APPENDIX A TO JOINT REVENUE REQUIREMENT STUDY FOR CUC & GHU WASTEWATER UTILITIES GOLDEN HEART UTILITIES WASTEWATER UTILITY

Transcription

1 APPENDIX A TO JOINT REVENUE REQUIREMENT STUDY FOR CUC & GHU WASTEWATER UTILITIES GOLDEN HEART UTILITIES WASTEWATER UTILITY For the Test Year Ended December 31, 2004 RC2005 GHU WASTEWATER.xls Title Page 1 Run Date: 6/14/2005 Time: 3:45 PM

2 GOLDEN HEART UTILITIES WASTEWATER APPENDIX A TO JOINT REVENUE REQUIREMENT STUDY TABLE OF CONTENTS I. HISTORICAL FINANCIAL INFORMATION Schedule Comparative Statement of Assets and Other Debits Comparative Statement of Liabilities and Other Credits Comparative Statement of Operations and Net Income Comparative Schedule of Operating and Maintenance Expenses Comparative Schedule of Operating Revenues Comparative Statement of Changes in Retained Earnings A A B C D E II. DETAILED REVENUE, EXPENSE AND PLANT CALCULATIONS Operating Revenues and Expenses with Pro Forma Adjustments Detail of Pro Forma Adjustments Operating Revenue Detail of Pro Forma Adjustments Operating Expenses Explanation of Pro Forma Adjustments Schedule of Rate Base Computation Using 13Month Average Plant Schedule of Rate Base Computation Using Year End Plant 13Month Average Plant In Service/Accumulated Depreciation by Type Code Prior to October Month Average Plant In Service/Accumulated Depreciation by Type Code Post October Month Average Rate Base Items Comparative Schedule of Plant in Service and Depreciation Expense F G H I J K L M N O III. WEIGHTED COST OF CAPITAL AND LONGTERM DEBT Schedule of Weighted Cost of Capital Comparative Schedule of Weighted Cost of LongTerm Debt P Q RC2005 GHU WASTEWATER.xls TOC Page 2 Run Date: 6/14/2005 Time: 3:45 PM

3 HISTORICAL FINANCIAL INFORMATION RC2005 GHU WASTEWATER.xls HFI Page 3 Run Date: 6/14/2005 Time: 3:45 PM

4 GOLDEN HEART UTILITIES WASTEWATER COMPARATIVE STATEMENT OF ASSETS AND OTHER DEBITS For the Years Ended December 31, 2003 and 2004 Schedule A Increase/ No. Account Title (Decrease) REGULATED PLANT 101 Plant in Service $ 53,935,308 $ 57,189,324 $ 3,254, Less: Accumulated Depreciation (25,888,412) (27,054,065) (1,165,653) Net Utility Plant 28,046,895 30,135,259 2,088, Acquisition Adjustment & Deferred Portion 3,693,661 3,693, Less: Accumulated Amortization (92,348) (215,475) (123,127) Net Acquisition Adjustment 3,601,313 3,478,186 (123,127) 105 Construction Work in Progress 69, , , Future Use 104,213 (104,213) Total Utility Plant 31,821,692 33,856,448 2,034,756 CURRENT ASSETS 131 Cash & Cash Equivalents 253, , , Accounts Receivable 288, ,780 (93,078) 151 Materials and Supplies 206, , , Prepayments 304, ,201 98,226 Other Current & Accrued Assets 590, , ,225 Total Current Assets 1,643,969 2,169, ,205 NONCURRENT ASSETS 144 Notes Receivable Deferred Debits 310, ,288 (49,619) Deferred Tax Asset 37,165 29,592 (7,573) Total NonCurrent Assets 348, ,880 (57,192) TOTAL ASSETS AND OTHER DEBITS $ 33,813,733 $ 36,316,503 $ 2,502,769 RC2005 GHU WASTEWATER.xls A Page 4 Run Date: 6/14/2005 Time: 3:45 PM

5 GOLDEN HEART UTILITIES WASTEWATER COMPARATIVE STATEMENT OF LIABILITIES AND OTHER CREDITS For the Years Ended December 31, 2003 and 2004 Schedule A Increase/ No. Account Title (Decrease) STOCKHOLDERS' EQUITY 201 Common Stock $ 6,891,911 $ 6,891,911 $ 211 Paid in Capital 2,208,809 2,079,953 (128,856) 214 Retained Earnings 3,010,285 4,013,947 1,003,662 Net Income (Loss) 1,003,002 1,083,189 80,187 Total Equity Capital 13,114,007 14,069, ,994 LONGTERM DEBT 224 LongTerm Debt 6,479,365 7,293, ,678 Total LongTerm Debt 6,479,365 7,293, ,678 CURRENT LIABILITIES 231 Accounts Payable 152, ,381 14, Customer Deposits 26,566 26,397 (169) Other Current Liabilities 287, ,464 (1,135) Total Current Liabilities 466, ,242 13,615 CONTRIBUTION IN AID OF CONSTRUCTION 271 Contribution In Aid of Construction 27,496,688 28,176, , Less Amortization (16,320,443) (16,917,348) (596,905) 271 Contribution In Aid of Construction(Unallocated) 12, , ,517 Net Contribution In Aid of Construction 11,189,163 11,383, ,913 OTHER LIABILITIES AND DEFERRED CREDITS 252 Advances for Construction 13,560 (13,560) Deferred Income Taxes Acquisition Adjustment 1,447,728 1,398,233 (49,495) Deferred Income Taxes 1,103,282 1,692, ,626 Total Deferred Credits 2,564,571 3,091, ,571 TOTAL LIABILITIES AND OTHER CREDITS $ 33,813,733 $ 36,316,503 $ 2,502,770 RC2005 GHU WASTEWATER.xls A Page 5 Run Date: 6/14/2005 Time: 3:45 PM

6 GOLDEN HEART UTILITIES WASTEWATER COMPARATIVE STATEMENT OF OPERATIONS AND NET INCOME For the Years Ended December 31, 2003 and 2004 Schedule B Line Increase/ No. Description (Decrease) 1 OPERATING REVENUES (Schedule 2.2) $ 8,515,636 $ 9,098,516 $ 582,880 2 OPERATING EXPENSES 3 O & M Expense (Schedule 2.1) 5,243,574 5,606, ,212 4 Depreciation Expense 5 New Plant 444, , ,837 6 Old Plant 296, ,234 (6,798) 7 Amortization of Acquisition Adjustment 92, ,127 30,779 8 Payroll & Property Taxes 275, ,980 11,946 9 Total Operating Expenses 6,351,121 6,925, , Net Utility Operating Income 2,164,515 2,173,419 8, OTHER INCOME AND EXPENSES 12 Interest Income ,312 12, Interest on LongTerm Debt (400,873) (421,826) (20,953) 14 Contract Income 6,495 1,563 (4,932) 15 Contract Expense (4,926) (891) 4, Other NonOperating Income (Expense) 17 Total Other Income (398,687) (407,842) (9,155) 18 Net Income Before Taxes 1,765,828 1,765,577 (251) 19 INCOME TAXES 20 Income Taxes (401,764) (134,413) 267, Provision for Deferred Taxes (356,558) (547,705) (191,147) 22 Contract Income Taxes (4,504) (270) 4, Total Income Taxes (762,826) (682,388) 80, NET INCOME $ 1,003,002 $ 1,083,189 $ 80,187 RC2005 GHU WASTEWATER.xls B Page 6 Run Date: 6/14/2005 Time: 3:45 PM

7 Schedule C GOLDEN HEART UTILITIES WASTEWATER COMPARATIVE SCHEDULE OF OPERATING AND MAINTENANCE EXPENSES For the Years Ended December 31, 2003 and 2004 Increase/ No. Account Title (Decrease) OPERATION EXPENSE Collection Operation $ 500,772 $ 640,815 $ 140, Pumping Operation 161, ,256 (7,548) Wastewater Treatment Operation 2,037,944 2,320, ,779 Total Operation Expense 2,700,519 3,115, ,274 MAINTENANCE EXPENSE Maintenance of Collecting Sewer System 200, ,303 (14,965) Maintenance of Pumping System 91,996 88,362 (3,634) Maintenance of Wastewater Treatment Plant 250, ,933 (23,155) Maintenance of Vehicles 79,335 89,897 10,562 Maintenance of Garage 25,293 36,768 11,476 Total Maintenance Expense 646, ,264 (19,717) CUSTOMER ACCOUNTS EXPENSE Meter Reading Expense 5,493 7,063 1, Customer Records & Collection Expense 7,222 7, Uncollectable Accounts 6,512 1,555 (4,957) USA Clearing Customer Service Expense 235, ,316 (15,629) Customer Service & Info Expense 807 5,736 4,929 Total Customer Accounts Expense 255, ,418 (13,561) ADMINISTRATIVE & GEN EXPENSE Administrative & General Salaries Office Supplies & Other Expense 4,283 4, Outside Services Employed 17,161 18, Insurance Expense 9,674 28,067 18, Employee Pensions & Benefits 687, ,048 (15,888) 760 USA Clearing Administration Expense 1,005,363 1,137, , Miscellaneous General Expense 24,395 29,998 5,603 Rate Case Amortization Expense 38,795 43,394 4,598 Total Admin & Gen Expense 1,787,608 1,933, ,937 Overhead Transfer Accounts (147,511) (312,233) (164,722) TOTAL OPERATION & MAINTENANCE EXPENSES $ 5,243,574 $ 5,606,787 $ 363,212 RC2005 GHU WASTEWATER.xls C Page 7 Run Date: 6/14/2005 Time: 3:45 PM

8 GOLDEN HEART UTILITIES WASTEWATER COMPARATIVE STATEMENT OF OPERATING REVENUES For the Years Ended December 31, 2003 and 2004 Schedule D Increase/ No. Account Title (Decrease) OPERATING REVENUES WASTEWATER Residential Single Family $ 1,501,195 $ 1,602,235 $ 101, Residential Duplex 541, ,057 26, Commercial 2,556,854 2,733, ,905 Not Used NA NA NA Not Used NA NA NA Industrial Operating Revenue FNSB 44,148 55,063 10, Public Authority FWW 956, ,988 35, Multi Family 3+ 1,580,061 1,627,389 47, Bulk Septage 403, ,322 63, Certified Utilities 771, , , Other Revenues Lakeview 31,023 38,810 7, Interdepartmental Sales 4,349 4, Miscellaneous Revenues 65, ,191 41, Equipment Revenues 59,104 (59,104) TOTAL OPERATING REVENUES $ 8,515,636 $ 9,098,516 $ 582,880 RC2005 GHU WASTEWATER.xls D Page 8 Run Date: 6/14/2005 Time: 3:45 PM

9 GOLDEN HEART UTILITIES WASTEWATER COMPARATIVE STATEMENT OF CHANGES IN RETAINED EARNINGS For the Years Ended December 31, 2003 and 2004 Schedule E Line No. Common Stock Paid in Capital Retained Earnings Total Balance January 1, 2003 $ 6,891,911 $ 3,439,964 $ 10,331,874 3 Acquisition Adjustment 2,208,809 2,208,809 4 Net Income ,003,002 1,003,002 5 Dividends Paid (429,679) (429,679) 6 Balance December 31, ,891,911 2,208,809 4,013,287 13,114, Acquisition Adjustment (128,856) 128,856 9 Net Income ,083,189 1,083, Dividends Paid (128,197) (128,197) 11 Balance December 31, 2004 $ 6,891,911 $ 2,079,953 $ 5,097,135 $ 14,068,999 RC2005 GHU WASTEWATER.xls E Page 9 Run Date: 6/14/2005 Time: 3:45 PM

10 DETAILED REVENUE, EXPENSE AND PLANT CALCULATIONS RC2005 GHU WASTEWATER.xls REPC Page 10 Run Date: 6/14/2005 Time: 3:45 PM

11 GOLDEN HEART UTILITIES WASTEWATER OPERATING REVENUES AND EXPENSES WITH PRO FORMA ADJUSTMENTS Schedule F Known & Line Actual Measurable Adjusted No. Description 12/31/04 Changes Test Year 1 OPERATING REVENUES WASTEWATER 2 Residential Single Family $ 1,602,235 $ 22,189 $ 1,624,424 3 Residential Duplex 568,057 7, ,140 4 Commercial 2,733,758 29,207 2,762,965 5 Not Used NA NA 6 Not Used NA NA 7 Industrial Operating Revenue FNSB 55,063 55,063 8 Public Authority FWW 991,988 12,145 1,004,133 9 Multi Family 3+ 1,627,389 19,771 1,647, Bulk Septage 466,322 3, , Certified Utilities CUC 903,272 (903,272) (0) 12 Other Revenues Lakeview 38, , Interdepartmental Sales 4, , Miscellaneous Revenues 107, , Equipment Revenues Total Operating Revenues 9,098,516 (809,144) 8,289, OPERATING EXPENSES 19 Operations Expense 3,115,794 (844,831) 2,270, Maintenance Expense 627,264 27, , Customer Accounts 242,418 19, , Administrative & General Expenses 1,933,545 (9,159) 1,924, Overhead Transfer Expenses (312,233) (312,233) 24 Total Operating & Maintenance Expenses 5,606,787 (807,164) 4,799, OTHER OPERATING EXPENSES 26 Depreciation Expense: 27 New Plant 618,969 48, , Old Plant 289,234 (234,428) 54, Amortization of Acquisition Adjustment 123, , Payroll, Property Taxes & Other 286, , Total Other Operating Expenses 1,318,310 (185,439) 1,132, Total Operating Expenses 6,925,097 (992,603) 5,932, OPERATING INCOME BEFORE INTEREST AND TAXES $ 2,173,419 $ 183,459 $ 2,356,878 RC2005 GHU WASTEWATER.xls F Page 11 RUN DATE: 6/14/2005 TIME: 3:45 PM

12 GOLDEN HEART UTILITIES WASTEWATER DETAIL OF PRO FORMA ADJUSTMENTS OPERATING REVENUE Schedule G Actual Normalize No. Account Title 12/31/04 Revenues Total (GHU WW 1) WASTEWATER REVENUES Residential Flat Rate $ 14,647 $ 238 $ 14, Not Used Residential Metered Sewer Single Family 1,587,587 21,951 1,609, Residential Metered Sewer Duplex 568,057 7, , Not Used Not Used Commercial Metered Sewer 2,733,758 29,207 2,762, Not Used Industrial Metered Sewer 55,063 55, Not Used Public Authority Sewer 991,988 12,145 1,004, Not Used Residential Metered Sewer Multi Unit 3+ 1,627,389 19,771 1,647, Not Used Other Revenue Bulk Septage 466,322 3, , Revenue from Other Systems CUC 903,272 6, , Revenue from Other Systems Lakeview 38, , Interdepartmental Revenues 4, , Not Used Revenue from Other Systems CUC (To Exp Clear) (910,220) (910,220) Total Wastewater Revenues from Rates 8,991,325 (809,144) $ 8,182,181 MISCELLANEOUS REVENUES 531 Compost Sales 29,943 29, Forfeited Discounts 14,979 14, Rents for Sewer Properties Customer NSF Fees Disconnection Delivery Fees 7,950 7, Customer Record Fees 8,540 8, Service Calls Inspections Fees 3,920 3, Quality Assurance Inspection Fees 8,071 8, Pretreatment Inspection Fees Miscellaneous Income 32,700 32, Equipment Rental Equipment Rental O&M Interdepartmental Sale Total Miscellaneous Revenues 107, ,191 TOTAL OPERATING REVENUES $ 9,098,516 $ (809,144) $ 8,289,372 RC2005 GHU WASTEWATER.xls G Page 12 RUN DATE: 6/14/2005 TIME: 3:45 PM

13 GOLDEN HEART UTILITIES WASTEWATER DETAIL OF PRO FORMA ADJUSTMENTS OPERATING EXPENSES AND TAXES Schedule H SCADA Payroll Health & Welfare Telephone No. Account Title Cost Increase Cost Increase Cost Decrease Subtotal (GHU WW 2) (GHU WW 3) (GHU WW 4) OPERATIONS EXPENSE Collection Operation $ 12,647 $ 1,437 $ (22,474) $ (8,390) Pumping Operation 3, , Treatment Operation 42,973 4,883 (466) 47,390 Treatment Clearing To CUC ('04 + Norm + '05 Inc) Treatment Compost Woodchips 750 Garage Operation Total Operations Expense 59,893 6,806 (22,940) 43,759 MAINTENANCE EXPENSE Maintenance of Collecting Sewer System 4, , Maintenance of Pumping System 2, , Maintenance of Treatment Plant 5, , Maintenance of Vehicles 750 Maintenance of Garage 3, ,027 Total Maintenance Expense 16,770 1,905 18,675 CUSTOMER ACCOUNT EXPENSE Meter Reading Expense Customer Records & Collection Expense Bad Debt Expense USA Contract Srv Customer Service Expense Miscellaneous Customer Service & Info Expense Total Customer Account Expense 1 1 ADMINISTRATION & GENERAL EXPENSE Administration & General Salaries Office Supplies & Other Expense 731 Outside Servcies Employed 755 Injuries and Damages Not Covered by Insurance 756 Insurance Expense 704 Employee Pensions & Benefits 760 USA Contract Srv Administration Expense Miscellaneous General Expense Advertising Miscellaneous General Expense Contributions Other Miscellaneous General Expense 766 COSS Amortization Expense 766 Rate Case Amortization Expense 186 NOT USED Total Administration & General Expense DEPRECIATION EXPENSE 403 Depreciation New Plant Depreciation Old Plant Total Depreciation Expense OPERATING TAXES 409 Current Income Taxes 410 Deferred Income Taxes 416 Contract Income Taxes Total Operating Taxes TOTAL OPERATING EXPENSES AND TAXES $ 76,664 $ 8,711 $ (22,940) $ 62,435 RC2005 GHU WASTEWATER.xls H Page 13 RUN DATE: 6/14/2005 TIME: 3:45 PM

14 GOLDEN HEART UTILITIES WASTEWATER DETAIL OF PRO FORMA ADJUSTMENTS OPERATING EXPENSES AND TAXES Schedule H No. OPERATIONS EXPENSE Account Title Workers' Comp 2005 Rate Electricity Insurance Case Cost Cost Increase Expense Amortization Subtotal (GHU WW 5) (GHU WW 6) (GHU WW 7) Collection Operation Pumping Operation Treatment Operation Treatment Clearing To CUC ('04 + Norm + '05 Inc) Treatment Compost Woodchips 750 Garage Operation Total Operations Expense $ 5,957 $ 6,554 $ 4,121 5,185 2,016 11,533 48,918 22, , ,060 31, ,856 MAINTENANCE EXPENSE Maintenance of Collecting Sewer System Maintenance of Pumping System Maintenance of Treatment Plant Maintenance of Vehicles 750 Maintenance of Garage Total Maintenance Expense 2,472 7,784 1,379 4,341 2,966 9,340 1,873 5,900 8,690 27,365 CUSTOMER ACCOUNT EXPENSE Meter Reading Expense Customer Records & Collection Expense Bad Debt Expense USA Contract Srv Customer Service Expense Miscellaneous Customer Service & Info Expense Total Customer Account Expense ADMINISTRATION & GENERAL EXPENSE Administration & General Salaries Office Supplies & Other Expense 731 Outside Servcies Employed 755 Injuries and Damages Not Covered by Insurance 756 Insurance Expense 704 Employee Pensions & Benefits 760 USA Contract Srv Administration Expense Miscellaneous General Expense Advertising Miscellaneous General Expense Contributions Other Miscellaneous General Expense 766 COSS Amortization Expense 766 Rate Case Amortization Expense 186 NOT USED Total Administration & General Expense 4,328 4,328 21,638 21,638 25,966 25,966 DEPRECIATION EXPENSE 403 Depreciation New Plant Depreciation Old Plant Total Depreciation Expense OPERATING TAXES 409 Current Income Taxes 410 Deferred Income Taxes 416 Contract Income Taxes Total Operating Taxes TOTAL OPERATING EXPENSES AND TAXES $ 60,060 $ 39,728 $ 25,966 $ 188,189 RC2005 GHU WASTEWATER.xls H Page 14 RUN DATE: 6/14/2005 TIME: 3:45 PM

15 GOLDEN HEART UTILITIES WASTEWATER DETAIL OF PRO FORMA ADJUSTMENTS OPERATING EXPENSES AND TAXES Schedule H No. OPERATIONS EXPENSE Account Title USA USA Property Administrative Customer Service Tax Cost Expense Cost Expense Increase Subtotal (GHU WW 8) (GHU WW 9) (GHU WW 10) Collection Operation Pumping Operation Treatment Operation Treatment Clearing To CUC ('04 + Norm + '05 Inc) Treatment Compost Woodchips 750 Garage Operation Total Operations Expense $ 4, ,760 1, , , ,975 MAINTENANCE EXPENSE Maintenance of Collecting Sewer System Maintenance of Pumping System Maintenance of Treatment Plant Maintenance of Vehicles 750 Maintenance of Garage Total Maintenance Expense 7,784 4,341 9,340 5,900 27,365 CUSTOMER ACCOUNT EXPENSE Meter Reading Expense Customer Records & Collection Expense Bad Debt Expense USA Contract Srv Customer Service Expense Miscellaneous Customer Service & Info Expense Total Customer Account Expense 2 19,459 19,459 19,459 19,461 ADMINISTRATION & GENERAL EXPENSE Administration & General Salaries Office Supplies & Other Expense 731 Outside Servcies Employed 755 Injuries and Damages Not Covered by Insurance 756 Insurance Expense 704 Employee Pensions & Benefits 760 USA Contract Srv Administration Expense Miscellaneous General Expense Advertising Miscellaneous General Expense Contributions Other Miscellaneous General Expense 766 COSS Amortization Expense 766 Rate Case Amortization Expense 186 NOT USED Total Administration & General Expense (27,422) (27,422) 4,328 21,638 (27,422) (1,456) DEPRECIATION EXPENSE 403 Depreciation New Plant Depreciation Old Plant Total Depreciation Expense OPERATING TAXES 409 Current Income Taxes 410 Deferred Income Taxes 416 Contract Income Taxes Total Operating Taxes TOTAL OPERATING EXPENSES AND TAXES $ (27,422) $ 19,459 $ 2,119 $ 182,345 RC2005 GHU WASTEWATER.xls H Page 15 RUN DATE: 6/14/2005 TIME: 3:45 PM

16 GOLDEN HEART UTILITIES WASTEWATER DETAIL OF PRO FORMA ADJUSTMENTS OPERATING EXPENSES AND TAXES Schedule H No. OPERATIONS EXPENSE Account Title Depreciation Image New Plant of Old Plant Advertising Depreciaiton Disallowed Subtotal (GHU WW 11) (GHU WW 12) (GHU WW 13) Collection Operation Pumping Operation Treatment Operation Treatment Clearing To CUC ('04 + Norm + '05 Inc) Treatment Compost Woodchips 750 Garage Operation $ 4,121 11, , Total Operations Expense 136,975 MAINTENANCE EXPENSE Maintenance of Collecting Sewer System Maintenance of Pumping System Maintenance of Treatment Plant Maintenance of Vehicles 750 Maintenance of Garage Total Maintenance Expense 7,784 4,341 9,340 5,900 27,365 CUSTOMER ACCOUNT EXPENSE Meter Reading Expense Customer Records & Collection Expense Bad Debt Expense USA Contract Srv Customer Service Expense Miscellaneous Customer Service & Info Expense Total Customer Account Expense 2 19,459 19,461 ADMINISTRATION & GENERAL EXPENSE Administration & General Salaries Office Supplies & Other Expense 731 Outside Servcies Employed 755 Injuries and Damages Not Covered by Insurance 756 Insurance Expense 704 Employee Pensions & Benefits 760 USA Contract Srv Administration Expense Miscellaneous General Expense Advertising Miscellaneous General Expense Contributions Other Miscellaneous General Expense 766 COSS Amortization Expense 766 Rate Case Amortization Expense 186 NOT USED Total Administration & General Expense (27,422) (2,156) (2,156) 4,328 21,638 (2,156) (3,611) DEPRECIATION EXPENSE 403 Depreciation New Plant Depreciation Old Plant Total Depreciation Expense 48,989 48,989 (234,428) (234,428) 48,989 (234,428) (185,439) OPERATING TAXES 409 Current Income Taxes 410 Deferred Income Taxes 416 Contract Income Taxes Total Operating Taxes TOTAL OPERATING EXPENSES AND TAXES $ (2,156) $ 48,989 $ (234,428) $ (5,249) RC2005 GHU WASTEWATER.xls H Page 16 RUN DATE: 6/14/2005 TIME: 3:45 PM

17 GOLDEN HEART UTILITIES WASTEWATER DETAIL OF PRO FORMA ADJUSTMENTS OPERATING EXPENSES AND TAXES Schedule H No. OPERATIONS EXPENSE Account Title Wastewater Natural Gas Treatment Collection Heating Clearing Center Lease Expense To CUC Subtotal (GHU WW 15) (GHU WW 16) (GHU WW 17) Collection Operation Pumping Operation Treatment Operation Treatment Clearing To CUC ('04 + Norm + '05 Inc) Treatment Compost Woodchips 750 Garage Operation Total Operations Expense $ 22,392 $ 26,513 11,760 9, ,314 (1,018,576) (1,018,576) ,392 9,845 (1,018,576) (849,364) MAINTENANCE EXPENSE Maintenance of Collecting Sewer System Maintenance of Pumping System Maintenance of Treatment Plant Maintenance of Vehicles 750 Maintenance of Garage Total Maintenance Expense 7,784 4,341 9,340 5,900 27,365 CUSTOMER ACCOUNT EXPENSE Meter Reading Expense Customer Records & Collection Expense Bad Debt Expense USA Contract Srv Customer Service Expense Miscellaneous Customer Service & Info Expense Total Customer Account Expense 2 19,459 19,461 ADMINISTRATION & GENERAL EXPENSE Administration & General Salaries Office Supplies & Other Expense 731 Outside Servcies Employed 755 Injuries and Damages Not Covered by Insurance 756 Insurance Expense 704 Employee Pensions & Benefits 760 USA Contract Srv Administration Expense Miscellaneous General Expense Advertising Miscellaneous General Expense Contributions Other Miscellaneous General Expense 766 COSS Amortization Expense 766 Rate Case Amortization Expense 186 NOT USED Total Administration & General Expense (27,422) (2,156) 4,328 21,638 (3,611) DEPRECIATION EXPENSE 403 Depreciation New Plant Depreciation Old Plant Total Depreciation Expense 48,989 (234,428) (185,439) OPERATING TAXES 409 Current Income Taxes 410 Deferred Income Taxes 416 Contract Income Taxes Total Operating Taxes TOTAL OPERATING EXPENSES AND TAXES $ 22,392 $ 9,845 $ (1,018,576) $ (991,588) RC2005 GHU WASTEWATER.xls H Page 17 RUN DATE: 6/14/2005 TIME: 3:45 PM

18 GOLDEN HEART UTILITIES WASTEWATER DETAIL OF PRO FORMA ADJUSTMENTS OPERATING EXPENSES AND TAXES Schedule H No. OPERATIONS EXPENSE Account Title Damages Composting Not Covered Woodchips Expense Expense Increase Increase NOT USED Total (GHU WW 19) (GHU WW 20) (GHU WW 21) Collection Operation Pumping Operation Treatment Operation Treatment Clearing To CUC ('04 + Norm + '05 Inc) Treatment Compost Woodchips 750 Garage Operation Total Operations Expense $ 26,513 11, ,314 (1,018,576) 4,533 4, ,533 (844,831) MAINTENANCE EXPENSE Maintenance of Collecting Sewer System Maintenance of Pumping System Maintenance of Treatment Plant Maintenance of Vehicles 750 Maintenance of Garage Total Maintenance Expense 7,784 4,341 9,340 5,900 27,365 CUSTOMER ACCOUNT EXPENSE Meter Reading Expense Customer Records & Collection Expense Bad Debt Expense USA Contract Srv Customer Service Expense Miscellaneous Customer Service & Info Expense Total Customer Account Expense 2 19,459 19,461 ADMINISTRATION & GENERAL EXPENSE Administration & General Salaries Office Supplies & Other Expense 731 Outside Servcies Employed 755 Injuries and Damages Not Covered by Insurance 756 Insurance Expense 704 Employee Pensions & Benefits 760 USA Contract Srv Administration Expense Miscellaneous General Expense Advertising Miscellaneous General Expense Contributions Other Miscellaneous General Expense 766 COSS Amortization Expense 766 Rate Case Amortization Expense 186 NOT USED Total Administration & General Expense (5,548) (5,548) (27,422) (2,156) 4,328 21,638 (5,548) (9,159) DEPRECIATION EXPENSE 403 Depreciation New Plant Depreciation Old Plant Total Depreciation Expense 48,989 (234,428) (185,439) OPERATING TAXES 409 Current Income Taxes 410 Deferred Income Taxes 416 Contract Income Taxes Total Operating Taxes TOTAL OPERATING EXPENSES AND TAXES $ (5,548) $ 4,533 $ (992,603) RC2005 GHU WASTEWATER.xls H Page 18 RUN DATE: 6/14/2005 TIME: 3:45 PM

19 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I Introduction During the test year, events occurred that required us to restate certain financial information for ratemaking purposes. These restatements are treated as pro forma adjustments to test year operating results. Pro forma adjustments can be classified into four general categories: 1. Normalizing Adjustments To restate the test year period data for any abnormal event, unusual circumstance or nonrecurring item through the addition or elimination of a certain revenue or expense; 2. Annualizing Adjustments To extend over the period, or to eliminate from the period, events that had partial period effects and are either recurring or have terminated; 3. OutofPeriod Adjustments To properly assign outofperiod events to the test year; 4. Reclassified Items To add or remove items for purposes of rate recovery. The pro forma adjustments presented in Appendices A, B and C, on Schedule I (1 through 28), have been calculated to show the effects that each pro forma adjustment has on operating revenues, operating expenses, and rate base of Golden Heart Utilities. Following is a general narrative description explaining the reasons for each adjustment. RC2005 GHU WASTEWATER.xls I Page 19 Run Date: 6/14/2005 Time: 3:45 PM

20 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 1. NORMALIZE REVENUES No. Account Title Amount Residential Flat Rate $ Residential Metered Sewer Single Family 21, Residential Metered Sewer Duplex 7, Commercial Metered Sewer 29, Public Authority Sewer 12, Residential Metered Sewer Multi Unit 3+ 19, Other Revenue Bulk Septage 3, Revenue from Other Systems CUC 6, Revenue from Other Systems Lakeview Interdepartmental Revenues 58 INCREASE TO REVENUES FROM NORMALIZATION FOR TEST YEAR $ 101, Revenue from Other Systems CUC (910,220) TOTAL INCREASE/(DECREASE) TO REVENUES $ (809,144) On April 1, 2004, Golden Heart Utilities implemented a Commission approved rate increase of 5%. The increase applied to all scheduled rates for the remaining nine (9) months of the test year. This adjustment calculates the rate increase for the first three (3) months of The elimination of intra company revenues from College Utilities Corporation Wastewater to Golden Heart Utilities results in a decrease to revenues and to the corresponding wastewater treatment expenses. This submittal reflects the net pro forma adjustment to the test year. RC2005 GHU WASTEWATER.xls GHU WW 1 Page 20 Run Date: 6/14/2005 Time: 3:45 PM

21 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 2. PAYROLL COST INCREASE No. Account Title Amount Collection Operation $ 12, Pumping Operation 3, Treatment Operation 42, Garage Operation 383 Total Operation 59, Maintenance of Collecting Sewer System 4, Maintenance of Pumping System 2, Maintenance of Treatment Plant 5, Maintenance of Garage 3, Meter Reading Expense 1 Total Maintenance 16,771 TOTAL INCREASE IN PAYROLL COSTS $ 76,664 The payroll costs for Golden Heart Utilities wastewater department reflect an actual wage increase of 4% above the test year as documented in the Golden Heart Utilities collective bargaining unit agreement with the IBEW. The three (3) year contract provides for pay and benefits increases under a published schedule. The number of employees and the total labor hours within the department will remain constant during 2005 thus the increase is directly related to the negotiated wage increase. This 4% increase was effective in January RC2005 GHU WASTEWATER.xls GHU WW 2 Page 21 Run Date: 6/14/2005 Time: 3:45 PM

22 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 3. HEALTH AND WELFARE COST INCREASE No. Account Title Amount Collection Operation $ 1, Pumping Operation Treatment Operation 4, Garage Operation 44 Total Operation 6, Maintenance of Collecting Sewer System Maintenance of Pumping System Maintenance of Treatment Plant Maintenance of Garage 411 Total Maintenance 1,905 TOTAL INCREASE IN HEALTH AND WELFARE COSTS $ 8,711 Effective March 1, 2005, the Health & Welfare costs for Golden Heart Utilities increased from $908 to $970 per employee per month. As part of the negotiated agreement between the employer and the IBEW who represents the employees, there is a cost sharing mechanism that is triggered when the premium increases. The current agreement requires the employee and the employer to equally share cost increases up to $0.50 per hour per year. The provisions of the negotiated agreement require both the employee and the employer to contribute $31 per month to cover the increased premium. This adjustment reflects the employer portion of the increased health premiums for the remaining ten (10) months of These costs are already being incurred by the utility and the increase is an amount established by the collective bargaining agreement. RC2005 GHU WASTEWATER.xls GHU WW 3 Page 22 Run Date: 6/14/2005 Time: 3:45 PM

23 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 4. SCADA TELEPHONE DECREASE No. Account Title Amount Pumping Operation $ (22,474) Treatment Operation (466) TOTAL DECREASE IN SCADA TELEPHONE EXPENSE $ (22,940) Golden Heart Utilities completed installation of Supervisory Control and Data Acquisition (SCADA) equipment at all wastewater collection lift stations late in the test year. As a result of the SCADA equipment installation, sixty (60) dedicated commercial telephone lines can be eliminated. The newly installed SCADA equipment has the capability of alerting oncall utility personnel in the event of an anomaly in the wastewater collection and pumping system. Such problems as power outages, high or low water levels or pump failures at the lift stations will be immediately relayed to utility personnel. SCADA equipment also allows the utility to realize operational efficiencies related to wastewater collection operations. The anticipated benefits include the ability to respond more rapidly to frozen or blocked wastewater mains, rapid identification of surges caused by inflow and infiltration (I&I) or other detrimental impacts upon the system. The risk avoidance and efficiency gained by the daily duty and oncall utility operators being able to immediately respond to an emergency situation logarithmically increases the benefit of the system. Sixty (60) commercial telephone lines can be disconnected from the wastewater collection lift stations for a new monthly savings. This pro forma adjustment eliminates the cost of commercial telephone service for facilities that are now served by utility owned SCADA equipment. RC2005 GHU WASTEWATER.xls GHU WW 4 Page 23 Run Date: 6/14/2005 Time: 3:45 PM

24 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 5. ELECTRICITY COST INCREASE No. Account Title Amount Collection Operation $ 5, Pumping Operation 5, Treatment Operation 48,918 TOTAL INCREASE IN ELECTRICITY COSTS $ 60,060 Fuel price volatility and the increasingly escalated costs of producing power in the past year have had a direct impact upon the cost of purchased power for the utility. The wastewater treatment plant relies almost entirely upon electricity to pump and treat the wastewater as well as pumping the wastewater throughout the wastewater collection system to the treatment plant. The sixty (60) lift stations of Golden Heart Utilities consume substantial amounts of electricity. Golden Valley Electric Association (GVEA), supplier of power for the utility, has implemented an 8% rate increase approved by the Commission. GVEA raised their rates in July Additionally, the Cost of Power Adjustment (COPA) has increased substantially. This adjustment normalizes the increase to the full year. The pro forma adjustment incorporates the increased electricity costs. An analysis of the electricity increase, on an account by account basis, is in included in the utility s work papers. RC2005 GHU WASTEWATER.xls GHU WW 5 Page 24 Run Date: 6/14/2005 Time: 3:45 PM

25 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 6. WORKERS' COMPENSATION INSURANCE EXPENSE No. Account Title Amount Collection Operation $ 6, Pumping Operation 2, Treatment Operation 22, Garage Operation 198 Total Operation 31, Maintenance of Collecting Sewer System 2, Maintenance of Pumping System 1, Maintenance of Treatment Plant 2, Maintenance of Garage 1, Meter Reading Expense 1 Total Maintenance 8,691 TOTAL INCREASE IN WORKERS' COMPENSATION INSURANCE EXPENSE $ 39,728 Alaska s industries have experienced radical Workers Compensation Insurance rate increases within the past two years which have been passed on to all businesses. The Alaska State Legislature is involved in attempting to legislate cost containing measures to reduce the impact upon businesses. Several companies no longer underwrite Workers Compensation policies in Alaska thus there is little competition to provide cost containment and affordable coverage. Those very few companies that do provide Workers Compensation coverage in Alaska have been unable to contain claim costs or reduce rates to employers due to the small market. The State developed classifications and statewide rate for the water and wastewater industry throughout Alaska has experienced significant rate increases. Workers Compensation rates for sewage disposal plant operations increased from $5.14 per $100 in wages in the test year to $5.87 per $100 in Clerical office employees rates experienced a similar growth from $1.15 per $100 in the test year to $1.38 in This adjustment also includes changes in the experience modification factor, schedule rating factor and terrorism risk insurance. Workers Compensation premiums are based upon actual wages paid during a policy year thus a trueup is conducted after the final wage figures are reported. The pro forma expenses for Workers Compensation coverage reflect a dramatic climb in the premium even though the workforce remains stable during Detailed computations are to be found in the utility s work papers. RC2005 GHU WASTEWATER.xls GHU WW 6 Page 25 Run Date: 6/14/2005 Time: 3:45 PM

26 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW RATE CASE COST AMORTIZATION No. Account Title Amount 766 COSS Amortization Expense $ 4, Rate Case Amortization Expense $ 21,638 TOTAL 2005 RATE CASE COST AMORTIZATION $ 25,966 In accordance with the stipulation accepted by the RCA in Order U0213 (7), Golden Heart Utilities and College Utilities Corporation are filing a joint Revenue Requirement and Cost of Service Study. We have taken the total joint contract costs of these studies, $300,000, and allocated the costs to the individual operating utilities based upon a weighted customer count within the service area. The Cost of Service Study will be completed by R.W. Beck. The cost for this work is $75,000. Honchen & Uhlenkott will provide revenue requirement and rate of return analysis and testimony. The cost is $60,000. Dorsey & Whitney will provide legal services throughout the rate proceedings. The cost is $165,000. Based on a weighted customer count allocation, Golden Heart Utilities wastewater portion of the contract costs of the Revenue Requirement and the Cost of Service Study will be $86,553. These rate costs will be amortized over three (3) years, and COSS costs over five (5) years. The pro forma adjustments reflect the annual amortization of these costs. RC2005 GHU WASTEWATER.xls GHU WW 7 Page 26 Run Date: 6/14/2005 Time: 3:45 PM

27 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 8. USA ADMINISTRATIVE COST EXPENSE No. Account Title Amount 760 USA Contract Srv Administration Expense $ (27,422) The concept of using an administrative services company to provide support functions for an operating utility is not unique. The efficiency of implementing such an organizational structure has been repeatedly validated through reduced costs, less overhead and less administrative layering. Golden Heart Utilities relies upon the administrative support provided by Utility Services of Alaska, a closely affiliated company, to provide purchasing, human resources, payroll, accounting, insurance, procurement, management, information technology, fixed asset management, etc. The costs of these administrative services support are proportionally allocated to the operating utility using the Massachusetts Formula, in accordance with the Cost Allocation Manual approved by the Commission. The Massachusetts Formula is accepted as an equitable distribution method to ensure utilities only pay their proportionate share of the costs of administration. This table reflects the pro forma adjustment for increased costs of the allocation of administrative service costs. These increased costs are fully detailed in the Appendix C (USA Cost Allocation). RC2005 GHU WASTEWATER.xls GHU WW 8 Page 27 Run Date: 6/14/2005 Time: 3:45 PM

28 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 9. USA CUSTOMER SERVICE COST EXPENSE No. Account Title Amount USA Contract Srv Customer Service Expense $ 19,459 The concept of using an administrative services company to provide support functions for an operating utility is not unique. The efficiency of implementing such an organizational structure has been repeatedly validated through reduced costs, less overhead and less administrative layering. Golden Heart Utilities relies upon the administrative support provided by Utility Services of Alaska, a closely affiliated company, to provide customer services including billing, account establishment, trouble call processing, bill outs and new services. The costs of this customer services support are proportionally allocated to the operating utility using the Massachusetts Formula, in accordance with the Cost Allocation Manual approved by the Commission. The Massachusetts Formula is accepted as an equitable distribution method to ensure utilities only pay their proportionate share of the costs of administration. This table reflects the pro forma adjustment for increased costs of the allocation of customer service costs. These increased costs are fully detailed in the Appendix C (USA Cost Allocation). RC2005 GHU WASTEWATER.xls GHU WW 9 Page 28 Run Time: 6/14/2005 Time: 3:45 PM

29 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 10. PROPERTY TAX INCREASE No. Account Title Amount Pumping Operation $ Treatment Operation 1,892 TOTAL INCREASE IN PROPERTY TAXES $ 2,119 Golden Heart Utilities has received assessment valuations from the Fairbanks North Star Borough for the 2005 property tax year. The 8.02% increase in property value assessment of facilities related to the Golden Heart Utilities wastewater utility will result in a property tax increase for 2005 over the test year tax expense. The increased property tax results in a pro forma adjustment to the test year. RC2005 GHU WASTEWATER.xls GHU WW 10 Page 29 Run Date: 6/14/2005 Time: 3:45 PM

30 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 11. IMAGE ADVERTISING No. Account Title Amount Miscellaneous General Expense Advertising $ (2,156) The commission has generally found that the cost of image advertising should not be included in regulated operating expense in determining revenue requirements. Often times, this advertising serves the primary purpose of keeping the customer informed of particular utility events or practices as well as educating the customer about the utility. Nonetheless, based upon the Commission s past determinations, the pro forma deduction for advertising is included in the summary. This adjustment removes the cost of advertising not associated with a particular service or product otherwise classified as image advertising. RC2005 GHU WASTEWATER.xls GHU WW 11 Page 30 Run Date: 6/14/2005 Time: 3:45 PM

31 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 12. NEW PLANT DEPRECIATION No. Account Title Amount 403 Depreciation New Plant $ 48,989 Golden Heart Utilities added substantial depreciable plant in 2004, much of it late in the calendar year. This adjustment normalizes the depreciation expense on those assets for the full year. Through December 31, 2004, Golden Heart Utilities has added $2,915,411 of inservice plant subject to allowable depreciation expense. Golden Heart Utilities has calculated the additional depreciation expense for assets placed into service during calendar year The annual depreciation on test year assets, based upon their respective asset lives, serves as the pro forma adjustment for The detailed computation of depreciation on those assets at January 1, 2005, annualized, compared to actual depreciation expense taken in 2004 on those same assets is shown in the utility s work papers. RC2005 GHU WASTEWATER.xls GHU WW 12 Page 31 Run Date: 6/14/2005 Time: 3:45 PM

32 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 13. DEPRECIATION OF OLD PLANT DISALLOWED No. Account Title Amount Depreciation Old Plant $ (234,428) A significant amount of the existing plant acquired in 1997 was disallowed from Rate Base in a previous filing, Docket U The nondepreciated asset value, at time of purchase, was purchased at a price less than book value due to the seriously deteriorated condition of the plant. In its decision, the Commission found that only 13.1% of the net asset value transferred from the previous owner would be considered for regulatory purposes. The utility is eliminating the disallowed depreciation expense associated with this disallowed plant. The pro forma adjustment to account for this disallowed depreciation is ($234,428). RC2005 GHU WASTEWATER.xls GHU WW 13 Page 32 Run Date: 6/14/2005 Time: 3:45 PM

33 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 15. WASTEWATER COLLECTION CENTER LEASE No. Account Title Amount Collection Operation $ 22,392 Golden Heart Utilities leases a facility from Golden Valley Electric Association to house the Wastewater Collections Operations. The lease agreement has an automatic renewal provision which includes an escalation in the lease cost for the first renewal upon expiration of the initial 7 year lease period. The lease rate for the test year increased during the test year from $26,866 to $53,735. The increase occurred effective October 7, The increased costs result in a pro forma adjustment to the test year. These increased costs are fully detailed in the utility s work papers. RC2005 GHU WASTEWATER.xls GHU WW 15 Page 33 Run Date: 6/14/2005 Time: 3:45 PM

34 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 16. NATURAL GAS HEATING EXPENSE No. Account Title Amount Treatment Operation $ 9,845 The Golden Heart Utilities Wastewater Treatment Plant uses natural gas to heat the large amount of air required for air changes to make the plant environment less humid to protect equipment and safer for plant employees. Fairbanks Natural Gas, LLC is the only natural gas supplier in Fairbanks. Energy prices are at historic highs and the cost of natural gas has been significantly impacted by the unprecedented volatility of the energy sector. Effective January 1, 2005, Fairbanks Natural Gas increased the rates for large commercial gas consumers from $0.951 per hundred cubic feet (ccf) to $1.094 per ccf. The 2005 rates result in a 15% pro forma increase in natural gas costs. Golden Heart Utilities projects that natural gas consumption patterns will remain constant in 2005 thus the pro forma adjustment is attributed to the natural gas rate increase imposed on January 1, RC2005 GHU WASTEWATER.xls GHU WW 16 Page 34 Run Date: 6/14/2005 Time: 3:45 PM

35 Schedule I GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS GHU WW 17. ELIMINATION OF INTRACOMPANY WASTEWATER TREATMENT CHARGE AND EXPENSE No. Account Title Amount Elimination of the PassThrough Expenses from GHU to CUC for test year. This is charged by GHU to CUC as a rate per thousand of gallons on GHU Rate Schedule 5241, GHU Wastewater Tariff Sheet $ (910,220) Proposed increase percentage to GHU Rates % Proposed increase amount to GHU Clearing Account (108,355) Total amount of the decrease to GHU treatment expenses for test year and the pass through to be charged to CUC for treatment of wastewater by GHU wastewater treatment plant. $ (1,018,575) The Golden Heart Utilities Wastewater Treatment Plant charges College Utilities Corporation in accordance with their tariff sheet 76.3, rate schedule 5241, a charge per thousand gallons for the wastewater passed by College Utilities Corporation to Golden Heart Utilities for treatment. For the test year 2004, the revenues received from College Utilities Corporation were $903,272. Because of the 5% rate increase placed in effect by Golden Heart Utilities in April of 2004, this annual revenue was normalized for the first three months prior to the rate increase. This was $6,948 (See K&M GHU WW 01, account 524). This was also eliminated. The total amount of the eliminated revenue and resultant Golden Heart Utilities expense is $910,220. The proposed percentage increase to the wastewater clearing account is shown on schedule 5.1 of the joint calculation. This percentage is used to calculate the increase to be passed through to College Utilities Corporation. The elimination of the Golden Heart Utilities treatment charges for the wastewater collected by College Utilities Corporation and passed to Golden Heart Utilities for treatment is shown below in journal entry format. This is done in an attempt to clarify this transaction in regards to the effects on the operating utilities NARUC accounts. NARUC ACCT DR CR GHU 524 Revenue from CUC (normally a credit) $ 910, GHU WW treatment charge to CUC (normally a debit) $ 1,018,575 CUC WW treatment charge from GHU (normally a debit) $ 108,355 $ 1,018,575 $ 1,018,575 RC2005 GHU WASTEWATER.xls GHU WW 17 Page 35 Run Date: 6/14/2005 Time: 3:45 PM

36 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 19. DAMAGES NOT COVERED EXPENSE INCREASE No. Account Title Amount 755 Injuries and Damages Not Covered by Insurance $ (5,548) Effective January 1, 2005, our operating utilities were unable to renew their liability insurance under the terms and conditions that existed for the 2004 and prior policies. One of those terms was the use of a $5,000 per damage claim deductible, i.e. for damages over $5,000 resulting from wastewater backups or water flooding the companies liability was limited to the $5,000 deductible and the insurance paid all amounts above $5,000. Effective January 1, 2005, the deductible was raised to $25,000. In the time period from the operating companies experienced five (5) claims that not only exceeded $5,000 but exceeded $25,000, thus, if the current policy had been in effect for the previous four (4) years the companies would have paid $100,000 in additional injuries and damages not covered by insurance. The four (4) year average for Golden Heart Utilities wastewater injuries and damages not covered by insurance, including the additional $20,000 cost, is $33,294. The expense for 2004 is $38,842, $5,548 higher than the four (4) year average, thus, a known and measurable decrease to this account. RC2005 GHU WASTEWATER.xls GHU WW 19 Page 36 Run Date: 6/14/2005 Time: 3:45 PM

37 GOLDEN HEART UTILITIES WASTEWATER EXPLANATION OF PRO FORMA ADJUSTMENTS Schedule I GHU WW 20. COMPOSTING WOODCHIPS EXPENSE INCREASE No. Account Title Amount Treatment Compost Woodchips $ 4,533 Woodchips are used in Golden Heart Utilities wastewater composting operation. In 2004 Golden Heart Utilities paid $9.50 per yard. Effective January 1, 2005, the price increase to $10.00 per yard. This results in an increased expense for RC2005 GHU WASTEWATER.xls GHU WW 20 Page 37 Run Date: 6/14/2005 Time: 3:45 PM