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Liberty Utilities
2016 General Rate Case (GRC)

 

Background 

Liberty Utilities serves approximately 49,000 electric customers in and around the Lake Tahoe Basin of California. 

On May 8, 2015, Liberty Utilities filed its General Rate Case (GRC) Application with the CPUC requesting to raise its customers’ rates for 2016. Liberty requests to increase its revenue requirement: 

  • 2016: $13.6 million (or 17.3%) increase over 2014 authorized rates  

Liberty requests CPUC authorization for $91.8 million in total revenue requirement, an increase from its current $78.3 million revenue requirement.

Liberty’s 2016 rate request is based on its forecasts of increases in these key cost areas:

  • Operation and Maintenance (O&M) Expenses: $17.2 million (an increase of $2.0 million).
  • Total Distribution Revenue Requirement: $16.5 million (a 58% increase). 
  • Net Capital Investment: $150.9 million (an increase of $33.5 million). 
  • Purchased Power: $40.9 million (an increase of $0.9 million).
  • Energy Efficiency: $95,000 (for a total annual program of $495,000).
  • Solar Incentive Program: $363,000 (A total of $2.18 million over six years for this new program).  
  • Vegetation Management Program: $23,000 (added to current $2.5 million annual program).

Liberty also seeks approval from the CPUC for authorized:

  • Return on Equity (ROE) of 10.5% (after taxes) – an increase from its current 9.875%
  • Overall Rate of Return (ROR) of 7.92% (after taxes) – and increase from its current 7.75%  

 

Supplemental Testimony

On March 30, 2016, the CPUC issued a Ruling directing Liberty to provide Supplemental Testimony on it use of the Safe Harbor accounting method related to repair of transmission and distribution. 

 

Proposed Settlement

On April 21, 2016, the CPUC requested a Table that compares Liberty's original position with ORA’s position and the proposed Settlement. A Settlement Conference was held on May 12, 2016.

On May 18, 2016, ORA and Liberty Utilities filed a joint Settlement Agreement with the CPUC, which would increase the utility's revenues for 2016 by $1 million (or 1.2%). This would bring Liberty's total revenue requirement to $79.3 million. The agreement would also require Liberty to:  

  • Decrease purchased power/ECAC costs by $10.0 million.  
      
  • Decrease its rate of return to 7.51%, down from its currently authorized 7.75%.  
      
  • Use a 10.0% return on equity, lower than its requested 10.5%.
      
  • Use a 47.5% debt/52.5% equity capital structure. 
      
  • Decrease O&M expenses request to $8.5 million and A&G expenses to $8.3 million. 
      
  • Reduce the residential customer charge to $6.56/month from its requested $7.67/month, as well as reductions for A-3 Large Commercial customers (e.g., hotels/ski operators) .
    • CARE customers charge would be reduced to $5.25/month 
     
  • Use rate increases of CPI-U minus 0.5% for 2017 and 2018.

The proposed Settlement accepts Liberty's proposed Solar Incentive Program.  

 

Public Participation Hearings were held in the Liberty service territory on January 7 and 8, 2016.

An Evidentiary Hearing was held on May 4, 2016 at the CPUC’s San Francisco headquarters.  

 

CPUC Final Decision

In November 2016, the CPUC issued its Final Decision adopting the Settlement Agreement.

 


ORA Position

ORA supports the Settlement Agreement because it provides Liberty with sufficient revenues to operate its system safely and reliably, as well as significantly reduces Liberty's initial request. The agreement reduces the Liberty 2016 revenue increase to 1.2%, compared with Liberty's original rate increase request of 17.3%. the settlement results in a 1.2% increase. The settlement also reduces Liberty’s rate of return, and provides a significant reduction in residential monthly customer charges.   

 

ORA's Analysis

ORA performed an in-depth review of Liberty’s proposal to determine whether the utility has sufficient resources to operate its system safely and reliably. ORA recommends an overall revenue increase of: 

  • 2016: $3.6 million (or 4.62%) over 2014 authorized rates 

Specifically, ORA recommends: 

  • A rate of return of 7.17%
  • An annual decrease to Energy Cost Adjustment Clause (ECAC) revenues of $3.7 million
  • An annual increase of $700,000 to amortize costs in its Catastrophic Events Memo Account (CEMA)
  • An annual increase of $70,000 for energy efficiency programs
  • An annual increase of $371,000 to implement a Solar Incentive Program
  • Liberty's residential customer charge remain at the current level of $7.10 per customer per month and reject Liberty’s proposed increase to $7.67 per month

ORA also recommends that Liberty should wait four years before filling its next rate case, instead of three years.     

See ORA’s November 9, 2015  Testimony.      

 

  See ORA’s June 11, 2015 Protest. 

 

CPUC Proceeding Docket

See the Proceeding docket for a full record of Liberty Utilities’ 2016 General Rate Case. 

At this docket you can also subscribe to receive regular proceeding updates. 

Other Resources

See ORA Archive of Liberty GRCs: