Commission Calculated Depreciation $63,007 Less Company Calculated Depreciation (62,725) Adjustment $ 282 Calculate Rate of Return on Equity Capital Structure Debt 0.5 Cost 5.10% Equity 0.5 X% 0.5 x 5.10% + 0.5 x X = 8.07% X = 8.07% - 2.55% 50% X = 11% Appendix B R-2014-2419115 Manwalamink Sewer Company Rate Structure The Company’s rate structure consists of a Service Charge and a two block declining rate structure. Bills are rendered on a monthly basis. The objective of rate design is to ensure that no class of service results in subsidizing service to one class at the expense of another class. The Company’s proposed second rate block for sales volumes greater than 10,000 gallons per month is $2.27 per 1,000 gallons, an increase of approximately 10% over the existing rate of $2.06. As a general rule, no rate should be below the incremental cost of treatment & disposal, as well as covering a percentage of fixed costs. As a test, an estimate of the incremental cost was developed resulting in a unit cost per 1,000 gallons of approximately $2.53. In this case, the increase to the second rate block would be approximately 22.8% To the extent that the second rate block increases by a greater than average increase, other rates will decrease correspondingly. In this case, the incremental increase to revenue from the second rate block will go to reduce the first rate block. The usage data is taken from the consumer usage analysis as shown in the Company rate filing. Commission’s design of the first rate block (10,000 gallons per month) is shown in Appendix C, Proof of Revenue. Using a first rate block of $6.59 per 1,000 gallons, revenue from metered sales and flat rate sales
Commission Calculated Depreciation Less Company Calculated Depreciation $63,007 (62,725) Adjustment Calculate Rate of Return on Equity $ 282 Capital Structure Debt 0.5 Cost 5.10% Equity 0.5 X% 0.5 x 5.10% + 0.5 x X = 8.07% X = 8.07% - 2.55% 50% X = 11% Appendix B R-2014-2419115 Manwalamink Sewer Company Rate Structure The Company’s rate structure consists of a Service Charge and a two block declining rate structure. Bills are rendered on a monthly basis. The objective of rate design is to ensure that no class of service results in subsidizing service to one class at the expense of another class. The Company’s proposed second rate block for sales volumes greater than 10,000 gallons per month is $2.27 per 1,000 gallons, an increase of approximately 10% over the existing rate of $2.06. As a general rule, no rate should be below the incremental cost of treatment & disposal, as well as covering a percentage of fixed costs. As a test, an estimate of the incremental cost was developed resulting in a unit cost per 1,000 gallons of approximately $2.53. In this case, the increase to the second rate block would be approximately 22.8% To the extent that the second rate block increases by a greater than average increase, other rates will decrease correspondingly. In this case, the incremental increase to revenue from the second rate block will go to reduce the first rate block. The usage data is taken from the consumer usage analysis as shown in the Company rate filing. Commission’s design of the first rate block (10,000 gallons per month) is shown in Appendix C, Proof of Revenue. Using a first rate block of $6.59 per 1,000 gallons, revenue from metered sales and flat rate sales
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