IN THE MATTER OF THE UTILITIES COMMISSION ACT, SBC 1980, c. 60 and IN THE MATTER OF AN APPLICATION BY PRINCETON LIGHT AND POWER COMPANY, LIMITED Decision March 24, 1981
TABLE OF CONTENTS Page APPEARANCES (i) LIST OF EXHIBITS (ii) I. INTRODUCTION 1 II. TEST PERIOD 3 III. RATE BASE 4 IV. COST OF SERVICE EXCLUDING RETURN 5 V. RETURN 7 VI. TARIFFS 8 VII. ORDER 10 SCHEDULES I (A) , (B) SCHEDULES II (A) , (B) SCHEDULES III (A), (B) SCHEDULES IV (A), (B)
The Application of Princeton Light and Power Company, Limited dated October 31, 1980 for authorization to amend its filed tariffs concerning the rates to be charged for electric service was heard in public in Princeton, British Columbia on Wednesday, January 21, 1981. The Division of the Commission which heard the Application was comprised of M. Taylor, Chairman; R. Smith, Deputy Chairman; and J.D.V. Newlands, Commissioner.
APPEARANCES K.C. r.tiACKENZIE Commission Counsel D.H. BELL-IRVING For Applicant, Princeton Light and Power Company, Limited HEARING SECRETARY A.C. Michelson COMMISSION STAFF W.J. Krampl J.A. Hodson COURT REPORTER Audiotron Enterprises Ltd. (W.G. Bemister) ( i)
LI OF EXHIBITS Exhibi No. British Columbia Utilities Commission Order No. U-G-12-80 1 Affidavit of Graham Gould including Exhibits "A", "B" and "C" pertaining to publication of Notice of Public Hearing; Mailing of Customer Notices; and sample envelope 2 Princeton Light and Power Company, Limited Tariff Application dated October, 1980 3 November 27, 1980 letter, R.J. Fletcher (B.C.U.C.) to D.H. Bell-Irving requesting additional data pertaining to revised filing (1981 and 1982 fiscal information using available normalized actual and forecast data and a mid-year Rate Base and Capital Structure) 4 January 7, 1981 letter, D.R. Bonner, C.A. to B.C.U.C. enclosing corrections to Application dated October, 1980 5 December 23, 1980 letter, R.J. Fletcher (B.C.U.C.) to D.R. Bonner, C.A. requesting additional information 6 January 7, 1981 letter, D.R. Bonner, C.A. to R.J. Fletcher enclosing response to December 23, 1980 Fletcher request 7 Supplement to Tariff Application (filed January 8, 1981) 8 January 7, 1981 letter, R.J. Fletcher to D.R. Bonner, C.A. requesting additional information 9 January 9, 1981 letter, D.R. Bonner, C.A. to R.J. Fletcher in response to January 7, 1981 request 10 (ii)
I. INTRODUCTION Background Princeton Light and Power Company, Limited is a closely held investor-owned electric distribution utility which has provided service to the Village of Princeton and the immediate surrounding areas for in excess of 60 years. Princeton is a community of approximately 5,500, situated at the junction of the Tularneen and Sirnilkarneen Rivers, approximately 300 kilometres east of Vancouver. The Company purchases its electricity requirements from West Kootenay Power and Light Company, Limited ("West Kootenay") pursuant to Schedule 45. This Schedule includes three interim increases awarded West Kootenay which are subject to refund depending on the results of the West Kootenay hearing. Although the electricity is purchased from West Kootenay the actual supply may be corning from either West Kootenay or the British Columbia Hydro and Power Authority as a result of a recent interconnection of the systems. This interconnection by West Kootenay has significantly increased the security of service not only to Princeton but also to other areas within the south Okanagan served by West Kootenay. 1
2 In 1979 the Company completed the construction of approximately 27 kilometres of distribution line at a total cost of approximately $323,000 to provide service to approximately 110 customers. It is anticipated that additional customers will be supplied as building lots are sold and homes constructed. The primary industries in che Princeton area are the Weyerhaeuser lumber mill and adjacent to Princeton the copper mining facilities of Newmont Mines Ltd. The Company on October 31, 1980 filed an Application seeking both interim and permanent relief. This Application was predicated upon a historical year ended March 31, 1980 annualized and normalized. The Commission by Order No. U-G-12-80 dated November 25, 1980, granted the interim relief sought, subject to refund after hearing, with interest at 12% per annum. The interim relief sought and granted represented 80% of the final relief applied for. This Order, in addition to granting the interim relief, established a hearing date of January 21, 1981 and directed the Applicant to mail copies of the customer notice to each of its customers under separate cover.
3 In response to a request from the Commission the Applicant filed actual and estimated data for the year ending March 31, 1981 and a forecast for the year ending March 31, 1982. The Applicant at the hearing was represented by Mr. John Barr Hall, Vice-President, as its policy witness, supported by Mr. Graham Gould, General Manager, Mr. David Bonner, C.A., Partner of Dunwoody & Co. as its accounting and financial witness and Mr. M.A. Thomas, Chairman of M.A. Thomas & Associates, as its electrical consultant. Subsequent to the hearing an increase in electric service rates was granted to West Kootenay permitting West Kootenay to recover the cost of increased water fees which became effective January 1, 1981. This matter is incorporated in this Decision. II. TEST PERIOD The Applicant initially provided a test year ending March 31, 1980 but this was subsequently revised to a test year ending March 31, 1981 and a test year extending to March 31, 1982. The Commission believes that, considering the impact of inflation, the need to provide a reasonable opportunity for the investors to earn the approved return, and the need to
4 minimize the cost of rate proceedings, the test period ending March 31, 1982 is appropriate. Even though a test period extending to March 31, 1982 has been adopted, the Commission during the course of its deliberations has considered what would be the appropriate rates to be in place in each of the fiscal years. That is to say, what would the appropriate rates be in the fiscal years ending March 31, 1981 and 1982. III. RATE BASE The Applicant in Exhibit 8 provided data in support of its 1981 rate base of $1,081,702 and its 1982 rate base of $1,124,263. The Commission has considered the material tendered and the evidence given, and accepts the rate bases proposed by the Applicant with the exception that adjustments have been made to reflect the impact of a revised lead/lag study, the inclusion of a portion of the unamortized rate case expenses in the rate base, the inclusion of the unamortized balance of contributions in aid of construction in the capital structure as no cost capital (with amortization to commence in the 1982 fiscal year), the adjustment required in the overhead capitalization policy, and costs relating to engineering studies.
5 With regard to the capitalization of overhead, the Commission believes that the overhead capitalization percentage should relate to the percentage of direct labour in construction, which the Applicant shows to be 30% in 1981 and 1982. This percentage should be applied to administrative and general accounts such as administration and accounting salaries, pensions, employee benefits, and office supplies. With regard to the cost of engineering studies preliminary to construction, the Commission believes that such costs should be charged to the facilities ultimately constructed, and therefore believes that the costs incurred in the year ended March 31, 1980 relative to the Osprey Lake preliminary engineering studies should be capitalized. Further adjustments were made in the 1981 and 1982 test years to recognize this concept. The respective rate bases are set out on Schedules I(A) and I(B). IV. COST OF SERVICE EXCLUDING RETURN The Commission has considered the material submitted by the Applicant as well as the impact of increased charges from West Kootenay which became effective February 16, 1981.
6 The Commission adjustments are set out on Schedules II(A) and II(B). In addition to the adjustments made the Commission is concerned with the rate hearing costs by this Company. In the interest of reducing these costs in the future the Commission will develop minimum filing guidelines. However, the Commission believes that the Applicant should review its own operation with the view to dramatically reducing the use of outside consultants. The Commission accepts the Applicant's argument that it is only a small utility but nevertheless, a point is reached when it is cheaper to employ in-house expertise in preference to consultants. The Commission has permitted the cost of the hearing to be written off over three years and has included in the rate base a portion of the unamortized rate hearing costs. This portion has been determined using a ratio of the allowed revenue increase over the requested increase exclusive of the most recent West Kootenay increase.
7 V. RETURN The Applicant has proposed that a 17% return be granted on the common equity component which comprises 55% of the capital structure as at March 31, 1982. The Commission has considered the capital structure and the 17% return on equity requested and has decided to reduce the return on equity to 16%. Furthermore, the Commission believes that the capital structure includes an excessive amount of common equity and accordingly has reduced this component to 35% of the capitalization with the balance imputed as additional preferred stock at 12%. With regard to the short-term debt, this has been included in the capital structure at the actual cost incurred in the year ended March 31, 1981 and at a deemed cost of 15% for the year ending March 31, 1982. If the actual cost in 1982 exceeds the deemed amount the difference should be recorded in a deferred rate base account. Similarly, if the amount is less than the 15% the account will be credited.
8 In adopting a rate of 15% the Commission has considered the absence of substantial administrative charges, the size of the utility, and the resultant difficulty of access to the financial markets. VI. TARIFFS The Commission has determined that the existing interim rates are just and reasonable for the fiscal year ending March 31, 1981 and a refund is not required. Effective on and after April 1, 1981, the Commission accepts the proposed amendments to the filed tariff which make provision for a basic service charge in Schedules A, B, C, D, G, J and K. In the fiscal year ending March 31, 1982 a further increase is required, effective April 1, 1981, to recover the increased charges from West Kootenay, which resulted from the increase in water fees. This latter increase should be recovered by adding approximately .1¢/kwh to the existing interim rates which are the final rates with the exception of that portion which is subject to refund pending a Commission decision on the West Kootenay interim rates.
9 DATED at the City of Vancouver, in the Province of British Columbia, this 24thday of March, 1981. M. . / I J.D.V. Newlands, Commissioner
,s-r. COf..u. ~ ~ ,._ ~~ ... . {l:;j "'.,.., 'l",;,ii >" c ;...>. ~ ,! -~ ' 0 ~ 1: ,, ..., q ")),~ ~ .., ~ er;::DEM s cotJ\"'' ~ ,. " ,_ PROVINCE OF BRITISH COLUMBIA BRITISH COLUMBIA UTILITIES COMMISSION IN THE MATTER OF the Utilities Commission Act, SBC 1980, c. 60 and IN THE MATTER OF an Application by Princeton Light and Power Company, Limited BEFORE: M. Taylor, Chairman; R. Smith, March 24, 1981 Deputy Chairman; and J.D.V. Newlands, Commissioner 0 R D E R WHEREAS Princeton Light and Power Company, Limited ("Princeton Light") applied October 31, 1980 as amended January 8, 1981 for both interim and permanent rate relief; and WHEREAS Commission Order No. U-G-12-80 authorized the implementation of amended tariff rate schedules effective with customer billing issued on or about November 30, 1980, with the interim increase subject to refund with interest at 12% per annum pending a public hearing; and WHEREAS a public hearing of Princeton Light's Application was heard at Princeton, B.C. on January 21, 1981; and ... /2 TWENTY FIRST FLOOR 1117 WEST HASTINGS STREET VANCOUVER S C V6E 2L7. CANADA TELEPHONE !604\ 689-1831. TELEX 04-54536
2 G-24-81 WHEREAS the Commission has considered the Application and the evidence adduced thereon and finds that Princeton Light has justified the interim rates which became effective on or about November 30, 1980 and that those interim rates augmented by .106 cents/kwh should be the permanent rates to become effective April 1, 1981, all as set forth in a Decision issued concurrently with this Order. NOW THEREFORE the Commission hereby orders Princeton Light and Power Company, Limited as follows: 1. The rate base for Princeton Light for the test periods are: March 31, 1981 $1,529,197 March 31, 1982 $1,601,135 2. The total cost of service including the return on capital employed for the test periods are: March 31, 1981 $1,082,745 March 31, 1982 $1,233,093 3. The Commission will accept for filing effective with consumption on and after April 1, 1981, subject to timely filing, amended tariff rate schedules which will permit Princeton Light to generate the annual gross revenue requirement of $1,233,093 as set out in Schedule II(B) of the Commission Decision dated March 24, 1981. The amended tariff rate schedules will incorporate a service charge as described in the Decision, and a reconciliation schedule must be filed concurrently. DATED at the City of Vancouver, in the Province of British Columbia, this 24th day of March, 1981. BY ORDER J/~~ Chairman
PRINCETON LIGHT AND POWER COMPANY, LIMITED Forecast Depreciated Rate Base for the year ending March 31, 1981 Mean Depreciated Plant in Service Less: Mean Contributions in Aid of Construction Mean Depreciated Plant Value Unamortized Rate Hearing Costs (pro-rated) Allowance for Working Capital: - Investment in cash operating expenses - Inventory (mean) - Less: mean customer deposits Mean Depreciated Rate Base SCHEDULE I (A) Per Application Commission Final Exhibit 8 Adjustments Balance $1,452,286 (a) $ 6,348 $1,461,424 (b) 2,790 (436,180) (c) 436,180 1,016,106 445,318 1,461,424 (d) 9,631 9,631 22,935 (d) (7,454) 15,481 49,511 491511 (6,850) (6,850) 65,596 (7,454) 58,142 495
POWER COMPANY LIMITED Notes to Schedule I (a) Adjustment of 1981 overhead capitalized on the basis of 30% of crew wages charged to capital. 1981 Accounting and administrative salaries, Pension, Office supplies and Employee benefits 86 968 Capitalized at 30% $26,090 Capitalized per Exhibit 8 l3, 394 Adjustment required 696 Mean 6 348 (b) To adjust rate base for the capitalization of engineering consulting costs. 1980 $1,100 1981 $3,419 Less depreciation __- --1 .. 9 :~ $3,380 1,690 2 2 790 (c) To add back contributions in aid of construction to depreciated rate base. These contributions have been included in the capital structure as no cost capital (see Schedule IV (A)). (d) Provision for unamortized rate hearing costs, prorated using a ratio of the allowed revenue increase over the requrested increase.
Notes to Schedule I Balance, beginning of year Amortization (3 years) Rate Hearing Costs Balance, end of year Mean Allocation 7.58% 15.0% X $19,060 (e) Adjustment of power purchases to 35 lag days. Revenue lag days Power purchases extension per Exhibit 3 (30 days) Power purchases extension at 35 days Adjustment Average expenses extension per Exhibit 3 Weighted average lag $20,423,592 Average expenses per Exh.3 $ Difference 7.08 365 X $725,552 Per Exhibit 8, 1981 1980 allowance for cash working capital plus 10%. $14,074 X 1.1 Exhibit 8 allowance for cash working capital Adjustment required (A) (cont'd) 1981 $ (19,060) 57,179 631 35.23 $13,968,930 16,297,085 2,328,155 18,095,437 28.15 725,552 7.08 14 074 $15,481 22,935
LIGHT AND LIMITED Forecast Statement of Earned Return for the year ending March 31, 1981 Per Application Commission Final Exhibit 8 Adjustments Balance Residential $ 363,805 (a) $36,528 $ 400,333 Commercial 266,630 (a) 26,771 293,401 Industrial - primary 293,448 (a) 29,464 322,912 - secondary 49,041 (a) 4,924 53,965 Street Lights 11,027 (a) 1,107 __1 ::.:::2~ 983,951 98,794 1,082,745 Less discounts 85,702 (a) _8:~.:::..:::.. 94,298 ----' 898,249 90,198 988,447 Other Income 16,196 16,196 914 A45 90,198 1,004,643 Purchased power 528,524 (b) 24,482 553,006 Maintenance - wages 58,123 58,123 - other 5,300 5,300 Transportation 7,885 7,885 Administration & Accounting salaries 50,706 50,706 Pension 18,392 18,392 Directors fees 9,500 9,500 Provincial taxes 8,735 8,735 Municipal taxes 10,018 10,018 Office supplies 10,000 10,000 Professional services 18,226 18,226 Engineering consulting 5,380 (c) (3,419) 1, 961 Miscellaneous 2,309 2,309 Insurance 6,923 6,923 Advertising 300 300 Employee benefits 7,870 7,870 Bad debts 600 600 Regulatory Commission 75 75 Travel 3,000 3,000 Depreciation 70,060 (d) 39 70,099 Amortization of rate hearing costs (c) 19,060 19,060 Construction overhead capitalized (13,394) (f) (12,696) (26, 090) 808,532 27,466 835,998 Utility Income before Income Taxes 105,913 62,732 168,645 Income Taxes 18,488 2,589 2l,077 Earned Return $ 87,425 60 143 568 Depreciated Rate Base 081 702 197 Rate of Return on Rate Base 8.08% 9.65%
LIGHT AND LIMITED Notes to Schedule II (a) Pro-ration of revenue deficiency and adjustment to customer discounts. (b) Adjustment for January 1, 1981 West Kootenay Power cost of power interim increase. Estimated 1981 purchases 48,502,300kwh Increase in cost/kwh .2019¢/kwh $97 ,926 X 3/12 Adjustment required 482 (c) To capitalize a portion of engineering consulting expense (see Note (b), Schedule I (A)). (d) Depreciation on 1981 Engineering consulting capitalized. (e) Amortization of rate hearing costs (see Note (d), Schedule I (A)). (f) Adjustment of construction overhead capitalized (see Note (a), Schedule I (A) ) .
PRINCETON LIGHT AND Forecast Income Taxes for the Application Exhibit 8 Utility Income before Taxes $105,913 Add: Depreciation Amortization of rate hearing costs 175,973 Deduct: Capital cost allowance Rate hearing costs Interest on long term debt Interest on bank loan Overhead capitalized Removal costs re plant retired 104,177 Taxable Income $ 71,796 Tax thereon: Federal @15.75% $ 11,308 Provincial @10% March 31 1981 Per Commission Final Adjustments Balance $62,732 $168,645 70,060 (a) 39 70,099 (b) 19,060 060 81,831 257,804 56,658 56,658 (c) 57,179 57,179 15,750 15,750 16,875 (d) 1,901 18,776 13,394 (e) 12,696 26,090 1,500 1,500 71,776 175,953 10 005 $ 81,851 $ 1,584 $ 12,892 7,180 1,005 8,185 $ 2,589
PRINCETON Notes to Schedule III (A) (a) Depreciation adjustments per Note (c), Schedule II (A). (b) Amortization of Rate Hearing costs (Note (c), Schedule I (A)). (c) All rate application costs deducted for income tax purposes. (d) Increase in interest on short term bank loan as a result of changes to rate base (see Schedule I (A)). (e) Overhead adjustment per Note (a), Schedule I (A).
PRINCETON LIGHT AND POWER COMPANY, LIMITED Forecast Capital Structure for the year ending March 31, 1981 Per Application Commission Exhibit 8 Adjustments Long Term Debt Debenture $ 150,000 Customer Advances 10,2~2 Contributions in Aid of Construction (a) $436,180 Bank Loan 100,250 (b) ll, 315 Preferred Shares 9% Class B 232,500 Deemed (c) 53,521 Common Share Equity 588,740 (c) (53,521) $447,495 SCHEDULE IV (A) Final % of Embedded Cost Balance Capital Cost Component $150,000 9.81 10.5% 1.03% 10,212 .67 0 0 436,180 28.52 0 0 111,565 7.30 16.83% 1. 23% 232,500 15.20 9.00% 1.37% 53,521 3.50 12.00% .42% 535,219 35.00 16.00% 5. 60% 100.00 -9.6 -51
Notes to Schedule IV (A) (a) To include the mean unamortized balance of contributions in aid of construction in the capita] structure. Beginning balance $433,129 Additions during the year 6,101 Ending balance Mean (b) To increase bank loan to balance the capital structure with rate base. (c) Adjustment to reflect common share equity at 35% with the balance deemed to be preferred share equity.
SCHEDULE I (B) LIGHT AND POWER COMPANY LIMITED Forecast Depreciated Rate Base for the year ending March 31, 1982 Per Application Commission Final Exhibit 8 Adjustments Balance Mean Depreciated Plant in Service $1,491,603 (a) $ 19,600 $1,517,327 (b) 6,124 Less: Mean Contributions in Aid of Construction (440,680) (c) 440,680 Mean Depreciated Plant Value 1,050,923 466,404 1,517,327 Unamortized Rate Hearing Costs (pro-rated) (d) 18,666 ___18 ,§66 Allowance for Working Capital: Investment in cash operating expenses 25,228 (e) (8,198) 17,030 Inventory (mean) 54,462 54,462 Less: mean customer deposits (6,350) (6,350) 73,340 65,142 Mean Depreciated Rate Base 3 872
PRINCETON LIGHT AND POWER COMPANY, LIMITED Notes to Schedule I (a) Adjustment of 1981 and 1982 overhead capitalized on the basis of 30% of crew wages charged to capital. Accounting and administrative salaries, Pension, Office supplies and Employee benefits Capitalized at 30% Capitalized per Exhibit 8 1982 Adjustment to Depreciated Plant in Service, April 1, 1981 Adjustment to Depreciated Plant in Service, March 31, 1982: 1981 Adjustment 1982 Ad Depreciation on 1981 Adjustment Mean (b) To adjust rate base for the capitalization of engineering consulting costs. Amount capitalized 1980 1981 1982 Less ciation Mean (c) To add back contributions in aid of construction to depreciated rate base. These contributions have been included in capital structure as no cost capital (see Schedule IV(B)). (d) Provision for unamortized rate hearing costs, prorated using a ratio of the allowed revenue increase over the requested increase. 1981 1982 $26,090 $28,227 13,394 13,970 $14,257 $12,696 $12,696 14,257 450 26,503 19 600 $ 1,100 3,419 3,368 158 3,210 ;. 2 605 6 124
Notes to Schedule I (B) Balance, beginning of year Amortization (3 years) Rate Hearing Costs Balance, end of year Mean Adjustment to rate base 99 498 $152,403 X $28,589 = (e) Adjustment of power purchases to 35 lag days. Revenue lag days Power purchases extension per Exhibit 3 (30 days) Power purchases extension at 35 days Adjustment Average expenses extension per Exhibit 3 Weighted average lag Average expenses per Exh. 3 Difference 7.08 365 X $725,552 = Per Exhibit 8, 1982 1980 allowance for cash working capital plus 10% per year. ($14,074x Ll) 1.1 Exhibit 8 allowance for cash working capital Adjustment required (con 'td] 1981 1982 $ - $38,119 (19 ,060) (19,060) 57 $19,059 $28,589 18 666 35.23 $13,968,930 16,297,085 2,328,155 18,095,437 28.15 7.08 14 074 $17,030 25,228
SCHEDULE II (B) LIGHT AND POWER LIMITED Forecast Statement of Earned Return for the year ending March 31, 1982 Per Application Commission Final Exhibit 8 Adjustments Balance SALES Residential $ 43 7' 389 (a) $ 22,728 $ 460,117 Commercial 319,517 (a) 16,606 336,123 Industrial - primary 344,813 (a) 17,921 362,734 - secondary 57,967 (a) 3,015 60,982 Street Lights 12,491 (a) 646 13,13 7 1,172,177 60,916 1,233,093 Less discounts 102,101 5 107,392 1,070,076 55,625 1,125,701 Other income 16,000 16,000 1,086,076 --55 -,62 -5 1 EXPENSES Purchased power 554,010 (b) 99,781 653,791 Maintenance - wages 64,402 64,402 - other 5,830 5, 830 Transportation 8,673 8,673 Administration & Accounting salaries 54,760 54,760 Pension 19,996 19,996 Directors' fees 10,000 10,000 Provincial taxes 14,660 14,660 Municipal taxes 11,721 11,721 Office supplies 11,000 11,000 Professional services 17,500 17,500 Engineering consulting 5,300 (c) (3,368) 1,932 Miscellaneous 2,518 2,518 Insurance 7,615 7,615 Advertising 350 350 Employee benefits 8,334 8,334 Bad debts 600 600 Regulatory Commission 75 75 Travel 3,300 3,300 (d) Depreciation 74,328 (e) 59,563 (f) Amortization of rate hearing costs 25,500 (g) 19,060 Construction overhead capitalized (13,970) (h) (28,227) 886,502 60,951 947,453 Utility Income before Income Taxes 199,574 (5,326) 194,248 Income Taxes 3 4, 889 1,967 36,856 Earned Return 392 Depreciated Rate Base $1,124,263 $1,601,135 Rate of Return on Rate Base 14.65% 9.83%
PRINCETON LIGHT AND POWER COMPANY, LIMITED Notes to (a) Pro-ration of additional revenue requirement and adjustment to customer discounts. (b) Adjustment for January 1, 1981 West Kootenay Power cost of power interim increase. Estimated 1982 purchases 49,421,050kwh Increase in cost/kwh Adjustment required $ 99 ( 781 (c) To capitalize a portion of engineering consulting expenses. (d) Depreciation on 1980 and 1981 engineering consulting expenses capitalized (see Note (b), Schedule I (B)). (e) Amortization of contributions in aid of construction (see Note (a), Schedule IV (B)). (f) Depreciation of 1981 overhead capitalized (see Note (a), Schedule I (B)). (g) Adjustment to amortization of rate hearing costs (see Note (d), Schedule I (B)). (h) Adjustment of construction overhead capitalized (see Note (a), Schedule I (B)).
SCHEDULE III (B) PRINCETON LIGHT AND POWER COMPANY, LIMITED Forecast Income Taxes Per Application Commission Final 8 ustments Balance Utility Income before Income Taxes $199,574 $ (5,326) $194,248 Add: Depreciation 74,328 (a) (14,765) 59,563 Amortization of rate hearing costs - (b) 19,060 19,060 74,328 4,295 ~623 Deduct: Capital cost allowance 57,657 57,657 Unamortized portion of estimated rate application costs 25,500 (c) (25,500) Interest on long term debt 15,750 15,750 Interest on bank loan 24,035 (d) 1,522 25,557 Overhead capitalized 13,970 (e) 14,257 28,227 Removal costs re plant retired 1,500 500 138,412 128,691 Taxable Income $ 8,690 $144,180 Tax Thereon: Federal @15?6 $ 20,324 $ $ 21,627 plus surtax 1,016 (f) 21,340 1,098 22,438 Provincial @10% 13,549 869 ~418 $ 34,889 $ 1,967 $ 36,856
PRINCETON LIGHT AND POWER COMPANY, LIMITED Notes to Schedule III(B) (a) Amortization of Customer contributions (Note (a) , Schedule IV (B)). $ (15,373) Depreciation of 1981 overhead capitalized (Note (a), Schedule I (B)). 450 Depreciation of 1980 and 1981 engineering consulting expenses capitalized 158 $ (14 '765) (b) Amortization of Rate Hearing costs (Note (b), Schedule I (B)). (c) All rate application costs were deducted in 1981 for income tax purposes. (d) Increase in interest on short term bank loans as a result of changes to rate base (see Schedule I (B)). ) Overhead adjustment per Note (a), Schedule I (B)). (f) The 5% Federal surtax is slated to end December 31, 1981, hence the rate has been reduced to an effective rate of 3.75% (i.e. 9/12 X 5%).
PRINCETON LIGHT AND POWER COMPANY, LIMITED Forecast Capital Structure for the year ending March 31, 1982 Per Application Commission Exhibit 8 Adjustments Long Term Debt Debenture $150,000 Customer Advances 14,746 Contributions in Aid of Construction (a) $432,994 Bank Loan 126,500 (b) Preferred Shares 9% Class B 210,000 Deemed (c) Common Share Equity 623,017 (c) (62,620) $1,124,263 SCHEDULE IV (B) Final % of Embedded Cost Balance Capitalization Cost Component $150,000 9. 3 7 10.5% .98% 14,746 .92 432,994 27.04 43,878 170,378 10.64 15.0% 1. 60% 210,000 13.12 9.0% 1.18% 62,620 62,620 3.91 12.0% . 4 7% 560,397 35.00 16.0% 5.60% $1,601,135 100.00 83%
PRINCETON LIGHT AND POWER COMPANY, LIMITED Notes to Schedule IV (B) (a) To include the mean unamortized balance of Contributions in Aid of Construction in the capital structure. Beginning balance $439,230 Amortization @3.5% (15,373) Additions during the year 2,900 Ending balance 7 Mean (b) To increase bank loan to balance the capital structure with rate base. (c) Adjustment to reflect common share equity at 35% with the balance deemed to be preferred share equity.
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