Opinion ID: 1907714
Heading Depth: 3
Heading Rank: 3

Heading: Did the commission make a proper adjustment for the eundercollections associated with the purchase of SNG?

Text: The mechanics behind the operation of the two PGA clauses have been discussed earlier under the heading of Cash Working Capital and do not merit repetition here. The sole issue at this juncture is whether the commission properly treated the $1.9 million undercollection associated with the SNG portion of the PGA. Normally, undercollections of a given test year will be treated as revenues to the company in computing its cost of service. The council recommended that the entire sum of undercollections be reflected as such in the computation. The commission, however, adopted the company's argument that at least part of the undercollections attributable to SNG were recurring costs (i. e. a continual undercollection) rather than a deferred cost that would be recouped. On that basis the commission determined the average undercollection over a 3-year period (the period since the company began using SNG) to be $1.1 million. Accordingly, it only included the excess undercollection, $798,539, as test year revenues. The council vehemently objects to this position as sheer speculation. The commission, while recognizing the potential inaccuracy of the estimate and the consequences thereof, [19] allowed the adjustment because the commission will have ample opportunity to investigate and analyze the operation of the clause in the future. To the extent that the company suffers a recurring underrecovery for SNG, we concur with the commission's treatment of it. However, given the commission's own hesitancy regarding the reliability of its prediction, this appears an appropriate situation to remand the cause and let the commission measure the accuracy of its estimate against the reality of the company's subsequent operating history. Narragansett Elec. Co. v. Harsch, R.I., 368 A.2d 1194 (1977); Rhode Island Consumers' Council v. Smith, 111 R.I. at 298, 302 A.2d at 773.