Court Opinion

ID: 4883403
Source: CourtListenerOpinion
Date Created: 2021-09-02 23:17:38.500042+00
Date Added: 2024-06-11T08:04:04.984578
License: Public Domain

Commissioner MAYO
specially concurs as follows —
Several procedures have been used by regulatory commissions to try to cope with the unbroken spiral of price inflation and the rapid erosion of the value of the dollar which has come to pass in the last ten to twelve years. Inflation is an economic fact of life from which neither the general body of ratepayers nor public utilities have been able to escape. The result of this rapid inflation has been the erosion of an economic entity’s achieved rate of return, i.e., attrition.
The Supreme Court has found that the commission should predicate its decision regarding the use of year end rate base solely on consideration of extraordinary growth, and by requiring all adjustments for attrition to be encompassed within a separate allowance. However, the court failed to define or identify any method for dealing with the problem of adequately and correctly measuring, attrition. It merely said to use a separate attrition allowance to cope with the problem.
Methods which have been utilized by this commission to compensate for the erosion of a company’s achieved rate of return have been — 1) year end rate base, 2) ninety days of net telephone plant, and 3) known and imminent changes. These types of tools are quantifiable and can be confirmed through audit procedures of the company’s financial records; they are not subjective. The goal or objective of any attrition allowance is to compensate for the erosion of a firm’s earnings. These three tools comply with this objective and can be measured with a high degree of validity.
All allowances for erosion of earnings must compensate for the expected future attrition rate. The error of computing attrition, in the manner used by the public counsel, is that it is based only on the historical decline in the company’s rate of return. This computation did not consider the underlying causes of past attrition and their probable effect upon future trends. A multitude of variables affect a telephone utility’s attrition rate. For any given time frame, some of these are (1) changes in level of service, (2) changes in'type and amount of plant in service, (3) sufficiency of plant capacity and (4) varying demands for service. The public counsel’s com*161puted attrition rate of .80% did not consider these underlying causes and their probable affect upon future trends.
I do feel that in future cases, attrition allowances similar to the one presented by public counsel should be computed and considered. It should not be used in lieu of the three tools described previously, but instead should be used in parallel with these tools as additive support and verification of a firm’s past and expected future attrition.