STATE OF INDIANA
INDIANA UTILITY REGULATORY COMMISSION
IN THE MATTER OF THE INDIANA UTILITY ) REGULATORY COMMISSION'S ) INVESTIGATION INTO THE IMPACTS OF ) THE TAX CUTS AND JOBS ACT OF 2017 AND ) CAUSE NO. 45032 S4 POSSIBLE RATE IMPLICATIONS UNDER ) PHASE 2 FOR INDIANA AMERICAN WATER ) COMP ANY, INC.
TESTIMONY
OF
RALPH C. SMITH - PUBLIC'S EXHIBIT NO. 2
ON BEHALF OF THE
INDIANA OFFICE OF UTILITY CONSUMER COUNSELOR
August 24, 2018
Respectfully Submitted, .. "' . . -
CERTIFICATE OF SERVICE
This is to certify that a copy of the foregoing Office of Utility Consumer Counselor Testimony of
Ralph C. Smith has been served upon the following counsel of record in the captioned proceeding by electronic service on August 24, 2018.
Hillary J. Close Todd A. Richardson Lauren M. Box Aaron A. Schmoll BARNES & THORNBURG LLP Joseph P. Rompala 11 South Meridian Street LEWIS & KAPPES, P.C. Indianapolis, Indiana 46204 One American Square, Suite 2500 Email: [email protected] Indianapolis, JN 46282 [email protected] Email: [email protected] [email protected] [email protected]
Nikki G. Shoultz Comtesy copy to: Kristina Kern Wheeler A [email protected] J. Clu·istopher Janak [email protected] BOSE MCKINNEY & EVANS LLP 111 Monument Circle, #2700 Robert M. Glennon Indianapolis, Indiana 46204 3697 N. County Road 500 E. Email: [email protected] Danville, Indiana 46122 [email protected] Email: [email protected] [email protected]
Courtesy Copy to: Jennifer Washburn Margo Tucker CITIZENS ACTION COALITION 1915 West 18, Street, Suite C Indianapolis, Indiana 46202 Email: [email protected] [email protected]
INDIANA OFFICE OF UTILITY CONSUMER COUNSELOR 115 West Washington Street Suite 1500 South Indianapolis, JN 46204 [email protected] 317/232-2494-Phone 317/232-5923 - Facsimile Public's Exhibit No. 2
IN THE MATTER OF THE INDIANA UTILITY REGULATORY COMMISSION'S INVESTIGATION INTO THE IMPACTS OF THE TAX CUTS AND JOBS ACT OF 2017 AND CAUSE NO. 45032-S4 POSSIBLE RATE IMPLICATIONS UNDER PHASEIIFORINDIANA AMERICANWATER COMP ANY, INC
DIRECT TESTIMONY OF
RALPH C. SMITH
ON BEHALF OF THE OFFICE OF THE INDIANA OFFICE OF UTILITY CONSUMER COUNSELOR
August 24, 2018 DIRECT TESTIMONY OF RALPH C. SMITH TABLE OF CONTENTS Page I. INTRODUCTION ...... 1 II. THE TAX CUTS AND JOBS ACT OF 2017 ...... 5 III. INDIANA-AMERICAN WATER COMPANY PROPOSED REGULATORY TREATMENT OF TCJA-RELATED FEDERAL INCOME TAX SAVINGS ...... 6 IV. REPAIRS DEDUCTIONS ...... 12 V. OUCC RECOMMENDATIONS ...... 17
ATTACHMENTS: LA-1, Background and Qualifications
LA-2, Page from Cause No. 45032 S21 Vectren Settlement Agreement showing the classification ofEADIT for Repairs as Non-Protected
LA-3, Selected Non-Confidential Indiana American Water Company Responses to Intenogatory Requests Referenced in the Testimony
LA-4, Selected Confidential Indiana American Water Company Responses to Interrogatory Requests Referenced in the Testimony (Copy ofIAWC's Tax Basis Balance Sheet as of December 31, 2016, as provided in the Confidential Attachment to OUCC 06-002) I. INTRODUCTION 1 Q. Please state your name, position and business address. 2 A. Ralph C. Smith. I am a Senior Regulatory Consultant at Larkin & Associates, PLLC,
3 15728 Farmington Road, Livonia, Michigan 48154.
4
5 Q. Please describe Larkin & Associates. 6 A. Larkin & Associates is a Certified Public Accounting and Regulatory Consulting firm.
7 The· firm performs independent regulatory consulting primarily for public
8 service/utility commission staffs and consumer interest groups (public counsels,
9 public advocates, consumer counsels, attorneys general, etc.). Larkin & Associates
10 has extensive experience in the utility regulatory field as expert witnesses in over 400
11 regulatory proceedings including numerous telephone, water and sewer, gas, and
12 electric matters.
13
14 Q. Please summarize your educational background. 15 A. I received a Bachelor of Science degree in Business Administration (Accounting
16 Major) with distinction from the University of Michigan - Dearborn, in April 1979. I
17 passed all parts of the C.P .A. examination in my first sitting in 1979, received my CPA
18 license in 1981, and received a certified financial planning certificate in 1983. I also
19 have a Master of Science in Taxation from Walsh College, 1981, and a law degree
20 (J.D.) cum laude from Wayne State University, 1986. In addition, I have attended a
21 variety of continuing education courses in conjunction with maintaining my
22 accountancy license. I am a licensed Certified Public Accountant and attorney in the
23 State of Michigan. I am also a Certified Financial Planner™ professional and a
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 1of19 1 Certified Rate of Return Analyst (CRRA). Since 1981, I have been a member of the
2 Michigan Association of Certified Public Accountants. I am also a member of the
3 Michigan Bar Association and the Society of Utility and Regulatory Financial
4 Analysts (SURF A). I have also been a member of the American Bar Association
5 (ABA), and the ABA sections on Public Utility Law and Taxation.
6
7 Q. Please summarize your professional experience. 8 A. Subsequent to graduation from the University of Michigan, and after a short period of
9 installing a computerized accounting system for a Southfield, Michigan realty
10 management firm, I accepted a position as an auditor with the predecessor CPA firm
11 to Larkin & Associates in July 1979. Before becoming involved in utility regulation
12 where the majority of my time for the past 39 years has been spent, I performed audit,
13 accounting, and tax work for a wide variety of businesses that were clients of the firm.
14 During my service in the regulatory section of our firm, I have been involved
15 m rate cases and other regulatory matters concerning numerous electric, gas,
16 telephone, water, and sewer utility companies. My present work consists primarily of
17 analyzing rate case and regulatory filings of public -utility companies before various
18 regulatory commissions and, where appropriate, preparing testimony and schedules
19 relating to the issues for presentation before these regulatory agencies.
20 I have performed work in the field of utility regulation on behalf of industry,
21 state attorneys general, consumer groups, municipalities, and public service
22 commission staffs concerning regulatory matters before regulatory agencies in
23 Alabama, Alaska, Arizona, Arkansas, California, Connecticut, Delaware, Florida,
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 2of19 1 Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Maine,
2 Michigan, Minnesota, Mississippi, Missouri, Montana, New Jersey, New Mexico,
3 New York, Nevada, North Carolina, North Dakota, Ohio, Pennsylvania, Puerto Rico,
4 Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont,
5 Virginia, Washington, Washington D.C., West Virginia, and Canada as well as the
6 Federal Energy Regulatory Commission and various state and federal courts oflaw.
7 My prior testimony has included evaluations of numerous utility rate case filings and
8 revenue requirement determinations.
9
10 Q. Have you prepared an attachment summarizing your educational background 11 and regulatory experience? 12 A. Yes. This is provided in Attachment LA-1.
13
14 Q. On whose behalf are you appearing? 15 A. Larkin & Associates, PLLC, was retained by the Indiana Office of Utility Consumer
16 Counselor ("OUCC") to review income tax issues related to the Tax Cuts and Jobs
17 Act ("TCJA") of Indiana American Water Company, Inc. ("IA WC" or "Company").
18 Accordingly, I am appearing on behalf of the OUCC.
19
20 Q. Have you previously filed testimony before the Indiana Utility Regulatory 21 Commission ("IURC" or "Commission")? 22 A. Yes. I have previously filed testimony before the Indiana Utility Regulatory
23 Commission in Cause Nos. 37352, 37353, 37354, 38431, 37396, 37394 and 37399,
24 each of which involved gas cost adjustment reviews, as well as in Cause No. 44022
25 involving income tax issues in an Indiana-American Water Company rate case, in
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-84 Page 3of19 1 Cause No. 43114 (various IGCC sub-dockets) involving Duke Energy Indiana's
2 Edwardsport IGCC plant, and in Cause No. 43955 DSM-3 involving DEI demand side
3 management ("DSM") issues.
4
5 Q. How will your testimony be organized? 6 A. I will address the organization and content of the attachments attached to my
7 testimony. That discussion is then followed by a discussion of the TCJA and IAWC's
8 proposed regulatory treatment of the federal income tax savings and excess
9 Accumulated Defened Income Taxes ("ADIT").
10
11 Q. Does your direct testimony include any exhibits? 12 A. Yes, Attachments LA-1 through LA-4.
13
14 Q. What is contained in Attachment LA-1? 15 A. Attachment LA-1 provides details concerning my experience and qualifications.
16
17 Q. What is contained in Attachment LA-2? 18 A. Attachment LA-2 shows a page from the Cause No. 45032 S21 Vectren Settlement
19 Agreement showing the classification ofEADIT for Repairs as Non-Protected.
20
21 Q. What is contained in Attachment LA-3? 22 A. Attachment LA-3 contains copies of selected non-proprietary discovery responses and
23 additional information supporting my testimony.
24
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 4of19 1 Q. What is contained in Attachment LA-4? 2 A. Attachment LA-4 contains copies of selected proprietary/confidential discovery
3 responses supporting my testimony (copy of IAWC's Tax Basis Balance Sheet as of
4 December 31, 2016, as provided in the Confidential Attachment to OUCC 06-002).
5
II. THE TAX CUTS AND JOBS ACT OF 2017 6 Q. Please describe some of the major impacts of the TCJA on public utilities such as 7 IAWC. 8 A. The major impacts of the TCJA on IAWC include the following:
9 • The reduction in the corporate federal income tax rate will reduce the Company's 10 income tax expense, which will reduce its cost of service and revenue 11 requirements; 12 • Excess Accumulated Deferred Income Taxes ("EADIT") will result from the 13 revaluation of the Accumulated Deferred Income Tax ("ADIT") balances as of 14 December 31, 2017. The EADIT calculation would transfer the excess tax 15 amounts from the ADIT accounts to net regulatory liability accounts, the 16 amounts of which would be returned to customers over time; 17 • Some of the EADIT is subject to normalization requirements (the "protected" 18 portion) and some is not subject to n01malization requirements (the 19 "unprotected" portion). The "protected" EADIT must follow a specified 20 amortization to comply with the normalization requirements. The amortization of 21 the "unprotected" EADIT is up to the discretion of the utility's regulator. For 22 IAWC, the amortization of "unprotected" EADIT is up to the discretion of the 23 IURC; 24 • Elimination of the Section 199 manufacturing deduction. This will not impact 25 IAWC's current rates because of the Company's net operating loss ("NOL") 26 cmTyforward position. Once the Company no longer has a loss cmTyforward 27 position and it realizes net positive taxable income, the Section 199 deduction 28 will no longer be available because it has been eliminated by the TCJA; 29 • Elimination of bonus depreciation, as well as the lower corporate income tax 30 rate, will decrease the rate of build-up of ADIT balances in the future compared 31 to what it would have been before the TCJ A; 32 • The inclusion in taxable income of contributed utility assets (Contributions in 33 Aid of Construction or "CIAC"), which is specific for water and sewer utilities, 34 could put a strain on cash flow, depending on whether the income taxes in CIAC
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 5of19 1 are collected from developers who contribute property. However, the impact on a 2 utility's cash flow is within its control as it can choose to have the contributor 3 pay the income taxes. Further, some utilities welcome the ability to pay the 4 income taxes and increase their rate base investment and return; 5 • Retention of net interest expense deductibility. Interest expense will continue to 6 be deductible for public utilities such as IAWC. The TCJA has limited interest 7 deductibility for other types of businesses. 8
III. INDIANA-AMERICAN WATER COMPANY PROPOSED REGULATORY TREATMENT OF TCJA-RELATED FEDERAL INCOME TAX SAVINGS 9 Q. What has been required in the Commission's Phase I Order? 10 A. On July 31, 2018, the Commission issued its Phase I Order that required IAWC to
11 change its rates for the full impact of the new 21 % tax rates on both its volumetric
12 rates and fixed charges.
13
14 Q. What amount of TCJA-related annual federal income tax savings has IAWC 15 identified as of May 31, 2018? 16 A. IAWC witness John Watkins discusses in his direct testimony on page 2 that, "as of
17 May 31, 2018, the Company has defened $4,529,322 related to the reduction in FIT
18 rate from 35% to 21 %."
19
20 Q. Has that amount been updated? 21 A. Yes. According to IAWC's response to OUCC 03-016, as of June 30, 2018, the amount
22 of the Company's defened TCJA related savings has increased to $5,458,177.
23
24 Q. Did IAWC record that amount as a regulatory liability? 25 A. Yes. Page 2 of Company witness Watkins direct testimony states that IAWC cunently
26 has a regulatory liability of that amount on its books, as of May 31, 2018, as a result
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-84 Page 6of19 1 of the accounting ordered in the January 3, 2018 order. As noted above, according to
2 IAWC's response to OUCC 03-016, as of June 30, 2018, the Company has recorded
3 on its books a regulatory liability for TCJA savings of $5,458, 177.
4
5 Q. How does IAWC propose to apply the TCJA-related federal income tax savings? 6 A. Company witness Watkins states on page 3 of his direct testimony that IAWC is
7 proposing to use the deferred TCJA-related savings to "help fund and accelerate lead
8 service line replacements." He estimated that the amount per metered customer that
9 would be available for credit as a result of the deferral is approximately $14.98.
10 According to the Company's response to OUCC 03-016, this amount increased to
11 approximately $21.02 per metered customer based on TCJA-savings through June 30,
12 2018.
13
14 Q. Is another witness for OUCC addressing how that amount should be updated and 15 applied? 16 A. Yes. Another witness for the OUCC, Edward Kaufmann, addresses updating that
17 amount as well as IAWC's proposal to apply TCJA-related savings to a lead-service
18 line replacement program.
19
20 Q. What amount of EADIT has IAWC identified?
21 A. IAWC witness John Wilde identifies in his direct testimony at page 4, the amount of
22 EADIT net liability as $71,073,677 of December 31, 2017. He cautions that this is a
23 preliminary estimate. Mr. Wilde (at page 4) indicates that $71,378,794 is a liability
24 for EADIT that is "plant-related" and $305, 118 is an asset for "non-plant related"
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 7of19 1 EADIT. The two amounts net to the $71,073,677 EADIT net liability that is
2 mentioned in Mr. Wilde's direct testimony.
3
4 Q. What amount of "protected" EADIT has IAWC identified? 5 A. IAWC has indicated that it has not yet been able to accurately classify its EADIT
6 between "protected" and "unprotected" amounts. IAWC has identified $71,378,394
7 as "plant-related" EADIT as of December 31, 2017. Mr. Wilde indicated this amount
8 is preliminary and is still uncertain and subject to revision.
9
10 Q. Should the Commission require a further breakout of IAWC's "plant-based" 11 EADIT between "protected" and "non-protected"? 12 A. Yes. IAWC's "plant-related" EADIT should be subject to classification into
13 "protected" and "unprotected" categories, based upon whether an Internal Revenue
14 Service ("IRS") normalization requirement applies.
15
16 Q. What amount of "unprotected" EADIT has IAWC identified? 17 A. IAWC has identified an asset of $305,118 as "unprotected/non-plant-related" EADIT
18 as of December 31, 2017. IAWC indicated this amount is preliminaiy and is still
19 uncertain and subject to revision.
20
21 Q. How does IAWC propose to amortize the "protected" portions of its EADIT? 22 A. According to pages 3 and 8 of Company witness John Wilde's Direct Testimony, the
23 Company proposes to amo1iize its protected excess ADIT using the Average Rate
24 Assumption Model ("ARAM"). However, he indicates that the Company is cunently
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-84 Page 8of19 1 not able to calculate the precise impact of the TCJA on its ADIT balances or to
2 determine the appropriate amortization periods consistent with federal normalization
3 requirements due to the fact that the Company has not built those records out into an
4 ARAM data set or set up systems to process ADIT balances pursuant to the ARAM.
5 He states that the Company is currently working to implement the necessary computer
6 software changes to compute ARAM. He estimates that an accurate ARAM
7 calculation will not be available until the end of the first quaiier of 2019. IAWC is
8 planning on filing a general rate case later this summer and proposes that the
9 determination and amortization of IAWC's EDAIT be considered in that upcoming
10 rate case and that the amortization be incorporated into its new base rates in that rate
11 case.
12
13 Q. How do you recommend that the Commission treat for regulatory purposes the 14 "protected" portion ofIAWC's EADIT resulting from the TCJA? 15 A. IAWC's appropriately classified "protected" EADIT should be amortized according to
16 the ARAM or an acceptable alternative. Unfortunately, IAWC has not put forward an
17 ARAM calculation as it claims it cannot yet calculate ARAM due to inadequate
18 computer software, which means ratepayers will continue to be deprived of the benefit
19 generated by the TCJA on EADIT. I note that other Indiana utilities have been able to
20 resolve protected ADIT amortization in a manner that also acknowledges ARAM
21 calculations are subject to further refinement. In Cause No. 45032 S21, the Vectren
22 companies were continuing to work with Power Tax on an "IT-based solution that will
23 perform the more precise and final ARAM calculations" while at the same time
24 Vectren used "an Excel-based model that ... utilized high-level assumptions about ...
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 9of19 1 applicable book depreciation rates due to the level of detail associated with a full-
2 blown ARAM calculation" in order to calculate an ARAM-based amortization period
3 for the return of protected EADIT to its customers. (Cause No. 45032 S21, Direct
4 Testimony of Vectren witness Stephen A. Allamanno, page 7.)
5 If information is not available to compute the ARAM, an acceptable alternative
6 would be to use the Reverse South Georgia Method, which essentially amortizes the
7 "protected" EADIT over the remaining life of the related utility property. IAWC has
8 indicated that they expect to be able to make the ARAM calculation, so an alternative
9 to the ARAM is not expected to be needed for IA WC. Compliance with IRS
10 normalization requirements is necessary to preserve the utility's ability to utilize
11 accelerated tax depreciation.
12 Because IA WC has not offered a resolution that provides for the timely return
13 of its EADIT to customers, I describe below in more detail the OUCC's
14 recommendation to apply an interest rate to IAWC's EADIT for the period it is not
15 amortizing the amount due to its ratepayers.
16
17 Q. How do you recommend that the Commission treat for regulatory purposes the 18 "unprotected" portion of IAWC's ADIT resulting from the TCJA? 19 A. I describe IAWC's claims that defened taxes generated from its use of the repairs
20 deduction should be classified as "protected," while also stating that it cannot specify
21 the amount ofEADIT related to this purpose, in more detail below. I recommend that
22 IAWC be required to prepare, justify, and support an appropriate classification of
23 EADIT between "protected" (required to meet IRS normalization requirements that
24 pertain to the use of accelerated tax depreciation) and "unprotected" (for which IRS
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 10of19 1 normalization requirements to not apply and hence for which disposition is up to the
2 Commission's discretion). Classifying deferred taxes derived from IAWC's use of the
3 repairs deduction as "protected" is not appropriate. The level of EADIT that is
4 unprotected by normalization requirements for IAWC should be appropriately
5 identified and should be refunded or applied for the benefit of IAWC's customers.
6 Appropriate customer benefits from applying the unprotected EADIT could
7 include using it to offset known and verified regulatory asset balances (such as those
8 that have a financing cost element that is being borne by customers) and/or by being
9 amortized over an appropriate period to reduce or minimize the impact of other rate
10 increases on customer rates. Ideally, setting this amortization period should be done
11 in Phase 2 of this TCJA-oriented proceeding. The application of "unprotected" EADIT
12 could be addressed in IAWC's rate case if, due to management decisions, IAWC is
13 unable to provide reliable calculations in the cmTent proceeding. However, IAWC
14 should not be rewarded for management decisions that have delayed its identification
15 ofEADIT into "protected" and "unprotected" categories.
16
17 Q. How should the Company's responsibility for delays in appropriately classifying 18 EADIT between protected and unprotected be addressed? 19 A. Because delays in returning EADIT balances to customers are occurring due to IAWC
20 and its parent company needing to develop updated data sets to use with their
21 PowerTax software, to the extent that such delays are caused by the Company, I
22 recommend the Commission apply interest on EADIT balances during the period
23 before the amortization commences, calculated at 6.598%, IAWC's most recently
24 authorized weighted average cost of capital in Cause No. 44450.
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 11of19 1
2 Q. What is your recommendation for the TCJA-related tax savings that IAWC have 3 experienced from January 1, 2018 through the date when the TCJA impacts are 4 effectively incorporated into IAWC's rates? 5 A. Consistent with the testimony of OUCC witness Kaufman, which addresses this issue
6 in more detail, the actual TCJA-related tax savings from January 1, 2018 through the
7 rate effective date should be reflected for the benefit of customers as a rate reduction
8 or refund. In response to OUCC Data Request No. 03-016, Indiana American
9 estimated that as of June 30, 2018, the impact of the reduction in the federal income
10 tax rate is $5,458,177 (approximately $909,700 per month). As explained by OUCC
11 witness Kaufman, if this liability grew by approximately $900,000 in July, while
12 Respondent continued to collect excess taxes in its rates, its total regulatory liability
13 should be roughly $6,358,000, or $24.50 per customer.
14
IV. REPAIRS DEDUCTIONS 15 Q. How is IAWC treating its excess ADIT related to its repairs deductions? 16 A. According to pages 6-7 of John Wilde's Direct Testimony, IAWC is treating the excess
17 ADIT related to its repairs deduction as "protected."
18
19 Q. Why is IAWC treating its excess ADIT related to its repairs deductions as 20 protected? 21 A. Mr. Wilde's Direct Testimony explains that IAWC's parent company, American Water
22 Works Company, Inc. qualified for the repairs deduction through a Form 3115
23 Application for Change in Tax Accounting Methods, which was filed for the taxable
24 year ended December 31, 2008. The application resulted in a Consent Agreement with
25 the IRS, which was signed by the IRS on July 30, 2010, and by American Water Works
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-84 Page 12of19 1 Company, Inc. on September 10, 2010. Mr. Wilde claims that the Consent Agreement
2 dictates how the excess ADIT related to the repairs deduction must be addressed.
3
4 Q. Do you agree that the excess ADIT related to the repairs deductions should be 5 treated as protected? 6 A. No. The repairs deductions represent a basis difference, not a tax depreciation
7 method/life difference. Amounts claimed as repairs deductions are not included in the
8 tax basis of IAWC's utility assets, and no tax depreciation is claimed on amounts that
9 have been deducted as repairs. Because the repairs deduction related EADIT is not
10 part of accelerated tax depreciation (either bonus tax depreciation or Modified
11 Accelerated Cost Recovery System ("MACRS") tax depreciation), it is not subject to
12 normalization requirements and is therefore properly classified as "unprotected."
13
14 Q. Have other Indiana Utilities classified the EADIT for repairs deductions as 15 "unprotected"? 16 A. Yes. As one example, shown in Attachment LA-2, the EADIT summary page from
17 Vectren (Cause No. 45032 S21) clearly shows that the EADIT amounts for Vectren
18 South - Electric, Vectren South- Gas, and Vectren - North for Repairs is classified as
19 "non-protected." This is shown on line 25 of the Vectren settlement page that is
20 included in Exhibit LA-2. Additionally, Duke Energy's EADIT for repairs is also
21 classified as "non-protected."
22 23 Q. Did you attempt to get IAWC to identify the amount of EADIT relating to repairs 24 deductions?
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 13of19 1 A. Yes. Data Requests OUCC 04-007, OUCC 04-019, and OUCC 04-021, asked the
2 Company to identify the federal income tax rate applied and the amount of ADIT
3 recorded for repairs deductions. However, the Company replied that it cannot separate
4 ADIT related to its repairs deductions. Additionally, Data Request OUCC 05-009
5 asked the Company how much EADIT it has relating to the $250,739,690 total amount
6 of repairs deductions that was listed in IAWC's response to OUCC 04-004. IAWC
7 responded that the amount listed in that response is not the sum of repairs deductions
8 claimed on the Company's tax return. Further, IAWC states that the Company's tax
9 accounting has not isolated repairs deductions claimed.
10 Data Requests OUCC 05-012 and OUCC 05-013 asked the Company if a
11 reasonable estimate of the EADIT related to its repairs deductions could be obtained
12 by taking the total amounts listed in OUCC 04-004 and OUCC 04-001 and multiplying
13 them by the negative 13.31 % difference in the federal and state blended income tax
14 rates. The Company responded: no, for the reasons listed in OUCC 05-009. Data
15 Requests OUCC 05-018 and 05-021 asked the Company about the line items "T103:
16 Gains and Losses" and "Tl 50: 481 Adjustment related to Repairs" and requested
17 IAWC to provide the EADIT amounts related to those items. However, both responses
18 to those data requests stated that that info1mation is not available.
19 Additional efforts were made in OUCC's sixth set of discovery to IAWC to
20 obtain information from IAWC to quantify the amount of EADIT at December 31,
21 2017 related to repairs deductions; however, IAWC was not able to provide such
22 info1mation, including even basic info1mation such as the amount of repairs
23 deductions that IAWC claimed on its tax return.
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 14of19 1
2 Q. What is a tax basis balance sheet? 3 A. A Tax Basis Balance Sheet reports the current tax basis of the Company's assets. It
4 can be utilized as a tool to aid in tracking accumulated deferred income tax balances,
5 which involve comparing book and tax differences and applying applicable income
6 tax rates to derive reported ADIT amounts. A tax basis balance sheet will show
7 different values for various assets than a balance sheet that is used for financial
8 reporting. As an illustrative example, assume there is a fleet often vehicles purchased
9 9 years ago for $200,000. The financial balance sheet would report the assets at
10 original cost, and accumulated depreciation would also be reflected. If the book life
11 was ten years with no salvage, the financial balance sheet would show the property,
12 plant and equipment amount at the original cost of $200,000, with accumulated
13 depreciation of $180,000 and a net book value of $20,000.
14 In contrast, the tax basis balance sheet would show a remaining tax basis of
15 zero as the vehicles would have been fully depreciated for income tax purposes. That
16 is, accelerated tax depreciation deductions would have been claimed on the original
17 purchase price of $200,000, so by the end of year 9 there is no remaining tax basis.
18
19 Q. Did the Company indicate that it has prepared tax basis balance sheets? 20 A. Yes. IAWC's response to OUCC 05-011 indicates that it has tax basis balance sheets
21 for December 31, 2016.
22
23 Q. Did the Company provide any tax basis balance sheets?
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 15of19 1 A. In the Company's response to OUCC 06-002, as a confidential attachment to that
2 response, IAWC provided its tax basis balance sheet as of December 31, 2016. A copy
3 of that response and the confidential attachment is included in Exhibit LA-4. This
4 shows that IAWC is tracking ADIT related to repairs deductions. Thus, if required by
5 the Commission, IAWC should be able to derive an estimate of its EADIT related to
6 repairs deductions, so that the amount of unprotected EADIT can be appropriately
7 addressed in this proceeding.
8
9 Q. Is the Company aware of any investor-owned utilities that have classified excess 10 ADIT related to repairs deductions as "unprotected"? 11 A. Yes. In response to OUCC 05-16, IAWC states that it is aware of investor-owned
12 utilities that have classified excess ADIT related to repairs deductions as
13 "unprotected." However, when asked to identify those utilities, IAWC's response to
14 OUCC 06-009 indicated that the Company has no first-hand knowledge and has not
15 compiled a list.
16
17 Q. Why are many other utilities classifying their EADIT related to repairs 18 deductions as "unprotected?" 19 A. It appears that other utilities are classifying repairs deduction-related EADIT as
20 "unprotected" because it is not based on the use of accelerated tax depreciation, and
21 therefore, is not subject to normalization requirements that relate to the use of
22 accelerated tax depreciation.1 In other words, the repairs deduction is a basis
1 The repairs deduction reduces the Company's tax basis in utility assets, resulting in no tax depreciation being applied on those amounts. Because the repairs deductions reduce the tax basis of the assets, there is no accelerated tax depreciation (MACRS or bonus tax depreciation) applied.
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 16of19 1 difference, not a method/life difference, and thus the related EADIT is properly
2 classified as "unprotected."
v. OUCC RECOMMENDATIONS 3 Q. Please summarize your recommendations for the regulatory treatment of TCJA 4 related federal income tax savings. 5 A. I have reached the following general conclusions and recommendations in this case:
6 1. Because the federal tax reform was an extraordinary, one-time event that was 7 beyond the control of utility management (and because single-issue 8 ratemaking already occurs for other types of costs, typically ones that 9 fluctuate or increase between utility rate cases, to the detriment of 10 consumers), the fact that a particular utility may be under-earning its most 11 recent authorized rate of return is not a sufficient reason to disregard any 12 regulatory liabilities related to the accumulation of TCJA-based savings. 13 Instead, the Commission should use its discretion to account for lower 14 federal tax rates and to apply the savings in the best interest of consumers.
15 2. IAWC's current and deferred income tax expense should be reduced to 16 reflect the impact of the lower 21 % corporate federal income tax rate that 17 will be in effect for 2018.
18 3. The revenue requirement reduction associated with the changes in current 19 income tax expense on a prospective basis should be applied for the benefit 20 of IAWC's utility ratepayers in a manner that is appropriate and in the best 21 interest of consumers.
22 4. The Commission is addressing the utility TCJA-related savings in two 23 phases. As noted by the February 16, 2018 Order, Phase 2 is intended to 24 address all issues remaining after Phase 1, including: (1) the amount and 25 amo1tization of normalized and non-normalized excess accumulated 26 deferred income taxes and the regulatory accounting being used by 27 Respondents as required by the Commission's January 3, 2018 Order in this 28 Cause for estimated impacts resulting from the Act, and (2) the timing and 29 method for how these benefits will be realized by customers, whether 30 directly or indirectly.
31 5. The revenue requirement reduction related to the 2018 income tax savings 32 for the period from January 1, 2018 through the effective date for 33 implementing the rate change (e.g., from January 1 through September 30, 34 2018) and the annual savings should be returned to customers as refunds or
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-84 Page 17 of19 1 rate reductions. OUCC witness Kaufman is addressing how to update the 2 estimated tax savings and show it should be applied.
3
4 Q: Please summarize your specific recommendations related to treatment of 5 IAWC's EADIT. 6 A: I have reached the following specific recommendations related to the appropriate
7 treatment ofIAWC's EADIT:
8 1. IAWC should be required to justify and support its classification ofEADIT 9 between "protected" (required to meet IRS normalization requirements that 10 pertain to the use of accelerated tax depreciation) and "unprotected" (for 11 which IRS normalization requirements to not apply and hence for which 12 disposition is up to the Commission's discretion).
13 2. Based on the information reviewed to date, EADIT related to repairs 14 deductions should be classified as "unprotected" because the repairs 15 deductions are a basis difference, not a method/life difference, and thus are 16 not subject to the nmmalization requirements that apply to the use of 17 accelerated tax depreciation. The treatment ofEADIT for repairs as 18 "unprotected" is also consistent with how other utilities, such as Vectren 19 and Duke, have classified it.
20 3. IAWC's appropriately classified "protected" EADIT should be amortized 21 according to the ARAM. Compliance with IRS normalization requirements 22 is necessary to preserve the utility's ability to utilize accelerated tax 23 depreciation.
24 4. The level ofEADIT that is unprotected by IRS normalization rules for 25 IAWC should be appropriately identified and should be refunded or applied 26 for the benefit of IAWC's customers. The unprotected EADIT could be 27 applied to offset known and verified regulatory asset balances (such as 28 those that have a financing cost element that is being borne by customers). 29 Alternatively, or in addition, the unprotected EADIT could be amortized 30 over an appropriate period to reduce or minimize the impact of other rate 31 increases on customer rates.
32 5. Due to IAWC's delays in quantifying EADIT and properly classifying it 33 between "protected" and "unprotected," and providing the related EADIT 34 amortizations for 2018, interest calculated at IAWC's most recently 35 authorized weighted average cost of capital ("WACC") of 6.598% should 36 be applied on the EADIT balances from January 1, 2018 through the date 37 when such balances are flowed back to IAWC rate payers. The Final Order
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-84 Page 18 of19 1 from IAWC's last rate case, Cause No. 44450, shows that the paiiies settled 2 on a 6.598 percent WACC for IAWC.
3
4 Q. Does this conclude your direct testimony? 5 A. Yes, it does.
Direct Testimony of Ralph C. Smith On Behalf of the Indiana Office of Utility Consumer Counselor IURC Cause No. 45032-S4 Page 19of19 OUCC Attacment LA-1 Cause No. 45032 S4 Page 1 of 14
Attachment LA-1 QUALIFICATIONS OF RALPH C. SMITH
Accomplishments Mr. Smith's professional credentials include being a Ce1tified Financial Planner™ professional, a Certified Rate of Return Analyst, a licensed Certified Public Accountant and attorney. He functions as project manager on consulting projects involving utility regulation, regulato1y policy and ratemaking and utility management. His involvement in public utility regulation has included project management and in-depth analyses of numerous issues involving telephone, electric, gas, and water and sewer utilities.
Mr. Smith has performed work in the field of utility regulation on behalf of industry, public service commission staffs, state attorney generals, municipalities, and consumer groups concerning regulatory matters before regulatory agencies in Alabama, Alaska, Arizona, Arkansas, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Jersey, New Mexico, New York, Nevada, North Carolina, N01th Dakota, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Washington DC, West Virginia, Canada, Federal Energy Regulatory Commission and various state and federal courts of law. He has presented expe1t testimony in regulatory hearings on behalf of utility commission staffs and intervenors on several occasions.
Project manager in Larkin & Associates' review, on behalf of the Georgia Commission Staff, of the budget and planning activities of Georgia Power Company; supervised 13 professionals; coordinated over 200 interviews with Company budget center managers and executives; organized and edited voluminous audit report; presented testimony before the Commission. Functional areas covered included fossil plant O&M, headquaiters and district operations, internal audit, legal, affiliated transactions, and responsibility reporting. All of our findings and recommendations were accepted by the Commission.
Key team member in the firm's management audit of the Anchorage Water and Wastewater Utility on behalf of the Alaska Commission Staff, which assessed the effectiveness of the Utility's operations in several areas; responsible for in-depth investigation and report writing in areas involving information systems, finance and accounting, affiliated relationships and transactions, and use of outside contractors. Testified before the Alaska Commission concerning certain areas of the audit report. A WWU concurred with each of Mr. Smith's 40 plus recommendations for improvement.
Co-consultant in the analysis of the issues surrounding gas transpo1tation performed for the law firm ofCravath, Swaine & Moore in conjunction with the case of Reynolds Metals Co. VS. the Columbia Gas System, Inc.; drafted in-depth report concerning the regulatmy treatment at both state and federal levels of issues such as flexible pricing and mandatory gas transportation.
Lead consultant and expert witness in the analysis of the rate increase request of the City of Austin - Electric Utility on behalf of the residential consumers. Among the numerous ratemaking issues addressed were the economies of the Utility's employment of outside services; provided both written and oral testimony outlining recommendations and their bases. Most of Mr. Smith's recommendations were adopted by the City Council and Utility in a settlement.
I Attachment LA-1, Qualifications of Ralph C. Smith Page 1of14 OUCC Attacment LA-1 Cause No. 45032 S4 Page 2of14
Key team member performing an analysis of the rate stabilization plan submitted by the Southern Bell Telephone & Telegraph Company to the Florida PSC; performed comprehensive analysis of the Company's projections and budgets which were used as the basis for establishing rates.
Lead consultant in analyzing Southwestern Bell Telephone separations in Missomi; sponsored the complex technical analysis and calculations upon which the firm's testimony in that case was based. He has also assisted in analyzing changes in depreciation methodology for setting telephone rates.
Lead consultant in the review of gas cost recovery reconciliation applications of Michigan Gas Utilities Company, Michigan Consolidated Gas Company, and Consumers Power Company. Drafted recommendations regarding the appropriate rate of interest to be applied to any over or under collections and the proper procedures and allocation methodology to be used to distribute any refunds to customer classes.
Lead consultant in the review of Consumers Power Company's gas cost recovery refund plan. Addressed appropriate interest rate and compounding procedures and proper allocation methodology.
Project manager in the review of the request by Central Maine Power Company for an increase in rates. The major area addressed was the propriety of the Company's ratemaking attrition adjustment in relation to its corporate budgets and projections.
Project manager in an engagement designed to address the impacts of the Tax Reform Act of 1986 on gas distribution utility operations of the Northern States Power Company. Analyzed the reduction in the corporate tax rate, uncollectibles reserve, ACRS, unbilled revenues, customer advances, CIAC, and timing of TRA-related impacts associated with the Company's tax liability.
Project manager and expett witness in the determination of the impacts of the Tax Reform Act of 1986 on the operations of Connecticut Natural Gas Company on behalf of the Connecticut Depmtment of Public Utility Control - Prosecutorial Division, Connecticut Attorney General, and Connecticut Department of Consumer Counsel.
Lead Consultant for The Minnesota Depmtment of Public Service ("DPS") to review the Minnesota Incentive Plan ("Incentive Plan") proposal presented by Northwestern Bell Telephone Company ("NWB") doing business as US West Communications ("USWC"). Objective was to express an opinion as to whether current rates addressed by the plan were appropriate from a Minnesota intrastate revenue requirements and accounting perspective, and to assist in developing recommended modifications to NWB's proposed Plan.
Performed a variety of analytical and review tasks related to our work effott on this project. Obtained and reviewed data and performed other procedures as necessary (1) to obtain an understanding of the Company's Incentive Plan filing package as it relates to rate base, operating income, revenue requirements, and plan operation, and (2) to formulate an opinion concerning the reasonableness of current rates and of amounts included within the Company's Incentive Plan filing. These procedures included requesting and reviewing extensive discovery, visiting the Company's offices to review data, issuing follow-up information requests in many instances, telephone and on-site discussions with Company representatives, and frequent discussions with counsel and DPS Staff assigned to the project.
I Attachment LA-1, Qualifications of Ralph C. Smith Page 2of14 OUCC Attacment LA-1 Cause No. 45032 S4 Page 3of14
Lead Consultant in the regulatory analysis of Jersey Central Power & Light Company for the Department of the Public Advocate, Division of Rate Counsel. Tasks performed included on-site review and audit of Company, identification and analysis of specific issues, preparation of data requests, testimony, and cross examination questions. Testified in Hearings.
Assisted the NARUC Committee on Management Analysis with drafting the Consultant Standards for Management Audits.
Presented training seminars covering public utility accounting, tax reform, ratemaking, affiliated transaction auditing, rate case management, and regulatory policy in Maine, Georgia, Kentucky, and Pennsylvania. Seminars were presented to commission staffs and consumer interest groups.
Previous Positions
With Larkin, Chapski and Co., the predecessor firm to Larkin & Associates, was involved primarily in utility regulatory consulting, and also in tax planning and tax research for businesses and individuals, tax return preparation and review, and independent audit, review and preparation of financial statements.
Installed computerized accounting system for a realty management firm.
Education
Bachelor of Science in Administration in Accounting, with distinction, University of Michigan, Dearborn, 1979.
Master of Science in Taxation, Walsh College, Michigan, 1981. Master's thesis dealt with investment tax credit and property tax on various assets.
Juris Doctor, cum laude, Wayne State University Law School, Detroit, Michigan, 1986. Recipient of American Jurisprudence Award for academic excellence.
Continuing education required to maintain CPA license and CFP® certificate.
Passed all parts of CPA examination in first sitting, 1979. Received CPA certificate in 1981 and Cetiified Financial Planning cetiificate in 1983. Admitted to Michigan and Federal bars in 1986.
Michigan Bar Association.
American Bar Association, sections on public utility law and taxation.
I Attachment LA-1, Qualifications of Ralph C. Smith Page 3of14 OUCC Attacment LA-1 Cause No. 45032 84 Page 4of14
Partial list of utility cases pmticipated in:
79-228-EL-F AC Cincinnati Gas & Electric Company (Ohio PUC) 79-231-EL-FAC Cleveland Electric Illuminating Company (Ohio PUC) 79-535-EL-AIR East Ohio Gas Company (Ohio PUC) 80-235-EL-FAC Ohio Edison Company (Ohio PUC) 80-240-EL-FAC Cleveland Electric Illuminating Company (Ohio PUC) U-1933 Tucson Electric Power Company (Arizona Corp. Commission) U-6794 Michigan Consolidated Gas Co. --16 Refunds (Michigan PSC) 81-0035TP Southern Bell Telephone Company (Florida PSC) 81-0095TP General Telephone Company of Florida (Florida PSC) 81-308-EL-EFC Dayton Power & Light Co.- Fuel Adjustment Clause (Ohio PUC) 810136-EU GulfPower Company (Florida PSC) GR-81-342 Northern States Power Co. -- E-002/Minnesota (Minnesota PUC) Tr-81-208 Southwestern Bell Telephone Company (Missouri PSC)) U-6949 Detroit Edison Company (Michigan PSC) 8400 East Kentucky Power Cooperative, Inc. (Kentucky PSC) 18328 Alabama Gas Corporation (Alabama PSC) 18416 Alabama Power Company (Alabama PSC) 820100-EU Florida Power Corporation (Florida PSC) 8624 Kentucky Utilities (Kentucky PSC) 8648 East Kentucky Power Cooperative, Inc. (Kentucky PSC) U-7236 Detroit Edison - Burlington Northern Refund (Michigan PSC) U6633-R Detroit Edison - MRCS Program (Michigan PSC) U-6797-R Consumers Power Company -MRCS Program (Michigan PSC) U-5510-R Consumers Power Company - Energy conservation Finance Program (Michigan PSC) 82-240E South Carolina Electric & Gas Company (South Carolina PSC) 7350 Generic Working Capital Hearing (Michigan PSC) RH-1-83 Westcoast Transmission Co., (National Energy Board of Canada) 820294-TP Southern Bell Telephone & Telegraph Co. (Florida PSC) 82-165-EL-EFC (Subfile A) Toledo Edison Company( Ohio PUC) 82-168-EL-EFC Cleveland Electric Illuminating Company (Ohio PUC) 830012-EU Tampa Electric Company (Florida PSC) U-7065 The Detroit Edison Company - Fermi II (Michigan PSC) 8738 Columbia Gas of Kentucky, Inc. (Kentucky PSC) ER-83-206 Arkansas Power & Light Company (Missouri PSC) U-4758 The Detroit Edison Company - Refunds (Michigan PSC) 8836 Kentucky American Water Company (Kentucky PSC) 8839 Western Kentucky Gas Company (Kentucky PSC) 83-07-15 Connecticut Light & Power Co. (Connecticut DPU) 81-0485-WS Palm Coast Utility Corporation (Florida PSC) U-7650 Consumers Power Co. (Michigan PSC) 83-662 Continental Telephone Company of California, (Nevada PSC) U-6488-R Detroit Edison Co., F AC & PIP AC Reconciliation (Michigan PSC) U-15684 Louisiana Power & Light Company (Louisiana PSC) 7395 & U-7397 Campaign Ballot Proposals (Michigan PSC) 820013-WS Seacoast Utilities (Florida PSC) U-7660 Detroit Edison Company (Michigan PSC) 83-1039 CP National Corporation (Nevada PSC) U-7802 Michigan Gas Utilities Company (Michigan PSC) 83-1226 Sierra Pacific Power Company (Nevada PSC) 830465-EI Florida Power & Light Company (Florida PSC) U-7777 Michigan Consolidated Gas Company (Michigan PSC) U-7779 Consumers Power Company (Michigan PSC) \ Attachment LA-1, Qualifications of Ralph C. Smith Page 4of14 OUCC Attacment LA-1 Cause No. 45032 S4 Page 5of14
.U-7480-R Michigan Consolidated Gas Company (Michigan PSC) U-7488-R Consumers Power Company - Gas (Michigan PSC) U-7484-R Michiga,n Gas Utilities Company (Michigan PSC) U-7550-R Detroit Edison Company (Michigan PSC) U-7477-R** Indiana & Michigan Electric Company (Michigan PSC) 18978 Continental Telephone Co. of the South Alabama (Alabama PSC) R-842583 Duquesne Light Company (Pennsylvania PUC) R-842740 Pennsylvania Power Company (Pennsylvania PUC) 850050-EI Tampa Electric Company (Florida PSC) 16091 Louisiana Power & Light Company (Louisiana PSC) 19297 Continental Telephone Co. of the South Alabama (Alabama PSC) 76-18788AA &76-l 8793AA Detroit Edison - Refund -Appeal ofU-4807 (Ingham County, Michigan Circuit Court) 85-53476AA & 85-534785AA Detroit Edison Refund - Appeal ofU-4758 (Ingham County, Michigan Circuit Court) U-8091/U-8239 Consumers Power Company - Gas Refunds (Michigan PSC) TR-85-179** United Telephone Company of Missouri (Missouri PSC) 85-212 Central Maine Power Company (Maine PSC) ER-85646001 & ER-85647001 New England Power Company (FERC) 850782-EI & 850783-EI Florida Power & Light Company (Florida PSC) R-860378 Duquesne Light Company (Pennsylvania PUC) R-850267 Pennsylvania Power Company (Pennsylvania PUC) 851007-WU & 840419-SU Florida Cities Water Company (Florida PSC) G-002/GR-86-160 Northern States Power Company (Minnesota PSC) 7195 (Interim) Gulf States Utilities Company (Texas PUC) 87-01-03 Connecticut Natural Gas Company (Connecticut PUC)) 87-01-02 Southern New England Telephone Company (Connecticut Department of Public Utility Control) 3673- Georgia Power Company (Georgia PSC) 29484 Long Island Lighting Co. (New York Dept. of Public Service) U-8924 Consumers Power Company - Gas (Michigan PSC) DocketNo. 1 Austin Electric Utility (City of Austin, Texas) Docket E-2, Sub 527 Carolina Power & Light Company (North Carolina PUC) 870853 Pennsylvania Gas and Water Company (Pennsylvania PUC) 880069** Southern Bell Telephone Company (Florida PSC) U-1954-88-102 Citizens Utilities Rural Company, Inc. & Citizens Utilities TE-1032-88-102 Company, Kingman Telephone Division (Arizona CC) 89-0033 Illinois Bell Telephone Company (Illinois CC) U-89-2688-T Puget Sound Power & Light Company (Washington UTC)) R-891364 Philadelphia Electric Company (Pennsylvania PUC) F.C. 889 Potomac Electric Power Company (District of Columbia PSC) Case No. 88/546 Niagara Mohawk Power Corporation, et al Plaintiffs, v. Gulf+ Western, Inc. et al, defendants (Supreme Court County of Onondaga, State of New York) 87-11628 Duquesne Light Company, et al, plaintiffs, against Gulf+ Western, Inc. et al, defendants (Comi of the Common Pleas of Allegheny County, Pennsylvania Civil Division) 890319-EI Florida Power & Light Company (Florida PSC) 891345-EI Gulf Power Company (Florida PSC) ER88110912J Jersey Central Power & Light Company (BPU) 6531 Hawaiian Electric Company (Hawaii PUCs) I Attachment LA-1, Qualifications of Ralph C. Smith Page 5of14 OUCC Attacment LA-1 Cause No. 45032 S4 Page 6of14
R0901595 Equitable Gas Company (Pennsylvania Consumer Counsel) 90-10 Artesian Water Company (Delaware PSC) 89-12-05 Southern New England Telephone Company (Connecticut PUC) 900329-WS Southern States Utilities, Inc. (Florida PSC) 90-12-018 Southern California Edison Company (California PUC) 90-E-1185 Long Island Lighting Company (New York DPS) R-911966 Pennsylvania Gas & Water Company (Pennsylvania PUC) 1.90-07-037, Phase II (Investigation of OPEBs) Department of the Navy and all Other Federal Executive Agencies (California PUC) U-1551-90-322 Southwest Gas Corporation (Arizona CC) U-1656-91-134 Sun City Water Company (Arizona RUCO) U-2013-91-133 Havasu Water Company (Arizona RUCO) 91-174*** Central Maine Power Company (Department of the Navy and all Other Federal Executive Agencies) U-1551-89-102 Southwest Gas Corporation - Rebuttal and PGA Audit (Arizona & U-1551-89-103 Corporation Commission) Docket No. 6998 Hawaiian Electric Company (Hawaii PUC) TC-91-040A and Intrastate Access Charge Methodology, Pool and Rates TC-91-040B Local Exchange Carriers Association and South Dakota Independent Telephone Coalition 9911030-WS & General Development Utilities - Port Malabar and 911-67-WS West Coast Divisions (Florida PSC) 922180 The Peoples Natural Gas Company (Pennsylvania PUC) 7233 and 7243 Hawaiian Nonpension Postretirement Benefits (Hawaiian PUC) R-00922314 & M-920313C006 Metropolitan Edison Company (Pennsylvania PUC) R00922428 Pennsylvania American Water Company (Pennsylvania PUC) E-1032-92-083 & U-1656-92-183 Citizens Utilities Company, Agua Fria Water Division (Arizona Corporation Commission) 92-09-19 Southern New England Telephone Company (Connecticut PUC) E-103 2-92-073 Citizens Utilities Company (Electric Division), (Arizona CC) UE-92-1262 Puget Sound Power and Light Company (Washington UTC)) 92-345 Central Maine Power Company (Maine PUC) R-932667 Pennsylvania Gas & Water Company (Pennsylvania PUC) U-93-60** Matanuska Telephone Association, Inc. (Alaska PUC) U-93-50** Anchorage Telephone Utility (Alaska PUC) U-93-64 PTI Communications (Alaska PUC) 7700 Hawaiian Electric Company, Inc. (Hawaii PUC) E-1032-93-111 & Citizens Utilities Company - Gas Division U-1032-93-193 (Arizona Corporation Commission) R-00932670 Pennsylvania American Water Company (Pennsylvania PUC) U-1514-93-169/ Sale of Assets CC&N from Contel of the West, Inc. to E-103 2-93-169 Citizens Utilities Company (Arizona Corporation Commission) 7766 Hawaiian Electric Company, Inc. (Hawaii PUC) 93-2006- GA-AIR The East Ohio Gas Company (Ohio PUC) 94-E-0334 Consolidated Edison Company (New York DPS) 94-0270 Inter-State Water Company (Illinois Commerce Commission) 94-0097 Citizens Utilities Company, Kauai Electric Division (Hawaii PUC) PU-314-94-688 Application for Transfer of Local Exchanges (North Dakota PSC) 94-12-005-Phase I Pacific Gas & Electric Company (California PUC) R-953297 UGI Utilities, Inc. - Gas Division (Pennsylvania PUC) 95-03-01 Southern New England Telephone Company (Connecticut PUC) 95-0342 Consumer Illinois Water, Kankakee Water District (Illinois CC) 94-996-EL-AIR Ohio Power Company (Ohio PUC) 95-1000-E South Carolina Electric & Gas Company (South Carolina PSC) I Attachment LA-1, Qualifications of Ralph C. Smith Page 6of14 oucc Atiacment LA-1 Cause No. 45032 S4 Page 7of14
Non-Docketed Citizens Utility Company - Arizona Telephone Operations Staff Investigation (Arizona Corporation Commission) E-1032-95-473 Citizens Utility Co. - Northern Arizona Gas Division (Arizona CC) E-1032-95-433 Citizens Utility Co. - Arizona Electric Division (Arizona CC) Collaborative Ratemaking Process Columbia Gas of Pennsylvania (Pennsylvania PUC) GR-96-285 Missouri Gas Energy (Missouri PSC) 94-10-45 Southern New England Telephone Company (Connecticut PUC) A.96-08-001 et al. California Utilities' Applications to Identify Sunk Costs ofNon Nuclear Generation Assets, & Transition Costs for Electric Utility Restructuring, & Consolidated Proceedings (California PUC) 96-324 Bell Atlantic - Delaware, Inc. (Delaware PSC) 96-08-070, et al. Pacific Gas & Electric Co., Southern California Edison Co. and San Diego Gas & Electric Company (California PUC) 97-05-12 Connecticut Light & Power (Connecticut PUC) R-00973953 Application of PECO Energy Company for Approval of its Restructuring Plan Under Section 2806 of the Public Utility Code (Pennsylvania PUC) 97-65 Application of Delmarva Power &Light Co. for Application of a Cost Accounting Manual and a Code of Conduct (Delaware PSC) 16705 Entergy Gulf States, Inc. (Cities Steering Committee) E-1072-97-067 Southwestern Telephone Co. (Arizona Corporation Commission) Non-Docketed Delaware - Estimate Impact of Universal Services Issues Staff Investigation (Delaware PSC) PU-314-97-12 US West Communications, Inc. Cost Studies (North Dakota PSC) 97-0351 Consumer Illinois Water Company (Illinois CC) 97-8001 Investigation oflssues to be Considered as a Result of Restructuring of Electric Industry (Nevada PSC) U-0000-94-165 Generic Docket to Consider Competition in the Provision of Retail Electric Service (Arizona Corporation Commission) 98-05-006-Phase I San Diego Gas & Electric Co., Section 386 costs (California PUC) 9355-U Georgia Power Company Rate Case (Georgia PUC) 97-12-020 - Phase I Pacific Gas & Electric Company (California PUC) U-98-56, U-98-60, Investigation of 1998 Intrastate Access charge filings U-98-65, U-98-67 (Alaska PUC) (U-99-66, U-99-65, Investigation of 1999 Intrastate Access Charge filing U-99-56, U-99-52) (Alaska PUC) Phase II of 97-SCCC-149-GIT Southwestern Bell Telephone Company Cost Studies (Kansas CC) PU-314-97-465 US West Universal Service Cost Model (North Dakota PSC) Non-docketed Bell Atlantic - Delaware, Inc., Review of New Telecomm. Assistance and Tariff Filings (Delaware PSC) Contract Dispute City of Zeeland, MI - Water Contract with the City of Holland, Ml (Before an arbitration panel) Non-docketed Project City of Danville, IL - Valuation of Water System (Danville, IL) Non-docketed Project Village of University Park, IL - Valuation of Water and Sewer System (Village of University Park, Illinois)
I Attachment LA-1, Qualifications of Ralph C. Smith Page 7of14 OUCC Attacment LA-1 Cause No. 45032 84 Page 8of14
E-1032-95-417 Citizens Utility Co., Maricopa Water/Wastewater Companies et al. (Arizona Corporation Commission) T-105 lB-99-0497 Proposed Merger of the Parent Corporation of Qwest Communications Corporation, LCI International Telecom Corp., and US West Communications, Inc. (Arizona CC) T-01051B-99-0105 US West Communications, Inc. Rate Case (Arizona CC) A00-07-043 Pacific Gas & Electric - 2001 Attrition (California PUC) T-01051B-99-0499 US West/Quest Broadband Asset Transfer (Arizona CC) 99-419/420 US West, Inc. Toll and Access Rebalancing (North Dakota PSC) PU314-99-l 19 US West, Inc. Residential Rate Increase and Cost Study Review (North Dakota PSC 98-0252 Ameritech - Illinois, Review of Alternative Regulation Plan (Illinois CUB) 00-108 Delmarva Billing System Investigation (Delaware PSC) U-00-28 Matanuska Telephone Association (Alaska PUC) Non-Docketed Management Audit and Market Power Mitigation Analysis of the Merged Gas System Operation of Pacific Enterprises and Enova Corporation (California PUC) 00-11-038 Southern California Edison (California PUC) 00-11-056 Pacific Gas & Electric (California PUC) 00-10-028 The Utility Reform Network for Modification of Resolution E-3527 (California PUC) 98-479 Delmarva Power & Light Application for Approval of its Electric and Fuel Adjustments Costs (Delaware PSC) 99-457 Delaware Electric Cooperative Restructuring Filing (Delaware PSC) 99-582 Delmarva Power & Light dba Conectiv Power Delivery Analysis of Code of Conduct and Cost Accounting Manual (Delaware PSC) 99-03-04 United Illuminating Company Recovery of Stranded Costs (Connecticut OCC) 99-03-36 Connecticut Light & Power (Connecticut OCC) Civil Action No. 98-1117 West Penn Power Company vs. PA PUC (Pennsylvania PSC) Case No. 12604 Upper Peninsula Power Company (Michigan AG) Case No. 12613 Wisconsin Public Service Commission (Michigan AG) 41651 Northern Indiana Public Se1vice Co Overearnings investigation (Indiana UCC) 13605-U Savannah Electric & Power Company- FCR (Georgia PSC) 14000-U Georgia Power Company Rate Case/M&S Review (Georgia PSC) 13196-U Savannah Electric & Power Company Natural Gas Procurement and Risk Management/Hedging Proposal, Docket No. 13196-U (Georgia PSC) Non-Docketed Georgia Power Company & Savannah Electric & Power FPR Company Fuel Procurement Audit (Georgia PSC) Non-Docketed Transition Costs ofNevada Vertically Integrated Utilities (US Depaiiment of Navy) Application No. Post-Transition Ratemaking Mechanisms for the Electric Industry 99-01-016, Restructuring (US Department of Navy) Phase I 99-02-05 Connecticut Light & Power (Connecticut OCC) 01-05-19-RE03 Yankee Gas Service Application for a Rate Increase, Phase 1-2002-IERM (Connecticut OCC) G-01551A-00-0309 Southwest Gas Corporation, Application to amend its rate Schedules (Arizona CC) 00-07-043 Pacific Gas & Electric Company Attrition & Application for a rate increase (California PUC)
) Attachment LA-1, Qualifications of Ralph C. Smith Page 8of14 OUCC Attacment LA-1 Cause No. 45032 84 Page 9of14
97-12-020 Phase II Pacific Gas & Electric Company Rate Case (California PUC) 01-10-10 United Illuminating Company (Connecticut OCC) 13711-U Georgia Power FCR (Georgia PSC) 02-001 Verizon Delaware§ 27l(Delaware DPA) 02-BL VT-377-AUD Blue Valley Telephone Company Audit/General Rate Investigation (Kansas CC) 02-S&TT-390-AUD S&T Telephone Cooperative Audit/General Rate Investigation (Kansas CC) 01-SFLT-879-AUD Sunflower Telephone Company Inc., Audit/General Rate Investigation (Kansas CC) 01-BSTT-878-AUD Bluestem Telephone Company, Inc. Audit/General Rate Investigation (Kansas CC) P404,407,520,413 426,427,430,421/ CI-00-712 Sherburne County Rural Telephone Company, dba as Connections, Etc. (Minnesota DOC) U-01-85 ACS of Alaska, dba as Alaska Communications Systems (ACS), Rate Case (Alaska Regulatory Commission PAS) U-01-34 ACS of Anchorage, dba as Alaska Communications Systems (ACS), Rate Case (Alaska Regulato1y Commission PAS) U-01-83 ACS of Fairbanks, dba as Alaska Communications Systems (ACS), Rate Case (Alaska Regulatory Commission PAS) U-01-87 ACS of the Northland, dba as Alaska Communications Systems (ACS), Rate Case (Alaska Regulatory Commission PAS) 96-324, Phase II Verizon Delaware, Inc. UNE Rate Filing (Delaware PSC) 03-WHST-503-AUD Wheat State Telephone Company (Kansas CC) 04-GNBT-130-AUD Golden Belt Telephone Association (Kansas CC) Docket 6914 Shoreham Telephone Company, Inc. (Vermont BPU) Docket No. E-01345 A-06-009 Arizona Public Service Company (Arizona Corporation Commission) Case No. 05-1278-E-PC-PW-42T Appalachian Power Company and Wheeling Power Company both d/b/a American Electric Power (West Virginia PSC) Docket No. 04-0113 Hawaiian Electric Company (Hawaii PUC) Case No. U-14347 Consumers Energy Company (Michigan PSC) Case No. 05-725-EL-UNC Cincinnati Gas & Electric Company (PUC of Ohio) Docket No. 21229-U Savannah Electric & Power Company (Georgia PSC) DocketNo. 19142-U Georgia Power Company (Georgia PSC) Docket No. 03-07-01REO1 Connecticut Light & Power Company (CT DPUC) Docket No. 19042-U Savannah Electric & Power Company (Georgia PSC) Docket No. 2004-178-E South Carolina Electric & Gas Company (South Carolina PSC) Docket No. 03-07-02 Connecticut Light & Power Company (CT DPUC) Docket No. EX02060363, Phases I&II Rockland Electric Company (NJ BPU) Docket No. U-00-88 ENSTAR Natural Gas Company and Alaska Pipeline Company (Regulatory Commission of Alaska) Phase 1-2002 IERM, Docket No. U-02-075 Interior Telephone Company, Inc. (Regulatory Commission of Alaska) Docket No. 05-SCNT- 1048-AUD South Central Telephone Company (Kansas CC) Docket No. 05-TRCT- 607-KSF Tri-County Telephone Company (Kansas CC) Docket No. 05-KOKT- 060-AUD Kan Okla Telephone Company (Kansas CC) Docket No. 2002-7 47 Northland Telephone Company of Maine (Maine PUC) I Attachment LA-1, Qualifications of Ralph C. Smith Page 9of14 OUCC Attacment LA-1 Cause No. 45032 S4 Page 10of14
Docket No. 2003-34 Sidney Telephone Company (Maine PUC) Docket No. 2003-35 Maine Telephone Company (Maine PUC) Docket No. 2003-36 China Telephone Company (Maine PUC) Docket No. 2003-37 Standish Telephone Company (Maine PUC) Docket Nos. U-04-022, U-04-023 Anchorage Water and Wastewater Utility (Regulatory Commission of Alaska) Case 05-116-U/06-055-U Entergy Arkansas, Inc. EFC (Arkansas Public Service Commission) Case 04-137-U Southwest Power Pool RTO (Arkansas Public Service Commission) Case No. 7109/7160 Vermont Gas Systems (Department of Public Service) Case No. ER-2006-0315 Empire District Electric Company (Missouri PSC) Case No. ER-2006-0314 Kansas City Power & Light Company (Missouri PSC) Docket No. U-05-043,44 Golden Heart Utilities/College Park Utilities (Regulatory Commission of Alaska) A-122250F5000 Equitable Resources, Inc. and The Peoples Natural Gas Company, d/b/a Dominion Peoples (Pennsylvania PUC) E-01345A-05-0816 Arizona Public Service Company (Arizona CC) Docket No. 05-304 Delmarva Power & Light Company (Delaware PSC) 05-806-EL-UNC Cincinnati Gas & Electric Company (Ohio PUC) U-06-45 Anchorage Water Utility (Regulatory Commission of Alaska) 03-93-EL-ATA, 06-1068-EL-UNC Duke Energy Ohio (Ohio PUC) PUE-2006-00065 Appalachian Power Company (Virginia Corporation Commission) G-04204A-06-0463 et. al UNS Gas, Inc. (Arizona CC) U-06-134 Chugach Electric Association, Inc. (Regulatory Commission of Alaska) Docket No. 2006-03 86 Hawaiian Electric Company, Inc (Hawaii PUC) E-01933A-07-0402 Tucson Electric Power Company (Arizona CC) G-01551A-07-0504 Southwest Gas Corporation (Arizona CC) Docket No.UE-072300 Puget Sound Energy, Inc. (Washington UTC) PUE-2008-00009 Virginia-American Water Company (Virginia SCC) PUE-2008-00046 Appalachian Power Company (Virginia SCC) E-01345A-08-0172 Arizona Public Service Company (Arizona CC) A-2008-2063737 Babcock & Brown Infrastructure Fund North America, LP. and The Peoples Natural Gas Company, d/b/a Dominion Peoples (Pennsylvania PUC) 08- l 783-G-42T Hope Gas, Inc., dba Dominion Hope (West Virginia PSC) 08-1761-G-PC Hope Gas, Inc., dba Dominion Hope, Dominion Resources, Inc., and Peoples Hope Gas Companies (West Virginia PSC) Docket No. 2008-0083 Hawaiian Electric Company, Inc. (Hawaii PUC) Docket No. 2008-0266 Young Brothers, Limited (Hawaii PUC) G-04024A-08-0571 UNS Gas, Inc. (Arizona CC) Docket No. 09-29 Tidewater Utilities, Inc. (Delaware PSC) Docket No. UE-090704 Puget Sound Energy, Inc. (Washington UTC) 09-0878-G-42T Mountaineer Gas Company (West Virginia PSC) 2009-UA-0014 Mississippi Power Company (Mississippi PSC) Docket No. 09-0319 Illinois-American Water Company (Illinois CC) Docket No. 09-414 Delmarva Power & Light Company (Delaware PSC) R-2009-2132019 Aqua Pennsylvania, Inc. (Pennsylvania PUC) Docket Nos. U-09-069, U-09-070 ENSTAR Natural Gas Company (Regulatory Commission of Alaska) Docket Nos. U-04-023, U-04-024 Anchorage Water and Wastewater Utility - Remand (Regulatory Commission of Alaska) W-01303A-09-0343 & SW-01303A-09-0343 Arizona-American Water Company (Arizona CC) 09-872-EL-FAC & 09-873-EL-FAC Financial Audits of the FAC of the Columbus Southern Power Company and the Ohio Power Company - Audit I (Ohio PUC) I Attachment LA-1, Qualifications of Ralph C. Smith Page 10of14 OUCC Attacment LA-1 Cause No. 45032 S4 Page 11 of 14
2010-00036 Kentucky-American Water Company (Kentucky PSC) E-04 lOOA-09-0496 Southwest Transmission Cooperative, IHnc. (Arizona CC) E-0 l 773A-09-0472 Arizona Electric Power Cooperative, Inc. (Arizona CC) R-2010-2166208, R-20 I 0-2166210, R-2010-2166212, & R-2010-2166214 Pennsylvania-American Water Company (Pennsylvania PUC) PSC Docket No. 09-0602 Central Illinois Light Company D/B/A AmerenCILCO; Central Illinois Public Service Company D/B/A AmerenCIPS; Illinois Power Company D/B/A AmerenIP (Illinois CC) 10-0713-E-PC Allegheny Power and FirstEnergy Corp. (West Virginia PSC) Docket No. 31958 Georgia Power Company (Georgia PSC) Docket No. I 0-046 7 Commonwealth Edison Company (Illinois CC) PSC Docket No. 10-237 Delmarva Power & Light Company (Delaware PSC) U-10-51 Cook Inlet Natural Gas Storage Alaska, LLC (Regulatory Commission of Alaska) I 0-0699-E-42T Appalachian Power Company and Wheeling Power Company (West Virginia PSC) 10-0920-W-42T West Virginia-American Water Company (West Virginia PSC) A.I 0-07-007 California-American Water Company (California PUC) A-20 I 0-2210326 TWP Acquisition (Pennsylvania PUC) 09-1012-EL-FAC Financial, Management, and Performance Audit of the F AC for Dayton Power and Light - Audit 1 (Ohio PUC) 10-268-EL FAC et al. Financial Audit of the FAC of the Columbus Southern Power Company and the Ohio Power Company - Audit II (Ohio PUC) Docket No. 20 I 0-0080 Hawaiian Electric Company, Inc. (Hawaii PUC) G-01551A-10-0458 Southwest Gas Corporation (Arizona CC) 10-KCPE-415-RTS Kansas City Power & Light Company - Remand (Kansas CC) PUE-2011-00037 Virginia Appalachian Power Company (Commonwealth of Virginia SCC) R-2011-2232243 Pennsylvania-American Water (Pennsylvania PUC) U-11-100 Power Purchase Agreement between Chugach Association, Inc. and Fire Island Wind, LLC (Regulatory Commission of Alaska) A. I 0-12-005 San Diego Gas & Electric Company (California PUC) PSC Docket No. 11-207 A1iesian Water Company, Inc. (Delaware PSC) Cause No. 44022 Indiana-American Water Company, Inc. (Indiana Utility Regulatory Commission) PSC Docket No. 10-247 Management Audit of Tidewater Utilities, Inc. Affiliate Transactions (Delaware Public Service Commission) G-04204A-l l-0158 UNS Gas, Inc. (Arizona Corporation Commission) E-01345A-l I-0224 Arizona Public Service Company (Arizona CC) UE-111048 & UE-111049 Puget Sound Energy, Inc. (Washington Utilities and Transp01iation Commission) Docket No. 11-0721 Commonwealth Edison Company (Illinois CC) l 1AL-947E Public Service Company of Colorado (Colorado PSC) U-11-77 & U-11-78 Golden Heart Utilities, Inc. and College Utilities Corporation (The Regulatory Commission of Alaska) DocketNo. 11-0767 Illinois-American Water Company (Illinois CC) PSC Docket No. 11-397 Tidewater Utilities, Inc. (Delaware PSC) Cause No. 44075 Indiana Michigan Power Company (Indiana Utility Regulatory Commission) Docket No. 12-000 I Ameren Illinois Company (Illinois CC) 11-5730-EL-FAC Financial, Management, and Performance Audit of the FAC for Dayton Power and Light-Audit 2 (Ohio PUC) PSC Docket No. 11-528 Delmarva Power & Light Company (Delaware PSC) 11-281-EL-FAC et al. Financial Audit of the FAC of the Columbus Southern Power Company and the Ohio Power Company -Audit III (Ohio PUC)
I Attachment LA-1, Qualifications of Ralph C. Smith Page 11of14 OUCC Attacment LA-1 Cause No. 45032 S4 Page 12of14
Cause No. 43l14-IGCC- 4S 1 Duke Energy Indiana, Inc. (Indiana Utility Regulatory Commission) Docket No. 12-0293 Ameren Illinois Company (Illinois CC) DocketNo. 12-0321 Commonwealth Edison Company (Illinois CC) 12-02019 & 12-04005 Southwest Gas Corporation (Public Utilities Commission of Nevada) Docket No. 2012-218-E South Carolina Electric & Gas (South Carolina PSC) Docket No. E-72, Sub 479 Dominion North Carolina Power (North Carolina Utilities Commission) 12-0511 & 12-0512 North Shore Gas Company and The Peoples Gas Light and Coke Company (Illinois CC) E-Ol 933A-12-0291 Tucson Electric Power Company (Arizona CC) Case No. 9311 Potomac Electric Power Company (Maryland PSC) Cause No. 43114-IGCC-10 Duke Energy Indiana, Inc. (Indiana Utility Regulatory Commission) Docket No. 36498 Georgia Power Company (Georgia PSC) Case No. 9316 Columbia Gas of Maryland, Inc. (Maryland PSC) Docket No. 13-0192 Ameren Illinois Company (Illinois CC) 12-1649-W-42T West Virginia-American Water Company (West Virginia PSC) E-04204A-12-0504 UNS Electric, Inc. (Arizona CC) PUE-2013-00020 Virginia and Electric Power Company (Virginia SCC) R-2013-2355276 Pennsylvania-American Water Company (Pennsylvania PUC) Formal Case No. 1103 Potomac Electric Power Company (District of Columbia PSC) U-13-007 Chugach Electric Association, Inc. (The Regulatory Commission of Alaska) 12-2881-EL-FAC Financial, Management, and Performance Audit of the FAC for Dayton Power and Light-Audit 3 (Ohio PUC) Docket No. 36989 Georgia Power Company (Georgia PSC) Cause No. 43114-IGCC-ll Duke Energy Indiana, Inc. (Indiana Utility Regulatory Commission) UM 1633 Investigation into Treatment of Pension Costs in Utility Rates (Oregon PUC) 13-1892-EL FAC Financial Audit of the FAC and AER of the Ohio Power Company-Audit I (Ohio PUC) E-04230A-14-0011 & E-01933A-14-001 l Reorganization ofUNS Energy Corporation with Fortis, Inc. (Arizona CC) 14-255-EL RDR Regulatory Compliance Audit of the 2013 DIR of Ohio Power Company (Ohio PUC) U-14-001 Chugach Electric Association, Inc. (The Regulatory Commission of Alaska) U-14-002 Alaska Power Company (The Regulatory Commission of Alaska) PUE-2014-00026 Virginia Appalachian Power Company (Commonwealth of Virginia SCC) 14-0117-EL-F AC Financial, Management, and Performance Audit of the FAC and Purchased Power Rider for Dayton Power and Light - Audit 1 (Ohio PUC) 14-0702-E-42T Monongahela Power Company and The Potomac Edison Company (West Virginia PSC) Formal Case No. 1119 Merger of Exelon Corporation, Pepco Holdings, Inc., Potomac Electric Power Company, Exelon Energy Delivery Company, LLC, and New Special Purpose Entity, LLC (District of Columbia PSC) R-2014-2428742 West Penn Power Company (Pennsylvania PUC) R-2014-2428743 Pennsylvania Electric Company (Pennsylvania PUC) R-2014-2428744 Pennsylvania Power Company (Pennsylvania PUC) R-2014-2428745 Metropolitan Edison Company (Pennsylvania PUC) Cause No. 43114-IGCC- 12/13 Duke Energy Indiana, Inc. (Indiana Utility Regulatory Commission) 14-l l 52-E-42T Appalachian Power Company and Wheeling Power Company (West Virginia PSC) . WS-01303A-14-0010 EPCOR Water Arizona, Inc. (Arizona CC) 2014-000396 Kentucky Power Company (Kentucky PSC) 15-03-45A Iberdrola, S.A. Et Al, and UIL Holdings Corporation merger (Connecticut PURA) A.14-11-003 San Diego Gas & Electric Company (California PUC) U-14-111 ENSTAR Natural Gas Company (Regulatory Commission of Alaska) I Attachment LA-1, Qualifications of Ralph C. Smith Page 12of14 OUCC Attacment LA-1 Cause No. 45032 84 Page 13of14
2015-UN-049 Atmos Energy Corporation (Mississippi PSC) l 5-0003-G-42T Mountaineer Gas Company (West Virginia PSC) PUE-2015-00027 Virginia Electric and Power Company (Commonwealth of Virginia SCC) Docket No. 2015-0022 Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc., Maui Electric Company Limited, and NextEra Energy, Inc. (Hawaii PUC) 15-0676-W-42T West Virginia-American Water Company (West Virginia PSC) 15-07-38M Iberdrola, S.A. Et Al, and UIL Holdings Corporation merger (Connecticut PURA) Iberdrola, S.A. Et Al, and UIL Holdings Corporation merger (Massachusetts DPU) 15-042-EL-F AC Management/Performance and Financial Audit of the FAC and Purchased Power Rider for Dayton Power and Light (Ohio PUC) 2015-UN-0080 Mississippi Power Company (Mississippi PSC) Docket No. 15-00042 B&W Pipeline, LLC (Tennessee Regulatory Authority) WR-2015-0301/SR-2015 -0302 Missouri American Water Company (Missouri PSC) U-15-089, U-15-091, & U-15-092 Golden Heart Utilities, Inc. and College Utilities Corporation (The Regulatory Commission of Alaska) Docket No. 16-00001 Kingsport Power Company d/b/a AEP Appalachian Power (Tennessee Regulatory Authority) PUE-2015-00097 Virginia-American Water Company (Commonwealth of Virginia SCC) 15-1854-EL-RDR Management/Performance and Financial Audit of the Alternative Energy Recovery Rider of Duke Energy Ohio, Inc. (Ohio PUC) P-15-014 PTE Pipeline LLC (Regulatory Commission of Alaska) P-15-020 Swanson River Oil Pipeline, LLC (Regulatory Commission of Alaska) Docket No. 40161 Georgia Power Company - Integrated Resource Plan (Georgia PSC) Formal Case No. 1137 Washington Gas Light Company (District of Columbia PSC) 160021-EI, et al. Florida Power Company (Florida PSC) R-2016-2537349 Metropolitan Edison Company (Pennsylvania PUC) R-2016-2537352 Pennsylvania Electric Company (Pennsylvania PUC) R-2016-2537355 Pennsylvania Power Company (Pennsylvania PUC) R-2016-2537359 West Penn Power Company (Pennsylvania PUC) 16-0717-G-390P Hope Gas, Inc., dba Dominion Hope (West Virginia PSC) 15-1256-G-390P (Reopening)/16-0922- G-390P Mountaineer Gas Company (West Virginia PSC) 16-0550-W-P West Virginia-American Water Company (West Virginia PSC) CEPR-AP-2015-0001 Pue1io Rico Electric Power Authority (Puerto Rico Energy Commission) E-01345A-16-0036 Arizona Public Service Company (Arizona CC) Docket No. 4618 Providence Water Supply Board (Rhode Island PUC) Docket No. 46238 Joint Report and Application of Oncor Electric Delivery Company LLC and NextEra Energy Inc. (Texas State Office of Administrative Hearings; Texas PUC) U-16-066 ENSTAR Natural Gas Company (Regulatory Commission of Alaska) Case No. 2016-00370 Kentucky Utilities Company (Kentucky PSC) Case No. 2016-00371 Louisville Gas and Electric Company (Kentucky PSC) P-2015-2508942 Metropolitan Edison Company (Pennsylvania PUC) P-2015-2508936 Pennsylvania Electric Company (Pennsylvania PUC) P-2015-2508931 Pennsylvania Power Company (Pennsylvania PUC) P-2015-2508948 West Penn Power Company (Pennsylvania PUC) E-04204A-15-0142* UNS Electric, Inc. (Arizona CC) E-01933A-15-0322* Tucson Electric Power Company (Arizona CC) UE-170033 & UG-170034* Puget Sound Energy, Inc. (Washington UTC) Case No. U-18239 Consumers Energy Company (Michigan PSC) Case No. U-18248 DTE Electric Company (Michigan PSC) j Attachment LA-1, Qualifications of Ralph C. Smith Page 13of14 OUCC Attacment LA-1 Cause No. 45032 S4 Page 14of14
Case No. 9449 Merger of AltaGas Ltd. and WGL Holdings (Maryland PSC) Formal Case No. 1142 Merger of AltaGas Ltd. and WGL Holdings (District of Columbia PSC) Case No. 2017-00179 Kentucky Power Company (Kentucky PSC) Docket No. 29849 Georgia Power Plant Vogtle Units 3 and 4, VCM 17 (Georgia PSC) Docket No .2017-AD-112 Mississippi Power Company (Mississippi PSC) Docket No. D2017.9.79 Montana-Dakota Utilities Co. (Montana PSC) SW-01428A-17-0058 et al Liberty Utilities (Litchfield Park Water & Sewer) Corp. (Arizona CC)
* Testimony filed, examination not completed * * Issues stipulated ***Company withdrew case A Testimony filed, case withdrawn after proposed decision issued M Issues stipulated before testimony was filed
J Attachment LA-1, Qualifications of Ralph C. Smith Page 14of14 OUCC Attacment LA-2 Cause No. 45032 S4 Page 1 of2
Indiana-American Water Company Cause No. 45032-S4 Attachment LA-2 Copies of Material from Other Cases Referenced in the Direct Testimony of Ralph C. Smith
Document Subject Coufidential No. of Pages Page No. Vectren Settlement Vectren Utility Holdings, Inc. shows Repairs being classified as "non-protected" on Agreement Attachment 1, Page 1 of 5 of its Settlement Agreement (Cause No. 45032 S2 I) No 1 2
Total Pages Including Content Pages 2 OUCC Attacment LA-2 Cause No. 45032 84 Page 2 of2
Settlement Agreement Attachment 1 Page 1of5
Vectren Utility Holdings, Inc. Federal Excess Deferred Liability As of December 31, 2017 Asset I (Liability)
Originating Vectren South- Vectren South- Component FERG Account Electric Gas Vectren North Ohio Valley Hub Unbilled Revenue 190 $ 207,525 $ 66,739 $ $ 2 Property Taxes 190 $ 661,238 $ 86,102 $ 657, 119 $ 2 Bad Debts 190 $ 206,498 $ 68,833 $ 269,052 $ 4 Capitalized Gas Inventory in Lines 190 $ $ 7,239 $ $ 4 Record Sec. 263A CAP Costs 190 $ $ 145,289 $ 121,909 $ 6 Refund Gas Costs Collected under GCA & FAC 283 $ (2,775,821) $ (582,569) $ (3,719,639) $ 6 7 Coal Inventory 283 $ (1,979, 133) $ $ $ 7 Prepaid Insurance 283 $ (190,324) $ (19,917) $ (157,630) $ 8 9 Construction Deposits 190 $ 565,445 $ 107,001 $ 410,963 $ 9 10 FASB 106 Costs 190 $ 1,520,685 $ 333,803 $ 1,564,657 $ 10 11 MGP Reserve Net of Insurance 190 $ $ 140,327 $ 188,552 $ 11 12 Reverse Exec Restr Stock Acer 190 $ 1,003,986 $ 170,916 $ 898,454 $ 12 13 Deferred Comp/Long-term Incentive Plan 190 $ 2,224,210 $ 332,167 $ 1,965,493 $ 13 14 Prepaid Ohio Excise Tax 190 $ $ $ $ 14 15 Amortization of Debt Expense 283 $ (67,224) $ (96,929) $ (539,305) $ 15 16 Amortization of Premium on Reacquired Debt 283 $ (9,628) $ (546) $ $ 16 17 Amortization of Rate Case Expense 283 $ (7,513) $ $ $ 17 18 Def Debits/Reg Assets 283 $ (549,810) $ (1,089,942) $ (4,578,660) $ 18 19 Amortization of Hedging Costs/Losses 283 $ (293,106) $ (127,489) $ (524,254) $ 19 20 Interest on prepaid OH Excise 283 $ $ $ $ 20 21 Pension Expense in Excess of Tax 283 $ (4,305,890) $ (945, 185) $ (4,570,606) $ 21 22 Cap Interest- CWIP 190 $ 183,127 $ 10,780 $ (12,805) $ 22 23 AFUDC CWIP (non-protected) 282 $ (1,016,912) $ (430,400) $ (1,703,582) $ 23 24 Depreciation Related (protected) 282 $ (102,924,769) $ (23,461,57 4) $ (78,660,627) $ (95,310) 24 25 Reeairs (non-erotected) 282 $ (14,455,798) $ (2,907,663) $ (17,221,584) $ 25 26 Total $ (122,003,215) $ (28, 193,019) $ (105,612,492) $ (95,310) 26
27 FERC 190 190 $ 6,572,714 $ 1,469, 197 $ 6,063,395 $ 27 28 FERC 282 282 $ (118,397,480) $ (26,799,638) $ (97,585,794) $ (95,310) 28 29 FERC 283 283 $ (10, 178,449) $ (2,862,578) $ (14,090,094) $ 29 30 Total $ (122,003,215) $ (28, 193,019) $ (105,612,492) $ (95,310) 30
31 Protected [Line24] $ (102,924,769) $ (23,461,574) $ (78,660,627) $ (95,310) 31 32 Unprotected [Line 26 - Line 31] $ (19,078,445) $ (4,731,444) $ (26,951,865) $ 32 33 Total $ (122,003,215) $ (28, 193,019) $ (105,612,492) $ (95,310) 33 OUCC Attacment LA-3 Cause No. 45032 S4 Page 1 of 48
Indiana-American Water Company Cause No. 45032-S4 Attachment LA-3 Copies of Non-Confidential Material Referenced in the Direct Testimony of Ralph C. Smith
Document Subiect Confidential No. of Pages Page No. oucc 03-016 IAWC provides updated amounts for the value of the regualtory liability through June 30 2018 and the value ner customer as of June 30, 20 l 8 No l 3 OUCC04-00I IAWC provides breakout of ADIT and identifies each book-tax difference that produces the $71,378,794 liabilitv amount and $305,118 asset amount No 6 4-9 oucc 04-004 IAWC identifies amount of repair deductions claimed No 2 10- ll oucc 04-005 IAWC identifies amount of repair deductions claimed in each year 2018-20 l 7 under Section 162 of the Internal Revenue Code and Section l.!62-4 of the Income Tax Regulations No I 12 oucc 04-006 Further information about the Internal Revenue Code and Income Tax Regulations pertaining to repair deductions No 2 13- 14 oucc 04-007 Information regarding ADIT relating to IAWC's repair deductions No I 15 OUCC04-012 Information regarding whether Mr. Wilde or anyone at American Water Works or any subsidaries know how ADIT relating to repair deductions have been treated in other IRS rulings No I 16 oucc 04-014 Information regarding whether Mr. Wilde or anyone at American Water Works are aware of other public utilties that are claiming that ADIT for repairs deductions as a "protected" item No 2 17 - 18 oucc 04-015 IAWC admits that one a deduction for repairs is taken under Section l 62 of the Internal Revenue Code, the amount of that repairs deduction ( l) cannot be added to the tax basis of the property and (2) cannot be depreciated for federal income tax purposes under Section 168 of the Internal Revenue Code No l 19 oucc 04-016 IAWC identified the units of property that were used to determine deductibility of repair and maintenance costs and information regarding any "safe harbor" provisions that may aoolv No 3 20-22 oucc 04-019 Information regarding ADIT amoutns relating to reoairs deductions No 1 23 oucc 04-021 Information regarding whether American Water Works has been able to identify the ADIT balances at December 31 2017 related to repairs in any of its jurisdictions No l 24 OUCC04-024 IAWC provides an updated version of JMW-6 with information through June 30, 2018 No 2 25-26 OUCC05-001 Inforniation regarding the item: "Tl 05: Renairs" No l 27 oucc 05-002 Information regarding the item: "Tl 09: Pavement Repairs" No l 28 oucc 05-003 IAWC indicates whether or not the Company's affilitated water companies listed on the data information request are currently flowing back some or all of the benefits of the TCJA to their customers No I 29 OUCC05-004 IA WC further explains how the affiliates in OUCC 05-003 are providing the TCJA benefits to the utility customers No l 30 OUCC05-005 IAWC indicates whether or not there are other water utility affilitates that are not listed in OUCC 05-003 orovidirn! the cost savings resulting from the TCJA to their customers No I 31 OUCC05-006 IAWC indicates whether or not the Company's affilitated water companies listed on the data inforniation request are currently flowing back the "stub period" benefits of the TCJA to their customers No l 32 oucc 05-008 Information regarding whether the repairs deductions listed in response to OUCC 4-4 is the same as the "Tl 05: Renairs" No I 33 OUCC05-009 Information regarding how much excess ADIT the Company has relating to the sum of repairs deductions listed in the response to OUCC 4-4 No l 34 OUCC05-0ll Information regarding the Company's Tax Basis Balance Sheets No I 35 oucc 05-012 IAWC states whether the excess ADIT related to the Company's repair deductions can be reasonably estimated by taking the sum total of repairs deductions listed in the response to OUCC 4-4 and multplying it by the difference in the federal and stated blended income tax rates No l 36 oucc 05-013 IAWC states whether the excess ADIT related to the Company's repair deductions can be reasonably estimated by taking the cumulative total of repairs deductions listed in the response to OUCC 4-1 and multplying it by the difference in the federal and stated blended income tax rates No l 37 OUCC Attacment LA-3 Cause No. 45032 S4 Page 2 of 48 oucc 05-014 Infonmtion regarding whether or not the Company is willing to seek a private letter ruling concerning whether the excess ADIT related to its repair deductions can be amortized over a oeriod determined bv the Commission that varies from the ARAM No 2 38-39 oucc 05-015 Information regarding whether or not the Company is willing to seek a private letter ruling concerning whether the amortization over a five-year period on a straight-line basis of the excess ADIT related to its reapirs deductions would result in a normalization violation or in any way impede the Company's ability to use accelerated tax depreciation or claim reoairs deductions No 1 40 oucc 05-016 IAWC admits that a number of other investor-owned utilities have classified the excess ADIT related to repairs deductions as "unprotected" No 1 41 oucc 05-017 IAWC cannot make a blanket admission that none of the spending related to the repairs deductions that have been claimed by the Company that are listed on the response to OUCC 4-1 added to the value of the orooertv or aooreciablv orolonged its useful life No 2 42-43 oucc 05-018 Information regarding the item: "Tl 03: Gains and Losses" No 1 44 oucc 05-021 Information regarding the item: "TISO: 481 Adiustment related to Reoairs" No 2 45-46 OUCCOS-022 IAWC explains why they start calculating their federal income tax savings from the TCJA on January 3, 2018 instead of January 1, 2018 No l 47 oucc 06-009 IAWC indicates that they do not have a list, and has no first-hand knowledge of investor- owned utilities that have classified EADIT related to tax repairs deductions as "unorotected" No l 48
Total Pages Including Content Pages 48 OUCC Attacment LA-3 Cause No. 45032 84 Page 3 of 48
oucc 03-016
DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4
Information Requested:
On page 2 of his testimony, Mr. Watkins states the current value of the regulatory liability through May 31 is approximately $4.5 million. He further states on page 3 of his testimony that the value is approximately $15.00 per customer. Please answer the following questions regarding Petitioner's assertion.
a. What is the current value of the regulatory liability through June 30, 2018? b. What is the value per customer as of June 30, 2018?
Information Provided:
a. The regulatory liability is $5,458, 177 .14 at June 30, 2018. b. The estimated amount per metered customer that would be available for credit as a result of the deferral is approximately $21.02 ($5,458177.14/259,613) as of June 30, 2018. OUCC Attacment LA-3 Cause No. 45032 S4 Page 4 of 48
oucc 04-001
DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4
Information Requested:
Refer to the testimony of John Wilde (Petitioner's Exhibit No. 3) at page 4.
a. Please identify and provide all journal entries that were recorded on the Company's books at the end of2017 relating to identifying "excess" ADIT. b. Please identify and provide all Excel files and workpapers related to identifying "excess" ADIT. c. Please identify each book-tax difference that produced the $71,378,794 amount on line 18. d. Please identify each book-tax difference that produced the $305, 118 amount on line 19.
Information Provided:
a. Below is the journal entry booked by Indiana-American for the estimated excess ADIT. The number is grossed up.
@' Qocument !;d ~ § oto Ext!J!S .S.ettings Enyironment System l:Jelp
~ Display Document: Data Enby View
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Data Entry View Document Nurrber '(10019e12 e I _co_mp~a~ny~C_od_e _->=[Wl0]=0 1=0 -~ _Flsca_ I Y_e_ar __~ [2illj_o 1~7 Document Date 112131120171 Postilg Date !1213112011] Period __§ -Re~fu-re-nc-e --~,======--~,,-O-os-H:~o-mp-.f-~o-. -;=lo=1 0=01=9=e 1=2 e~10~1=01~7 j,-- Currency [iiSD""J Texts ex;,1: O Ledger Group n
~I ~~ UID) lQID l ')i?i-li lJ: l·l[]L)I ~~ I ~ . j~ I ~ I [ill] lco. .." '" [ Jtm jPK js !Account joescr"tion [ Amount jcurr. ITx jAssignment !Text 11010 1 50 18505100 RA-ITRtR-St TaxChge 243,017.00- USO 2017 Fed Reg Asset I - ~ 1 5 ~ [ •25621000 IRL-ITRR-ExcDefAT 94,359,170.00- IUSD j2017 Fed Reg Asset 3 140 25311000 •oeffu Uab-Other 89;78( 104.oo ·uso 20i7 Fed Reg Asset - l 4 140 25321000 [Def SIT Liab-Other 4,818,083 .00 USO 2017 Fed Reg Asset b, c & d. Our current deferred tax accounting system does not trace the reversal of originating plant related difference needed to separate the cumulative book tax difference or ADIT to be associated with that originating difference from other plant related differences. OUCC Attacment LA-3 Cause No. 45032 84 Page 5 of 48
Attachments:
OUCC 04-00 I Attachment.xlsx OUCC Attacment LA-3 Cause No. 45032 Stl'00 o•-0o• Att>chmoot Page 6 of 48
1ndlan::a-Am C! rlc::an Water CausC! No. 450J2 S4 Phase 2, ltC!m 1(a)(I) ScheduleJRW-1
American Water Works Company, Inc. Deferred Balances Report - Fed/State/FBOS {Reporting) Case A - Fed at 35% with RTP , 1010 Indiana American Water Co
12/31/2017
Opening Balance APIC Con ve r.:lon Adjusted Opening R~A / L& ITC TBBS Adjustments Flnal Recluses for Reg All & ITC Other Deferred Other Deferred Code Name Beginning Balance Rate Change ShcetAdl.lP/ll IBSOl Bahince Movement PY fBSOl !Pill FN IBSOl Current Activity Movcmcnt(P/L) Ad!ustmcnb {P/L) AdJu stments fBSOl Ending Bnlancc Al Aclvtincos & contributions 66,495.877 0 66,495,877 74,048,322 3,838,889 0 0 0 144,383,088 A4 T:1xlo:;sos1Jnd Credits 4,358,249 0 5,461 4,363,710 194,252 0 (571,331) 3,986,632 A5 Pension Benefits (197,368) 0 20,572 (176,796) 0 (237,329) 374,809 0 139,315) A7 Olhor 1,461,707 0 (151,814) 1,309,893 0 0 (216,993) 82,894 (97,026) 1,078,769 L1 Ulilltypl:tnt, pflmarlly doproc!alion (257,300,740) 0 (1,418,436) (258,719,176) 631 (21 1,929) (74,048,322) (14,388,912) 0 8,645 (2,950,600) {350,309,664) L13 Pension Benefits (237,329) 0 0 (237,329) 0 0 237,329 0 0 0 0 0 L5 OTHER (1,521,373) 0 18,477 (1,502,896) 0 272,699 (52,551) 13,379 443,1 24 (826,246) Umisslgnod Unacslgnod 0 (1,516) 1,51 6 0 0 0 (29,882) 29,882 0
Total {186 940 976) f15161 {15242251 pas 46611n 631 (176W (106908381 30343 {7858) (2 574 6201 /201 726 7361 OUCC Attacment LA-3 Cause No. 45032 Sti'cca""0' Atbohm"' Page 7 of 48
lndlan:i-Amerlcan Water Cause No. 45032 S4 Phase 2, Item 1 (a)(I) Schedule JRW-1
American Water Works Company, Inc. Deferred Balances Report - Fed/State/FBOS (Reporting) 2017 Combined December YE F!nal 1 OK, 101 o Indiana American Water Co
12131/2017 Opening Balance APIC Conversion Adjusted Beginning Return To Provision TBBS Adjustments Final Reclassesfor Reg All. & ITC OthN Deferred Other Deferred Code Name Beginning Balance Rate Change SheetAd!.(Pfll CBSO) Bal:1nce (Pill IP/ll FN IBSOl Current Activity Movement (P/L) Adlustments CP/LJ Adlu!ltml!!nts fBSOl Ending Balance A1 Advances & contributions 66,495,877 {23.185,180) a 43,310,697 a 48,229,824 2,500,380 a 0 a 94,040,900 A4 Tax Lo55os ::ind Credits 4,358,249 (1 ,729,096) 2,629,153 6,638 116,551 a (353,626) a 2,398,717 AS Pen~on Bonof1ts (197,368) 68,816 (128,552) 13,399 0 (154,579) 244,124 a a (25,607) A7 Othor 1,461 ,707 (509,655) a 952,052 (86.693) a 0 (141 ,334) 100,749 (109,953) 714,822 L1 Utility plant, prlmarlly deprocl:ation (257,300,740) 93,241,405 (182,576) (164,241 ,91 1) (942,531) (138,036) (48,229,824) (9,144,613) 0 8,645 {2,885,935) (225,574,205) L13 Pom1l on8enofit:> (237,329) 82,750 a (154,579) a a 154,579 a a a a 0 LS OTHER (1 ,521,373) 519,078 18,170 (984,125) 200 a 0 177,617 (63,870) 13,379 23,756,660 22,909,860 Unassigned Una~i gnad 0 0 (71,009,012) a (71,009,012) a 0 (36,318) 71,045,330 a
Tot:il (186 940976) 68 488 118 Q1 191 5881 18170 (189 626 276} !1008987) (21484) f6 717 451 ) 36879 (14294) 91 816102 !105 535 513) OUCC Attacment LA-3 Cause l'f6~<415S121 Indiana-American Water Cause No. 45032 S4 Phase 2, Item 1(a)(iii) Schedule JRW-1 American Water Works Company, Inc. Deferred Balances Report - Pre-Tax (Reporting) 2017 Combined December YE Final 10K, 1010 Indiana American Water Co Code Name Ending Balance .El.eflllil Af1er .Gllanllll A 1 Advances & contributions 378.114,673 Federal Rate 35.00% 21.00% A4 Tax Losses and Credits 11,257,269 State Def Rate 4.90% 4.90% A5 Pension Benefits (102,960) Blended Rate 38.19% 24.87% -13.31% A7 Other 2.768,521 L 1 Utility plant, primarily depreciation (930.314.627) State Def Rate 4.90% L 13 Pension Benefits 0 State Curr Rate 6.13% L5 OTHER 92.118.052 Difference 1.23% Unassigned Unassigned 0 Total (446, 159,073) Gross Temporary Difference on Plant only (553,910,338) Change in blended tax rate -13.31% DTL remeasurement related to Plant 73,747,622 Gross Temporary Difference on Tax Losses and Credits 10,925,704 Change in federal tax rate -14.00% OTA remeasurement related to Fed NOL (1,529,599) State only plant temporary items (7,274,825) Change in federal rate -14.00% Remeasurement on federal benefit of state items 1,018,476 Gross Temporary Difference on Plant only (23,078,070) Curr/Def State rate difference -1.23% State rate difference 282,706 Total 73,519,206 Items not recoverable (2, 140,412) Total estimated Plant excess ADIT 71,378,794 Gross Temporary Differences non-plant related 97, 172,455 Minus Current Reg Liability (95,315,002) 1,857,453 Change in blended tax rate -13.31% DTL remeasurement related to non-Plant (247,301) Fed only non-plant temporary items (346,894) Change in federal rate -14.00% Remeasurement on fed only items 48,565 State only non-plant temporary items 1,033,006 Change in federal rate -14.00% Remeasurement on federal benefit of state items (144,621) Gross Temporary Difference on non-plant 3,401,050 Curr/Def State rate difference -1.23% State rate difference (41,663) Total (385,020) Items not recoverable 79903 Total estimated Non-Plant excess ADIT (305,117) Total estimated excess ADIT 71073677 ::!:::!:::!;;!. ::!: ::!: ::!: ::!:::!: ::!:::!: ::! ::!::!: ::!: Jz:~ iuai r .. - ...... »i i ~= ...... , , ::!: ::!: ::!::! ~:;:~~ !.!iliHJJ.~i .::t mm;·;·;·;f l ~ni~~~~ 1n: :11' ~ ~~ ' ~ ~ ~ i ml ~ u~m1 1mmm ;; ~~~E rt ~ ~~i~i~ HHP~H upmF~•i1 mmi IWH :~! ! ~!HWH HJi!H ~ I H~ ~ 1 1hH ~HlH 1 I" > m 1~u ;•~!1i!l l H Hnl~ ! 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'i · '. eii~§~~~~:j '' ' a~~;~u~= ' g~' "ii~~~~ ~U§~hn~ij~~i!l!!i~l ·~~ES.~. ~~is~~! ~i~!t!~}t! . "i ~i I s~,.. ~ h .. 1i ~~!~i ~1 .,,·~ i ! • •I .! oc0 ru O 5i 0 CD )> -0 Z@' ID ? n "".!>- 3 CD 01 CD oucc 04-004 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Please identify the amount of repairs deductions claimed by Indiana American Water Company (1) as the cumulative effect of the change in tax account method and (2) for each year subsequent to the original change in tax accounting method for repairs. Information Provided: See OUCC 04-004 Attachment for the cumulative repairs deductions taken by Indiana-American Water on its tax returns since 2008. Note that 2017 was provided but that the tax return has not been filed yet. Our current deferred tax accounting system does not trace the reversal of originating plant related difference needed to separate the cumulative book tax difference or ADIT to be associated with that originating difference from other plant related differences. In addition 481 (a) entries (Adjustments Required by Changes in Method of Accounting) contain both the originating deduction and the reversal that would have occurred to that point. Attachments: OUCC 04-004 Attachment.xlsx OUCC Attacment LA-3 Cause No. 45032 84 Page 11 of 48 Indiana-American Water IURC Cause No. 45032 54 OUCC04-004 Summary of Repairs deductons Tax Year 2017 2016 2015 2015 481(a) 2014 2014 481(a) 2013 2012 2011 2010 2009 2008 2008 481(a) Repairs deduction $31,961,408 $37,349,343 $21,926,204 ($17,260,306) $17,587,381 $11,820,539 $20,428,284 $29,009,620 $18,593,745 $26,433,571 $11,298,109 $22,339,095 $19,251,696 Note that 2017 tax return has not been filed yet OUCC Attacment LA-3 Cause No. 45032 S4 Page 12 of 48 oucc 04-005 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Please refer to Attachments JRW-1 and JRW-2 to the testimony of John Wilde (Petitioner's Exhibit No. 3). Identify the amounts of repairs deductions that Indiana American claimed in each year under Section 162 of the Internal Revenue Code and Section 1.162-4 of the Income Tax Regulations in each year 2008 through 2017. Information Provided: See response to OUCC 04-004. OUCC Attacment LA-3 Cause No. 45032 S4 Page 13 of 48 oucc 04-006 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Please refer to Attachment JRW-2 to the testimony of John Wilde (Petitioner's Exhibit No. 3). a. Has Mr. Wilde ever read Section 162 of the Internal Revenue Code? If so, when was the last time? If not, explain fully why not. b. Has Mr. Wilde ever read Section 1.162-4 of the Income Tax Regulations? If so, when was the last time? If not, explain fully why not. c. Identify all provisions in Section 162 of the Internal Revenue Code and Section 1.162-4 of the Income Tax Regulations that address normalization requirements. d. Is it the Company's position that there is a federal income tax normalization requirement for repairs deductions claimed on a federal income tax return under Section 162 of the Internal Revenue Code and Section 1.162-4 of the Income Tax Regulations? e. Identify and explain all authority for the Company's position that there is a federal income tax normalization requirement for repaiis deductions claimed on a federal income tax return under Section 162 of the Internal Revenue Code and Section 1.162- 4 of the Income Tax Regulations. Information Provided: a. Yes. He read it for purposes of answering this question as well as recently in the context of answering another question in another rate proceeding. b. Yes. See a. c. Subsection b of Section 1.162-4 Repairs provides as follows: (b )Accounting method changes.- A change to comply with this section is a change in method of accounting to which the provisions of sections 446 and 481 and the accompanying regulations apply. A taxpayer seeking to change to a method of accounting permitted in this section must secure the consent of the Commissioner in accordance with § 1.446- ~ and follow the administrative procedures issued under §1.446-l(e)(3)(ii) for obtaining the Commissioner's consent to change its accounting method. The consent decree contains the normalization requirement. OUCC Attacment LA-3 Cause No. 45032 84 Page 14 of 48 d. No. The regulations simply impose a commissioner consent provision, which was given with the following condition: 9) If any item of property subject to the taxpayer's Form 3115 Is public utility property within the meaning of§ 168(1)(10) or former§ 167(1)(3)(A): (A) A normalization rnethod ot accounting (within the meaning of § 168(i)(9), former§ 168(e)(3){B), or former§ 167(1)(3)(G), as applicable) must be usod for such public utility property; e. See response to ( d) OUCC Attacment LA-3 Cause No. 45032 84 Page 15 of 48 oucc 04-007 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Please refer to the testimony of John Wilde (Petitioner's Exhibit No. 3). a. Identify the federal income tax rate applied and amount of accumulated deferred income taxes recorded for repairs deductions in each year on an annual and cumulative basis through December 31, 2017. b. Show in detail how the December 31, 2017 balance of ADIT for repairs deductions for the Company was revaluated at the new 21 percent federal income tax rate. Information Provided: The Company cannot separate the ADIT related to its repairs deduction. Our current deferred tax accounting system does not trace the reversal of originating plant related difference needed to separate the cumulative book tax difference or ADIT to be associated with that originating difference from other plant related differences. In addition, 481 (a) entries contain both the originating deduction and the reversal that would have occurred to that point. OUCC Attacment LA-3 Cause No. 45032 S4 Page 16 of 48 oucc 04-012 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Is Mr. Wilde or anyone else at American Water Works or its subsidiaries aware of any IRS rulings that have treated ADIT related to repairs deductions as an item that is subject to the normalization requirements of Internal Revenue Code sections 167 or 168? If so, identify and provide each such ruling. Information Provided: Neither Mr. Wilde nor anyone else at American Water or its subsidiaries is aware of any IRS rulings that have treated ADIT related to repairs deductions as an item subject to the normalization requirements ofIRC 167 or 168. See also response to OUCC 04-014. OUCC Attacment LA-3 Cause No. 45032 S4 Page 17 of 48 oucc 04-014 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Is Mr. Wilde or anyone at American Water Works aware of any other investor-owned regulated public utilities that are claiming that ADIT for repairs deductions taken under Section 162 or 263 of the Internal Revenue Code is a "protected" item (i.e., is subject to normalization requirements under sections 167 or 168 of the Internal Revenue Code)? If not, explain fully why not. If so, identify each other investor-owned regulated public utility of which Mr. Wilde and American Water is aware of that is claiming that ADIT for repairs deductions is a "protected" item that is subject to normalization requirements under sections 167 or 168 of the Internal Revenue Code. Information Provided: As a point of clarification, American Water is not saying repairs are "protected" if the term "protected" can only mean subject to IRS normalization rules. In other words, the Company has never said that repairs are subject to the normalization rules under 168. American Water's position is that it would not be allowed to claim the repairs deductions that have been claimed if the company had not agreed to normalize the effects of the deductions pursuant to the consent decree it signed. In simple terms, if American Water is forced to flow back the tax effects of the repairs deductions faster than ARAM (i.e. in the same manner as normalized property), American Water would be in violation of its agreement with the IRS, and the change in accounting would no longer be valid. As a result, the excess deferred taxes would essentially be paid back to the government instead of customers. With that in mind, it is American Water Works' understanding that other regulated utilities in the process of filing a change in their accounting methods with similar timing and facts should have had to make a similar representation in their consent decree. However, electric utilities who did so, but subsequently changed their method to conform to the electric distribution or electric generation safe harbor methods in later IRS guidance, may have been able to eliminate that requirement. American Water Works has no way of knowing if gas distribution, water and wastewater utilities filed for a tax repairs method or if they are following their book method for most tax repairs because of the lack of a safe harbor method being available. American Water Works has no way of knowing which investor-owned utilities are similarly situated, meaning they would be subject to the same IRS requirements outlined in the American Water Works - IRS consent decree, who are also required to use ARAM to n01malize tax repairs. OUCC Attacment LA-3 Cause No. 45032 S4 Page 18 of 48 American Water believes that all investor owned utilities planning to use RSGM to normalize TCJA excess ADIT balances should be treating all plant related excess consistently under that method. This is simply because anyone using RSGM would lack the ability to break out tax repairs from plant related ADIT balances. In order to be able to break out repairs one must know the book depreciation by vintage for repair property. Therefore, any utility that can break out repairs would also have the ability and records to use ARAM. Thus, American water believes all utilities that intend to use RSGM would treat tax repairs in exactly the same manner as protected differences, because they would have no records or ability to do otherwise. American Water Works has not maintained a list of those investor owned utilities that plan to use RSGM. OUCC Attacment LA-3 Cause No. 45032 S4 Page 19 of 48 oucc 04-015 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Admit that once a deduction for repairs is taken under Section 162 of the Internal Revenue Code the amount of that repairs deduction (1) cannot be added to the tax basis of the property and (2) cannot be depreciated for federal income tax purposes under Section 168 of the Internal Revenue Code. a. If your answer is anything other than an unqualified admission, explain fully and provide citations to all authority relied upon. Information Provided: Admitted. A tax repairs deduction is a reduction to book basis in arriving at tax basis and not depreciated for tax purposes. OUCC Attacment LA-3 Cause No. 45032 S4 Page 20 of48 oucc 04-016 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Refer to Attachment JRW-2, page 8. a. Please identify and explain the unit(s) of property that American Water and Indiana American Water used to determine the deductibility of repair and maintenance costs. b. Is Mr. Wilde or anyone at American Water Works or its subsidiaries aware of any "safe harbor" provisions for repairs deductions that apply to regulated public utilities? If so, identify the "safe harbor" provisions of which Mr. Wilde and/or others at American Water Works are aware. c. Do any of the "safe harbor" provisions for regulated public utility repairs deductions apply to water utilities? If so, which ones? d. Between 2008 when the tax accounting method for repairs deductions was adopted and December 31, 2017, have American Water and Indiana American Water used any "safe harbor" method for their repairs deductions? If not, explain fully why not. If so, identify and explain the "safe harbor" method used. Information Provided: a. American Water outlines the tax units of property used to determine a deductible repair. Network or linear water property is broken down as follows: Each contiguous and functionally interdependent length of transmission main - 12" or greater. Each contiguous and functionally interdependent length of distribution main - 10"- 12" Each contiguous and functionally interdependent length of distribution circuit - 2"-8" Note: Fixtures such as hydrants, services, valves are component parts of these units. Meters are a separate unit. A similar breakdown of waste water network or linear property is applied, just with different size distinctions. Water production property or water treatment is broken down between the collection, coagulation, sedimentation, filtration, and disinfection processes within that plant. OUCC Attacment LA-3 Cause No. 45032 S4 Page 21 of 48 b. Below is a list of utility related safe harbors that American Water Works is aware have been issued. Of those American Water Works is most familiar with the safe-harbors related to Electric Transmission and Distribution and Power generation Assets. List of Utility related Safe Harbors Capitalization of Cable Assets • Revenue Procedure 2015-2 provides several safe harbor methods of accounting for certain property costs paid or incurred by cable system operators. • Directive LB&I 04-0415-003, Examination of Taxpayers Using the Safe Harbor Methods of Accounting for Cable Network Assets, provides direction to the field in the examination of taxpayers using the safe harbor methods of accounting for cable network assets. Capitalization ofPower Generation Assets • Revenue Procedure 2013-24 provides definitions of units of property and major components taxpayers may use to determine whether expenditures to maintain, replace, or improve steam or electric power generation property must be capitalized under§ 263(a) of the Internal Revenue Code. • Directive LB&I 04-0713-005 provides direction to the field in the examination of a taxpayer eligible to change to the method of accounting provided in Rev. Proc. 2013-24 for steam or electric generation prope1ty. Capitalization. ofElectric Transmission and Distribution Property • Revenue Procedure 2011-42 provides taxpayers with guidance regarding the use and evaluation of statistical samples and sampling estimates. • Revenue Procedure 2011-43 provides a safe harbor method of accounting that taxpayers may use to dete1mine whether expenditures to maintain, replace, or improve electric transmission and distiibution prope1ty must be capitalized under § 263(a) of the Internal Revenue Code. The revenue procedure also provides procedures for obtaining automatic consent to change to the safe harbor method of accounting. Capitalization and depreciation of network assets in. the telecommunications industry • Revenue Procedure 2011-22 that provides a safe-harbor method for determining the recovery period for depreciation of certain tangible assets used by wireless telecommunications carriers. • Revenue Procedure 2011-27 that provides similar safe harbors for 'wireline' telecom carriers, firms with ' landline' networks. • Revenue Procedure 2011-28 for the wireless telecom sector providing two alternative safe-harbor methods for determining the amount of network asset repair and replacement expenditures that must be capitalized. OUCC Attacment LA-3 Cause No. 45032 S4 Page 22 of 48 c. None of the safe harbors that have been issued relate to water or sewer prope1iy. To the best of American Water Works' knowledge there is no process in place that will result in the issuance of a safe harbor for water and sewer property. The closest alignment may be what is expected to be issued for gas distribution and transmission property. d. None. This is because no safe harbor has been issued related to Water or Wastewater Property. OUCC Attacment LA-3 Cause No. 45032 S4 Page 23 of 48 oucc 04-019 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Refer to Attachment JRW-1. a. Where are the ADIT amounts related to repairs deductions shown on that attachment? b. If ADIT related to repairs deductions is not shown on Attachment JRW-1, show it before and after the change in federal income tax rate. Information Provided: a. The ADIT related to repairs is included under code Ll Utility plant. b. See response to OUCC 04-007. OUCC Atlacment LA-3 Cause No. 45032 S4 Page 24 of 48 oucc 04-021 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Has American Water Works been able to identify the ADIT balances at December 31, 2017 related to repairs in any of its jurisdictions? If not, explain fully why not. If so, identify and explain how American Water Works was able to identify the ADIT related to repairs deductions as of December 31, 2017 in each jurisdiction in which such identification has been made. Information Provided: No, it has not been able to identify the ADIT balances at December 31, 2017 related to repairs for all its regulated companies. See response to OUCC 04-007. OUCC Attacment LA-3 Cause No. 45032 S4 Page 25 of 48 oucc 04-024 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Refer to the testimony of John Watkins (Petitioner's Exhibit No. 2) and to Attachment JMW-6. a. Provide a copy of Attachment JMW-6 in Excel with formulas intact. b. Provide information for June 2018 similar to that shown on Attachment JMW-6 for January through May 2018. c. Provide budgeted June and July 2018 information similar to that shown on Attachment JMW-6 for January through May 2018. d. Was the federal income tax rate was reduced to 21 percent effective on January 1, 2018? If your answer is anything other than an unqualified "yes", explain fully and provide the authority relied upon. e. Did the Company began experiencing federal income tax savings effective on January 1, 2018? If your answer is anything other than an unqualified "yes", explain fully and provide the authority relied upon. f. Do the calculations presented on Attachment JMW-6 reflect any TCJA savings for customers of Indiana American Water Company for the period January 1 through January 3, 2018? Information Provided: a. An Excel copy of the requested attachment was provided with the service copies of the Company's Phase 2 case in chief. b. Please see the attachment labeled OUCC 04-024 Attachment. c. The Company has not budgeted what the deferred amount would be. d. Presuming the question intended is whether the federal income tax rate on January 1, 2018 was 21 percent, Yes. e. If by "experiencing", the question intends to ask whether the Company was subject to a 21 percent federal income tax rate on January 1, 2018 which is less than the federal income tax rate on December 31, 2017, Yes. f. Attachment JMW-6 reflects savings from January 3, 2018 through May 31, 2018. OUCC Attacment LA-3 Cause No. 45032 S4 N Page 26 o~'4~ 0 4 50 32 4 Indiana-American 04 024 ttach ent YT une 2018 an e ar Apr ay une YT 2018 illed eneral Re enue $17,322,477 11 $16,865,540 60 $16,590,738 21 $16,375,993 47 $17,398,682 32 $18,683,039 99 $103,236,471 70 illed 949,547 01 926,571 73 964,920 27 1,405,533 29 1,532,548 60 1,480,257 59 7,259,378 49 nbilled {552,902 60) {437,227 49) 706,387 24 468,773 69 1,345,881 58 {433,556 70) 1,097,355 72 Tota Re enue 17 719 121.S2 17 3S4 884.84 18 262 04S. 72 18 2SO 300.4S 20 277 112.SO 19 729 740.88 111 S93 20S.91 an e ar Apr ay une YT 2018 i ed Sp it eneral Re enue 94 8 94 8 94 5 921 919 92 7 52 52 5 5 79 81 73 Un i ed A ocation usin i ed Sp it eneral Re enue {$524,169 77) {$414,457 70) $667,561 73 $431,719 67 $1,236,927 81 {$401,727 80) $995,853 95 {$28,732 83) {$22,769 79) $38,825 51 $37,054 02 $108,953 77 {$31,828 90) $101,501 77 an e ar Apr ay une YT 2018 ro orma Re enue A ocated Un i ed eneral Re enue $16,798,307 34 $16,451,082 90 $17,258,299 94 $16,807,713 14 $18,635,610 13 $18,281,312 19 $104,232,325 65 920,814 18 903,80194 1,003,745 78 1,442,587 31 1,641,502 37 1,448,428 69 7,360,880 26 Tota Re enue 17 719 121.S2 17 3S4 884.84 18 262 04S.72 18 2SO 300.4S 20 277 112.SO 19 729 740.88 111 S93 20S.91 an e ar Apr ay une YT 2018 eneral Re enue eferral ays pplicable {1 3 18 present) 29 28 31 30 31 30 otal ays in onth 31 28 31 30 31 30 ays pplicable { ) 93 5 100 0 100 0 100 0 100 0 100 0 otal eneral Re enue $16,798,307 34 $16,451,082 90 $17,258,299 94 $16,807,713 14 $18,635,610 13 $18,281,312 19 pplicable ount 93 5 100 0 100 0 100 0 100 0 100 0 eneral Re enue ub ect to Refund $15,714,545 58 $16,451,082 90 $17,258,299 94 $16,807,713 14 $18,635,610 13 $18,281,312 19 eferral ercent 5 08 5 08 5 08 5 08 5 08 5 08 enera Re enue eferra Amount 798 440.3S 83S 863.07 876 876.96 8S3 983.10 946 8S6.72 928 8SS.19 s 240 87S.38 Re enue eferral ays pplicable {1 3 18 3 13 18) 29 28 13 0 0 0 otal ays in onth 31 28 31 30 31 30 ays pplicable { ) 93 5 100 0 419 00 00 00 otal Re enue $920,81418 $903,80194 $1,003,745 78 $1,442,587 31 $1,641,502 37 $1,448,428 69 pplicable aunt 93 5 100 0 419 00 00 00 Re enue ub ect to Refund $861,406 81 $903,80194 $420,925 65 $0 00 $0 00 $0 00 eferral ercent 9 94 9 94 9 94 9 94 9 94 9 94 SIC Re enue eferra Amount 8S 623.84 89 837.91 41840.01 0.00 0.00 0.00 217 301.76 TOTA R NU RRA A DUNT 884 064.18 92S 700.98 918 716.97 8S3 983.10 946 8S6.72 928 8SS.19 s 4S8177.14 OUCC Attacment LA-3 Cause No. 45032 S4 Page 27 of48 oucc 05-001 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Refer to the Company's response to OUCC 4-1. a. Explain the following item: "Tl05: Repairs" b. Has the $256,280,025 amount in the ending balance column been excluded from the tax basis ofIAWC utility assets? i) If not, explain fully why not. c. Has any federal income tax depreciation been claimed on the $256,280,025 or any portion of that amount? i) If so, identify the amount of federal income tax depreciation claimed on the $256,280,025 or any portion of that amount. ii) If not, explain fully why not. d. What amount of excess ADIT relates to the $256,280,025 for "Tl 05: Repairs"? e. How was the amount of excess ADIT for the $256,280,025 of "Tl05: Repairs" calculated? Show details. Information Provided: a. This amount includes: • gross tax repair deduction in excess of book repair deductions claimed for 2001- 2017, plus and minus • bonus depreciation deduction and accelerated tax depreciation deductions claimed prior to each change in the Company's method of accounting that were included in 481(a) adjustment. b. This amount is not isolated to tax repair deductions claimed, it is net bonus and accelerated tax depreciation deductions that were part of 481(a) adjustments. In practice, any tax repairs deduction claimed reduces tax basis so that tax depreciation is only calculated on the remaining basis. c. See Company response to OUCC 5-00l(b.). d. The Company has not computed the excess ADIT amount related to tax repairs in isolation of other plant related excess ADIT amounts. See Company response to OUCC 4-001 and OUCC 5-009. e. See Company response to OUCC 5-00l(d.). OUCC Attacment LA-3 Cause No. 45032 S4 Page 28 of 48 oucc 05-002 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 84 Information Requested: Refer to the Company's response to OUCC 4-1. a. Explain the following item: "Tl09: Pavement Repairs" b. Why is the "T109: Pavement Repairs" ADIT classified as "Non Plant"? Information Provided: a. Tl 09: Pavement Repairs is the tax effect of a short term temporary difference representing the difference between when the pavement repairs are accrued on the books vs when they are incurred for tax purposes. b. It is considered non-plant because it is a short term accrual for future expenses and not related to the utility plant in service capitalized on the company books. This adjustment does not result in a change to tax basis in plant. OUCC Attacment LA-3 Cause No. 45032 S4 Page 29 of 48 oucc 05-003 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Are the Company's affiliated water utilities in each of the following jurisdictions currently flowing back some or all of the benefits of the TCJA to their customers: a. Illinois-American Water Company? b. Iowa-American Water Company? c. Missouri-American Water Company? d. New Jersey-American Water Company? e. Virginia-American Water Company? f. Pennsylvania-American Water Company? Information Provided: a. Yes, please see the response to OUCC 05-004 for more details. b. Yes, please see the response to OUCC 05-004 for more details. c. Yes, please see the response to OUCC 05-004 for more details. d. Yes, please see the response to OUCC 05-004 for more details. e. No. f. Yes, please see the response to OUCC 05-004 for more details. OUCC Attacment LA-3 Cause No. 45032 S4 Page 30 of 48 oucc 05-004 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: If the answer to any parts of the previous request is "yes" briefly explain how the TCJA benefits for each affiliate are being provided to the utility customers. Information Provided: Illinois-American Water Company is flowing back the benefits of the reduction of the federal income tax rate from 35% to 21 % through a percentage rate that is applied to the base rate portion of the bill and presented as a credit. This credit on the bill became effective on May 1, 2018. Iowa-American Water Company is using a portion of the reduction in current federal income tax expense to issue customer credits to offset the QIP (accelerated infrastructure replacement) surcharge, and will use the rest of the reduction as an offset which will accelerate the amortization of the floodwall, and refund the excess (if any) by a customer credit. The revenue requirement used to set Missouri~American Water Company's current rates, which took effect on May 28, 2018, reflects the reduction in current federal income tax expense due to the TCJA. New Jersey-American Water Company, reduced their water service rates, effective April 1, 2018, to account for the TC A's reduction of the income tax rate from 35% to 21 % as ordered by the Board of Public Utilities. Pennsylvania-American Water Company implemented a negative TCJA surcharge, effective July 1, 2018, to reflect the costs savings associated with the TCJA's reduction of the income tax rate from 35% to 21 %. Pennsylvania-American Water Company is required to establish a deferred regulatory liability account to record on its books the tax sa ings associated with the TCJA for the January 1, 2018 through June 30, 2018 time period (stub period). The disposition of this regulatory liability will be determined in the company's next base rate case or if the company does not file a base rate case within three (3) years the company must file a petition to propose how to distribute the funds in the regulatory liability account. OUCC Attacment LA-3 Cause No. 45032 84 Page 31 of 48 oucc 05-005 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Are any other Company water utility affiliates besides those listed in Q-5-3 cmTently providing the cost savings resulting from TCJA to their customers? If so, which ones? Information Provided: California-American Water Company, Hawaii-American Water Company, Maryland American Water Company, New York American Water Company, Tennessee-American Water Company, Virginia American Water Company and West Virginia American Water Company are not currently providing benefits to customers as a result of TCJA. Kentucky-American Water Company has filed to reduce their rates to reflect the reduction in income taxes from 5 to 21 and the stub period effecti e August 1, 2018. OUCC Attacment LA-3 Cause No. 45032 S4 Page 32 of 48 oucc 05-006 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Are the Company's affiliated water utilities in each of the following jurisdictions currently flowing back the "stub period" (January 1, 2018 the effective date of the 21 % federal income tax rate and the date upon which the benefits were provided to TCJA customers) benefits of the TCJA to their customers: a. New Jersey-American Water Company? b. Pennsylvania-American Water Company? Information Provided: a. No. b. No, as the response to OUCC 05-004 states, Pennsylvania-American Water Company will establish a regulatory liability to account for the stub period . OUCC Attacment LA-3 Cause No. 45032 S4 Page 33 of 48 oucc 05-008 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Refer to the Company's responses to OUCC 4-1 and OUCC 4-4. a. Are the repairs deductions listed in the response to OUCC 4-4 which sum to $250,738,690 the same thing as the "T105: Repairs"? item on the response to OUCC 4-1 which is listed as $256,280,025? b. If not, explain how those repairs deduction items are different. c. If so, why are the amounts different? Information Provided: They are both repairs related. The $256,280,025 is the gross tax repair deduction, net of adjustments for bonus depreciation and accelerated tax depreciation. See response to OUCC 05-00la. The $250,738,690 is net further for two other 481(a) adjustments done in 2014 & 2015. OUCC Attacment LA-3 Cause No. 45032 84 Page 34 of 48 oucc 05-009 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: How much excess ADIT does the Company have relating to the $250,738,690 sum of repairs deductions listed on the response to OUCC 4-4? Show calculations. Information Provided: The Company's response to OUCC 4-4 is not the sum of repair deductions claimed on the Company's tax return. The Company's tax accounting has not isolated repair deductions claimed, nor has it isolated and tracked the reversal of tax repair deductions that results over time from book depreciation. It is in the process of isolating those amounts in its tax accounting as part of its PowerTax systems reimplementation project. The $250,738,690 is a book to tax difference comprised of: • Originating tax repair deductions in excess of book repair deduction claimed. • 481(a) adjustments which are one-time book to tax adjustments or cumulative effect adjustments. Section 481 provides that where a taxpayer's taxable income for a tax year is computed under a method of accounting different from that previously used, an adjustment will be made to prevent amounts from being duplicated or omitted solely by reason of the change in accounting method. Therefore, these 481(a) adjustments include both decreases and increases to accelerated tax depreciation and bonus depreciation deductions, and the ADIT balances related to increases in bonus deductions and accelerated tax depreciation would be "protected" pursuant to the tax normalization rules. OUCC Attacment LA-3 Cause No. 45032 S4 Page 35 of 48 oucc 05-011 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Refer to the attachment to the Company's response to OUCC 4-17, where there is a column "TBBS Adjustments". a. Does the Company have a Tax Basis Balance Sheet? b. If "yes" identify and provide it as of each of these dates: (1) 12/31/2017 and (2) 6/30/2018. c. If not, what does the "TBBS" refer to? Information Provided: a. Yes. b. As is the process with most companies, the TBBS is updated after the filing of the tax returns, so it is prepared on a one year lag. Therefore, we do not have a version relevant to 12/31/2017 or 6/30/2018. The last fully reviewed and tied in version addresses 12/31/2016 balances. c. NIA OUCC Attacment LA-3 Cause No. 45032 S4 Page 36 of 48 oucc 05-012 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Can the excess ADIT related to the Company's repairs deductions be reasonably estimated by taking the sum total of the repairs deductions listed in the response to OUCC 4-4 which sum to $250,738,690 and multiplying it by the -13.31 % difference in the federal and state blended income tax rates listed on Attachment JRW-1? If not, explain fully why not. Information Provided: No, see Company response to OUCC 5-009. OUCC Attacment LA-3 Cause No. 45032 S4 Page 37 of 48 oucc 05-013 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Can the excess ADIT related to the Company's repairs deductions be reasonably estimated by taking the cumulative total for repairs deductions listed in the response to OUCC 4-1 of $256,280,025 as "Tl05: Repairs" and multiplying it by the -13.31% difference in the federal and state blended income tax rates listed on Attachment JRW-1? If not, explain fully why not. Information Provided: No, see Company response to OUCC 5-009. OUCC Attacment LA-3 Cause No. 45032 84 Page 38 of 48 oucc 05-014 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Is the Company willing to seek a private letter ruling concerning whether the excess ADIT related to its repairs deductions can be amortized over a period determined by the Commission that varies from the ARAM such as straight-line amortization over a period? If not, explain fully why not. Information Provided: First, the tax normalization rules as a general matter do not direct a regulatory commission's actions, they simply outline the alternative tax treatment attributable to those actions. So the question to the IRS would need to address a question or concern the IRS would be willing to rule on. However, if the Commission rules that a private letter ruling should be sought to determine if future acceleration of deductions would be at risk, then the Company would comply and seek a ruling. The method proposed by the company to normalize plant related excess ADIT balances including tax repairs using ARAM is consistent with the tax normalization rules, so no ruling would be needed to eliminate that risk ofloss. Regardless of the tax normalization rules, the Company believes that all plant related excess ADIT balances should be normalized using consistent accounting methods into future rates over the remaining life of the underlying property for the following reasons: • Using inconsistent methods and periods to normalize plant related ADIT balances results in cross-subsidization of tax expense between customers using the same utility plant in different periods and can create inequities between present and future generations of customers. Consistent normalization of the tax benefits of claiming deductions at a 35% federal income tax rate that in time will reverse over the plant's useful life at 21 % results in the proper allocation of tax expense between current and future customers while taking into account the time value of the savings resulting from deferred tax payments by including ADIT as a zero cost item in the capital structure. For ratemaking purposes, the sum of all the ADIT accounts is generally a liability balance and reflected in the capital structure at zero cost. This recognizes that OUCC Attacment LA-3 Cause No. 45032 S4 Page 39 of 48 the temporary cash savings resulting from the deferred tax payments represents a cost-free source of capital to the utility. The inclusion of the net ADIT liability ensures that customers receive the benefit of this cost free capital. • Using inconsistent methods and periods to normalize plant related ADIT balances results in system and process complexities that must be built and maintained for the life of the underlying property. Also, it adds complexity in financial and regulatory reporting and ratemaking. • Water utilities do not have a safe harbor method to follow in addressing tax repair deductions with a high degree of certainty. To date, the Company's tax repair method of accounting has not been the subject of an IRS audit of the Company. Therefore, the amount that was claimed at 35% that will turnaround at 21 % is uncertain, and returning the excess ADIT balance to customers too quickly could cause future ratemaking issues should those uncertainties be realized. OUCC Attacment LA-3 Cause No. 45032 S4 Page 40 of 48 oucc 05-015 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Is the Company willing to seek a private letter ruling concerning whether the amortization over a five-year period on a straight-line basis of the excess ADIT related to its repairs deductions would result in a normalization violation or in any way impede the Company's ability to use accelerated tax depreciation or claim repairs deductions? If not, explain fully why not. Information Provided: See response to OUCC 05-014. OUCC Attacment LA-3 Cause No. 45032 S4 Page 41of48 oucc 05-016 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Admit that a number of other investor-owned utilities have classified the excess ADIT related to repairs deductions as "unprotected" and have indicated that the application or amortization of their repairs-related excess ADIT is up to the discretion of their respective regulatory authority/commission and/or have indicated that the average rate assumption method (ARAM) does not need to be applied to repairs related excess ADIT. Information Provided: The Company is aware of investor owned utilities that have classified their balance of excess ADIT related to tax repairs deduction in excess of book as "unprotected". Some of those utilities have suggested the use of ARAM as the appropriate normalization method, some of those utilities have suggested an alternative method and period, and some of those utilities have left the method and period of normalization to their respective commission. The Company is also aware of investor owned utilities that have indicated they would use RSGM to normalize all plant related ADIT balances, and therefore would inherently be treating tax repairs as "protected" or subject to that method and period of amortization as part of its plant related ADIT balances. See the Company's response to OUCC DR 4-014. OUCC Attacment LA-3 Cause No. 45032 S4 Page42 of 48 oucc 05-017 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 84 Information Requested: Admit that none of the spending related to the repairs deductions that have been claimed by the Company that are listed on the response to OUCC 1-4 added to the value of the property or appreciably prolonged its useful life. Information Provided: It is our assumption that the question is referring to OUCC 4-1 and not OUCC 1-4. The company cannot make such a blanket admission. The answer to this question would be different as applied to the unit of property (UOP) and capitalization rules used for financial and regulatory ("book") accounting methods, versus as applied to the UOP and capitalization rules tax methods of accounting. Inherent in the decision to capitalize an expenditure to utility plant for financial, regulatory, or tax accounting purposes is the belief that the useful life of the UOP is extended, but the UOP you are applying that standard to is often different for book and tax purposes so the outcome to the question of "Is its useful life prolonged" is often different. To illustrate this, we look at the 2003 Federal Express Corp. (FedEx) case (FedEx Corp v United States, 291 F. Supp.2d 699 (W.D. Tenn, 2003). In this case, FedEx incurred costs of rebuilding the engines of its jets which were required regularly to keep the jet functional. The IRS proposed that the extensive cost of rebuilding an asset such as a jet engine should be capitalized and depreciated. Most looking at the type of asset and cost of the rebuild alone may agree with this, but FedEx contended that these costs were regular maintenance for the larger asset - the jet (as a whole). The court ultimately decided on this case in favor of FedEx agreeing that the asset in question is the jet, and rebuilding the engines should be treated as normal repair of the asset. In addition to the definition of a UOP, one also has to look at the change in the capitalization rules, which are evolving as the IRS issues guidance on the subject of capitalization. These changes in guidance relate to the change in the definition of a UOP, but also include the following change to old and new rules as listed below: Old Rules (You must capitalize expenditures for tax purposes that do one of the following): OUCC Attacment LA-3 Cause No. 45032 84 Page 43 of 48 • Materially increases the value of the property (the entire asset) • Substantially prolongs the useful life of the property (the entire asset) • Adapts the property (the entire asset) to a new or different use New Rules (You must capitalize expenditures for tax purposes that do one of the following): • Relates to the bette1ment of the unit of property • Relates to the restoration of the unit of property • Adapts the unit of property (or entire asset) to a new or different use OUCC Attacment LA-3 Cause No. 45032 S4 Page 44 of 48 oucc 05-018 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Refer to the response to OUCC 4-1. a. Explain the following item: "Tl03: Gains and Losses". b. Does any of the $39,847,045 pre-tax amount or the related excess ADIT amount for Gains and Losses relate to repairs? i) If not, explain fully why not. ii) If so, provide an estimate of how much, and show and explain how the estimate was derived. Information Provided: a. T 103: Gains and Losses represent book/tax differences from sales of property taken on the tax return over time. b. It is possible that some of the pre-tax amount or the related excess ADIT amount for Gains and Losses relate to repairs because while something is considered a repair and a current deduction is taken for tax purposes, the book asset is still being capitalized and depreciated. If that asset is sold, there would be a gainJloss calculation done. Again, the detail of the individual line items is not available at this time. OUCC Attacment LA-3 Cause No. 45032 S4 Page 45 of 48 oucc 05-021 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Refer to the response to OUCC 4-1 Attachment. a. Explain the following item: "T150: 481 Adjustment related to Repairs" b. Has any federal income tax depreciation been claimed on the $8,884, 722 or any portion of that amount? i) If so, identify the amount of federal income tax depreciation claimed on that amount or any portion of that amount. ii) If not, explain fully why not. c. What amount of excess ADIT relates to the $8,884,722 for" T150: 481 Adjustment related to Repairs"? d. Does the Company have an opinion as to whether the excess ADIT on the $8,884, 722 for "Tl50: 481 Adjustment related to Repairs" can be amortized using an amortization period to be determined by the Commission? If so, state that opinion and explain in detail the basis for it, including any authority being relied upon. e. Does the Company have an opinion as to whether the excess ADIT on the $8,884,722 for " T150: 481 Adjustment related to Repairs" will violate Internal Revenue Code normalization requirements if amortized more rapidly than would be the result of applying the average rate assumption method? If so, state that opinion and explain in detail the basis for it, including any authority being relied upon. Information Provided: a. T150: 481 Adjustment Related to Repairs was created to account for the company's method change related to the repair expensing of meters. In 2015 the company changed its position regarding meters from expensing meter replacements as a repair to capitalizing all meter replacements, based on how the IRS responded in Rev Proc 2011-43 for the Electric T&D industry. IRC 481 a is the code that specifies how to account for the change. The net adjustment to reverse the prior repair deductions taken for meters created a tax liability for the company. Per the Code, the company is allowed to spread the amount over four years, so it is tracked through T150. b. In calculating a 481a adjustment, the gross repairs is identified, after which any bonus or accelerated depreciation that would have been allowed had the property always been treated as capital, would offset the gross amount. Therefore there is bonus and accelerated depreciation included in the net amount presented. OUCC Attacment LA-3 Cause No. 45032 84 Page 46 of 48 c. The Company has not computed the excess ADIT amount related to tax repairs in isolation of other plant related excess ADIT amounts. See Company response to OUCC 4-001 and OUCC 5-009. d. The company believes it needs to be normalized and therefore ARAM used to calculate the amortization. The 481 a amount is related to repairs and is a net number including bonus and accelerated depreciation. The Company also believes any 48la adjustment related to repairs should follow the same method used for Repairs. The 48la is only a partial reversal of the previous repairs deductions. e. The Company believes it would violate the consent decree and agreement with the IRS that allowed the tax accounting method change for tax repairs. OUCC Attacment LA-3 Cause No. 45032 84 Page 47 of 48 oucc 05-022 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Refer to the response to OUCC 4-24. a. Is the Company attempting to deprive ratepayers of the federal income tax savings for the first two days of2018? b. If the answer to part a is "yes" explain fully why. c. If it is determined that ratepayer should receive federal income tax savings commencing with January 1 (rather than January 3), can the Company's calculation presented in the OUCC 4.24 attachment be adjusted by using 31 days for January 2018 (rather than just 29)? i) If not, explain fully why not. Information Provided: a. No, the Company is complying with the Order in Cause No. 45032 which was approved and made effective on January 3, 2018, which provided, "the Commission finds it is appropriate and in the public interest for Respondents to immediately begin using regulatory accounting, such as the use of regulatory assets and liabilities, for all calculated differences resulting from the Act and what would have been recorded if the Act did not go into effect." b. Not applicable. c. Yes. i. Not applicable. OUCC Attacment LA-3 Cause No. 45032 S4 Page 48 of 48 oucc 06-009 DATA INFORMATION REQUEST Indiana-American Water Company Cause No. 45032 S4 Information Requested: Refer to the response to OUCC 5-16 which states that the Company is aware of investor owned utilities that have classified EADIT related to tax repairs deductions as "unprotected." Identify each utility that has classified EADIT related to tax repairs deductions as "unprotected" of which the Company is aware. Information Provided: The Company has not compiled a list, and has no first-hand knowledge. The Company's awareness is a general awareness based on publically available reports, conversations with peers and industry experts, and informal statements of those intervening in those rate cases. On numerous occasions the Company was alerted to the position of another company as outlined in summary, only to later learn via additional information that the publically available summary was incomplete. The Company has made no efforts to validate its position by comparison to what it generally understands others are proposing to do or have done with respect to computing or normalizing EADIT balances based on that company's unique facts and circumstances. The Company's position is based on its own set of unique facts and circumstances applied to relevant law and rule for computing and normalizing ADIT and EADIT. "Excluded from public access per A.R. 9(G)." CONFIDENTIAL OUCC ATTACHMENT LA-4 CAUSE NO. 45032 54