To satisfy IRRC's comment, we have spelled out ''Pennsylvania'' wherever it appears in this regulation.
With regard to Data Request IV.13, IRRC stated that it had four concerns. First, the word ''thereunder'' is repetitive and should be deleted; second, the closing sentence should not be in parenthesis; third, the phrase ''so stated'' should be replaced with ''provide an explanation;'' and, finally, the term ''interrogatory'' is inconsistent with § 53.53(a), which states the exhibits contain ''data requests.''
After reviewing IRRC's concerns with regarding to IV.13 we have made the changes suggested by IRRC in each of the four instances. Therefore, the word ''thereunder'' has been deleted; the closing sentence is no longer in parenthesis; the phrase ''so stated'' has been replaced with ''provide an explanation;'' and the term ''interrogatory'' has been replaced with the ''data requests.''
In its comments IRRC stated that Data Requests V.2, 3, and 5 contain sentences and phrases in parentheses that are not needed and should be deleted. Additionally, IRRC noted that Data Request V.7(c), (d), and (e) contain the abbreviation ''PA.'' To comply with IRRC's comments, we have eliminated the parentheses in V.2, 3, and 5. In regard to the abbreviation ''PA,'' as stated infra, the word ''Pennsylvania'' has replaced all abbreviations.
Finally, regarding Rate Base, IRRC stated that the phrase ''in providing water service'' in Data Request V.15 appears to be incomplete since this regulation applies to water and wastewater and that the term ''wastewater'' should be added to this paragraph. To this end, we have inserted the word ''wastewater'' in V.15.
With regard to Section VII, relating to Rate of Return, IRRC expressed concern that Data Request VII.16 contains the phrase ''month/quarter'' and that it is not clear whether the ''/'' denotes the word ''and'' or the word ''or.'' This concern has been addressed by our deleting the ''/'' and inserting the word ''or.''
IRRC also expressed concern that the term ''and/or'' is used in Data Requests VII.22 and 32 and that this construction should not be used and should be replaced with specific filing requirements. To address this concern we have deleted the ''/or'' in Data Request VII.22. Further, we have deleted the term ''and/or'' and inserted language that provides that in the appropriate instances, the company, its parent, or both, will supply financial data for the last five years.
In Section VIII.1, relating to Rate Structure and Cost of Service, IRRC stated that the term ''approximately'' is vague and that a definitive time frame should be included in the final form regulation. To comply with this suggestion, we have deleted the term ''approximately'' so that a definitive term of three years is set forth in VIII.1.
In addressing Section XI, relating to Other Data, IRRC questioned why the requirement for companies to submit balance sheets and income statements for each month were required in this section as opposed to elsewhere in the regulation, such as Section 1. The placement of this requirement was discussed by all parties concerned, including governmental agencies, associations and industry representatives. The result of those discussions and negotiations between the parties was a general consensus that the best placement of this requirement is in this section.
Lastly, in its comments IRRC listed a number of typographical and clerical issues that needed to be corrected. IRRC also expressed concern about acronyms that were used in Exhibit D but that were not defined. In each instance, we have reviewed the suggestion made by IRRC and made the necessary corrections. Therefore, all typographical and clerical errors have been corrected and all acronyms have been defined.
The following comments were filed to the Commission's Tentative Final Rulemaking Order and thus, some comments will refer to amendments shown in the tentative final order that were not present in the Proposed Rulemaking Order.
OTS Comments
In the OTS comments, two separate concerns were expressed. The first concern is that the various delineations of the terms ''historic'' and ''future'' in reference to test years included in the data requests are cumbersome and confusing. To this end the OTS, as well as the OCA, supports the continued use of the term ''test year'' without qualifying whether the test year should be ''historic'' or ''future.''
To address these concerns, as well as the concerns of the IRRC (which supports the defining test years as ''historic'' or ''future''), we have reviewed each reference to ''historic'' and ''future'' test years and determined whether it is appropriate to include either or both terms and, where relevant, have defined which test year data should be specified.
The OTS was also concerned with Exhibit D, Section I.1 that provides for a water/wastewater utility to supply a detailed explanation pertaining to the causes of variances between the historic test year and preceding test year that are greater than 15 percent. Both the OTS and the OCA prefer the use of the words ''major'' and ''significant'' in lieu of the 15 percent limitation. Both the OTS and the OCA assert that it is preferable to leave the decision concerning which data to include in the filing up to the discretion of the utility.
OCA Comments
As stated previously, the IRRC is concerned that the use of the terms ''major'' and ''significant'' does not provide sufficient clarification as to what is expected. So that this section provides some clarity, as well as to afford the utility some degree of discretion in terms of which variances need to be explained in their filings, we have added the words ''limit the explanation to the differences of $10,000 or greater'' to the end of Section I.1. This provides a threshold for the utility to acknowledge and, at the same time, provides some degree of discretion as to when an explanation is needed.
The OCA also commented that, with regard to Section II.3 the phrase ''various monthly uses'' should be retained and the decision on the amount of data to be provided for each customer group should be left to the discretion of the utility. The OCA believes that the term ''various monthly uses'' is preferable to the 5000 gallon consumption increments. To the contrary, the IRRC recommended clarification of the term ''various monthly uses.''
So that the term ''various monthly uses'' is more precisely defined, we have retained the 5000 gallon consumption increments in Section II.3. Further, we have provided in II.3 that a copy of the proposed tariff or tariff supplement should be provided on a ''red-line'' basis to easily identify any changes. To require provision of this information on a red-line basis will simplify the process of identifying changes.
The OCA stated in its comments that the phrase ''forfeited discounts'' found in Sections II.1.b and II.2.a should not be stricken since this phrase is commonly understood in the industry. Additionally, the OCA states that this terminology is the terminology used in the National Association of Regulatory Commissioners Uniform System of Accounts that all water and wastewater utility must use.
This Commission now utilizes the term ''penalty'' and not ''forfeited discounts.'' Discounts are no longer offered and the correct terminology as adopted by this Commission is ''penalties.''
The OCA states that Section II.12 should be changed so that the phrase ''at current rates'' should be deleted, as well as the word ''historic.'' Additionally, the OCA would either eliminate the word ''future'' from the second sentence in Section II.12 or add the word ''historic'' to this sentence so that both historic and future test year data would be provided.
In reviewing the OCA's comments, we are of the opinion that historic test year data and the two prior years consumption data and billing data for the ten largest water customers at current rates is valuable information that should be reviewed in a rate filing. Therefore, the term ''historic'' should remain in the first sentence. We are also of the opinion that the OCA is correct and that the second sentence of II.12 should provide for historic, as well as future test year data and have added the words ''historic and future'' to this sentence.
The OCA states that in Section III.5.h words were inadvertently deleted and that the sentence should read ''submit a schedule showing any deferred income and consultant fees to corporate officers and employees.'' After reviewing this section, the Commission has made this change.
The OCA states that in Section III.7 the phrase ''if allocated from the parent company'' should be deleted. According to the OCA, this would imply that utilities that are not part of a holding company system need not provide the explanation for calculating the monthly annual payments made pursuant to various leases.
After reviewing the OCA's comments, we are of the opinion that the phrase ''if allocated from the parent company'' should remain in the regulation but we have further clarified this section in a way that addresses the concerns stated in the comments. Specifically, we have inserted the words ''provide the method of allocation'' to Section III.7. Providing this method will allow parties to review these costs where allocated, and to determine to whom these costs were allocated.
The OCA's comments also address Section III.11 and its elimination of the phrase ''regulatory commission'' to modify the word ''expenses'' and state that the change limits the data requested to expenses relating to rate cases. The OCA states that the phrase ''regulatory commission expense'' encompasses not only the regulatory costs of the rate proceedings but also other types of proceedings such as tariff filings. The OCA also asserts that the phrase ''by major components'' should be reinserted into this section.
After reviewing the OCA's comments, we have changed Section III.11 so that companies are required to submit a schedule that will show expenses relating to rate cases separately from other expenses. This will address the OCA's concern since it will specifically define which expenses are related to rate cases expenses in addition to other regulatory expenses. With regard to reinserting the phrase ''by major components'' we, as well as the IRRC, are of the opinion that this phrase is too vague and have not reinserted it.
The OCA states that in Section III.15 the word ''historic'' should be replaced by the word ''future'' or, in the alternative, deleted. Additionally, in Section III.20, the OCA states that the question mark ''(?)'' should be replaced by a period ''(.).''
In addressing the OCA's concern relating to Section III.15, we have provided further clarification by stating at the end of that section that the company must ''Provide any estimates for the future test year.'' In relation to the OCA's comments regarding Section III.20, we have replaced the question mark ''(?)'' with a period ''(.).''
In its comments, the OCA states that the word ''future'' should be deleted from Section IV.4.a so that the requirement generates data from both the historic and future test years. The OCA expresses the same concern in relation to Sections IV.7 and IV.12.
As stated previously, we have reviewed all ''historic'' and ''future'' test year references and, where appropriate, we have clarified the requirements. Specifically, with regard to Section IV.4.a, we have addressed the OCA's concern by adding a sentence at the end of IV.4a. that reads ''if based on the historic test year, justify.'' Similarly, we have addressed the OCA's concerns regarding Sections IV.7 and IV.12 by adding the words ''historic and future'' to both sections.
The OCA also expressed a concern with the term ''data request,'' which was substituted for the term ''interrogatory'' in Section IV.13. According to the OCA, neither word is correct and the word ''requirement'' should be inserted.
After reviewing this comment, we have changed the wording by eliminating the word ''data'' and retaining the word ''request.'' It is our opinion that this more accurately describes what is required.
In the OCA's comments, a concern is expressed regarding Section VII.16 in that the term ''month and/or quarter'' has been stricken in favor of ''month or quarter.'' According to the OCA, large water utilities often submit monthly data and this data is critical to the rate of return analysis so that the utility should not have the option of providing only quarterly data. Therefore, the OCA submits that the requirement should read ''for each month for the last two years.'' After reviewing this section, we are in agreement with the OCA. Therefore, we have eliminated ''/or quarter'' so that Section VII.16 now reads '' . . . each month for the last two years.''
In its comments, the OCA states that Section VII.32 should be changed so that a utility is not given the option of filing data for either the utility or the parent. According to the OCA, this requirement should apply to both the utility and the parent and should be changed to read '' . . . supply financial data of the company and its parent, if any . . . ''
We agree that Section VII.32 should be restated. To this end, this Section will now read '' . . . supply financial data of the company and its parent, if applicable . . . ''
Finally with regard to Section VIII.1, line 5, the OCA states that the insertion of the words ''or wastewater'' is not correct because there are no wastewater ''users.'' The OCA recommends the substitution of the word ''customers'' for the word ''users.'' Similarly, the OCA states that Section IX.2.a is not correct because water pressure is not an issue in wastewater systems.
After reviewing these comments, we have changed the wording in Section VIII.1, line 5, so that the word ''customer'' has replaced the word ''users.'' Moreover, we have deleted the words ''or wastewater'' found in Section IX.2.a and substituted the words ''transmission and'' to address the OCA's comments.
OSBA Comments
The OSBA also filed comments to these proposed regulations. The OSBA's first comment states that Exhibit D Section VIII.1 implies that there could be more than the presently permitted 3-year lapse between the last required complete cost of service study and the future test year in the current filing. Additionally, the OSBA states that because the proposed regulations would drop the alternative requirement that a production-only cost of service study be filed, the filing of a complete cost of service study for major rate cases might end. As a consequence, the OSBA submits, if a utility were to choose not to file a complete cost of service study, extensive discovery would be necessary to evaluate whether the utility is making progress in eliminating class subsidies and moving rates toward cost of service.
It is our opinion that the information required by Section VIII.1 will either be sufficient to obtain the information necessary to evaluate a company's rate structure position or major companies requesting an increase of $1,000,000 or more will, in most cases, file a complete cost of service study since those companies also have an interest in moving rates toward cost of service. Furthermore, this matter was specifically addressed at the collaborative meetings between the interested parties. The OTS, the OSA and the OSBA were all present or invited to attend these meetings and Exhibit D Section VIII.1 is a result of that collaborative. Therefore, it is the Commission's position that Section VIII.1 should remain as proposed.
The OSBA also comments that the present Section 53.53, Exhibit A, IV(A)(1)(f) requires the filing of testimony and exhibits to explain the extent of shifting revenue burden between customer classes while the proposed regulations would drop this requirement. According to the OSBA, such testimony is adequately necessary in order for a utility to meet its burden of proof.
We agree with the OSBA's position in that submitting such testimony will, in all likelihood, be necessary in order for the utility to meet its burden of proof. In fact, the proposed regulations do not avoid the requirement of a utility submitting testimony and exhibits and, it is expected that large utilities such as the ones to which this regulation applies will continue to submit such testimony. If not, there will be a substantial risk that the burden of proof will not be met.
It should also be mentioned that much of the information about which the OSBA seems concerned is addressed in Section VIII.1.a-j. It is apparent that testimony on these issues and exhibits are a necessary part of the company's rate case. Therefore, we are of the opinion that the regulations, as proposed, address the OSBA's concern regarding this issue.
The OSBA's comments also state that Section II.3 does not require the filing of a company's current tariff but only the one that the company is proposing in its rate filing. According to the OSBA, relieving the utility of having to file a copy of the current tariff would shift the burden of retrieval to parties other than the company and, in the case of a utility that has multiple, non-continuous divisions, this burden could be unreasonable. The OSBA suggests that, as a compromise, a utility should be relieved of filing the current tariff but should be required to file the proposed tariff on a red-lined basis so that the changes could be readily identified.
After reviewing and considering the OSBA's comments relating to Section II.3, we are of the opinion that the OSBA's suggestion is a good one. Therefore, we have added to the end of Section II.3 the words ''on a red-line basis, to easily identify any changes.''
Section XI.5 requires the filing of a statement indicating unaccounted for water in the test year and the two prior years. In the current regulation, utilities are required to file a statement indicating unaccounted for water in the test year and the four prior years. The OSBA questions whether relaxing the filing requirement would be a significant benefit to the utility and whether it would simply increase the amount of discovery needed in cases involving utilities for which unaccounted for water has been a problem.
After reviewing the OSBA's comment relating to Section XI.5, we are of the opinion that Section XI.5 should remain as proposed. Unaccounted for water is calculated in annual reports and unaccounted for water schedules are now more detailed than they were when these regulations were originally written. Moreover, the calculations for unaccounted for water are rarely a problem as related to large water companies. Finally, this is an issue that was addressed at the collaborative meetings of all the parties herein and resolved through that method.
In the OSBA's comments, it is stated that proposed Section II.9 requires the filing of a statement showing the number of customers and water consumption by customer classification for the test year, two years prior to the historic test year, and two years after the historic test year. According to the OSBA, the requiring of the utility to file two years of projected data including the future test year would be more likely to increase the filing burden than to reduce it. The OSBA states that the current filing requirement under which a utility must file a statement showing the number of customers and water consumption by customer classification for the test year and four prior years should be retained.
Once again, this section, as the others mentioned herein, was drafted pursuant to collaborative meetings in which all the parties hereto were present or invited. After numerous meetings and discussions, the parties decided that Section II.9 is a fair and equitable resolution of data required to be filed.
The OSBA states in its comments that if a utility has customers being billed at a flat rate, it should continue to be required to provide a statement or feasibility study showing why the customers should not be metered pursuant to 52 Pa. Code § 65.7(d). The OSBA is apparently concerned that the elimination of Section 53.53(IV)(A)(2)(e) would affect a utility's requirement to provide such a statement.
After reviewing and considering the OSBA's comment regarding this matter, we are of the opinion that the retention of Section 53.53 IV, Exhibit A, (A)(2)(e) is not necessary, particularly for those companies that are of the size affected by the proposed regulations. When a problem may exist, 52 Pa. Code § 65.7(d) still may be applied.
Finally, the OSBA comments that Section II.4, as proposed, states that data must be filed ''to support present and proposed rates by customer classification and tariff rate schedule.'' The OSBA states that this section is presumably intended to require proof of revenues and that the word ''rates'' should be deleted and replaced by the word ''revenues.''
We have considered the OSBA's comments in regard to this section and are of the opinion that the OSBA is correct. Therefore, we have changed the word ''rates'' to the word ''revenues'' in Section II.4.
Conclusion
Accordingly, under sections 501 and 503 of the Public Utility Code, 66 Pa.C.S. §§ 501 and 503; sections 201 and 202 of the act of July 31, 1968, P. L. 769 No. 240, 45 P. S. §§ 1201 and 1202, and the regulations promulgated thereunder at 1 Pa. Code §§ 7.1, 7.2 and 7.5; section 204(b) of the Commonwealth's Attorneys Act, 71 P. S. 732.204(b); section 745.5 of the Regulatory Review Act, 71 P. S. § 745.5; and section 612 of The Administrative Code of 1929, 71 P. S. § 232, and the regulations promulgated thereunder at 4 Pa. Code §§ 7.251--7.235, we find that the regulations at 52 Pa. Code § 53.53 should be amended as set forth in Annex A; Therefore,
It Is Ordered That:
1. The regulations of the Commission, 52 Pa. Code Chapter 53, are amended by amending § 53.53 to read as set forth in Annex A, with ellipses referring to the existing text of the regulation.
2. The Secretary shall certify this order and Annex A and deposit them with the Legislative Reference Bureau for publication in the Pennsylvania Bulletin.
3. The Secretary shall submit this order and Annex A to the Office of Attorney General for approval as to legality.
4. The Secretary shall submit this order and Annex A to the Governor's Budget Office for review of fiscal impact.
5. The Secretary shall submit this order and Annex A for review by the designated standing committees of both the Houses of the General Assembly and for review and approval by IRRC.
6. A copy of this order and Annex A shall be served upon the Office of Trial Staff, the Office of Consumer Advocate, the Office of Small Business Advocate and the National Association of Water Companies.
7. The final regulation in Annex A shall become effective upon publication in the Pennsylvania Bulletin.
JAMES J. MCNULTY,
Secretary(Editor's Note: For the text of the order of the Independent Regulatory Review Commission, relating to this document, see 35 Pa.B. 2703 (April 30, 2005).)
Fiscal Note: Fiscal Note 57-223 remains valid for the final adoption of the subject regulation.
Annex A
TITLE 52. PUBLIC UTILITIES
PART I. PENNSYLVANIA PUBLIC UTILITY COMMISSION
Subpart C. FIXED SERVICE UTILITIES
CHAPTER 53. TARIFFS FOR NONCOMMON CARRIERS
INFORMATION FURNISHED WITH THE FILING OF RATE CHANGES § 53.53. Information to be furnished with proposed general rate increase filings in excess of $1 million.
(a) When a public utility, other than a canal, turnpike, tunnel, bridge or wharf company, files a tariff or tariff supplement seeking a general rate increase within the meaning of 66 Pa.C.S. § 1308(d) (relating to voluntary changes in rates), and the general rate increase exceeds $1 million in gross annual revenues, in addition to the data required by other provisions of this chapter, the tariff or tariff supplement shall be accompanied by responses to the data requests contained in the following exhibits which apply to the utility types indicated.
(1) Exhibit A--Utilities except communications, electric, water and wastewater utilities.
(2) Exhibit B--Communications utilities.
(3) Exhibit C--Electric utilities.
(4) Exhibit D--Water and wastewater utilities.
(b) In providing responses to these data requests, if the requested data have been previously filed with the Commission, they may be incorporated by reference. Also, the term ''historic test year'' as used in these exhibits refers to the test year chosen by the utility to support its filing, that is, presumably future test year data would be supplied in most cases. ''Historic test year,'' as referred to in Exhibit D, is defined as book figures for the base test year. The term ''future test year,'' as used in Exhibit D, refers to the adjusted historic test year for known and measurable changes 12 months beyond the book figures for the base year, or the utility's final claimed supporting data.
(c) Initial utility direct testimony of a witness who shall testify in support of the utility's position shall be provided as part of the filing materials. The testimony of the filing utility shall include a complete explanation and justification of claims which depart from the unadjusted test year results of operations, including the methodology and rationale. The testimony shall be accompanied by supporting worksheets, if necessary, and shall refer to supporting exhibits to which the testimony relates. The explanation and documentation of the proposed adjustments shall enable a reasonably informed party to determine how the amount was calculated and to understand why the amount is being claimed.
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