Agenda Date: June 28, 2000 Item Number: Docket: TG-000726 Company Name: Northwest Waste Industries, Inc., G-235 (Lynnwood Disposal) Staff: Nicki Johnson, Policy Research Specialist Penny Hansen, Public Involvement Coordinator Recommendations : 1. Allow Staff recommended rates in Docket TG-000726 to become effective July 1, 2000, and 2. Issue a complaint and order to suspend pages 13, 15, 25, and 26 of Docket TG-000726 and approve temporary rates to become effective July 1, 2000. Discussion : On May 12, 2000, Northwest Waste Industries, Inc., Lynnwood Disposal, filed for a general rate increase. The filing proposes to increase residential and commercial solid waste rates, residential recycling rates and yardwaste rates. The company proposes rate decreases for dropbox and multi-family recycling rates. Additionally, Lynnwood Disposal proposes to establish in its recycling programs a deferred accounting methodology for the sale of recycle commodities. The Commission received six letters opposed to the filing. The customers believe the company's proposed rates are excessive. Lynnwood Disposal provides solid waste services in and around the cities of Lynnwood, Edmonds, and Woodway in Snohomish County. It also has a solid waste contract with the city of Snohomish. The company has about 14,500 regulated customers. The company's last rate increase was January 1, 1993. Since its last increase, the company has experienced increases in wages, recycle processing fees, yardwaste disposal charges and operating rents. In September 1999, Northwest Waste Industries was purchased by Allied Waste Industries (AWI). The proposed solid waste rates generate revenues of approximately $684,000 (11.95% increase). Although the Commission Staff made adjustments to the company's proposed case, including using AWI's actual capital structure of 85 percent debt, 15 percent equity, (the company used 60 percent debt and 40 percent equity) Staff analysis of the company's operations indicates that the company has a revenue requirement of approximately $685,000. However, Staff does not agree with the company's rate design. For instance, staff believes the proposed increase in yardwaste rates is excessive and the multi-family recycle rate should not be decreased. The company filed revised rates at the staff recommended levels on June 23, 2000. Lynnwood Disposal's deferred accounting methodology for recycle commodities uses 12 months to estimate future values. Using the 12 month average, the proposed recycle credit for a residential customer is $1.40 per month. The commodity credit based on three months of commodity value would be $1.92 per month. The use of 12 months of recent commodity sales to estimate future values has been proposed by both AWI and Waste Management in their latest annual reviews of deferred accounting for recycle commodities. The Commission has suspended those filings. Consistent with those filings, Staff recommends that the pages with residential and multi-family recycling rates be suspended and temporary rates be granted. The following table is a sample of current, proposed and staff revised rates. The amounts for solid waste do not contain the charge for recycling service. Current Proposed Revised Residential Monthly rate for weekly pickup 32gal.Can $7.90 $ 8.40 $ 7.55 60 gal. toter 12.81 14.20 13.35 Residential Recycling 2.79 4.05 4.90 Commodity Credit N/A 1.40 1.40 Yardwaste 5.17 7.00 6.40 Commercial per Pickup One Yard 9.02 9.20 9.20 20 Yard Dropbox 69.72 69.00 69.72 Multi-family One Yard 2.05 1.70 2.05 Staff recommends the Commission allow the revised rates in Docket TG-000726 to become effective July 1, 2000. For the pages with proposed commodity credits, pages 13,15, 25 and 26, Staff recommends that the Commission issue a complaint and order to suspend those pages and approve temporary rates to become effective July 1, 2000.