Five-Year Average Test Year Period. XXX proposes adoption of a five-year historical test period in place of its current historical test year. The purpose for this proposal is to develop pro forma test year data relative to revenues and certain expenses that is less likely to reflect unusual or abnormal events, such as a uniquely dry or wet summer that may occur during a given test year. The Settling Parties agree that PAC shall compute test year revenues using the trailing five-year average consumption at the most recently approved volumetric rates and fixed charges. The Settling Parties also agree that the five-year trailing average consumption determination shall be based on the four calendar years immediately preceding the designated test year for which the rate case is filed as well as the test year itself. Additionally, all direct test year expenses which are affected by differences in consumption, including but not limited to purchased water expense, electricity expense, and chemical treatment expense, shall also include pro forma adjustments to reflect the pro forma difference in consumption between the five-year average and the test year. PAC shall also include pertinent pro forma adjustments with respect to the financial data of each year that is included in the determination of the five-year average in accordance with current ratemaking principles. Further, the Settling Parties agree that PAC’s use of a five-year average test period in computing its revenue deficiency in no way precludes either the DOE or other parties from making an alternative recommendation in place of such with respect to the determination of PAC’s revenue deficiency. The Settling Parties agree and recommend the Commission approve that in rate proceedings where an “atypical” year would be included in the calculation of PAC’s five-year trailing average for revenues, the “atypical” year’s data would be substituted for data from the next most recent preceding typical operating year’s data. The Settling Parties further agree that an “atypical” year should be defined as one in which that year’s water consumption either exceeds or falls short of the calculated trailing five-year average of water consumption by more than 15%. The underlying trailing five-year average, however, will be calculated with the inclusion of the data from the atypical year before assessing whether there is an atypical year.
