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

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

3. 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.

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

6. Draft Recommendation on the methodology for deriving operating ratio

7. 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

9. Letter from Council Member Lambert
Commission Response

11. 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

12. Bear Proof Containers Ursus americanus kermodei
Photo Credit: Fred Seiler

14. Waste Control, Inc. Issues
Staff Guidance

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

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

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

19. Shared Utility Expenses

20. 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.

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

22. 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.

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

26. What is NOT a Rate Case Filing
WAC (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.

27. What is NOT a Rate Case Filing
WAC (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.

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

29. NEW SECTION – Interim Rates
WAC General rate proceedings
Solid waste collection companies.
NEW SECTION – Interim Rates

30. 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.

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

33. 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

34. 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

35. 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.

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

37. Questions or Comments?
Thank you!