Minutes of the Annual Meeting of the Power - New York Power ...

C. Issue: Inflation Compensation Adjustment
Public Comments:
The MEUA stated that the Authority has used the incorrect Handy-Whitman
Index (“HWI”) numbers in calculating the annual inflation compensation
adjustment. MEUA proposed that the initial HWI number used should be that for
July 1, 1981 and not the July 1, 1980 number which has been used in all of the
Authority’s Cost of Service analyses. The change in the HWI for the 12 months
ended July 1, 1981 was 7.5%, while that for the 12 months ended July 1, 1982
was 4.5%. MEUA proposes that the Authority restate over 20 years of cost
studies which would result in an $11.5 million positive adjustment in the RSR
balances. NYAPP and Neighboring States support the MEUA position.
Staff Analysis:
The April 1983 Final Staff Report, noted that the beginning rate base for 1982
should be the net original cost plant in service as of the end of 1981, based upon
the Gilbert Associates’ depreciation study. Annual changes in the HWI (July 1 to
June 30) would be used to index original cost depreciation expense. The use of
the July 1, 1980 starting date was necessitated by the availability of data at the
time of the initial studies. The May 1987 Final Staff Report also shows in
Appendix I that the initial HWI was the number for July 1, 1980. According to its
comments, MEUA first raised the issue about the base period HWI in June 1993,
but never in the context of a hydroelectric rate proceeding.
Recommendation:
Staff does not recommend changing the base period HWI to July 1, 1981 from
July 1, 1980. The choice of the July 1, 1980 starting date was appropriate and
necessitated by the availability of data at the time of the initial studies. To
change the base year now would amount to rolling back the clock on over 20
years of cost analyses and rate approvals by the Authority’s Trustees. This is a
well-settled matter and MEUA’s recommendation should not be accepted.
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