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B. "Allocations" means for all utilities, the division of plant, revenues, expenses, taxes
and reserves between cities or between cities and unincorporated areas, where such items
are used for providing utility service for more than one city or for a city and unincorporated
areas. Examples of items subject to allocation include general office buildings, general
administrative expenses, and income taxes.
C. "Separation" means, for communications utilities only, the division of plant, revenues,
expenses, taxes and reserves, and the amounts thereof, applicable to exchange or local service
where such items are used in common for providing utility service to both local exchange
service and other service, such as interstate or intrastate service.
SECTION III
DEFINITION OF STATUTORY RATE BASE
A. Fair Value. Utility rates shall be based on the fair value of property used and useful in
providing service. "Fair value" shall be a reasonable balance between original cost less
depreciation and replacement or trended cost less an adjustment for both present age and
condition. The adjustment for both present age and condition shall not be a lesser percentage
G*� of replacement or trended cost than book depreciation is for original costs.
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0 B. Balance Between Original Cost and Replacement Costs. Unless otherwise determined by
City, "reasonablebalance" shall mean 60% weighting of original cost less depreciation and
V 40% weighting of replacement or trended costs less adjustment for both present age and con-
dition. In City's determination of reasonable balance, it may consider inflation, deflation,
quality of service being provided, growth rate of service area, and need for Utility to attract
new capital.
C. Deduction. In arriving at fair value rate base, deductions shall be made for: (1) contributions
in aid of construction, and (2) deferred liabilities such as deferred income taxes and invest-
ment tax credit, representing interest free capital.
D. Rate Base. When requesting a change in rates Utility shall treat, for rate base purposes,
the f— oo owing items as indicated.
1. Construction work in rogre�ss - shall not be included in rate base.
2. Plant held for future use- shall not be included in rate base.
3. Materia s and su ies - a reasonable blance may be included in rate base unless
fun su icient for such purposes have been provided by ratepayers through advance
payment for service, tax accruals or other means.
4. Working Capital - a reasonable allowance, which shall not exceed 1/8 of cash oper-
ating and maintenance expenses for the test period, may be included in rate base unless
sufficient funds for such purposes have been provided by ratepayers through advance payment
for service, tax accruals or other means.
City may, in consideration of local circumstances, require or permit, by specific action,
treatment of the four items enumerated above in such other manner it considers appropriate.
City may include or exclude other items from the rate base for reasonable cause.
E. Aggregate of Rate Base Elements. The aggregate of all property rate base elements, not
including items ff 1 through 4 enumerated above, shall not exceed 110% of original cost
undepreciated for those same items.
SECTION IV
REPORTING REQUIREMENTS
A. Information to be filed. Utility shall file annually with the City Secretary of City a complete
balance sheet and operating statement. Such balance sheet and operating statement shall cover
the local service area of Utility and shall be appropriate for City's use in reviewing local
operations and in setting service rates. Such material shall include a statement of the total
number of customers by classes (for a telephone company the number of telephones by classes)
served within City and within the service territory covered by the operating statement; shall
cover the fiscal year of Utility unless some other fiscal period shall be approved by City; and
shall be filed within 120 days after the close of said period. In addition, Utility shall file: