Opinion ID: 2279962
Heading Depth: 1
Heading Rank: 4

Heading: Rate Base Treatment of the Defective Muffler

Text: The Company owns an oil-fired generating plant, so-called Wyman Unit No. 4, in Yarmouth. The plant came on line in December, 1978. From the outset it was plagued with difficulties. One difficulty involved a poorly designed or installed stack muffler which, because of its excessive noise, the Company was obliged to replace in the autumn of 1979 with a second muffler. The PUC staff urged that since the original muffler was no longer used or useful its value should be excluded from rate base and its costs amortized over the useful life of the plant. The PUC agreed in part. It excluded from rate base $542,468 and concluded that, because the Company was seeking to recover the defective muffler's costs from the manufacturer, any allowance for an amortization at this point in time is premature. Acknowledging that the value of the defective muffler should be excluded from rate base, the Company claims, first, that the PUC erred in its valuation of that muffler and, second, that it is entitled as a matter of law to recover its investment in the defective muffler through amortization. We agree with the Company's first contention but disagree as to the second.