Opinion ID: 2339319
Heading Depth: 1
Heading Rank: 2

Heading: the claimed adjustment for anticipated additional sales

Text: The next ground of review advanced by the division is based upon a comment by a rebuttal witness presented by the company. Mr. John J. Natalizia, during the course of his testimony, estimated that the company would have about 2,000 additional heating customers when these proposed rates would become effective, as compared with the test year. He also observed that the addition of these customers would make less gas available for interruptible customers. [1] On the basis of this comment, the division sought to have the estimated revenue from these anticipated new customers included in the calculation of the proposed rates under consideration. The commission did not include such revenues in its calculations. These revenue estimates had not been included in the test year and were matched by no corresponding data concerning capital expenditures and variable operating expenses, save a most general statement by Mr. Natalizia that, given such added revenues, an additional $3 million of plant investment would be made along with an additional $500,000 in gross margin. Consideration by the commission of this element of information not included in the rate-case preparation would have completely set aside the test-year concept. The test-year concept results in bringing before the commission a complete picture of revenues and expenses based upon an historical period for which data pertaining to such revenues and expenses may be accurately obtained and tested in order to project reliable estimates into the future. The Washington Utilities and Transportation Commission presents a persuasive analysis of this concept in Pacific Power & Light Co., 7 P.U.R.4th 470, 476-77 (Wash. Util. & Transp. Comm'n 1974), in the following terms: A most fundamental concept is that revenues, expenses, net operating income, and investment have an interrelationship and that this interrelationship is depicted by the actual year selected for test-year purposes. Therefore one-sided restatements and adjustments, such as to expenses without all other necessary revenue or investment restatements, would distort results and these actual relationships. Conversely, revenue adjustments without all necessary expense or investment restatements would be equally distorting; so would making investment restatements without all related revenue and expense adjustments. Had the commission considered this asymmetrical element and thrust aside the test-year concept, it would have moved into an area of speculation upon which a factual conclusion cannot properly rest. See United States v. Public Utilities Commission, 393 A.2d at 1095. Thus, the conclusion of the commission in this instance not to consider the element of information under discussion was clearly correct.