clock menu more-arrow no yes

Filed under:

UTILITY LOSES BID TO BASE ITS RATES ON PROJECTIONS

The Public Service Commission has rejected Mountain Fuel Supply Co.'s request to change the way its rates are figured.

Since 1989, the PSC has used actual yearly expense and income reports to help it decide how much consumers will pay for natural gas in a coming year. The calculations using this year of data - which is called a "test year" - are required because as a regulated utility, Mountain Fuel is allowed to earn a particular level of profit.Mountain Fuel filed a request for a $9.56 million rate increase on March 3. The figure was based on projected expenses, rather than actual expenses during a past year. Mountain Fuel argued that a future test year, that is, projections, should become the standard.

The PSC has not issued a ruling on the rate request itself. But Monday, the commissioners decided that the historic test year must be retained.

Mountain Fuel expert witness Allen Allred had said a 1995 projected test year more closely approximates conditions where rates will be in effect, wrote PSC commissioners Stephen F. Mecham and Constance B. White.

Allred had argued that "the 1995 year would reflect the cost and revenue implications of the additional growth it expects and the early retirement program it intends to implement in April this year," they noted.

Using the future test year's figures, Mountain Fuel would need to increase revenue by $9.56 million, they said. This is about $1 million less than the historical test year's figures would indicate.

In turning down the request for using the projections, Mecham and White wrote that Utah's economy has remained reasonably stable. Both nationally and locally, inflation is low.

"The commission's preference to use an historical test year has not harmed, and actually could be slightly beneficial for MFS (Mountain Fuel) in this case," they added.

The historical test year arguably has allowed Mountain Fuel to earn its authorized rate of return in three out of the past four years, they said.

"The facts of this case do not warrant forgoing the use of actual, auditable, historical data and substituting it for conjectural projections," Mecham and White added.