Revised May 26, 1998 Agenda Date: May 27, 1998 Item Number: 3A Docket: TG-980572 Company Name: Harold Lemay Enterprises, Inc., G-98 d/b/a Rural Garbage Service Staff: Nicki Johnson, Revenue Requirements Specialist Penny Hansen, Public Involvement Coordinator Recommendation: Approve the revised filing by Harold LeMay Enterprises in Docket TG-980572 with staff recommended rates to become effective June 1, 1998. And issue an order approving the company’s request to establish a deferred accounting methodology for the sale of recycle commodities.. Discussion: On April 17, 1998, Harold LeMay Enterprises (Rural Garbage Service) filed for increased solid waste rates and residential recycling rates. Present garbage rates have been in effect since January 1995, and recycling rates have not changed since the program began in 1991. Rural Garbage serves about 3,200 customers in southern Thurston County in and around the City of Yelm. Rural Garbage is run out of the Pierce County Refuse operations and is about ten percent of the total company. The Commission received one letter opposed to the filing. The customer believes the proposed rates for once a week pickup of a three yard container is excessive. The proposed solid waste rates would generate revenues of approximately $68,900. Staff findings indicate that the company needs only about $20,600 more in solid waste revenue to reach the target Lurito/Gallagher operating ratio of 93.73 percent. According to staff analysis, the dropbox hauling operation has a revenue deficiency of $27,600. Since this exceeds Rural Garbage’s total revenue need of $20,600, only dropbox hauling rates should increase. The company’s proposed revenue increase in dropbox hauling rates is approximately $13,000. In its residential recycling program, the company proposed rates would increase revenue by $37,000. Staff analysis, using the three months of January to March 1998 to project commodity values, reveals that the company has a revenue need of only $4,700. In both solid waste operations and the residential recycling program, the company overstated net investment. Staff restated the net investment and associated depreciation expense to the proper amounts, which is the primary reason that staff revenue requirement is less than the company’s proposal. In the residential recycling program the company proposed to increase the recycling rate to the total cost of collection and processing and to establish a commodity credit for the value of the commodities. The commodity credit would be based upon the average of the most recent three month sales price. After one year, the commodity credit would be revalued at a new average of the most three recent months sales price. This is not a deferred accounting methodology. No adjustment would be made to the ratepayers benefit if commodities exceeded what was projected. And similarly, no adjustment would be made allowing the company to recoup any money if commodity values fell. The staff finds this to be an unacceptable methodology. In 1996, the staff established a deferred accounting methodology for tracking commodity values. Under this method the customer receives all the revenue or pays all the costs associated with commodities. The company has agreed to initiate the staff preferred method. The company filed substitute pages on May 22, 1998. The following table is a sample of current, proposed and staff revised rates. Residential rates do not include the recycle component. Current Proposed Revised Residential Monthly rate for weekly pickup Minican $ 5.48 $ 6.20 $ 5.48 One Can 8.52 9.20 8.52 Recycle rate 2.35 3.99 3.19 Commodity credit ---- .54 .53 Commercial per Pickup One Yard 10.28 11.31 10.28 Two Yard 14.80 15.98 14.80 Dropbox per Pickup 20 yard pickup 45.00 62.00 62.00 20 yard rent 70.00 58.00 58.00 Docket TG-980572 May 27, 1998 Page 1 Staff recommends to approve the revised filing in Docket TG-980572 to become effective June 1, 1998. And that the Commission issue an order to approve the company’s request to establish a deferred accounting method for the sale of recycle commodities. Attachments