While authorizing Nashville Gas Co. to increase rates by $4.417 million, the Tennessee Regulatory Authority has modified its existing policy on the treatment of advertising expenses in gas rate cases.
The authority abandoned a past policy limiting advertising recovery to 0.5 percent of the company's gross revenues. It also ordered a 50-50 sharing between ratepayers and shareholders. It granted, however, the LDC's request for full recovery of both payroll and nonpayroll "sales promotion" costs, rejecting allegations the costs should be treated as advertising expenses.
In approving the rate increase, the authority set the company's cost of common equity at 11.5 percent. In doing so it rejected a proposal to adjust the approved cost of equity for monthly compounding of earnings. It ruled that such an adjustment would be inappropriate because it would assume a constant monthly earnings rate atypical of a gas utility, ignore variable dividend payments and conflict with the calculation of annual earnings used elsewhere in the case. Ratepayers and shareholders will share costs associated with a long-term incentive compensation plans for upper management employees.