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r cc���� <br />DEC �. 1979 Box 42 PAGE 2,69 <br />1 13.2% plus a 5% factor included to represent the spread between <br />2 the cost of debt and equity capital. This factor is included <br />3 to recognize differences in risk between a debt and equity <br />4 capital position. However, I want to point out that based on <br />5 the revenues requested in this rate case, the water and sewer <br />6 operations will still sustain a net operating loss and, there - <br />7 fore, there will be no return on the investment. <br />8 <br />9 Q. Mr. Fancher, have you prepared a schedule which shows the <br />10 effects of the requested level of revenues and its results <br />11 on the operations of the company? <br />12 A. Yes I have. If you will turn to attachment 2 of Exhibit "2", <br />13 you will see the constructed statement of operations for both <br />14 water and sewer operations for the test year ended December <br />15 31, 1978. Column 1 shows the per book results of operations <br />16. for the test year and the various components of the expense <br />17 items. For water operations we had operating revenues of <br />18 $22,000.00. The related expenses are broken up into the <br />19 following categories: operation of $44,000.00; maintenance of <br />20 $7,000.00; depreciation of $9,000.00; and taxes other than <br />21 income taxes of $4,000.00. Total expenses incurred during the <br />22 test year were $64,000.00, which resulted in a net operating <br />23 loss of $42,000.00. In column 2 we have adjustments to reflect <br />24 that portion of plant which is not considered used and useful <br />25 in providing service to the customers. The total adjustments <br />26 in that column reduce the net operating loss by $2,000.00 so <br />27 that the adjusted statement of operations for the test year <br />