We shall adopt the recommendation on this issue, and reject the ALJ’s OCA’s proposed adjustment to M&S inventory. We find that the use of a three-year Company’s average of the inventory is preferable to the proposed thirteen-month Company’s OCA’s average for the reasons advanced by Columbia. Although it may be possible for the Company to produce inventory levels in a monthly basis, we accept the Company’s explanation that its monthly numbers are not audited and are less accurate than the year-end numbers produced by its current accounting system. We are not persuaded by the OCA’s arguments, which would require Columbia to incur the costs of adopting a more sophisticated and expensive accounting system for little discernable benefit. C. Capital Structure 1. Positions of the Parties Columbia proposed a capital structure consisting of 35.6% pro forma debt and 64.4% common equity is based on its projected actual capital structure as of December 31, 2013. The Company argued that circumstances have not changed substantially since the Commission approved a capital structure of 35.8% long-term debt and 64.2% in the last rate case. CWC M.B. at 45, referencing the Company’s Company’s at 71. 2009 Rate Case Order I&E recommended a capital structure of 50% debt and 50% equity. I&E argued that actual capital structure has a disproportionately high percentage of Columbia’s equity, which results in an inflated overall rate of return. I&E argued that Columbia’s capital structure should be rejected because it is not in line with the industry average. The five year average capital structure for the water proxy group selected by I&E Witness Maurer was 50.99% long-term debt, 0.25% preferred stock and 48.77% common equity, which approximates the capital structure recommended by I&E. In addition, I&E argued that the capital structure as of December 31, 2103, is weighted more heavily Company’s toward equity than at any time in the last five years. According to I&E, Columbia’s
We shall adopt the ALJ’s recommendation on this issue, and reject the OCA’s proposed adjustment to M&S inventory. We find that the Company’s use of a three-year average of the Company’s inventory is preferable to the OCA’s proposed thirteen-month average for the reasons advanced by Columbia. Although it may be possible for the Company to produce inventory levels in a monthly basis, we accept the Company’s explanation that its monthly numbers are not audited and are less accurate than the year-end numbers produced by its current accounting system. We are not persuaded by the OCA’s arguments, which would require Columbia to incur the costs of adopting a more sophisticated and expensive accounting system for little discernable benefit. C. Capital Structure 1. Positions of the Parties Columbia proposed a pro forma capital structure consisting of 35.6% debt and 64.4% common equity is based on its projected actual capital structure as of December 31, 2013. The Company argued that circumstances have not changed substantially since the Commission approved a capital structure of 35.8% long-term debt and 64.2% in the Company’s last rate case. CWC M.B. at 45, referencing the Company’s 2009 Rate Case Order at 71. I&E recommended a capital structure of 50% debt and 50% equity. I&E argued that Columbia’s actual capital structure has a disproportionately high percentage of equity, which results in an inflated overall rate of return. I&E argued that Columbia’s capital structure should be rejected because it is not in line with the industry average. The five year average capital structure for the water proxy group selected by I&E Witness Maurer was 50.99% long-term debt, 0.25% preferred stock and 48.77% common equity, which approximates the capital structure recommended by I&E. In addition, I&E argued that the Company’s capital structure as of December 31, 2103, is weighted more heavily toward equity than at any time in the last five years. According to I&E, Columbia’s
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