WUTC Summer Report to Haulers June 16, 2018 Danny Kermode CPA Regulatory Services Assistant Director Water and Transportation

WUTC Summer Report to Haulers June 16, 2018 Danny Kermode CPA Regulatory Services Assistant Director Water and Transportation

Disclaimer The opinions expressed in this presentation are my opinions as Assistant Director of the Water and Transportation Section. They do not necessarily reflect the opinions of the Washington Utilities and Transportation Commission or its commissioners.

Rulemaking TG-131255 Lurito Gallagher Model Update Inquiry into methods for setting rates for solid waste collection companies

Draft Recommendation on the methodology for deriving operating ratio

Draft Recommendation on the methodology for deriving operating ratio Presents updated results using two methods: Lurito Gallagher Method DuPont Formula Method Process Recommendations: Provides a period of time to review the models Provides for comments Convene Workshop(s) Technical Discussion

Letter from Council Member Lambert Commission Response

Reasons for Differences in the Costs of Service Service Area Density Mandatory Service Rural vs Urban Commercial Subsidization Rate Design Requirements Density of Commercial Accounts Lower Cost Areas Subsidize Higher Cost Areas Cannot reduce costs to one group without increasing the cost to another

Bear Proof Containers Ursus americanus kermodei Photo Credit: Fred Seiler

Waste Control, Inc. Issues Staff Guidance

Shared Utility Expenses Should allocated shared costs include costs that can be directly allocated to the cost causer? What allocator should be used?  

Shared Utility Expenses Should allocated shared costs include costs that can be directly allocated to the cost causer?

Shared Utility Expenses Should allocated shared costs include costs that can be directly allocated to the cost causer? What allocator should be used?  

Shared Utility Expenses

Shared Utility Expenses What allocator should be used? There is no Magic Allocator, each shared expense must be examined to determine a rational allocator that can be applied on a consistent basis.   Previously Assigned is an acceptable approach as a last Approach. Revenue is never an acceptable allocator.

Affiliated Land Rents What rents should be recognized for ratemaking purposes when the property being rented or leased is owned by an affiliate?

Affiliated Land Rents What rents should be recognized for ratemaking purposes when the property being rented or leased is owned by an affiliate? Fair Market Value for the Property Rented or Leased. The Use of the Property Rented or Leased MUST be prudent.

Rulemaking TG-130355 The Rate Filing Rules Rulemaking to consider revisions to WAC 480-07, relating to procedural rules

What is NOT a Rate Case Filing WAC 480-07-505(3)(b) General rate proceedings—Definition What is NOT a Rate Case Filing CURRENT - (b) Disposal fee pass-through charges for drop-box service, provided there are no affiliated interest relationships.

What is NOT a Rate Case Filing WAC 480-07-505(3)(c) General rate proceedings—Definition What is NOT a Rate Case Filing CURRENT - (c) Rate increases designed to recover government-imposed increases in costs of doing business such as changes in tax laws or ordinances.

WAC 480-07-505(3)(e) General rate proceedings—Definition What is NOT a Rate Case Filing NEW SECTION – Adjustment Mechanisms

NEW SECTION – Interim Rates WAC 480-07-520 General rate proceedings Solid waste collection companies. NEW SECTION – Interim Rates

NEXT STEPS IN THE RULEMAKING: CR 102 by the end of this month, Comments due by the end of July, Adoption hearing with an adoption order by end of August, Rules in place by the end of September.

Income Taxes for Flow-through Entities Imputed income Taxes for Ratemaking

What is a Flow Through Entity? Any Business form that, in itself, is not taxable Taxable income of the company flows-through directly to its owners S-corporations, Partnerships, Sole Proprietors, and certain Limited Liability Companies

What is NOT a Flow-Through Entity? Any Business form that, in itself, IS taxable Taxable income is first tax at the company level and then, after distribution to its owners it is taxed again. (Double Taxation) C-corporations, and certain Limited Liability Companies

Current Ratemaking Treatment Flow-Through Entities are allowed an allowance for income taxes at the 21 percent corporate rate even though the companies themselves do not pay income taxes.

Emerging Issues Increasing Fuel Costs / Surcharge or Tracker Increasing Recycling Costs Annual Reports

Questions or Comments? Thank you!