that the Commission should reward small companies like Columbia for their “[i]nstead, efforts to provide reasonable and safe service while minimizing financial risk to the extent CWC Exc. at 6-7. possible.” According to Columbia, the circumstances in this proceeding are virtually identical to most recent rate case, where the Commission approved the use of Columbia’s the capital structure at December 31, 2008, of 35.80% long-term debt pro forma Company’s and 64.20% common equity for ratemaking purposes. Columbia states that the Commission, in approving actual capital structure, held: Columbia’s In order to determine overall cost of capital an Columbia’s appropriate capital structure must be used. We agree with the ALJ that capital structure is not disproportionately Columbia’s weighted on the equity side. capital structure is not Columbia’s unreasonable or uneconomical under the rational of the decision as discussed earlier. The record evidence Carnegie does not indicate that Columbia has abused its managerial discretion with regard to the development of its capital structure. Therefore, we will adopt the recommendation to use ALJ’s actual capital structure of 35.8% debt and 64.2% Columbia’s common equity for ratemaking purposes. CWC Exc. at 7-8. Columbia argues that, as set forth in the case, a capital Carnegie utility’s structure is within the management discretion of the utility, and the touchstone for evaluating a actual capital structure is whether the utility abused its discretion. As utility’s the Commission stated in Carnegie: The Commission has the duty to regulate utilities in a manner which provides customers with reliable service at reasonable cost. This is not to say that we may mandate to regulated utilities the proportion of debt and equity contained in their capital structures. Rather, the actual capital structure is a matter within the discretion of corporate management; however, this does not preclude the commission from determining that a particular capital structure is unreasonable and utility’s
that “[i]nstead, the Commission should reward small companies like Columbia for their efforts to provide reasonable and safe service while minimizing financial risk to the extent possible.” CWC Exc. at 6-7. According to Columbia, the circumstances in this proceeding are virtually identical to Columbia’s most recent rate case, where the Commission approved the use of the Company’s pro forma capital structure at December 31, 2008, of 35.80% long-term debt and 64.20% common equity for ratemaking purposes. Columbia states that the Commission, in approving Columbia’s actual capital structure, held: In order to determine Columbia’s overall cost of capital an appropriate capital structure must be used. We agree with the ALJ that Columbia’s capital structure is not disproportionately weighted on the equity side. Columbia’s capital structure is not unreasonable or uneconomical under the rational of the Carnegie decision as discussed earlier. The record evidence does not indicate that Columbia has abused its managerial discretion with regard to the development of its capital structure. Therefore, we will adopt the ALJ’s recommendation to use Columbia’s actual capital structure of 35.8% debt and 64.2% common equity for ratemaking purposes. CWC Exc. at 7-8. Columbia argues that, as set forth in the Carnegie case, a utility’s capital structure is within the management discretion of the utility, and the touchstone for evaluating a utility’s actual capital structure is whether the utility abused its discretion. As the Commission stated in Carnegie: The Commission has the duty to regulate utilities in a manner which provides customers with reliable service at reasonable cost. This is not to say that we may mandate to regulated utilities the proportion of debt and equity contained in their capital structures. Rather, the actual capital structure is a matter within the discretion of corporate management; however, this does not preclude the commission from determining that a particular utility’s capital structure is unreasonable and
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