No. 28307: R746-407. Annualization of Test-year Data

DAR File No.: 28307
Filed: 10/28/2005, 04:48
Received by: NL

 

NOTICE OF REVIEW AND STATEMENT OF CONTINUATION

Concise explanation of the particular statutory provisions under which the rule is enacted and how these provisions authorize or require the rule:

This rule is authorized by Section 54-1-1 which requires the Commission to exercise its rulemaking powers, and to do all things, whether specifically designated or in addition thereto, which are necessary or convenient in the exercise of its power and jurisdiction to supervise and regulate every public utility and Subsection 54-4-4(3) states, "the commission, in its determination of just and reasonable rates, may consider recent changes in the utility's financial condition or changes reasonably expected, but not speculative in the utility's revenues, expenses or investments and may adopt an appropriate future test period, not exceeding 12 months from the date of filing, including projections or projections together with a period of actual operations in determining the utility's test year for ratemaking purposes."

 

Summary of written comments received during and since the last five-year review of the rule from interested persons supporting or opposing the rule:

The commission has received no written comments since the five-year review and continuation of this rule in 2000.

 

Reasoned justification for continuation of the rule, including reasons why the agency disagrees with comments in opposition to the rule, if any:

In the traditional cost of service approach to ratemaking, it is generally assumed that utilities have a right to charge rates that will provide a reasonable opportunity to recover costs prudently incurred in the process of providing utility services. There is little challenge to the position that recovery of these costs is justified, and that the objective of the ratemaking process is to produce rates that will do so. The primary difficulty in meeting this objective is in determining the levels of costs to be incurred and the rate levels required to maintain cost recovery. The approach used by the regulators (the Commission) is to measure the total costs incurred in conducting operations over a 12-month period (i.e., the test period cost of service) and to fix rates that will produce revenues to match costs of that period. Since the test period is the basis for setting rates, the development of adequate test period data is obviously crucial to the outcome of the regulatory process. If the data do not accurately express operating conditions for the period in which rates are applied to recover costs, the rates will not function as intended. As stated in Subsection R746-407-1(A), "This rule will enable the Commission to more accurately coordinate a utility's rates with the utility's anticipated revenues and costs by recognizing that some of the conditions which arise during a test period are ongoing and must be spread over the entire period." Because of the use of test period operations as a measure of future operations to establish future rates, the need to focus on the quality of the test period data continues to be necessary, and therefore, this rule should be continued.

 

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Public Service Commission
Administration
HEBER M WELLS BLDG
160 E 300 S
SALT LAKE CITY UT 84111-2316

 

Direct questions regarding this rule to:

Barbara Stroud at the above address, by phone at 801-530-6714, by FAX at 801-530-6796, or by Internet E-mail at [e-mail]

 

Authorized by:

Barbara Stroud, Paralegal