Appeals from the Order of the Pennsylvania Public Utility Commission, in case of Pennsylvania Public Utility Commission v. Equitable Gas Company, No. R-842769.
Robert P. Haynes, III, Assistant Consumer Advocate, with him, David M. Barasch, Consumer Advocate, for petitioner/intervenor, David M. Barasch, Consumer Advocate.
Charles E. Thomas, Jr., with him, Thomas T. Niesen, Lawrence B. Nydes and Amy M. A. Klodowski, Thomas & Thomas, for petitioner/intervenor, Equitable Gas Company.
Mark C. Morrow, Assistant Counsel, with him, Daniel P. Delaney, Chief Counsel, for respondent.
President Judge Crumlish, Jr., Judges Craig, MacPhail, Doyle, Barry, Colins and Palladino. Opinion by Judge Craig. Concurring and Dissenting Opinion by Judge Palladino.
[ 108 Pa. Commw. Page 328]
David Barasch, as Consumer Advocate, and the Equitable Gas Company cross-appealed from an order of the Public Utility Commission (commission) which permits Equitable to increase its service rates.
On January 4, 1985, the Equitable Gas Company filed Supplement No. 50 to its Tariff Gas-Pa. PUC No. 20. Equitable's filing proposed changes in its rates, rules and regulations to produce an increase in annual revenues of $36,372,000 for retail gas service. The commission suspended Supplement No. 50 and began an investigation of the proposed rate change.
On March 1, 1985, Equitable filed, pursuant to section 1307(f) of the Public Utility Code, 66 Pa. C.S. § 1307(f), an addendum to Tariff Gas-Pa. PUC No. 20, to become effective September 1, 1985. With that filing, Equitable sought to recover purchased gas costs including gas cost experienced during the period July 1, 1983 through December 31, 1984 and projected costs estimated to be incurred during the period September 1, 1985 through August 31, 1986.
The commission consolidated hearings relating to investigations on both filings before Administrative Law Judge Klovekorn.
On August 29 and September 30, 1985, the commission issued orders which authorized Equitable to recover $353,000,634 in Pennsylvania jurisdictional operating revenues, excluding state tax, adjustment
[ 108 Pa. Commw. Page 329]
surcharge and gas cost revenues. This order increased the company's annual revenues by $26,007,000.
The Consumer Advocate contends that the commission improperly refused to deduct, from Equitable's rate base, cash working capital supplied by ratepayers and that the commission failed to recognize that the amount of "unaccounted-for gas" which Equitable claims as an expense is excessive. Equitable counters those contentions of the Consumer Advocate, and, in a cross-appeal, maintains that the commission erred in adopting a $417,000 adjustment to net income from the test year for Equitable's "rate 5" sales. Equitable also contends that the commission's decision to defer its analysis of Equitable's transportation revenues until Equitable's next rate case was in error.
Our scope of review in this case is limited to a determination of whether there has been a constitutional violation, an error of law or whether the findings of fact are supported by substantial evidence. Barasch v. Pennsylvania Public Utility Commission, 507 Pa. 561, 493 A.2d 653 (1985).
A. CONSUMER ADVOCATE'S APPEAL
Cash working capital is the amount of cash required to operate the utility between the rendition of service and the receipt of payment. City of Pittsburgh v. Pennsylvania PUC, 370 Pa. 305, 88 A.2d 59 (1952). Where investors supply funds to the utility to bridge the gap between the time the service is rendered and payment for that service is received, the utility has a "positive" cash working capital requirement. Conversely, where a utility receives payment for services before it must satisfy a corresponding liability, the utility has a "negative" cash working capital requirement.
[ 108 Pa. Commw. Page 330]
Equitable's proposed rate increase is based, in part, on a positive cash working capital requirement of $2,312,853 -- a component of Equitable's rate base. Equitable's cash working capital requirement is based on the number of days before (lead) or after (lag) customer payments are received relative to Equitable's payments for four categories of expenses:
Total Daily (Lead) Working
Adjusted Amount Lag Capital
Costs $210,302 $575 (6.67) ($3,833)
Payroll Costs 46,266 126 18.05 2,282
Than Payroll 39,212 107 ...