Agenda Date: March 31, 1999 Item Number: Docket: TG-981476 Company Name: Nooksack Valley Disposal Inc., G-166 Staff: Danny P. Kermode, Revenue Requirements Specialist Bob Colbo, Transportation Program Consultant Recommendation: 1. Dismiss the Complaint and Order Suspending the filing in Docket TG-981476. 2. Approve the revised filing by Nooksack Valley Disposal, Inc., with Staff recommended rates to become effective April 1, 1999. 3. Approve the company’s request to establish a deferred accounting methodology for the value residential curbside of recycled commodities. 4. Approve the discontinuance of the deferred accounting tracker for disposal fees and the establishment of a revenue adjustment mechanism to recover amounts over refunded previously. Discussion: On November 16, 1998, Nooksack Valley Disposal, Inc. (Nooksack) filed Tariff No. 3 canceling Tariff No. 2. The filing proposed to increase garbage and recycle rates. In addition, the company requested institution a deferred accounting methodology for the value of curbside residential recycled commodities and to discontinue the deferred accounting tracker for disposal fees. On December 30, 1998, the Commission suspended the filing to allow the company time to respond to Staff’s analysis of their filing. The company operates in northern Whatcom County and serves, on a contract basis, the cities of Lynden, Everson, Sumas, and Nooksack. The regulated portion of Nooksack Valley Disposal’s operation is within the unincorporated areas of the county. The Company serves approximately 2,000 residential customers and 350 commercial customers. The present garbage rates have been in effect since November 1990 with the recycle program rates being instituted in September 1991. Since April 1997, Nooksack has participated in the deferred disposal program. The company filed substitute pages on March 29, 1999. The Commission has received one letter opposed to this filing. The customer believes the proposal is excessive. Docket TG-981476 addresses six distinct issues. Summaries of each issue are provided below. • Rate increase for garbage service for both residential and commercial customers Nooksack requested increased rates for both their residential and commercial customers. However, after reviewing the company’s books and records, Staff found that no additional revenue was necessary for garbage service. The company currently has a 91.45 percent operating ratio which is only 0.12 percent greater than the Lurito-Gallagher recommended operating ratio of 91.33 percent. Staff has not recommended any increase in total garbage revenue. Nooksack Disposal has filed revised garbage rates that are revenue neutral. • Redesign garbage rate structure so that the rates are cost based. The company proposed to redesign the company’s current rates to reflect costs associated with providing the different levels of service which the current rate structure does not do. Staff agrees with the company's objective and requested the company file rates that reflect the results of a cost of service study. Therefore, even though the total revenue generated by the revised rates is not different from the company's current revenue level, individual customers may find their service level rates have either increased or decreased due to the results of the cost of service study. In no case are the rates greater than what was originally proposed by the company • Rate increase for regulated recycling customers. The proposed new tariff would generate approximately $40,000 of additional recycling revenue. This represents a 51 percent increase in total test year recycling revenues of $78,631. Staff's investigation indicates a lesser increase is needed than that requested by the company. The company has filed revised rates that will generate approximately $18,000 of additional revenue or a 22.8 percent increase over the current revenue level. Some of the increase in recycling rates is due to the company requesting the establishment of deferred accounting for the sale of recycle commodities which results in the removal of commodity revenue from the calculation of the base recycle rate. (See below) • Establishment of a deferred accounting methodology for the value of recycled commodities. Nooksack Disposal has requested the establishment of a deferred accounting methodology for the value of residential curbside recycled commodities. This methodology reflects the current market prices received for recycled goods, such as paper and glass, as a credit to the base recycle rate charged its customers. The credit will be adjusted annually to reflect any new market conditions with a true up of any amount over or under collected in the prior period. The calculated credit for the current period would be set at $0.28. • Discontinuance of the deferred accounting tracker for disposal fees. In April of 1997 Nooksack instituted a deferred accounting tracker to account for a highly volatile tip fee being charged to haulers in Whatcom County. The volatile market was caused by a price war between the two disposal sites in the area. The price per ton fluctuated from a high of $91 per ton to a low of $39 per ton. The deferred accounting tracker allowed the company to refund thousands of dollars to its customers. The tip fee has now stabilized and the company is requesting that the deferred accounting tracker for disposal be discontinued. Staff agrees with the company that the tracker is no longer needed and should be discontinued. • Institution of a temporary revenue adjustment mechanism As a result of the removal of the deferred accounting tracker cited above, approximately $73,000 was over-refunded. Therefore the company has filed supplement No. 4 which allows the company to collect an additional amount ranging between 5 to 10 percent of the base garbage service charge. The supplement is scheduled to expire on August 31, 2001 or when the full amount over-refunded has been collected. The following table is a sample of current, proposed and revised rates with temporary disposal fee adjuster stated separately. Residential rates do not include the recycle component which is stated separately. Current Proposed Revised Disposal Fee Adjuster Residential Monthly rate/weekly pickup Minican One can Recycle rate Commodity Credit $ 3.86 $13.95 $ 3.10 -0- $ 4.47 $15.16 $ 4.68 ($0.28) $ 4.35 $14.36 $ 3.86 ($0.28) $0.72 $0.80 Commercial Per Pickup 1 yard 1-1/2 yard $16.30 $20.65 $16.58 $21.65 $16.10 $20.75 $0.48 $0.90 Staff recommends that the Commission: (1) Dismiss the Complaint and Order Suspending the filing in Docket TG-981476. (2) Approve the revised filing by Nooksack Valley Disposal Inc., with Staff recommended rates to become effective April 1, 1999. (3) Approve the company’s request to establish a deferred accounting methodology for the value of residential curbside recycled commodities. (4) Approve the discontinuance of the deferred accounting tracker for disposal fees and approve the establishment of a revenue adjuster mechanism . Attachments (2)