Opinion ID: 2347721
Heading Depth: 1
Heading Rank: 16

Heading: Disallowance of Standpipe Painting Expense

Text: Ellsworth sought $1,625.00 per year as a pro forma operating and maintenance expense adjustment. In the data which Ellsworth submitted, there is indication that the $1,625.00 per year (or total of $13,000.00 for eight years) was sought to provide for painting of standpipes. Ellsworth has two standpipes: a 290,000-gallon standpipe which was painted once in 1970 for a cost of $5,830.00 and a 500,000-gallon standpipe which has not been painted since its erection in 1966. Ellsworth arrived at the figure of $13,000.00 by adding cost estimates of $6,200.00 for the smaller tank and $6,800.00 for the larger tank. In answer to a staff data request, it stated that the current estimated cost for painting the smaller tank is $18,000.00, which price includes sandblasting the surfaces (a procedure not done in 1970), and that the estimated cost for painting the larger tank is $24,000.00. The Commission disallowed any adjustment at all for standpipe painting. It stated: We have concluded that the standpipe painting adjustment is not supported by the evidence. The Company witness testified that the standpipe painting adjustment was to recover the past cost of standpipe painting. The evidence shows that this expense was incurred some years ago and was written off completely in the past. We will not permit an expense in rates set for the future which was actually incurred and written off several years ago. We believe that the Commission's disallowance of the adjustment was erroneous as a matter of law and inconsistent with its own policy. It is true that the 1970 painting expense was completely written off and that no unamortized balance remains. However, as we read the record, Ellsworth was not asking for the adjustment as a reimbursement for a past painting but was in fact requesting a pro forma adjustment for use in the future. This type of adjustment was allowed in the companion case of Mechanic Falls. Apparently, the only reason it was disallowed in Ellsworth was because of a statement by the rate coordinator for General who, when asked whether any amount of the sought adjustment was to be applied to future painting rather than past painting, answered in the negative. However, a close reading of the record indicates that Ellsworth's accounting practice tracks that of Mechanic Falls in amortizing costs for standpipe painting over a future period. We find the $13,000.00 cost estimate, or $1,625.00 per year, to be reasonable, and we allow that amount as a pro forma expense for standpipe painting.