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BOHM 1100E, <br />800 58 w�. 83 <br />9. At the original rate hearing, Breezy Village Utilities was not <br />:prepared and because of this incurred (7 <br />rate case expenses <br />at the cost of the consumer. The rate case expense of $12,000 <br />is high for a utility of this size and, therefore, the staff <br />recommends that only fifty percent of this should be absorbed <br />by the consumer and that it be amortized over three years instead <br />of two. The net affect is the rate expense would be $2,000 <br />instead of $6,000. <br />10. The income tax calculation did not include any offsetting <br />adjustment for investment credit. However, it is understood <br />the investment tax credits are not for the purpose of rate <br />relief. <br />11. Breezy Village Utilities has requested a 13.09% rate of return. <br />Staff recommends that if after the public hearing the commission <br />feels that the Utility was operated under prudent and economical <br />management that they be allowed a maximum of 12% rate of return. <br />If the opinion is that the Utility has not used prudent and <br />economical management, it is recommended that rate of return not <br />be permitted for one year. <br />The staff established the following revenue requirement scenarios <br />based on specific circumstances. In each scenario, taxes are only <br />estimated since there was not enough information to compute them <br />exactly. <br />Utility Proposed Rate Request <br />Total. Operating Expenses $34,200 <br />Provision for Income Taxes 1,712 <br />Return on -Rate Base 8,286 <br />(63,386 X 13.07%) <br />Total Revenue Requirement $44,198 <br />Scenario 1• <br />Proposed Rate Request Modify <br />Extraordinary repairs amortized over 5 years instead of 3; rate case <br />expense over 3 years instead of 2 years; and 121 rate of return on <br />Rate Base: <br />Total Operating Expenses $313488 <br />Provision for Income Taxes 1,549 <br />Return on Rate Base 7,606 <br />(63,386 X 12%) <br />Total Revenue Requirement $40,643 <br />Scenario 2: <br />Proposed Rate Request Modify <br />Repairs amortized over 5 years; 50% of rate case expense amortized over <br />3 years; and 12% rate of return: <br />Total,Operating Expenses $29,448 <br />Provision for Taxes 1,549 <br />Return on Rate Base 7,606 <br />(63,386 X 12%) <br />Total Revenue Requirement $38,603 <br />30 <br />- M _ <br />