Opinion ID: 2396599
Heading Depth: 2
Heading Rank: 3

Heading: Unchallenged Expenditures

Text: While we recognize the PSC was entitled to determine Utility should not be credited with some of the expenditures it claimed, Utility argues, and we agree, that the concerns raised at the public hearings were not sufficient to overcome the presumption of reasonableness as to all of Utility's claimed expenditures. Thus, rather than denying Utility's rate application in its entirety, the PSC should have adjusted Utility's application to reflect only those expenditures the PSC determined should be passed on to consumers. See Patton, 280 S.C. at 292, 312 S.E.2d at 259-60 (finding the PSC could refuse to pass a portion of an expense on to ratepayers, in the interest of promoting good business practices). ORS investigated Utility's expenditures and made adjustments where it found they were necessary, thereby reducing Utility's claimed rate base by more than $550,000. Customer testimony regarding water quality and the lack of capital improvements brought the prudence of certain other expenditures into question. However, the customers who testified represented only a small portion of the eighty-one neighborhoods in which Utility provides water service. Utility, on the other hand, testified it made improvements to almost every water system it owned. The PSC was required to consider whether, even putting aside the expenditures it found questionable, Utility was entitled to some increase in its rates. Likewise, because Utility's payments to its affiliate accounted for only a small portion of Utility's budget, a decision to exclude those expenses from Utility's rate application could not justify an outright denial of the rate increase. In sum, we find the PSC could rely on non-party testimony, or on any other relevant evidence, to determine that the presumption of reasonableness had been overcome as to a particular expense. Nevertheless, the PSC should have credited Utility with the expenses that were not challenged. Accordingly, on remand, and after giving Utility the opportunity to meaningfully respond to the evidence challenging the rate increase recommended by ORS, the PSC must determine whether, even excluding any expenses it finds imprudent, Utility's expenses have increased since its last rate application such that it might be entitled to an increase in its rates.