Find the full staff report here
Find Fight the Hike Ohio’s response here
Staff recommends a revenue increase range… 4.30% to 5.82% for Water A, 5.85% to 7.27% for Water C, and 3.58% to 5.27% for Wastewater. (p. 4)
The Applicants test year labor also includes incentive pay based on financial, individual, and operational goals… The Staff believes shareholders should pay for the annual incentive awards during the present recession, not ratepayers. (p. 15)
The Applicant estimated rate case expense to be $692,785 for this proceeding…The Staff reviewed and compared… to prior rate case expense levels and determined that the Applicant's current estimate is overstated. (p. 17)
Further complicating the Staffs investigation was the fact that the Applicant reflected plant additions in this case with a vintage date prior to the date certain in the previous case… These additions should have been included as part of a prior case. (p. 5/7)
In the present case, the Applicant cites numerous benefits resulting from the proposed three step increase… it will save the ratepayers $2.1 million by not filing additional rate filings in 2010, 2011, and 2012… the time of officers and upper management in the company who spend many hours on a rate case application would be saved… customers would know in advance what the rate increase will be and thus be better able to manage their finances... the savings in time and resources that can be devoted to other critical issues facing the Company, the Public Utilities Commission, and the Office of Consumer's Counsel… would not be a need for the Company to file a request for a System Improvement Surcharge through 2013. For the same reasons Staff did not recommend Commission approval of the proposed three step increase in the 1995 Ohio American rate case, Staff does not recommend it now. (p. 22)
Staff does not believe it is appropriate to establish rates based on a five-year forecast… Calculating a new revenue requirement with all updated information is no less time consuming than conducting a full rate case investigation. (p. 22)
Conclusions & Recommendations
Ohio American Water Company must find ways to better control costs. The Company should strive for a reasonable cost trend that reflects a value close to the rate of inflation, preferably trending close to Ohio market conditions such as that of Ohio Household Income. (p. 80)
Staff recommends that Ohio American Water operate its business based on cost controls first until the company can bring its business in-line with Ohio's economy. (p. 80)
Staff recommends an adjustment to A&G expenses… to bring operating costs to a reasonable level for an efficiently run water company… This recommendation should incent the Company to rapidly implement a new business model and cost control strategy. (p. 80)
Staff concludes that the business model currently utilized at Ohio American Water Company must be updated or altered. Cost growth trends that exceed the inflation rate and the customers' ability to pay relative to the rate of household income growth, are unsustainable in the longer term. (p. 79)
Staff concludes that Ohio American Water needs to change its business model to better control costs and to better reflect economic conditions in the market it serves… Staff believes that costs have reached a serious point at Ohio American where major processes need to be altered and institutional changes need to be implemented. (p. 79)