Wastewater Rate Filing Case Study
EXPERT ASSISTANCE SUPPORTS FINANCIAL RESILIENCY
Our Client’s Challenge
Wastewater companies in the U.S. are regulated monopolies for which prices are established by state jurisdictional utility commissions. To help the City of Lancaster set utility rates to enhance financial resiliency, the Gannett Fleming valuation and rate team provided expert testimonies and rate case filing requirements for a wastewater rate filing before the Pennsylvania Public Utility Commission (PUC). The project included the development of:
- Revenue requirements.
- Cost of capital.
- Rate base.
- Cost of service allocation.
- Rate design.
During the litigation period after the filing, the team:
- Responded to interrogatories related to expert testimony.
- Prepared additional testimony and exhibits in support of the city’s position.
- Reviewed the submissions of other parties.
- Assisted with settlement discussions.
Our Solution
Pro forma statements of income and revenue required for the historic test year (HTY), future test year (FTY), and fully projected future test year (FPFTY) included the pro forma statement of revenues for the HTY, FTY, and FPFTY under present and proposed rates. They also included the pro forma statement of operation and maintenance expenses, the pro forma statement of income and rate of return under present and proposed rates, and the balance sheet for the historic test year. The team used its special knowledge to prepare exhibits and direct testimony, setting forth the results of the studies in consultation with city personnel and solicitors in a form suitable for filing with the PUC. The team’s fair rate of return study analyzed and determined the city’s appropriate capital structure and provided:
- The development of embedded cost rates for debt and fund equity.
- An assessment of risk considerations and financial analysis.
- A calculation of an overall rate of return.
The cost-of-service allocation study and design of proposed rates included the application of present and proposed rates to an analysis for the city’s FPFTY, the allocation of costs to inside and outside city service areas and customer classifications, and the design of proposed rate structure based on the results of the cost allocation study and input from city management.
The team conducted depreciation studies for the city’s wastewater fund for three periods based on our firm’s area of expertise. The studies included updating the original cost of wastewater utility property used and useful in rendering wastewater service as of the end of the HTY and an estimate based on projections by city personnel of the completed construction at the end of the FTY and FPFTY.
Key Features
- Development of revenue requirements, cost of capital, rate base, depreciation, cost of service allocation, and rate design.
- Depreciation studies for the city’s wastewater fund for HTY, FTY, and FPFTY.
- Exhibits and direct testimony in the necessary format for PUC filing.
Awards & Recognition
- Awards list (This web part is hidden)
Outcomes
- Solid support for wastewater rate filing.
- Determination of the city’s appropriate capital structure.
- Response to interrogatories and development of direct and rebuttal testimony.
- Settlement of the rate case.
- Development of equitable rates for city wastewater customers.
CLIENT
City of Lancaster
LOCATION
Lancaster, Pa.
ROLE
Expert Witness Services
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