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The Utah Test

Defining a test period to overcome controversies and inaccuracies.

Fortnightly Magazine - May 2010

days are spent determining the test period, then intervenors especially are at a disadvantage in trying to prepare their cases for the test period chosen.

The second process problem experienced in Utah that continues to cause consternation concerns forecast updates. This, of course, overlaps with forecast accuracy concerns as well. Generally, the PSC has allowed some revisions due to new information becoming available during the course of a rate case that affects the forecasts originally made by the utility. The utility would like to amend its forecast assumptions as late in the process as possible. Intervenors generally don’t want the utility updating forecasts, especially after the first round of testimony has been filed—usually arguing that the time left to evaluate the change is inadequate. (Of course, when intervenors want to include new information late in the process, they argue that the new information should be allowed. Their reasoning is that the utility chooses when to file and controls much of the information, resulting in an advantage, as mentioned above, that should be leveled by allowing late-filed intervenor information.) The PSC has dealt with these amended filings and forecasts on a case-by-case basis so far. However, without guiding rules in place, this continues to be a source of controversy in a forecasted rate case.

An additional issue that is part process and part systemic problem with forecasts is that forecasts potentially lead to endless bickering about assumptions. One could argue that in Utah intervenors are taking advantage of the inherent ambiguity of the future by arguing that the utility has either under- or over-forecast a particular item, depending on which way suits their purpose. The utility has little defense against competing forecasts, except relying on the PSC to make a reasonable decision. The utility would like the issue to be simply one concerning the reasonableness of its forecasts, thereby shifting the burden to intervenors to show that the utility forecasts are unreasonable. This would differ from the current assumption that it is the utility’s burden to prove its case.

Risk Sharing

Recent trends indicate more frequent and overlapping rate cases in the future due in part to increasing investments made by utilities and also as a means for regulated companies to temper regulatory lag. In Utah, one utility filed a new rate case prior to the decision in the previous general rate case—thus the overlapping rate-case problem. In addition, the test period filed in the latter case used a test period that overlapped by six months the test period selected in the prior rate case. Intervening parties claimed that this was merely a second attempt to recover costs, or a second bite at the apple. Others claimed the utility was selectively re-litigating certain issues, presenting legal problems and unnecessary burdens to re-audit the same test period data. In an earlier time when pancaking rate cases had started to become a problem, the PSC expressed concern over the regulatory difficulties caused by overlapping test years and noted that it “will take steps to protect the regulatory process whenever overlapping test periods are proposed.” 8