Consumer Advocate witness recommends 3‑year normalization, rejects inflation add‑backs for most costs

The Consumer Advocate’s witness, Mr. McGrice, told the Public Utilities Commission he reviewed Young Brothers’ proposed 2025 test‑year revenue requirement and recommended adjustments using a 3‑year historical average for many non‑labor operating expenses.

"The scope of my direct testimony is to review Young Brothers overall revenue requirement proposal, which relate to rate based valuation, operating revenues, operating expenses, and associated depreciation, amortization, and the flow through of taxes to set rates for service going forward," Mr. McGrice testified.

McGrice said he used a 3‑year average (2022–2024) rather than a 5‑year average because the five‑year span includes 2020–2021 — pandemic years he described as abnormal and potentially skewing averages. He applied a 10% variance threshold: where forecast test‑year amounts differed from the historical average by 10% or more, he applied an adjustment toward the representative historical level. He said he did not apply an inflation increase to those normalized amounts because the underlying historical costs already reflect actual expenditures.

McGrice accepted the company’s labor cost forecasts and did not normalize labor; he explained the timing for filling vacancies was uncertain and his recommendation could change if the company provided updated hiring information. In rebuttal, Young Brothers updated its vacancy count: out of five vacancies the company reported, two had been filled and three remained outstanding; Mr. McGrice said his adjustments reflected the updates he had at the time.

On cash working capital, McGrice said he flowed his operating adjustments through to the cash working capital calculation; in his schedules he set cash working capital at approximately $7,530,940 and described that figure as slightly higher than the company’s proposed balance based on his adjusted operating-expense inputs.

McGrice also testified that he relied on Dr. Pavlovic’s allocations between total‑company and intrastate operations for certain jurisdictional splits and that he did not perform a separate cost‑of‑capital analysis. He said his rate‑setting approach is aimed at producing a representative forecast for the forward 2025 test year while moderating out anomalies caused by the pandemic.

On cross‑examination, Mr. McGrice acknowledged he had produced both 5‑year and 3‑year averages in his workpapers but explained he used the 3‑year result for his recommended adjustments because it excluded the anomalous COVID‑period data. He also acknowledged that he did not add an explicit inflation factor to the normalized amounts and that his method therefore produces a historical‑average‑based forecast rather than a separate forward projection with inflation adjustments.

Mr. McGrice’s testimony is part of the Consumer Advocate’s effort to limit the size of Young Brothers’ proposed revenue increase by adjusting non‑labor operating expenses toward recent historical averages while leaving labor forecast assumptions intact pending further evidence from the company.