NAC704.583. Calculation of amount of allowance for cash working capital.

     1. To calculate the amount of an allowance for cash working capital, a public utility that furnishes water or services for the disposal of sewage, or both, may:

     (a) Conduct a lead-lag study; or

     (b) Use the 1/8 formula method.

     2. If a public utility that furnishes water elects to use the 1/8 formula method to calculate the amount of an allowance for cash working capital, the utility must use in that calculation exclusively the following accounts of the Uniform System of Accounts of the National Association of Regulatory Utility Commissioners:

     (a) Account 408, Taxes Other Than Income; and

     (b) Accounts 601 through 675, inclusive, Operations and Maintenance, exclusive of:

          (1) Account 670, Bad Debt Expense; and

          (2) Amortization of expenses of a rate case that have been deferred, otherwise included in:

               (I) Account 666, Regulatory Commission Expenses - Amortization of Rate Case Expense (Class A and B Utilities); and

               (II) Account 665, Regulatory Commission Expenses - Amortization of Rate Case Expense (Class C Utilities).

     3. If a public utility that furnishes services for the disposal of sewage elects to use the 1/8 formula method to calculate the amount of an allowance for cash working capital, the utility must use in that calculation exclusively the following accounts of the Uniform System of Accounts of the National Association of Regulatory Utility Commissioners:

     (a) Account 408, Taxes Other Than Income; and

     (b) Accounts 701 through 775, inclusive, Operations and Maintenance, exclusive of:

          (1) Account 770, Bad Debt Expense; and

          (2) Amortization of expenses of a rate case that have been deferred, otherwise included in:

               (I) Account 766, Regulatory Commission Expenses - Amortization of Rate Case Expense (Class A and B Utilities); and

               (II) Account 765, Regulatory Commission Expenses - Amortization of Rate Case Expense (Class C Utilities).

     4. For the purposes of this section:

     (a) “1/8 formula method” means the computation of the amount of cash working capital which equals the sum of the total annual operating expenses and total annual maintenance expenses of a utility divided by 8.

     (b) “Cash working capital” means the amount of money that the shareholders or investors of the utility have provided to enable the utility to pay current operating expenses of the utility between the time when the expenses of rendering utility service are paid and the time when revenues for that service are collected from the customers of the utility.

     (Added to NAC by Pub. Utilities Comm’n by R036-10, eff. 12-16-2010)