LETTER NO. L-8-02 ROBERT J. PELLATT SIXTH FLOOR, 900 HOWE STREET, BOX 250 COMMISSION SECRETARY VANCOUVER, B.C. CANADA V6Z 2N3 Commission.Secretary@bcuc.com TELEPHONE: (604) 660-4700 web site: http://www.bcuc.com BC TOLL FREE: 1-800-663-1385 FACSIMILE: (604) 660-1102 Log No. 477, 586, 621, 696 VIA FACSIMILE March 5, 2002 Mr. Ed Nielsen Dansk Alpine Developments Ltd. 101 - 1465 Pearson Place Kamloops, B.C. V1S 1J9 Dear Mr. Nielsen: Re: Sun Peaks Utilities Co., Ltd. (“SPUCL”) __Overhead Charges for Repair of Gas Line__ This is in response to your letter of complaint dated January 9, 2002 regarding SPUCL’s charges for gas line repairs on October 10, 2000, SPUCL’s January 23, 2002 reply and your February 5 and 14, 2002 letters. When calculating the bill for the repairs, SPUCL added an overhead charge of 25 percent or $320 to the contractor’s invoice amount. SPUCL’s approved tariff states that Other Contracted Services will be charged “At SPUCL’s Costs”, and defines SPUCL’s Costs as including “a reasonable allowance for SPUCL’s overhead costs”. At the time that the Commission was reviewing SPUCL’s tariff filing, SPUCL stated that it considered a reasonable allowance to be in the order of 15 to 25 percent on capital expenditures and 25 to 50 percent on labour and services, and that different allowances would be charged where justified by differences in the services provided. We understand that you have been provided with copies of this information. Overhead charges represent costs that are not chargeable to individual projects directly, and which are allocated to projects on a basis that is considered to be reasonable. In its January 23, 2002 letter, SPUCL provided information showing that its average overhead expenses in 2001 were considerably higher than the percentage ranges it had earlier identified as a reasonable allowance. In the letter, SPUCL recognized that its overhead percentage varies from year to year, and stated it intended to continue its billing practice of 15 to 25 percent on capital expenditures and 25 to 50 percent on labour and services. …/2
2 LETTER NO. L-8-02 Overhead costs vary from year-to-year and utility-to-utility. Nevertheless, to illustrate other utility practice, enclosed is Appendix “A” from the BC Gas Utility Ltd. (“BC Gas”) Transfer Pricing Policy for services provided to affiliated companies. For short-term “as required” services, BC Gas charges 10 percent general overhead plus a 20 percent availability charge. The Commission agrees with you that a standard 25 percent allocation may not be appropriate for all repairs, particularly a larger project. The approved tariff enables SPUCL to adjust the fee to suit the circumstances, and SPUCL will be expected to consider the situation when preparing invoices for future repair work. With regard to the overhead charge of 25 percent or $320 that SPUCL added in the case of your repair, the charge is reasonable in the circumstances and is consistent with SPUCL’s approved tariff. Therefore, the Commission denies your complaint regarding the overhead charge. Yours truly, Original signed by: Robert J. Pellatt JBW/mmc Enclosure cc: Pat Miller Manager, Utility Services Sun Peaks Utilities Co., Ltd. Complaints/SP-Cor/Nielsen-Chgs, Repair Gas Line
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