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Virginia Administrative Code
Title 20. Public Utilities and Telecommunications
Agency 5. State Corporation Commission
Chapter 403. Rules Governing Small Investor-Owned Telephone Utilities
1/27/2020

20VAC5-403-70:1. Appendix a

Schedule 1
Capital Structure and Cost of Capital Statement

Instructions: This schedule shall state the amount of each capital component per balance sheet, the amount for ratemaking purposes, the percentage weight in the capital structure, the component cost, and the weighted capital cost, using the format of the attached schedule. This information shall be provided for the test period. In Part A, the test period information should be compatible with the State Corporation Commission Annual Operating Report. The methodology used in constructing the capital structure should be consistent with that approved in the applicant's last rate case. If the applicant wishes to use a different methodology (including a change in cost of equity) in constructing its capital structure in a rate application, it may prepare an additional schedule labeled as Schedule 1(a) explaining the methodology used and justifying any departure from applicant's last rate case.

The amounts and costs for short-term debt, revolving credit agreements, and similar arrangements shall be based on a 13-month average over the test year, or, preferably, a daily average during the test year, if available. All other test period amounts are end-of-year. The component weighted cost rates equal the product of each component's capital structure weight for ratemaking purposes times its cost rate. The weighted cost of capital is equal to the sum of the component weighted cost rates.

Schedule 1
Capital Structure and Cost of Capital Statement Test Period

A. Capital Structure Per Balance Sheet ($)

Short-Term Debt

Customer Deposits

Other Current Liabilities

Long-Term Debt

Common Equity

Investment Tax Credits

Other Tax Deferrals

Other Liabilities

Total Capitalization

B. Capital Structure Approved for Ratemaking Purposes ($)

Short-Term Debt

Long-Term Debt

Job Development Credits

Cost-Free Capital

Common Equity

Total Capitalization

C. Capital Structure Weights for Ratemaking Purposes (%)

Short-Term Debt

Long-Term Debt

Job Development Credits

Cost-Free Capital

Common Equity

Total Capitalization (100%)

D. Component Capital Cost Rates (%)

Short-Term Debt

Long-Term Debt

Job Development Credits

Cost-Free Capital

Common Equity (Authorized)

E. Component Weighted Cost Rates (%)

Short-Term Debt

Long-Term Debt

Job Development Credits

Cost-Free Capital

Common Equity (Authorized)

Weighted Cost of Capital

Schedule 2
Schedule of Bonds, Mortgages, Other Long-Term Debt, and Cost-Free Capital

Instructions: Provide a description of each issue, amount outstanding, percentage of total capitalization, and annualized cost based on the embedded cost rate. These data shall support the debt cost contained in Schedule 1. Provide a detailed breakdown of all cost-free capital items contained in Schedule 1.

Schedule 3
Schedule of All Short-Term Debt, Revolving Credit Agreements, and Similar Arrangements

Instructions: Provide data and explain the methodology used to calculate the cost and balance contained in Schedule l for short-term debt, revolving credit agreements, and similar arrangements.

Schedule 4
Stockholders' Annual Report

Instructions: Provide a copy of the most recent stockholders' annual report and SEC Form 10K (if SEC Form 10K is available).

Schedule 5
Company Profitability and Capital Markets Data

Instructions: This schedule shall be prepared by companies having more than $3 million in gross annual operating revenue which are not a subsidiary of a telecommunications company, using the definitions provided below and the format of the attached schedule. These companies shall provide data for the two most recent calendar years plus the test period. This information shall be compatible with the latest Stockholders' Annual Reports (including any restatements).

Definitions

Return on Year-End Equity* =

Earnings Available for Common Stockholders

Year-End Common Equity

Return on Average Equity* =

Earnings Available for Common Stockholders

The Average of Year-End Equity for the Current & Previous Year

Earnings Per Share (EPS) =

Earnings Available for Common Shareholders

Average No. Common Shares Outstanding

Dividends Per Share (DPS) = Common Dividends Paid Per Share During the Year

Payout Ratio = DPS/EPS

Average Market Price** = (Yearly High + Yearly Low Price)/2 (if known)

*Job Development Credits shall not be included as part of equity capital nor shall a deduction be made from earnings for a capital charge on these Job Development Credits.

**An average based on monthly highs and lows is also acceptable. If this alternative is chosen, provide monthly market prices and sufficient data to show how the calculation was made.

Schedule 5
Company Profitability and Capital Market Data Test Period

A. Ratios

Return on Year-End Equity

Return on Average Equity

Earnings Per Share

Dividends Per Share

Payout Ratio

Market Price of Common Stock:

Year's High

Year's Low

Average Price

B. External Funds Raised

External Funds Raised -- All Sources (itemized)

Dollar Amount Raised

Coupon Rate (if applicable)

Rating Service (if applicable)

Average Offering Price (for Stock)

Schedule 6
Coverage Ratios and Cash Flow Profile Data

Instructions: This schedule shall be prepared using the definitions and instructions given below and using the format of the attached schedule for the past two calendar years plus the test period.

- Interest (lines 3, 4, 5) shall include amortization of discount expense and premium on debt without deducting an allowance for borrowed funds used during construction.

- Income taxes (line 2) shall include federal and state income taxes (in Virginia gross receipts tax should be considered State income tax).

- Earnings before interest and taxes (line 6) equals net income plus income taxes plus total interest = (line 1) + (line 2) + (line 5).

- IDC (line 8), where applicable, is total IDC - allowance for borrowed and other funds.

- Cash flow generated (line 14) = (line 1) + (line 9) + (line 10) + (line 11) + (line 12) - (line 8) - (line 13).

- Construction expenditures (line 15) is net of IDC.

Coverage definitions for Schedule 6

Pre-Tax Interest Coverage =

Earnings before Interest & Taxes

=

line 6

Interest

line 5

Common Dividend Coverage =

Cash Flow Generated

=

line 14

Common Dividends

line 16

Cash Coverage of Construction Expenditures =

Cash Flow Generated

=

line 14

Construction

line 15

Schedule 6
Coverage Ratios and Cash Flow Data Test Period

Interest Coverage Ratios

a. Pre-Tax Method

Cash Flow Coverage Ratios

a. Common Dividend Coverage

b. Cash Flow Coverage of Construction Expenditures

Data for Interest Coverage

Line 1. Net Income

Line 2. Income Taxes

Line 3. Interest on Mortgages

Line 4. Other Interest

Line 5. Total Interest

Line 6. Earnings Before Interest and Taxes

Line 7. Estimated Rental Interest Factor (SEC)

Data for Cash Flow Coverage

Line 1. Net Income

Line 8. Interest During Construction (IDC)

Line 9. Amortization

Line 10. Depreciation

Line 11. Change in Deferred Taxes

Line 12. Change in Investment Tax Credits

Line 13. Preferred Dividends Paid

Line 14. Cash Flow Generated

Line 15. Construction Expenditures

Line 16. Common Dividends Paid

Schedule 7
Comparative Balance Sheets

Instructions: Provide a comparative balance sheet for the test period and the corresponding 12-month period immediately preceding the test period.

Schedule 8
Comparative Income Statement

Instructions: Provide a comparative income statement for the test period and the 12-month period immediately preceding the test period.

Schedule 9
Rate of Return Statement

Instructions: Use the format of the attached schedule. Column 1 should state the Applicant's total Company per books results for the test period. Non-jurisdictional amounts will be shown in Column 2, and Column 3 will reflect Virginia jurisdictional amounts. Adjustments to test period per books results shall be shown in Column 4. These adjustments shall be explained in Schedule 11. If a calendar year test period is used, Column 1 can be prepared from information filed by Applicant in its annual report to the commission. If a calendar year test period is used, operating revenue line items can be found in Schedule 34 at page 58 of the Annual Report. "Depreciation and Amortization" is set forth on Line 23 of Schedule 35 at page 60 of the Annual Report. "Operating and Maintenance Expense" can be derived by subtracting the amount of depreciation and amortization expense from total operating expenses (Schedule 35, line 68). Interest on customer deposits must be calculated from Applicant's books. Column 6 should show the increase requested by Applicant.

Schedule 9
Rate of Return Statement Test Period

Total Company Per Books

Virginia Non-Jurisdic. Amounts

Jurisdic. Amounts

Amounts Adjustments

Effect of After Adjustments

After Proposed Increase

Proposed Increase

Col. (1)

Col. (2)

Col. (3)

Col. (4)

Col. (5)

Col. (6)

Col. (7)

Operating Revenues

Local Service

Toll Service

Access Charges

Miscellaneous

Less: Uncollectible

Total Revenues


Operating Expenses

Operating and Maintenance Expense

Depreciation and Amortization

Income Taxes

Taxes Other than Income Taxes

Gain/Loss on Property Disposition

Total Expenses


Operating Income

Less: Charitable Donations

Interest Expense on Customer Deposits

Net Operating Income -- Adjusted

Plus: Other Income (Expense)

Less: Interest Expense

Preferred Dividend Expense

JDC Capital Expense

Income Available for Common Equity

Allowance for working capital

Net Utility Plant


Total Rate Base


Total Capital for Ratemaking


Common Equity Capital


Rate of Return Earned on Rate Base


Rate of Return Earned on Common Equity

Schedule 10
Statement of Net Original Cost of Utility Plant and Allowances for Working Capital for the Test Year

Instructions: This schedule should be constructed using the ratemaking policies, procedures, and guidelines last prescribed for Applicant by the commission. The schedule should indicate all property held for future use by account number and the date of the planned use should be shown. In a footnote, applicant should identify the amount of plant and working capital devoted to non-regulated business activities, if any. Such plant shall not be included in the rate base. Applicants should use the format described below. The unamortized balance of investment tax credits shall be deducted from the rate base if the telephone company is subject to Option 1 treatment under I.R.S. Code § 46(f). Column (4) adjustments should be explained and detailed in Schedule 11. Columns (2) and (3) only apply to companies with over $3,000,000 in gross annual operating revenues which are subsidiaries of telecommunications companies.

Schedule 10
Net Original Cost of Utility Plant and Allowances

Total Company Per Books

Non-Jurisdic. Amounts

Jurisdic. Amounts

Adjustments

Amounts After Adjustments

Col. (1)

Col. (2)

Col. (3)

Col. (4)

Col. (5)

Telephone Plant in Service

Telephone Plant under construction

Property held for future use

Gross Plant


Less: Reserve for Depreciation

Net Telephone Plant


Allowance for Working Capital


Materials and supplies (13-month average)

Cash (20 days of O&M expenses)

Total Allowance for Working Capital


Other Rate Base Deductions:

Customer Deposits

Deferred Federal Income Taxes

Customer Advances for Construction

Option 1 Investment Tax Credits

Total Other Rate Base Deductions


Rate Base

Schedule 11
Explanation of Adjustments to Book Amounts

Instructions: All ratemaking adjustments to test period operations (test period and proforma) are to be fully explained in a supporting schedule to the applicant's Schedules 9 and 10. Such adjustments shall be numbered sequentially beginning with operating revenues. Supporting data for each adjustment, including the details of its calculation, should be provided. Examples of adjustments include:

1. Adjustments to annualize changes occurring during the test period.

2. Adjustments to reflect known and certain changes in wage agreements and payroll taxes occurring in the test period and proforma period (the 12-month period following the test period).

3. Adjustments to reflect depreciation and property taxes based on end-of-period plant balances.

4. Adjustments relating to other known changes occurring during the test period or proforma period.

5. Amounts relating to known and certain changes in company operations that take place in the proforma period can be adjusted through the end of the rate year. The rate year shall be defined as the 12 months following the effective date of new rates. The proforma period shall be defined as the 12 months immediately following the test year.

Schedule 12
Working Papers

Instructions: Provide detailed work papers and supporting schedules of all proposed adjustments. Two copies of this exhibit shall be filed with the commission's Division of Utility Accounting and Finance. Copies shall be provided to other parties on request. Each schedule shall identify sources of all data. Data shall be clearly identified as actual or estimated.

Schedule 13
Revenue and Expense Schedule

Instructions: The applicant shall provide information about revenues by primary account (consumer classification) and operating and maintenance expenses by primary account during the test period.

The applicant shall also provide a detailed explanation of all revenue and expense item increases and decreases of more than 10% during the test period as compared to the 12-month period immediately preceding the test period. Worksheets used to compute the percentage change should be available for review upon request.

Schedule 14
Explanation of Proposed Revenue Requirement Calculation

Instructions: Provide a schedule describing the methodology used to determine the revenue requirement shown on Schedule 9, Column 6.

Schedule 15
Additional Revenues

Instructions: Show the calculations of the additional gross revenues and percentage increases by customer classes that would be produced by the new rates during the test period.

Schedule 16
Statement of Compliance

Instructions: Include the following statement signed by the person(s) sponsoring the application:

I, (Name of Sponsoring Party), (Title), affirm that this application complies with the commission's rules for small investor-owned telephone utilities' applications for increases in rates, and I further affirm that the schedules filed to support the application comply with the instructions for the schedules set forth in the Appendix to those rules.

(Signature of Sponsoring Party)

(Date)

Statutory Authority

§ 12.1-13 of the Code of Virginia.

Historical Notes

Derived from Volume 18, Issue 04, eff. October 17, 2001; amended, Virginia Register Volume 29, Issue 23, eff. July 1, 2013.

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