OAR 860-037-0547
Allocation of Costs by a Wastewater Utility
(1)
As used in this rule:(a)
“Affiliate” means a corporation or person who has an affiliated interest, as defined in ORS 757.015 (“Affiliated interest” defined for ORS 757.105 (1) and 757.495), with a wastewater utility;(b)
“Affiliate transaction” means a transfer of assets, a sale of supplies, or a sale of services between accounts for regulated activities of a wastewater utility and accounts for nonregulated activities of a separate entity that is either an affiliated interest or another company in which the wastewater utility owns a controlling interest. The term also means a transfer of assets, a sale of supplies, or a sale of services between accounts for the regulated and nonregulated activities of a single wastewater utility;(c)
“Asset” means any tangible or intangible property of a wastewater utility or other right, entitlement, business opportunity, or other thing of value to which a wastewater utility holds claim that is recorded or should be recorded as a capital expenditure in the wastewater utility’s financial statements. All wastewater utility tangible or intangible property, rights, entitlements, business opportunities, and things of value should be considered assets, services or supplies;(d)
“Cost” means fully distributed cost, including the wastewater utility’s authorized rate of return and all overheads;(e)
“Fair market value” means the potential sales price that could be obtained by selling an asset in an arm’s-length transaction to a nonaffiliated entity, as determined by commonly accepted valuation principles;(f)
“Market rate” means the lowest price that is available from nonaffiliated suppliers for comparable services or supplies;(g)
“Net book value” means original cost less accumulated depreciation;(h)
“Nonregulated activity” means an activity that is not a regulated activity of the wastewater utility as defined in subsection (1)(i) of this rule;(i)
“Regulated activity” means a Commission regulated activity that is provided by a wastewater utility directly or indirectly relating to the general operations of the wastewater utility such as production, transmission, delivery, or furnishing of water, and the provision of wastewater services to the public inside the boundaries of a city unless the Commission has determined the activity to be exempt from regulation;(j)
“Services” means labor-related activities including, but not limited to advice, auditing, accounting, sponsoring, engineering, managing, operating, financing, and legal. All wastewater utility tangible or intangible property, rights, entitlements, business opportunities, and things of value should be considered assets, services, or supplies; and(k)
“Supplies” means any tangible or intangible property of a wastewater utility or other thing of value to which a wastewater utility holds claim that is recorded or should be recorded as an operating expense in the wastewater utility’s financial statements. All wastewater utility tangible or intangible property, rights, entitlements, business opportunities and things of value should be considered assets, services, or supplies.(2)
For purposes of this rule, regulated and nonregulated activities of a wastewater utility shall be accounted for in accordance with the Uniform System of Accounts for Water Utilities published by the National Association of Regulatory Utility Commissioners as modified by the Commission.(3)
When a wastewater utility is conducting an affiliate interest transaction, as defined in this rule, the wastewater utility must use the following cost allocation methods:(a)
When an asset is transferred to a wastewater utility from an affiliate, the transfer shall be recorded in the wastewater utility’s accounts at the lower of net book value or fair market value.(b)
When an asset is transferred from a wastewater utility to an affiliate, the transfer shall be recorded in the wastewater utility’s accounts at the tariff rate if an appropriate tariff is on file with the Commission. If no tariff is applicable, proceeds from the transfer shall be recorded in the wastewater utility’s accounts at the higher of net book value or fair market value.(c)
When an asset is transferred from a wastewater utility to an affiliate at a fair market value that is greater than net book value, the difference shall be considered a gain to the wastewater utility. The wastewater utility shall record the gain so the Commission can determine the proper disposition of the gain in a subsequent rate proceeding.(d)
When services or supplies are sold by a wastewater utility to an affiliate, sales shall be recorded in the wastewater utility’s accounts at tariffed rates if an applicable tariff is on file with the Commission. Tariffed rates shall be established whenever possible. If services or supplies are not sold pursuant to a tariff, sales shall be recorded in the wastewater utility’s accounts at the wastewater utility’s cost or the market rate, whichever is higher.(e)
When services or supplies are sold to a wastewater utility by an affiliate, sales shall be recorded in the wastewater utility’s accounts at the wastewater utility’s cost or the market rate, whichever is lower. The affiliate’s cost shall be calculated using the wastewater utility’s most recently authorized rate of return.(f)
Income taxes shall be calculated for the wastewater utility on a standalone basis for both ratemaking purposes and regulatory reporting. When income taxes are determined on a consolidated basis, the wastewater utility shall record income tax expense as if it were determined for the wastewater utility separately for all time periods.
Source:
Rule 860-037-0547 — Allocation of Costs by a Wastewater Utility, https://secure.sos.state.or.us/oard/view.action?ruleNumber=860-037-0547.