Description of Document Bates - Liberty Utilities Liberty Utilities... · Description of Document...

PUC DOCKET NO. 46256

APPLICATION OF LIBERTYUTILITIES (WOODMARK SEWER)CORP. AND LIBERTY UTILITIES(TALL TIMBERS SEWER) CORP. TOCHANGE RATES FOR SEWERSERVICE IN SMITH COUNTY,TEXAS

§§§§§§§

BEFORE THE PUBLIC UTILITY

COMMISSION OF TEXAS

TABLE OF CONTENTS

Description of Document Bates #

Statement of Intent to Change Rates for Sewer Service LU 000001 - 000008

Proposed Protective Order LU 000009 - 000026

Rate Filing Package on the Commission-approved Form LU 000027 - 000091

Proposed Notice to Liberty Utilities (Woodmark Sewer) Corp. andLiberty Utilities (Tall Timbers Sewer) Corp.

LU 000092 - 000096

Proposed Notice to Liberty Utilities (Tall Timbers Sewer) Corp. -Inside the City of Tyler Customers

LU 000097 - 000101

Proposed Tariff Liberty Utilities (Woodmark Sewer) Corp. andLiberty Utilities (Tall Timbers Sewer) Corp.

LU 000102 - 000124

Proposed Tariff Liberty Utilities (Tall Timbers Sewer) Corp. - Insidethe City of Tyler Customers

LU 00125 - 000147

Excerpts from the 2015 Annual Report of Algonquin Power andUtilities Corporation

LU 000148 - 000158

Affidavit/Certification of Application of Matthew Garlick LU 000159 - 000160

Direct Testimony and Attachments of Matthew GarlickMG-1 Woodmark Expansion - Project Cost EstimateMG-2 Woodmark Expansion - Project ScheduleMG-3 Costs Associated with Hydraulic Improvement Project

LU 000161 - 000198

Direct Testimony of Gerald Becker LU 000196 - 000202

Direct Testimony and Attachments of Crystal GreeneCG-1 Resume

LU 000203 - 000209


APPLICATION OF LIBERTYUTILITIES (WOODMARK SEWER)CORP. AND LIBERTY UTILITIES(TALL TIMBERS SEWER) CORP. TOCHANGE RATES FOR SEWERSERVICE IN SMITH COUNTY,TEXAS

§§§§§§§


COMMISSION OF TEXAS

TABLE OF CONTENTS

Direct Testimony and Attachments of William KilleenWRK-1 ResumeWRK-2 Toronto and New York Stock Exchange RulesWRK-3 2015 Cost Allocation Manual

LU 000212 - 000278

Direct Testimony and Attachments of Bruce FairchildBHF-1 ResumeBHF-2 Summary of Testimony before Regulatory AgenciesBHF-3 Income Statements and Balance SheetsBHF-4 Workpapers

LU 000279 - 000371

Table of Contents


APPLICATION OF LIBERTY § BEFORE THE PUBLIC UTILITY UTILITIES (WOODMARK SEWER) § CORP. AND LIBERTY UTILITIES § COMMISSION OF TEXAS (TALL TIMBERS SEWER) CORP. TO § CHANGE RATES FOR SEWER § SERVICE IN SMITH COUNTY, § TEXAS §

STATEMENT OF INTENT TO CHANGE RATES FOR SEWER SERVICE

Comes now Liberty Utilities (Woodmark Sewer) Corp. ("Liberty Woodmark") and Liberty

Utilities (Tall Timbers Sewer) Corp. ("Liberty Tall Timbers") (collectively, "Liberty Utilities" or

"Applicants") and file this Statement oflntent to Change Rates for Sewer Service-Rate Application

or Rate Filing Package ("RFP") in Smith County, Texas, and in support of this filing would

respectfully show the following:

I. STATEMENT OF JURISDICTION

The Public Utility Commission of Texas ("Commission") has original jurisdiction over this

Rate Application for Liberty Utilities customer connections located outside the City ofTyler, Texas,

pursuant to TWC §§ 13.042 and 13.1871and16 Texas Administrative Code ("TAC")§ 24.22. The

City of Tyler has original jurisdiction over this Rate Application for customer connections located

within its corporate limits pursuant to TW C § § 13. 04 2 and 13 .1871. Pursuant to Texas Water Code

§§ 13.002(4-b) and 16 TAC §24.3(18), Liberty Utilities is a Class B Utility. The two Liberty

Utilities sewer systems in Texas collectively provide retail sewer utility services to approximately

3, 739 active customer connections in Smith County under CCN No. 20670 (Liberty Woodmark) and

20694 (Liberty Tall Timbers). Liberty Utilities has additional systems under Liberty Utilities

(Silverleaf Water) LLC ("Liberty Silverleaf') that serve approximately 1,914 water and sewer

customer connections in different Texas service areas that are physically distinct from the adjacent

LU 000001

service areas served by Liberty W oodmark and Liberty Tall Timbers. Collectively, the three utilities

provide "retail water or sewer utility service to 500 or more taps or active connections but fewer than

10,000 taps or active connections" and do not provide combined retail water or sewer utility service

in any one service area. 1 Here, Liberty W oodmark and Liberty Tall Timbers are the only Applicants

and their connections numbers should be viewed individually to conclude they are each Class B

Utilities. However, even if the Liberty Utilities combination of Liberty Woodmark, Liberty Tall

Timbers, and Liberty Silverleaf are considered together, Liberty Utilities still qualifies as a Class B

Utility in Texas. Thus, Applicants have prepared this RFP and statement of intent notices in

accordance with Class B Utility requirements.

II. BACKGROUND STATEMENT

The Applicants only provide sewer utility service in Smith County, Texas. The Applicants

were acquired in separate stock purchase transactions that took place in 2002. As explained in

supporting testimony, all Applicants' service costs are allocated under a uniform policy. During the

Liberty Utilities Co. tenure of owning these two companies, Applicants have applied for very few

rate increases. The last Liberty W oodmark sewer rate change filing was approved in TCEQ Docket

No. 2014-0064-UCR in an order dated August 5, 2014. The last Liberty Tall Timbers sewer rate

change filing was approved in TCEQ Docket No. 2009-1381-UCR. Those rates, approved in an

order dated April 21, 2011 , were effective July 2010 only for the Liberty Tall Timbers sewer service

area outside the City of Tyler corporate limits. Sewer rates for the Liberty Tall Timbers service area

inside the City of Tyler have not changed since those rates were set in TCEQ Docket No. 2003-0153-

UCR, which involved a rate filing based on a 2001 test year before Liberty Utilities Co. owned

Liberty Tall Timbers.

I P.U.C. SUBST. R. 24.3(18), (51 ), (72), and (73).

Statement of Intent Page2

LU 000002

Since 2002, Liberty Utilities has invested millions of dollars to ensure these sewer systems

are up to state and federal regulatory standards and to improve customer service. In this Rate

Application, Liberty Utilities is requesting compensatory rates designed to recover its full cost of

service in a two-phase rate increase. The second phase will be tied to completion of a Liberty

Woodmark wastewater treatment plant expansion project and Liberty Tall Timbers line

relocation/hydraulic improvement projects for the benefit of both systems and their service areas.

The Rate Application has been completed using the latest Class B Rate/Tariff Change

Application form available from the Commission's web site. However, as explained in the Direct

Testimony of Bruce H. Fairchild, some modifications were required since this is a sewer only case

and the Commission forms were not designed for such rate/tariff change applications. The Rate

Application is based on a test year ending December 31, 2015, and is supported by the schedules,

workpapers, and testimonies of several witnesses, which are contained in the RFP. The testimonies,

tariff, schedules, and workpapers are being filed contemporaneously with this Statement. An

identical application is being filed with the City of Tyler ("City'). Customer notices are styled

slightly differently for in-City versus out-of-City customers due to the different ratemaking

procedures applicable within each jurisdiction. However, both customer notices are included in the

combined RFP filed with the Commission and with the City.

III. REQUESTED RELIEF AND EFFECTIVE DATE

Applicants have based their proposed sewer rates on a test year ending December 31, 2015,

in line with the definition in 16 TAC § 24.3(71 ), adjusted for only a few known and measurable

changes ("Test Year"). The operating costs in the Test Year are indicative of an ongoing level of

costs to operate and maintain the facilities used and useful in providing wastewater service. Further,

Applicants are seeking consolidated rates to correspond to the combined operations and


LU 000003

management for the two adjacent systems. Finally, Applicants seek a second-step Phase II sewer rate

increase that will permit it to recover increased costs associated with a Liberty Woodmark

wastewater treatment plant expansion project and Liberty Tall Timbers line relocation/hydraulic

improvement projects for the benefit of both systems and their service areas. Applicants seek an

overall Phase I increase in annual revenues of approximately $1,038,363. Applicants seek an

additional annual increase in revenue of $964, 151 for an overall Phase II increase in annual revenues

of approximately $2,002,514 based on estimated costs attributable to the Liberty Woodmark and

Liberty Tall Timbers Phase II projects, but this Phase II increase amount will be reviewed prior to

implementation in accordance with 16 TAC§ 24.34(b)(4).

The proposed effective date of Phase I is November 1, 2016, which is the first day of

Applicants' billing cycles and at least 35 days after required notice in compliance with Commission

rules at 16 TAC § 24.22( d)(l ). The effective date for the Phase II rates is estimated to be March 1,

2017, but that will depend on the status of the capital improvement projects upon which Phase II is

based. In the event that the proposed rates are suspended, Applicants reserve the right to seek

interim rates during the pendency of this proceeding.

Applicants seek a consolidated and consistent tariff, but seek very few other changes to their

respective tariffs other than updating them for consistency with PUC regulation and rule references.

Applicants are proposing that Liberty Tall Timbers and Liberty W oodmark have the same amounts

for miscellaneous charges. Thus, Liberty Tall Timbers would have an increase of $25 from $25 to

$50 for a Transfer Fee and increase of $10 from $20 to $30 for a "Returned Check Charge." The

Liberty Woodmark "Reconnection Fee (Customer's Request)" would be reduced by $525 from $550

to $25 which is the present charge at Liberty Tall Timbers. Applicants believe that the existing

charge of$550 for "Reconnection Fee (Customer's Request)" was approved in error. Applicants are


LU 000004

seeking to have the Commission determine their consolidated rate base amount during the review

of this application.

IV. PARTIES AFFECTED

The Rate Application affects retail wastewater utility customers within the service territories

of Liberty Woodmark and Liberty Tall Timbers in Smith County, Texas. Part of the Liberty Tall

Timbers service area is within the corporate boundaries of the City of Tyler, Texas, which has

original jurisdiction over retail wastewater rates therein pursuant to Texas Water Code (TWC) §

13.042.

V. FILING OVERVIEW

This Rate Application consists of the following:

1. Statement of Intent to Change Rates

2. Proposed Protective Order

3. Rate Filing Package on the Commission-approved form, including all required schedules

4. Proposed Notices

5. Proposed Tariffs

6. Affidavit attesting to the correctness of the Application

7. Excerpts from the 2015 Annual Report of Algonquin Power and Utilities Corporation

(includes consolidated annual income statement, statement of cash flow, and balance

sheets for Applicants and affiliates).

8. Pre-filed direct testimony, including supporting attachments

a. b. c. d. e.

Matthew Garlick Gerald Becker Crystal Greene William Killeen Bruce Fairchild

Statement of Intent Page 5

LU 000005

VI. CONTACT INFORMATION AND AUTHORIZED REPRESENTATIVES

Applicants' business address is: Liberty Utilities (Woodmark Sewer) Corp. Liberty Utilities (Tall Timbers Sewer) Corp. 12725 W. Indian School Rd., Suite D 101 Avondale, AZ 85392

Applicants'authorized representative for this Rate Application is:

Gerry Becker Utility Rates and Regulatory Manager Liberty Utilities 12725 W. Indian School Rd., Suite D 101 Avondale, AZ 85392 Telephone: (623) 298-3769 Facsimile: (623) 935-1020 [email protected]

Liberty's authorized legal representative is:

Geoffrey P. Kirshbaum TERRILL & WALDROP

810 West 101h Street

Austin, Texas 78707 (512) 474-9100 (512) 474-9888 - fax [email protected]

VII. MOTION TO SEVER RATE CASE EXPENSE RECOVERY ISSUES

Pursuant to the Texas Water Code and 16 TAC § 24.33, Applicants seek to recover all

reasonable and necessary rate case expenses that it incurs in connection with the Application.

Applicants propose to recover reasonable and necessary rate case expenses through a surcharge over

a period to be determined. However, without waiving same, Applicants respectfully request that all

rate case expense issues be severed from this proceeding and considered in a separate

docket/proceeding. No rate case expenses for this Rate Application were included in Applicants'

requested cost of service. Such severance is consistent with Commission practice in other rate cases,

will serve the interest of efficiency in setting Applicants ' just and reasonable retail rates other than


LU 000006

a surcharge to recover rate case expenses, and will avoid the need to estimate and update rate case

expenses before the expenses are finalized in this proceeding. Applicant hereby reserves the right

to supplement the Application with a rate case expense recovery request and evidence supporting

same if its severance request is denied.

VIII. NOTICE

Pursuant to 16 TAC§ 24.22(d), Applicants are providing notice of this Rate Application to

all customers of Applicants affected by the rate change, and to the Office of Public Utility Counsel.

Notice will be mailed separately to each customer, or hand-delivered. Applicants will mail separate

notice to each affected customer and the City of Tyler, Texas. Applicants are providing notice on

the Commission-approved form, and will include instructions on how a ratepayer may file a protest.

Applicants will provide proof of notice pursuant to Commission rules at 16 TAC § 24.22(b )( 5) upon

completing notice, which will consist of an affidavit attesting to notice completion.

IX. MOTION FOR ENTRY OF A PROTECTIVE ORDER

Applicants request that a Protective Order of the standard form used by the Commission be

entered promptly in this case. The draft Protective Order is included in the RFP. Until a protective

order is issued in this proceeding, Applicants will provide access to confidential materials only to

parties that agree in writing to be bound by the proposed protective order as if it had been issued by

the Commission.

X. PRAYER

WHEREFORE, PREMISES CONSIDERED, Liberty Utilities (Woodmark Sewer) Corp.

and Liberty Utilities (Tall Timbers Sewer) Corp. respectfully request approval of their proposed rate

and tariff changes contained in this Application to be effective November 1, 2016 for Phase I, and

March 1, 2017 or as soon thereafter as the Phase II projects described in the RFP are complete and


LU 000007

compliance with P.U.C. SUBST. R. 24.34(b) is achieved. Additionally, Applicants request all other

and further relief, general or special, at law or in equity, to which Applicants may show themselves

to be justly entitled.

Statement of Intent

Respectfully submitted,

By: ~/~ AY . d A:· J/ (/"·~ t/V:z /~ ~ ~~

Geoffrfy P. Kiishbaum State Bar No. 24029665 TERRILL & WALDROP

810 West 10th Street Austin, Texas 78701 Tel: (512) 474-9100 Fax: (512) 474-9888 [email protected]

ATTORNEYS FOR LIBERTY UTILITIES (WOOD MARK SEWER) CORP. AND LIBERTY UTILITIES (TALL TIMBERS SEWER) CORP.

Page8

LU 000008


APPLICATION OF THE LIBERTY UTILITIES (WOODMARK SEWER) CORP. AND LIBERTY UTILITIES (TALL TIMBERS SEWER) CORP. TO CHANGE RATES FOR SEWER SERVICES IN SMITH COUNTY, TEXAS

§ § § § § §

PUBLIC UTILITY COMMISSION

OF TEXAS

PROTECTIVE ORDER

This Protective Order shall govern the use of all information deemed confidential

(Protected Materials) or highly confidential (Highly Sensitive Protected Materials) by a party

providing information to the Public Utility Commission of Texas (Commission), including

information whose confidentiality is currently under dispute.

It is ORDERED that:

1. Designation of Protected Materials. Upon producing or filing a document, including, but

not limited to, records stored or encoded on a computer disk or other similar electronic

storage medium in this proceeding, the producing party may designate that document, or

any portion of it, as confidential pursuant to this Protective Order by typing or stamping

on its face “PROTECTED PURSUANT TO PROTECTIVE ORDER ISSUED IN

DOCKET NO. 46256” or words to this effect and consecutively Bates Stamping each

page. Protected Materials and Highly Sensitive Protected Materials include not only the

documents so designated, but also the substance of the information contained in the

documents and any description, report, summary, or statement about the substance of the

information contained in the documents.

2. Materials Excluded from Protected Materials Designation. Protected Materials shall not

include any information or document contained in the public files of the Commission or

any other federal or state agency, court, or local governmental authority subject to the

Texas Public Information Act. Protected Materials also shall not include documents or

information which at the time of, or prior to disclosure in a proceeding, is or was public

LU 000009

knowledge, or which becomes public knowledge other than through disclosure in

violation of this Protective Order.

3. Reviewing Party. For the purposes of this Protective Order, a Reviewing Party is a party

to this docket.

4. Procedures for Designation of Protected Materials. On or before the date the Protected

Materials or Highly Sensitive Protected Materials are provided to the Commission, the

producing party shall file with the Commission and deliver to each party to the

proceeding a written statement, which may be in the form of an objection, indicating: (1)

any and all exemptions to the Public Information Act, Tex. Gov’t Code Ann., Chapter

552, claimed to be applicable to the alleged Protected Materials; (2) the reasons

supporting the providing party’s claim that the responsive information is exempt from

public disclosure under the Public Information Act and subject to treatment as protected

materials; and (3) that counsel for the providing party has reviewed the information

sufficiently to state in good faith that the information is exempt from public disclosure

under the Public Information Act and merits the Protected Materials designation.

5. Persons Permitted Access to Protected Materials. Except as otherwise provided in this

Protective Order, a Reviewing Party shall be permitted access to Protected Materials only

through its Reviewing Representatives who have signed the Protective Order

Certification Form. Reviewing Representatives of a Reviewing Party include its counsel

of record in this proceeding and associated attorneys, paralegals, economists, statisticians,

accountants, consultants, or other persons employed or retained by the Reviewing Party

and directly engaged in these proceedings. At the request of the Commissioners or their

staff, copies of Protected Materials may be produced by the Commission Staff (Staff) or

the Commission’s Docket Management and Commission Advising (CADM) to the

Commissioners. The Commissioners and their staff shall be informed of the existence

and coverage of this Protective Order and shall observe the restrictions of the Protective

Order.

6. Highly Sensitive Protected Material Described. The term Highly Sensitive Protected

Materials is a subset of Protected Materials and refers to documents or information which

a producing party claims is of such a highly sensitive nature that making copies of such

documents or information or providing access to such documents to employees of the

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Reviewing Party (except as set forth herein) would expose a producing party to

unreasonable risk of harm, including but not limited to: (1) customer-specific information

protected by Tex. Util. Code Ann. § 32.101(c); (2) contractual information pertaining to

contracts that specify that their terms are confidential or which are confidential pursuant

to an order entered in litigation to which the producing party is a party; (3) market-

sensitive fuel price forecasts, wholesale transactions information and/or market-sensitive

marketing plans; and (4) business operations or financial information that is

commercially sensitive. Documents or information so classified by a producing party

shall bear the designation “HIGHLY SENSITIVE PROTECTED MATERIALS

PROVIDED PURSUANT TO PROTECTIVE ORDER ISSUED IN DOCKET

NO. 46256” or words to this effect and shall be consecutively Bates Stamped in

accordance with the provisions of this Protective Order. The provisions of this Protective

Order pertaining to Protected Materials also apply to Highly Sensitive Protected

Materials, except where this Protective Order provides for additional protections for

Highly Sensitive Protected Materials. In particular, the procedures herein for challenging

the producing party's designation of information as Protected Materials also apply to

information that a producing party designates as Highly Sensitive Protected Materials.

7. Restrictions on Copying and Inspection of Highly Sensitive Protected Material. Except as

expressly provided herein, only one copy may be made of any Highly Sensitive Protected

Materials except that additional copies may be made in order to have sufficient copies for

introduction of the material into the evidentiary record if the material is to be offered for

admission into the record. A record of any copies that are made of Highly Sensitive

Protected Material shall be kept and a copy of the record shall be sent to the producing

party at the time the copy or copies are made. The record shall include information on

the location and the person in possession of the copy. Highly Sensitive Protected

Material shall be made available for inspection only at the location or locations provided

by the producing party, except as provided by Paragraphs 9 and 13. Limited notes may

be made of Highly Sensitive Protected Materials, and such notes shall themselves be

treated as Highly Sensitive Protected Materials unless such notes are limited to a

description of the document and a general characterization of its subject matter in a

manner that does not state any substantive information contained in the document.

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8. Restricting Persons Who May Have Access to Highly Sensitive Protected Material. With

the exception of Commission Staff and the Office of Public Utility Counsel (OPC), and

except as provided herein, the Reviewing Representatives for the purpose of access to

Highly Sensitive Protected Materials may be persons who are: (1) outside counsel for the

Reviewing Party; (2) outside consultants for the Reviewing Party working under the

direction of Reviewing Party's counsel; or (3) employees of the Reviewing Party working

with and under the direction of Reviewing Party's counsel who have been authorized by

the presiding officer to review Highly Sensitive Protected Materials. The Reviewing

Party shall limit the number of Reviewing Representatives that review each Highly

Sensitive Protected document to the minimum number of persons necessary. The

Reviewing Party is under a good faith obligation to limit access to each portion of any

Highly Sensitive Protected Materials to two Reviewing Representatives whenever

possible. Reviewing Representatives for Commission Staff and OPC, for the purpose of

access to Highly Sensitive Protected Materials, shall consist of their respective counsel of

record in this proceeding and associated attorneys, paralegals, economists, statisticians,

accountants, consultants, or other persons employed or retained by them and directly

engaged in these proceedings.

9. Copies Provided of Highly Sensitive Protected Material. A producing party shall provide

one copy of Highly Sensitive Protected Materials specifically requested by the Reviewing

Party to the person designated by the Reviewing Party who must be a person authorized

to review Highly Sensitive Protected Material under Paragraph 8, and be either outside

counsel or an outside consultant. Other representatives of the reviewing party who are

authorized to view Highly Sensitive Material may review the copy of Highly Sensitive

Protected Materials at the office of the Reviewing Party’s representative designated to

receive the information. Each reviewing party may make two additional copies of Highly

Sensitive Protected Materials for outside consultants and/or Reviewing Party’s

employees whose business offices are located outside of Travis County. The additional

copies may be maintained at the outside consultant’s offices outside Travis County. All

restrictions on Highly Sensitive documents in this Order shall apply to additional copies

maintained outside the office of the Reviewing Party’s representative designated to

receive the information. Any Highly Sensitive Protected documents provided to a

LU 000012

Reviewing Party may not be copied except as provided in Paragraph 7 and shall be

returned along with any copies made pursuant to Paragraph 7 to the producing party

within two weeks after the close of the evidence in this proceeding. The restrictions

contained herein do not apply to Commission Staff, OPC, and the Office of the Attorney

General (OAG) when the OAG is a representing a party to the proceeding.

10. Procedures in Paragraphs 10-14 Apply to Commission Staff, OPC, and the OAG and

Control in the Event of Conflict. The procedures set forth in Paragraphs 10 through 14

apply to responses to requests for documents or information that the producing party

designates as Highly Sensitive Protected Materials and provides to Commission Staff,

OPC, and the OAG in recognition of their purely public functions. To the extent the

requirements of Paragraphs 10 through 14 conflict with any requirements contained in

other paragraphs of this Protective Order, the requirements of these Paragraphs shall

control.

11. Copy of Highly Sensitive Protected Material to be Provided to Commission Staff, OPC,

and the OAG. When, in response to a request for information by a Reviewing Party, the

producing party makes available for review documents or information claimed to be

Highly Sensitive Protected Materials, the producing party shall also deliver one copy of

the Highly Sensitive Protected Materials to the Commission Staff, OPC (if OPC is a

party), and the OAG (if the OAG is representing a party) in Austin, Texas. Provided

however, that in the event such Highly Sensitive Protected Materials are voluminous, the

materials will be made available for review by Commission Staff, OPC (if OPC is a

party), and the OAG (if the OAG is representing a party) at the designated office in

Austin, Texas. The Commission Staff, OPC (if OPC is a party), and the OAG (if the

OAG is representing a party) may request such copies as are necessary of such

voluminous material under the copying procedures set forth herein.

12. Delivery of the Copy of Highly Sensitive Protected Material to Staff and Outside

Consultants. The Commission Staff, OPC (if OPC is a party), and the OAG (if the OAG

is representing a party) may deliver the copy of Highly Sensitive Protected Materials

received by them to the appropriate members of their staff for review, provided such staff

members first sign the certification provided in Paragraph 15. After obtaining the

agreement of the producing party, Commission Staff, OPC, and the OAG (if the OAG is

LU 000013

representing a party) may deliver the copy of Highly Sensitive Protected Materials

received by it to the agreed, appropriate members of their outside consultants for review,

provided such outside consultants first sign the certification attached hereto.

13. Restriction on Copying by Commission Staff, OPC, and the OAG. Except as allowed by

Paragraphs 7, Commission Staff, OPC, and the OAG may not make additional copies of

the Highly Sensitive Protected Materials furnished to them unless the producing party

agrees in writing otherwise, or, upon a showing of good cause, the Presiding Officer

directs otherwise. Limited notes may be made by Commission Staff, OPC (if OPC is a

party), and the OAG (if the OAG is representing a party) of Highly Sensitive Protected

Materials furnished to them and all such handwritten notes will be treated as Highly

Sensitive Protected Materials as are the materials from which the notes are taken.

Commission Staff, OPC (if OPC is a party), and the OAG (if OAG is a representing

party) may make two additional copies of Highly Sensitive documents for outside

consultants whose business offices are located outside Travis County. All restrictions on

Highly Sensitive documents in this Order shall apply to additional copies maintained in

the outside consultant’s offices.

14. Public Information Requests. In the event of a request for any of the Highly Sensitive

Protected Materials under the Public Information Act, an authorized representative of the

Commission OPC, or the OAG may furnish a copy of the requested Highly Sensitive

Protected Materials to the Open Records Division at the OAG together with a copy of

this Protective Order after notifying the producing party that such documents are being

furnished to the OAG. Such notification may be provided simultaneously with the

delivery of the Highly Sensitive Protected Materials to the OAG.

15. Required Certification. Each person who inspects the Protected Materials shall, before

such inspection, agree in writing to the following certification set forth in the attachment

to this Protective Order:

I certify my understanding that the Protected Materials are provided to me pursuant to the terms and restrictions of the Protective Order in this docket, and that I have been given a copy of it and have read the Protective Order and agree to be bound by it. I understand that the contents of the Protected Materials, any notes, memoranda, or any other form of information regarding or derived from the Protected Materials shall not be disclosed to

LU 000014

anyone other than in accordance with the Protective Order and unless I am an employee of Commission Staff or OPC shall be used only for the purpose of the proceeding in Docket No. 46256. I acknowledge that the obligations imposed by this certification are pursuant to such Protective Order. Provided, however, if the information contained in the Protected Materials is obtained from independent public sources, the understanding stated herein shall not apply.

In addition, Reviewing Representatives who are permitted access to Highly Sensitive

Protected Material under the terms of this Protective Order shall, before inspection of

such material, agree in writing to the following certification set forth in the Attachment to

this Protective Order:

I certify that I am eligible to have access to Highly Sensitive Protected Material under the terms of the Protective Order in this docket.

A copy of each signed certification shall be provided by the reviewing party to counsel

for the producing party and served upon all parties of record.

16. Disclosures Between Reviewing Representatives and Continuation of Disclosure

Restrictions After a Person is no Longer Engaged in the Proceeding. Any Reviewing

Representative may disclose Protected Materials, other than Highly Sensitive Protected

Materials, to any other person who is a Reviewing Representative provided that, if the

person to whom disclosure is to be made has not executed and provided for delivery of a

signed certification to the party asserting confidentiality, that certification shall be

executed prior to any disclosure. A Reviewing Representative may disclose Highly

Sensitive Protected Material to other Reviewing Representatives who are permitted

access to such material and have executed the additional certification required for persons

who receive access to Highly Sensitive Protected Material. In the event that any

Reviewing Representative to whom Protected Materials are disclosed ceases to be

engaged in these proceedings, access to Protected Materials by that person shall be

terminated and all notes, memoranda, or other information derived from the protected

material shall either be destroyed or given to another Reviewing Representative of that

party who is authorized pursuant to this Protective Order to receive the protected

materials. Any person who has agreed to the foregoing certification shall continue to be

LU 000015

bound by the provisions of this Protective Order so long as it is in effect, even if no

longer engaged in these proceedings.

17. Producing Party to Provide One Copy of Certain Protected Material and Procedures for

Making Additional Copies of Such Materials. Except for Highly Sensitive Protected

Materials which shall be provided to the Reviewing Parties pursuant to Paragraph 9, and

voluminous Protected Materials, the producing party shall provide a Reviewing Party one

copy of the Protected Materials upon receipt of the signed certification described in

Paragraph 15. Except for Highly Sensitive Protected Materials, a Reviewing Party may

make further copies of Protected Materials for use in this proceeding pursuant to this

Protective Order, but a record shall be maintained as to the documents reproduced and

the number of copies made, and upon request the Reviewing Party shall provide the party

asserting confidentiality with a copy of that record.

18. Procedures Regarding Voluminous Protected Materials. Production of voluminous

Protected Materials will be governed by 16 Tex. Admin. Code § 22.144(h). Voluminous

Protected Materials will be made available in the producing party’s voluminous room, in

Austin, Texas, or at a mutually agreed upon location, Monday through Friday, 9:00 a.m.

to 5:00 p.m. (except on state or Federal holidays), and at other mutually convenient times

upon reasonable request.

19. Reviewing Period Defined. The Protected Materials may be reviewed only during the

Reviewing Period, which shall commence upon entry of this Protective Order and

continue until the expiration of the Commission’s plenary jurisdiction. The Reviewing

Period shall reopen if the Commission regains jurisdiction due to a remand as provided

by law. Protected materials that are admitted into the evidentiary record or

accompanying the evidentiary record as offers of proof may be reviewed throughout the

pendency of this proceeding and any appeals.

20. Procedures for Making Copies of Voluminous Protected Materials. Other than Highly

Sensitive Protected Materials, Reviewing Parties may take notes regarding the

information contained in voluminous Protected Materials made available for inspection

or they may make photographic, mechanical, or electronic copies of the Protected

Materials, subject to the conditions hereof; provided, however, that before photographic,

mechanical, or electronic copies can be made, the Reviewing Party seeking photographic,

LU 000016

mechanical, or electronic copies must complete a written receipt for copies on the

attached form identifying each piece of Protected Materials or portions thereof the

Reviewing Party will need.

21. Protected Materials to be Used Solely for the Purposes of These Proceedings. All

Protected Materials shall be made available to the Reviewing Parties and their Reviewing

Representatives solely for the purposes of these proceedings. Access to the Protected

Materials may not be used in the furtherance of any other purpose, including, without

limitation: (1) any other pending or potential proceeding involving any claim, complaint,

or other grievance of whatever nature, except appellate review proceedings that may arise

from or be subject to these proceedings; or (2) any business or competitive endeavor of

whatever nature. Because of their statutory regulatory obligations, these restrictions do

not apply to Commission Staff or OPC.

22. Procedures for Confidential Treatment of Protected Materials and Information Derived

from those Materials. Protected Materials, as well as a Reviewing Party's notes,

memoranda, or other information regarding or derived from the Protected Materials are to

be treated confidentially by the Reviewing Party and shall not be disclosed or used by the

Reviewing Party except as permitted and provided in this Protective Order. Information

derived from or describing the Protected Materials shall be maintained in a secure place

and shall not be placed in the public or general files of the Reviewing Party except in

accordance with the provisions of this Protective Order. A Reviewing Party must take all

reasonable precautions to insure that the Protected Materials including notes and analyses

made from Protected Materials that disclose Protected Materials are not viewed or taken

by any person other than a Reviewing Representative of a Reviewing Party.

23. Procedures for Submission of Protected Materials. If a Reviewing Party tenders for

filing any Protected Materials, including Highly Sensitive Protected Materials, or any

written testimony, exhibit, brief, motion, or other type of pleading or other submission at

the Commission or before any other judicial body that quotes from Protected Materials or

discloses the content of Protected Materials, the confidential portion of such submission

shall be filed and served in sealed envelopes or other appropriate containers endorsed to

the effect that they contain Protected Material or Highly Sensitive Protected Material and

are sealed pursuant to this Protective Order. If filed at the Commission, such documents

LU 000017

shall be marked “PROTECTED MATERIAL” and shall be filed under seal with the

Presiding Officer and served under seal to the counsel of record for the Reviewing

Parties. The Presiding Officer may subsequently, on his/her own motion or on motion of

a party, issue a ruling respecting whether or not the inclusion, incorporation or reference

to Protected Materials is such that such submission should remain under seal. If filing

before a judicial body, the filing party: (1) shall notify the party which provided the

information within sufficient time so that the providing party may seek a temporary

sealing order; and (2) shall otherwise follow the procedures set forth in Tex. R. Civ.

P. 76a.

24. Maintenance of Protected Status of Materials During Pendency of Appeal of Order

Holding Materials are not Protected Materials. In the event that the Presiding Officer at

any time in the course of this proceeding finds that all or part of the Protected Materials

are not confidential or proprietary, by finding, for example, that such materials have

entered the public domain or materials claimed to be Highly Sensitive Protected

Materials are only Protected Materials, those materials shall nevertheless be subject to the

protection afforded by this Protective Order for three (3) full working days, unless

otherwise ordered, from the date the party asserting confidentiality receives notice of the

Presiding Officer's order. Such notification will be by written communication. This

provision establishes a deadline for appeal of a Presiding Officer's order to the

Commission. In the event an appeal to the Commissioners is filed within those three (3)

working days from notice, the Protected Materials shall be afforded the confidential

treatment and status provided in this Protective Order during the pendency of such

appeal. Neither the party asserting confidentiality nor any Reviewing Party waives its

right to seek additional administrative or judicial remedies after the Commission's denial

of any appeal.

25. Notice of Intent to Use Protected Materials or Change Materials Designation. Parties

intending to use Protected Materials shall notify the other parties prior to offering them

into evidence or otherwise disclosing such information into the record of the proceeding.

During the pendency of Docket No. 46256 at the Commission, in the event that a

Reviewing Party wishes to disclose Protected Materials to any person to whom disclosure

is not authorized by this Protective Order, or wishes to have changed the designation of

LU 000018

certain information or material as Protected Materials by alleging, for example, that such

information or material has entered the public domain, such Reviewing Party shall first

file and serve on all parties written notice of such proposed disclosure or request for

change in designation, identifying with particularity each of such Protected Materials. A

Reviewing Party shall at any time be able to file a written motion to challenge the

designation of information as Protected Materials.

26. Procedures to Contest Disclosure or Change in Designation. In the event that the party

asserting confidentiality wishes to contest a proposed disclosure or request for change in

designation, the party asserting confidentiality shall file with the appropriate Presiding

Officer its objection to a proposal, with supporting affidavits, if any, within five (5)

working days after receiving such notice of proposed disclosure or change in designation.

Failure of the party asserting confidentiality to file such an objection within this period

shall be deemed a waiver of objection to the proposed disclosure or request for change in

designation. Within five (5) working days after the party asserting confidentiality files its

objection and supporting materials, the party challenging confidentiality may respond.

Any such response shall include a statement by counsel for the party challenging such

confidentiality that he or she has reviewed all portions of the materials in dispute and

without disclosing the Protected Materials, a statement as to why the Protected Materials

should not be held to be confidential under current legal standards, or alternatively that

the party asserting confidentiality for some reason did not allow such counsel to review

such materials. If either party wishes to submit the material in question for in camera

inspection, it shall do so no later than five (5) working days after the party challenging

confidentiality has made its written filing.

27. Procedures for Presiding Officer Determination Regarding Proposed Disclosure or

Change in Designation. If the party asserting confidentiality files an objection, the

appropriate Presiding Officer will determine whether the proposed disclosure or change

in designation is appropriate. Upon the request of either the producing or reviewing party

or upon the presiding officer’s own initiative, the presiding officer may conduct a

prehearing conference. The burden is on the party asserting confidentiality to show that

such proposed disclosure or change in designation should not be made. If the Presiding

Officer determines that such proposed disclosure or change in designation should be

LU 000019

made, disclosure shall not take place earlier than three (3) full working days after such

determination unless otherwise ordered. No party waives any right to seek additional

administrative or judicial remedies concerning such Presiding Officer's ruling.

28. Maintenance of Protected Status During Periods Specified for Challenging Various

Orders. Any party electing to challenge, in the courts of this state, a Commission or

Presiding Officer determination allowing disclosure or a change in designation shall have

a period of ten (10) days from: (1) the date of an unfavorable Commission order; or (2) if

the Commission does not rule on an appeal of an interim order, the date an appeal of an

interim order to the Commission is overruled by operation of law, to obtain a favorable

ruling in state district court. Any party challenging a state district court determination

allowing disclosure or a change in designation shall have an additional period of ten (10)

days from the date of the order to obtain a favorable ruling from a state appeals court.

Finally, any party challenging a determination of a state appeals court allowing disclosure

or a change in designation shall have an additional period of ten (10) days from the date

of the order to obtain a favorable ruling from the state supreme court, or other appellate

court. All Protected Materials shall be afforded the confidential treatment and status

provided for in this Protective Order during the periods for challenging the various orders

referenced in this Paragraph. For purposes of this Paragraph, a favorable ruling of a state

district court, state appeals court, supreme court or other appellate court includes any

order extending the deadlines set forth in this Paragraph.

29. Other Grounds for Objection to Use of Protected Materials Remain Applicable. Nothing

in this Protective Order shall be construed as precluding any party from objecting to the

use of Protected Materials on grounds other than confidentiality, including the lack of

required relevance. Nothing in this Protective Order constitutes a waiver of the right to

argue for more disclosure, provided, however, that unless and until such additional

disclosure is order by the Commission or a court, all parties will abide by the restrictions

imposed by the Protective Order.

30. Protection of Materials from Unauthorized Disclosure. All notices, applications,

responses, or other correspondence shall be made in a manner which protects Protected

Materials from unauthorized disclosure.

LU 000020

31. Return of Copies of Protected Materials and Destruction of Information Derived from

Protected Materials. Following the conclusion of these proceedings, each Reviewing

Party must, no later than thirty (30) days following receipt of the notice described below,

return to the party asserting confidentiality all copies of the Protected Materials provided

by that party pursuant to this Protective Order and all copies reproduced by a Reviewing

Party, and counsel for each Reviewing Party must provide to the party asserting

confidentiality a letter by counsel that, to the best of his or her knowledge, information,

and belief, all copies of notes, memoranda, and other documents regarding or derived

from the Protected Materials (including copies of Protected Materials) that have not been

so returned, if any, have been destroyed, other than notes, memoranda, or other

documents which contain information in a form which, if made public, would not cause

disclosure of the substance of Protected Materials. As used in this Protective Order,

“conclusion of these proceedings” refers to the exhaustion of available appeals, or the

running of the time for the making of such appeals, as provided by applicable law. If,

following any appeal, the Commission conducts a remand proceeding, then the

“conclusion of these proceedings” is extended by the remand to the exhaustion of

available appeals of the remand, or the running of the time for making such appeals of the

remand, as provided by applicable law. Promptly following the conclusion of these

proceedings, counsel for the party asserting confidentiality will send a written notice to

all other parties, reminding them of their obligations under this Paragraph. Nothing in

this Paragraph shall prohibit counsel for each Reviewing Party from retaining two (2)

copies of any filed testimony, brief, application for rehearing, hearing exhibit, or other

pleading which refers to Protected Materials provided that any such Protected Materials

retained by counsel shall remain subject to the provisions of this Protective Order.

32. Applicability of Other Law. This Protective Order is subject to the requirements of the

Public Information Act, the Open Meetings Act, and any other applicable law, provided

that parties subject to those acts will give the party asserting confidentiality notice, if

possible under those acts, prior to disclosure pursuant to those acts.

33. Procedures for Release of Information Under Order. If required by order of a

governmental or judicial body, the Reviewing Party may release to such body the

confidential information required by such order; provided, however, that: (1) the

LU 000021

Reviewing Party shall notify the party asserting confidentiality of such order at least five

(5) calendar days in advance of the release of the information in order for the party

asserting confidentiality to contest any release of the confidential information; (2) the

Reviewing Party shall notify the producing party that there is a request for such

information within five (5) calendar days of the date the Reviewing Party is notified of

the request for information; and (3) the Reviewing Party shall use its best efforts to

prevent such materials from being disclosed to the public. The terms of this Protective

Order do not preclude the Reviewing Party from complying with any valid and

enforceable order of a state or federal court with competent jurisdiction specifically

requiring disclosure of Protected Materials earlier than contemplated herein.

34. Best Efforts Defined. The term “best efforts” as used in the preceding paragraph requires

that the Reviewing Party attempt to ensure that disclosure is not made unless such

disclosure is pursuant to a final order of a Texas governmental or Texas judicial body or

written opinion of the Texas Attorney General which was sought in compliance with the

Public Information Act. The Reviewing Party is not required to delay compliance with a

lawful order to disclose such information but is simply required to timely notify the party

asserting confidentiality, or its counsel, that it has received a challenge to the

confidentiality of the information and that the Reviewing Party will either proceed under

the provisions of Tex. Gov’t Code Ann. § 552.301, or intends to comply with the final

governmental or court order.

35. Notify Defined. Notify, for purposes of Paragraphs 32, 33, and 34, shall mean written

notice to the party asserting confidentiality at least five (5) calendar days prior to release;

including when a Reviewing Party receives a request under the Public Information Act.

However, the Commission or OPC may provide a copy of Protected Materials to the

Open Records Division of the OAG as provided herein.

36. Requests for Non-Disclosure. If the producing party asserts that the requested

information should not be disclosed at all, or should not be disclosed to certain parties

under the protection afforded by this Order, the producing party shall tender the

information for in camera review to the presiding officers within 10 calendar days of the

request. At the same time, the producing party shall file and serve on all parties its

argument, including any supporting affidavits, in support of its position of non-

LU 000022

disclosure. The burden is on the producing party to establish that the material should not

be disclosed. The producing party shall serve a copy of the information under the

classification of Highly Sensitive Protected Material to all parties requesting the

information that the producing party has not alleged should be prohibited from reviewing

the information. Parties wishing to respond to the producing party’s argument for non-

disclosure shall do so within five working days. Responding parties should explain why

the information should be disclosed to them, including why disclosure is necessary for a

fair adjudication of the case if the material is determined to constitute a trade secret. If

the presiding officer finds that the information should be disclosed as Protected Material

under the terms of this Protective Order, the presiding officer shall stay the order of

disclosure for such period of time as the presiding officer deems necessary to allow the

producing party to appeal the ruling to the commission.

37. Sanctions Available for Abuse of Designation. If the presiding officer finds that a

producing party unreasonably designated material as Protected Material or as Highly

Sensitive Protected Material, or unreasonably attempted to prevent disclosure pursuant to

Paragraph 36, the presiding officer may sanction the producing party pursuant to 16 Tex.

Admin. Code § 22.161.

38. Modification of Protective Order. Each party shall have the right to seek changes in this

Protective Order as appropriate from the presiding officer.

39. Breach of Protective Order. In the event of a breach of the provisions of this Protective

Order, the producing party, if it sustains its burden of proof required to establish the right

to injunctive relief, shall be entitled to an injunction against such breach without any

requirements to post bond as a condition of such relief. The producing party shall not be

relieved of proof of any element required to establish the right to injunctive relief. In

addition to injunctive relief, the producing party shall be entitled to pursue any other form

of relief to which it is entitled.

SIGNED AT AUSTIN, TEXAS as of the day of , 2016.

________________________________

LU 000023

LU 000024

Protective Order Certification

I certify my understanding that the Protected Materials are provided to me pursuant to the terms and restrictions of the Protective Order in this docket, and that I have been given a copy of it and have read the Protective Order and agree to be bound by it. I understand that the contents of the Protected Materials, any notes, memoranda, or any other form of information regarding or derived from the Protected Materials shall not be disclosed to anyone other than in accordance with the Protective Order and unless I am an employee of Commission Staff or OPC shall be used only for the purpose of the proceeding in Docket No. 46256. I acknowledge that the obligations imposed by this certification are pursuant to such Protective Order. Provided, however, if the information contained in the Protected Materials is obtained from independent public sources, the understanding stated herein shall not apply.

_____________________________ _____________________________ Signature Party Represented _____________________________ _____________________________ Printed Name Date

I certify that I am eligible to have access to Highly Sensitive Protected Material under the terms of the Protective Order in this docket.

_____________________________ ______________________________ Signature Party Represented _____________________________ ______________________________ Printed Name Date

LU 000025

DOCKET NO. 46256

I request to view/copy the following documents:

Document requested

# of Copies

Non-Confidential

Confidential &/or H.S.

______________________________ ______________________________ Signature Party Represented ______________________________ ______________________________ Printed Name Date

LU 000026

9/17/15 Page 1

PUBLIC UTILITY COMMISSION OF TEXAS

CLASS B RATE/TARIFF CHANGE APPLICATION

Required Schedules for rate/tariff changes

WATER UTILITY NAME: Liberty Utilities (Woodmark Sewer) Corp. and Liberty Utilities (Tall Timbers Sewer) Corp.CCN No. WM 20679; TT 20694

ADDRESS OF UTILITY: 12725 W. Indian School Rd, Suite D 101Street, P.O. Box and/or suite number

Avondale, AZ 85391City and Zip Code

PHONE NUMBER: ( 623 ) 298-3769area code

NAME OF PERSON TO CONTACT REGARDING THIS FILING:

NAME: Gerry Becker - Utility Rates and Regulatory Manager

PHONE: (623) 298-3769EMAIL ADDRESS:[email protected]

PUC CLASS SIZE: B C (circle one)

Step 1 Step 2INCREASE (DECREASE) 1,038,363 2,002,514 (From Sch. I-1, Line 33)

dollar amount

37.51% 72.34% (From Sch. I-1, Line 34)percent above (below) current revenue requirement

DESCRIBE OWNERSHIP OF COMPANY:

Liberty Utilities (Woodmark Sewer) Corp. and Liberty Utilities (Tall Timbers Sewer) Corp.

DATE OF LAST GENERAL RATE CASE FILING: Woodmark filed June 18, 2013, Tall Timber filed April 1, 2009

DATE OF LAST NON-GENERAL RATE CHANGE*: N/A* (e.g. pass through rate change or temporary water rate provision).

LU 000027

mailto:[email protected]

9/17/15 Page 2

CLASS B RATE/TARIFF CHANGE APPLICATION

Required Schedules for rate/tariff changes**Please read the "Class B Investor-Owned Utilities water and/or sewer Instructions for

Rate/Tariff Change Application" completing these schedules.**

These schedules are organized in a manner whereby the user can work through each section to:

1st Record historical test year data on Schedule I-1, Column D.Enter your test year end on the table of contents.

2nd Provide historical revenue information on Schedule 1-2.

3rd Calculate operating expenses and make adjustments (Section II).

4th Calculate return for rate making purposes (Section III).

5th Calculate adjusted taxes other than income (Section IV).

6th Calculate federal income taxes (Section V).

8th Determine revenue requirements (Schedule I).

9th Design proposed rates (Section VI).

These schedules are intended to assist the utility in calculation of its newrates. The process consists of a number of relatively complex steps. Utilities are required to provide all the information necessary to support amountsincluded in the schedules and to cross-reference all information. If the applicant does not use a schedule, it should be noted as "N/A",and an explanation provided.

LU 000028

9/17/15 Page 3

GENERAL WATER RATE/TARIFF CHANGE APPLICATIONSCHEDULES

Complete all of the following schedules for your Class A or B utility(if the schedule does not apply, include it marked "N/A")

TABLE OF CONTENTS (Page 1 of 2)

FOR TEST YEAR ENDED: 12/31/2015DATE SUBMITTED TO PUC:

Attachment ItemsSchedule Checked

SECTION I REVENUES AND REVENUE REQUIREMENTRevenue Requirement Summary I-1 XHistorical Revenue Summary I-2 X

Include the appropriate schedules:Metered Active Connections by Meter Size I-3 N/AUnmetered Active (Flat Rate) Customers I-4 X

SECTION II OPERATIONS AND EXPENSESWater Production (no unmetered rates) II-1(a) N/AWater Production (with unmetered rates) II-1(b) N/AOther Revenues & Expenses passed through II-3 XPurchased Power II-4 XOther Volume Related Expenses II-5 XPayroll Cost Allocation II-6 XMaterials II-7 XContract Work II-8 XTransportation Expenses II-9 XOther Plant Maintenance II-10 XEmployee Pensions/Benefits II-11 N/ABad Debts/uncollectables II-12 XOffice Services and Rentals II-13 XOffice Supplies and Expense II-14 N/AProfessional Services II-15 N/AInsurance II-16 XRate Case Expense II-17 N/ARegulatory Commission Expense II-18 XMiscellaneous Expense II-19 X

September 2, 2016

Liberty Utilities - Woodmark and Tall TimbersUTILITY NAME:

LU 000029

9/17/15 Page 4

GENERAL WATER RATE/TARIFF CHANGE APPLICATION SCHEDULESTABLE OF CONTENTS (Page 2 of 2)

Attachment ItemsSchedule Checked

SECTION III RETURN AND RATE BASE

Requested Return III-1 XRate Base III-2 XUtility Plant III-3 XUtility Plant reconciled to previous filing III-3(a) XDeveloper Construction work in progress III-4(a) N/AMaterials and Supplies Inventory III-4(b) XWorking Cash III-5 XNotes Payable III-6 XAccumulated Depreciation III-7 XAdvances for Construction III-8(a) XContributions in Aid of Construction III-8(b) XDeferred Income Taxes III-9(a) XDeferred Investment Tax Credits III-9(b) N/ADeferred Assets III-10(a) N/A

SECTION IV TAXES OTHER THAN INCOMEProperty,Payroll and Other Taxes IV(a) XRevenue Related Taxes IV(b) X

SECTION V FEDERAL INCOME TAXES (FIT)Income Taxes at Present Rates-effective rate V X

SECTION VI RATE DESIGNRate Design Worksheet VI X


LU 000030

Instr. RR

9/17/15 Page 5

The purpose of Section I is to summarize the revenue requirementand provide revenues and meter information for the test year.

Instructions for Section I - Revenue Requirement and Revenues

Carefully complete the label for each workpaper. Your application docketnumber should be included on each page.

Schedule I-1 is a SUMMARY. Complete column D, historical test yearinformation first using financial records, then work through the remainderof the sections and schedules other than the rate design, Schedule VI, to calculate the utility's changes to its historical test year in Column E. Column G provides the workpaper source for amounts in Columns E & F.

Schedule I-2 reports historical revenues collected and Schedules I-3 and 1-4 report connection information.Use historical financial data and data from recent annual reports (PUC Rpt.) to complete the schedules.

Please complete Schedule II-3 prior to I-2.

Insert and reference additional workpapers as necessary. For example, you may wish to add schedules that apply to unique situations in your utility.

The schedules are based on NARUC chart of accounts and include sub-accountsas necessary for detail needed to determine reasonable and necessary expenditures.

SCHEDULES - CLASS B RATE/TARIFF CHANGESECTION I - REVENUE REQUIREMENTS AND REVENUES

UTILITY NAME: Liberty Utilities - Woodmark and Tall Timbers

LU 000031

I-1 Rev Req

9/17/15 Page 6

UTILITY NAME: SCHEDULES - CLASS B RATE/TARIFF CHANGE

I-1 REVENUE REQUIREMENT SUMMARY

PUC Docket No._____________ Test Year End:A B C D E F=D+E G

Historical K & M AdjustedTest Year Changes Test Year

Line Acct. Account Name Reference/No. No. Instructions

Volume related expenses:1 710 Purchased Wastewater Treatment 59,960 - 59,960 Schedule II-32 711 Sludge Removal Expense 102,652 - 102,652 Schedule II-33 715-716 Power Expense-production only 156,021 - 156,021 Schedule II-44 718 Chemicals 38,825 - 38,825 Schedule II-55 Total volume related exp. 357,457 357,457 Add Lines 1-3

Non-volume related expenses:6 701 Salaries and wages 629,578 - 629,578 Schedule II-6, Line 17 720 Materials and supplies 53,107 - 53,107 Schedule II-78 731-736 Contract work 734,708 - 734,708 Schedule II-89 750 Transportation expenses 36,643 - 36,643 Schedule II-910 742 Rental of equipment 25,241 - 25,241 Schedule II-1011 Total non-volume related exp. 1,479,278 1,479,278 Add Lines 5-9

Admin. & general expenses:12 701 Office salaries - - - Schedule II-6, line 213 701 Mgmt. salaries - - - Schedule II-6, line 314 704 Employee pensions & benefits - - - Schedule II-1115 715 Purchased power-Office only - - - Schedule II-416 770 Bad debt expense 25,766 9,303 35,069 Schedule II-1217 776 Rental of Building/real Property 7,887 - 7,887 Schedule II-1318 777 Office supplies & expenses - - - Schedule II-1419 778 Professional services - - - Schedule II-1520 784 Insurance 13,861 - 13,861 Schedule II-1621 766 Regulatory (rate case) expense - - - Schedule II-1722 767 Regulatory expense (other) 6,670 (6,670) - Schedule II-1822 775 Miscellaneous expenses 90,295 - 90,295 Schedule II-1923 Total admin. & general expense 144,479 147,112 Add Lines 11-2224 Total operating Expenses 1,981,213 1,983,846 Lines 4 + 10 + 2325 403 Depreciation 735,146 - 735,146 Sch III-3, Col E, Line 5026 408 Taxes Other than Income 172,327 35,746 208,073 Sch IV(b), Line 827 409/10 Income Tax Expense - 270,993 270,993 Schedule V, Line 728 TOTAL EXPENSES 2,888,687 3,198,058

29 TOTAL HISTORIC REVENUE 2,768,051 Sch I-2, Line 630 HISTORICAL TEST YEAR RETURN (120,636) Line 30 less Line 2931 REQUESTED RETURN 608,356 Schedule III-1, Line 332 TOTAL REVENUE REQUIREMENT 3,806,414 Line 30 plus Line 34

33REQUESTED ANNUAL REVENUE INCREASE (to notice) 1,038,363 Line 32 less Line 29

34 PERCENTAGE INCREASE 37.5%Line 36 divided by Line 33

35 LESS: OTHER REVENUES (86,668)Sch. II-3(b), Col. D, Line 8

36 Revenue for Rate Design (to VI, line 1) 3,719,747 Line 32 minus Line 35

Liberty Utilities - Woodmark and Tall Timbers

_____________________12/31/2015

LU 000032

I-2 Rev

9/17/15 Page 7

SCHEDULES - CLASS B RATE/TARIFF CHANGE

LineNo.

461 Metered connection gallonage rate revenue

2,709,954

2,709,954

58,097

2,768,051

*Provide all calculations and explanations for any differences between the applicant'sannual report and this schedule.

* If the utility provides other than residential retail service (wholesale, industrial, etc),provide a work paper with the detail of this account by NARUC sub account number.

521.1 -- Residential Revenues521.2 -- Commercial Revenues522.1 -- Residential Revenues522.2 -- Commercial Revenues Total 2,709,954

6. Line 4 plus line 5

5.

1.

4.

From II-3, Column B, line 7

Total Metered & Flat Rate Revenue

From financial records


461 Metered connections base rate revenue

Plus: Total Other Revenues

2.

3. 521-522 Unmetered (Flat rate) revenue

-

204,339 23,224

(to I-1, Column D, line 29)


FOR TEST YEAR ENDED:

NARUC A/C Description

I-2 HISTORICAL REVENUE SUMMARY

Historical Test Year

Total Historic Test Year Revenues per income statement and Annual Report*

2,209,040


-

273,351

12/31/2015

LU 000033

I-3 Met Con

9/17/15 Page 8

UTILITY NAME:

I-3 METERED ACTIVE CONNECTIONS BY METER SIZE

A B C D E F G H

Number of Connections

Line Meter End of Prior End of Average Meter Meter No. Size Year Test Year Test Year Ratios Equivalencies

Additions End of TYPUC report

Sch. 9 (C+D) (C + E) /2 (E x G)

1. 5/8" x 3/4" N/A 1.0

2. 3/4" 1.5

3. 1" 2.5

4. 1 1/2" 5.0

5. 2" 8.0

6.

7.

8.

9. Total

10 Average


Liberty Utilities - Woodmark and Tall TimbersSCHEDULES - CLASS B RATE/TARIFF CHANGE

12/31/2015

LU 000034

I-4 Conn

9/17/15 Page 9

SCHEDULES - CLASS B RATE/TARIFF CHANGEI-4 UNMETERED (FLAT RATE) ACTIVE CONNECTIONS

A B C D E F

Line Flat Rate End of Prior Test Year End of Average No. Unit Year Additions Year

PUC report (C + D) (C + E) /2 Sch. 9

1.

2.

3.

4.

5. Total 48,600


Number of Basic Equivalent Rates (BER)

FOR TEST YEAR ENDED: 12/31/2015

LU 000035

INSTRUCTIONS - OPERATIONS AND MAINTENANCE

9/17/15 Page 10

The purpose of Section II is to report expense information and allow forfor the known and measurable changes to operating expenses to determinethe revenue requirement in Schedule I-1.

Instructions for Section II

Compile financial and source information to determine known andmeasurable changes to the test year expenses. Provide copies ofsource documents, such as increased utility bill notices, to verifythe applicant's proposed known and measurable changes.Show calculations and explanations for all known and measurable

workpapers if needed.

Working through Schedules II-4 through II-19, complete each and transfer test year amounts to column G of Schedule I-1.Depreciation expense, other taxes, FIT and return will be determined using later schedules. Wait until those schedules arecomplete, and then transfer the amounts to Schedule I-1.

Insert and reference additional workpapers as necessary. For example, the applicant may use additional schedules that address unique aspects of the utility.

changes on all schedules, where applicable. Attach extra

SCHEDULES - CLASS B RATE/TARIFF CHANGESECTION II - OPERATIONS AND MAINTENANCE


LU 000036

II-1 Prod

9/17/15 Page 11


II-1(a) AND II-1(b) - HISTORICAL OF WATER PRODUCTION FOR TEST YEAR ENDED:

SCHEDULE II-1(a): WATER PRODUCTION:(COMPANIES WITH METERED RATE CUSTOMERS)

Line Water Production A B C= A+B DNo. (1,000 Gallons)

Test K & M Adjusted ReferenceYear Changes Test Year

1 Total water pumped N/A PUC Annual Report

2 Total water purchased PUC Annual Report

3 Total water produced Line 1 + line 2

4 Total water sold PUC Annual Report

5 Total accounted for non-revenue water*

6 Total unaccounted for waterLines 3 less 4 less 5

7Percentage

Line 6 divided by Line 3

* Describe the tracking technique for calculating line 5 and provide the records reflecting the calculation.

SCHEDULE II-1(b) WATER PRODUCTION (COMPANIES WITH UNMETERED (FLAT) RATE CUSTOMERS)

A B C=A+B DLine Test K & M AdjustedNo. Description Year Change Test Year

1 PUC report Sch. D-1

2 PUC report Sch. D-1

3 Lines 13 + 14


Known and measurable calculations and explanations:

Reference

Water Purchased (1,000 gallons)

Water Pumped (1,000 gallons)

Total production (1,000 gallons)

12/31/2015

LU 000037

II-3 Other Rev

9/17/15 Page 12


II-3 OTHER REVENUES & EXPENSES PASSED THROUGH

II-3(a) Purchased Water or Other Pass Through ExpensesLine A B C D DNo.

Units purchasedPurchased from: (in _________)

(e.g. 1,000 gal, AC - FT)

1. Account 710 (Purchased Treatment) 59,960 2. Account 711 (Sludge Removal) 102,652 3. 4. Total * 162,612

* Must agree with Schedule II-1(a), Line 2, column A, or provide a reconciliation.

II-3(b) Other revenues collected from customersLine A B C DNo.

Item passed thru or type of other revenue

Test year historical revenues collected

1. Tap Fees* -0-*2. Late Fees 28,571 3. Meter Test Fees4. Reconnect Fees5. Purchased Water Fees

6.Groundwater Conservation District Fees

7. Other (attach detail**) 58,097 8. Total Other Revenues 86,668

(to Sch. I-2, line 5) (to Sch. I-1, line 35)

* Tap fees should be reported on Sch. III-8-CIAC, Line 1.** If the utility provides other than residential retail service (wholesale, industrial, etc),provide a work paper with the detail of this account by NARUC sub account number.

Establishment Fees 24,725 Service Charges 33,400 Miscellaneous (28) Total Other 58,097


Test year revenues netted

against COS

Actual Cost paid per financial

records


Price Per Unit Total Calculated Cost (B x C)

12/31/2015

LU 000038

II-4 Pur Pow

9/17/15 Page 13

UTILITY NAME:

FOR TEST YEAR ENDED: 12/31/2015

This page is supplemental information. It is required to complete Schedule I-1.

References below refer to Schedule I-1.

Line No. Account No.

2. 715-716

II-4(a) Volume related expenses (Electric used for production of water/sewer)

List the amount spent on purchased power (electricity) for the last two record periods and actualfor the Test Year. Indicate the kinds of expenses included in this account by identifying all large*items. If the actual for the Test Year is higher than previous years, indicate the reason for the increase:

and more than $1,000.

Year Amount

2013 $ 186,404

2014 $ 170,069

Test Year 2015 $ 156,021 K & M Change $ (to I-1, Column E, Line 2)

Adjusted Test year $ (to I-1, Column F, Line 2)

Explanation and calculations of known and measurable change:

II-4(b) Office related expenses (Electric used for production of water/sewer)Line No. Account No.

14

Volume related expenses

List the amount spent on purchased power (electricity) for the last two record periods and actualfor the Test Year. Indicate the kinds of expenses included in this account by identifying all largeitems. If the actual for the Test Year is higher than previous years, indicate the reason for the increase: Year

a. Test Yearb. K & M Change $ - (to I-1, Column E, Line14)

c. Adjusted Test year (a. + b.) $ - (to I-1, Column F, Line 14)


Account Name

Account Name

- 156,021

Amount

II-4 SCHEDULES - CLASS B RATE/TARIFF CHANGEPURCHASED POWER

* A large item is more than 10% of the test year account balance

Purchased Power and Fuel


LU 000039

II-5 Chem

9/17/15 Page 14

FOR THE TEST YEAR ENDED:

This page is supplemental information. It is required to complete Schedule I-1.


3. 718 Chemicals

Other volume related expenses

List the amount spent on other volume related expenses for the last two recordperiods and actual for the Test Year. Indicate the kinds of expenses includedin this account by identifying all large* items. If the actual for the Test Year is higher than previous years, indicate the reason for the increase:

* A large item is more than 10% of the test year account balance and more than $1,000.

Amount

2013 $ 43,300

2014 $ 37,184

a. Test Year 2015 $ 38,825

b. K & M Change $ - (to I-1, Column E, Line 3)

c. Adjusted Test year (a.+b.) $ 38,825 (to I-1, Column F, Line 3)


Year


II-5 OTHER RELATED VOLUME EXPENSESSCHEDULES - CLASS B RATE/TARIFF CHANGE

Account Name

12/31/2015

LU 000040

II-6 Payroll

9/17/15 Page 15

FOR THE ADJUSTED TEST YEAR

SOME SALARIES MUST BE CAPITALIZED IN THIS REPORT IF EMPLOYEES INSTALL PLANT IN SERVICEII-6(a) PAYROLL COSTS:

A B C D E F G H

Line Employee Test Year Capitalized Expensed 1st 7,001 to 9,001 to over Total

No. Name Payroll Payroll Payroll7000 or

new limit9000 or

new limit118500 or new limit

118500 or new limit Payroll

(FUTA max) (SUTA max)(or FICA max)

1.

2.

3.

4.

5.

6.

7.

8.

9. Total

10. Percentage Capitalized Line 9, column F divided by line 9, column E=

II-6(b) ALLOCATION OF PAYROLL TO EXPENSE:Line 'Total Payroll Expenses' should equal the total from 'Expensed Payroll' (Column C, Line 9) above

Line Acct. Test Yr No. No. Expense

1. 701 Salaries and Wages 629,578 to Schedule I-1, Line 5.2. Office salaries to Schedule I-1, Line 11.3. to Schedule I-1, Line 12.4. 629,578 (should equal II-6(a), Column C, Line 9.)

The utilities have no employees. All labor costs are incurred by Liberty Utilities Service Corp., with labor and benefits costs being charged to the utilities on cost-causal bases.

** Attach an explanation and calculation for K&M salary changes from test year.

*Attach a brief summary of the utility's capitalization policy and explain any changes in capitalization rates of more the 5% per year.

UTILITY NAME: Liberty Utilities - Woodmark and Tall Timbers SCHEDULES - CLASS B RATE/TARIFF CHANGE

II-6 ALLOCATION OF PAYROLL EXPENSES

Account Name

Management salaries

Total Payroll Expenses

12/31/2015

LU 000041

II-7 M&S

9/17/15 Page 16


This page is supplemental information. It is required to complete Schedule I-1.References below refer to Schedule I-1.


6. 720

II-7(a) Materials

List the amount spent on materials for the last two record periods and for the Test Year.Indicate the kinds of expenses included in this account by identifying all large* items in the list below. If the Test Year is higher than previous years, indicate the reason for theanticipated increase:

Year Amount

2013 $ 42,545

2014 $ 48,342

a. Test Year 2015 $ 53,107

b. K & M Change $ - (to I-1, Column E, Line 6

c. Adjusted Test year (a. + b.) $ 53,107 (to I-1, Column F, Line 6

Expensed materials may not be included in rate base in materials and supplies inventories.


II-7(b) Large Items:Description Amount Date in service

* A large item is more than 10% of the test year account balance and more than $1,000.00

UTILITY NAME: Liberty Utilities - Woodmark and Tall Timbers SCHEDULES - CLASS B RATE/TARIFF CHANGE

II-7 MATERIALS

Account Name

Materials and Supplies

N/A

12/31/2015

LU 000042

II-8 Cont Work

9/17/15 Page 17

This page is supplemental information. It is required to complete Schedule I-1.References below refer to Schedule I-1.Line No. Account No.

7. 731-736 Contract work (non-capitalized engineering, testing, other)

II-7(a) Contract work

List the amount spent on contract work for the last two record periods and for the Test Year.Indicate the kinds of expenses included in this account by identifying all large* items. If the Test Year is higher than previous years, indicate the reason for the anticipated increase.

Year

$

2013 $ 545,601

2014 $ 1,050,827

a. Test Year 2015 $ 734,708


c. Adjusted Test year (a. + b.) $ 734,708 (to I-1, Column F, Line 7)

* A large item is more than 10% of the test year account balance more than $1,000.


II-8(b) Large Items:

Amount

N/A



II-8 CONTRACT WORKSCHEDULES - CLASS B RATE/TARIFF CHANGE

Account Name

Description Amount Date in service

12/31/2015

LU 000043

II-9 Trans

9/17/15 Page 18




8. 750 Transportation expense

II-9(a) Transportation expense

List the type of vehicles used by the utility and allocate the percent used for business purposes.For example, is there one vehicle used solely for the utility, or is it used for non-business activities too? Is there a vehicle involved that is part of the Company's Plant in Service andthus is already depreciated?

Vehicle expenses reported using a cost per unit (say 34 cents per mile) have the depreciationfactor included. A vehicle which is part of the Plant in Service should show only actual operating and maintenance expenses (oil, gas, repairs, maintenance) excluding insurance.The purpose of this supplemental page is to ensure that vehicle expense will be recordedproperly and that vehicle depreciation is not listed twice or totally omitted.

Year Amount

2013 $ 34,790

2014 $ 45,667

a. Test Year 2015 $ 36,643




II-9(b) Large Items*:


Date in service



II-9 TRANSPORTATION

N/A

Account Name

Description Amount

12/31/2015

LU 000044

II-10 Rentals

9/17/15 Page 19



9. 742 Rental of equipment

II-10(a) Other plant maintenance

List the amount spent on other plant maintenance for the last two record periods and estimated for the Test Year. Indicate the kinds of expenses included in this account by identifying all large* items. If theTest Year is higher than previous years, indicate the reason for the anticipated increase:

Year

2013 $ 95,878

2014 $ 114,546

a. Test Year 2015 $ 25,241



* A large item is more than 10% of the test year account balance more than $1,000.


II-10(b) Large Items:Description Amount Date in service


II-10 OTHER PLANT MAINTENANCEFOR THE TEST YEAR ENDED:

Account Name

Amount


12/31/2015

LU 000045

II-11 Emp Ben

9/17/15 Page 20



13. 604 Employee pensions and benefits

Employee pensions and benefits

List the amount spent on Employee's pensions and benefits for the last two record periods and estimate for the TestYear. Indicate the kinds of expenses included in this account by identifying all items by category. For example, Pensions includes such items as ESOPs and IRAs. The "Other" column includes such items as dental, vision, lifeinsurance, etc. Also include the number of employees covered and charged to account 674 and indicate the cost peremployee. As applicable, provide information on any qualified pensions offered to employees and documentation, suchas actuarial studies, discussing net pension costs as well as current funding status of the utility's projected benefitobligation. If the Test Year amount is higher than previous years, indicate the reason for the anticipated change:

List types of Pensions & Benefits:

$ $ $ $ $ Year Total Amount Pensions Health Other Amount Capitalized*

Cost per Employee:


Number of Employees covered:

Cost per Employee:

List types of Pensions & Benefits:


Number of Employees covered:

Cost per Employee: *(use % on Sch 11-6(a), line 10)

The utilities have no employees. All labor costs are incurred by Liberty Utilities Service Corp., with labor and benefits costs being charged to the utilities on cost-causal bases.


Account Name

UTILITY NAME: Liberty Utilities - Woodmark and Tall TimbersSCHEDULES - CLASS B RATE/TARIFF CHANGE

II-11 EMPLOYEE PENSIONS AND BENEFITS12/31/2015

LU 000046

II-12 Bad Debts

9/17/15 Page 21



Line No. Account No. Account Name

15. 770 Bad Debts

II-12 Bad debts/Uncollectibles

List the recorded amount the company was unable to collect for the last two years,and estimate the uncollectible amount for the Test Year. If the the Test Year is higher than previous years, indicate the reason for the anticipated increase.

Year Amount

2013 $ 4,991

2014 $ 13,702

a. Test Year 2015 $ 25,766

b. K & M Change $ 9,303 (to I-1, Column E, Line 15)



II-12(b) Large Items*:Description Amount Date in service

N/A

II-12 BAD DEBTS



Adjusted to correspond to requested rates.


12/31/2015

LU 000047

II-13 Off Rent

9/17/15 Page 22



16. 741 Rental of Building/Real Property

II-13(a) Office services and rentals

List the amount spent on office services and rentals for the last two record periodsand estimate for the Test Year. Indicate the kinds of expenses included in this accountby identifying all large* items. If the Test Year is higher than previous years, indicate the reason for the anticipated increase:

Year Amount 2013 $ 6,303 2014 $ 6,825

a. Test Year 2015 $ 7,887




* A large item is more than 10% of the test year account balance and more than $1,000.II-13(b) Large Items:

N/A


II-13 OFFICE SERVICES AND RENTALSFOR THE TEST YEAR ENDED:


Account Name

12/31/2015

LU 000048

II-14 Off Sup

9/17/15 Page 23



17. 681 Office supplies & expenses

II-14(a) Office supplies & expenses

List the amount spent on office supplies and expenses for the last two record periods and estimate for the Test Year. Indicate the kinds of expenses included in this account by identifying all large* items. If the Test Year is higher than previous years, indicate the reason for the anticipated increase:

Year Amount

$

$

a. Test Year $ N/A







N/A Description


Account Name

Amount Date in service

II-14 OFFICE SUPPLIES


12/31/2015

LU 000049

II-15 Prof Serv

9/17/15 Page 24



18. 682 Professional services

II-15(a) Professional services

List the amount spent on professional services for the last two record periods and estimate for the Test Year. Indicate the kinds of expenses included in this account by identifying all large items*. If the TestYear is higher than previous years, indicate the reason for the anticipated increase:

Year Amount

$

$

a. Test Year $ N/A







N/A

II-15 PROFESSIONAL SERVICES


Account Name



12/31/2015

LU 000050

II-16 Ins

9/17/15 Page 25



19. 756-757 Insurance

InsuranceList the amount spent on insurance for the last two record periods and estimate for the Test Year. Indicate the kinds of expenses included in this account by identifying all large items*. If the TestYear is higher than previous years, indicate the reason for the anticipated increase:

Year Amount

2013 $ 21,859

2014 $ 16,084

a. Test Year 2015 $ 13,861



Types of insurance: $

Year Total amount Period Covered Type Company

$ Year Total amount Period Covered Type Company

$

Year Total amount Period Covered Type Company


SCHEDULES - CLASS B RATE/TARIFF CHANGEUTILITY NAME: Liberty Utilities - Woodmark and Tall Timbers

II-16 INSURANCEFOR THE TEST YEAR ENDED: 12/31/2015

LU 000051

II-17 RC Exp

9/17/15 Page 26



20. 666 Regulatory (Rate Case) Expense

II-17(a) Regulatory commission expense

List the amount spent on rate case expense for the last two years and for the Test Year. Typically, the commission seperates rate case expensefrom the revenue requirement and allows recovery through a surcharge. The knownand measurable adjustment would decrease this expense to zero in this case.In any event, if the applicant does not file every year, the expense must be amortizedover the time between filings and only one year's worth should be charged to customers.Record Commission filing fees or fees to consultants, attorneys, etc. in formal and informal rate cases, complaints, or other dealings with the Commission, which are not reported under Professional Services. Indicate the kinds of expenses included in this account by identifying all large* items. If the Test Year is higher thanprevious years, indicate the reason for the anticipated increase:

Year Amount

$

$

a. Test Year $

b. K & M Change $ - (to I-1, Column E, Line 20 - see instructions above)

c. Adjusted Test year (a. + b.) $ - (to I-1, Column F, Line 20 - see instructions above)




Account Name

Date in serviceDescription


Amount

and more than $1,000 .

II-17 REGULATORY EXPENSE

FOR THE TEST YEAR ENDED: 12/31/2015

LU 000052

SCHEDULE II-18 OTHER REG

9/17/15 Page 27



21. 766-767 Regulatory commission expense

II-18(a) Regulatory commission expense

List the amount spent on regulatory commission expense for the two record periods and for the Test Year. Include TCEQ inspection fees or permit permit fees, and other regulatory expense. Do not include the regulatory assessment; this is a pass through expense. Indicate the kinds of expenses included in this account by identifying all large* items. If the Test Year is higher than previous years, indicate the reason for the anticipated increase:

Year

2013 $ -

2014 $ - a. Test Year

2015 $ 6,670 b. K & M Change (to I-1, Column E, Line 21 - see instructions above)

$ (6,670) c. Adjusted Test year (a. + b.) (to I-1, Column F, Line 21 - see instructions above)

$ - Explanation and calculations of known and measurable change:


II-18 (b) Large Items:

FOR THE TEST YEAR ENDED: ____________________________


II-18 REGULATORY EXPENSE

Account Name

Amount

Amount Date in service

Description


12/31/2015

LU 000053

II-19 Misc

9/17/15 Page 28



22. 775 Miscellaneous

II-19 (a) Miscellaneous expense

List the amount spent on general miscellaneous for the last two record periods andfor the Test Year. Indicate the kinds of expenses included in this account by identifying all large* items. If the Test Year is higher than previous years, indicate the reason for the anticipated increase:

Year Amount

2013 $ 80,487

2014 $ 124,676

a. Test Year 2015 $ 90,295

b. K & M Change $ - (to I-1, Column E, Line 22 - see instructions above)

c. Adjusted Test year (a. + b.) $ 90,295 (to I-1, Column F, Line 22 - see instructions above)


II-19 (b) Large Items:


II-19 MISCELLANEOUS EXPENSE

Description Amount

* A large item is more than 10% of the test year account balance.

FOR THE TEST YEAR ENDED: _______________

N/A Date in service

12/31/2015

LU 000054

III Rate Base

9/17/15 Page 29

Section III provides working tables to allow the calculation of rate baseand return on rate base.

Instructions for Section III

1 Complete Schedules III-3 through III-9 as they apply to your company.

2 Transfer resulting year end balances (last line of each table) to Schedule III-2.

3 Complete Schedule III-1

SCHEDULES - CLASS B RATE/TARIFF CHANGESECTION III RATE BASE INSTRUCTIONS


LU 000055

III-1 Ret

9/17/15 Page 30


RETURN ON RATE BASE:

Line No.

1 Test year end rate base (from III-2, Line 16) 7,076,376 6125700

2 Requested ROR ( Col G, Line 7 below) 8.60%0.0901

3 Return on rate base (Line 1 x Line 2) 608,356 551,926

Rate of Return:

A B C D E F G

WeightedDescription Amount Percentage Rate Reference Average

Rate Amount from previous

column divided by

Line 6, Column C

4. Equity (Rate base less Line 5, Column D)

4,770,248 70.00% 10.160% Col E = Requested return on equity

7.11%7.1120000%

5.Long Term Debt and Advances from associated companies from Schedule III-6

- 30.00% 4.95%Col E = From Sch. III-6, Column H, Line 9

1.49%

6. Total capitalization (Rate Base Sch III-2, Line 16)

4,770,248

Return on rate baseCol G, Line 6 rounded Line 4 + Line 5 To Line 2 aboveto nearest 0.01%)

* ROE = Return on Equity

7. 8.60%


G=(E x F)

Line No.

III-1 REQUESTED RETURN FOR THE TEST YEAR ENDED: 12/31/2015

LU 000056

III-2 Rate Base

9/17/15 Page 31


Line No. Description Amount Reference

1 Additions: (From)

2. Utility plant (Original Cost) 15,075,600 Schedule III-3, Line 50, Col D

3. Construction work in progress - Schedule III-4, Line 5

4. Materials and supplies - Schedule III-4, Line 8

5. Working cash (capital) 165,321 Schedule III-5, Line 2

6. Prepayments 2,937 Schedule III-4, line 8

7. Other Additions - Add schedule

8. TOTAL ADDITIONS (Add Lines 2 through 6) 15,243,858

Deductions:

9. Reserve for depreciation (Accumulated) (4,516,396) Schedule III-3, Col F, Line 50

10. Advances for construction - Schedule III-8(a), Col F, Line 6

11. Developer Contributions in aid of construction (2,588,981) Schedule III-8(b), Col G, Line 6

12. Accumulated deferred income taxes (1,032,894) Schedule III-9(a), Line 3

13. Accumulated deferred investment tax credits - Schedule III-9(b), Line 3

14. Other Deductions (29,212) Customer Deposits

15. TOTAL DEDUCTIONS (Add lines 9 through 14) (8,167,483)

16. RATE BASE (Line 8, less Line 15) 7,076,376


FOR THE TEST YEAR ENDED: 12/31/2015III-2 RATE BASE SUMMARY

LU 000057

9/17/15 Page 32

Schedule III-3

III-3 UTILITY PLANT IN SERVICE (NET BOOK VALUE) CALCULATIONAdd schedules as needed, provide a summary also

[B] [D.1] [D.2] [D]= [D.1] - [D.2]

LineNo.

1 Various 189,003 N/A N/A N/A N/A N/A - - 189,003

2 Various 30 5,842,924 N/A N/A N/A N/A N/A 191,127 (2,316,481) 3,526,443

3 Various 20 2,200 N/A N/A N/A N/A N/A (568) (1,008) 1,192

4 Various 50 665,780 N/A N/A N/A N/A N/A 13,316 (66,281) 599,499

5 Various 50 1,223,692 N/A N/A N/A N/A N/A 24,474 (245,630) 978,063


7 Various 20 2,582 N/A N/A N/A N/A N/A - (2,582) -


9 Various 5 2,578,593 N/A N/A N/A N/A N/A 440,756 (1,048,907) 1,529,686

10 Various 25 2,786,635 N/A N/A N/A N/A N/A 111,497 (323,758) 2,462,878







17 Various 10 15,791 N/A N/A N/A N/A N/A (8,461) (18,553) (2,762)

18 Various 20 7,770 N/A N/A N/A N/A N/A 259 (259) 7,511


2021 Various 15,075,600 871,187 (4,516,396) 10,559,204

2223 Various (3,776,938) N/A N/A N/A N/A N/A (136,041) 1,187,957 (2,588,981)

24 11,298,662 735,146 (3,328,439) 7,970,223 #

To Sch III-2, line 2

To Sch I-1, line 27

To Sch III-2, line 9

[C]

395: Power Operated Equipment

361: Collection Sewers -- Gravity

390: Office Furniture

391: Transportation Equipment

393: Tools, Shop & Garage Equip.

355: Power Generation Equipment

363: Services to Customers

353: Land and Land Rights

354: Structures and Improvements

Item Service Life (yrs) * **

Date of Installation

[A]

364: Flow Measuring Devices

370: Receiving Wells

[F] Accumulated ($) (Reserve)

Total

Sub-Total -- Plant in Service

396: Communications Equipment

Contributions in Aid of Const.

[E] = [D]/[C] Annual ($)

Time in Service

MonthsYears in Service

Original Cost when installed $

394: Laboratory Equipment

371: Pumping Equipment

360: Collection Sewers -- Force


Add detailed workpapers if necessary to support this Schedule.

1Any amount paid for an item that was not incurred by the utility, such as by a customer, is deducted from the original cost. The adjusted original cost amount here, Column D-2, labeled "Adjusted Original Cost for Customer CIAC". Column D-2 will then be depreciated and the net book value will be calculated (ColumnG). For an item with the entire amount of its original cost paid for by customer(s), Columns D-2, E, F and G would be zero. See Schedule III-8 for developer CIAC.

Customer CIAC amount

SCHEDULES - CLASS B RATE/TARIFF CHANGE(Provide a schedule for each PWS system)

0

DepreciationAdjusted Original Cost for Customer

CIAC1

[G] = [D]-[F] Net Book Value ($)Days

390.1: Computer & Software

389: Other Plant & Misc. Equip.

381: Plant Sewers

380: Treatment & Disposal Equip.

LU 000058

III-3(a) RB Recon

9/17/15 Page 33

UTILITY NAME:


ORIGINAL COST DATAA B C D

Line No. Description Amount Amount

1.Beginning Gross Plant balance - (from previous rate case)

Must match previous rate case 8,722,667.97$

2. Plant additions after previous rate case354 2,254,503.46$ 360 497,251.63$ 361 471,438.96$ 363 48,751.60$ 370 84,881.22$ 371 1,733,532.84$ 380 (174,171.18)$ 381 688,293.47$ 389 125,711.02$ 390 39,107.69$ 3901 5,609.40$ 391 42,131.86$ 393 42,539.65$ 395 7,770.13$ 396 12,185.53$

3Total additions (add line 11 through 25, Col C) 5,879,537.28$

4Test year plant retirements after previous rate case:354 76,040.37$ 360 -$ 361 30,657.20$


III-3(a) UTILITY PLANT IN SERVICE-RECONCILIATION TO PRIOR CASE12/31/2015

LU 000059

III-4 CWIP

9/17/15 Page 34

UTILITY NAME:

_________________________

III-4 AVERAGE CONSTRUCTION WORK IN PROGRESS:

A B C Line Test Year No. Amount

1. Beginning balance N/A

2. Test year costs added

3. Test year construction costs completed

4. Ending balance

5. Average balance - test year (line 1 plus line 4, divided by 2

6. Sum of 12 test year month end balances - 34,192

7. One month prior to the test year, month end balance - 3,996

8.13 Month Average balance (line 6 plus line 7, divided by 13 - 2,937

To III-2, Line 4. To III-2, Line 6.


Materials & Supplies inventory Prepaid Expenses

***DO NOT include construction work in progress in rate base, unless the utility meets the requirements of PUC Subst. Rule 24.31C(4).


SCHEDULES - CLASS B RATE/TARIFF CHANGE III-4 AVERAGE CONSTRUCTION WORK IN PROGRESS,

MATERIALS AND SUPPLIES INVENTORY & PREPAYMENTS

***DO NOT include construction work in progress in rate base, unless the utility meets the requirements of PUC Subst. Rule 24.31C(4).

Description

Typically zero, to Schedule III-2, Line 3

12/31/2015

LU 000060

III-5 CWCA

9/17/15 Page 35

III-5 WORKING CASH ALLOWANCE CALCULATIONS ________________________

1. No working cash allowance is permitted when a utility bills its customers in advanceand provides service to flat rate customers only. Sewer connections count for the purposes of this schedule.2. A utility which has all metered customers and bills monthly shall divide its annual Operating and Maintenance (O&M) expenses (excluding all taxes and depreciation) by 12if it is a Class B utility, or by 8 if it is a Class C utility filing a Class B package

Class B Class C1. Annual Expenses $70,000 $70,0002. Taxes and depreciation (10,000) (10,000)3. Net Expenses (Line 1 - Line 2) 60,000 60,0004. Working Cash (Line 3 / line 5) $5,000 $7,5005. Divisor 12 8

A Water Sewer Water SewerLine No

1 1,983,846 From Sch I-1, line 25

2 165,321 To Sch III-2, line 5

3 12 12 8 8Divisor

Working Cash (Line 3 / Line 5)

Annual O & M Expenses

Class C

UTILITY NAME: SCHEDULES FOR CLASS B RATE/TARIFF CHANGE

to calculate working cash allowance. An example follows:

Description


BClass B

FOR THE TEST YEAR ENDED: 12/31/2015

LU 000061

III-6 NP

9/17/15 Page 36

UTILITY NAME:

List the following information concerning debt and equity of the utility and attach copies of notes payable used. Round all percentages to two (2) decimal places.If debt from affiliated interests is allocated to the utility, provide workpapersdemonstrating and justifying the allocation.

(E )Outstanding or

Unpaid Balance-

End of Test Year

1 Part 1 - Debt2 Senior Unsecured Debt (AZ and TX) 50,000,000 5.60% 2.80%3 Liberty Utilties Company General Debt 50,000,000 4.30% 2.15%45678

9 Total 100,000,000 4.95%

To Sch. III-1, Column G, Line 5

List short term debt, if any:

(B ) Date of Issue

FOR THE YEAR ENDED:

(D) Original Amount

of Loan


III-6 LONG TERM DEBT/ NOTES PAYABLE – WATER AND SEWER

(F) Interest

Rate

(G)=Col. E, Line 20 x Col. F, Line 20

Weighted Average(C )

Date of Maturity(A) Long Term Debt

Name of Bank/Lender

12/31/2015

LU 000062

III-7 Acc Dep

9/17/15 Page 37


ACCUMULATED DEPRECIATION:

Line Dollar No. Amount

1.Ending-Prior Rate Case (Docket No.________) 2,917,034.56 Must match previous rate case.

2Ending balance per Sch III-3, Column F, Line 50 4,516,396.31 Describe accounting adjustments made between the prior rate case and the current rate case: N/A

III-7 ACCUMULATED DEPRECIATION FROM PRIOR RATE CASEFOR THE TEST YEAR ENDED:

Description


12/31/2015

LU 000063

III-8 CIAC

9/17/15 Page 38

UTILITY NAME: SCHEDULES - CLASS B RATE/TARIFF CHANGEIII-8 ADVANCES FOR CONSTRUCTION ANDCONTRIBUTIONS IN AID OF CONSTUCTION

III-8(a) ADVANCES FOR CONSTRUCTION:A B C D E F G

Line No.

1. Advances for Construction Various Various 30,000 - - 30,000 2. 3. 4. 5. 6. Total - 30,000 - - 30,000

*If any advances or CIAC from developers or customers are refundable, please provide the potential date of refunding, if known.

III-8(b) DEVELOPER CONTRIBUTIONS IN AID OF CONSTRUCTION*:A B C D E F G

Line

No. 1. Contributions in Aid of Construction Various Unknown 3,776,938 136,041 (1,187,957) 2,588,981 2. 3. 4. 5. 6. Total - 3,776,938 136,041 (1,187,957) 2,588,981

*Customer CIAC is entered directly on III-3



Repayments made to developer

Amount of AdvanceTotal Cost

Date of Installation

Amount to be refunded in the future*

(G)=(D) - (F) Rate Base

Value ( to Sch III-2)Item

Date of Installation or Contribution Total Cost

Amount of Developer

Contribution Annual amortization

(F)=(D)-(E) Rate base Value

(to Sch III-2)

Accumulated Amortization

Item

12/31/2015

LU 000064

III-9 ADIT

9/17/15 Page 39

SCHEDULES - CLASS B RATE/TARIFF CHANGEIII-9 DEFERRED INCOME TAXES ANDDEFERRED INVESTMENT TAX CREDITS

since the last rate filing, provide a complete description of the underlying issues that giverise to the new category of ADIT.

III-9(a) ACCUMULATED DEFERRED INCOME TAXES:

Line Description Test Year

No. Amount

1. Beginning balance N/A

2. Test year amount

3. Ending balance 1,032,894

III-9(b) ACCUMULATED DEFERRED INVESTMENT TAX CREDITS: Line Description Test Year No. Amount

1. Beginning balance - 2. Test year amortization -

3. Ending balance -

To the extent that new line items have been included within the calculation of ADIT

FOR THE TEST YEAR ENDED: _________________________


12/31/2015

LU 000065

9/17/15 Page 40

SCHEDULES - CLASS B RATE/TARIFF CHANGEIII-10 OTHER DEFERRED ASSETS

III-10(a) : Other Deferred Assets

Line Description Test Year No. Amount

1. N/A - 2. - 3. -

III-10(b) ACCUMULATED AMORTIZATION ON OTHER DEFERRED ASSETS Line Description Test Year Total Accum Amort No. Amount End of test year

1. - 2. - 3. -

FOR THE TEST YEAR ENDED: _____________


12/31/2015

LU 000066

IV Other Tax

9/17/15 Page 41

Section IV is used to report taxes other than income for proposed revenues.

Instructions for Section IV

Follow the instructions included with individual schedules under the heading reference.



LU 000067

IV(a) PR & Prop

9/17/15 Page 42

SCHEDULES - CLASS B RATE/TARIFF CHANGEIV(a) ESTIMATE OF TAXES OTHER THAN INCOME

PROPERTY TAXES:

A B C D E Line No.

1 Property taxes paid in in test year per property tax bills

2 Utility plant added in test year Schedule III-3(a), Line 11

3 Utility plant retirements in test year Schedule III-3(a), Line 214 Net additions 952,750 Line 2 minus line 3

5

Net Property tax rate 1.70%6 Test year property tax on additions Line 4 times Line 5

179,525

8 Known and measurable change 16,198 Line 7 minus Line 1

PAYROLL TAXES (BASED ON ADJUSTED TEST YEAR NUMBERS):

A B C D E F G Line Wage Tax Taxable No. Level Rate Wages

SCHEDULE II-6 (D x E) wages to _____ % Column D+E+F

Line 9 wages to _____ % Column H

Line 9wages to ______ %

wages to _____ % Column DLine 9

wages to _____ % Column D+ELine 9

Total(add Lines 11 through 14)

15 Less: Capitalized Use % on Sch II-6(a), line 10 %Test year Payroll TaxExpense Line 13 less 14

17 Known and measurable change (Line 13 minus Line 14) - OTHER TAXES:

A I J K

Line No. Description Test yearK & M change

18 Other taxes & licenses 1920 Texas Franchise Tax 9,000 19,548 21 Total Other Taxes (Line 18 + Line 19 + Line 20)22 Total this page - taxes other than income

(Line 7) + (Col G, Line 16) + (Col L, Line 21)

2335,746

Tax

Adjusted Test Year

Federal unemployment

L

28,548

16

Amount Reference

Line 1 + Line 6

State unemployment

13

Adjusted Test year property tax expense

9

10

FICA

Description

Tax Type

Medicare

Reference

208,073

208,073 Sch IV(a), Total known and measurable change (Line 8 plus line 17, Column G plus line 21, Column K)


11 Added Medicare (Affordable Care Act)

Line 1 / beginning of test year gross plant balance from III-3 (a), Col. D, Line 1

Amount

163,327

16,198

FOR THE TEST YEAR ENDED: _____________________________________

14

7

12

12/31/2015

LU 000068

IV(b) Rev Rel Tax

9/17/15 Page 43

SCHEDULES - CLASS B RATE/TARIFF CHANGEIV(b) REVENUE RELATED TAXES AND EXPENSES

A B C D E F=B+C+D+E

LineTexas Margins

TaxCity Franchise

TaxesBad Debt Expense

Other Revenue Related Totals

1 Test year expense 9,000 9,000

2 Test year effective rate (test year tax expense/historic test year revenues-Sch I-1) -

3 Gross up factor (1.0 divided by (1.0 minus Line (example below)

4 Change in revenue requirement (Sch I-1, line 33)

5 Adjusted revenue requirement (Line 3 x Line 4)

6 Adjusted expense (Line 3 times Line 4) 35,746

UTILITY NAME:

FOR THE TEST YEAR ENDED: _________________________


12/31/2015

LU 000069

V Inc Taxes

9/17/15 Page 44

Section V calculated federal income taxe at present rates.

Instructions for Section V

Complete SCHEDULE V per instructions found in the reference column.


LU 000070

V FIT

9/17/15 Page 45

SCHEDULES - CLASS B RATE/TARIFF CHANGEV SCHEDULE OF EFFECTIVE FEDERAL TAX RATE

A B C D

Line Amount Reference

1 Requested Return 608,356 Schedule III-1, Line 3 or II-1, line 34

2 Less: Synchronized Interest (105,084) Sch. III-1, Col. G, Line 5 x Sch. III-2, Line 16)

3 Requested taxable return 503,272 Line 1 minus Line 2

4 Income taxes at proposed rates 270,993 Line 17 below

5 Effective tax rate 35.00%Line 4 divided by Line 3

6 Total gross up factor 1.000000 1.0 divided by (1.0 minus line 5)

7 Grossed up federal income tax 270,993 Line 4 times line 6 To Sch I-1, Line 27

FEDERAL INCOME TAX CALCULATION:

Line Tax Rate Taxable Income Tax Rate TaxNo.

(Portion of Taxable (C x D)Income in Level)

12 1st 50,000 of taxable income 50,000 15%13 Next 25,000 of taxable income 25,000 25%14 Next 25,000 of taxable income 25,000 34%15 Next 235,000 of taxable income 235,000 39%

16 Over 335,000 of taxable income 34%

17 Total before gross up To Line 4

FOR THE TEST YEAR ENDED: _________________


12/31/2015

LU 000071

SCHEDULE VI INSTRUCTIONS

9/17/15 Page 46

Section VI is used for rate design.

Instructions for Section VI:

Rates and resulting revenues for each class of customer and each ratetier included in the proposed tariff must be specified. If a different fixed/variable expense split is proposed, attached explanations of why the split


is appropriate, and include any calculations not included on Schedule VI.

VI RATE DESIGN INSTRUCTIONS

Sheet VI-1 designs rates based on the requested revenue requirement.Complete the schedule using the referenced lines from other schedules.The schedule is for a simple base (customer charge) rate and onegallonage rate per each 1,000 gallons. If a different rate structure isrequested, all calculations supporting the proposed rates must be included.


LU 000072

VI Rate Cal

9/17/15 Page 47


Line A CNo.

DETERMINATION OF FIXED COSTS 1. Gross revenues to be recovered: Sch I-1, Line 36 3,719,747

Less variable costs: 2. Purchased water - Account 610 - 3. Purchased power - Account 615 - 4. Other volume related - Account 618 - 5. Other volume related or allocated (attach schedule) 6. 7. 8. 9. 10. FIXED COSTS (Line 1 minus Lines 2-9) 3,719,747 11. 0.00% 12. TO BE RECOVERED THROUGH BASE SERVICE CHARGE 100.00%

RECAP: 13. RECOVERED THROUGH BASE SERVICE CHARGE 3,719,747 14. RECOVERED THROUGH VOLUMETRIC RATE -

TOTAL 3,719,747 TO BE RECOVERED THROUGH BASE SERVICE CHARGE

15. TOTAL BASIC EQUIVALENT RATE (BERs) 48,600 16. BASIC EQUIVALENT RATE 76.54$

TO BE RECOVERED THROUGH VOLUMETRIC RATE 17. TOTAL WATER SALES IN 1,000 GALS - 18. VOLUMETRIC RATE (CHARGE PER 1,000 GALS) -

PROPOSED RATES: 19. FOR ALL WATER DELIVERED PER 1,000 gallons -

BASIC EQUIVALENT RATE 76.54$ Meter size Line 16 Base Rate/size

20. Please refer to proposed rate schedule 21. 22. 23. 24. 25. 26.

If the utility is setting a tiered rate, calculations for all tiers must be provided with totalcollections for all tiers compared to the revenue requirement requested.

Equivalency

Line 13 / Line 15

Sch II-1(a), Col C, line 4Line 14 / Line 17

Line 18 or attach calc

Line 10Line 1 - Line 10Equals Line 1

Sch I-3, Col H, line 9

Sch I-1, Col. F, line 1Sch I-1, Col. F, line 2Sch I-1, Col. F, line 3

% OF FIXED COSTS RECOVERED IN VOLUMETRIC CHARGE


Schedule VI-1 RATE DESIGNFOR THE TEST YEAR ENDED:

BReference

12/31/2015

LU 000073

2015 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined101 Utility Plant in Service - - - 351 Organization - - - 352 Franchises 431,640 - 431,640 353 Land and Land Rights 25,000 164,003 189,003 354 Structures and Improvements 3,384,080 2,360,791 5,744,871 355 Power Generation Equipment 2,200 - 2,200 360 Collection Sewers - Force 46,402 619,378 665,780 361 Collection Sewers - Gravity 643,162 567,272 1,210,434 362 Special Collecting Structures - - - 363 Services to Customers 218,960 111,909 330,869 364 Flow Measuring Devices 2,582 - 2,582 365 Flow Measuring Installations - - - 366 Reuse Services - - - 367 Reuse Meters and Meter Installations - - - 370 Receiving Wells 84,881 - 84,881 371 Pumping Equipment 1,047,618 1,122,876 2,170,493 374 Reuse Distribution Reservoirs - - - 375 Reuse Transmission and Distribution System - - - 380 Treatment and Disposal Equipment 1,836,113 625,338 2,461,451 381 Plant Sewers 490,008 198,286 688,293 382 Outfall Sewer Lines - - - 389 Other Plant and Miscellaneous Equipment 37,315 83,485 120,800 390 Office Furniture and Equipment 91,225 49,607 140,833

390.1 Computer & Softwear 1,487 4,122 5,609 391 Transportation Equipment 82,240 32,229 114,469 392 Stores Equipment - - - 393 Tools, Shop and Garage Equipment 118,327 42,540 160,867 394 Laboratory Equipment 9,459 - 9,459 395 Power Operated Equipment - 7,770 7,770 396 Communication Equipment 4,632 7,554 12,186 397 Miscellaneous Equipment - - - 398 Other Tangible Plant - - -

Accumulated Depreciation

108 Accumulated Depreciation - - - 108 Accumulated Depreciation - - - 351 Organization - - - 351 Organization - - - 352 Franchises (107,466) (107,466) 354 Structures and Improvements (1,298,386) (1,040,715) (2,339,100) 354 Structures and Improvements 19,815 2,804 22,619 355 Power Generation Equipment (1,008) - (1,008) 355 Power Generation Equipment - - - 360 Collection Sewers - Force (1,397) (64,884) (66,281) 360 Collection Sewers - Force - - - 361 Collection Sewers - Gravity (158,850) (96,361) (255,211) 361 Collection Sewers - Gravity 647 8,934 9,582 362 Special Collecting Structures - - - 362 Special Collecting Structures - - - 363 Services to Customers (103,617) (37,715) (141,331) 363 Services to Customers - - - 364 Flow Measuring Devices (2,582) - (2,582) 364 Flow Measuring Devices - - -

LU 000074

2015 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined365 Flow Measuring Installations - - - 365 Flow Measuring Installations - - - 366 Reuse Services - - - 366 Reuse Services - - - 367 Reuse Meters and Meter Installations - - - 367 Reuse Meters and Meter Installations - - - 370 Receiving Wells (4,480) - (4,480) 370 Receiving Wells - - - 371 Pumping Equipment (570,395) (478,512) (1,048,907) 371 Pumping Equipment - - - 374 Reuse Distribution Reservoirs - - - 374 Reuse Distribution Reservoirs - - - 375 Reuse Transmission and Distribution System - - - 375 Reuse Transmission and Distribution System - - - 380 Treatment and Disposal Equipment (287,235) (37,091) (324,326) 380 Treatment and Disposal Equipment 568 - 568 381 Plant Sewers (25,176) (12,393) (37,569) 381 Plant Sewers - - - 382 Outfall Sewer Lines - - - 382 Outfall Sewer Lines - - - 389 Other Plant and Miscellaneous Equipment (22,955) (30,319) (53,275) 389 Other Plant and Miscellaneous Equipment - - - 390 Office Furniture and Equipment (53,455) (23,563) (77,018) 390 Office Furniture and Equipment - - - 390 Office Furniture and Equipment (489) (962) (1,451) 390 Office Furniture and Equipment - (358) (358) 391 Transportation Equipment (69,586) (30,219) (99,805) 391 Transportation Equipment - - - 392 Stores Equipment - - - 392 Stores Equipment - - - 393 Tools, Shop and Garage Equipment (55,551) (20,971) (76,522) 393 Tools, Shop and Garage Equipment 38 - 38 394 Laboratory Equipment (18,553) - (18,553) 394 Laboratory Equipment - - - 395 Power Operated Equipment - (259) (259) 395 Power Operated Equipment - - - 396 Communication Equipment (462) (704) (1,167) 396 Communication Equipment - - - 397 Miscellaneous Equipment - - 397 Miscellaneous Equipment - - - 398 Other Tangible Plant - - - 398 Other Tangible Plant - - -

LU 000075

2014 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined

Plant in Service

101 Utility Plant in Service 37,315 63,232 100,547 351 Organization - 7,299 7,299 352 Franchises 431,640 - 431,640 353 Land and Land Rights 25,000 164,003 189,003 354 Structures and Improvements 2,947,055 1,423,037 4,370,092 355 Power Generation Equipment 2,200 594,253 596,453 360 Collection Sewers - Force 9,678 527,846 537,524 361 Collection Sewers - Gravity 632,102 35,005 667,107 362 Special Collecting Structures - 111,909 111,909 363 Services to Customers 218,960 - 218,960 364 Flow Measuring Devices 2,582 - 2,582 365 Flow Measuring Installations - - - 366 Reuse Services - - - 367 Reuse Meters and Meter Installations - - - 370 Receiving Wells 84,881 - 84,881 371 Pumping Equipment 865,590 587,251 1,452,841 374 Reuse Distribution Reservoirs - - - 375 Reuse Transmission and Distribution System - - - 380 Treatment and Disposal Equipment 1,805,462 72,927 1,878,388 381 Plant Sewers 329,824 - 329,824 382 Outfall Sewer Lines - - - 389 Other Plant and Miscellaneous Equipment 118,327 - 118,327 390 Office Furniture and Equipment 91,225 49,607 140,833

390.1 Computer & Softwear 1,487 4,122 5,609 391 Transportation Equipment 75,104 - 75,104 392 Stores Equipment - - - 393 Tools, Shop and Garage Equipment - 39,304 39,304 394 Laboratory Equipment 10,300 - 10,300 395 Power Operated Equipment - - - 396 Communication Equipment 3,858 - 3,858 397 Miscellaneous Equipment - - - 398 Other Tangible Plant - - -


108 Accumulated Depreciation (4,688) (39,275) (43,963) 108 Accumulated Depreciation - - - 351 Organization - - - 351 Organization - - - 352 Franchises (96,675) (96,675) 354 Structures and Improvements (1,198,220) (962,574) (2,160,793) 354 Structures and Improvements 10,699 2,696 13,395 355 Power Generation Equipment (898) - (898) 355 Power Generation Equipment - - - 360 Collection Sewers - Force (469) (52,496) (52,965) 360 Collection Sewers - Force - - - 361 Collection Sewers - Gravity (146,796) (85,275) (232,071) 361 Collection Sewers - Gravity - 8,858 8,858 362 Special Collecting Structures - - - 362 Special Collecting Structures - - - 363 Services to Customers (92,669) (32,413) (125,081) 363 Services to Customers - - - 364 Flow Measuring Devices (2,582) - (2,582) 364 Flow Measuring Devices - - - 365 Flow Measuring Installations - - - 365 Flow Measuring Installations - - - 366 Reuse Services - - - 366 Reuse Services - - - 367 Reuse Meters and Meter Installations - - - 367 Reuse Meters and Meter Installations - - -

LU 000076

2014 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined370 Receiving Wells (1,650) - (1,650) 370 Receiving Wells - - - 371 Pumping Equipment (423,054) (288,855) (711,909) 371 Pumping Equipment - - - 374 Reuse Distribution Reservoirs - - - 374 Reuse Distribution Reservoirs - - - 375 Reuse Transmission and Distribution System - - - 375 Reuse Transmission and Distribution System - - - 380 Treatment and Disposal Equipment (214,736) (6,548) (221,284) 380 Treatment and Disposal Equipment - - - 381 Plant Sewers (12,259) - (12,259) 381 Plant Sewers - - - 382 Outfall Sewer Lines - - - 382 Outfall Sewer Lines - - - 389 Other Plant and Miscellaneous Equipment (21,089) (26,886) (47,976) 389 Other Plant and Miscellaneous Equipment - - - 390 Office Furniture and Equipment (47,238) (19,969) (67,207) 390 Office Furniture and Equipment - - - 390 Office Furniture and Equipment (192) (137) (329) 390 Office Furniture and Equipment - (358) (358) 391 Transportation Equipment (65,971) (29,488) (95,460) 391 Transportation Equipment - - - 392 Stores Equipment - - - 392 Stores Equipment - - - 393 Tools, Shop and Garage Equipment (32,260) (12,895) (45,155) 393 Tools, Shop and Garage Equipment 38 - 38 394 Laboratory Equipment (10,300) - (10,300) 394 Laboratory Equipment - - - 395 Power Operated Equipment - - - 395 Power Operated Equipment - - - 396 Communication Equipment (154) (201) (355) 396 Communication Equipment - - - 397 Miscellaneous Equipment - - - 397 Miscellaneous Equipment - - - 398 Other Tangible Plant - - - 398 Other Tangible Plant - - -

Current Assets

103 Property Held for Future Use - - - 105 Construction Work in Progress 718,651 2,435,805 3,154,457 105 Construction Work in Progress 104,563 69,472 174,035 114 Utility Plant Acqusition 1,000 1,000

131.1 Cash on Hand 14,890 3,037 17,928 131.2 Cash in Bank - - - 131.2 Cash in Bank 300 1,050 1,350 132 Special Deposits - - - 132 Special Deposits - - - 132 Special Deposits - - - 132 Special Deposits - - - 141 Customer Accounts Receivable 64,155 43,564 107,719 142 Other Accounts Receivable - - - 143 Accumulated Provision for Uncollectible Accounts (12,987) (11,213) (24,200) 145 Accounts Receivable from Associated Companies - - - 162 Prepayments - - - 162 Prepayments 1,786 2,210 3,996 162 Prepayments - - - 173 Accrued Utility Revenues 123,706 104,166 227,873 173 Accrued Utility Revenues - - - 184 Clearing Accounts - - - 186 Miscellaneous Deferred Debits - - - 186 Miscellaneous Deferred Debits - - - 186 Miscellaneous Deferred Debits - (950) (950)

LU 000077

2014 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined186 Miscellaneous Deferred Debits - 2,638 2,638 186 Miscellaneous Deferred Debits 9,573 - 9,573 186 Miscellaneous Deferred Debits - - -

Current Liabilities

231 Accounts Payable - - - 233 Accounts Payable to Associated Companies - - - 233 Accounts Payable to Associated Companies 1,109,373 1,415,929 2,525,303 233 Accounts Payable to Associated Companies (3,486,487) (2,295,318) (5,781,805) 235 Customer Deposits (17,326) (12,213) (29,538) 235 Customer Deposits - - - 236 Accrued Taxes - - - 236 Accrued Taxes 8,008 (11,210) (3,202) 237 Accrued Interest (1,756) (1,591) (3,347) 241 Miscellaneous Current and Accrued Liabilities (117,117) (95,024) (212,141) 241 Miscellaneous Current and Accrued Liabilities (27,298) 3,847 (23,450) 241 Miscellaneous Current and Accrued Liabilities (519) 2,532 2,014 241 Miscellaneous Current and Accrued Liabilities (13,006) (11,271) (24,277) 242 Miscellaneous Current and Accrued Liabilities (12,688) (7,083) (19,771) 252 Advances for Construction (7,500) (7,500) (15,000) 283 Accum Deffered Income Tax

Non-Investor Supplied Capital

271 Contributions in Aid of Construction (2,333,088) (1,443,850) (3,776,938) 271 Contributions in Aid of Construction - (60,340) (60,340) 272 Accumulated Amortization of Contributions in Aid o 753,092 298,825 1,051,916

Capital

201 Common Stock Issued (483,040) (1,100) (484,140) 211 Other Paid-In Capital (499,946) (510,308) (1,010,254) 211 Other Paid-In Capital - (250) (250) 211 Other Paid-In Capital - 164,353 164,353 211 Other Paid-In Capital 407,489 358,924 766,413 214 Appropriated Retained Earnings - - - 216 Reacquired Capital Stock (1,608,494) (2,449,181) (4,057,676)

Operating Revenues

521.1 Residential Revenues (1,352,082) (1,015,627) (2,367,709) 521.2 Commercial Revenues (57,315) (210,861) (268,177) 521.3 Industrial Revenues - - - 522.1 Residential Revenues - - - 522.2 Commercial Revenues - - - 522.3 Industrial Revenues - - - 536 Other WasteWater Revenues - - - 536 Other WasteWater Revenues (3,300) (10,825) (14,125) 536 Other WasteWater Revenues (19,350) (6,675) (26,025) 536 Other WasteWater Revenues - - - 536 Other WasteWater Revenues (14,845) (8,813) (23,658) 536 Other WasteWater Revenues - - - 544 Reuse Revenues from Other Systems - - -

Operating Expenses

701 Salaries and Wages - Employees - - - 701 Salaries and Wages - Employees 32,516 25,797 58,313 58,313 710 Purchased WasteWater Treatment 22,814 15,658 38,472 531,884

LU 000078

2014 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined711 Sludge Removal Expense 141,668 144,492 286,160 711 Sludge Removal Expense - - - 715 Purchased Power 44,817 47,491 92,309 715 Purchased Power - - - 715 Purchased Power 42,455 35,305 77,760 715 Purchased Power - - - 715 Purchased Power - - - 715 Purchased Power - - - 715 Purchased Power - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 718 Chemicals - - - 718 Chemicals 48 - 48 718 Chemicals 26,290 10,846 37,136 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 720 Materials and Supplies 2,609 1,275 3,884 48,342 720 Materials and Supplies - 58 58 720 Materials and Supplies 6,763 6,388 13,151 720 Materials and Supplies - - - 720 Materials and Supplies - - - 720 Materials and Supplies 445 860 1,305 720 Materials and Supplies 150 1,786 1,936 720 Materials and Supplies 2,229 3,623 5,852 720 Materials and Supplies - - - 720 Materials and Supplies - - - 720 Materials and Supplies 9,232 12,925 22,157 731 Contractual Services - Engineering - - - 1,050,827 731 Contractual Services - Engineering - - - 732 Contractual Services - Accounting 150 (4,156) (4,006) 733 Contractual Services - Legal 7,411 886 8,296 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees 5,614 7,032 12,646 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees 11,799 12,817 24,616 734 Contractual Services - Management Fees 51,179 65,967 117,146 734 Contractual Services - Management Fees 26,972 27,281 54,253 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees 40,301 50,475 90,776 734 Contractual Services - Management Fees 5,775 6,015 11,790 734 Contractual Services - Management Fees 4,661 5,840 10,501 734 Contractual Services - Management Fees 7,766 8,438 16,204 734 Contractual Services - Management Fees 3,836 4,805 8,641 734 Contractual Services - Management Fees 7,818 7,933 15,751 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 735 Contractual Services - Testing - - - 735 Contractual Services - Testing 19,163 12,973 32,136 735 Contractual Services - Testing 425 565 990 735 Contractual Services - Testing - - - 736 Contractual Services - Other 39,922 51,299 91,221 736 Contractual Services - Other 184,450 189,209 373,659 736 Contractual Services - Other 10,725 840 11,565

LU 000079

2014 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined736 Contractual Services - Other 135 6,922 7,057 736 Contractual Services - Other 36,006 22,303 58,309 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other 911 2,886 3,797 736 Contractual Services - Other - 415 415 736 Contractual Services - Other 8,031 788 8,819 736 Contractual Services - Other 630 - 630 736 Contractual Services - Other - - - 736 Contractual Services - Other 78,990 16,623 95,614 741 Rental of Building/Real Property 3,274 3,551 6,825 742 Rental of Equipment 68 68 135 114,546 742 Rental of Equipment - - - 742 Rental of Equipment 12,474 94,652 107,127 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment 1,630 2,128 3,758 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment 535 2,992 3,527 750 Transportation Expenses 19,794 14,285 34,079 750 Transportation Expenses 7,310 4,278 11,588 756 Insurance - Vehicle 2,236 2,236 4,472 757 Insurance - General Liability 7,282 4,330 11,612 766 Regulatory Commission Expenses - Amortization o - - - 767 Regulatory Commission Expenses - Other - - - 767 Regulatory Commission Expenses - Other - - - 770 Bad Debt Expense 10,322 3,379 13,702 775 Miscellaneous Expenses 1,838 1,293 3,131 775 Miscellaneous Expenses 34,007 2,670 36,676 775 Miscellaneous Expenses 2,387 287 2,673 775 Miscellaneous Expenses 12,338 17,583 29,921 775 Miscellaneous Expenses 27,236 25,039 52,274

Depreciation and Amortization Expense

272 Amortization of CIAC (77,687) (58,271) (135,958) 403 Depreciation Expenses 10,791 197,561 208,352 403 Depreciation Expenses 354,910 1,066 355,976 403 Depreciation Expenses 6,225 3,066 9,291 403 Depreciation Expenses 5,671 5,671 407 Amortization Expense - 7,058 7,058 407 Amortization Expense 5,546 6,026 11,572

Taxes Other than Income

408 Taxes Other than Income 92,175 63,046 155,221 408 Taxes Other than Income - - -

Income taxes

409 Income Taxes - - - 409 Income Taxes - - -

Non-Operating Income and Expenses

414 Gains (Losses) from Disposition of Utility Property - - - 419 Interest and Dividend Income - - -

LU 000080

2014 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined419 Interest and Dividend Income - - - 420 Allowance for Funds Used During Construction (5,980) (72,852) (78,832) 420 Allowance for Funds Used During Construction - - - 427 Interest Expense 1,039 744 1,783 427 Interest Expense - - - 427 Interest Expense - - - 428 Amortization of Debt Discount and Expense - - -

Total (0) 0 (0)

LU 000081

2013 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined Summary

Plant in Service

101 Utility Plant in Service 37,315 63,232 100,547 10,885,969 351 Organization - - - 352 Franchises 431,640 - 431,640 353 Land and Land Rights 25,000 164,003 189,003 354 Structures and Improvements 2,914,504 1,411,758 4,326,262 355 Power Generation Equipment 2,200 - 2,200 360 Collection Sewers - Force 2,521 594,253 596,773 361 Collection Sewers - Gravity 513,682 526,495 1,040,177 362 Special Collecting Structures - - - 363 Services to Customers 218,960 111,909 330,869 364 Flow Measuring Devices 2,582 - 2,582 365 Flow Measuring Installations - - - 366 Reuse Services - - - 367 Reuse Meters and Meter Installations - - - 370 Receiving Wells - - - 371 Pumping Equipment 809,180 514,880 1,324,060 374 Reuse Distribution Reservoirs - - - 375 Reuse Transmission and Distribution System - - - 380 Treatment and Disposal Equipment 1,797,529 51,810 1,849,339 381 Plant Sewers 329,824 - 329,824 382 Outfall Sewer Lines - - - 389 Other Plant and Miscellaneous Equipment 107,824 (24,044) 83,780 390 Office Furniture and Equipment 90,964 47,929 138,893

390.1 Computer & Softwear - - - 391 Transportation Equipment 69,747 29,488 99,235 392 Stores Equipment - - - 393 Tools, Shop and Garage Equipment - 30,484 30,484 394 Laboratory Equipment 10,300 - 10,300 395 Power Operated Equipment - - - 396 Communication Equipment - - - 397 Miscellaneous Equipment - - - 398 Other Tangible Plant - - -


108 Accumulated Depreciation - - - (3,503,088) 108 Accumulated Depreciation - - - 351 Organization - - - 351 Organization - - - 352 Franchises (85,884) (85,884) 354 Structures and Improvements (1,113,458) (931,187) (2,044,645) 354 Structures and Improvements - 1,005 1,005 355 Power Generation Equipment (788) - (788) 355 Power Generation Equipment - - - 360 Collection Sewers - Force (361) (40,611) (40,972) 360 Collection Sewers - Force - - - 361 Collection Sewers - Gravity (134,224) (74,314) (208,539) 361 Collection Sewers - Gravity - 8,840 8,840 362 Special Collecting Structures - - - 362 Special Collecting Structures - - - 363 Services to Customers (81,721) (27,111) (108,831) 363 Services to Customers - - - 364 Flow Measuring Devices (2,432) - (2,432) 364 Flow Measuring Devices - - - 365 Flow Measuring Installations - - - 365 Flow Measuring Installations - - - 366 Reuse Services - - - 366 Reuse Services - - - 367 Reuse Meters and Meter Installations - - -

LU 000082

2013 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined Summary367 Reuse Meters and Meter Installations - - - 370 Receiving Wells - - - 370 Receiving Wells - - - 371 Pumping Equipment (377,635) (302,697) (680,332) 371 Pumping Equipment - - - 374 Reuse Distribution Reservoirs - - - 374 Reuse Distribution Reservoirs - - - 375 Reuse Transmission and Distribution System - - - 375 Reuse Transmission and Distribution System - - - 380 Treatment and Disposal Equipment (142,686) (3,958) (146,644) 380 Treatment and Disposal Equipment - - - 381 Plant Sewers (4,013) - (4,013) 381 Plant Sewers - - - 382 Outfall Sewer Lines - - - 382 Outfall Sewer Lines - - - 389 Other Plant and Miscellaneous Equipment (17,355) - (17,355) 389 Other Plant and Miscellaneous Equipment - - - 390 Office Furniture and Equipment (40,519) (16,293) (56,811) 390 Office Furniture and Equipment - - - 390 Office Furniture and Equipment - - - 390 Office Furniture and Equipment - - - 391 Transportation Equipment (59,381) (28,423) (87,804) 391 Transportation Equipment - - - 392 Stores Equipment - - - 392 Stores Equipment - - - 393 Tools, Shop and Garage Equipment (11,809) (5,772) (17,582) 393 Tools, Shop and Garage Equipment - - - 394 Laboratory Equipment (10,300) - (10,300) 394 Laboratory Equipment - - - 395 Power Operated Equipment - - - 395 Power Operated Equipment - - - 396 Communication Equipment - - - 396 Communication Equipment - - - 397 Miscellaneous Equipment - - - 397 Miscellaneous Equipment - - - 398 Other Tangible Plant - - - 398 Other Tangible Plant - - -

Current Assets

103 Property Held for Future Use - - - 105 Construction Work in Progress 51,790 411,551 463,341 105 Construction Work in Progress 12,470 18,420 30,890 114 Utility Plant Acqusition 1,000 134,249 135,249

131.1 Cash on Hand 8,186 14,506 22,692 131.2 Cash in Bank - - - 131.2 Cash in Bank 300 1,050 1,350 132 Special Deposits - - - 132 Special Deposits - - - 132 Special Deposits - - - 132 Special Deposits - - - 141 Customer Accounts Receivable 54,045 32,649 86,695 142 Other Accounts Receivable - - - 143 Accumulated Provision for Uncollectible Accounts (11,139) (10,349) (21,488) 145 Accounts Receivable from Associated Companies - - - 162 Prepayments - - - 2,933 162 Prepayments 1,304 1,629 2,933 162 Prepayments - - - 173 Accrued Utility Revenues 115,286 100,517 215,804 173 Accrued Utility Revenues - - - 184 Clearing Accounts - - - 186 Miscellaneous Deferred Debits - - - 186 Miscellaneous Deferred Debits - - -

LU 000083

2013 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined Summary186 Miscellaneous Deferred Debits - 8,745 8,745 186 Miscellaneous Deferred Debits 9,573 - 9,573 186 Miscellaneous Deferred Debits - - - 186 Miscellaneous Deferred Debits - - -

Current Liabilities

231 Accounts Payable (9,657) (10,872) (20,529) 233 Accounts Payable to Associated Companies - - - 233 Accounts Payable to Associated Companies 1,109,373 1,395,929 2,505,303 233 Accounts Payable to Associated Companies (2,827,939) (359,068) (3,187,007) 235 Customer Deposits 300 300 600 (25,833) 235 Customer Deposits (15,559) (10,874) (26,433) 236 Accrued Taxes - - - 236 Accrued Taxes 8,008 (11,210) (3,202) 237 Accrued Interest (1,870) (1,702) (3,572) 241 Miscellaneous Current and Accrued Liabilities (25,899) (149,821) (175,720) 241 Miscellaneous Current and Accrued Liabilities 0 (3,251) (3,251) 241 Miscellaneous Current and Accrued Liabilities - - - 241 Miscellaneous Current and Accrued Liabilities - - - 242 Miscellaneous Current and Accrued Liabilities (11,582) (9,716) (21,299) 252 Advances for Construction (2,500) (2,500) (5,000) 283 Accum Deffered Income Tax


271 Contributions in Aid of Construction (2,223,608) (1,443,850) (3,667,458) (2,777,000) 271 Contributions in Aid of Construction (14,500) (11,000) (25,500) 272 Accumulated Amortization of Contributions in Aid o 675,405 240,554 915,959

Capital

201 Common Stock Issued (483,040) (1,100) (484,140) (4,238,803) 211 Other Paid-In Capital (499,946) (510,308) (1,010,254) 211 Other Paid-In Capital - (250) (250) 211 Other Paid-In Capital - 164,353 164,353 211 Other Paid-In Capital 407,489 358,924 766,413 214 Appropriated Retained Earnings - - - 216 Reacquired Capital Stock (1,525,155) (2,149,770) (3,674,924)

Operating Revenues

521.1 Residential Revenues (1,028,600) (979,218) (2,007,818) 521.2 Commercial Revenues (51,338) (206,591) (257,930) 521.3 Industrial Revenues - - - 522.1 Residential Revenues - - - 522.2 Commercial Revenues - - - 522.3 Industrial Revenues - - - 536 Other WasteWater Revenues (5,500) - (5,500) 536 Other WasteWater Revenues (19,575) (6,850) (26,425) 536 Other WasteWater Revenues (1,320) - (1,320) 536 Other WasteWater Revenues (11,985) (380) (12,365) 536 Other WasteWater Revenues (85) (7,435) (7,520) 536 Other WasteWater Revenues - (7,300) (7,300) 536 Other WasteWater Revenues - (82) (82) 544 Reuse Revenues from Other Systems - - -

Operating Expenses

LU 000084

2013 TRIAL BALANCES


701 Salaries and Wages - Employees - - - 701 Salaries and Wages - Employees 194,482 160,732 355,213 710 Purchased WasteWater Treatment 14,301 3,511 17,812 444,106 711 Sludge Removal Expense 101,817 94,773 196,590 711 Sludge Removal Expense - - - 715 Purchased Power 46,756 31,396 78,152 715 Purchased Power 45,498 62,754 108,252 715 Purchased Power - - - 715 Purchased Power - - - 715 Purchased Power - - - 715 Purchased Power - - - 715 Purchased Power - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 718 Chemicals 511 2,498 3,008 718 Chemicals 27,885 710 28,594 718 Chemicals - 11,698 11,698 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 720 Materials and Supplies 1,837 1,197 3,033 42,545 720 Materials and Supplies 2,227 3,231 5,458 720 Materials and Supplies 1,917 863 2,781 720 Materials and Supplies 3,491 5,178 8,670 720 Materials and Supplies 8,317 14,287 22,604 720 Materials and Supplies - - - 720 Materials and Supplies - - - 720 Materials and Supplies - - - 720 Materials and Supplies - - - 720 Materials and Supplies - - - 720 Materials and Supplies - - - 731 Contractual Services - Engineering - - - 731 Contractual Services - Engineering - - - 732 Contractual Services - Accounting - - - 733 Contractual Services - Legal 1,386 3,861 5,247 734 Contractual Services - Management Fees 6,174 4,045 10,219 734 Contractual Services - Management Fees 48,354 60,027 108,381 734 Contractual Services - Management Fees 22,791 24,760 47,550 734 Contractual Services - Management Fees 42,449 52,810 95,259 734 Contractual Services - Management Fees 6,470 7,029 13,499 734 Contractual Services - Management Fees 4,425 5,500 9,925 734 Contractual Services - Management Fees 12,673 13,770 26,443 734 Contractual Services - Management Fees 4,764 6,048 10,813 734 Contractual Services - Management Fees 5,233 5,684 10,917 734 Contractual Services - Management Fees 5,285 5,744 11,029 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 735 Contractual Services - Testing 6,856 6,815 13,671 735 Contractual Services - Testing - - -

LU 000085

2013 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined Summary735 Contractual Services - Testing - - - 735 Contractual Services - Testing - - - 736 Contractual Services - Other 45,398 26,118 71,516 736 Contractual Services - Other 11,446 4,050 15,496 736 Contractual Services - Other 2,258 1,388 3,645 736 Contractual Services - Other 1,214 1,850 3,064 736 Contractual Services - Other 51,760 37,166 88,926 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 741 Rental of Building/Real Property 3,151 3,152 6,303 742 Rental of Equipment 65 65 130 95,878 742 Rental of Equipment 17,831 67,323 85,155 742 Rental of Equipment 5,069 568 5,637 742 Rental of Equipment 2,334 2,623 4,957 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 750 Transportation Expenses 14,417 12,933 27,350 34,790 750 Transportation Expenses 3,855 3,585 7,440 756 Insurance - Vehicle 2,050 1,925 3,975 757 Insurance - General Liability 9,765 8,119 17,884 766 Regulatory Commission Expenses - Amortization o - - - 767 Regulatory Commission Expenses - Other - - - 767 Regulatory Commission Expenses - Other - - - 770 Bad Debt Expense 3,476 1,516 4,991 775 Miscellaneous Expenses 1,850 878 2,728 775 Miscellaneous Expenses 1,817 2,829 4,646 775 Miscellaneous Expenses 290 290 581 775 Miscellaneous Expenses 10,308 18,379 28,687 775 Miscellaneous Expenses 21,581 22,264 43,845


272 Amortization of CIAC (73,337) (58,271) (131,609) 403 Depreciation Expenses 10,791 115,877 126,668 403 Depreciation Expenses - 4,264 4,264 403 Depreciation Expenses 10,010 938 10,948 403 Depreciation Expenses 7,006 7,006 407 Amortization Expense 236,710 7,965 244,676 407 Amortization Expense (10) (11) (21)



Income taxes


LU 000086

2013 TRIAL BALANCES



414 Gains (Losses) from Disposition of Utility Property - - - 419 Interest and Dividend Income - - - 419 Interest and Dividend Income - - - 420 Allowance for Funds Used During Construction (32,791) (26,783) (59,574) 420 Allowance for Funds Used During Construction - - - 427 Interest Expense 1,278 894 2,172 427 Interest Expense - - - 427 Interest Expense - - - 428 Amortization of Debt Discount and Expense - - -

Total (0) 0 0

LU 000087

2015 DEPRECIATION EXPENSE

NARUC Woodmark Tall Timbers Combined

352 10,791 10,791 354 114,420 73,439 187,859 355 (568) (568) 360 928 12,388 13,316 361 12,863 11,345 24,209 363 10,948 5,302 16,250 370 2,829 2,829 371 171,223 194,428 365,651 380 73,475 25,014 98,489 381 12,292 9,914 22,206 389 1,866 3,433 5,299 390 6,217 3,594 9,811

390.1 297 824 1,122 391 3,615 554 4,169 393 23,290 8,077 31,367 394 (9,094) (9,094) 395 259 259 396 309 504 812

Book 435,701 349,076 784,777

Correct 429,186 349,076 778,262

272 77,770 58,271 136,041

LU 000088

2015 DEFERRED INCOME TAXES


190 Accumulated Deferred Income Taxes (NOL CF) 597,191 75,498 672,689 281 ADIT -- Accelerated Depreciation of Property (736,667) (899,631) (1,636,298) 282 ADIT -- Other Property (71,289) - (71,289) 283 ADIT -- Other (Bad Debts) 578 1,427 2,005

(210,188) (822,706) (1,032,894)

LU 000089

2015 PREPAYMENTS

NARUC Month Year Woodmark Tall Timbers Combined DescriptionPrepaid Licences Fees & Permits

162 12 2014 1,786 2,210 3,996 Prepaid Licences Fees & Permits162 1 2015 1,725 2,132 3,857 Prepaid Licences Fees & Permits162 2 2015 1,725 2,132 3,857 Prepaid Licences Fees & Permits162 3 2015 1,569 1,938 3,507 Prepaid Licences Fees & Permits162 4 2015 1,412 1,744 3,156 Prepaid Licences Fees & Permits162 5 2015 1,255 1,551 2,805 Prepaid Licences Fees & Permits162 6 2015 1,098 1,357 2,455 Prepaid Licences Fees & Permits162 7 2015 941 1,163 2,104 Prepaid Licences Fees & Permits162 8 2015 784 969 1,753 Prepaid Licences Fees & Permits162 9 2015 471 775 1,246 Prepaid Licences Fees & Permits162 10 2015 314 581 895 Prepaid Licences Fees & Permits162 11 2015 1,983 2,644 4,627 Prepaid Licences Fees & Permits162 12 2015 1,877 2,051 3,929

Total 38,187

Average 2,937

LU 000090

2015 BILLING UNITS (Base Equivalent Rate Units)

Month Year Woodmark Tall Timbers Combined

January 2015 1,876 2,135 4,011 February 2015 1,783 2,307 4,089 March 2015 1,760 2,184 3,944 April 2015 1,763 2,214 3,977 May 2015 1,781 2,212 3,993 June 2015 1,794 2,231 4,025 July 2015 1,781 2,516 4,297 August 2015 1,798 2,241 4,038 September 2015 1,783 2,266 4,048 October 2015 1,785 2,273 4,058 November 2015 1,791 2,267 4,058 December 2015 1,794 2,267 4,061

Total 21,488 27,112 48,600

LU 000091

P.U.C. DOCKET NO.46256

NOTICE OF PROPOSED RATE CHANGE PURSUANT TO TEX. WATER CODE § 13.1871

Liberty Utilities (Woodmark Sewer) Corp. CCN No. 20679 and Liberty Utilities (Tall Timbers Sewer) Corp. CCN No. 20694 (“Liberty Utilities”)

Company Name CCN Number(s)

have filed a rate change application with the Public Utility Commission of Texas (Commission or PUC). The application may be reviewed online at interchange.puc.texas.gov. You may also inspect a copy of the rate change application at your utility's office at the address below or at the Commission's office (1701 N. Congress Ave, Austin, TX 78701). The proposed rates will apply to service received after the effective date provided below, unless modified or suspended by the Commission. If the Commission receives a sufficient number of protests, separately or in a combined protest letter, from at least 10 percent of the utility’s customers (over whose rates the Commission has original jurisdiction) or from any affected municipality before the 91st day after the proposed effective date, the matter will be set for hearing. See the Protest Form on the last page of this notice for instructions on how to protest. Liberty Utilities is proposing to increase revenues in two Phases based on combined revenue requirements for the two affected systems. The first Phase increase for wastewater service ($1,038,363) would be implemented after the effective date shown below for Phase 1. Phase 2 ($2,002,514) would be implemented on March 1, 2017 or thereafter subject to Phase 2 project completions, determination of actual project costs, and additional notice per 16 TAC §24.34(b).

EFFECTIVE DATE OF PROPOSED REVENUE INCREASES

Phase 1 $1,038,363 Effective Date: November 1, 2016 Phase 2 $2,002,514 Effective Date: March 1, 2017 (Estimated) Please see attached “Notice of Current and Proposed Rates” following Protest Form for complete schedule of current and proposed Phase 1 rates, Phase 2 rates, and Miscellaneous Fees. Please refer to filed rate change application for other proposed service policy updates/revisions for tariff.

(Proposed rates requested by the utility are not final. The Commission may modify the rates and order a refund or credit against future bills all sums collected during the pendency of the rate proceeding in excess of the rate finally ordered plus interest.) Liberty Utilities’ address is 12725 W. Indian School Rd., Ste. D101, Avondale, Arizona 85392. Our telephone number is (800)525-9547. Total Annual Revenue Increase requested: $3,040,877 (Phases 1 and 2 Combined) Date Customer Notice mailed: September 6, 2016 Dates Meter Typically Read: Not applicable; billing period ends last day of month. This rate increase affects the following systems which are both located in Smith County, Texas: Liberty Tall Timbers (TPDES Permit No. 13000-001); Date of Last Rate Change: June 1, 2010 Liberty Woodmark (TPDES Permit No. 13168-001); Date of Last Rate Change: September 16, 2013

Reason(s) for proposed Rate Change: Operating expenses have increased, and Applicants have made significant capital improvements to provide more reliable service to customers necessitating the requested Phase I rate increase. Additional capital improvement projects will necessitate the Phase II rate increase requested to take effect after completion.

LU 000092

Rate Description

Tall Timbers Current Rate

(Effective as of 7/1/10)

Woodmark Current Rate

(Effective as of 9/16/2013

Proposed Rate Phase 1


Monthly Service Charge Residential Single Family Residential $54.93 $66.92 $76.54 $96.38

Base Equivalent Rate (BER) $56.18 $76.54 $96.38 $34.85 $66.92 $76.54 $96.38

$153.92 $176.04 $221.67 $347.98 $397.99 $501.15

Duplex (per unit) Commercial* OK Trailer Park* Donald Donnelly's RV Park $700.00 $800.61 $1,008.12 *Note these are average rates per class. Actual rates will be determined by rate matrix below.

Other Residential – The monthly rate equals the BER multiplied by the following factors:

Triplexes and Quadplexes 0.68 per unit 0.68 per unit 0.68 per unit

Apartments and condos with 5 or more units 0.52 per unit 0.55 per unit 0.55 per unit Mobile home park 0.68 per space 0.68 per space 0.68 per space 0.68 per space Transient mobile home park 0.52 per space 0.55 per space 0.55 per space 0.55 per space

Institutional – The monthly rate equals the BER multiplied by the following factors:

Schools with Showers 1.00 per 12 attendees

1.00 per 12 attendees



Schools without Showers 1.00 per 15 attendees




Hospital 0.89 per bed 0.89 per bed 0.89 per bed 0.89 per bed Nursing home 0.45 per bed 0.45 per bed 0.45 per bed 0.45 per bed

Commercial – Monthly rate equals the larger of: 1) 80 percent of the actual water meter usage as supplied by the water utility or 2) the BER multiplied by the following factors: Restaurant (fast food &/or disposal) 1.12 per table 1.12 per table 1.12 per table 1.12 per table

Restaurant (sit down &/or dishwashers) 0.45 per table 0.45 per table 0.45 per table 0.45 per table

Motel without restaurant 0.50 per unit 0.50 per unit 0.50 per unit 0.50 per unit

Motel with restaurant 0.50 per unit plus 0.45 per table

0.50 per unit plus 0.45 per table



Laundromat 2.00 per washer 2.00 per washer 2.00 per washer 2.00 per washer

Commercial laundry 3.00 per washer 3.00 per washer 3.00 per washer 3.00 per washer

Retail Space 1.50 per space 1.50 per space 1.50 per space 1.50 per space

*Service station without bays 1.50 per facility 1.50 per facility 1.50 per facility 1.50 per facility

Notice of Current and Proposed Rates

LU 000093

Commercial – Monthly rate equals the larger of: 1) 80 percent of the actual water meter usage as supplied by the water utility or 2) the BER multiplied by the following factors:

*Service station with bays 1.50 per facility plus 6.96 per service bay

1.50 per facility plus 6.96 per service bay



Grocery without butcher 1.50 per facility 1.50 per facility 1.50 per facility 1.50 per facility

Grocery with butcher 2.00 per facility plus 4.18 per facility

2.00 per facility plus 4.18 per facility



Carwash self-service 1.50 per bay 1.50 per bay 1.50 per bay 1.50 per bay

Churches

1.50 per 200 persons capacity in the main sanctuary or meeting room




Golf course with showers

1.0 per 30 potential golfers during the normal day of 8:00AM to 1:00 with foursomes being dispatched every 10 minutes (120 per day)




Golf course without showers





* If service station also prepares and serves food, it will pay the highest rate applicable to it. If there is no water meter data and the commercial enterprise is not expected to generate waterborne waste greater than a normal single-family residence, i.e., a common office not operating a retail sales business with multiple restrooms open to the public, the business will be imputed a service demand factor of 1.0 for every 1 to 19 on-premises employees. This factor will increase to 2.0 on-premises employees 20 to 39. Industrial or large commercial other than shown – The monthly rate will be individually negotiated based upon quantity and strength of effluent. The lowest rate to be charged these customers will be the retail rate of 1.5. All Other RV Parks - The single family residential rate multiplied by a factor of 0.55 per average annual occupied space/pad. Average annual occupancy rate to be recalculated annually from information provided by the customer. For the first year of the rate there will be an inputter occupancy rate of 80% to be used until an historic average can be calculated.

LU 000094

Description

Tall Timbers Current Rate (Effective as

of 7/1/10)

Woodmark Current Rate

(Effective as of 9/16/2013



Miscellaneous Fees Tap Fee $1,100.00 $1,100.00 $1,100.00 $1,100.00

Tap Fee (Large Connection Tap) Actual Cost Actual Cost Actual Cost Actual Cost

Reconnection Fee (Non-payment of Bill) $25.00 $25.00 $25.00 $25.00

Reconnection Fee (Customer's request) $25.00 $550.00 $25.00 $25.00

Service Relocation Fee Actual Cost* Actual Cost* Actual Cost* Actual Cost*

Seasonal Reconnection Fee

Base rate times number of months off system**




Transfer Fee $25.00 $50.00 $50.00 $50.00 Return Check Charge $20.00 $30.00 $30.00 $30.00 Late Charge $5.00 $5.00 $5.00 $5.00 Customer Deposit Residential (Maximum $50) $50.00 $50.00 $50.00 $50.00

Commercial and Non-residential Deposit

1/6 estimated annual bill




Regulatory Assessment of 1% is added to base rate. Additional fees and meter sizes may be shown on a separate page. *Actual cost to relocate that service connection this fee may be charged if a customer requests relocation of an existing service connection. **Not to exceed six months when leave and return within a twelve month period. Line Extension and Construction Charges: Refer to section 2.20 Specific Utility Service rules and Section 3.20 Utility Specific Extension Policy for terms, conditions, and charges. Governmental Testing, Inspection and Costs Surcharge Clause: Increases in inspection fees and water testing costs imposed by state or federal law may be passed through as an adjustment to the monthly base rate charge under the terms and conditions of 16 T.A.C. 24.21 (k) (2) after notice to customers and upon written approval by the TX PUC. If applicable, list any bill payment assistance programs to low income Ratepayers. Not applicable.

LU 000095

□ □ □

□

P.U.C. DOCKET NO. 46256

RATEPAYER PROTEST

If you wish to PROTEST the proposed rate change, you must submit this form and 10 copies to:

Filing Clerk Public Utility Commission of Texas

1701 North Congress Avenue P.O. Box 13326

Austin, Texas 78711-3326 Unless protests are received from at least 10% of ratepayers or from any affected municipality, or the Commission Staff requests a hearing, no hearing will be held and the rates will be effective as proposed.

CUSTOMER INFORMATION (to be completed by customers submitting protests)

First Name: Last Name:

Phone Number: Fax Number:

Address, City, State:

Location where service is received: (if different from the mailing address)

Please fill out the following:

I wish to PROTEST the following proposed rate action/s:

Water Rate Change Sewer Rate Change Both Water and Sewer Rate Change

Other (please specify below)

Signature of Protestant:

Date:

Si desea informacion en Espanol, puede llamar al 1-888-782-8477

Hearing- and speech-impaired individuals with text telephones may contact the PUC’s Customer Assistance

Hotline at 512-936-7136

LU 000096

NOTICE OF PROPOSED RATE CHANGE PURSUANT TO TEX. WATER CODE § 13.1871 Liberty Utilities (Tall Timbers Sewer) Corp. CCN No. 20694 (“Liberty Tall Timbers”)

Company Name CCN Number

has filed a rate change application with the City of Tyler, Texas. You may also inspect a copy of the rate change application at your utility’s office at the address below or at the City of Tyler address provided below. The proposed rates will apply to service received after the effective date provided below, unless modified or suspended by the City of Tyler. If the City of Tyler receives a sufficient number of protests, separately or in a combined protest letter, from at least 10 percent of the utility’s customers (over whose rates the City of Tyler has original jurisdiction) before the 91st day after the proposed effective date, the matter will be set for hearing. See Protest Form on the last page of this notice for instructions on how to protest. If you are located within the City of Tyler, please send your protest to Edward Broussard, City Manager- City of Tyler, 212 N. Bonner Ave., Tyler, Texas, 75702. You may also wish to contact the City of Tyler at (903)531-1250. Liberty Tall Timbers is proposing to increase revenues in two Phases based on combined revenue requirements for Liberty Tall Timbers and Liberty Utilities (Woodmark Sewer) Corp. (“Liberty Woodmark”). The first Phase increase for wastewater service ($1,038,363) would be implemented after the effective date shown below for Phase 1. Phase 2 ($2,002,514) would be implemented on March 1, 2017 or thereafter subject to Phase 2 project completions, determination of actual project costs, and additional notice per 16 TAC §24.34(b).

EFFECTIVE DATE OF PROPOSED REVENUE INCREASES

Phase 1 $1,038,363 Effective Date: November 1, 2016 Phase 2 $2,002,514 Effective Date: March 1, 2017 (Estimated) Please see attached “Notice of Current and Proposed Rates” following Protest Form for complete schedule of current and proposed Phase 1 rates, Phase 2 rates, and Miscellaneous Fees. Please refer to filed rate change application for other proposed service policy updates/revisions for tariff.

(Proposed rates requested by the utility are not final. The City of Tyler may modify the rates and order a refund or credit against future bills all sums collected during the pendency of the rate proceeding in excess of the rate finally ordered plus interest, subject to appeal to the Public Utility Commission of Texas which may take similar actions.) Liberty Tall Timbers’ address is 12725 W. Indian School Rd., Ste. D101, Avondale, Arizona 85392. Our telephone number is (800)525-9547. Total Annual Revenue Increase requested: $3,040,877 (Phases 1 and 2 Combined) Date Customer Notice mailed: September 6, 2016 Dates Meter Typically Read: Not applicable; billing period ends last day of month. This rate increase affects the following system which is located in Smith County, Texas: Liberty Tall Timbers (TPDES Permit No. 13000-001) Date of Last Rate Change: November 1, 2002 (inside City of Tyler rates only)

Reason(s) for proposed Rate Change: Operating expenses have increased, and significant capital improvements have been made to provide more reliable service to customers necessitating the requested Phase I rate increase. Additional capital improvement projects will necessitate the Phase II rate increase requested to take effect after completion.

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Rate Description TT - Tyler Rate (effective as of 11/1/2002) Proposed Rate Phase 1 Proposed Rate Phase 2

Monthly Service Charge Residential Single Family Residence $27.75 $76.54 $96.38 Base Equivalent Rate (BER) $27.75 $76.54 $96.38 Duplex (per unit) $76.54 $76.54 Other Residential – The monthly rate equals the BER multiplied by the following factors:

2-4 Family Residence 0.68 per unit (Times Tyler Rate)

Triplexes and Quadplexes 0.68 per unit 0.68 per unit

Apartments and condos with 5 or more units

0.52 per unit (Times Tyler Rate) 0.55 per unit 0.55 per unit

Mobile home park 0.68 per space (Times Tyler Rate) 0.68 per space 0.68 per space

Transient mobile home park 0.52 per space (Times Tyler Rate) 0.55 per space 0.55 per s

Institutional – The monthly rate equals the BER multiplied by the following factors:

Schools with Showers 1.00 per 12 attendees (Times Tyler Rate) 1.00 per 12 attendees 1.00 per 12 attendees

Schools without Showers 1.00 per 15 attendees (Times Tyler Rate) 1.00 per 15 attendees 1.00 per 15 attendees

Hospital 0.89 per bed (Times Tyler Rate) 0.89 per bed 0.89 per bed

Nursing home 0.45 per bed (Times Tyler Rate) 0.45 per bed 0.45 per bed


Restaurant (fast food &/or disposal) 1.12 per table (Times Tyler Rate) 1.12 per table 1.12 per table

Restaurant (sit down &/or dishwashers)

0.45 per table (Times Tyler Rate) 0.45 per table 0.45 per table

Motel without restaurant 0.50 per unit (Times Tyler Rate) 0.50 per unit 0.50 per unit

Motel with restaurant 0.50 per unit plus 0.45 per table (Times Tyler Rate)



Laundromat 2.00 per washer (Times Tyler Rate) 2.00 per washer 2.00 per washer

Commercial laundry 3.00 per washer (Times Tyler Rate) 3.00 per washer 3.00 per washer

Retail Space 1.50 per space (Times Tyler Rate) 1.50 per space 1.50 per space

Notice of Current and Proposed Rates

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*Service station without bays 1.50 per facility (Times Tyler Rate) 1.50 per facility 1.50 per facility

*Service station with bays 1.50 per facility plus 6.96

per service bay (Times Tyler Rate)



Grocery without butcher 1.50 per facility (Times Tyler Rate) 1.50 per facility 1.50 per facility

Grocery with butcher 2.00 per facility plus 4.18

per facility (Times Tyler Rate)



Carwash self-service 1.50 per bay (Times Tyler Rate) 1.50 per bay 1.50 per bay

Churches 1.50 per 200 persons capacity in the main

sanctuary or meeting room

1.50 per 200 persons capacity in the main sanctuary or meeting

room

1.50 per 200 persons capacity in the main sanctuary or meeting

room

Golf course with showers

1.0 per 30 potential golfers during the normal day of

8:00AM to 1:00 with foursomes being

dispatched every 10 minutes (120 per day)

1.0 per 30 potential golfers during the normal day of 8:00AM to 1:00 with foursomes being dispatched every 10

minutes (120 per day)

1.0 per 30 potential golfers during the

normal day of 8:00AM to 1:00 with foursomes being dispatched every

10 minutes (120 per day)

Golf course without showers

1.0 per 50 potential golfers during the normal day of

8:00AM to 1:00 with foursomes being

dispatched every 10 minutes (120 per day)

1.0 per 50 potential golfers during the normal day of 8:00AM to 1:00 with foursomes being dispatched every 10

minutes (120 per day)




* If service station also prepares and serves food, it will pay the highest rate applicable to it. If there is no water meter data and the commercial enterprise is not expected to generate waterborne waste greater than a normal single-family residence, i.e., a common office not operating a retail sales business with multiple restrooms open to the public, the business will be imputed a service demand factor of 1.0 for every 1 to 19 on-premises employees. This factor will increase to 2.0 on-premises employees 20 to 39. Industrial or large commercial other than shown – The monthly rate will be individually negotiated based upon quantity and strength of effluent. The lowest rate to be charged these customers will be the retail rate of 1.5. All Other RV Parks - The single family residential rate multiplied by a factor of 0.55 per average annual occupied space/pad. Average annual occupancy rate to be recalculated annually from information provided by the customer. For the first year of the rate there will be an inputter occupancy rate of 80% to be used until an historic average can be calculated.

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Description TT-Tyler Rate (Effective as of

11/1/2002)



Miscellaneous Fees Tap Fee $1,100.00 $1,100.00 $1,100.00

Tap Fee (Large Connection Tap) Actual Cost Actual Cost Actual Cost

Reconnection Fee (Non payment of Bill) $25.00 $25.00 $25.00

Reconnection Fee (Customer's request) $25.00 $25.00 $25.00

Service Relocation Fee Actual Cost* Actual Cost* Actual Cost*

Seasonal Reconnection Fee Base rate times number of months off system**



Transfer Fee $50.00 $50.00 $50.00 Return Check Charge $30.00 $30.00 $30.00 Late Charge $5.00 $5.00 $5.00 Customer Deposit Residential (Maximum $50) $50.00 $50.00 $50.00

Commercial and Non-residential Deposit




Regulatory Assessment of 1% is added to base rate. Additional fees and meter sizes may be shown on a separate page. *Actual cost to relocate that service connection this fee may be charged if a customer requests relocation of an existing service connection. **Not to exceed six months when leave and return within a twelve month period. Line Extension and Construction Charges: Refer to section 2.20 Specific Utility Service rules and Section 3.20 Utility Specific Extension Policy for terms, conditions, and charges. Governmental Testing, Inspection and Costs Surcharge Clause: Increases in inspection fees and water testing costs imposed by state or federal law may be passed through as an adjustment to the monthly base rate charge under the terms and conditions of 16 T.A.C. 24.21 (k) (2) after notice to customers and upon written approval by the TX PUC. If applicable, list any bill payment assistance programs to low income Ratepayers. Not applicable.

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□

RATEPAYER PROTEST

If you wish to PROTEST the proposed rate change, you may submit this form to:

Edward Broussard City Manager - City of Tyler

212 N. Bonner Ave. Tyler, Texas, 75702

CUSTOMER INFORMATION (to be completed by customers submitting protests)

First Name: Last Name:

Phone Number: Fax Number:

Address, City, State: Location where service is received: (if different from the mailing address)

Please fill out the following:

I wish to PROTEST the following proposed rate action/s:

Sewer Rate Change

Other (please specify below)

Signature of Protestant:

Date:

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PUCT Sewer Tariff Page 1 of 22 9/1/14

SEWER UTILITY TARIFF Docket No. 46256

Liberty Utilities (Woodmark Sewer) Corp. and Liberty Utilities (Tall Timbers Sewer) Corp. (Utility Name)

12725 W Indian School Rd. Ste D101 (Business Address)

Avondale, Arizona 85392 (City, State, Zip Code)

(800)525-9547 (Area Code/Telephone)

This tariff is effective for utility operations under the following Certificates of Convenience and Necessity: 20679 and 20694 This tariff is effective in the following county: Smith This tariff is effective for the following systems: Liberty Tall Timbers (TPDES Permit No. 13000-001) (Outside City of Tyler) Liberty Woodmark (TPDES Permit No. 13168-001) The above utility lists the following sections of its tariff (if additional pages are needed for a section, all pages should be numbered consecutively):

TABLE OF CONTENTS SECTION 1.0 – RATE SCHEDULE 2 SECTION 2.0 – SERVICE RULES AND POLICIES 5

SECTION 3.0 – EXTENSION POLICY 14 APPENDIX A – STANDARD SERVICE APPLICATION

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Liberty Utilities (Woodmark Sewer) Corp. Sewer Tariff page No. 2 and Liberty Utilities (Tall Timbers Sewer) Corp. (Outside City of Tyler)

PUCT Sewer Tariff (Previously TCEQ Form 10436) Page 2 of 22 9/1/14

SECTION 1.0 -- RATE SCHEDULE Section 1.01 - Rates Monthly Service Charge Base Equivalent Rate (BER) Phase 1 - $76.54 Phase 2 - $96.38 Residential Phase 1 Phase 2 Single Family Residential $76.54 $96.38 Duplex (per unit) $76.54 $96.38

Other Residential – the monthly rate equals the BER multiplied by the following factors: Phase 1 Phase 2 Triplexes and Quadplexes 0.68 per unit 0.68 per unit Apartments and condos with 5 or more units 0.55 per unit 0.55 per unit Mobile home park 0.68 per space 0.68 per space Transient mobile home park 0.55 per space 0.55 per space

Institutional – the monthly rate equals the BER multiplied by the following factors: Phase 1 Phase 2 Schools with Showers 1.00 per 12

attendees 1.00 per 12

attendees Schools without Showers 1.00 per 15


attendees Hospital 0.89 per bed 0.89 per bed Nursing Home 0.45 per bed 0.45 per bed

Commercial – the monthly rate equals the larger of: 1) 80 percent of the actual water meter usage as supplied by the water utility or 2) the BER multiplied by the following factors: Phase 1 Phase 2 Restaurant (fast food and/or disposal) 1.12 per table 1.12 per table Restaurant (sit down and/or dishwashers) 0.45 per table 0.45 per table Motel without restaurant 0.50 per unit 0.50 per unit Motel with restaurant 0.50 per unit plus 0.45

per table 0.50 per unit plus 0.45

per table Laundromat 2.00 per washer 2.00 per washer Commercial Laundry 3.00 per washer 3.00 per washer Retail Space 1.50 per space 1.50 per space Service Station without bays 1.50 per facility 1.50 per facility

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Service Station with bays 1.50 per facility plus 6.96 per service bay


Grocery without butcher 1.50 per facility 1.50 per facility Grocery with butcher 2.00 per facility plus

4.18 per facility 2.00 per facility plus

4.18 per facility Carwash, self service 1.50 per bay 1.50 per bay Churches 1.50 per 200 person

capacity in main sanctuary or meeting

room

1.50 per 200 person capacity in main


Golf Course with showers 1.0 per 30 potential golfers during the






Golf Course without showers 1.0 per 50 potential golfers during the






FORM OF PAYMENT: The utility will accept the following forms of payment: Cash X, Check X, Money Order X, Credit Card X, Other (specify) Visa/Master Card Credit Card/Only; Electronic Draft Available Upon Request

(THE UTILITY MAY REQUIRE EXACT CHANGE FOR PAYMENTS AND MAY REFUSE TO ACCEPT PAYMENTS MADE USING MORE THAN $1.00 IN SMALL COINS. A WRITTEN RECEIPT WILL BE GIVEN FOR CASH PAYMENTS. CASH PAYMENTS MUST BE MADE AT LOCAL OFFICE.)

REGULATORY ASSESSMENT ........................................................................................................... 1.0% THE PUBLIC UTILITY COMMISSION (COMMISSION) RULES REQUIRE THE UTILITY TO COLLECT AND REMIT TO THE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY A FEE OF ONE PERCENT OF THE RETAIL MONTHLY BILL.

Section 1.02 - Miscellaneous Fee TAP FEE........................................................................................................................................ $1,100.00 TAP FEE IS BASED ON THE AVERAGE OF THE UTILITY’S ACTUAL COSTS FOR MATERIALS AND LABOR TO INSTALL A STANDARD RESIDENTIAL CONNECTION PLUS UNIQUE COSTS AS PERMITTED BY PUC RULE AT COST.

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SECTION 1.0 -- RATE SCHEDULE (continued) TAP FEE (Large Connection Tap) ............................................................................................ Actual Cost TAP FEE IS BASED ON THE UTILITY'S ACTUAL COST FOR MATERIALS AND LABOR FOR TAP SIZE INSTALLED.

RECONNECTION FEE: THE RECONNECT FEE WILL BE CHARGED BEFORE SERVICE CAN BE RESTORED TO A CUSTOMER WHO HAS BEEN DISCONNECTED FOR THE FOLLOWING REASONS:

a) Non payment of bill (Maximum $25.00) ...................................................................................... $25.00 b) Customer’s request ........................................................................................................................ $25.00

OR OTHER REASONS LISTED UNDER SECTION 2.0 OF THIS TARIFF

TRANSFER FEE ................................................................................................................................ $50.00 THE TRANSFER FEE WILL BE CHARGED FOR CHANGING AN ACCOUNT NAME AT THE SAME SERVICE LOCATION WHEN THE SERVICE IS NOT DISCONNECTED.

LATE CHARGE ................................................................................................................................... $5.00 A ONE-TIME PENALTY TO BE CHARGED ON DELINQUENT BILLS. A LATE CHARGE MAY NOT BE APPLIED TO ANY BALANCE TO WHICH THE PENALTY WAS APPLIED IN A PREVIOUS BILLING.

RETURNED CHECK CHARGE ....................................................................................................... $30.00 CUSTOMER DEPOSIT RESIDENTIAL (Maximum $50) ............................................................... $50.00 COMMERCIAL AND NON-RESIDENTIAL DEPOSIT.................................. 1/6th EST. ANNUAL BILL SERVICE RELOCATION FEE ..................................... Actual Cost to Relocate that Service Connection

THIS FEE MAY BE CHARGED IN A CUSTOMER REQUESTS RELOCATION OF AN EXISTING SERVICE CONNECTION

SEASONAL RECONNECTION FEE:

BASE RATE TIMES NUMBER OF MONTHS OFF THE SYSTEM NOT TO EXCEED SIX MONTHS WHEN LEAVE AND RETURN WITHIN A TWELVE MONTH PERIOD.

LINE EXTENSION AND CONSTRUCTION CHARGES:

Refer to Section 2.20 Specific Utility Service Rules and Section 3.20 Utility Specific Extension Policy for terms, conditions, and charges.

GOVERNMENTAL TESTING, INSPECTION AND COSTS SURCHARGE CLAUSE: Increase in inspection fees and water testing costs imposed by state or federal law may be passed through as an adjustment to the monthly base rate charge under the terms and conditions of 16 TAC 24.21(k)(2) when authorized by the Commission and after notice to customers.

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SECTION 2.0 — SERVICE RULES AND REGULATIONS Section 2.01 – Public Utility Commission of Texas Rules The utility will have the most current Public Utility Commission of Texas Rules relating to sewer utilities available at its office for reference purposes. The Rules and this tariff shall be available for public inspection and reproduction at a reasonable cost. The latest Rules or Commission approved changes to the Rules supersede any rules or requirements in this tariff. Section 2.02 - Application for Sewer Service All applications for service will be made on the utility's standard application or contract form (attached in the Appendix to this tariff), will be signed by the applicant before sewer service is provided by the utility. A separate application or contract will be made for each service location. After the applicant has met all the requirements, conditions and regulations for service, the utility will install service connections, which may include a utility cut-off valve and/or take all necessary actions to initiate service. The utility will serve each qualified applicant for service within 5 working days unless line extensions or new facilities are required. If construction is required to fill the order and if it cannot be completed within 30 days, the utility will provide the applicant with a written explanation of the construction required and an expected date of service. Where service has previously been provided, the utility will reconnect the service within one working day after the applicant has met requirements for reconnection. The customer will be responsible for furnishing and laying the necessary customer service pipe from the connection location to the place of use. Section 2.03 - Refusal of Service The utility may decline to serve an applicant until the applicant has complied with the regulations of the regulatory agencies (state and municipal regulations) and for the reasons outlined in the commission rules. In the event that the utility refuses to serve an applicant, the utility will inform the applicant in writing of the basis of its refusal. The utility is also required to inform the applicant that a complaint may be filed with the Commission.

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SECTION 2.0 – SERVICE RULES AND POLICIES (Continued) Section 2.04–Customer Deposits If a residential applicant cannot establish credit to the satisfaction of the utility, the applicant will be required to pay a deposit as provided for in Section 1.02 of this tariff. The utility will keep records of the deposit and credit interest in accordance with Commission rules. Residential applicants 65 years of age or older may not be required to pay deposits unless the applicant has an outstanding account balance with the utility or another water or sewer utility which accrued within the last two years. Nonresidential applicants who cannot establish to the satisfaction of the utility may be required to make a deposit that does not exceed an amount equivalent to one-sixth of the estimated annual billings. Refund of deposit - If service is not connected, or after disconnection of service, the utility will promptly refund the customer's deposit plus accrued interest or the balance, if any, in excess of the unpaid bills for service furnished. The utility may refund the residential customer’s deposit at any time prior to termination of utility service but must refund the deposit plus interest for any residential customer who has paid 18 consecutive billings without being delinquent.

Section 2.05–Meter Requirements, Readings, and Testing It is not a requirement that the utility use meters to measure the quantity of sewage disposed of by individual customers. One connection is required for each residential, commercial, or industrial facility in accordance with Commission rules.

Section 2.06–Billing Bills from the utility will be mailed monthly unless otherwise authorized by the Commission. The due date of bills for utility service will be at least twenty (20) days from the date of issuance. The postmark on the bill or, if there is no postmark on the bill, the recorded date of mailing by the utility will constitute proof of the date of issuance. If the due date falls on a holiday or weekend, the due date for payment purposes will be the next workday after the due date. A late penalty of $5.00 will be charged on bills received after the due date. The penalty on delinquent bills will not be applied to any balance to which the penalty was applied in a previous billing. The utility must maintain a record of the date of mailing to charge the late penalty.

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SECTION 2.0 – SERVICE RULES AND POLICIES (Continued) Each bill will provide all information required by the commission rules. For each of the systems it operates, the utility will maintain and note on the monthly bill a local or toll-free telephone number (or numbers) which may be reached by a local call by customers. At the utility’s option, a toll-free telephone number or the equivalent may be provided. In the event of a dispute between a customer and a utility regarding any bill for utility service, the utility will conduct an investigation and report the results to the customer. If the dispute is not resolved, the utility will inform the customer that a complaint may be filed with the Commission.

Section 2.07 - Service Disconnection Utility service may be disconnected if the bill has not been paid in full by the date listed on the termination notice. The termination date must be at least 10 days after the notice is mailed or hand delivered. The utility is encouraged to offer a deferred payment plan to a customer who cannot pay an outstanding bill in full and is willing to pay the balance in reasonable installments. However, a customer's utility service may be disconnected if a bill has not been paid or a deferred payment agreement entered into within 30 days from the date of issuance of a bill and if proper notice of termination has been given. Notice of termination must be a separate mailing or hand delivery in accordance with the commission rules. Utility service may also be disconnected without notice for reasons as described in the commission rules. Utility personnel must be available to collect payments and to reconnect service on the day of and the day after any disconnection of service unless service was disconnected at the customer’s request or due to a hazardous condition. Section 2.08–Reconnection of Service Service will be reconnected within 24 hours after the past due bill and any other outstanding charges are pair or correction of the conditions which caused service to be disconnected.

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SECTION 2.0 – SERVICE RULES AND POLICIES (Continued)

Section 2.09–Service Interruptions The utility will make all reasonable efforts to prevent interruptions of service. If interruptions occur, the utility will re-establish service within the shortest possible time. Except for momentary interruptions due to automatic equipment operations, the utility will keep a complete record of all interruptions, both emergency and scheduled and will notify the Commission in writing of any service interruptions affecting the entire system or any major division of the system lasting more than four hours. The notice will explain the cause of the interruptions. Prorated Bills – If service is interrupted or impaired for 24 consecutive hours or more, the utility will prorate the monthly base bill in proportion to the time service was not available to reflect this loss of service. Section 2.10 - Quality of Service The utility will plan, furnish, and maintain and operate a treatment and collection facilities of sufficient size and capacity to provide continuous and adequate service for all reasonable consumer uses and to treat sewage and discharge effluent of the quality required by its discharge permit issued by the TCEQ. Unless otherwise authorized by the TCEQ, the utility will maintain facilities as described in the TCEQ’s rules. Section 2.11 - Customer Complaints and Disputes If a customer or applicant for service lodges a complaint, the utility will promptly make a suitable investigation and advise the complainant of the results. Service will not be disconnected pending completion of the investigation. If the complainant is dissatisfied with the utility's response, the utility must advise the complainant that he has recourse through the commission’s complaint process. Pending resolution of a complaint, the commission may require continuation or restoration of service. The utility will maintain a record of all complaints which shows the name and address of the complainant, the date and nature of the complaint and the adjustment or disposition thereof, for a period of two years after the final settlement of the complaint.

SECTION 2.20 SPECIFIC UTILITY SERVICE RULES AND REGULATIONS This section contains specific utility service rules in addition to the rules previously listed under Section 2.0. It must be reviewed and approved by the Commission and in compliance with the commission rules to be effective.

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SECTION 2.20 SPECIFIC UTILITY SERVICE RULES AND REGULATIONS (continued)

The utility adopts the administrative rules of the Public Utility Commission of Texas, as the same may be amended from time to time, as its company specific service rules and regulations. These rules will be kept on file at the company's offices for customer inspection during regular business hours. In the event of a conflict between the commission’s amended rules and the provisions of this tariff, the amended rules shall prevail. Where necessary, any conflicting provision of this tariff shall be deemed to have been superseded by the commission rule in question to the degree that the Utility may conduct its lawful business in conformance with all requirements of said rule. All payments for utility service shall be delivered or mailed to the utility's business office. If the business office fails to receive payment prior to the time of noticed disconnection for non-payment of a delinquent account, service will be terminated as scheduled. Utility service crews shall not be allowed to collect payments on customer accounts in the field. Payment of an account by any means that has been dishonored and returned by the payor or payee's bank, shall be deemed to be delinquent. All returned payments must be redeemed with cash or valid money order. If a customer has two returned payments within a twelve month period, the customer shall be required to pay a deposit if one has not already been paid. Customer shall be liable for any damage or injury to utility-owned property or personnel shown to be caused by the customer, his invitees, his agents, his employees, or others directly under his control. Limitation on Product/Service Liability - The utility will not accept liability for any injury or damage to individuals or their property occurring on the customer's premises. The utility makes no representations or warranties (expressed or implied) that customer's appliances will not be damaged by disruptions of or fluctuations in sewer service whatever the cause. The utility will not accept liability for injuries or damages to persons or property due to disruption of sewer service caused by: (1) acts of God, (2) acts of third parties not subject to the control of the utility if the utility has undertaken such preventive measures as are required by commission rules, (3) electrical power failures in sewer systems not required by commission rule to have auxiliary power supplies, or ( 4) termination of sewer service pursuant to the utility's tariff and the commission’s rules. If the services of a registered professional engineer are required as a result of an application for service received by the Utility for service to that applicant's service extension only, such engineer will be selected by the Utility and the applicant, and the applicant shall bear all expenses incurred therein.

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If an applicant requires service other than the standard service provided by the utility, such applicant will be required to pay all expenses incurred by the utility in excess of the expenses that would be incurred in providing the standard service and connection. Any applicant who places unique or non-standard service demands on the system may be required to provide contributions in aid of construction (as may be allowed by commission rule) for the actual costs of any additional facilities required to maintain compliance with the Texas Commission Environmental Quality minimum design criteria for sewer collection, treatment, pumping and discharge. Any applicant or existing customer required to pay for any costs not specifically set forth in the rate schedule pages of this tariff shall be entitled to a written explanation of such costs prior payment and/or commencement of construction. If the applicant or existing customer does not believe that these costs are reasonable or necessary, the applicant or existing customer shall have the right to appeal such costs to the commission or such other regulatory authority having jurisdiction over the utility's rates in that portion of the utility's service area in which the applicant's or existing customer's property(ies) is located. Tap fees may be increased by unique costs not normally incurred as may be permitted by 16 TAC 24.86(b)(1)(C). The Utility adopts the Uniform Plumbing Code pursuant to TCEQ Rule 290.46(i). The piping and other equipment on the premises furnished by the customer will be maintained by the customer at all times in conformity with the requirements of the PUC, TCEQ, the Uniform Plumbing Code, and with the service rules and regulations of the Utility. The customer will bring out his service line to his property line at the point on the customer's property mutually acceptable to the customer and the Utility subject to such requirements as may exist by commission rule. The utility will have the right of access to the customer's premises at all times reasonable for the purpose of installing, testing, inspecting or repairing sewer mains or other equipment used in connection with its provision of sewer service, or for the purpose of removing its property and disconnecting lines, and for all other purposes necessary to the operation of the utility system including inspecting the customer's plumbing for code, plumbing or tariff violations. The customer shall allow the utility and its personnel access to the customer's property to conduct any tests or inspections required by law. Unless necessary to respond to equipment failure, leak or other condition creating an immediate threat to public health and safety or the continued provision of adequate utility service to others, such entry upon the customer's property shall be during normal business hours. The

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customer may require any utility representative, employee, contractor, or agent seeking to make such entry identify themselves, their affiliation with the utility, and the purpose of their entry. Threats to or assaults upon utility personnel shall result in criminal prosecution. Except in cases where the customer has a contract with the utility for reserve or auxiliary service, no other sewer service will be used by the customer on the same installation in conjunction with the utility's service, either by means of a cross-over valve or any other connection. Customer shall not connect, or allow any other person or party to connect, onto any sewer lines on his premises. Two places shall not be permitted to be supplied with one service pipe where there is a sewer main abutting the premises. No application, agreement or contract for service may be assigned or transferred without the written consent of the utility. It is agreed and understood that any and all sewer lines and other equipment furnished by the utility (excepting the customer's individual service lines from the point of connection to customer's structures on customer's premises) are and shall remain the sole property of the i1tility, and nothing contained herein or in a contract/application for service shall be construed to reflect a sale or transfer of any such lines or equipment to any customer. All tap and extension charges shall be for the privilege of connecting to said sewer lines and for installation, not purchase, of said lines. Service applicants may be required to comply with any pre-condition to receiving service not printed herein as may exist under PUC or TCEQ rule (customer service, health and safety or environmental), USEPA rule, TWDB rule, local regulatory district rule or health department rule. Existing customer shall be required to comply with such rules, including modification of their plumbing and/or consumption patterns, after notice. The disposal into the utility's sewer collection system of bulk quantities of food or food scraps not previously processed by a grinder or similar garbage disposal unit and grease and oils, except as incidental waste in process or wash water, used in or resulting from food preparation by sewer utility customers engaged in the preparation and/or processing of food for other than domestic consumption for sale to the public shall be prohibited. Specifically included in this prohibition are grease and oils from grease traps to other grease and/or oil storage containers. These substances are defined as

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“garbage” under Section 361.003 (12) of the Solid Waste Disposal Act, Texas Health and Safety Code, and are not “sewage” as defined by Section 26.001 (7) of the Texas Water Code. The utility only provides “sewage” collection and disposal service to the public. This service is limited to the collection, treatment and disposal of waterborne human waste and waste from domestic activities such as washing, bathing, and food preparation. This service does not include the collection, treatment or disposal of waste of such high BOD or TSS characteristics that it cannot reasonably be processed by the utility's state-approved waste water treatment plant within the parameters of the utility's state and federal waste water discharge permits. THIS SERVICE DOES NOT INCLUDE THE COLLECTION AND DISPOSAL OF STORM WATERS OR RUN OFF WATERS, WHICH MAY NOT BE DIVERTED INTO OR DRAINED INTO THE UTILITY'S COLLECTION SYSTEM. Pursuant to PUC Rule 16 TAC 24.87(n), the utility may charge for all labor, material, equipment, and other costs necessary to repair to replace all equipment damaged due to service diversion or the discharge of wastes which the system cannot properly treat. This shall include all repair and clean -up costs associated with discharges of grease and oils, except as incidental waste in process or wash water, used in or resulting from food preparation by sewer utility customers engaged in the preparation and/or processing of food for other than domestic consumption or for sale to the public discharged from grease traps or other grease and/or oil storage containers. The utility may charge for all costs necessary to correct service diversion or unauthorized taps where there is no equipment damage, including incidents where service is reconnected without authority. The utility may not charge any additional penalty or charge other than actual costs unless such penalty has been expressly approved by the regulatory authority having rate/tariff jurisdiction and filed in the utility's tariff. Pursuant to PUC Rule 16 TAC 24.86(b)(3)(A) and (B), the customer's service line and appurtenances shall be construed in accordance with the laws and regulations of the State of Texas, local plumbing codes, or, in the absence of such local codes, the Uniform Plumbing Code. It shall be the customer's responsibility to maintain the service line and appurtenances in good operating condition, i.e., clear of obstruction, defects, or blockage. If the utility can provide evidence of excessive infiltration or inflow or failure to provide proper pretreatment, the utility may, with the written approval of the Commission, require the customer to repair the line or eliminate the infiltration or inflow or take such actions necessary to correct the problem. If the customer falls to correct the problem within a reasonable time, the utility may disconnect service after proper notice.

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In accordance with the requirements of Utility's Wastewater discharge Permit, any and all repairs and maintenance of Utility's lines, tanks, pumps and equipment located on Customer's premises shall be performed exclusively by the Utility. Copies of the utility's state and federal waste water discharge permits shall be available for public inspection and copying in the utility's business office during normal business hours. Non-residential customers electing the pretreatment option for sewage with non-standard characteristics may be charged those costs set forth in the utility's extension policy if such pretreatment fails or otherwise causes the utility’s facilities to violate their waste-water discharge permits. RESIDENTIAL SINGLE FAMILY GRINDER/SEWAGE STATIONS Prior to the installation of a grinder I sewage station, the utility must be given a complete listing of all materials and equipment that will be used. In order to prevent inflow and infiltration, the materials must comply with standard specifications, approved by the TCEQ. After the utility has approved the proposed grinder/sewage station, the construction may begin. Once the work has been completed, the utility will do an inspection of the grinder I sewage station to ensure the complete installation was as specified. The customer will retain ownership of receiving tanks or lift stations on the customer's property, and all maintenance; repairs and replacement are the customer's responsibility. The repairs may be performed by anyone selected by the customer, who is competent to perform such repairs. The utility requires that parts and equipment meet the minimum standards approved by the TCEQ, to insure proper and efficient operation of the sewer system. MULTI-FAMILY AND COMMERCIAL RECEIVING TANK/LIFT STATIONS Prior to the installation of a grinder I sewage station, the utility must be given a complete listing of all materials and equipment that will be used, along with the storage for that development.

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In order to minimize inflow and infiltration into the collection system, the installation and materials must comply with standard specifications approved by the TCEQ. After the utility has approved the proposed grinder I sewage station, the construction may begin. Once the work has been completed, the utility will do an inspection of the grinder/sewage station to ensure the complete installation was as specified. Prior to acceptance of an existing receiving tank or lift station that is being used as an interceptor tank for primary treatment, wastewater storage or pump tanks prior to discharge into an alternative or conventional sewage system must be cleaned, inspected, repaired, modified, or replaced if necessary to minimize inflow and infiltration into the collection system. Existing pumps and tanks must be of adequate size to insure proper pumpage in the event of high flow or if the pump is out of service. If the existing pumps and receiving tanks or lift stations are of inadequate size the utility will not accept liability for backups due to: high flows, one pump out of service, rainfall (causing inflow or infiltration, power outages, lack of proper storage capacity, etc. If the collection system that discharges into the receiving tank/lift station has an inflow or infiltration problem and collects rainfall discharge, the owner or P.O.A. will correct it within 90 days of written notice from the utility. If no action is taken to correct the problem within 90 days, the utility may take the responsibility to make corrections at the owner's/P.O.A.’s expense. The utility is not responsible for the collection system that discharges into the receiving tank/lift station. The owner/P.O.A. shall be responsible for the monthly electric bill. An adequate easement must encompass the receiving tank I lift station by a 15 foot radius and also a 15 foot access easement to the receiving tank/ lift station site. If this easement does not exist, one must be created and filed of record.

SECTION 3.0 -- EXTENSION POLICY Section 3.01 - Standard Extension Requirements LINE EXTENSION AND CONSTRUCTION CHARGES: No contribution in aid of construction may be required of any customer except as provided for in this approved extension policy.

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SECTION 3.0 – EXTENSION POLICY (continued) The customer will be given an itemized statement of costs, options such as rebates to the customer, sharing of construction costs between the utility and the customer, or sharing of costs between the customer and other applicants prior to beginning construction. The utility will bear the full cost of any oversizing of collection mains necessary to serve other customers in the immediate area. The individual residential customer shall not be charged for any additional treatment capacity or facilities. Contributions in aid of construction may not be required of individual residential customers for treatment capacity or collection facilities unless otherwise approved by the Commission under this specific extension policy. COST UTLITIES SHALL BEAR. Within its certificate area, the utility will pay the cost of the first 200 feet of any sewer collection line necessary to extend service to an individual residential customer within a platted subdivision. However, if the residential customer requesting service purchased the property after the developer was notified of the need to provide facilities to the utility, the utility may charge for the first 200 feet. The utility must also be able to document that the developer of the subdivision refused to provide facilities compatible with the utility’s facilities compatible with the utility’s facilities in accordance with the utility’s approved extension policy after receiving a written request from the utility. Developers may be required to provide contributions in aid of construction in amounts to furnish the system with all facilities necessary to comply with the Texas Commission on Environmental Quality’s Rules. Section 3.02 – Specific Utility Extension Policies This section contains the utility's specific extension policy which complies with the requirements already stated under Section 3.01. It must be reviewed and approved by the Commission and in compliance with Commission Rules to be effective. Residential customers not covered under Section 3.01 will be charged the equivalent of the costs of extending service to their property from the nearest collection line even if that line does not have adequate capacity to serve the customer. However, if the customer places unique, non-standard service demands upon the system, the customer may be charged the full cost of extending service to and throughout their property, including the cost of all necessary treatment capacity necessary to meet the service demands anticipated to be created by that property.

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SECTION 3.0 – EXTENSION POLICY (continued)

Developers will be required to provide contributions in aid of construction in amounts sufficient to furnish the development with all facilities necessary to provide for reasonable local demand requirements and to comply with Texas Commission on Environmental Quality’s minimum design criteria for facilities used in collecting, treating, transmitting, and discharging of wastewater effluent. For purposes of this subsection, a developer is one who subdivides or requests more than two connections on a piece of property. Commercial, industrial, and wholesale customers will be treated as developers. The utility adopts the administrative rules of the Public Utility Commission of Texas, as amended from time to time, as its company specific extension policy. These rules will be kept on file at the company's business office for customer inspection during normal business hours. Non-residential customers generating sewage creating unique or non-standard treatment demands which might reasonably be expected to cause the utility's treatment facilities to operate outside their current wastewater discharge permit parameters may be charged the cost of all studies, engineering plans, permit costs, and collection treatment or discharge facilities construction or modification costs necessary to enable the utility to treat said sewage within permit limits acceptable to the Texas Commission On Environmental Quality, EPA and other regulatory agencies. In the alternative, the customer may have the option of pretreating said sewage in such a manner to that it may not reasonably be expected to cause the utility’s facilities to operate outside their permit parameters. In such case, the customer shall be required to pay the utility’s costs of evaluating such pretreatment processes and cost of obtaining regulatory approval of such pretreatment processes. In the event of the pretreatment facilities of a customer making this election fail and cause the utility's facilities to operate outside their permit parameters, the customer shall indemnify the utility for all costs incurred for clean ups or environmental remediation and all fines, penalties, and costs imposed by regulatory or judicial enforcement actions relating to such permit violations. Non-residential sewer customers producing water borne waste significantly different from waste generated by residential customers may be required to provide a suitable sampling point at the property line for testing the customer's waste for chemicals or substances, e.g., grease, oils, solvents, pesticides, etc., which can reasonably be believed to have an injurious effect on the Utility’s plant and/or its ability to treat and dispose of such wastes within the parameters of the Utility's permit. Utility shall have reasonable access to the sampling point at all times.

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SECTION 3.0 – EXTENSION POLICY (continued) Any service extension to a subdivision (recorded or unrecorded) may be subject to the provisions and restrictions of 16 TAC 24.86(d) and this tariff. When a developer wishes to extend the system to prepare to service multiple new connections, the charge shall be the cost of such extension, plus a pro-rata charge based upon the capacities of collection, transmission, storage, treatment and discharge facilities, compliant with the Texas Commission On Environmental Quality minimum design criteria, which must be committed to such extension. As provided by 16 TAC 24.86(d)(4), for purposes of this section, commercial, industrial, and wholesale customers shall be treated as developers. The imposition of additional extension costs or charges as provided by Sections 2.20 and 3.20 of this tariff shall be subject to appeal as provided in this tariff, PUC rules, or the rules of such other regulatory authority as may have jurisdiction over the utility's rates and services. Any applicant required to pay for any costs not specifically set forth in the rate schedule pages of this tariff shall be entitled to a written explanation of such costs prior to payment and/or commencement of construction. If the applicant does not believe that these costs are reasonable or necessary, the applicant shall have the right to appeal such costs to the PUC or such other regulatory authority having jurisdiction over the utility's rates in that portion of the utility's service area in which the applicant's property(ies) is located. Unless the PUC or other regulatory authority enters interlocutory orders to the contrary, service to the applicant may be delayed until such appeal is resolved. The Utility will provide a written service application form to the applicant for each request for service received by the Utility's business offices. A separate application shall be required for each potential service location if more than one service connection is desired by any individual applicant. Service applications forms will be available for applicant pick up at the Utility's business office during normal weekday business hours. Service applications will be sent by prepaid first class United States mail to the address provided by the applicant upon request. Completed applications should be returned by hand delivery in case there are questions which might delay fulfilling the service request. Completed service applications may be submitted by mail if hand delivery is not possible. The Utility shall serve each qualified service applicant within its certificated service area as soon as practical after receiving a completed service application. All service requests will be fulfilled within the time limits prescribed by PUC rules once the applicant has met all conditions precedent to achieving “qualified service applicant” status. If a service request cannot be fulfilled within the required period, the applicant shall be notified in writing of the delay, its cause and the anticipated date that service will be available. The PUC service dates shall not become applicable until the service applicant has met all conditions precedent to becoming a "qualified service applicant" as defined herein or by PUC rules.

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SECTION 3.0 – EXTENSION POLICY (continued) The Utility is not required to extend service to any applicant outside of its certificated service area and will only do so, at the Utility's sole option, under terms and conditions mutually agreeable to the Utility and the applicant and upon extension of the Utility's certificated service area boundaries by the PUC. Service applicants may be required to bear the cost of the service area amendment. A “qualified service applicant” is an applicant who has: (1) met all of the Utility's requirements of service contained in this tariff, PUC rules and/or PUC order, (2) has made all payments for tap fees and extension charges, (3) has provided all necessary easements and rights-of-way necessary to provide service to the requested location, including staking said easements or rights-of-way where necessary, and (4) has executed a customer service application for each location to which service is being requested. Where a new tap or service connection is required, the service applicant shall be required to submit a written service application and request that a tap be made. The tap request must be accompanied with a plat, map, diagram or written metes and bounds description of precisely where the applicant desires each tap or service connection is to be made and, if necessary, where the connection is to be installed, along the applicant's property line. The actual point of connection must be readily accessible to Utility personnel for Inspection, servicing and testing while being reasonably secure from damage by vehicles and mowers. If the Utility has more than one main adjacent to the service applicant's property, the tap or service connection will be made to the Utility's near service main with adequate capacity to service the applicant's full potential service demand. If the tap or service connection cannot be made at the applicant's desired location, it will be made at another location mutually acceptable to the applicant and the Utility. If no agreement on location can be made, applicant may refer the matter to the PUC for resolution. Unless otherwise ordered by the PUC, the tap or service connection will not be made until the location dispute is resolved. The Utility shall require a developer (as defined by PUC rule) to provide permanent recorded public utility easements as a condition of service to any location within the developer's property. The Developer shall be required to obtain all necessary easements and rights-of-way required to extend the Utility's existing service facilities from their nearest point with adequate service capacity (as prescribed by PUC rules and local service conditions) to and throughout the Developer's property. The easements shall be sufficient to allow the construction, Installation, repair, maintenance, testing, and replacement of any and all utility plant necessary to provide continuous and adequate service to each and every potential service location within the property at full occupancy. Unless otherwise restricted by law, sewage treatment, holding tank sites, lift station sites shall convey with all

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SECTION 3.0 – EXTENSION POLICY (continued) permanent easements and buffers required by PUC rules. Unless otherwise agreed to by the Utility, pipe line right-of-way easements must be at least 15 feet wide to allow adequate room to facilitate backhoe and other heavy equipment operation and meters. Easements must be provided for all storage, treatment, pressurization and disposal sites which are sufficient to construct and maintain all weather roads as prescribed by commission rules. All easements shall be evidenced, at Developer's expense, by recorded county-approved subdivision plat or by specific assignment supported by metes and bounds survey from a surveyor licensed by the State of Texas. Prior to the extension of utility service to developers (as defined by PUC rules) or new subdivisions, the Developer shall comply with the following; (a) The Developer shall make a written request for service to property that is to be subdivided and

developed. The Developer shall submit to the Utility a proposed plat on a scale of one inch (l 11) to two hundred feet (200') for review and determination of required easements, utility plant, and plant location. If sewer service is requested, the plat must contain elevation data. A reconcilable deposit in an amount set by the Utility may be required to cover preliminary engineering, legal and copy cost to be incurred by the Utility in reviewing and planning to meet this service request. The plat and/or accompanying information shall identify the type, location and number of houses and other planned structures that will be requiring utility service. If other than residential structures are to be located on the property, all other types of anticipated businesses and their service demands shall be identified with specificity. All areas requiring special irrigation and/or other unique water demands must be identified. To the extent reasonably possible, this information must be precise so that adequate facilities can be designed and constructed to meet all future service demands without hazard to the public, other utility customers and/or the environment.

(b) After the requirements of easements and rights-of-way have been determined, a red line copy

will be returned by the Utility to the Developer for final plat preparation. (c) Copies of all proposed plats and plans must be submitted to the Utility prior to their submission

to the county for approval to insure that they are compatible with the adequate long-term utility needs of potential service customers. Copies will be returned after review by the Utility so that necessary changes may be incorporated into the Developer's final submitted plat(s) and plans.

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(d) The Utility shall be provided with three (3) certified copies of the final plat(s) approved by the County Commissioners Court. At this time, the Utility will begin engineering the facilities necessary to serve the property. Plans and specifications will be prepared and submitted to the TCEQ by the Utility if required by law. If further plat or plans changes are necessary to accommodate the specific service needs of the property and the anticipated customer demands, the Developer will be so notified. Plat amendments must be obtained by the Developer. The Developer shall be notified when all required TCEQ or other governmental approvals or permits have been received. No construction of utility plant which requires prior TCEQ plans approval shall be commenced until that approval has been received by the Utility and any conditions imposed by the TCEQ in association with its approvals have been satisfied.

(e) The Developer shall be required to post bond or escrow the funds necessary to construct all

required utility plant, except individual sewer connections, required to serve the property. Construction shall not commence until funds are available. If the construction is to be done in coordination with the phased development of the property, funds must be provided in advance which are sufficient to complete each phase. No phase or facilities for any phase shall be constructed prior to the bonding or escrowing of all funds associated with that phase.

(f) At the sole option of the Utility, the Developer may be required to execute a Developer

Extension Contract setting forth all terms and conditions of extending service to their property including all contributions-in-aid of construction and developer reimbursements, if any.

(g) The Utility may require the Developer to commence construction of subdivision improvements

within three (3) months of utility plans approval or the Utility may abate its construction activities until full development construction begins. If the Developer stops construction of subdivision improvements for any purpose, the Utility may abate its construction for a similar period.

(h) As soon as the roads are rough cut and prior to paving, extension lines will need to be

constructed at each road crossing. The Developer must notify the Utility sufficiently in advance of this development stage to allow for the necessary utility construction without disruption to other service operations of the Utility. Failure to provide adequate advance notice and cooperation in the construction of necessary utility plant may result in additional delays in obtaining service to the property. The Developer shall be required to pay for all additional costs of road boring or other remedial construction necessary to install adequate utility plant throughout the affected property.

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SECTION 3.0 – EXTENSION POLICY (continued) Within its certificated area, the Utility shall bear the cost of the first 200 feet of any water main or sewer collection line necessary to extend service to an individual residential service applicant within a platted subdivision unless the Utility can document: (a) that the developer of the subdivision refused to provide facilities compatible with the utility's

facilities in accordance with the Utility's approved extension policy after receiving a written request from the Utility; or,

(b) that the Developer defaulted on the terms and conditions of a written agreement or contract

existing between the utility and the developer or the terms of this tariff regarding payment for services, extensions, or other requirements; or in the event the Developer declared bankruptcy and was therefore unable to meet obligations; and,

(c) that the residential service applicant purchased the property from the Developer after the

Developer was notified of the need to provide facilities to the utility. A residential service applicant may be charged the remaining costs of extending service to his property; provided, however, that the residential service applicant may only be required to pay the cost equivalent to the cost of extending the nearest water main or wastewater collection line, whether or not that line has adequate capacity to serve that residential service applicant. The following criteria shall be considered to determine the residential service applicant's cost for extending service:

(a) the residential service applicant shall not be required to pay for costs of main extensions

greater. than 2" in diameter for pressure wastewater collection lines and 6" in diameter for gravity wastewater lines.

(b) Exceptions may be granted by the TCEQ Executive Director or PUC if: (1) adequate service cannot be provided to the applicant using the maximum line sizes

listed due to distance or elevation, in which case, it shall be the utility's burden to justify that a larger diameter pipe is required for adequate service;

(2) larger minimum line sizes are required under subdivision platting requirements or

applicable building codes.

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SECTION 3.0 – EXTENSION POLICY (continued) (c) If an exception is granted, the Utility shall establish a proportional cost plan for the

specific extension or a rebate plan which may be limited to seven years to return the portion of the applicant's costs for oversizing as new customers are added to ensure that future applicants for service on the line pay at least as much as the initial service applicant.

For purposes of determining the costs that service applicants shall pay, commercial customers with service demands greater than residential customer demands in the certificated area, industrial, and wholesale customers shall be treated as developers.

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PUCT Sewer Tariff Page 1 of 22 9/1/14

SEWER UTILITY TARIFF

Liberty Utilities (Tall Timbers Sewer) Corp. (Utility Name)

12725 W Indian School Rd. Ste D101 (Business Address)

Avondale, Arizona 85392 (City, State, Zip Code)

(800) 525-9547 (Area Code/Telephone)

This tariff is effective for utility operations under the following Certificates of Convenience and Necessity: 20694 This tariff is effective in the following county: Smith This tariff is effective in the following cities or unincorporated towns (if any): City of Tyler This tariff is effective for the following systems: Liberty Tall Timbers (TPDES Permit No. 13000-001) (inside City of Tyler only) The above utility lists the following sections of its tariff (if additional pages are needed for a section, all pages should be numbered consecutively):

TABLE OF CONTENTS SECTION 1.0 – RATE SCHEDULE 2 SECTION 2.0 – SERVICE RULES AND POLICIES 5

SECTION 3.0 – EXTENSION POLICY 14 APPENDIX A – STANDARD SERVICE APPLICATION

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Liberty Utilities (Tall Timbers Sewer) Corp. (City of Tyler Only) Sewer Tariff page No. 2

SECTION 1.0 -- RATE SCHEDULE Section 1.01 - Rates Monthly Service Charge Base Equivalent Rate (BER) Phase 1 - $76.54 Phase 2 - $96.38 Residential Phase 1 Phase 2 Single Family Residential $76.54 $96.38 Duplex (per unit) $76.54 $96.38

Other Residential – the monthly rate equals the BER multiplied by the following factors: Phase 1 Phase 2 Triplexes and Quadplexes 0.68 per unit 0.68 per unit Apartments and condos with 5 or more units 0.55 per unit 0.55 per unit Mobile home park 0.68 per space 0.68 per space Transient mobile home park 0.55 per space 0.55 per space

Institutional – the monthly rate equals the BER multiplied by the following factors: Phase 1 Phase 2 Schools with Showers 1.00 per 12


attendees Schools without Showers 1.00 per 15


attendees Hospital 0.89 per bed 0.89 per bed Nursing Home 0.45 per bed 0.45 per bed

Commercial – the monthly rate equals the larger of: 1) 80 percent of the actual water meter usage as supplied by the water utility or 2) the BER multiplied by the following factors: Phase 1 Phase 2 Restaurant (fast food and/or disposal) 1.12 per table 1.12 per table Restaurant (sit down and/or dishwashers) 0.45 per table 0.45 per table Motel without restaurant 0.50 per unit 0.50 per unit Motel with restaurant 0.50 per table plus 0.45

per unit 0.50 per table plus 0.45

per unit Laundromat 2.00 per washer 2.00 per washer Commercial Laundry 3.00 per washer 3.00 per washer Retail Space 1.50 per space 1.50 per space Service Station without bays 1.50 per facility 1.50 per facility

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Service Station with bays 1.50 per facility plus 6.96 per service bay


Grocery without butcher 1.50 per facility 1.50 per facility Grocery with butcher 2.00 per facility plus

4.18 per facility 2.00 per facility plus

4.18 per facility Carwash, self service 1.50 per bay 1.50 per bay Churches 1.50 per 200 person

capacity in main sanctuary or meeting

room

1.50 per 200 person capacity in main


Golf Course with showers 1.0 per 30 potential golfers during the






Golf Course without showers 1.0 per 50 potential golfers during the






FORM OF PAYMENT: The utility will accept the following forms of payment: Cash X, Check X, Money Order X, Credit Card X, Other (specify) Visa/Master Card Credit Card/Only; Electronic Drafts Available Upon Request

(THE UTILITY MAY REQUIRE EXACT CHANGE FOR PAYMENTS AND MAY REFUSE TO ACCEPT PAYMENTS MADE USING MORE THAN $1.00 IN SMALL COINS. A WRITTEN RECEIPT WILL BE GIVEN FOR CASH PAYMENTS. CASH PAYMENTS MUST BE MADE AT LOCAL OFFICE.)

REGULATORY ASSESSMENT ........................................................................................................... 1.0% THE PUBLIC UTILITY COMMISSION (COMMISSION) RULES REQUIRE THE UTILITY TO COLLECT AND REMIT TO THE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY A FEE OF ONE PERCENT OF THE RETAIL MONTHLY BILL.

Section 1.02 - Miscellaneous Fees TAP FEE........................................................................................................................................ $1,100.00 TAP FEE IS BASED ON THE AVERAGE OF THE UTILITY’S ACTUAL COSTS FOR MATERIALS AND LABOR TO INSTALL A STANDARD RESIDENTIAL CONNECTION PLUS UNIQUE COSTS AS PERMITTED BY PUC RULE AT COST.

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TAP FEE (Large Connection Tap) ............................................................................................ Actual Cost TAP FEE IS BASED ON THE UTILITY'S ACTUAL COST FOR MATERIALS AND LABOR FOR TAP SIZE INSTALLED.

SECTION 1.0 -- RATE SCHEDULE (continued) RECONNECTION FEE: THE RECONNECT FEE WILL BE CHARGED BEFORE SERVICE CAN BE RESTORED TO A CUSTOMER WHO HAS BEEN DISCONNECTED FOR THE FOLLOWING REASONS:

a) Non payment of bill (Maximum $25.00) ...................................................................................... $25.00 b) Customer’s request ........................................................................................................................ $25.00

OR OTHER REASONS LISTED UNDER SECTION 2.0 OF THIS TARIFF

TRANSFER FEE ................................................................................................................................ $50.00 THE TRANSFER FEE WILL BE CHARGED FOR CHANGING AN ACCOUNT NAME AT THE SAME SERVICE LOCATION WHEN THE SERVICE IS NOT DISCONNECTED.

LATE CHARGE ................................................................................................................................... $5.00 A ONE-TIME PENALTY TO BE CHARGED ON DELINQUENT BILLS. A LATE CHARGE MAY NOT BE APPLIED TO ANY BALANCE TO WHICH THE PENALTY WAS APPLIED IN A PREVIOUS BILLING.

RETURNED CHECK CHARGE ....................................................................................................... $30.00 CUSTOMER DEPOSIT RESIDENTIAL (Maximum $50) ............................................................... $50.00 COMMERCIAL AND NON-RESIDENTIAL DEPOSIT.................................. 1/6th EST. ANNUAL BILL SERVICE RELOCATION FEE ..................................... Actual Cost to Relocate that Service Connection

THIS FEE MAY BE CHARGED IN A CUSTOMER REQUESTS RELOCATION OF AN EXISTING SERVICE CONNECTION

SEASONAL RECONNECTION FEE:

BASE RATE TIMES NUMBER OF MONTHS OFF THE SYSTEM NOT TO EXCEED SIX MONTHS WHEN LEAVE AND RETURN WITHIN A TWELVE MONTH PERIOD.

LINE EXTENSION AND CONSTRUCTION CHARGES:

Refer to Section 2.20 Specific Utility Service Rules and Section 3.20 Utility Specific Extension Policy for terms, conditions, and charges.

GOVERNMENTAL TESTING, INSPECTION AND COSTS SURCHARGE CLAUSE: Increase in inspection fees and water testing costs imposed by state or federal law may be passed through as an adjustment to the monthly base rate charge under the terms and conditions of 16 TAC 24.21(k)(2) when authorized by the Commission and after notice to customers.

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SECTION 2.0 — SERVICE RULES AND REGULATIONS Section 2.01 – Public Utility Commission of Texas Rules The utility will have the most current Public Utility Commission of Texas Rules relating to sewer utilities available at its office for reference purposes. The Rules and this tariff shall be available for public inspection and reproduction at a reasonable cost. The latest Rules or Commission approved changes to the Rules supersede any rules or requirements in this tariff. Section 2.02 - Application for Sewer Service All applications for service will be made on the utility's standard application or contract form (attached in the Appendix to this tariff), will be signed by the applicant before sewer service is provided by the utility. A separate application or contract will be made for each service location. After the applicant has met all the requirements, conditions and regulations for service, the utility will install service connections, which may include a utility cut-off valve and/or take all necessary actions to initiate service. The utility will serve each qualified applicant for service within 5 working days unless line extensions or new facilities are required. If construction is required to fill the order and if it cannot be completed within 30 days, the utility will provide the applicant with a written explanation of the construction required and an expected date of service. Where service has previously been provided, the utility will reconnect the service within one working day after the applicant has met requirements for reconnection. The customer will be responsible for furnishing and laying the necessary customer service pipe from the connection location to the place of use. Section 2.03 - Refusal of Service The utility may decline to serve an applicant until the applicant has complied with the regulations of the regulatory agencies (state and municipal regulations) and for the reasons outlined in the commission rules. In the event that the utility refuses to serve an applicant, the utility will inform the applicant in writing of the basis of its refusal. The utility is also required to inform the applicant that a complaint may be filed with the Commission.

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SECTION 2.0 – SERVICE RULES AND POLICIES (Continued) Section 2.04–Customer Deposits If a residential applicant cannot establish credit to the satisfaction of the utility, the applicant will be required to pay a deposit as provided for in Section 1.02 of this tariff. The utility will keep records of the deposit and credit interest in accordance with Commission rules. Residential applicants 65 years of age or older may not be required to pay deposits unless the applicant has an outstanding account balance with the utility or another water or sewer utility which accrued within the last two years. Nonresidential applicants who cannot establish to the satisfaction of the utility may be required to make a deposit that does not exceed an amount equivalent to one-sixth of the estimated annual billings. Refund of deposit - If service is not connected, or after disconnection of service, the utility will promptly refund the customer's deposit plus accrued interest or the balance, if any, in excess of the unpaid bills for service furnished. The utility may refund the residential customer’s deposit at any time prior to termination of utility service but must refund the deposit plus interest for any residential customer who has paid 18 consecutive billings without being delinquent.

Section 2.05–Meter Requirements, Readings, and Testing It is not a requirement that the utility use meters to measure the quantity of sewage disposed of by individual customers. One connection is required for each residential, commercial, or industrial facility in accordance with Commission rules.

Section 2.06–Billing Bills from the utility will be mailed monthly unless otherwise authorized by the Commission. The due date of bills for utility service will be at least twenty (20) days from the date of issuance. The postmark on the bill or, if there is no postmark on the bill, the recorded date of mailing by the utility will constitute proof of the date of issuance. If the due date falls on a holiday or weekend, the due date for payment purposes will be the next workday after the due date. A late penalty of $5.00 will be charged on bills received after the due date. The penalty on delinquent bills will not be applied to any balance to which the penalty was applied in a previous billing. The utility must maintain a record of the date of mailing to charge the late penalty.

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SECTION 2.0 – SERVICE RULES AND POLICIES (Continued) Each bill will provide all information required by the commission rules. For each of the systems it operates, the utility will maintain and note on the monthly bill a local or toll-free telephone number (or numbers) which may be reached by a local call by customers. At the utility’s option, a toll-free telephone number or the equivalent may be provided. In the event of a dispute between a customer and a utility regarding any bill for utility service, the utility will conduct an investigation and report the results to the customer. If the dispute is not resolved, the utility will inform the customer that a complaint may be filed with the Commission.

Section 2.07 - Service Disconnection Utility service may be disconnected if the bill has not been paid in full by the date listed on the termination notice. The termination date must be at least 10 days after the notice is mailed or hand delivered. The utility is encouraged to offer a deferred payment plan to a customer who cannot pay an outstanding bill in full and is willing to pay the balance in reasonable installments. However, a customer's utility service may be disconnected if a bill has not been paid or a deferred payment agreement entered into within 30 days from the date of issuance of a bill and if proper notice of termination has been given. Notice of termination must be a separate mailing or hand delivery in accordance with the commission rules. Utility service may also be disconnected without notice for reasons as described in the commission rules. Utility personnel must be available to collect payments and to reconnect service on the day of and the day after any disconnection of service unless service was disconnected at the customer’s request or due to a hazardous condition. Section 2.08–Reconnection of Service Service will be reconnected within 24 hours after the past due bill and any other outstanding charges are pair or correction of the conditions which caused service to be disconnected.

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SECTION 2.0 – SERVICE RULES AND POLICIES (Continued)

Section 2.09–Service Interruptions The utility will make all reasonable efforts to prevent interruptions of service. If interruptions occur, the utility will re-establish service within the shortest possible time. Except for momentary interruptions due to automatic equipment operations, the utility will keep a complete record of all interruptions, both emergency and scheduled and will notify the Commission in writing of any service interruptions affecting the entire system or any major division of the system lasting more than four hours. The notice will explain the cause of the interruptions. Prorated Bills – If service is interrupted or impaired for 24 consecutive hours or more, the utility will prorate the monthly base bill in proportion to the time service was not available to reflect this loss of service. Section 2.10 - Quality of Service The utility will plan, furnish, and maintain and operate a treatment and collection facilities of sufficient size and capacity to provide continuous and adequate service for all reasonable consumer uses and to treat sewage and discharge effluent of the quality required by its discharge permit issued by the TCEQ. Unless otherwise authorized by the TCEQ, the utility will maintain facilities as described in the TCEQ’s rules. Section 2.11 - Customer Complaints and Disputes If a customer or applicant for service lodges a complaint, the utility will promptly make a suitable investigation and advise the complainant of the results. Service will not be disconnected pending completion of the investigation. If the complainant is dissatisfied with the utility's response, the utility must advise the complainant that he has recourse through the commission’s complaint process. Pending resolution of a complaint, the commission may require continuation or restoration of service. The utility will maintain a record of all complaints which shows the name and address of the complainant, the date and nature of the complaint and the adjustment or disposition thereof, for a period of two years after the final settlement of the complaint.

SECTION 2.20 SPECIFIC UTILITY SERVICE RULES AND REGULATIONS This section contains specific utility service rules in addition to the rules previously listed under Section 2.0. It must be reviewed and approved by the Commission and in compliance with the commission rules to be effective.

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The utility adopts the administrative rules of the Public Utility Commission of Texas, as the same may be amended from time to time, as its company specific service rules and regulations. These rules will be kept on file at the company's offices for customer inspection during regular business hours. In the event of a conflict between the commission’s amended rules and the provisions of this tariff, the amended rules shall prevail. Where necessary, any conflicting provision of this tariff shall be deemed to have been superseded by the commission rule in question to the degree that the Utility may conduct its lawful business in conformance with all requirements of said rule. All payments for utility service shall be delivered or mailed to the utility's business office. If the business office fails to receive payment prior to the time of noticed disconnection for non-payment of a delinquent account, service will be terminated as scheduled. Utility service crews shall not be allowed to collect payments on customer accounts in the field. Payment of an account by any means that has been dishonored and returned by the payor or payee's bank, shall be deemed to be delinquent. All returned payments must be redeemed with cash or valid money order. If a customer has two returned payments within a twelve month period, the customer shall be required to pay a deposit if one has not already been paid. Customer shall be liable for any damage or injury to utility-owned property or personnel shown to be caused by the customer, his invitees, his agents, his employees, or others directly under his control. Limitation on Product/Service Liability - The utility will not accept liability for any injury or damage to individuals or their property occurring on the customer's premises. The utility makes no representations or warranties (expressed or implied) that customer's appliances will not be damaged by disruptions of or fluctuations in sewer service whatever the cause. The utility will not accept liability for injuries or damages to persons or property due to disruption of sewer service caused by: (1) acts of God, (2) acts of third parties not subject to the control of the utility if the utility has undertaken such preventive measures as are required by commission rules, (3) electrical power failures in sewer systems not required by commission rule to have auxiliary power supplies, or ( 4) termination of sewer service pursuant to the utility's tariff and the commission’s rules. If the services of a registered professional engineer are required as a result of an application for service received by the Utility for service to that applicant's service extension only, such engineer will be selected by the Utility and the applicant, and the applicant shall bear all expenses incurred therein.

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If an applicant requires service other than the standard service provided by the utility, such applicant will be required to pay all expenses incurred by the utility in excess of the expenses that would be incurred in providing the standard service and connection. Any applicant who places unique or non-standard service demands on the system may be required to provide contributions in aid of construction (as may be allowed by commission rule) for the actual costs of any additional facilities required to maintain compliance with the Texas Commission Environmental Quality minimum design criteria for sewer collection, treatment, pumping and discharge. Any applicant or existing customer required to pay for any costs not specifically set forth in the rate schedule pages of this tariff shall be entitled to a written explanation of such costs prior payment and/or commencement of construction. If the applicant or existing customer does not believe that these costs are reasonable or necessary, the applicant or existing customer shall have the right to appeal such costs to the commission or such other regulatory authority having jurisdiction over the utility's rates in that portion of the utility's service area in which the applicant's or existing customer's property(ies) is located. Tap fees may be increased by unique costs not normally incurred as may be permitted by 16 TAC 24.86(b)(1)(C). The Utility adopts the Uniform Plumbing Code pursuant to TCEQ Rule 290.46(i). The piping and other equipment on the premises furnished by the customer will be maintained by the customer at all times in conformity with the requirements of the PUC, TCEQ, the Uniform Plumbing Code, and with the service rules and regulations of the Utility. The customer will bring out his service line to his property line at the point on the customer's property mutually acceptable to the customer and the Utility subject to such requirements as may exist by commission rule. The utility will have the right of access to the customer's premises at all times reasonable for the purpose of installing, testing, inspecting or repairing sewer mains or other equipment used in connection with its provision of sewer service, or for the purpose of removing its property and disconnecting lines, and for all other purposes necessary to the operation of the utility system including inspecting the customer's plumbing for code, plumbing or tariff violations. The customer shall allow the utility and its personnel access to the customer's property to conduct any tests or inspections required by law. Unless necessary to respond to equipment failure, leak or other condition creating an immediate threat to public health and safety or the continued provision of adequate utility service to others, such entry upon the customer's property shall be during normal business hours. The

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customer may require any utility representative, employee, contractor, or agent seeking to make such entry identify themselves, their affiliation with the utility, and the purpose of their entry. Threats to or assaults upon utility personnel shall result in criminal prosecution. Except in cases where the customer has a contract with the utility for reserve or auxiliary service, no other sewer service will be used by the customer on the same installation in conjunction with the utility's service, either by means of a cross-over valve or any other connection. Customer shall not connect, or allow any other person or party to connect, onto any sewer lines on his premises. Two places shall not be permitted to be supplied with one service pipe where there is a sewer main abutting the premises. No application, agreement or contract for service may be assigned or transferred without the written consent of the utility. It is agreed and understood that any and all sewer lines and other equipment furnished by the utility (excepting the customer's individual service lines from the point of connection to customer's structures on customer's premises) are and shall remain the sole property of the i1tility, and nothing contained herein or in a contract/application for service shall be construed to reflect a sale or transfer of any such lines or equipment to any customer. All tap and extension charges shall be for the privilege of connecting to said sewer lines and for installation, not purchase, of said lines. Service applicants may be required to comply with any pre-condition to receiving service not printed herein as may exist under PUC or TCEQ rule (customer service, health and safety or environmental), USEPA rule, TWDB rule, local regulatory district rule or health department rule. Existing customer shall be required to comply with such rules, including modification of their plumbing and/or consumption patterns, after notice. The disposal into the utility's sewer collection system of bulk quantities of food or food scraps not previously processed by a grinder or similar garbage disposal unit and grease and oils, except as incidental waste in process or wash water, used in or resulting from food preparation by sewer utility customers engaged in the preparation and/or processing of food for other than domestic consumption for sale to the public shall be prohibited. Specifically included in this prohibition are grease and oils from grease traps to other grease and/or oil storage containers. These substances are defined as

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“garbage” under Section 361.003 (12) of the Solid Waste Disposal Act, Texas Health and Safety Code, and are not “sewage” as defined by Section 26.001 (7) of the Texas Water Code. The utility only provides “sewage” collection and disposal service to the public. This service is limited to the collection, treatment and disposal of waterborne human waste and waste from domestic activities such as washing, bathing, and food preparation. This service does not include the collection, treatment or disposal of waste of such high BOD or TSS characteristics that it cannot reasonably be processed by the utility's state-approved waste water treatment plant within the parameters of the utility's state and federal waste water discharge permits. THIS SERVICE DOES NOT INCLUDE THE COLLECTION AND DISPOSAL OF STORM WATERS OR RUN OFF WATERS, WHICH MAY NOT BE DIVERTED INTO OR DRAINED INTO THE UTILITY'S COLLECTION SYSTEM. Pursuant to PUC Rule 16 TAC 24.87(n), the utility may charge for all labor, material, equipment, and other costs necessary to repair to replace all equipment damaged due to service diversion or the discharge of wastes which the system cannot properly treat. This shall include all repair and clean -up costs associated with discharges of grease and oils, except as incidental waste in process or wash water, used in or resulting from food preparation by sewer utility customers engaged in the preparation and/or processing of food for other than domestic consumption or for sale to the public discharged from grease traps or other grease and/or oil storage containers. The utility may charge for all costs necessary to correct service diversion or unauthorized taps where there is no equipment damage, including incidents where service is reconnected without authority. The utility may not charge any additional penalty or charge other than actual costs unless such penalty has been expressly approved by the regulatory authority having rate/tariff jurisdiction and filed in the utility's tariff. Pursuant to PUC Rule 16 TAC 24.86(b)(3)(A) and (B), the customer's service line and appurtenances shall be construed in accordance with the laws and regulations of the State of Texas, local plumbing codes, or, in the absence of such local codes, the Uniform Plumbing Code. It shall be the customer's responsibility to maintain the service line and appurtenances in good operating condition, i.e., clear of obstruction, defects, or blockage. If the utility can provide evidence of excessive infiltration or inflow or failure to provide proper pretreatment, the utility may, with the written approval of the Commission, require the customer to repair the line or eliminate the infiltration or inflow or take such actions necessary to correct the problem. If the customer falls to correct the problem within a reasonable time, the utility may disconnect service after proper notice.

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In accordance with the requirements of Utility's Wastewater discharge Permit, any and all repairs and maintenance of Utility's lines, tanks, pumps and equipment located on Customer's premises shall be performed exclusively by the Utility. Copies of the utility's state and federal waste water discharge permits shall be available for public inspection and copying in the utility's business office during normal business hours. Non-residential customers electing the pretreatment option for sewage with non-standard characteristics may be charged those costs set forth in the utility's extension policy if such pretreatment fails or otherwise causes the utility's facilities to violate their waste-water discharge permits. RESIDENTIAL SINGLE FAMILY GRINDER/SEWAGE STATIONS Prior to the installation of a grinder I sewage station, the utility must be given a complete listing of all materials and equipment that will be used. In order to prevent inflow and infiltration, the materials must comply with standard specifications, approved by the TCEQ. After the utility has approved the proposed grinder/sewage station, the construction may begin. Once the work has been completed, the utility will do an inspection of the grinder I sewage station to ensure the complete installation was as specified. The customer will retain ownership of receiving tanks or lift stations on the customer's property, and all maintenance; repairs and replacement are the customer's responsibility. The repairs may be performed by anyone selected by the customer, who is competent to perform such repairs. The utility requires that parts and equipment meet the minimum standards approved by the TCEQ, to insure proper and efficient operation of the sewer system. MULTI-FAMILY AND COMMERCIAL RECEIVING TANK/LIFT STATIONS Prior to the installation of a grinder I sewage station, the utility must be given a complete listing of all materials and equipment that will be used, along with the storage for that development.

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In order to minimize inflow and infiltration into the collection system, the installation and materials must comply with standard specifications approved by the TCEQ. After the utility has approved the proposed grinder I sewage station, the construction may begin. Once the work has been completed, the utility will do an inspection of the grinder/sewage station to ensure the complete installation was as specified. Prior to acceptance of an existing receiving tank or lift station that is being used as an interceptor tank for primary treatment, wastewater storage or pump tanks prior to discharge into an alternative or conventional sewage system must be cleaned, inspected, repaired, modified, or replaced if necessary to minimize inflow and infiltration into the collection system. Existing pumps and tanks must be of adequate size to insure proper pumpage in the event of high flow or if the pump is out of service. If the existing pumps and receiving tanks or lift stations are of inadequate size the utility will not accept liability for backups due to: high flows, one pump out of service, rainfall (causing inflow or infiltration, power outages, lack of proper storage capacity, etc. If the collection system that discharges into the receiving tank/lift station has an inflow or infiltration problem and collects rainfall discharge, the owner or P.O.A. will correct it within 90 days of written notice from the utility. If no action is taken to correct the problem within 90 days, the utility may take the responsibility to make corrections at the owner's/P.O.A.’s expense. The utility is not responsible for the collection system that discharges into the receiving tank/lift station. The owner/P.O.A. shall be responsible for the monthly electric bill. An adequate easement must encompass the receiving tank I lift station by a 15 foot radius and also a 15 foot access easement to the receiving tank/ lift station site. If this easement does not exist, one must be created and filed of record.

SECTION 3.0 -- EXTENSION POLICY Section 3.01 - Standard Extension Requirements LINE EXTENSION AND CONSTRUCTION CHARGES: No contribution in aid of construction may be required of any customer except as provided for in this approved extension policy.

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SECTION 3.0 – EXTENSION POLICY (continued) The customer will be given an itemized statement of costs, options such as rebates to the customer, sharing of construction costs between the utility and the customer, or sharing of costs between the customer and other applicants prior to beginning construction. The utility will bear the full cost of any oversizing of collection mains necessary to serve other customers in the immediate area. The individual residential customer shall not be charged for any additional treatment capacity or facilities. Contributions in aid of construction may not be required of individual residential customers for treatment capacity or collection facilities unless otherwise approved by the Commission under this specific extension policy. COST UTLITIES SHALL BEAR. Within its certificate area, the utility will pay the cost of the first 200 feet of any sewer collection line necessary to extend service to an individual residential customer within a platted subdivision. However, if the residential customer requesting service purchased the property after the developer was notified of the need to provide facilities to the utility, the utility may charge for the first 200 feet. The utility must also be able to document that the developer of the subdivision refused to provide facilities compatible with the utility’s facilities compatible with the utility’s facilities in accordance with the utility’s approved extension policy after receiving a written request from the utility. Developers may be required to provide contributions in aid of construction in amounts to furnish the system with all facilities necessary to comply with the Texas Commission on Environmental Quality’s Rules. Section 3.02 – Specific Utility Extension Policies This section contains the utility's specific extension policy which complies with the requirements already stated under Section 3.01. It must be reviewed and approved by the Commission and in compliance with Commission Rules to be effective. Residential customers not covered under Section 3.01 will be charged the equivalent of the costs of extending service to their property from the nearest collection line even if that line does not have adequate capacity to serve the customer. However, if the customer places unique, non-standard service demands upon the system, the customer may be charged the full cost of extending service to and throughout their property, including the cost of all necessary treatment capacity necessary to meet the service demands anticipated to be created by that property.

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SECTION 3.0 – EXTENSION POLICY (continued)

Developers will be required to provide contributions in aid of construction in amounts sufficient to furnish the development with all facilities necessary to provide for reasonable local demand requirements and to comply with Texas Commission on Environmental Quality’s minimum design criteria for facilities used in collecting, treating, transmitting, and discharging of wastewater effluent. For purposes of this subsection, a developer is one who subdivides or requests more than two connections on a piece of property. Commercial, industrial, and wholesale customers will be treated as developers. The utility adopts the administrative rules of the Public Utility Commission of Texas, as amended from time to time, as its company specific extension policy. These rules will be kept on file at the company's business office for customer inspection during normal business hours. Non-residential customers generating sewage creating unique or non-standard treatment demands which might reasonably be expected to cause the utility's treatment facilities to operate outside their current wastewater discharge permit parameters may be charged the cost of all studies, engineering plans, permit costs, and collection treatment or discharge facilities construction or modification costs necessary to enable the utility to treat said sewage within permit limits acceptable to the Texas Commission On Environmental Quality, EPA and other regulatory agencies. In the alternative, the customer may have the option of pretreating said sewage in such a manner to that it may not reasonably be expected to cause the utility’s facilities to operate outside their permit parameters. In such case, the customer shall be required to pay the utility’s costs of evaluating such pretreatment processes and cost of obtaining regulatory approval of such pretreatment processes. In the event of the pretreatment facilities of a customer making this election fail and cause the utility's facilities to operate outside their permit parameters, the customer shall indemnify the utility for all costs incurred for clean ups or environmental remediation and all fines, penalties, and costs imposed by regulatory or judicial enforcement actions relating to such permit violations. Non-residential sewer customers producing water borne waste significantly different from waste generated by residential customers may be required to provide a suitable sampling point at the property line for testing the customer's waste for chemicals or substances, e.g., grease, oils, solvents, pesticides, etc., which can reasonably be believed to have an injurious effect on the Utility’s plant and/or its ability to treat and dispose of such wastes within the parameters of the Utility's permit. Utility shall have reasonable access to the sampling point at all times.

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SECTION 3.0 – EXTENSION POLICY (continued) Any service extension to a subdivision (recorded or unrecorded) may be subject to the provisions and restrictions of 16 TAC 24.86(d) and this tariff. When a developer wishes to extend the system to prepare to service multiple new connections, the charge shall be the cost of such extension, plus a pro-rata charge based upon the capacities of collection, transmission, storage, treatment and discharge facilities, compliant with the Texas Commission On Environmental Quality minimum design criteria, which must be committed to such extension. As provided by 16 TAC 24.86(d)(4), for purposes of this section, commercial, industrial, and wholesale customers shall be treated as developers. The imposition of additional extension costs or charges as provided by Sections 2.20 and 3.20 of this tariff shall be subject to appeal as provided in this tariff, PUC rules, or the rules of such other regulatory authority as may have jurisdiction over the utility's rates and services. Any applicant required to pay for any costs not specifically set forth in the rate schedule pages of this tariff shall be entitled to a written explanation of such costs prior to payment and/or commencement of construction. If the applicant does not believe that these costs are reasonable or necessary, the applicant shall have the right to appeal such costs to the PUC or such other regulatory authority having jurisdiction over the utility's rates in that portion of the utility's service area in which the applicant's property(ies) is located. Unless the PUC or other regulatory authority enters interlocutory orders to the contrary, service to the applicant may be delayed until such appeal is resolved. The Utility will provide a written service application form to the applicant for each request for service received by the Utility's business offices. A separate application shall be required for each potential service location if more than one service connection is desired by any individual applicant. Service applications forms will be available for applicant pick up at the Utility's business office during normal weekday business hours. Service applications will be sent by prepaid first class United States mail to the address provided by the applicant upon request. Completed applications should be returned by hand delivery in case there are questions which might delay fulfilling the service request. Completed service applications may be submitted by mail if hand delivery is not possible. The Utility shall serve each qualified service applicant within its certificated service area as soon as practical after receiving a completed service application. All service requests will be fulfilled within the time limits prescribed by PUC rules once the applicant has met all conditions precedent to achieving “qualified service applicant” status. If a service request cannot be fulfilled within the required period, the applicant shall be notified in writing of the delay, its cause and the anticipated date that service will be available. The PUC service dates shall not become applicable until the service applicant has met all conditions precedent to becoming a "qualified service applicant" as defined herein or by PUC rules.

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SECTION 3.0 – EXTENSION POLICY (continued) The Utility is not required to extend service to any applicant outside of its certificated service area and will only do so, at the Utility's sole option, under terms and conditions mutually agreeable to the Utility and the applicant and upon extension of the Utility's certificated service area boundaries by the PUC. Service applicants may be required to bear the cost of the service area amendment. A “qualified service applicant” is an applicant who has: (1) met all of the Utility's requirements of service contained in this tariff, PUC rules and/or PUC order, (2) has made all payments for tap fees and extension charges, (3) has provided all necessary easements and rights-of-way necessary to provide service to the requested location, including staking said easements or rights-of-way where necessary, and (4) has executed a customer service application for each location to which service is being requested. Where a new tap or service connection is required, the service applicant shall be required to submit a written service application and request that a tap be made. The tap request must be accompanied with a plat, map, diagram or written metes and bounds description of precisely where the applicant desires each tap or service connection is to be made and, if necessary, where the connection is to be installed, along the applicant's property line. The actual point of connection must be readily accessible to Utility personnel for Inspection, servicing and testing while being reasonably secure from damage by vehicles and mowers. If the Utility has more than one main adjacent to the service applicant's property, the tap or service connection will be made to the Utility's near service main with adequate capacity to service the applicant's full potential service demand. If the tap or service connection cannot be made at the applicant's desired location, it will be made at another location mutually acceptable to the applicant and the Utility. If no agreement on location can be made, applicant may refer the matter to the PUC for resolution. Unless otherwise ordered by the PUC, the tap or service connection will not be made until the location dispute is resolved. The Utility shall require a developer (as defined by PUC rule) to provide permanent recorded public utility easements as a condition of service to any location within the developer's property. The Developer shall be required to obtain all necessary easements and rights-of-way required to extend the Utility's existing service facilities from their nearest point with adequate service capacity (as prescribed by PUC rules and local service conditions) to and throughout the Developer's property. The easements shall be sufficient to allow the construction, Installation, repair, maintenance, testing, and replacement of any and all utility plant necessary to provide continuous and adequate service to each and every potential service location within the property at full occupancy. Unless otherwise restricted by law, sewage treatment, holding tank sites, lift station sites shall convey with all

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SECTION 3.0 – EXTENSION POLICY (continued) permanent easements and buffers required by PUC rules. Unless otherwise agreed to by the Utility, pipe line right-of-way easements must be at least 15 feet wide to allow adequate room to facilitate backhoe and other heavy equipment operation and meters. Easements must be provided for all storage, treatment, pressurization and disposal sites which are sufficient to construct and maintain all weather roads as prescribed by commission rules. All easements shall be evidenced, at Developer's expense, by recorded county-approved subdivision plat or by specific assignment supported by metes and bounds survey from a surveyor licensed by the State of Texas. Prior to the extension of utility service to developers (as defined by PUC rules) or new subdivisions, the Developer shall comply with the following; (a) The Developer shall make a written request for service to property that is to be subdivided and

developed. The Developer shall submit to the Utility a proposed plat on a scale of one inch (l 11) to two hundred feet (200') for review and determination of required easements, utility plant, and plant location. If sewer service is requested, the plat must contain elevation data. A reconcilable deposit in an amount set by the Utility may be required to cover preliminary engineering, legal and copy cost to be incurred by the Utility in reviewing and planning to meet this service request. The plat and/or accompanying information shall identify the type, location and number of houses and other planned structures that will be requiring utility service. If other than residential structures are to be located on the property, all other types of anticipated businesses and their service demands shall be identified with specificity. All areas requiring special irrigation and/or other unique water demands must be identified. To the extent reasonably possible, this information must be precise so that adequate facilities can be designed and constructed to meet all future service demands without hazard to the public, other utility customers and/or the environment.

(b) After the requirements of easements and rights-of-way have been determined, a red line copy

will be returned by the Utility to the Developer for final plat preparation. (c) Copies of all proposed plats and plans must be submitted to the Utility prior to their submission

to the county for approval to insure that they are compatible with the adequate long-term utility needs of potential service customers. Copies will be returned after review by the Utility so that necessary changes may be incorporated into the Developer's final submitted plat(s) and plans.

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SECTION 3.0 – EXTENSION POLICY (continued) (d) The Utility shall be provided with three (3) certified copies of the final plat(s) approved by the

County Commissioners Court. At this time, the Utility will begin engineering the facilities necessary to serve the property. Plans and specifications will be prepared and submitted to the TCEQ by the Utility if required by law. If further plat or plans changes are necessary to accommodate the specific service needs of the property and the anticipated customer demands, the Developer will be so notified. Plat amendments must be obtained by the Developer. The Developer shall be notified when all required TCEQ or other governmental approvals or permits have been received. No construction of utility plant which requires prior TCEQ plans approval shall be commenced until that approval has been received by the Utility and any conditions imposed by the TCEQ in association with its approvals have been satisfied.

(e) The Developer shall be required to post bond or escrow the funds necessary to construct all

required utility plant, except individual sewer connections, required to serve the property. Construction shall not commence until funds are available. If the construction is to be done in coordination with the phased development of the property, funds must be provided in advance which are sufficient to complete each phase. No phase or facilities for any phase shall be constructed prior to the bonding or escrowing of all funds associated with that phase.

(f) At the sole option of the Utility, the Developer may be required to execute a Developer

Extension Contract setting forth all terms and conditions of extending service to their property including all contributions-in-aid of construction and developer reimbursements, if any.

(g) The Utility may require the Developer to commence construction of subdivision improvements

within three (3) months of utility plans approval or the Utility may abate its construction activities until full development construction begins. If the Developer stops construction of subdivision improvements for any purpose, the Utility may abate its construction for a similar period.

(h) As soon as the roads are rough cut and prior to paving, extension lines will need to be

constructed at each road crossing. The Developer must notify the Utility sufficiently in advance of this development stage to allow for the necessary utility construction without disruption to other service operations of the Utility. Failure to provide adequate advance notice and cooperation in the construction of necessary utility plant may result in additional delays in obtaining service to the property. The Developer shall be required to pay for all additional costs of road boring or other remedial construction necessary to install adequate utility plant throughout the affected property.

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SECTION 3.0 – EXTENSION POLICY (continued) Within its certificated area, the Utility shall bear the cost of the first 200 feet of any water main or sewer collection line necessary to extend service to an individual residential service applicant within a platted subdivision unless the Utility can document: (a) that the developer of the subdivision refused to provide facilities compatible with the utility's

facilities in accordance with the Utility's approved extension policy after receiving a written request from the Utility; or,

(b) that the Developer defaulted on the terms and conditions of a written agreement or contract

existing between the utility and the developer or the terms of this tariff regarding payment for services, extensions, or other requirements; or in the event the Developer declared bankruptcy and was therefore unable to meet obligations; and,

(c) that the residential service applicant purchased the property from the Developer after the

Developer was notified of the need to provide facilities to the utility. A residential service applicant may be charged the remaining costs of extending service to his property; provided, however, that the residential service applicant may only be required to pay the cost equivalent to the cost of extending the nearest water main or wastewater collection line, whether or not that line has adequate capacity to serve that residential service applicant. The following criteria shall be considered to determine the residential service applicant's cost for extending service:

(a) the residential service applicant shall not be required to pay for costs of main extensions

greater. than 2" in diameter for pressure wastewater collection lines and 6" in diameter for gravity wastewater lines.

(b) Exceptions may be granted by the TCEQ Executive Director, PUC, or other regulatory

authority if: (1) adequate service cannot be provided to the applicant using the maximum line sizes

listed due to distance or elevation, in which case, it shall be the utility's burden to justify that a larger diameter pipe is required for adequate service;

(2) larger minimum line sizes are required under subdivision platting requirements or

applicable building codes.

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SECTION 3.0 – EXTENSION POLICY (continued) (c) If an exception is granted, the Utility shall establish a proportional cost plan for the

specific extension or a rebate plan which may be limited to seven years to return the portion of the applicant's costs for oversizing as new customers are added to ensure that future applicants for service on the line pay at least as much as the initial service applicant.

For purposes of determining the costs that service applicants shall pay, commercial customers with service demands greater than residential customer demands in the certificated area, industrial, and wholesale customers shall be treated as developers.

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ANNUALREPORT

2015

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ALGONQUIN POWER & UTILITIES CORP. Algonquin is a $5 billion North American diversified generation, transmission and distribution utility.

OUR VISION IS CLEAR. To be most admired bycustomers, communities and investors for ourpeople, passion and performance.

WWW.ALGONQUINPOWERANDUTILITIES.COM TORONTO STOCK EXCHANGE:

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74 2015 Annual ReportConsolidated Financial Statements

INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Algonquin Power & Utilities Corp.

We have audited the accompanying consolidated financial statements of Algonquin Power & Utilities Corp., which comprise the consolidated balance sheets as at December 31, 2015 and 2014 and the consolidated statements of operations, comprehensive income, equity, and cash flows for each of the years in the two-year period ended December 31, 2015, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Algonquin Power & Utilities Corp. as at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

Other Matter

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Algonquin Power & Utilities Corp.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 10, 2016 expressed an unqualified opinion on Algonquin Power & Utilities Corp.’s internal control over financial reporting.

Chartered Professional Accountants,

Licensed Public Accountants

Toronto, Canada

March 10, 2016

LU 000150

752015 Annual ReportConsolidated Financial Statements

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROLS UNDER STANDARDS OF THE PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD (UNITED STATES)

To the Board of Directors and Shareholders of Algonquin Power & Utilities Corp.

We have audited Algonquin Power & Utilities Corp.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Algonquin Power & Utilities Corp.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Algonquin Power & Utilities Corp.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Algonquin Power & Utilities Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.

We also have audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Algonquin Power & Utilities Corp. as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the years in the two-year period ended December 31, 2015 and our report dated March 10, 2016 expressed an unqualified opinion thereon.

Chartered Professional Accountants,

Licensed Public Accountants

Toronto, Canada

March 10, 2016

LU 000151


Algonquin Power & Utilities Corp.Consolidated Balance Sheets

(thousands of Canadian dollars)

December 31,

2015December 31,

2014

ASSETSCurrent assets:

Cash and cash equivalents $ 124,353 $ 9,273Accounts receivable, net (note 4) 186,681 188,573Natural gas in storage (note 1(h)) 28,502 31,550Regulatory assets (note 7) 32,213 61,645Prepaid expenses 18,409 10,431Derivative instruments (note 24) 15,039 10,688Other current assets 18,537 15,359

423,734 327,519Property, plant and equipment, net (note 5) 3,873,684 3,278,422Intangible assets, net (note 6) 77,963 54,011Goodwill (note 6) 110,493 92,328Regulatory assets (note 7) 213,102 185,627Derivative instruments (note 24) 73,322 31,782Long-term investments (note 8) 174,802 43,279Deferred income taxes (note 19) 18,109 64,275Other assets (note 12) 26,516 25,605

$ 4,991,725 $ 4,102,848

LU 000152


Algonquin Power & Utilities Corp.Consolidated Balance Sheets

(thousands of Canadian dollars)

December 31,

2015December 31,

2014

LIABILITIES AND EQUITYCurrent liabilities:

Accounts payable $ 50,428 $ 68,540Accrued liabilities 193,320 199,374Dividends payable (note 16) 41,802 25,395Regulatory liabilities (note 7) 44,167 20,590Long-term debt (note 9) 8,945 9,130Other long-term liabilities and deferred credits (note 13) 36,621 49,303Other liabilities 16,593 10,234

391,876 382,566Long-term debt (note 9) 1,477,850 1,262,589Regulatory liabilities (note 7) 131,180 101,166Deferred income taxes (note 19) 175,799 134,460Derivative instruments (note 24) 106,628 40,088Pension and other post-employment benefits (note 10) 150,094 138,602Other long-term liabilities (note 13) 223,135 177,235Preferred shares, Series C (note 11) 17,548 17,608

2,282,234 1,871,748Redeemable non-controlling interest (note 3(e)) 25,751 12,146

Equity:Preferred shares (note 14(b)) 213,805 213,805Common shares (note 14(a)) 1,808,894 1,633,262Subscription receipts (note 14(a)(ii)) 110,503 110,503Additional paid-in capital 38,241 33,068Deficit (523,116) (505,305)Accumulated other comprehensive income (note 15) 286,737 34,213Total Equity attributable to shareholders of Algonquin Power & Utilities Corp. 1,935,064 1,519,546Non-controlling interests 356,800 316,842Total Equity 2,291,864 1,836,388

Commitments and contingencies (note 22)Subsequent events (notes 3(a) and (b), 8(e), 9, 14(a)(iii) and 25)

$ 4,991,725 $ 4,102,848

See accompanying notes to consolidated financial statements

LU 000153

2015 Annual ReportConsolidated Financial Statements78

Algonquin Power & Utilities Corp.Consolidated Statements of Operations

(thousands of Canadian dollars, except per share amounts) Year ended December 31

2015 2014

RevenueRegulated electricity distribution $ 224,110 $ 204,721Regulated gas distribution 464,767 446,025Regulated water reclamation and distribution 78,467 66,419Non-regulated energy sales 222,581 202,300Other revenue 37,930 22,149

1,027,855 941,614

ExpensesOperating expenses 278,561 234,038Regulated electricity purchased 131,647 120,506Regulated gas purchased 217,236 261,116Non-regulated energy purchased 27,990 39,264Administrative expenses 40,675 34,692Depreciation and amortization 149,806 114,047Gain on foreign exchange (2,631) (1,112)

843,284 802,551

Operating income from continuing operations 184,571 139,063Interest expense 65,993 62,418Interest, dividend, equity and other income (9,095) (7,758)Other gains (5,110) —Acquisition-related costs 1,832 2,552Write-down of long-lived assets and loss on disposal 2,890 8,027Loss (gain) on derivative financial instruments (note 24(b)(iv)) (2,188) 1,375

54,322 66,614

Earnings from continuing operations before income taxes 130,249 72,449

Income tax expense (note 19)Current 7,310 3,674Deferred 36,403 13,133

43,713 16,807Earnings from continuing operations 86,536 55,642Loss from discontinued operations, net of tax (1,032) (2,127)

Net earnings 85,504 53,515Net loss attributable to non-controlling interests (note 18) (31,976) (22,186)

Net earnings attributable to shareholders of Algonquin Power & Utilities Corp. $ 117,480 $ 75,701Series A and D Preferred shares dividend (note 16) 10,400 9,503

Net earnings attributable to common shareholders of Algonquin Power & Utilities Corp. $ 107,080 $ 66,198Basic net earnings per share from continuing operations (note 20) $ 0.43 $ 0.32Basic net earnings per share (note 20) 0.42 0.31Diluted net earnings per share from continuing operations (note 20) 0.42 0.32Diluted net earnings per share (note 20) $ 0.42 $ 0.31


LU 000154


Algonquin Power & Utilities Corp.Consolidated Statements of Comprehensive Income

(thousands of Canadian dollars) Year ended December 31

2015 2014

Net earnings $ 85,504 $ 53,515Other comprehensive income:

Foreign currency translation adjustment, net of tax recovery of $nil and $1,049,respectively (notes 1(v), 24(b)(iii) and 24(c)) 289,035 104,183

Change in fair value of cash flow hedges’, net of tax expense of $12,010 and$6,589, respectively (note 24(b)(ii)) 16,165 2,799

Change in unrealized appreciation in value of available-for-sale investments (73) 1

Change in pension and other post-employment benefits, net of tax expense of$4,923 and tax recovery of $22,446, respectively (note 10) 7,571 (35,669)

Other comprehensive income, net of tax 312,698 71,314Comprehensive income 398,202 124,829Comprehensive income attributable to the non-controlling interests 28,198 7,077Comprehensive income attributable to shareholders of Algonquin Power & Utilities Corp. $ 370,004 $ 117,752


LU 000155


Algonquin Power & Utilities Corp.Consolidated Statement of Equity

(thousands of Canadian dollars)For the year ended December 31, 2015

Algonquin Power & Utilities Corp. Shareholders

Commonshares

Preferredshares

Subscriptionreceipts

Additionalpaid-incapital

Accumulateddeficit

AccumulatedOCI

Non-controllinginterests Total

Balance,December 31, 2014 $1,633,262 $213,805 $ 110,503 $ 33,068 $ (505,305) $ 34,213 $316,842 $1,836,388

Net earnings (loss) — — — — 117,480 — (31,976) 85,504

Redeemable non-controlling interestsnot included in equity

— — — — — — 3,571 3,571

Other comprehensiveincome — — — — — 252,524 60,174 312,698

Dividends declaredand distributions tonon-controllinginterests — — — — (105,929) — (2,626) (108,555)

Dividends andissuance of sharesunder dividendreinvestment plan 29,302 — — — (29,302) — — —

Contributions receivedfrom non-controllinginterests — — — — — — 10,815 10,815

Shares issuedpursuant to publicoffering, net of costs(note 14(a)(i)) 144,987 — — — — — — 144,987

Issuance of commonshares underemployee sharepurchase plan 1,343 — — (282) (60) — — 1,001

Share-basedcompensation — — — 5,455 — — — 5,455


LU 000156


Algonquin Power & Utilities Corp.Consolidated Statement of Equity

(thousands of Canadian dollars)For the year ended December 31, 2014

Algonquin Power & Utilities Corp. Shareholders

Commonshares

Preferredshares

Subscriptionreceipts

Additionalpaid-incapital

Accumulateddeficit

AccumulatedOCI

Non-controllinginterests Total

Balance,December 31, 2013 $1,351,264 $116,546 $ — $ 7,313 $ (488,406) $ (31,410) $510,654 $1,465,961

Net earnings (loss) — — — — 75,701 — (22,186) 53,515

Redeemable non-controlling interestsnot included in equity — — — — — — (289) (289)

Other comprehensiveincome — — — — — 42,051 29,263 71,314

Dividends declaredand distributions tonon-controllinginterests — — — — (75,205) — (4,738) (79,943)

Dividends andissuance of sharesunder dividendreinvestment plan 17,395 — — — (17,395) — — —

Contributions receivedfrom non-controllinginterests — — — — — — 9,934 9,934

Issuance ofsubscription receipts(note 14(a)(ii)) — — 110,503 — — — — 110,503

Shares issuedpursuant to publicoffering, net of costs(note 14(a)(i)) 263,869 — — — — — — 263,869

Issuance of commonshares underemployee sharepurchase plan 734 — — — — — — 734

Share-basedcompensation expense — — — 3,203 — — — 3,203

Preferred shares,Series D (note 14(b)) — 97,259 — — — — — 97,259

Acquisition of non-controlling interest(note 18) — — — 22,552 — 23,572 (205,796) (159,672)



LU 000157


Algonquin Power & Utilities Corp.Consolidated Statements of Cash Flows

(thousands of Canadian dollars) Year ended December 312015 2014

Cash provided by (used in):

Operating ActivitiesNet earnings from continuing operations $ 86,536 $ 55,642

Adjustments and items not affecting cash:

Depreciation and amortization 151,627 115,399

Deferred taxes 36,403 13,133

Unrealized loss (gain) on derivative financial instruments (1,990) 3,046

Share-based compensation expense 5,455 3,203

Cost of equity funds used for construction purposes (2,424) (1,910)

Pension and post-employment expense (3,333) (2,050)

Write-down of long-lived assets 1,781 8,463

Unrealized gain on disposal of VIE 220 —

Increase in deferred income 550 —

Changes in non-cash operating items (note 23) (11,149) (1,790)

Changes in non-cash operating items from discontinued operations — 1,262

Cash used in discontinued operations (1,806) (1,682)

261,870 192,716

Financing ActivitiesCash dividends on common shares (79,121) (57,848)

Cash dividends on preferred shares (10,400) (9,503)

Cash contributions from non-controlling interests 15,222 11,845

Production-based cash contributions from non-controlling interest 10,815 8,976

Cash distributions to non-controlling interests (2,936) (4,738)

Issuance of common shares, net of costs 144,694 261,452

Proceeds from subscription receipts — 110,503

Issuance of preferred shares, net of costs — 96,271

Acquisition of non-controlling interest — (127,121)

Increase in long-term debt 248,811 236,528

Decrease in long-term debt (196,149) (286,552)

Increase in other long-term liabilities 31,544 18,618

Decrease in other long-term liabilities (6,182) (3,091)

156,298 255,340

Investing ActivitiesIncrease (decrease) in other assets 281 (13,785)

Distributions received in excess of equity income 1,386 264

Receipt of principal on notes receivable 29,273 280

Additions to property, plant and equipment (204,195) (432,373)

Acquisitions of long-term investments (138,560) (25,432)

Acquisitions of operating entities (3,717) (8,757)

Proceeds from sale of long-lived assets 5,516 26,535

(310,016) (453,268)

Effect of exchange rate differences on cash 6,928 646

Increase (decrease) in cash and cash equivalents 115,080 (4,566)

Cash and cash equivalents, beginning of year 9,273 13,839

Cash and cash equivalents, end of year $ 124,353 $ 9,273

Supplemental disclosure of cash flow information: 2015 2014Cash paid during the year for interest expense $ 69,610 $ 57,098

Cash paid during the year for income taxes $ 6,153 $ 2,571

Non-cash financing and investing activities:Property, plant and equipment acquisitions in accruals $ 44,834 $ 25,568

Issuance of common shares under dividend reinvestment plan and share-based compensation plans $ 30,645 $ 18,129


LU 000158


APPLICATION OF LIBERTY § BEFORE THE PUBLIC UTILITYUTILITIES (WOODMARK SEWER) §CORP. AND LIBERTY UTILITIES § COMMISSION OF TEXAS(TALL TIMBERS SEWER) CORP. §(CCN NOS. 20679 AND 20694) TO §CHANGE RATES FOR SEWER §SERVICE IN SMITH COUNTY, TEXAS §

AFFIDAVIT/CERTIFICATION OF APPLICATION

STATE OF ARIZONA §§

COUNTY OF MARICOPA §

Matthew Garlick, first being sworn on his oath, states:

1, Matthew Garlick, am the President of Liberty Utilities (Woodmark Sewer) Corp. and

Liberty Utilities (Tall Timbers Sewer) Corp (“Liberty Utilities”). I have the authority and have

been directed to execute all documents deemed necessary or appropriate in connection with

regulatory matters with the Public Utility Commission of Texas on behalf of Liberty Utilities

(Woodmark Sewer) Corp. and Liberty Utilities (Tall Timbers Sewer) Corp.

Liberty Utilities (Woodmark Sewer) Corp. and Liberty Utilities (Tall Timbers Sewer) Corp

have filed a Rate Application with the Public Utility Commission of Texas. I have reviewed said

Rate Application. Based on my knowledge. said Rate Application does not contain any untrue

statements of a material fact or omit to state a material fact necessary to make the statements made

not misleading, in light of the circumstances under which such statements were made.

Based on my knowledge, the financial information, and other information included in said

Rate Application is consistent with the accounting and other records of Liberty Utilities

(Woodmark Sewer) Corp. and Liberty Utilities (Tall Timbers Sewer) Corp. for the period

presented in the Rate Application.

LU 000159

All other statements contained in said Rate Application are true, and said Rate Application

is correct and complete for all information requested and consistent with the books and records of

the applicant.

4JMatthew Garlick

Subscribed and sworn to before me on this the 3 day of ,2016.

Notary Public

My commission expires:

6Lip UJpcThrJ

S/zc/,8

OFFICIAL SEALBrian Walton

NOTARY PUSUC STATE Of ARIZONAMkopaCoun

MyCon.Thsika E,pO.aMay2L2Ofl

LU 000160


APPLICATION OF LIBERTY UTILITIES (WOODMARK SEWER) CORP. AND LIBERTY UTILITIES (TALL TIMBERS SEWER) CORP. (CCN NOS. 20679 AND 20694) TO CHANGE RATES FOR SEWER SERVICE IN SMITH COUNTY, TEXAS

§ § § § § § § §


COMMISSION OF TEXAS

DIRECT TESTIMONY AND ATTACHMENTS

OF

MATTHEW GARLICK

ON BEHALF OF

LIBERTY UTILITIES (WOODMARK SEWER) CORP. AND LIBERTY UTILITIES (TALL TIMBERS SEWER) CORP.

September 2, 2016

LU 000161

ii

DIRECT TESTIMONY AND ATTACHMENTS OF

MATTHEW GARLICK

TABLE OF CONTENTS SECTION PAGE

I. INTRODUCTION .............................................................................................................. 1

II. OVERVIEW OF LIBERTY UTILITIES ............................................................................ 4

III. OVERVIEW OF LIBERTY WOODMARK ...................................................................... 9

IV. OVERVIEW OF LIBERTY TALL TIMBERS ................................................................ 11

V. LIBERTY WOODMARK’S PROPOSED WASTEWATER PLANT EXPANSION ..... 14

VI. TARIFF CHANGES ......................................................................................................... 19

VII. FINANCING..................................................................................................................... 20

ATTACHMENTS:

MG-1 Woodmark Expansion - Project Cost Estimate

MG-2 Woodmark Expansion - Project Schedule

MG-3 Costs Associated with the Hydraulic Improvement Project

LU 000162

1

DIRECT TESTIMONY OF MATTHEW GARLICK 1

ON BEHALF OF 2

LIBERTY UTILITIES (WOODMARK SEWER) CORP. AND 3 LIBERTY UTILITIES (TALL TIMBERS SEWER) CORP. 4

5 I. INTRODUCTION 6

Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. 7

A. My name is Matthew Garlick. My business address is 12725 W. Indian School 8

Road, Suite D-101, Avondale, Arizona 85392. 9

10

Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY? 11

A. I have been employed by Liberty Utilities since 2000. On June 1, 2015, I became 12

President of the Liberty Utilities regulated utilities in Arizona and Texas, including 13

Liberty Utilities (Woodmark Sewer) Corp. (“Liberty Woodmark”) and Liberty 14

Utilities (Tall Timbers Sewer) Corp. (“Liberty Tall Timbers”) (collectively 15

“Applicants”). 16

17

Q. ON WHOSE BEHALF ARE YOU TESTIFYING IN THIS PROCEEDING? 18

A. I’m providing this testimony on behalf of both of the Applicants. 19

20

Q. PLEASE DESCRIBE YOUR RESPONSIBILITIES AS PRESIDENT OF 21

LIBERTY UTILITIES IN ARIZONA/TEXAS. 22

A. I am responsible for Liberty Utilities’ water and sewer operations in Texas and 23

Arizona.1 This includes directing the daily operations and administration of all of 24

1 In Texas, along with Applicants, Liberty Utilities also owns and operates Liberty Utilities (Silverleaf Water) LLC (“Liberty Silverleaf”) and the unregulated Liberty Utilities (Seaside Water) LLC (“Liberty Seaside”).

LU 000163

2

the utilities, including their financial and operating results, capital and operating 1

cost budgeting, rate case planning and oversight, and rate setting policies and 2

procedures. As President, I also oversee customer and development services, 3

environmental, health and safety, accounting/finance, human resources, 4

engineering, and conservation planning. 5

6

Q. WHAT OTHER POSITIONS HAVE YOU HELD WITH LIBERTY 7

UTILITIES? 8

A. I was hired in January 2000 as a Technical Services Supervisor. In November 9

2009, I was named Business Manager of Liberty Utilities (Litchfield Park Water & 10

Sewer) Corp. (formerly known as Litchfield Park Service Company) in Arizona, 11

and was responsible for operations for approximately 40,000 utility customers. In 12

March 2012, I assumed the role of Director of Operations – Arizona, and was 13

responsible for operations throughout Arizona, as well as Texas, Missouri, and 14

Illinois. In June 2015, I became President of our operating utilities in Arizona and 15

Texas. 16

17

Q. WHAT WAS YOUR EDUCATION AND EMPLOYMENT PRIOR TO 18

LIBERTY UTILITIES? 19

A. For 15 years prior, I was a Senior Project Geologist with an environmental 20

engineering firm called Environmental Science and Engineering. My role was to 21

direct and support other project scientists in the daily work activities on various 22

State of Arizona Water Quality Assurance Revolving Fund (WQARF) groundwater 23

remedial projects. I earned a Bachelor of Science degree in Earth Science from 24

Northern Arizona University. 25

26

LU 000164

3

Q. DO YOU HOLD ANY CERTIFICATIONS? 1

A. I hold the highest level of Operator Certifications (Grade IV – WD, WP, WWT, and 2

Grade III in WWC) in Arizona. I am also a certified Backflow Tester. 3

Additionally, I belong to several professional organizations such as the American 4

Water Works Association (AWWA), and American Backflow Prevention 5

Association (ABPA). In addition, I am a board member of Water Utilities 6

Association of Arizona (WUAA) and Independent Water and Sewer Companies of 7

Texas (IWSCOT). 8

9

Q. HAVE YOU TESTIFIED BEFORE THIS OR ANY OTHER COMMISSION? 10

A. I have not testified before the Public Utility Commission of Texas or its 11

predecessors. However, I have testified before the Arizona Corporation 12

Commission in utility rate cases involving Liberty Utilities subsidiaries. 13

14

Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS 15

PROCEEDING? 16

A. To support Applicants’ request for rate relief. Specifically, I will provide general 17

background on the Liberty Utilities companies, and on Liberty Woodmark and 18

Liberty Tall Timbers. I will also address Applicants’ requests for approval of 19

various changes that are being proposed to Applicants’ tariffs of rates and charges. 20

Additionally, I signed the Affidavit/Certification of Application on behalf of 21

Applicants, which is included in the Rate Filing Package, attesting to the accuracy 22

of the information in this case to the best of my knowledge. 23

24 Q. ARE THE DOCUMENTS ATTACHED AS MG-1, MG-2, MG-3 AND THE 25

ALGONQUIN POWER & UTILITIES CORP. 2015 COST ALLOCATION 26

BUSINESS RECORDS OF THE LIBERTY UTILITIES COMPANIES? 27

LU 000165

4

A. Yes. 1

2

Q. AS AN EMPLOYEE OF LIBERTY UTILITIES COMPANIES, ARE YOU 3

FAMILIAR WITH THE MANNER IN WHICH THE RECORDS ARE 4

CREATED AND MAINTAINED? 5

A. Yes. 6

7

Q. BASED ON LIBERTY UTILITIES COMPANIES REGULAR PRACTICES 8

WERE THE RECORDS MADE AT OR NEAR THE TIME OF EACH ACT, 9

EVENT, CONDITION, OPINION, OR DIAGNOSIS SET FORTH IN THE 10

RECORDS, MADE BY, OR FROM INFORMATION TRANSMITTED BY, 11

PERSONS WITH KNOWLEDGE OF THE MATTERS SET FORTH, AND 12

KEPT IN THE COURSE OF REGULARLY CONDUCTED BUSINESS 13

ACTIVITY? 14

A. Yes. 15

16

Q. ARE THE BUSINESS RECORDS YOU NOTED ABOVE EXACT 17

DUPLICATES OF THE ORIGINAL RECORDS? 18

A. Yes. 19

20

II. OVERVIEW OF LIBERTY UTILITIES 21

Q. PLEASE PROVIDE AN OVERVIEW OF LIBERTY UTILITIES. 22

LU 000166

5

A. Liberty Utilities Co. (“Liberty Utilities”) is a Delaware corporation that operates 1

regulated gas, water, sewer and electric utilities in eleven states—Arizona, 2

Arkansas, California, Georgia, Illinois, Iowa, Massachusetts, Missouri, Montana, 3

New Hampshire and Texas. Liberty Utilities Co. is a subsidiary of Liberty Utilities 4

(Canada) Corp. (“Liberty Utilities Canada”). The Texas utilities are wholly owned 5

subsidiaries of Liberty Utilities (Sub) Corp., which is a wholly owned subsidiary of 6

Liberty Utilities. Algonquin Power & Utilities Corp., or APUC, a publicly traded 7

member of the Toronto Stock Exchange, ultimately owns all of the Liberty Utilities 8

entities, including Applicants. 9

APUC is a $5 billion electric generation, transmission and distribution utility 10

company based in Oakville, Ontario. APUC is listed on the Toronto Stock 11

Exchange and is a registrant with the U.S. Security and Exchange Commission. 12

APUC subsidiaries own and operate regulated utilities in the United States, and own 13

non-regulated generation facilities and regulated electric transmission and natural 14

gas pipelines throughout the United States and Canada. The distribution business 15

group operates in the United States as Liberty Utilities and provides rate-regulated 16

water, wastewater, electricity and natural gas utility services to over half a million 17

customers. The electric generation business group operates as Algonquin Power 18

Co. and owns or has interests in a portfolio of North American based contracted 19

wind, solar, hydroelectric and natural gas powered generating facilities representing 20

more than 1,300 MW of installed capacity. The transmission business group 21

invests in rate regulated electric transmission and natural gas pipeline systems in the 22

United States and Canada. Common shares and preferred shares of APUC are 23

traded on the Toronto Stock Exchange under the symbols AQN, AQN.PR.A and 24

AQN.PR.D. The APUC website is www.AlgonquinPowerandUtilities.com. The 25

complete APUC Annual Report 2015 is available at this site. Excerpts from that 26

LU 000167

6

report are included in the Rate Filing Package in response to the Commission’s 1

Class B Utility Rate Filing Package Form Instruction requirements. 2

3

Q. WHAT IS LIBERTY UTILITIES' OVERALL PHILOSOPHY REGARDING 4

THE OPERATION OF ITS REGULATED UTILITY BUSINESSES? 5

A. Liberty Utilities promotes a common set of organizational values to help guide 6

day-to-day business decisions. Those organizational values are Quality, 7

Efficiency, and Care. They are the foundation of the Liberty Utilities culture and 8

provide guidance on day-to-day business operations. Overarching all of those 9

organizational values is Safety. Liberty Utilities considers Safety a meta-level 10

value and places safety of customers, employees and community first and foremost. 11

In addition to local operations, strategic oversight and administrative support 12

services are provided centrally from Liberty Utilities Canada and APUC to the local 13

utility businesses. We take this approach because we believe these services can be 14

provided more cost effectively and in a manner that ensures consistent quality 15

across all of our operating utilities if provided on a shared services basis. We strive 16

to ensure, however, that doing so will not detract from the local presence that is 17

valued by our customers and regulators. Customers receive significant benefits 18

from this shared services model and the local approach in the provision of high 19

quality utility service. 20

21

Q. HOW DOES LIBERTY UTILITIES’ REGULATORY PHILOSOPHY 22

INFLUENCE THE WAY IN WHICH IT APPROACHES THE 23

MANAGEMENT AND OPERATION OF THE UTILITIES IT OWNS? 24

A. We believe that there is no adequate substitute for local management, local 25

decision-making and local operational control for a utility that is serious about 26

achieving the highest level of customer satisfaction and maintaining strong 27

LU 000168

7

regulatory compliance. We believe that utilities can best meet the needs of 1

customers and regulators when the people making the decisions impacting the 2

communities they serve are located near those customers and are in easy, regular, 3

close contact with customers and regulators. In terms of operating its regulated 4

utilities, Liberty Utilities focuses on local management control and operation. 5

We operate on the following corporate principles—“Local. Responsive. We 6

Care.” Each state has a President who directs the utilities in that state. I am that 7

President in Arizona and Texas. The state presidents have local decision making 8

authority and responsibility, including operational and financial authority. We 9

have system operators and local customer service representatives to interact with 10

customers directly. Customers, based on our experience, appreciate the “local” 11

aspect of our service, and we try to accomplish that wherever reasonably possible. 12

We have been successful in implementing this local service approach in Texas. 13

14

Q. WHAT ROLE DOES LIBERTY UTILITIES PLAY IN THE OPERATION 15

AND MANAGEMENT OF APPLICANTS? 16

A. Liberty Utilities is more than just a holding company—it is the operator of each of 17

the Applicants. Employees that operate, administer and manage the day-to-day 18

operations are employed by Liberty Utilities Service Corp. (“LUSC”), a direct 19

subsidiary of Liberty Utilities. Liberty Utilities is also Applicants’ source of 20

capital for utility plant investment and operations with investment capital ultimately 21

coming from APUC. 22

23

Q. ARE THERE ADVANTAGES TO OPERATING IN THIS MANNER? 24

A. Yes, there are substantial advantages. To start, operating in this manner achieves 25

economies of scale that allow us to provide great service at a reasonable price. As 26

stand-alone utilities, Applicants would have to hire and pay full time engineering 27

LU 000169

8

staff, human resources, safety and rates personnel, repair and maintenance staff, 1

accounting and billing staff, and customer service and management personnel. In 2

turn, those stand-alone costs would be incorporated into rates. We all see these 3

financial realities daily in the hundreds of small water and sewer utilities regulated 4

by the Commission. In Arizona and Texas, Liberty Utilities currently has over 100 5

employees working to provide the best possible service at a reasonable cost to the 6

customers of multiple different regulated water and wastewater utilities. 7

8

Q. BUT DO APPLICANTS REALLY NEED THAT MANY FULL-TIME 9

EMPLOYEES TO OPERATE SAFELY AND RELIABLY? 10

A. Neither Applicant has any full-time staff, which illustrates the benefits of Liberty 11

Utilities’ operations model. For example, in Arizona, we currently have a 12

substantial project for Liberty Black Mountain—the Boulders WWTP 13

closure—and our engineering and regulatory staff have spent a great deal of time 14

focused on that project. Several years ago, we had a major plant expansion at the 15

Liberty Litchfield Park Palm Valley Water Reclamation Facility, and we are 16

currently constructing another expansion of that plant. We now have a planned 17

wastewater treatment plant expansion for Liberty Woodmark. Under our structure, 18

each of our Texas utilities has access to personnel with experience and expertise 19

available to focus on major capital improvement projects for multiple utilities. 20

And while the engineers and operators focus on capital improvements and 21

maintenance of the existing systems, the billing clerks focus on getting bills out and 22

payments in, and customer service handles customer inquiries. Each of us has a 23

role in the running of all utility operations and that allows us to have the right people 24

with the right skills available to do the job for each and any utility as needed. This 25

operational structure also allows us to share those necessary costs over multiple 26

entities, in turn reducing service costs and rates for customers. 27

LU 000170

9

Q. DOESN’T THIS ARRANGEMENT RESULT IN CONFUSION OVER THE 1

COSTS FOR LIBERTY UTILITIES’ VARIOUS TEXAS UTILITIES? 2

A. No. All direct costs related to each utility’s specific operations are direct charged. 3

Common costs are pooled and allocated through a central cost allocation. 4

Mr. Killeen, Director, Regulatory Strategy for Liberty Utilities (Canada) Corp., 5

addresses the corporate cost allocations from APUC and Liberty Utilities Canada in 6

his direct testimony. All of the costs are scrutinized in the ratemaking process. 7

III. OVERVIEW OF LIBERTY WOODMARK 8

Q. PLEASE PROVIDE AN OVERVIEW OF LIBERTY WOODMARK. 9

A. Liberty Woodmark provided sewer service to approximately 1,660 residential and 10

commercial customer connections as of the end of 2015. Liberty Woodmark’s 11

certificated service territory is located in Smith County, Texas. Liberty Woodmark 12

became a Liberty Utilities subsidiary in 2002 through a stock purchase. 13

14

Q. PLEASE DESCRIBE LIBERTY WOODMARK’S SEWER SYSTEM 15

RESOURCES. 16

A. The Liberty Woodmark sewer system contains collection lines and lift stations 17

throughout a service area covering approximately eleven square miles that feed into 18

a wastewater treatment plant currently permitted under TCEQ Texas Pollutant 19

Discharge Elimination System (“TPDES”) Permit No. WQ13168001. That 20

wastewater plant is currently permitted to treat and discharge up to 0.4 million 21

gallons per day (“MGD”) (i.e., 400,000 gallons per day) in its final phase. Liberty 22

Woodmark operates under Certificate of Convenience and Necessity (“CCN”) No. 23

20679. Liberty Woodmark does not provide water service within its CCN. That 24

service is provided by Southern Utilities. 25

26

LU 000171

10

Q. WHAT IS LIBERTY WOODMARK’S COMPLIANCE STATUS? 1

A. To the best of our knowledge, Liberty Woodmark is currently in general compliance 2

with the rules and regulations of the Texas Commission on Environmental Quality 3

(“TCEQ”) and the Public Utility Commission of Texas (“PUC”). However, those 4

rules require expansion planning when a certain percentage of the plant capacity is 5

being utilized. The Liberty Woodmark wastewater treatment plant has reached 6

that capacity and is under a compliance mandate to expand. That is why we have 7

commenced our Liberty Woodmark wastewater treatment plant expansion project. 8

9

Q. WHEN DID THE CURRENT RATES GO INTO EFFECT FOR LIBERTY 10

WOODMARK? 11

A. The current sewer rates for Liberty Woodmark were approved in TCEQ Docket No. 12

2014-0064-UCR, SOAH Docket No. 582-14-2348 in an order dated August 5, 13

2014. Those rates were based on a test year ending March 31, 2013. 14

15

Q. WHAT SIGNIFICANT CAPITAL IMPROVEMENTS HAS LIBERTY 16

WOODMARK MADE SINCE MARCH 31, 2013? 17

A. Liberty Woodmark has completed several expansions of its wastewater treatment 18

plant from .25 MGD (i.e., 250,000 gallons per day) to .363 MGD (i.e., 363,000 19

gallons per day) in 2014, and then to .4 MGD in 2015 (i.e., 400,000 gallons per day). 20

Since the prior test year ending March 31, 2013, approximately $1.8 M of capital 21

improvements were made at Liberty Woodmark, including $.5 M for lift station 22

improvements which includes $.17M for our HWY 69 Lift Station rehab, and 23

approximately $.2M for a digester at the wastewater treatment plant. These 24

Woodmark project improvements included a modification of the treatment 25

technology from a conventional activated sludge system to an integrated fixed film 26

LU 000172

11

activated sludge system (referred to as IFAS). This technology is especially 1

effective in providing nutrient removal. 2

3

Q. HAVE THERE BEEN ANY NOTEWORTHY CHANGES IN OPERATIONS 4

FOR LIBERTY WOODMARK SINCE THE LAST RATE CASE? 5

A. Yes. TCEQ has required that we expand the Liberty Woodmark wastewater 6

treatment plant again. That project is currently underway and expected to be 7

completed by February, 2017. 8

9

Q. WHY IS LIBERTY WOODMARK IN NEED OF RATE RELIEF AT THIS 10

TIME? 11

A. Since the last Liberty Woodmark rate case, operating expenses have increased and 12

Liberty Woodmark has made significant capital improvements to provide more 13

reliable service to its customers. As a result, Liberty Woodmark is significantly 14

under earning. The Liberty Woodmark wastewater plant is also undergoing a 15

required expansion that necessitates increased rates. 16

17

IV. OVERVIEW OF LIBERTY TALL TIMBERS 18

Q. PLEASE PROVIDE AN OVERVIEW OF LIBERTY TALL TIMBERS. 19

A. Liberty Tall Timbers provided sewer service to approximately 2,079 residential and 20

commercial customer connections as of the end of 2015. The Liberty Tall Timbers 21

certificated service territory is located in Smith County, Texas. Part of its service 22

area is also located within the City of Tyler, Texas. Liberty Tall Timbers became a 23

Liberty Utilities subsidiary in 2002 through a stock purchase. 24

25

LU 000173

12

Q. PLEASE DESCRIBE THE LIBERTY TALL TIMBERS SEWER SYSTEM 1

RESOURCES. 2

A. The Liberty Tall Timbers sewer system contains collection lines and lift stations 3

throughout a service area covering approximately thirteen square miles that feed 4

into a wastewater treatment plant currently permitted under TCEQ Texas Pollutant 5

Discharge Elimination System (“TPDES”) Permit No. WQ13000001. That 6

wastewater plant is currently permitted to treat and discharge up to 0.445 MGD (i.e., 7

445,000 gallons per day) in its final phase. Liberty Tall Timbers operates under 8

Certificate of Convenience and Necessity (“CCN”) No. 20694. Liberty Tall 9

Timbers does not provide water service within its CCN. That service is provided 10

by City of Tyler in certain areas and Southern Utilities in others. 11

12

Q. WHAT IS LIBERTY TALL TIMBERS’ COMPLIANCE STATUS? 13

A. To the best of our knowledge, Liberty Tall Timbers is currently in compliance with 14

the rules and regulations of the TCEQ and PUC. 15

16

Q. WHEN DID THE CURRENT RATES GO INTO EFFECT FOR LIBERTY 17

TALL TIMBERS? 18

A. The current Liberty Tall Timbers sewer rates were approved in TCEQ Docket No. 19

2009-1381-UCR/SOAH Docket No. 582-10-0350 for only its service area outside 20

the City of Tyler, Texas. Those rates were effective July 2010. The final order 21

from that case is dated April 21, 2011. That rate case was filed on April 1, 2009 22

using a test year ending 2008. The current Liberty Tall Timbers sewer rates in 23

effect within the City of Tyler, Texas, were approved for Tall Timbers Utility 24

Company, Inc. based on conditions before it became a Liberty Utilities subsidiary. 25

Those rates were set in TCEQ Docket No. 2003-0153-UCR/SOAH Docket No. 26

582-03-2283. The final order from that case is dated June 17, 2005 and set rates 27

LU 000174

13

effective back to November 1, 2002. The test year used in that case was the year 1

ending December 31, 2001. 2

3

Q. WHAT SIGNIFICANT CAPITAL IMPROVEMENTS HAS LIBERTY 4

TALL TIMBERS MADE SINCE 2008? 5

A. Since the prior test year ending December 31, 2008, approximately $4.1 M of 6

capital improvements have been made at Liberty Tall Timbers, including $2.1 M for 7

an expansion of the Liberty Tall Timbers wastewater treatment plant from .312 8

MGD (i.e., 312,000 gallons per day) to .455 MGD (i.e., 455,000 gallons per day) in 9

2014. 10

11

Q. HAVE THERE BEEN ANY NOTEWORTHY CHANGES IN OPERATIONS 12

FOR LIBERTY TALL TIMBERS SINCE THE LAST RATE CASE? 13

A. Yes. The Liberty Tall Timbers improvement project, completed around October 14

2015, included a modification of its biosoilds separation and balancing through the 15

capital additions of a clarifier splitter box, ancillary pumping valves and piping 16

improvements to re-direct the clarifier flows to the newly constructed splitter box. 17

These improvements were necessary to maximize the treatment capability of the 18

existing treatment plant, based on diurnal flows entering the plant. 19

20

Q. WHY IS LIBERTY TALL TIMBERS IN NEED OF RATE RELIEF AT THIS 21

TIME? 22

A. Since the last Liberty Tall Timbers rate cases, operating expenses have increased 23

and Liberty Tall Timbers has made significant capital improvements to provide 24

more reliable service to its customers. As a result, Liberty Tall Timbers is 25

significantly under earning. Liberty Tall Timbers also seeks to correct the rate 26

disparity that exists between its customers within the City of Tyler and those outside 27

LU 000175

14

in line with more recent cost of service conditions. The Liberty Woodmark 1

wastewater plant is also undergoing an expansion which will, in part, serve Liberty 2

Tall Timbers customers and necessitates increased rates. 3

4

V. LIBERTY WOODMARK’S PROPOSED WASTEWATER 5

PLANT EXPANSION 6

Q. WHAT IS LIBERTY WOODMARK PROPOSING WITH RESPECT TO 7

THE WASTEWATER TREATMENT PLANT EXPANSION PROJECT 8

MENTIONED PREVIOUSLY? 9

A. We are currently expanding the Liberty Woodmark wastewater treatment plant 10

facility and re-routing 500 Liberty Tall Timbers customers to that facility, which 11

would utilize .1 MGD (i.e., 100,000 gallons per day). Originally, the plan was to 12

expand the Liberty Woodmark wastewater treatment plant to .6 MGD (i.e., 600,000 13

gallons per day). However, that project is needed to maintain compliance whether 14

we send sewage from the Liberty Tall Timbers service area or not. In January 15

2016, Liberty Woodmark executed a contract with Capps-Capco Construction, Inc. 16

for the plant expansion. The expansion project involves expanding the capacity of 17

the plant to 0.7 million gallons per day (i.e., 700,000 gallons per day) by installing a 18

new clarifier, a new aeration basin with IFAS media and expanding the chlorine 19

contact basin. We also are adding one influent pump to the existing influent pump 20

station, adding an influent pump station splitter box, adding one aeration basin 21

process blower, adding a scum pumping station, upgrading the chemical feed 22

equipment and chemical storage, and other items. As designed, expansion of the 23

Liberty Woodmark plant will avoid a current need to expand the Liberty Tall 24

Timbers wastewater treatment plant facility and create other operational 25

efficiencies. The avoided expansion of the Liberty Tall Timbers facility is 26

LU 000176

15

expected to result in avoided costs of approximately $3.6 million. Here, the 1

incremental cost of the additional 100,000 gpd at Liberty Woodmark wastewater 2

treatment plant expansion is estimated to only cost an additional $500,000 for a total 3

of approximately $3.45M. Our licensed professional engineer has prepared an 4

estimated project cost estimate and anticipated schedule included as MG-12 and 5

MG-2. Additional project costs not reflected therein are internal and are not of the 6

type typically developed by professional engineers. While a collective rate 7

increase is still needed to cover the project cost for expansion of the Liberty 8

Woodmark plant, there is an overall cost savings of $3.1M created by this approach. 9

10

Q. ARE THERE ADDITIONAL PROJECTS NECESSARY IN WHOLE OR IN 11

PART TO SUPPORT THE COST SAVING OJBECTIVES OF THE 12

LIBERTY WOODMARK PLANT EXPANSION? 13

A. Yes. The Texas Department of Transportation (“TxDOT”) has required the 14

removal and relocation of our FM-2493 force main to be outside of future roadways 15

and not underneath the highway. In order to make the most cost effective use of 16

our regional resources, Liberty Woodmark and Liberty Tall Timbers will use this 17

opportunity to divert the flows from certain Liberty Tall Timbers to the expanded 18

Liberty Woodmark WWTP as part of the FM 2493 removal and relocation project. 19

In tandem with the decision to expand the Woodmark WWTP by an additional 20

100,000 gpd, this decision will contribute to producing total lower costs for the 21

customers of both Liberty Woodmark and Liberty Tall Timbers, as described more 22

fully above, compared with other options. The total cost of the relocation of the 23

Liberty Tall Timbers force main is approximately $.89M. Our licensed 24

2 The attached certification by the Professional Engineer is for approximately $2.71M of the total plant expansion costs of approximately $3.45M. The difference of $.74M represent costs for internal labor and AFUDC which are outside the direct control of the engineer and therefore not certifiable by the engineer.

LU 000177

16

professional engineer has prepared an estimated project cost estimate and 1

anticipated schedule included as MG-13 and MG-2. Additional project costs not 2

reflected therein are internal and are not of the type typically developed by 3

professional engineers. 4

In addition to the relocation of the force main, there were hydraulic 5

improvements of approximately $0.44M completed for the Liberty Tall Timbers 6

wastewater treatment plant in 2016 that were also necessary to accomplish the 7

above costs savings. MG-3. This hydraulic improvement program was necessary 8

for the Liberty Tall Timbers wastewater treatment plant to achieve compliance with 9

TCEQ regulations. 10

11

Q. WHY CONSOLIDATE LIBERTY WOODMARK AND LIBERTY TALL 12

TIMBERS FOR RATEMAKING AND TARIFF PURPOSES? 13

A. Liberty Woodmark and Liberty Tall Timbers are contiguous and substantially 14

similar or, in some cases, identical in terms of facilities, quality of service, and cost 15

of service. Liberty Woodmark and Liberty Tall Timbers both provide only sewer 16

service to their customers, with each having sewer collection systems and a 17

wastewater treatment plant. Because the Liberty Woodmark and Liberty Tall 18

Timbers systems are operated by the same employees and management applying the 19

same set of core values and operating procedures, the quality of service on both 20

systems is similar. Further, because the Liberty Woodmark and Liberty Tall 21

Timbers systems are both operated and managed by the same entities, whose costs 22

are allocated between systems based on the same allocation factors, the cost of 23

service on the two systems are substantially the same. The costs of service on the 24

3 The attached certification by the Professional Engineer is for approximately $.68M of the total relocation costs of approximately $.89M. The difference of $.21M represent costs for internal labor and AFUDC which are outside the direct control of the engineer and therefore not certifiable by the engineer.

LU 000178

17

two systems would become even more similar if the operations of the systems were 1

combined to achieve the savings and economies described above. 2

Q. WHAT ARE SOME OF THE OPERATIONAL EFFICIENCIES CREATED 3

BY SYSTEM CONSOLIDATION? 4

A. Basic services such as maintenance, billing, customer service, and testing are often 5

duplicated in neighboring systems. For small systems, the technical, managerial, 6

and financial capabilities required of a modern wastewater treatment system are 7

often too expensive to afford, resulting in suboptimal quality and service. 8

Combining the Liberty Woodmark and Liberty Tall Timbers systems will 9

collectively give a better price to both sets of customers. Generally, larger capacity 10

systems have improved bargaining power relative to capital improvement and 11

operational material purchasing needed for construction, maintenance, and 12

operation. Consolidating equipment reduces maintenance costs and significantly 13

reduces exposure to safety hazards associated with operation and maintenance of 14

such equipment. Managing the safety regulatory and environmental requirements 15

of less facilities reduces safety, regulatory, and environmental risk. In sum, 16

consolidation creates economies of scale that are beneficial to the utilities and their 17

customers. 18

19

Q. ARE THERE TECHNICAL EFFICIENCIES THAT WILL BE CREATED 20

BY USING THE WOODMARK TREATMENT PLANT TO SERVE SOME 21

TALL TIMBERS CUSTOMERS? 22

A. Yes. The Liberty Woodmark and Liberty Tall Timbers CCNs are adjacent and the 23

natural slope of the ground slopes from the Liberty Tall Timbers service area 24

towards the Liberty Woodmark service area. Currently, there are also several lift 25

stations that pump sewage from areas close to the Liberty Woodmark service area to 26

LU 000179

18

the Liberty Tall Timbers wastewater treatment plant. Rerouting some of that 1

territory to the Liberty Woodmark wastewater treatment plant will avoid this 2

situation and reduce pumping costs. 3

Q. WHAT ARE SOME OF THE REASONS DRIVING THE NEED TO 4

EXPAND EITHER THE LIBERTY TALL TIMBERS WASTEWATER 5

PLANT OR THE LIBERTY WOODMARK WASTEWATER PLANT? 6

A. Since the Texas Department of Transportation (“TxDOT”) has required the removal 7

and relocation of our FM-2493 force main, Liberty Woodmark and Liberty Tall 8

Timbers collectively decided to prepare a design that reverses the flow away from 9

several subdivisions close to the Liberty Woodmark CCN to the Liberty Woodmark 10

wastewater treatment plant. This will avoid a current need to expand the Liberty 11

Tall Timbers wastewater treatment plant to maintain TCEQ compliance. The 12

Liberty Woodmark wastewater treatment plant expansion project is currently 13

underway and is expected to be completed in February 2017. Consolidating the 14

combined capacity of the two treatment plants for the collective benefit of Liberty 15

Woodmark and Liberty Tall Timbers is expected to increase their collective 16

treatment capacity and reduce capital/operational costs associated with 17

construction, permitting, and operating needs for the Tall Timbers wastewater 18

treatment plant for the next several years. 19

20

Q. WHAT IS THE REASON FOR THE PHASE II RATE INCREASE? 21

A. The Liberty Woodmark wastewater treatment plant expansion project, together with 22

the line relocation and hydraulic improvement projects I have discussed, will 23

necessitate a rate increase beyond what is reflected in the test year cost of service. 24

Therefore, a two-step rate increase seemed like the best approach to obtain the 25

LU 000180

19

revenue level needed while reducing the need for multiple rate cases and the costs 1

they entail in such a short period of time. 2

3

VI. TARIFF CHANGES 4

Q. DO APPLICANTS PROPOSE ANY CHANGES OR MODIFICATIONS TO 5

TARIFFS? 6

A. Yes. A copy of the proposed tariff is attached to the rate application. Most 7

significantly, the Liberty Tall Timbers and Liberty Woodmark tariffs are being 8

combined into a single tariff document. 9

10

Q. CAN YOU SUMMARIZE SOME OF THE SPECIFIC CHANGES BEING 11

PROPOSED? 12

A. Yes. 13

• Rates: Applicants’ proposed consolidated rates have been inserted. 14

• Miscellaneous Charges: Applicants propose that Liberty Tall Timbers and 15

Liberty Woodmark have the same amounts for miscellaneous charges. 16

Liberty Tall Timbers would have an increase of $25 from $25 to $50 for a 17

Transfer Fee and an increase of $10 from $20 to $30 for a Return Check Fee. 18

Liberty Woodmark Reconnection Fee (Customer’s request) would be 19

reduced by $525 from $550 to $25 which is the present charge at Liberty Tall 20

Timbers. The applicants believe that the existing charge of $550 for 21

Reconnection Fee (Customer's request) was approved in error. 22

• Service Policies: Applicants are not requesting service policy tariff 23

revisions other than to update rule and regulatory authority references to 24

reflect the change in regulatory agencies from the Texas Commission on 25

Environmental Quality (TCEQ) to the Public Utility Commission of Texas 26

(PUC) and its rules where applicable. 27

LU 000181

20

VII. FINANCING 1

Q. IN HIS DIRECT TESTIMONY, MR. FAIRCHILD MENTIONS NEW 2

CAPITAL STRUCTURES EQUAL TO 70 PERCENT EQUITY AND 30 3

PERCENT DEBT. WHY ARE APPLICANTS PROPOSING NEW 4

CAPITAL STRUCTURES? 5

A. Liberty Woodmark and Liberty Tall Timbers presently have capital structures of 6

100 percent equity. We are seeking to standardize the capital structure of the Texas 7

operating utilities at 70 percent equity and 30 percent debt in line with our utilities in 8

other states. So the specific purpose of the debt financing is to infuse more debt 9

into Applicants’ capital structures for ratemaking purposes and bring the debt level 10

to 30 percent. 11

12

Q. WHAT AMOUNT OF DEBT APPROVAL IS BEING REQUESTED? 13

A. The amount of debt would be equal to 30 percent of the amount of rate base being 14

recognized at each phase requested in this proceeding. 15

16

Q. DOES THIS CONCLUDE YOUR DIRECT TESTIMONY? 17

A. Yes. 18

LU 000182

INC .1 Civil & Environmental Engineering

13044 CR 192 Tel 903.531.9670 Tyler, Texas 75703 Fax 903.531.9675

TBPE REG. NO. F-4J47

August 25, 2016

Mr. Bhaskar Kolluri, P.E. Liberty Utilities 12725 W. Indian School Road, Suite DlOl Avondale, AZ 85392

Subject: Sanitary Sewer Relocation Project for the FM 2493 Widening Project FM 2493 (Old Jacksonville Hwy) Corridor from Gresham to Flint, Texas

Mr. Kolluri:

Attached are the associated costs for the FM2493 widening/relocation project broken out into the applicable sections. Along with these costs are the construction schedule for your review.

The breakdown is as follows:

Woodhollow Force Main Reroute Wedgewood Force Main Reroute FM 2493 Force Main and Lift Station Catholic Church Force Main Reroute Civil Engineering for all

$82,260.50 $34,890.00 $462,417.50 $52,025.00 $51,115.00

The total cost for the Reroute work associated with the road widening is $682, 708

I appreciate your business and you can call me at my office at 903-531-9670 anytime to discuss this

project. ~~'~ ~OF Ti \\ .. tr-1' ••••••••• ~~\ ...

;~>·· *··.·::r~r'ie , fl:' '.f~ 8§ :~.: ' \<J~ 1· · ~· •<>e I 111O181 IO~I • lb•IC>IOf • O(ICI<>~

l f'l.FllAN E. CAPPS .~; ~···:"""'"'"'''"'"''""":'"'$ 'f ~\ 8?60..:J ,..~-' ft5d· -$' - <,) ~· ~ ~(~"~91ST·. £~~.·:&~ ~ ~,8s1(i"t" <(;,'•·"..~ ·f' \« .... NA\. '"-' I\,,

"'"-'l..''-''loo4' '6 I fl

MG-1

LU 000183

ITEM

Liberty Utilities WOODHOLLOW FORCEMAIN

PROPOSAL

UNIT OF CONTRACT NO DESCRIPTION MEASURE QUANTITY

1.00 4" yellowmine pipe by bore LF

2.00 4" Forcemain by opencul LF

3.00 2-4" check valves wilh vaull LS

4.00 4" fittings EA

5.00 Pavemenl repair SY

6.00 New manhole (0-10') deplh EA

7.00 Sod SY

8.00 locale exlsling ulililies LS

9.00 mobilization, bonds, and insurance LS

10.00 irrigalion repair if needed LS

*Proposal valid for 30 days.

NOTE: If you have any questions feel free to call Mike Lavender 903-705-8581

G..1pps-C11pco Cvn-'>-lnldiun, //II.'..

1.lfJ..14 CR 192 Tyler, 7X 75701 901-561-6657

901-53)-9675/tLr: 8/10/2016

1,443.00

177.00

1.00

12.00

58.00

1.00

121.00

1.00

1.00

1.00

UNIT PRICE EXTENSION

$35.00 $50,505.00

$17.50 $3,097.50

$5,200.00 $5,200.00

$300.00 $3,600.00

$105.00 $6,090.00

$5,750.00 $5,750.00

$8.00 $968.00

$1,750.00 $1,750.00

$3,800.00 $3,800.00

$1,500.00 $1,500.00

TOTAL $82,260.50

LU 000184

ITEM NO

1.00 4" Sewerline by opencut

2.00 4" yellowmine by bore

3.00 4"fittings

4.00 locate existing utilities

5.00 sod repair

6.00 cap existing forcemain

7.00 mobilization, bonds, insurance


DESCRIPTION

Liberty Utilities WEDGEWOOD FORCEMAIN

PROPOSAL

UNIT OF MEASURE

LF

LF

EA

LS

SY

EA

LS


Capps-Copco Co11str11clio11, /11c. 130UCR 192 Tyler, TX75703 903-561-6657 903-531-9675 fax 8/10/2016

CONTRACT QUANTITY UNIT PRICE EXTENSION

50.00 $30.00 $1,500.00

800.00 $35.00 $28,000.00

6.00 $300.00 $1,800.00

1.00 $1,200.00 $1,200.00

30.00 $8.00 $240.00

2.00 $250.00 $500.00

1.00 $1,650.00 $1,650.00

TOTAL $34,890.00

LU 000185

CAPCO CONSTRUCTION, INC

ITEM NO DESCRIPTION

1.00 6" yellowmine pipe by bore

2.00 New manhole @ plant (Q-6') depth

3.00 6" Forcemain by opencut

4.00 6" Bends

5.00 Sod Replacement

6.00 Irrigation Repair if needed

7.00 Seed and fertilize

8.00 Construction staking

9.00 12" bore wtth steel casing

10.00 Air release valve wtth vautt

11.00 Connect to exisling Forcemain

12.00 Abandon existing Forecemain

13.00 Mobilizalion, bonds, and insurance

14.00 k>cate existing utilities

15.00 camera abandoned force main for services

16.00 LiftStation @ Forest Glen

17.00 Conlingency


Liberty Utilities 2493 FORCEMAIN

PROPOSAL

UNIT OF MEASURE

LF

EA

LF -

EA

SY

LS

LS

LS

LF

EA

EA

LF

LS

LS

LF

LS

LS


Capps-G1pw CoiL~lnit'lirm, lne. 130-1-1CR192 Tf'/er, TX 757113 1)0,l-561·6657

90J-SJJ-9675 fax 8/25/2016

CONTRACT QUANTITY UNIT PRICE EXTENSION

2,250.00 $38.00 $85,500.00

1.00 $4,750.00 $4,750.00

3,500.00 $15.50 $54,250.00

18.00 $375.00 $6,750.00

100.00 $8.00 $800.00

1.00 $1,500.00 $1,500.00

1.00 $750.00 $750.00

1.00 $1,500.00 $1,500.00

170.00 $92.00 $15,640.00

1.00 $2,450.00 $2,450.00

1.00 $1,650.00 $f,650.00

6,565.00 $7.00 $45,955.00

1.00 $9,325.00 $9,325.00

1.00 $1,750.00 $1,750.00

6,565.00 $1.50 $9,847.50

1.00 $180,000.00 $180,000.00

1.00 $40,000.00 $40,000.00

TOTAL $462,417.50

LU 000186

ITEM NO

1.00 2" Sewerline by opencut

2.00 2" sch 40 by bore

3.00 2" fillings

4.00 locate existing ulilities

5.00 bore with 6" sleel casing

6.00 seed amd fertilize

7.00 cap exisilng forcemain

8.00 mob, bonds, ins

9.00 lrench safety


Liberty Utilities CATHOLIC CHURCH FORCEMAIN

PROPOSAL

UNIT OF CONTRACT DESCRIPTION MEASURE QUANTITY

LF 2,100.00

LF 325.00

EA 6.00

LS 1.00

LF 200.00

LS 1.00

EA 1.00

LS 1.00

LS 1.00


Capps-Copco Comlmction, Inc. 130.J.I CR 192 T)•ler, TX 75703 903-56/-6657 903-53/-9675 fax 8/10/2016

UNIT PRICE EXTENSION

$12.75 $26,775.00

$20.00 $6,500.00

$75.00 $450.00

$1,200.00 $1,200.00

$60.00 $12,000.00

$450.00 $450.00

$250.00 $250.00

$1,900.00 $1,900.00

$2,500.00 $2,500.00

TOTAL $52,025.00

~ ..... ,,,, f. OF r \\ ......... ~ .. .,, ~" , 'lb... .:,.1.-~-"' 'J~ "' . * ..... -.. r·l·· ....... 1,

.nu · ¢i I ~·•••••••••••••O•c<>••••.,oot•1' !, 0,.J ~ BRIAN E. CAPPS ,._ ,~•<·o!o"''"' ••••••••••••.,•••• ''""' "''

'c%··. 82004 .·~~-•~o~.:9~ . (!}.~0/4 v

4 {'·.,G15n_, . .. , \,.ss;· ... ,. , . ;. ,,1:.. 1~,; 1 0f:IA '. "· '_'"

; ' '. '"·· "~ ,.; .. ,,. .. ) .

LU 000187

~ Liberty Utilities

CHANGE ORDER #1 TO SHORT FORM OF AGREEMENT

BETWEEN OWNER AND ENGINEER FOR

PROFESSIONAL SERVICES

ThisChange Order is made this 1othday ofDecember, 2015 by and between CAPCO Engineering lnc.(ENGINEER) and Liberty Utilities(Woodmark Sewer) Corp. (OWNER) with regard lo the Contract for Design of FM 2493 - Forcemain Relocation Project rProject")(the •Agreemenr) dated June30, 2015.

The parties hereby agree that

This Change Order is for the following additional scope of services provided by the ENGINEER

• Engineer will provide the Force Main Route Alignmenl(s}, Gravity Plan/Profile design as well as aPrellmlnary EOPC for accommodating the TxDOT project which will revise a portion of the Tatmmbers CCN to the Woodmark CCN for a lump sum price of $32,285 (not Including the additional (services Items). -$28,685

• Force Main Route Alignment for the Outfall to Woodmarl< WWTP* - $13,845

The Contract Amount is hereby amended to the following:

CONTRACT SUMMARY Description Lump Sum

Amount Original contract $ 8,625.00

Change Order #1 $42,530.00

Total: $ 51115.00

N t.OF)'~\\ '.\~1........... ,,

~ .... ~ ·· .. •.• t•l ~ ........ f ~~FiiAN.E.°.C°Ar·r~·\ ~ .. ~ .............. , . .,,, ..... ., ... ; ,,~.... 82604 " •" '$" 10·'9~ ~,,., 1, ... (i-·· .. ~ISTE~ •• Y'

11. ... .s$1o··r·~~ . All other terms and conditions of the Agreement shall remain unchanged and In full force and effect. "''ti.\:""it.,~ .... \\ Agreed and accepted by: ~

CONTRACT~ri~.

Signature:.-1:.!42-C-.,..c-~""------------Printed Name: Brian E. Capps

Tille: ------'-'Pres=id=e"'"'n"""t --------

Date Signed: ____.~._2_-..... /_"_-6 __ 'J ______ _

Agreement between Liberty Utilities and CAPCO Engineering, Inc. LUEC-2014-02 REV 6-17-14

OWNER: Uberty Utilities (Woodmark Sewer) rp.

Signature: ·1'Y1~ Printed Name: ..... M=at=lh=ew=-=G=a=rli=ck._ _____ _

TiUe: ----"-'Pf=es=id=e=n"""t-_,Ari;....::..:'zo=n=a,__ ____ _

Date Signed: """'~""""""'"""-.-'l_f'.-_,_1 .... a.,;,,;o._1.;::;.(o ___ _

Project FM 2493 - Forcemaln Relocation Project Project No.: 8400-15039-3310

Page 1

LU 000188

2493 Forcemain

Project Timeline August 16, 2016

September 5, 2016 -December 31,2016

WEEK# 9/5 9/12 9/19 9/26 10/3 10/10 10/17 10/24 10/31 11/7 11/14 11/21 11/28 12/5 12/12 12/19 12/26

1 Catholic Church 2" ForceMain ~

~~~-~-:~-~-~-·;g-~w-a~-~-B-o-re~~~~~~~~~~~~~~~~~~;~T-1

~llllllll~:J~~[+!+++-1-1-++++-1-1-1++4-+-H-+4-l-++-1++-1-+4-l-++-l-1-H~1-++-1-++-l-l--l-l-l--l-H-+-l-l--l--i-++++++++++++++-1 1.03 Bores, Piping 1 I 1.04 Tie ins after plant complete (3 days)

2 Wedgewood ForceMain

2.01 Bores, Piping

2.02 Tie ins - 1 week after plant finished 3 Wodhollow ForceMain

4 FM 2493

RAIN DAYS

3.01 Piping

3.02 Tie ins - 2 week & cameras

4.01 Bores , Piping

4.02 Camera & Tie Ins

4.03 Lift Station

lHHfHUUI:' nu

MG-2

LU 000189

MG-3

LU 000190

LU 000191

LU 000192

LU 000193

LU 000194

LU 000195


APPLICATION OF LIBERTY UTILITIES (WOODMARK SEWER) CORP. AND LIBERTY UTILITIES (TALL TIMBERS SEWER) CORP. (CCN NOS. 20679 AND 20694) TO CHANGE RATES FOR SEWER SERVICE IN SMITH COUNTY, TEXAS.

§ § § § § § § §


COMMISSION OF TEXAS


OF

GERALD BECKER

ON BEHALF OF


September 2, 2016

LU 000196

ii


GERALD BECKER


I. INTRODUCTION .................................................................................................... 1 II. OVERVIEW OF LIBERTY UTILITIES ................................................................. 2 III. PURPOSE OF TESTIMONY/EXHIBITS ............................................................... 3 IV. RATE APPLICATION DEVELOPMENT PROCESS ........................................... 4

LU 000197

1

DIRECT TESTIMONY OF GERALD BECKER 1

ON BEHALF OF 2


5

I. INTRODUCTION 6

Q. Please state your name, occupation, and business address. 7

A. My name is Gerald Becker. I am the Utility Rates and Regulatory Manager for 8

Liberty Utilities. My business address is 12725 W. Indian School Road, Suite D-9

101, Avondale, AZ 85392. 10

Prior to my employment at Liberty Utilities, I was employed by the Arizona 11

Corporation Commission in the Utilities Division (“Staff”). I was responsible for 12

the examination and verification of financial and statistical information included in 13

utility rate applications. In addition, I developed revenue requirements, and 14

prepared written reports, testimonies, and schedules that included Staff 15

recommendations to the Arizona Corporation Commission. I am also responsible 16

for testifying at formal hearings on these matters. 17

18

Q. Please describe your educational background and professional experience. 19

A. I received a Masters of Business Administration with an emphasis in Accounting 20

from Pace University. I have achieved the designations of Certified Public 21

Accountant and a Certified Internal Auditor. I have participated in multiple rate, 22

LU 000198

2

financing, and regulatory proceedings. I attended the National Association of 1

Regulatory Utility Commissioners (“NARUC”) Utilities Rate School. 2

I began employment with the Arizona Corporation Commission as a utilities 3

regulatory analyst in April 2006. Prior to joining the Arizona Corporation 4

Commission, I worked as an Auditor at the Department of Economic Security and 5

Department of Revenue in the Taxpayer Assistance Section. Prior to those jobs, I 6

worked for 15 years as an Auditor, Analyst, Financial Analyst, and Budget Manager 7

at United Illuminating, an investor-owned electric company in New Haven, CT. 8

9

Q. Please describe your involvement in the instant proceeding. 10

A. I have reviewed the financial and operational data provided to our rate consultant, 11

Mr. Bruce Fairchild who is also filing testimony in this case. 12

13

II. OVERVIEW OF LIBERTY UTILITIES 14

Q. PLEASE PROVIDE AN OVERVIEW OF LIBERTY UTILITIES. 15

A. Liberty Utilities Co. (“Liberty Utilities”) is a Delaware corporation that operates 16

regulated gas, water, sewer and electric utilities in eleven states—Arizona, 17

Arkansas, California, Georgia, Illinois, Iowa, Massachusetts, Missouri, Montana, 18

New Hampshire and Texas. Liberty Utilities Co. is a subsidiary of Liberty Utilities 19

(Canada) Corp. (“Liberty Utilities Canada”). The Texas utilities are wholly owned 20

subsidiaries of Liberty Utilities (Sub) Corp., which is a wholly owned subsidiary of 21

Liberty Utilities. Algonquin Power & Utilities Corp., or APUC, a publicly traded 22

LU 000199

3

member of the Toronto Stock Exchange, ultimately owns all of the Liberty Utilities 1

entities, including Applicants. 2

APUC is a $4.1 billion electric generation, transmission and distribution 3

utility company based in Oakville, Ontario. APUC is listed on the Toronto Stock 4

Exchange and is a registrant with the U.S. Security and Exchange Commission. 5

APUC subsidiaries own and operate regulated utilities in the United States, and own 6

non-regulated generation facilities and regulated electric transmission and natural 7

gas pipelines throughout the United States and Canada. The distribution business 8

group operates in the United States as Liberty Utilities and provides rate-regulated 9

water, wastewater, electricity and natural gas utility services to over half a million 10

customers. The electric generation business group operates as Algonquin Power 11

Co. and owns or has interests in a portfolio of North American based contracted 12

wind, solar, hydroelectric and natural gas powered generating facilities representing 13

more than 1,150 MW of installed capacity. The transmission business group 14

invests in rate regulated electric transmission and natural gas pipeline systems in the 15

United States and Canada. Common shares and preferred shares of APUC are 16

traded on the Toronto Stock Exchange under the symbols AQN, AQN.PR.A and 17

AQN.PR.D. The APUC website is www.AlgonquinPowerandUtilities.com. 18

III. PURPOSE OF TESTIMONY/EXHIBITS 19

Q. Please state the purpose of your testimony. 20

A. The purpose of my testimony is to discuss the rate application development process. 21

LU 000200

4

IV. RATE APPLICATION DEVELOPMENT PROCESS 1

Q. Generally, what was your assignment and scope of work in regard to this rate 2

case? 3

A. I have been involved with a number of different aspects of this rate case for the 4

Applicants. Generally, my rate case work has entailed: 5

• researching and providing other company information to FINCAP as needed 6

to prepare Applicants’ rate application; 7

• assisting in development of the company’s prefiled direct case; and 8

• producing Applicants’ business records for submission into the record. 9

10

Q. Please describe your working relationship with Mr. Bruce Fairchild and 11

FINCAP in developing the rate application. 12

A. Applicants hired FINCAP, which is Mr. Bruce Fairchild’s consulting firm, as a 13

consultant to prepare Applicants’ sewer rate application. Consulting firms must 14

rely on their clients to provide the detailed information that is used to develop such 15

rate applications. I served as the liaison for the Applicants to provide Mr. Fairchild 16

with the information FINCAP needed from Applicants’ business records to populate 17

the rate application form. I also researched and provided additional information 18

FINCAP requested to complete the application as needed. Mr. Fairchild will testify 19

as to how he used that information to develop the Applicants’ rate application. 20

21

Q. Does this conclude your prefiled direct testimony? 22

LU 000201

5

A. Yes, it does. 1

LU 000202



§ § § § § § § §

BEFORE THE PUBLIC UTILITY COMMISSION OF TEXAS


OF

CRYSTAL GREENE

ON BEHALF OF


September 2, 2016

LU 000203

ii


CRYSTAL GREENE


I. INTRODUCTION ......................................................................................................... 1 II. PURPOSE OF TESTIMONY ...................................................................................... 2 III. FINANCIAL STATEMENTS AND GENERAL LEDGER REPORTING ............... 2 IV. INTANGIBLE ASSETS ............................................................................................. 5 ATTACHMENTS:

CG-1 Resume of Crystal Greene

LU 000204

1

DIRECT TESTIMONY OF CRYSTAL GREENE 1

ON BEHALF OF 2


5

I. INTRODUCTION 6

Q. Please state your name, occupation, and business address. 7

A. My name is Crystal Greene. I am the Senior Accounting Manager for Liberty 8

Utilities. My business address is 12725 W. Indian School Road, Suite D-101, 9

Avondale, AZ 85392. 10

11

Q. Please describe your educational background and professional experience. 12

A. I received a Bachelor of Science in accounting from Arizona State University. I 13

began employment with Liberty Utilities in 2009. Prior to joining Liberty Utilities, 14

I worked as an Accounting Manager/Controller at Aero Automatic Sprinkler Co. & 15

Jet Pipe Industries for six years. I was responsible for financial reporting and 16

general ledger accounting, and I managed cash management functions, coordination 17

of audits and budgeting/forecasting. Prior to that employment, I worked for seven 18

years as an Assistant Controller, Contract Administrator, and Staff Accountant for 19

general and subcontractor construction companies. A copy of my resume is 20

attached as CG-1. 21

22

LU 000205

2

II. PURPOSE OF TESTIMONY 1

Q. What is the purpose of your testimony? 2

A. I am testifying to provide information regarding the financial statements and general 3

ledger reporting for the test year that were used by Bruce Fairchild with Financial 4

Concepts and Applications, Inc. (“FINCAP”) to prepare the rate application for 5

Liberty Utilities (Woodmark Sewer) Corp. and Liberty Utilities (Tall Timbers 6

Sewer) Corp. 7

8

III. FINANCIAL STATEMENTS AND GENERAL LEDGER REPORTING 9

Q. What is your involvement in this proceeding? 10

A. I reviewed the financial statements and general ledger reporting for the test year that 11

were provided to FINCAP for use in preparing the rate application for Liberty 12

Utilities (Woodmark Sewer) Corp. and Liberty Utilities (Tall Timbers Sewer) Corp. 13

that is the subject of this proceeding. 14

15

Q. What controls and assurances are in place to ensure compliance with National 16

Association of Regulatory Utility Commissioners (NARUC) guidelines? 17

A. Liberty Utilities acknowledges GAAP and NARUC guidelines for financial 18

statement purposes. Additionally, we are required to undergo quarterly financial 19

audits and yearly Sarbanes Oxley (SOX) audits with internal and external auditors. 20

Internal controls are in place to ensure accuracy and integrity of the data. 21

22

LU 000206

3

Q. What additional controls and assurances are in place to ensure that Liberty 1

Utilities (Woodmark Sewer) Corp. and Liberty Utilities (Tall Timbers Sewer) 2

Corp. expenses are reasonable and necessary? 3

A. The budgets for operations and maintenance expenses are subject to review and 4

approval in advance of committing funds by both local management in the Avondale 5

office and by senior management at the home office. Further, the results of 6

operations are part of a monthly review also by both local and senior management. 7

8

Q. What additional controls and assurances are in place to ensure that Liberty 9

Utilities (Woodmark Sewer) Corp. and Liberty Utilities (Tall Timbers Sewer) 10

Corp. plant investments are reasonable, necessary, and prudently incurred? 11

A. The controls and assurances to ensure the propriety of plant investments are similar 12

to those discussed above for operations and maintenance expenses. 13

14

Q. How was the original cost for used and useful Liberty Utilities (Woodmark 15

Sewer) Corp. and Liberty Utilities (Tall Timbers Sewer) Corp. plant assets 16

determined that were provided to FINCAP for use in the rate application? 17

A. The plant assets fall into two categories – those that were in place when the two 18

companies were acquired in 2002 and assets installed since that time. To the best 19

of my knowledge, for the first category of assets, Liberty Utilities relied on values 20

produced by the prior owner during due diligence for the plant roll forward after 21

Liberty Utilities acquired the stock of Liberty Utilities (Woodmark Sewer) Corp. 22

LU 000207

4

and Liberty Utilities (Tall Timbers Sewer) Corp in 2002 consistent with NARUC 1

uniform accounting systems. The purchase price of the stock purchase agreement 2

supports those plant balances as our starting point. The transaction is available for 3

review in addition to available invoices. Since 2002, Liberty Utilities has utilized 4

the audit and financial controls mentioned above to ensure the integrity of the plant 5

asset data in this case. Liberty Utilities has maintained supporting invoices that are 6

available for review. 7

8

Q. Are the plant balances for Liberty Utilities (Woodmark Sewer) Corp. and 9

Liberty Utilities (Tall Timbers Sewer) Corp. maintained and depreciated using 10

an itemized or group accounting method? 11

A. The plant balances for Liberty Utilities (Woodmark Sewer) Corp. and Liberty 12

Utilities (Tall Timbers Sewer) Corp. are maintained and depreciated consistent with 13

NARUC uniform accounting systems using an itemized accounting method. An 14

itemized plant list that supports the rate base totals included in the rate application 15

is available for review upon request. 16

17

Q. How has Liberty Utilities (Woodmark Sewer) Corp. and Liberty Utilities (Tall 18

Timbers Sewer) Corp. accounted for retired assets in the net plant balances 19

reported to FINCAP used in the rate application? 20

A. When assets are retired for either Liberty Utilities (Woodmark Sewer) Corp. or 21

Liberty Utilities (Tall Timbers Sewer) Corp., they are accounted for within each 22

LU 000208

5

company’s net plant balances as prescribed by the NARUC uniform system of 1

accounts and consistent with 16 TAC 24.31. If there is reported salvage value, 2

which typically there is not, we make sure the customer gets the benefit of same 3

through either a reduction or increase in value of net plant in service for the 4

replacement asset consistent with the NARUC uniform system of accounts. 5

6

IV. INTANGIBLE ASSETS 7

Q. For the Liberty Utilities (Woodmark Sewer) Corp. and Liberty Utilities (Tall 8

Timbers Sewer) Corp. assets included in plant balances used by FINCAP in 9

the rate application, are there any intangible assets included? 10

A. No. Intangible asset entries were not included in the plant balances used by 11

FINCAP in the rate application. 12

13

Q. Does this conclude your pre-filed direct testimony? 14

A. Yes, it does. 15

LU 000209

Crystal L. Greene

♦ [email protected] ♦ (623) 208-2802

PROFESSIONAL EXPERIENCE:

Liberty Water Co. Avondale, AZ September 2009 – Present

Sr. Accounting Manager

• Provides financial monthly, quarterly, and annual reporting for multiple companies • Monitors and reviews monthly bank reconciliations, journal entries, balance sheet reconciliations prepared by

junior and senior accountants • Give daily direction and leadership to all accounting staff • Provide assistance to customer service, operations, home office and business managers • Preparation of yearly budgets and forecasting • Act as the administrator for all cash accounts, credit cards, and paypal • Organize and manage all new acquisitions • Coordinate and handle all audit requests from internal and external auditors • Provide all data required during rate cases

Capitol Fire Sprinkler, Inc. & AZ Pipe Fab, LLC Phoenix, AZ Mar 2003 – Sept 2009 (Formerly known as Aero Automatic Sprinkler Company and Jet Pipe Industries) (Left in august of 2006 to pursue a part time accountant position and returned to Capitol Fire in April of 2007.)

Accounting Manager / Controller

• Coordinated month end with the department and performed the general ledger reconciliation of the balance sheet and income statement accounts

• Preparation of all monthly journal entries • Analyzed and prepared monthly financial statements which includes balance sheet, income statement, cash flow

statement, and WIP schedules for both entities • Handle all cash management functions including lines of credit, investment accounts and banking relationships • Coordination of 401K and Insurance Audits with outside CPA/Audit firms • Maintained budgets and forecasting and prepared the necessary reports for all departments • Prepared monthly and quarterly Sales and Use Tax prep for eight states and fifteen cities • Managed a staff of five • Coordination of year-end audit and corporate tax return with CPA firm • Performed monthly inventory cycle counts and year end physical inventory count • Maintained accounting system updates with IT along with scheduling training for department • Designed and Implemented the financial reporting process and procedures in Report Designer/Crystal Reports • Review all invoices and outgoing checks • Prepared the due diligence on sale of companies in 2007 • Maintained the accounts payable and accounts receivable functions for both entities from 2007 through 2009. • Prepared the sales tax returns/closed all tax accounts and licenses in over 150 cities and 10 states • Maintained full accounting for Owner’s two leasing companies • Managed and closed the terminated 401K/Profit Sharing plan along with final 5500

Contract Work April 2002 – March 2003 Staff Accountant Renaissance companies December 2002 – March 2003

LU 000210

• Temporary position assisting the CFO with A/R, Billing, A/P, Job Cost, and G/L reconciliation

Sales Coordinator ERA Encore Realty April 2002 – November 2002

• Handled real estate/title legal documents along with daily communication with customers, escrow officers and loan officers

MKB Construction, Inc. Phoenix, AZ April 1996 – April 2002 Contract Administrator/Assistant Controller

• Maintained all Contracts which consisted of reviewing contracts, preliminary notices, liens, insurance, change order, and releases

• Prepared all contract billing, accounts receivable entries, and job costing • Prepared Sales tax returns and quarterly payroll returns • Maintained general ledger and balance sheet reconciliation • Prepared the monthly revenue, backlog and cash projection reporting • Fully trained as backup for payroll, accounts payable, and purchasing positions • Administrative work for estimators, superintendents, and project managers such as bids, faxes, letters and also

managed all job/contract files • Daily customer communication • Management of five accounting positions • Prepared yearly W-2s and 1099s

Software: Microsoft Word, Excel, Access, Outlook, Powerpoint, Quicken, Quickbooks, Eclipse Manufacturing, Timberline, Great Plains, Crystal Reports, and Cogsdale Education: Arizona State University West: Bachelor of Science in Accounting

LU 000211



§ § § § § § § §


COMMISSION OF TEXAS


OF

WILLIAM KILLEEN

ON BEHALF OF


September 2, 2016

LU 000212

ii


WILLIAM R. KILLEEN


I. INTRODUCTION AND PURPOSE OF TESTIMONY ......................................... 1 II. OVERVIEW OF LIBERTY UTILITIES’ BUSINESS MODEL ............................ 4 III. COST ALLOCATION MANUAL ........................................................................ 10 ATTACHMENTS:

WRK-1 Resume of William R. Killeen

WRK-2 Toronto and New York Stock Exchange Rules

WRK-3 2015 Cost Allocation Manual

LU 000213

1

DIRECT TESTIMONY OF WILLIAM R. KILLEEN 1

ON BEHALF OF 2


5

I. INTRODUCTION AND PURPOSE OF TESTIMONY 6


A. My name is William R. Killeen. My business address is 345 Davis Road, Oakville, 8

Ontario, Canada, L6J 2X1. 9

10

Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY? 11

A. I am the Director of Regulatory Operations for Liberty Utilities (Canada) Corp. 12

(“Liberty Utilities Canada”). Liberty Utilities Canada is the indirect parent 13

company of Liberty Utilities Co. (“Liberty Utilities”). Liberty Utilities Canada is 14

a wholly owned subsidiary of Algonquin Power & Utilities Corp. (“APUC”). 15

Applicants Liberty Utilities (Woodmark Sewer) Corp. (“Liberty Woodmark”) and 16

Liberty Utilities (Tall Timbers Sewer) Corp. (“Liberty Tall Timbers”) are wholly 17

owned subsidiaries of Liberty Utilities (Sub) Corp. Liberty Utilities (Sub) Corp. is 18

a wholly owned subsidiary of Liberty Utilities Co. 19

As the Director of Regulatory Operations, I am responsible for strategy 20

development and management of regulatory affairs for all of Liberty Utilities’ 21

regulated utilities currently providing water, wastewater, electric and gas utility 22

services in Arizona, Arkansas, California, Georgia, Illinois, Iowa, Massachusetts, 23

Missouri, Montana, New Hampshire and Texas. Liberty Utilities is continuing to 24

expand its regulated utility footprint and holdings throughout the United States. 25

For example, in January 2016, Liberty Utilities acquired three new regulated water 26

utilities—two in California and one in Montana. 27

LU 000214

2

Q. PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND 1

PROFESSIONAL EXPERIENCE. 2

A. I earned a Bachelor of Engineering Science (Chemical) degree from the University 3

of Western Ontario (now Western University) in 1985. I also earned a Master’s 4

degree in Business Administration from the Ivey School of Business at Western 5

University in 1989. 6

I have 27 years of professional experience in the energy and utilities 7

industries in the areas of regulation, supply, operations and customer service. 8

I have worked at natural gas and electric utilities, as well as in consulting, 9

marketing, and government positions. Early in my career, I was employed by 10

Union Gas Limited, a major natural gas utility serving over 1.4 million customers 11

in Ontario, Canada, for twelve years in varying capacities, including regulatory and 12

supply. 13

Prior to joining Liberty Utilities in February 2014, I was employed by 14

Enersource Hydro Mississauga Inc., a major electric utility serving the City of 15

Mississauga, Ontario, for three years as Manager, Regulatory Affairs. In between 16

my employment at these two large utilities, I was employed at various other 17

companies, always retaining responsibility for oversight of regulatory affairs, 18

typically in Ontario or eastern Canada. These companies include Engage Energy 19

Canada Inc., Direct Energy as Manager, Regulatory Affairs and a consulting 20

company, ECNG Energy LP, as Director, Supply and Regulatory Affairs for eight 21

years. Following ECNG, I spent a brief tenure within the Ministry of Energy of 22

the Ontario Government. My Curriculum Vitae is attached as WRK-1. 23

24

Q. DO YOU HAVE ANY PROFESSIONAL DESIGNATIONS? 25

A. Yes. I am a licensed Professional Engineer in the Province of Ontario and a 26

member of the Ontario Society of Professional Engineers. 27

LU 000215

3

Q. HAVE YOU PREVIOUSLY TESTIFIED BEFORE THIS OR ANY OTHER 1

COMMISSION? 2

A. My direct and rebuttal testimonies were admitted in evidence in the Liberty Utilities 3

(Black Mountain Sewer) Corp. rate case, Docket Nos. SW-02361A-15-0206 and 4

SW-02361A-15-0207 (consolidated), before the Arizona Corporation Commission 5

(“ACC”). My direct testimony was pre-filed in the Liberty Utilities (Bella Vista 6

Water) Corp. and Liberty Utilities (Rio Rico Water & Sewer) Corp. rate cases, 7

Docket Nos. W-02465A-15-0367 and WS-02676A-15-0368 (consolidated) also 8

before the ACC. My direct testimony was most recently pre-filed in the Liberty 9

Utilities (Entrada Del Oro Sewer) rate case, Docket No. SW-02361A-16-0085 10

before the ACC. I also have testified in a number of gas and electric utility pricing 11

cases and facility approval cases before the Ontario Energy Board. Additionally, I 12

testified in a rate case before the Arkansas Public Service Commission (Docket No. 13

14-020-U) on behalf of Liberty Utilities (Pine Bluff Water) Inc. 14

15

Q. WHAT IS THE PURPOSE OF YOUR DIRECT TESTIMONY? 16

A. The purpose of my direct testimony here is to support the Liberty Woodmark and 17

Liberty Tall Timbers consolidated request for new sewer rates by addressing the 18

corporate costs and allocation methods employed by all companies within the 19

APUC/Liberty Utilities umbrella. In my testimony, I explain the APUC and 20

Liberty Utilities corporate cost allocation model and the benefits of our shared 21

service model to Liberty Woodmark, Liberty Tall Timbers and the other regulated 22

utilities operated by Liberty Utilities. 23

LU 000216

4

II. OVERVIEW OF LIBERTY UTILITIES’ BUSINESS MODEL 1

Q. WILL YOU PLEASE SUMMARIZE THE LIBERTY UTILITIES BUSINESS 2

MODEL? 3

A. As mentioned above, APUC serves as the overall corporate parent and has two 4

major operating subsidiaries, Algonquin Power Co. (“APCo”) and Liberty Utilities 5

Co. APCo is an unregulated entity that provides renewable power generation from 6

facilities owned throughout the United States and Canada. Liberty Utilities Co. 7

owns and operates regulated water, wastewater, gas and electric utilities in eleven 8

states. 9

10

Q. PLEASE EXPLAIN THE LIBERTY UTILITIES SHARED SERVICES AND 11

CORPORATE COST ALLOCATION MODEL. 12

A. Two corporate groups provide shared services to entities within the APUC 13

organizational structure, including Liberty Utilities and its regulated utilities. 14

One is APUC, and the other is Liberty Utilities Canada, including the shared 15

services department called Liberty Algonquin Business Services (LABS). 16

17

Q. WHAT SHARED SERVICES DOES APUC PROVIDE? 18

A. APUC is structured as a publicly traded holding company and provides substantial 19

benefits to its regulated utilities and generation facilities through access to capital 20

markets. As the ultimate corporate parent, APUC also provides financial, strategic 21

management, corporate governance, administrative and support services to Liberty 22

Utilities and APCo. 23

APUC’s financing services involve selling units to public investors in order 24

to generate the funding and capital necessary (be it short term or long term funding, 25

including equity and debt) for Liberty Utilities, as well as providing legal services 26

in connection with the issuance of public debt. In connection with the provision of 27

LU 000217

5

financing services, APUC incurs the following types of costs: (i) strategic 1

management costs (board of director, third-party legal services, accounting services, 2

tax planning and filings, insurance, and required auditing); (ii) capital access costs 3

(communications, investor relations, trustee fees, escrow and transfer agent fees); 4

(iii) financial control costs (audit and tax expenses); and (iv) administrative costs.1 5

Non-labor costs, including corporate capital, are pooled and allocated to Liberty 6

Utilities and APCo using the “multi-factor” method summarized in Table 1 of the 7

Algonquin Power & Utilities Corp. Cost Allocation Manual (“CAM”) effective 8

July 1, 2015. Without question, the services provided by APUC are necessary for 9

Liberty Utilities and its regulated subsidiaries to have access to capital markets for 10

capital projects and operations. 11

12

Q. WHAT TYPES OF SHARED SERVICES DOES LIBERTY UTILITIES 13

CANADA PROVIDE? 14

A. Liberty Utilities Canada provides Liberty Utilities (and its regulated utilities) with 15

the following services: accounting, administration (rent, depreciation, and general 16

office costs), corporate finance, human resources (including training and 17

development), information technology, rates and regulatory affairs, environment, 18

health and safety, and security, customer service, procurement, risk management, 19

legal and utility planning. Specific examples of these services include: (i) 20

budgeting, forecasting, and financial reporting services including preparation of 21

reports and preservation of records, cash management (including electronic fund 22

transfers, cash receipts processing, managing short-term borrowings and 23

investments with third parties); (ii) development of customer service policies and 24

procedures; (iii) development of human resource policies and procedures; (iv) 25

1 Appendix 2 of the APUC Cost Allocation Manual or “CAM” referenced below provides a more detailed discussion of the costs incurred by APUC. See WRK-3.

LU 000218

6

selection of information systems and equipment for accounting, engineering, 1

administration, customer service, emergency restoration and other functions and 2

implementation thereof; (v) development, placement and administration of 3

insurance coverages and employee benefit programs, including group insurance and 4

retirement annuities, property inspections and valuations for insurance; (vi) 5

purchasing services including preparation and analysis of product specifications, 6

requests for proposals and similar solicitations, and vendor and vendor-product 7

evaluations; and (vii) development of regulatory strategy. 8

Liberty Utilities Canada will direct charge or assign costs that can be directly 9

attributable to a specific utility. Those costs include direct labor and direct non-10

labor costs. Indirect Liberty Utilities Canada costs, however, cannot be directly 11

attributed to an individual utility. Within the formal organizational structure, 12

Liberty Utilities Canada provides certain services that benefit the entire company, 13

i.e., both Liberty Utilities and APCo. Those indirect business services and costs 14

from these shared service functions are allocated between APCo and Liberty 15

Utilities using the “multi-factor” methodology shown in Table 4 of the CAM. 16

Those factors are designed to closely align the costs with the driver of the activity. 17

These shared service functions include risk management, information technology, 18

human resources, training, facilities and building rent, financial reporting and 19

administration, environmental health safety and security, legal costs, treasury, 20

internal auditing, procurement, and communications. 21

Once those indirect costs are allocated between APCo and Liberty Utilities, 22

the indirect labor and indirect non-labor costs, including capital costs, attributable 23

to Liberty Utilities are then reallocated to its regulated utilities using the Utility Four 24

Factor Methodology set forth in Table 2 of the CAM: 25

LU 000219

7

CAM Table 2: Utility Four Factor Methodology

Factor Weight

Utility Plant 25% Customer Count 25% Non-Labor Expenses 25% Labor 25% Total 100%

1

Q. HOW DOES LIBERTY UTILITIES SERVICE CORP. FIT INTO THIS 2

BUSINESS MODEL? 3

A. Liberty Utilities Service Corp. (“LUSC”) is a wholly owned subsidiary of Liberty 4

Utilities Co. All United States regulated utility employees are or will be employed 5

by LUSC. The purpose of LUSC is to streamline administration of payroll across 6

the United States-based companies. All employee costs, such as salaries, benefits, 7

insurance, etc. are paid by LUSC and direct charged to the extent possible to the 8

regulated utility for which the employee performs dedicated work. In situations 9

where time sheets do not allow direct charging of LUSC costs (which is expected 10

to be an infrequent occurrence), those indirect costs are allocated using the 11

allocation methodology set forth in Table 5 of the CAM. 12

13

Q. HOW DO LIBERTY WOODMARK, LIBERTY TALL TIMBERS, AND 14

LIBERTY SILVERLEAF IN TEXAS BENEFIT FROM THIS SHARED-15

SERVICES MODEL? 16

A. The Liberty Utilities shared services business model serves a significant and very 17

important role for Liberty Woodmark, Liberty Tall Timbers, and Liberty Silverleaf. 18

The benefits of this shared service model are significant, including: 19

20

LU 000220

8

1. Access to Skilled Strategic Management. This means Liberty Woodmark 1

and Liberty Tall Timbers enjoy access to wide ranging expertise and 2

resources that are typically not available to small utilities. That is a direct 3

result of the nationwide utility footprint of Liberty Utilities and our shared 4

services model. 5

2. Controls and Processes. Through this business model, controls and 6

processes are in place to ensure that accounting methodologies are consistent 7

with generally accepted accounting principles and fully adhere to Sarbanes-8

Oxley compliance and other appropriate internal controls. That means 9

Liberty Woodmark and Liberty Tall Timbers benefit from sound accounting, 10

capital investment and operational expertise. 11

3. Economies of Scale. By sharing regional resources with other utilities, 12

Liberty Woodmark and Liberty Tall Timbers enjoy the benefits of lower 13

overall cost structures while at the same time maintaining a local flavor in its 14

day-to-day operations and customer contact. Further, as Liberty Utilities 15

grows, its overall costs will be allocated over a larger base of utilities, 16

lowering the cost of shared services to each subsidiary utility, including 17

Liberty Woodmark and Liberty Tall Timbers. 18

4. Access to Capital. As discussed earlier, APUC is the entity that is traded 19

on the Toronto Stock Exchange and ensures that Liberty Woodmark and 20

Liberty Tall Timbers have uninterrupted access to capital. The APUC 21

family (including Liberty Utilities) has access to over $600M in credit 22

facilities and, from 2010-2014, raised over $1.7B in capital through the 23

issuance of long-term debt and equity. The capital expenditure budget for 24

2015 was $113M for Liberty Utilities. 25

LU 000221

9

Q. AND THESE APUC AND LUC COSTS ARE NECESSARY AND 1

BENEFICIAL? 2

A. Yes. Among other things, many of these costs are requirements of APUC being a 3

publicly traded entity on the Toronto Stock Exchange (TSX). As a publicly traded 4

entity, APUC must issue certain communications subject to the TSX’s rules and 5

regulations. For example, Section 714 of the TSX Company Manual states “TSX 6

may delist securities of a listed issuer that has failed to comply with the TSX’s 7

Timely Disclosure Policy… or with disclosure requirements under any securities 8

law to which the issuer is subject.” Additionally, section 406 of the TSX Company 9

Manual in part states “It is a cornerstone policy of the Exchange that all persons 10

investing in securities listed on the Exchange have equal access to information that 11

may affect their investment decisions…. Companies whose securities are listed on 12

the Exchange are legally obligated to comply with the provisions on timely 13

disclosure...” Finally, Ontario Securities Commission National Policy 51-201 14

states in Section 4.5 “Companies who do not comply with an exchange's 15

requirements could find themselves subject to an administrative proceeding before 16

a provincial securities regulator.” 17

These requirements and related costs are no different than publicly traded 18

companies on the New York Stock Exchange (NYSE), whose Listed Company 19

Manual, Section 202.05 states “A listed company is expected to release quickly to 20

the public any news or information which might reasonably be expected to 21

materially affect the market for its securities. This is one of the most important and 22

fundamental purposes of the listing agreement which the company enters into with 23

the Exchange.” Put simply, the APUC and LUC costs are the same types of costs 24

that entities traded on the NYSE are required to incur. These costs are a necessary 25

and unavoidable part of a publicly traded entity’s cost of doing business. APUC’s 26

presence on the TSX is the means by which Liberty Utilities obtains capital for 27

LU 000222

10

investment and I do not think anyone disputes that APUC’s access to capital is a 1

benefit to Liberty Woodmark, Liberty Tall Timbers, and their customers in Texas. 2

If we need access to capital, then we must incur those costs to obtain the needed 3

capital, and those costs should be included if we show they are required. The 4

underlying record illustrates that those costs are required. Copies of these pertinent 5

provisions of the TSX and NYSE rules are attached as WRK-2. 6

7

III. COST ALLOCATION MANUAL 8

Q. YOU HAVE REFERRED TO A COST ALLOCATION MANUAL OR CAM 9

THAT GOVERNS THE LIBERTY UTILITIES BUSINESS MODEL. 10

CAN YOU PLEASE DESCRIBE THE CAM? 11

A. Yes. Our cost allocation methodologies and processes are set forth in the 12

Algonquin Power & Utilities Corp. Cost Allocation Manual or CAM, which is 13

attached as WRK-3. Shared services and corporate costs are allocated to Liberty 14

Woodmark and Liberty Tall Timbers in accordance with the methodologies and 15

processes set forth in the CAM. Specifically, the CAM outlines the methods of 16

direct charge and cost allocations between (1) APUC and its affiliates, APCo and 17

Liberty Utilities; (2) Liberty Utilities Canada and APCo/Liberty Utilities; (3) 18

Liberty Utilities and its regulated utility subsidiaries; and (4) LUSC and its affiliates. 19

The CAM is based on the National Association of Regulatory Utility 20

Commissions (“NARUC”) Guidelines for Cost Allocations and Affiliate 21

Transactions. The NARUC Guidelines are attached as Appendix 1 to the CAM. 22

The fundamental premise of those guidelines and the CAM is to direct charge costs 23

as much as possible and to use reasonable allocation factors where allocation of 24

indirect costs is necessary and direct charging is not possible. 25

26

LU 000223

11

Q. CAN YOU CITE THE KEY PRINCIPLES FROM THE NARUC 1

GUIDELINES TO WHICH YOU ARE REFERRING? 2

A. Yes. The CAM utilizes the following “Cost Allocation Principles” as stated in the 3

NARUC Guidelines: 4 5 1. To the maximum extent practicable, in consideration of administrative costs, 6

costs should be collected and classified on a direct basis for each asset, 7 service or product provided (NARUC Guidelines at 2, § B.1). 8

9 2. The general method for charging indirect costs should be on a fully allocated 10

cost basis. Under appropriate circumstances, regulatory authorities may 11 consider incremental cost, prevailing market pricing or other methods for 12 allocating costs and pricing transactions among affiliates (NARUC 13 Guidelines at 2, § B.2). 14

15 3. To the extent possible, all direct and allocated costs between regulated and 16

non-regulated services and products should be traceable on the books of the 17 applicable regulated utility to the applicable Uniform System of Accounts. 18 Documentation should be made available to the appropriate regulatory 19 authority upon request regarding transactions between the regulated utility 20 and its affiliates (NARUC Guidelines at 2, § B.3). 21

22 4. The allocation methods should apply to the regulated entity's affiliates in 23

order to prevent subsidization from, and ensure equitable cost sharing 24 among, the regulated entity and its affiliates, and vice versa (NARUC 25 Guidelines at 2-3, § B.4). 26

27 5. All costs should be classified to services or products, which, by their very 28

nature, are regulated, non-regulated, or common to both (NARUC 29 Guidelines at 3, § B.5). 30

31 6. The primary cost driver of common costs, or a relevant proxy in the absence 32

of a primary cost driver, should be identified and used to allocate the cost 33 between regulated and non-regulated services or products (NARUC 34 Guidelines at 3, § B.6). 35

36 7. The indirect costs of each business unit, including the allocated costs of 37

shared services, should be spread to the services or products to which they 38 relate using relevant cost allocators (NARUC Guidelines at 3, § B.7). 39

40

LU 000224

12

Our CAM follows these cost allocation principles and, as a result, provides for the 1

appropriate allocation of prudently incurred corporate costs and shared services to 2

Liberty Woodmark and Liberty Tall Timbers. 3

4

Q. CAN YOU BRIEFLY EXPLAIN HOW THE ALLOCATION PROCESS 5

WORKS FOR APUC CORPORATE COSTS AND SHARED SERVICES? 6

A. Yes. APUC will charge costs that can be directly attributable to a specific utility 7

to that utility. APUC charges labor rates for these shared services at cost. 8

These labor costs are charged directly to a specific utility based on timesheets. 9

If such labor is for the benefit of all subsidiaries and, therefore, not directly 10

chargeable to a single entity, then those indirect labor costs are allocated using the 11

methodologies in the CAM. To start, indirect non-labor and indirect labor costs 12

incurred by APUC, including corporate capital, are pooled and allocated to Liberty 13

Utilities Canada and APCo using the methodology in Table 1 of the CAM. 14

Once those costs are allocated between Liberty Utilities Canada and APCo, the 15

APUC costs allocated to Liberty Utilities Canada are then allocated to the regulated 16

utilities under Liberty Utilities using the Four Factor Methodology set forth in Table 17

2 of the CAM (as set forth above). 18

19

Q. CAN YOU BRIEFLY EXPLAIN HOW THE ALLOCATION PROCESS 20

WORKS FOR LIBERTY UTILITIES CANADA CORPORATE COSTS AND 21

SHARED SERVICES? 22

A. Liberty Utilities Canada will charge costs that can be directly attributable to a 23

specific utility to that utility. Those costs include direct labor and direct non-labor 24

costs. Any remaining indirect corporate costs incurred by Liberty Utilities Canada 25

that can’t be directly attributed or billed to an individual utility are then allocated 26

using the Four Factor Method in Table 2 of the CAM. 27

LU 000225

13

Liberty Utilities Canada, through a shared services department (LABS), 1

provides certain services to both Liberty Utilities (and its regulated utilities) and 2

APCo. Those shared services are as follows: treasury; financial reporting and 3

administration; internal audit; risk management; training; information technology; 4

human resources; environmental, health, safety, and security; legal; procurement; 5

and communication. As noted above, costs will continue to be directly charged 6

where possible. 7

When shared services costs cannot be directly assigned to a specific entity 8

such as either APCo or Liberty Utilities, indirect costs incurred by the shared 9

services department within Liberty Utilities Canada first will be allocated between 10

Liberty Utilities and APCo using the cost drivers and methodologies shown in Table 11

4 of the CAM. Once those indirect corporate costs are allocated between APCo 12

and Liberty Utilities, the resulting indirect charges of Liberty Utilities Canada that 13

are allocated to Liberty Utilities by the shared services department are then 14

reallocated to the regulated utilities using the Four Factor Methodology noted 15

above. Put simply, Liberty Utilities Canada allocates its indirect labor and indirect 16

non-labor costs, including capital costs, to its regulated utilities using the Four 17

Factor Methodology noted above to allocate those costs incurred for the benefit of 18

all of its regulated utilities. Those indirect costs are allocated to the Liberty 19

Utilities regulated entities from the shared services departments within Liberty 20

Utilities Canada, using the Four Factor Utility Methodology (utility plant, customer 21

count, non-labor expenses, and labor). Each factor is equally weighted to more 22

accurately reflect the size and scope of each utility. 23

24

LU 000226

14

Q. CAN YOU PLEASE DESCRIBE HOW THE CAM IS USED TO ASSIGN 1

AND ALLOCATE COSTS TO LIBERTY WOODMARK AND LIBERTY 2

TALL TIMBERS? 3

A. Yes, under the CAM, a utility incurs costs in one of three ways: (1) Direct Costs – 4

costs incurred directly by a local operating company for its own purposes; 5

(2) Assigned costs – costs incurred by one company for the exclusive benefit of one 6

or more other companies, and which are directly charged to the company or 7

companies that specifically benefited; and (3) Allocated costs – costs incurred by 8

one company that are for the benefit of either (a) all of the Algonquin companies or 9

(b) all of the regulated Liberty Utilities companies. Allocated costs are charged to 10

the benefited companies using a methodology and set of logical allocation factors 11

that establish a reasonable link between cost causation and cost recovery. 12

13

Q. CAN YOU PROVIDE EXAMPLES? 14

A. Yes. First, costs that are incurred by Liberty Woodmark and/or LibertyTall 15

Timbers as part of providing utility services in Texas are direct costs, and thus are 16

neither assigned nor allocated under the CAM. Second, costs that are incurred by 17

APUC, LUC, or LUSC for the exclusive benefit of any utility’s operations are 18

directly assigned to that utility. Third, costs that are incurred by APUC, LUC or 19

LUSC that benefit other companies within the Algonquin corporate family are 20

allocated on a rational basis that logically links cost causation to cost recovery using 21

a two-step process. 22

23

Q. WHAT IS THAT TWO-STEP ALLOCATION PROCESS? 24

A. The CAM addresses those assigned and allocated costs under the following two-25

step process. Boiled down, all allocated costs have two levels of allocation filters 26

applied. The first level is designed to appropriately separate common costs 27

LU 000227

15

between the regulated and the unregulated businesses. The second level is 1

designed to appropriately allocate the costs that have been allocated to the group of 2

regulated utilities to each of the individual regulated utilities. 3

4

Q. PLEASE ILLUSTRATE THESE CORPORATE COST ALLOCATION 5

METHODOLOGIES. 6

A. As noted above, Liberty Woodmark/Liberty Tall Timbers can be assigned and/or 7

allocated costs from APUC, LUC and LUSC. I provide an overview of the 8

methodology for each cost center in the following paragraphs. 9

10

Q. LET’S START WITH APUC. 11

A. As noted below on Appendix 1 (Illustration of CAM Allocation of APUC Services) 12

and as described in §3.1 of the CAM, APUC incurs three types of costs that are 13

allocated to its direct and indirect subsidiaries. The first type is APUC’s costs that 14

directly benefit a particular unregulated company. Those “Assigned Costs” on 15

Appendix 1 are directly assigned to that unregulated company (APCo). 16

The second type is APUC’s Assigned Costs that directly benefit a particular 17

regulated company. Those costs are directly assigned to that regulated company. 18

The third type is APUC’s remaining “Allocated Costs” that benefit the entire 19

enterprise (both regulated and unregulated), which are allocated between regulated 20

and unregulated company groups under CAM Table 1. CAM Table 1 specifies: 21

(a) each type of cost incurred by APUC that is to be allocated between regulated 22

and unregulated parts of the business; (b) the factors used to allocate each type of 23

cost between regulated and unregulated activity; (c) the rationale for selecting the 24

factors that are used for allocation; and (d) examples of the specific allocated costs. 25

Once those Allocated Costs are allocated between APCo (unregulated) and 26

Liberty Utilities (regulated) using CAM Table 1, the total of those Allocated Costs 27

LU 000228

16

allocated to Liberty Utilities is then reallocated to individual utilities using the Four-1

Factor Utility Allocation Methodology set forth in CAM Table 2. 2

Appendix 1 on the next page labeled “Illustration of CAM Allocation of 3

APUC Services” provides a flow chart illustration of how the APUC direct and 4

indirect costs are allocated under the CAM. The APUC cost allocations for Liberty 5

Woodmark and Liberty Tall Timbers here follow this allocation methodology and 6

process. 7 8

LU 000229

17

APPENDIX 1: 1 ILLUSTRATION OF CAM ALLOCATION OF APUC SERVICES 2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

(A): Costs that are directly assigned and charged to unregulated entities (APCo). 22 (B): Costs that benefit both unregulated entities and regulated utilities. 23 (C): Costs that are directly assigned and charged to regulated utilities (Liberty 24

Utilities). 25

26

ALGONQUIN POWER & UTILITIES CORP. (APUC)

APUC ASSIGNED COSTS

(A)

APUC ASSIGNED COSTS

(C)

APUC ALLOCATED COSTS

(B)

CAM TABLE 1 (Allocation of APUC costs between

regulated entities under Liberty Utilities and unregulated entities under APCo)

UTILITY 4-FACTOR CAM TABLE 2

(Allocation of APUC costs between regulated utilities)

25% Utility Plant

25% Customer Count 25% Non-Labor Expenses

25% Labor

ALGONQUIN POWER (APCo) LIBERTY REGULATED UTILITIES (INCL. LIBERTY WOODMARK/TALL TIMBERS)

LU 000230

18

Q. CAN YOU PLEASE ILLUSTRATE THE LIBERTY UTILITIES CANADA 1

ALLOCATIONS? 2

A. As illustrated in Appendix 2 on the following page and as described in section 4 of 3

the CAM, Liberty Utilities Canada incurs three types of costs that are passed on to 4

other direct or indirect subsidiaries of APUC. The first type is Assigned Costs that 5

directly benefit a particular regulated company, which are directly assigned to that 6

regulated company. The second type is Shared Services Costs that benefit both the 7

regulated group of companies and the unregulated group of companies. 8

Those Shared Services Costs are allocated between the two groups under the 9

methodology set forth in CAM Table 4. CAM Table 4 includes: (a) each type of 10

cost incurred by Liberty Utilities Canada that is to be allocated between regulated 11

and unregulated parts of the business; (b) the factors used to allocate each type of 12

cost between regulated and unregulated activity; (c) the rationale for selecting the 13

factors that are used for allocation; and (d) examples of the specific allocated costs. 14

In turn, the Shared Services costs that are allocated to the regulated 15

companies as a group are then reallocated to individual companies using the four-16

factor utility allocation methodology set forth in CAM Table 2, resulting in utility-17

specific allocated charges from Liberty Utilities Canada. 18

The third type of costs allocated by Liberty Utilities Canada is Allocated 19

Costs that benefit all of the regulated companies, which are allocated using the four-20

factor method in CAM Table 2. Appendix 2 below illustrates the cost allocation 21

methodology relating to the direct and indirect services provided and costs incurred 22

by Liberty Utilities Canada for the benefit of Liberty Wookdmark/Liberty Tall 23

Timbers. The Liberty Utilities Canada cost allocations for Liberty 24

Woodmark/LibertyTall Timbers follow this allocation methodology and process. 25 26

LU 000231

19

APPENDIX 2: 1 2

ILLUSTRATION OF CAM ALLOCATION OF LUC AND LUSC SERVICES 3 4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

(A): Costs that are directly assigned to unregulated companies. 22 (B): Costs that are directly assigned to regulated companies. 23 (C): Costs that benefit both unregulated and regulated companies and operations. 24 (D): Costs that benefit all regulated companies and operations. 25 26

LIBERTY UTILITIES (CANADA) CORP. (LUC)

ALLOCATE COSTS

(C)

ASSIGNED COSTS

(B)

ALLOCATE COSTS

(D)

CAM TABLE 4 (Allocation of LUC costs between regulated entities under Liberty Utilities and unregulated entities

under APCo)

CAM TABLE 2 UTILITY 4-FACTOR

(Allocation of LUC costs

between regulated utilities) 25% Utility Plant

25% Customer Count 25% Non-Labor Expenses

25% Labor

ALGONQUIN POWER (APCo) LIBERTY REGULATED UTILITIES (INCL. LIBERTY WOODMARK/TALL TIMBERS)

LIBERTY UTILITIES SERVICE CORP.

(LUSC)

ASSIGNED PAYROLL COSTS (B)

ALLOCATECOSTS

(D)

CAM TABLE 5 (Allocation of LUSC

costs between regulated utilities)

ASSIGNED COSTS

(A)

LUC SHARED SERVICES GROUP

LUC DEDICATED STAFF

ASSIGNED COSTS

(B)

LU 000232

20

Q. FINALLY, CAN YOU ILLUSTRATE HOW THE ALLOCATION PROCESS 1

WORKS FOR LUSC COSTS? 2

A. As illustrated in Appendix 2 and as described in section 5 of the CAM, LUSC can 3

incur two types of costs that can be passed on to regulated utilities of Liberty 4

Utilities. The first type is LUSC Assigned Payroll Costs that directly benefit a 5

particular regulated company. Those Assigned Payroll Costs are directly assigned 6

to that regulated company. Currently, payroll expenses for all regulated operating 7

company employees are incurred by LUSC, and those utility-specific expenses are 8

directly assigned to each operating utility. 9

The second type of cost that may be incurred by LUSC is Allocated Costs 10

that benefit all of the regulated operating companies. LUSC does not provide 11

indirect services to any unregulated entity, so there is no reason to allocate these 12

costs between APCo and Liberty Utilities. As such, the only allocation by LUSC 13

occurs under CAM Table 5 between the regulated utilities of Liberty Utilities. 14

Currently, LUSC is not incurring any indirect costs and LUSC has not allocated any 15

Allocated Costs to Liberty Woodmark/Liberty Tall Timbers. I only mention it here 16

because if those costs are incurred by LUSC in the future, those costs would be 17

allocated to Liberty Woodmark/Liberty Tall Timbers under CAM Table 5. 18

19

Q. HOW WOULD YOU SUMMARIZE APUC’S COST ALLOCATION 20

METHODOLOGIES AS APPLIED TO LIBERTY WOODMARK/TALL 21

TIMBERS UNDER THE CAM? 22

A. Ultimately, our cost allocation process applies a reasonable and common sense 23

approach. To start, costs are assigned and allocated from the three cost centers 24

(APUC, LUC and LUSC) each month. Where there is a factual basis to do so, costs 25

incurred specifically for Liberty Woodmark or Liberty Tall Timbers are directly 26

assigned to Liberty Woodmark/Liberty Tall Timbers. The cost allocation 27

LU 000233

21

methodologies are applied only after all direct charges have been assigned to Liberty 1

Woodmark/Liberty Tall Timbers and the other APUC subsidiaries. The allocations 2

deal only with remaining costs that are not specific to a particular operating entity. 3

Cost allocations involve a two-step approach. The first step is to split all costs 4

between the unregulated businesses (APCo) and the regulated businesses (Liberty 5

Utilities and its subsidiaries). The second step is to allocate the costs that are 6

attributable to the regulated utilities among those regulated entities, including 7

Liberty Woodmark and Liberty Tall Timbers, to determine utility-specific charges. 8

All of those costs are allocated among the regulated utilities to determine utility-9

specific charges. 10

11

Q. WHEN WAS THE CAM MOST RECENTLY UPDATED? 12

A. The current methodology within the CAM became effective July 1, 2014. The 13

CAM percentages were updated in April 2016 to reflect the growth of the companies 14

within the APUC group of companies and Liberty Utilities. The 2016 changes were 15

administrative in nature and did not alter the methodology developed in 2015. 16

A thorough review of the cost drivers was done to develop and affirm the 17

current methodology, including a department-by-department identification of cost 18

drivers. Essentially, each department was asked to confirm the factors driving their 19

costs, and the weightings of the factors if there were multiple drivers. Going 20

forward, we intend to review the CAM annually to evaluate whether the 21

methodology is achieving its purposes—i.e., to achieve a fair allocation of shared 22

services and corporate costs, and to adjust for changes in the number and size of 23

companies receiving shared services and benefitting from the shared services model. 24

This could occur more frequently in the event of a significant acquisition that could 25

change the balance of utility sizes and scope or the overall cost structure. 26

27

LU 000234

22

Q. WHAT IS THE IMPACT OF THE PARK WATER COMPANY 1

TRANSACTION ON CORPORATE ALLOCATIONS? 2

A. The addition of three Park Water Company utilities was recognized and 3

incorporated into the distribution of corporate charges commencing with the 4

January 2016 billings. The allocation percentages have been adjusted to reflect the 5

addition of these additional utilities amongst the Liberty family. 6

7

Q. HAVE OTHER REGULATORY COMMISSIONS IN OTHER 8

JURISDICTIONS APPROVED THIS COST ALLOCATION MODEL IN 9

RECENT RATE CASES FOR LIBERTY UTILITIES? 10

A. Yes. We have received favorable treatment and review of this cost allocation model 11

in other states. 12

13

Q. HAVE THE APUC AND LUC CORPORATE COST POOLS CHANGED 14

SINCE THE LAST RATE CASES FOR LIBERTY UTILITIES? 15

A. No, the general costs allocated from APUC and LUC have not changed. We are 16

allocating the same general corporate costs from APUC and LUC to Liberty 17

Woodmark/Tall Timbers and the other Texas utilities. Although the types of costs 18

allocated have not changed, we have made changes to how those costs are allocated. 19

As noted above, we updated the cost methodologies to reflect the growth of APUC 20

and its subsidiaries, and we made some changes in allocation factors to ensure that 21

the proper cost drivers are reflected in the allocation methodologies. As Liberty 22

Utilities evolves as a company, we continually strive to implement our own best 23

practices and link costs to cost drivers. That is why we intend to annually review 24

the allocation methodologies and the results of the APUC and LUC allocations. 25

That review process involves evaluating and updating the allocation factors based 26

on current information relating to plant, customer numbers, and other similar 27

LU 000235

23

information. 1

2

Q. WHAT WAS THE CORPORATE COST ALLOCATION AMOUNT FOR 3

LIBERTY WOODMARK/TALL TIMBERS IN THE TEST YEAR? 4

A. The corporate cost allocation was $57,505 for Liberty Woodmark and $56,286 for 5

Liberty Tall Timbers. That is a very good price for the level of services received. 6

7

Q. DOES THIS CONCLUDE YOUR DIRECT TESTIMONY? 8

A. Yes. 9

LU 000236

CURRICULUM VITAE OF WILLIAM R. KILLEEN

Work Experience:

Liberty Utilities (Canada) Corp. (2014 to Present) Director, Regulatory Strategy

Enersource Hydro Mississauga Inc. (2011 - 2014) Manager, Regulatory Affairs

Ministry of Energy, Energy Supply and Competition Branch (2011) Senior Advisor, External Energy Supply

ECNG Energy LP (2003 -2010) Director, Energy Supply and Regulatory

Direct Energy (2002-2003) Manager, Regulatory Affairs

Engage Energy Canada Inc. (2001-2002) Manager, Marketing and Sales

Union Gas Limited (1989 - 2001)

Education:

Team Leader, Customer Support Services Manager, Gas Supply Planning Coordinator, Regulatory Affairs

Masters of Business Administration, Richard Ivey School of Business, University of Western Ontario (now Western University), 1989

Bachelor of Engineering Science, Chemical Engineering, University of Western Ontario (now Western University), 1985

Appearances before the Ontario Energy Board (on behalf of Union Gas):

EBRO 499 EBRO 493-04/494-06 EBRO 493/494 EBRO 486-04 EBRO 486-03 EBRO 486 EBO 174 EBLO 243 EBRM 103

WRK-1

LU 000237

EBRM 104 EBLO 244 EBRO 476-03

Appearances before the Ontario Energy Board (on behalf of Enersource):

EB-2012-0033

Other Representations at the Ontario Energy Board:

EB-2002-0130 EB-2005-0520 EB-2008-0106 EB-2008-0219 EB-2008-0292

Other Testimony (on behalf of Liberty Utilities):

Arkansas Public Service Commission - Docket No. 14-020-U - on behalf of Liberty Utilities (Pine Bluff Water) Inc.

Arizona Corporation Commission - Docket Nos. SW-02361A-15-0206 & SW-02361A-15-0207 (consolidated) - on behalf of Liberty Utilities (Black Mountain Sewer) Corp.

Memberships:

Professional Engineers of Ontario Ontario Society of Professional Engineers Ontario Energy Association (OEA): Former Chairperson, Energy Markets Committee; Member of Utilities Sector Committee; Former Member of Marketers and Retailers Committee

LU 000238

TSX Company Manual Page 1of1

Lafl'i!uage

Toronto Stock Exchange TSX Company Manual

Table of Contents VlewUpdAtM Bookmark

Print Mlnll•r

LoallOn; TSX Company Manual • Part VII Haltinjj or Tradi1111, Suspension and Deli5ting of Securities • D.

Oellstlng Criteria> (4} Failure To Comply With TSX Requirements & Policies • Dl51:losure Pot!cl!!$ • Sec.

7H.

" Disclosure Policies

Sec. 714.

TSX may dellst the securities of a listed issuer that has failed to comply With TSX"s Timely Disclosure policy (see Sections 406 to 423.3 and 472 to 475) or with dlsclosur~ requirements under any securities law to which the listed Issuer Is subject. In addition, TSX may dellst the recurities or a listed lssuer that Is engaged In the business of mlnerat ei<ploratlon, deyelopment or production if such lfsted issuer has failed to c:omply with TSX"s "Disclosure Standards for Companies Engaged In Mineral Eicploratlon, t>evelopment & Production" (see APPendlx 8).

" Disclosure Policies Payment of Fees or Charges"

,_, TSX Inc. Atl rights rewived. Do not copy, distribute, sell or modify this document w1thout TSX Inc:, sprier written consent. TSX materials, including manuals, tradl11t1 rules, Ptlllcles and forms, are repnlduted by Complinet with tile permission of TSX Inc. and TSX Venture Exchange Inc, under a non-exclu~lve license. Neither TSX Inc:. nor any of Its arfillated companies euarantees ~I! accuracy, adequacy, completen1m or avallal>lllty of any Information and nor shall they be responsible for any errors or omissions or otherwise.

TS)( Company Manual:

-- TSX Company Manu.a I + Part I Introduction ~ Part u Wtry List on the Toronto Stock Exchanse? ~ Part Ill Original Listi"!! Requlremenu "Part IV Malnu.1n1na a listing ... General Requirements r;:- Part v Spe<lat Requlremenu for Non·uempt lssuea ff Part VI Chanses In Capital Structure of Listed Issuers - Part VII Halting of Trailing, Suspension and Dellstlng of Securities

!+ A. General ff: B. Halting of Trading 'f C. ~nsion and Oellstlng c__ o. Del!stlns Criteria

t-(1) lnwlvency ;'t; {2) Financial Condition and /or Operating Rewlts :t: (3) Market Value and Publfc Distribution ~ (4) Failure To Comply With TSX Requirements & Policies

't listing Agreement ;- DlsclO<ure Policies

.-Sec. 714.

<+Payment of Fees or ChafieS I+ Manasement

:£!(SJ Change In Business !t E. Reinstatement of listing i£ f. Review of Dellstlng Decisions rt G. Voluntary Dellstlns if H. Effect cf Amendments oo Existing Relllews and S~pensicns

:t: Part VIII Fees Payable by Listed Companies ~ Part IX llealtn11 wl th the Hews Media ;:;- Part X Specill l Purpose Acquisition Corporations (SPACs) ct; Provisions Respecting Contllct of Interest and Competitors of TMX Group Limited ··Forms :t /<ppendh:es ;.c Notices of Approval

T Requests for Comm.,nu T Staff Notices to Applicants, listed Issuers, Se<Urttles Lawyers and Partlclpatlns Organizations :£ Anhlve

~.,::,; t: ... -~ -~· ~ '

THOMSON R£UTERS M:CELVS ~

BKI< to top

TMX GROUP Toronto Stcx:k uchani" J TSX Venture Exchange I TMX Select I Alpha I Montreal Exchanae I BOX I NGX I SharCAn

The Canadian Depnsltory for Securities Limited I Canl!dfan Derivatives Clearing Corporation TMX Datallnx I fMX Atrium I

TMX Technolagy Solutions I TMX Equlcom I TMX Equity Tronsfer Service<

Capyrlfht Cl 201 l TMX Group Umlbd IJI t11hU rewrved.

http:l/tmx.complinet.com/en/display/display _main.html?rbid==2072&element_id=354 6115/2015

WRK-2

LU 000239

TSX Company Manual Page 1of1

Toronto Stock Exchange TSX Company Manual

Bookmark Keyword seuch 1

" Advanced Search View Updatu

Go

Prlntjgn.,..r

Location: TS)( Company Manual• Part II/ Maintaining a Listln£ General Requirements• fl. Timely

Disclosure > Introduction • Sec. 406.

•• Introduction Material Information "

Sec. 406.

It Is a cornerstone policy of the Exchanse that all persons i~tfng tn secUfltles Usted on the Exchan11e have equal access to Information that may arrect their investment decisions. Public confidence in the inteQrity of the Exchanse as a securities market requires timely disclosure of material Information concerning the bu51ness and affairs or companies USted on the Exchange, thereby placing all participants in the market on an equal rooting.

The timely disclosure policy of the Excliange Is the primary timely disclosure standard for all TSX listed issuers. National Policy 51·201 Disclosure Standards of the CSA, "Disclosure Staridards", assisu issuers in meeting their legislative disclosure requirements. While the lesJslative and Exchange timely disclosure requirements differ somewhat, the CSA ciearty state In National Polley 51·201 Dfsclosur,. Standards tliat they expect listed Issuers to comply with the requirements of the Exchanae.

To minimize the number of authorities that must be consulted In a partlcu.ar matter, Ill the case of securities listed on the Exchange, the Exchange ts the rele-vant contact. The Issuer may, of course, consult with the aovemment securities administrator of the particular Jur!sdktlon. In the case of securities listed on more man one mx:k market, the Issuer should deal with each market.

The requirements of the E.iccha'"i@ and National Policy 51-201 Drsctosure Standards are In addition to any applk:able statutory requirements. The Exchanse enforces its own policy. Companies whose securities are listed on the Exchange are tegaUy obi' gated to comply wt th the provisions on tlmety disclosure set out 1 n section 75 of the OSA and the Regulation under the Act. Reference should also be made to National Instrument 71-102 contlfltlOUs Disclosure and Other Exemptions Relatln'j ta Foreljn Issuers, Nat-onal Instrument SS.102 System for Ell'Ctronlc Disclosure by Insiders, and National Instrument 62·103 The Early Warning System and Related Take·Over bid and Insider Reportlrtj Issues.

In aliOltlon lO the fo1eao1ns requt1emenu, tompanle$ whose 5ealrlties are Hsted on the E..chanse and who ensage In m•neral exploration, development and/or production, must follow the "Disclosure Standards for Companies En11a11ed In Mineral Eicploration, Development and Production" as outlined in Appendix B of this Manual for both their timely and CO"ltmuous disclosure.

The Market Surveillance Division monitors the llme\y dlscl05Ufe policy on behalf of the Exchange.

•• Introduction Material lnf0rmat1on ..

e TSX Inc. All rights reserved. Do not copy, distribute, sell or modify this document without TSX lnc:.'s prior written consent. TSX materials, lncludlns manuals, tr111dln11 l'\lles, policies and forim, are reproduced by Compllnet with the permission of TSX Inc. and TSX Venture Exchan~e Inc. under a non-exclusive license. Nefttier TSX Inc. nor any of Its affiliated companies guarantees the accuracy, adequacy, completeness or availability cf any Information and nor shall they be ~sponslble for any errors or omissions or otherwise.

TSX Campany Manual:

.~ TSX Company Manual ·•··Part I Introduction

Part II Why list on the Toronto Stock Exchan~? •• Part Ill Original llstl"!I Requirements

Part IV Ma lntainlns a Listing · Gtneral Requlrtmients

1if A. General - B. Timely Dlscl1»ure

~,Introduction

- Sec. 406. T' Material Information ~ Mark..-t Surveillance -;: Announcements of Material tnl armatlon :r Trading Halts • ConfldentlaUty ;. Insider Tradtn1

'f C. Company Reportlfl!i Forms i~ D. Dividends and Other Distributions to Sec"r1ty Holclers if E. Debermire Interest Changes "+ F. Financial Statements :; G. Sharehol~rs· Mfftlnss and Prcxy Sol.lcttatlon '!~ H. Notlc"s and Rl!pottS to 5"curity Holders ] l.Chartl!rAniendments '£ J, Chan11e In Evidence of Security Ownership or Change tn Security Certificate It K. ProPl>'!'d l.suantl! of S..curit!es + L. Secondary Distributions .. M. Corporate Governance

··•Part V Special Requirements for Non·Exempl Issuers l' Part VI Cha"!!es In Capital Structure of Listed I.suers

'i Part VII Halt1n1 or Trading, Suspension and Oellst!ng of Securities :t. Part vm Fees Payable by Listed Companies ;.: Part IX Dealing with the Hews Media :F· Part X Special Purpose Acquisition Corporations (SPACsl ;.' Provts1ons Respecting Conflict of Interest and Compl'tltor,; of TMX Grnup Limited ~.Forms

1c Appendices -,., Notices of Appro¥al

~ Requests for C:ommcmts ·+ Staff Notkes to Appl1cants, Listed tsSUl!fS, Securities Lawyers and Partlc!pattfl!i Organliatlons =+-Archive

THOMSON REUTERS >.C~~U.l~ -

TMX GROUP Toronta Stoc:k Exch•n!I" 1 TSX Venture U.change ! TMX Select l Alpha I Montreal bchaoge I BOX NGX I Shorcan

The ta<>adlan Depository for SecurltlM limited i Canadian Oef\vatlves C1e11rlng Cofl)orAtlon 1 TMX 0.U.llnx I TMX Atrium t

TMX Technol"!IY Solutions j TMX Equlcom j TMX Equity Transfer Services

Capyn1t11 Cl 2011 TMX liraup Limited All ri1hts r ..... rwcl.

http://tmx.complinet.com/en/display/display _ main.html?rbid=2072&element_ id= 112 6/15/2015

LU 000240

National Policy: NP - 51- 201 - Disclosure Standards Page 1of40

Ill (http://www.osc.gov.on.ca/en/home.htm)

Securities Law & Instruments ~ : .... Miii

PDF Version (/documents/en/Securities-Category5/po1_20020712_51-201.pdf)

NATIONAL POLICY 51-201 DISCLOSURE STANDARDS

Part I • Introduction

1.1 Purpose

i(D-lt is fundam~ntal that everyone lnve~tin~ in ~ecurities have equal access to1

~nformation that may affect their investment decisions. The Canadian Securities' i

',:,dministrators ("the CSA" or 'We") are concerned about the selective disclosure of,

imaterial corporate information by companies to analysts, institutional investors,!

linvestment dealers and other market professionals. Selective disclosure occurs when1

i i 1,1::11 company discloses material nonpublic information to one or more individuals on I I ;companies and not broadly to the investing public. Selective disclosure can create;

bpportunities for insider trading and also undermines retail investors' confidence in thel

[marketplace as a level playing field. '

i ' i(2) This policy provides guidance on "best disclosure" practices in a difficult areal

:involving competing business pressures and legislative requirements. Ou~

lrecommendations are not intended to be prescriptive. We encourage companies to]

J;:;dopt the suggested measures, but they should be implemented flexibly and sensiblyjl

;:.o fit the situation of individual companies.

I i i I

!(3) The timely disclosure requirements and prohibitions against selective disclosure'. ' I J,:: re substantially similar everywhere in Canada, but there are differences among the'.

~rovinces and territories, so companies should carefully review the legislation which is!

r" pplicable to them for the details.

!. .. ·-···-·····--·· ........ .

http://www.osc.gov.on.ca/en/SecuritiesLaw _pol_ 20020712 _ 51-201.jsp 6/15/2015

LU 000241

http://www.osc.gov

National Policy: NP- 51- 201 - Disclosure Standards Page 16of40

in government policy that affects most companies in a particular industry does not require an

announcement. but if it affects only one or a few companies in a material way, such companies

should make an announcement.

4.5 Exchange Policies

(1) The Toronto Stock Exchange Inc. (the "TSX") and the TSX Venture Exchange Inc.'

(''TSX Venture") each have adopted timely disclosure policy statements which include

many examples of the types of events or information which may be material.

Companies should also refer to the guidance provided in these policies when trying to

assess the materiality of a particular fact, change or piece of Information.

,(2) The TSX and TSX Venture policies require the timely disclosure of "material]

nnformation". Material information includes both material facts and material changes; ' '

!relating to the business and affairs of a company. The timely disclosure obligations in' ' !!

~he exchanges' policies exceed those found in securities legislation. It is not

uncommon, or inappropriate, for exchanges to impose requirements on their listed

companies which go beyond those imposed by securities legislation.31 We expec' I

1

Usted companies to comply with the requirements of the exchange they are listed on.'

Companies who do not comply with an exchange's requirements could find

hemselves subject to an administrative proceeding before a provincial securities

regulator.32

Part V - Risks Associated with Certain Disclosures

5.1 Private Briefings with Analysts, Institutional Investors and other Market Professionals

http://www.osc.gov.on.ca/en/SecuritiesLaw _pol_ 20020712_51-201.jsp 611512015

LU 000242

NYSE Listed Company Manual

11111~ NYSE

What's New Sections Help

About the Listed Company Manual

The New York Stock Exchange Listed Company Manual is the comprehensive rulebook for listed companies. The Manual also details original and continued fisting requirements of the Exchange and sets for1t1 NYSE rules and policies on such matters as corporate governance, shareholder communications. and shareholder approval

Cl). Wolters Kluwer Rn&rdal SeMce5

;:i. 2015 NYSE All rights reserved

http://nysemanual.nyse.com/LCM!Sections/

Page l of 1

Search

Listed Company Manual

Sections

General Organizalion

Section 1 - The Listing Process

Section 2 - Disclosure and Reporting Material Information

Section 3 - Corporate Responsibility

Section 4 - Shareholders' Meetings and Proxies

:- Section 5 - Certificates

; Section 6 - Agencies, Depositories, Trustees

Section 7 - Listing Applications

Section 8 - Suspension and Delisting

Section 9 - Exchange Forms

Jo'.i· Voting Rights Interpretations Under Listed Company Manual Section 313 (pdf}

Back to Top I Print this Page

6/15/2015

LU 000243

http://nysemanual.ny

of9

The determination to impose restrictions is based on a careful inspection of the trading for the latest one week period, defir year's average weekly volume to the volume for the period considered, arbitrage, stop order bans, short position, earnings

The restriction itself is aimed primarily at eliminating the extension of credit to those who buy a security and sell it the samE requirement is usually imposed on all other margin customers in that they must put up the full purchase price within five bu in seven days.

202.05 Timely Disclosure of Material News Developments

A listed company is expected to release quickly to the public any news or information which might reasonably be expected into with the Exchange.

A listed company should also act promptly to dispel unfounded rumors which result in unusual market activity or price varia

The issuer of income deposit securities traded as a unit shall publicize any change in the terms of the unit, such as change component), or to the ratio of the components within the unit. Such publication shall be made as soon as practicable in rels issuer must provide information regarding the terms and conditions of the components of the unit (including information wit

202.06 Procedure for Public Release of Information

(A) Immediate Release Policy

Information required to be released quickly to the public under Section 202.05 above should be disclosed by means of any issuers must comply with the timely alert policy set forth in Section 202.05 and may do so by any method (or combination c companies to comply with the immediate release policy by issuing press releases.

The spirit of the immediate release policy is not considered to be violated on weekends where a "Hold for Sunday or Mand

Annual and quarterly earnings, dividend announcements, mergers, acquisitions, tender offers, stock splits, major managen News of major new products, contract awards, expansion plans, and discoveries very often fall into the same category. Urr disguise unfavorable news endangers managemenfs reputation for integrity. Changes in accounting methods to mask sue

It should be a company's primary concern to assure that news will be handled in proper perspective. This necessitates app qualified, conservative and factual. Excessive or misleading conservatism should be avoided. Likewise, the repetitive relea

Few things are more damaging to a company's shareholder relations or to the general public's regard for a company's sea trivia.

Premature announcements of new products whose commercial application cannot yet be realistically evaluated should be , not match earlier projections, this too should be reported and explained.

Judgment must be exercised as to the timing of a public release on those corporate developments where the immediate re company should weigh the fairness to both present and potential shareholders who at any given moment may be consider!

(B) Telephone Alert to the Exchange

When the announcement of news of a material event or a statement dealing with a rumor which calls for immediate releasE representative by telephone at least ten minutes prior to release of the announcement. to inform the Exchange of the subsl information necessary to locate the news upon publication. VI/hen the announcement is in written form, the company must. to release of the announcement. If the Exchange receives such notification in time, it will be in a position to consider wheth openings and trading halts.) A delay in trading after the appearance of the news on the Dow Jooes, Reuters or Bloomberg specialist's book in view of the news announcement. Even if limit orders are not canceled or changed during the halt, the f;: regardless of the previously entered limit. A longer delay in trading may be necessary if there is an unusual influx of orders overall importance of fairness to all those participating in the market demands that these procedures be followed.

(C) Release to Newspapers and News Wire Services

http://nysemanual.nyse.com/LCMTools!fOCChapter.asp?manual::::o/lcm/sections/lcm-secti... 6/15/2015

LU 000244

ALGONQUIN POWER & UTILITIES CORP.

COST ALLOCATION MANUAL V2014.1 Effective: July 1st, 2015

This document outlines the methods of direct charges and cost allocations: (i) between Algonquin Power & Utilities Corp. and its affiliates, including Algonquin Power Company and Liberty Utilities (Canada) Corp.; (ii) between Liberty Utilities (Canada) Corp. and its regulated utility subsidiaries; (iii) between Liberty Utilities (Canada) Corp.’s shared services functions and its affiliates, including Algonquin Power Company and Liberty Utilities (Canada) Corp.; and (iv) between Liberty Utilities Service Corp. and its affiliates.

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LU 000245

COST ALLOCATION MANUAL

Page 1 of 33

TABLE OF CONTENTS

1. INTRODUCTION ................................................................................................... 2

2. THE APUC CORPORATE STRUCTURE .......................................................... 3

3. SCOPE OF SERVICES FROM APUC AND APCO AMONG AFFILIATES AND HOW THOSE COSTS ARE DISTRIBUTED ....................... 4

Each distribution utility can be assigned and/or allocated costs from APUC, LUC and LUSC. This section provides an overview of the services and the cost methodology for APUC. In addition, this section also addresses any costs and services that may arise from APCo. ............................................................................ 4

3.1 Labor Services and Cost Allocation from APUC to LUC and APCo.............. 4

3.2 Labor Services and Cost Allocation From APCo To LUC ............................ 10

4. SCOPE OF SERVICES PROVIDED BY LUC TO ITS SUBSIDIARIES, APUC AND APCO, AND HOW THOSE COSTS ARE DISTRIBUTED ........ 10

4.1 Overview of LUC Services and Costs .............................................................. 10

4.2 LUC Services and Costs Provided to Utilities .................................................. 11

4.3 Shared Services from LUC .................................................................................. 13

5. LIBERTY UTILITIES SERVICE CORP. .......................................................... 17

6. CORPORATE CAPITAL ....................................................................................... 19

7. UPDATING ALLOCATIONS ............................................................................. 20

8. CAM TRAINING .................................................................................................... 20

9. APPENDICES ........................................................................................................... 21

APPENDIX 1 - NARUC GUIDELINES FOR COST ALLOCATIONS ....... 21

APPENDIX 2 – DETAILED EXPLANATION OF APUC COSTS .............. 28

1. APUC STRATEGIC MANAGEMENT COSTS ........................................................ 28

2. ACCESS TO CAPITAL MARKETS ........................................................................... 29

3. APUC FINANCIAL CONTROLS ............................................................................ 29

4. APUC ADMINISTRATIVE COSTS ......................................................................... 30

APPENDIX 3 – LIFE OF AN APUC INVOICE ............................................... 31

APPENDIX 4 – LIFE OF A LIBERTY UTILITIES INVOICE ..................... 32

APPENDIX 5 – LIFE OF A SHARED SERVICES INVOICE ....................... 33

LU 000246


Page 2 of 33

1. INTRODUCTION The purpose of this manual is to provide a detailed explanation of services provided by Algonquin Power & Utilities Corp (“APUC”), and its affiliates, Algonquin Power Company (“APCo”), Liberty Utilities (Canada) Corp. (“LUC”), and Liberty Utilities Service Corp. (“LUSC”) to the regulated utilities and to describe the Direct Charge1 and Cost Allocation2 Methodologies used by APUC, APCo, LUC, and LUSC. The following organization chart identifies the relationships between the separate entities.

Figure 1: Algonquin Power & Utilities Corporate Structure

This Cost Allocation Manual (“CAM”) has been completed in accordance and conformance with the NARUC Guidelines for Cost Allocations and Affiliate Transactions (“NARUC Guidelines”). More specifically, the founding principles of this Cost Allocation Manual are to a) directly charge as much as possible to the entity that procures any specific service, and b) to ensure that inappropriate subsidization of unregulated activities by regulated activities, and vice versa, does not occur. For ease of reference, the NARUC Guidelines are attached as Appendix 1.

1 Direct charges (sometimes referred to as assigned costs) are costs incurred by one company for the exclusive

benefit of one or more other companies, and which are directly charged (or assigned) to the company or companies

that specifically benefited.

2 Allocated costs are costs incurred by one company that are for the benefit of either (a) all of the Algonquin

companies or (b) all of the regulated companies, and which are charged to the benefited companies using a

methodology and set of logical allocation factors that establish a reasonable link between cost causation and cost

recovery.

Generating Facilities

Regulated Utilities

Liberty Utilities Service Corp.

LU 000247


Page 3 of 33

Costs charged and allocated pursuant to this CAM shall include direct labor, direct materials, direct purchased services associated with the related asset or services, and overhead amounts. The direct charges are assigned as follows:

a. Tariffed rates or other pricing mechanisms established by rate setting authorities shall be used to provide all regulated services;

b. Services not covered by (a) shall be charged by the providing party to the receiving party at fully distributed cost; and

c. Facilities and administrative services rendered to a rate-regulated subsidiary shall be charged on the following basis:

(i) the prevailing price for which the service is provided for sale to the general public by the providing party (i.e., the price charged to non-affiliates if such transactions with non-affiliates constitute a substantial portion of the providing party’s total revenues from such transactions) or, if no such prevailing price exists, (ii) an amount not to exceed the fully distributed cost incurred by the providing party in providing such service to the receiving party.

2. THE APUC CORPORATE STRUCTURE

APUC’s primary business is direct interest or equity ownership in renewable and thermal power generating facilities and regulated utilities. APUC owns a widely diversified portfolio of independent power production facilities3 and regulated utilities4 consisting of water distribution, wastewater treatment facilities, electric and gas utilities. While power production facilities are located in both Canada and the United States, regulated utility operations are exclusively in the United States. APUC is publicly traded on the Toronto Stock Exchange5. Its structure as a publicly traded holding company provides substantial benefits to its regulated utilities through access to capital markets.

3 All power production (i.e. generation) facilities are found within Algonquin Power Company within the APUC

corporate structure.

4 All distribution utilities are found within Liberty Utilities (Canada) Corp. within the APUC corporate structure.

5 Common shares and preferred shares are traded on the Toronto Stock Exchange (TSX) under the symbols AQN,

AQN.PR.A and AQN.PR.D. Additional corporate information can be found at the company’s website,

algonquinpower.com.

LU 000248


Page 4 of 33

APUC is the ultimate corporate parent and affiliate that provides financial, strategic management, corporate governance, administrative and support services to LUC and its subsidiaries as well as to the numerous generation assets held by APCo. The services provided by APUC are necessary for LUC and its subsidiaries to have access to capital markets for capital projects and operations. These services are expensed at APUC and are performed for the benefit of APCo and LUC and their respective businesses. APUC and its affiliates capitalize on APUC’s expertise and access to the capital markets through the use of certain shared services, which maximizes economies of scale and minimizes redundancy. In short, it provides for maximum expertise at lower costs. Further, the use of shared expertise allows each of the entities to receive a benefit they may not be able to achieve on a stand-alone basis such as strategic management advice and access to capital at more competitive rates.

3. SCOPE OF SERVICES FROM APUC AND APCO AMONG AFFILIATES AND HOW THOSE COSTS ARE DISTRIBUTED

Each distribution utility can be assigned and/or allocated costs from APUC, LUC and LUSC. This section provides an overview of the services and the cost methodology for APUC. In addition, this section also addresses any costs and services that may arise from APCo.

3.1 Labor Services and Cost Allocation from APUC to LUC and APCo

3.1.1 Description of the APUC Services and Costs APUC provides benefits to its affiliate companies by use of certain shared services. APUC charges labor rates for these shared services at cost, which is the dollar hourly rate per employee as recorded in APUC’s payroll systems, grossed up for burdens such as payroll taxes, health benefits, retirement plans, other insurance provided to employees, and other employee benefits. These labor costs are charged directly based on timesheets to the extent possible. If labor is for the benefit of all subsidiaries then the allocation methodologies used for non-labor costs are applied.

LU 000249


Page 5 of 33

APUC’s non-labor services include Financing Services. As used herein Financing Services means the selling of units to public investors in order to generate the funding and capital necessary (be it short term or long term funding, including equity and debt) for LUC and APCo as well as providing legal services in connection with the issuance of public debt. The capital and funds obtained from the sale of shares in APUC are used by LUC and APCo for current and future capital investments. The services provided by APUC are critical and necessary to LUC and APCo because without those services they would not have a readily available source of capital funding. Further, relatively small utilities may have difficulty attracting capital on a stand-alone basis. The services provided by APUC specifically optimize the performance of the utilities, keeping rates low for customers while ensuring access to capital is available. If the utilities did not have access to the services provided by APUC, then they would be forced to incur associated costs for financing, capital investment, audits, taxes and other similar services on a stand-alone basis, which would substantially increase such costs. Simply put, without incurring these costs, APUC would not be able to invest capital in its subsidiaries, including the regulated utilities. In connection with the provision of Financing Services, APUC incurs the following types of costs: (i) strategic management costs (board of director, third-party legal services, accounting services, tax planning and filings, insurance, and required auditing); (ii) capital access costs (communications, investor relations, trustee fees, escrow and transfer agent fees); (iii) financial control costs (audit and tax expenses); and (iv) administrative (rent, depreciation, general office costs). See Appendix 2 for a more detailed discussion of the costs incurred by APUC. Non-labor costs, excluding corporate capital, are pooled and allocated to LUC’s subsidiaries and APCo using the method summarized in Table 1. Each corporate cost type, or function, has been carefully reviewed to properly identify the factors driving those costs. Each function or cost type is typically driven by more than one factor and each has been assigned an appropriate weighting. Table 1 includes brief commentary on the rationale for each cost driver and weighting, along with examples for each cost type.

LU 000250


Page 6 of 33

Table 1: Summary of Corporate Allocation Method of APUC Indirect Costs

Type of Cost Allocation Methodology

Rationale Examples

Legal Costs Net Plant 33.3% Number of Employees 33.3% O&M 33.3%

This function is driven by factors which include Net Plant, as typically the higher the value of plant, the more legal work it attracts; similarly, a greater number of employees are typically more indicative of larger facilities that require greater levels of attention; and O&M costs tend to be a third factor indicative of size and legal complexity.

Employee labor and related administration and programs; Third party legal

Tax Services Revenue 33.3% O&M 33.3% Net Plant 33.3%

This function is driven by a variety of factors that influence the size and relative tax complexity, including Revenues, O&M and Net Plant. Tax activity can be driven by each of these factors.

Employee labor and related administration and programs, including Third party tax advice and services

Audit Revenue 33.3% O&M 33.3% Net Plant 33.3%

This function is driven by a variety of factors that influence the size

Employee labor and related administration and programs,

LU 000251


Page 7 of 33

and complexity of Audit, including Revenues, O&M and Net Plant. Audit activity can be driven by each of these factors.

including Third party accounting and audit services

Investor Relations Revenue 33.3% O&M 33.3% Net Plant 33.3%

This function is driven by factors which reflect the relative size and scope of each affiliate - Revenues, Net Plant and O&M costs.

Employee labor and related administration and programs, including third party Investor day communications and materials

Director Fees and Insurance

Revenue 33.3% O&M 33.3% Net Plant 33.3%


Board of Director fees, insurance and administration

Licenses, Fees and Permits



Third party costs

Escrow and Transfer Agent Fees



Third party costs

LU 000252


Page 8 of 33

Other Professional Services



Third party costs

Office Administration

Oakville Employees 50% Square Footage 50%

This function is driven by factors which are indicative of number of employees and square footage utilized by these employees.

Office space and utility costs. Employee labor and related administration

Executives Revenue 33.3% O&M 33.3% Net Plant 33.3%


Employee labor cost that is not directly attributable to any entity

Notwithstanding the above, if a charge is related either solely to the regulated utility business, i.e., LUC, or to the power generation business, i.e., APCo, then all of those costs will be direct charged, or assigned, to the business segment for which they are incurred. Lastly, if a cost can be directly attributable to a specific entity, it will be directly charged to that entity. 3.1.2 Description of the APUC Cost Flows Please refer to Figure 2 for a diagram of the various flows of costs that may arise from each affiliate, including APUC.

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Figure 2: Illustration of APUC Corporate Cost Distributions

As illustrated in Figure 2 and as described above, APUC incurs three types of costs that are passed on to its direct and indirect subsidiaries. The first type is APUC’s costs that directly benefit a particular specific unregulated company, which are directly assigned to that unregulated company. The second type is APUC’s costs that directly benefit a particular regulated company, which are directly assigned to that regulated company. The third type are APUC’s remaining costs that benefit the entire enterprise (both regulated and unregulated), which are allocated between regulated and unregulated company groups pursuant to CAM Table 1. Information within Table 1 includes: (a) each type of cost incurred by APUC that is to be allocated between regulated and unregulated parts of the business; (b) the factors used to allocate each type of cost between regulated and unregulated activity; (c)

(a) Costs that are directly assignable to unregulated companies

(b) Costs that are directly assignable to regulated companies

(c) Costs that benefit both unregulated and regulated operations

(d) Costs that benefit all regulated operations

Algonquin Power & Utilities Corp(APUC)

AssignedCosts (b)

AssignedCosts (a)

APUC Allocated Costs (c)

Algonquin Power (APCo)

Utility Four Factor Methodology CAM Table 2

Liberty Utilities Service Corp (LUSC)

Assigned Payroll

Costs (b)

Regulated Utilities

Liberty Utilities (Canada) Corp(LUC)

Shared Services (LABS) (c)AllocatedCosts (d)

AssignedCosts (b)

AllocatedCosts (d)

CAM Table 1

CAM Table 4 CAM Table 5

There are currently no LUSC

allocated costs.

AssignedCosts (a)

Allocated Costs (c)AssignedCosts (b)

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the rationale for selecting the factors that are used for allocation; and (d) examples of the specific allocated costs. The costs allocated to the regulated companies as a group are then reallocated to individual companies using the Utility Four-Factor allocation methodology set forth in CAM Table 2 (described below), resulting in utility-specific allocated charges from APUC. For an example of how an APUC invoice would be assigned or allocated, please see Appendix 3. Certain costs, which are incurred for the benefit of APUC’s businesses, are not allocated to any subsidiary. These include costs such as certain corporate travel and certain overheads.

3.2 Labor Services and Cost Allocation From APCo To LUC

From time to time, APCo may provide Engineering and Technical Labor to LUC or its utilities. These charges plus an allocation for corporate overheads such as rent, materials/supplies, etc. are capitalized and directly charged to the relevant utility. From time to time, APCo employees may provide administrative support to LUC or its utilities. These charges are direct charged using time sheets.

4. SCOPE OF SERVICES PROVIDED BY LUC TO ITS SUBSIDIARIES, APUC AND APCO, AND HOW THOSE COSTS ARE DISTRIBUTED

Each distribution utility can be assigned and/or allocated costs from APUC, LUC and LUSC. This section provides an overview of the services and the cost methodology for LUC.

4.1 Overview of LUC Services and Costs Please refer to Figure 2 for a diagram of the various flows of costs that may arise from each affiliate, including LUC. As illustrated in Figure 2, LUC incurs three types of costs that are passed on to other direct or indirect subsidiaries. The first type is an LUC cost that directly benefits a particular regulated company, which is directly assigned to that regulated

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company. The second type is an LUC cost that benefits all of the regulated companies, which is allocated using the Utility Four-Factor Methodology described in CAM Table 2. Both of these cost types are described in section 4.2 below. The third type of costs arising from LUC are those from shared services6 that benefit both the regulated group of companies and the unregulated group of companies within the Liberty / Algonquin family, which are allocated between the two groups pursuant to the methodology described in section 4.3 and as set forth in CAM Table 4.

4.2 LUC Services and Costs Provided to Utilities LUC provides its regulated utilities with the following services: accounting, administration, corporate finance, human resources (including training and development), information technology, rates and regulatory affairs, environment, health, safety, and security, customer service, procurement, risk management, legal, and utility planning. The following are examples of some of the services provided: (i) budgeting, forecasting, and financial reporting services including preparation of reports and preservation of records, cash management (including electronic fund transfers, cash receipts processing, managing short-term borrowings and investments with third parties); (ii) development of customer service policies and procedures; (iii) development of human resource policies and procedures; (iv) selection of information systems and equipment for accounting, engineering, administration, customer service, emergency restoration and other functions and implementation thereof; (v) development, placement and administration of insurance coverages and employee benefit programs, including group insurance and retirement annuities, property inspections and valuations for insurance; (vi) purchasing services including preparation and analysis of product specifications, requests for proposals and similar solicitations; and vendor and vendor-product evaluations; (vii) energy procurement oversight and load forecasting; and (viii) development of regulatory strategy. LUC will assign costs that can be directly attributable to a specific utility. These include direct labor and direct non-labor costs. However, the indirect LUC costs cannot be directly attributed to an individual utility. LUC allocates its indirect

6 As discussed later, LUC costs that benefit both regulated and unregulated businesses are incurred within Liberty

Algonquin Business Services (“LABS”), which is a business unit within LUC that serves both regulated and

unregulated entities.

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labor and indirect non-labor costs, including capital costs, to its regulated utilities using a Utility Four-Factor Methodology. LUC uses the Utility Four-Factor Methodology to allocate costs incurred for the benefit of all of its regulated assets (“System-Wide Costs”) to all of its utilities. The Utility Four-Factor Methodology allocates costs by relative size of the utilities. The methodology used by LUC involves four allocating factors, or drivers: (1) Utility Plant; (2) Total Customers; (3) Non-Labor Expenses; and (4) Labor, with each factor assigned an equal weight, as shown in Table 2 below.

Table 2: Utility Four-Factor Methodology Factors and Weightings

Factor Weight

Utility Plant 25%

Customer Count 25%

Non-Labor Expenses 25%

Labor 25%

Total 100%

LUC also uses the Utility Four-Factor Methodology to allocate to its regulated utilities the system-wide indirect labor and indirect non-labor costs allocated to LUC from APUC. Table 3 provides a simplified hypothetical example to demonstrate how the Utility Four-Factor Methodology would be calculated based on ownership of only two hypothetical utilities.

Table 3: Utility Four-Factor Methodology Example

Factor

Utility 1

Utility 2 Total All Utilities

Utility 1 % of Total

Factor Weight

Utility 1 Allocation

Utility Plant ($) 727 371 1098 66% 25% 17%

Customer Count (#)

6000 1000 7000 86% 25% 21%

Labor ($) 57 32 89 64% 25% 16%

Non-Labor Expenses ($)

108 41 149 72% 25% 18%

Total Allocation 72%

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As can be seen from these hypothetical numbers in Table 3, Utility 1 would be allocated 72% of the total indirect costs incurred by LUC, based on its relative size and application of the Utility Four-Factor Methodology. Utility 2 would be allocated the remaining 28%. LUC has developed and utilized this methodology to better allocate costs, recognizing that larger utilities require more time and management attention and incur greater costs than smaller ones. On occasion there may be costs which are incurred for the benefit of two or more utilities, but not all of the utilities. These costs are directly assigned to utilities as per the vendor invoice, or, if the invoice doesn’t specify a share for each utility, the Utility Four-Factor Methodology is used. In this situation, the weighting is determined by only including the utilities that benefited from the service and excluding the utilities that did not receive the service. For an example of how an LUC invoice would be assigned or allocated, please see Appendix 4.

4.3 Shared Services from LUC The third type of costs arising from LUC are those from shared services7 that benefit both the regulated group of companies and the unregulated group of companies within the Liberty / Algonquin family. Consistent with the organization practices described earlier, shared services and costs (within LUC) are assigned when they are directly attributable to a specific business unit8. Labor charges for LUC shared services staff are assigned using time sheets that depict the amount of time that is to be direct charged to either LUC or APCo. Indirect costs for services from the shared services functions that cannot be directly assigned are allocated between the regulated and unregulated business units, LUC and APCo, pursuant to the methodology set forth in CAM Tables 4a and 4b. Similar to Table 1, Tables 4a and 4b include: (a) each type of cost incurred by LUC that is to be allocated between regulated and unregulated parts of the business; (b) the factors used to allocate each type of cost between regulated and

7 Liberty Algonquin Business Services (“LABS”) is a business unit found organizationally within LUC that serves

both regulated and unregulated entities.

8 To clarify, if a LABS service is for only one specific organization, such as the unregulated generation business,

APCo, the cost will be directly charged to that business unit.

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unregulated activity; (c) the rationale for selecting the factors that are used for allocation; and (d) examples of the specific allocated costs. The costs allocated to the regulated companies as a group are then reallocated to individual companies using the Utility Four-Factor Methodology set forth in CAM Table 2, resulting in utility-specific allocated charges from LUC. For an example of how an invoice or cost within LUC’s shared services (LABS) would be assigned or allocated, please see Appendix 5. 4.3.1 Business Services and Corporate Services LUC shared services that benefit the entire company, i.e., APCo and LUC, are internally referenced under two names - Business Services and Corporate Services. The services and functions within each category are shown in the tables below9. Indirect costs from Business Services and Corporate Services are allocated using the following methodology shown in Tables 4a and 4b, respectively, which are designed to closely align the costs with the driver of the activity.

Table 4a: Summary of Corporate Allocation Method of LUC Business Services Indirect Costs


Rationale Examples

Information Technology

Number of Employees 90% O&M 10%

IT function is driven by factors which include number of employees and O&M. The larger the number of employees, the more support, software and IT infrastructure is required.

Enterprise wide support, architecture, etc. Third party fees

9 Note that the shared service functions found in Tables 4a and 4b are unchanged from those shown in Table 4 in

the prior version of the CAM. These functions have simply been reorganized into these two Tables, 4a and 4b, to

show the differentiation between Business Services and Corporate Services.

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Human Resources Number of Employees 100%

HR function is driven by number of employees. A greater number of employees requires additional HR support

HR policies, payroll processing, benefits, employee surveys

Training Number of Employees 100%

Training is directly proportional to the number of employees per function

Courses, lectures, in house training sessions by third party providers

Facilities and Building Rent

Square Footage 100%

Office space occupied accurately reflects space requirements of each subsidiary

Corporate office building

Environment, Health, Safety and Security

Number of Employees 100%

EHSS training, etc. is directly proportional to the number of employees per function

Enterprise wide programs, employee labor and related administration

Procurement O&M 50% Capital Expenditures 50%

Procurement function is based on typical proportion of expenditures

Enterprise wide support and related administration

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Table 4b: Summary of Corporate Allocation Method of LUC Corporate Services Indirect Costs

Risk Management Net Plant 33.3% Revenue 33.3% O&M 33.3%

This function is driven by factors which reflect the relative size and complexity of Risk Management - Revenues, Net Plant and O&M costs.

Software platform, fees and administration

Financial Reporting and Administration


This function is driven by factors which reflect the relative size and complexity of Financial Reporting and Admin. - Revenues, Net Plant and O&M costs.

Employee labor and related administration and third party fees

Treasury Capital Expenditures 25% O&M 50% Net Plant 25%

Treasury activity is typically guided by the amount of necessary capex/plant for each utility, and operating costs/cash flow

Third party financing, employee labor and related administration and programs

Internal Audit Net Plant 25% O&M 75%

This function is driven by factors which reflect the relative size and complexity of Internal audit activity. Larger Plant and operating costs drive of a given facility drive

Third party fees, employee labor and related administration and programs

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more activity from IA.

Communications Number of Employees 100%

Communications cost is directly proportional to the number of employees

Enterprise wide support and related administration

Legal Costs Net Plant 33.3% Number of Employees 33.3% O&M 33.3%

This function is driven by factors which include Net Plant, as typically the higher the value of plant, the more legal work it attracts; similarly, a greater number of employees are typically more indicative of larger facilities that require greater levels of attention; and O&M costs tend to be a third factor indicative of size and legal complexity.

Employee labor and related administration and programs, including third party legal

5. LIBERTY UTILITIES SERVICE CORP. Each distribution utility can be assigned and/or allocated costs from APUC, LUC and LUSC. This section provides an overview of the services and the cost methodology for LUSC. All U.S.-based utility employees are employed, or will be employed, by Liberty Utilities Service Corp. (LUSC). All employees’ costs, such as salaries, benefits, insurances etc. are to be paid by LUSC and direct charged to the company to which the employee is dedicated and performs work. Services provided from

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LUSC to each regulated utility shall be done on a time sheet basis to the extent possible. In infrequent instances where time sheeting may not be possible, the allocation factors shown in Table 5 are to be used.

Table 5: Summary of Allocation Method of LUSC Indirect Costs


Rationale Examples

Customer Care and Billing

Customer count 100%

Customer count accurately reflects the resource requirements of the Customer Care and Billing group

Customer Care and Billing employees and related administrations

IT/Tech Support Number of Employees 100%

Technical support requirements are related to the number of employees

Tech support staff, associated administration, and required software, hardware, etc.

Human Resources Number of Employees 100%

HR function is driven by number of employees. A greater number of employees requires additional HR support

HR policies, payroll processing, benefits, employee surveys

Gas Control Net Plant 100% The greater the plant, the more control required

Gas Control labor, administration, and associated programs

Legal Net Plant 33.3% Number of Employees 33.3% O&M 33.3%

Allocated based on the relative size of affiliate and employee count.

Employee labor and related administration and programs, including third party legal

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Regulatory Net Plant 33.3% Number of Employees 33.3% O&M 33.3%

Allocated based on the relative size of affiliate and employee count.

Utility-wide studies or third party costs beneficial to all utilities

Environment, Health, Safety and Security

Number of Employees 100%

EHSS training, etc. is directly proportional to the number of employees

Utility-wide programs, employee labor and related administration

Procurement O&M 50% Capital Expenditures 50%

Based on typical proportion of expenditures

Utility-wide support and related administration

Please note the allocation methodology can be adjusted based on the number of participating utilities. For example, Customer Service representatives who serve only the New Hampshire utilities will only have their indirect costs allocated, if any, based on the number of customers within New Hampshire. Labor costs associated with energy procurement are directly billed to the utilities requiring energy procurement services using timesheets.

6. CORPORATE CAPITAL APUC or LUC will make capital investments for the benefit of all the utilities or facilities it owns (examples include corporate headquarters, IT systems, etc.). All capital investments kept at the corporate level benefiting all facilities will be distributed monthly in the form of an intercompany operating expense charge that captures the depreciation expense and cost of capital associated with the assets. All costs associated to service the investment will be allocated to APCo and LUC’s utilities based on that department’s allocation where the capital investment is made. For example, if the capital investment is made in Human Resources then the allocation methodology used for Human Resources to allocate non-capital indirect costs as shown in Table 4a will be used to allocate the charge associated with the corporate capital expenditures, including the cost of capital, depreciation, property tax, operation and maintenance costs and all other associated costs. Any corporate capital charges allocated to LUC are then reallocated to individual companies using the Utility Four-Factor Methodology set forth in CAM Table 2.

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7. UPDATING ALLOCATIONS Allocation percentages10 are updated annually. These annual updates to the allocation percentages are based on the most recent audited financial statements and other actual, year-end information. The updated percentages come into effect each April 1st and are valid through to the following March 31st. These allocations percentages are also updated if an entity is either acquired or sold.

8. CAM TRAINING The oversight of the CAM is currently the responsibility of the corporate Regulatory department. Any updates or revisions are coordinated and completed by this group. The CAM, and any support material, is distributed to Finance and Regulatory staff throughout the organization at least annually. Any revisions to the CAM are distributed immediately upon finalization to this same audience. Training sessions are conducted annually to Finance, Regulatory and other affected departments. As part of the employee orientation program, new employees receive an introduction to the CAM. Further enhancements and additions to this employee training program to foster and enhance the organization’s understanding of the CAM are ongoing. For example, it is anticipated that an online training module will be created and deployed across the organization, supplemented by a self-certification process.

10 To clarify, the factors and weightings are expected to remain constant. It is the underlying information used to

calculate the allocation percentages that is updated annually, such as the most recent net plant figures, or the most

recent numbers of employees, for example.

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9. APPENDICES

APPENDIX 1 - NARUC GUIDELINES FOR COST ALLOCATIONS

Guidelines for Cost Allocations and Affiliate Transactions:

The following Guidelines for Cost Allocations and Affiliate Transactions (Guidelines) are intended to provide guidance to jurisdictional regulatory authorities and regulated utilities and their affiliates in the development of procedures and recording of transactions for services and products between a regulated entity and affiliates. The prevailing premise of these Guidelines is that allocation methods should not result in subsidization of non-regulated services or products by regulated entities unless authorized by the jurisdictional regulatory authority. These Guidelines are not intended to be rules or regulations prescribing how cost allocations and affiliate transactions are to be handled. They are intended to provide a framework for regulated entities and regulatory authorities in the development of their own policies and procedures for cost allocations and affiliated transactions. Variation in regulatory environment may justify different cost allocation methods than those embodied in the Guidelines. The Guidelines acknowledge and reference the use of several different practices and methods. It is intended that there be latitude in the application of these guidelines, subject to regulatory oversight. The implementation and compliance with these cost allocations and affiliate transaction guidelines, by regulated utilities under the authority of jurisdictional regulatory commissions, is subject to Federal and state law. Each state or Federal regulatory commission may have unique situations and circumstances that govern affiliate transactions, cost allocations, and/or service or product pricing standards. For example, The Public Utility Holding Company Act of 1935 requires registered holding company systems to price "at cost" the sale of goods and services and the undertaking of construction contracts between affiliate companies. The Guidelines were developed by the NARUC Staff Subcommittee on Accounts in compliance with the Resolution passed on March 3, 1998 entitled "Resolution Regarding Cost Allocation for the Energy Industry" which directed the Staff Subcommittee on Accounts together with the Staff Subcommittees on Strategic Issues and Gas to prepare for NARUC's consideration, "Guidelines for Energy Cost Allocations." In addition, input was requested from other industry parties.

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Various levels of input were obtained in the development of the Guidelines from the Edison Electric Institute, American Gas Association, Securities and Exchange Commission, the Federal Energy Regulatory Commission, Rural Utilities Service and the National Rural Electric Cooperatives Association as well as staff of various state public utility commissions. In some instances, non-structural safeguards as contained in these guidelines may not be sufficient to prevent market power problems in strategic markets such as the generation market. Problems arise when a firm has the ability to raise prices above market for a sustained period and/or impede output of a product or service. Such concerns have led some states to develop codes of conduct to govern relationships between the regulated utility and its non-regulated affiliates. Consideration should be given to any "unique" advantages an incumbent utility would have over competitors in an emerging market such as the retail energy market. A code of conduct should be used in conjunction with guidelines on cost allocations and affiliate transactions. A. DEFINITIONS 1. Affiliates - companies that are related to each other due to common ownership or control. 2. Attestation Engagement - one in which a certified public accountant who is in the practice of public accounting is contracted to issue a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party. 3. Cost Allocation Manual (CAM) - an indexed compilation and documentation of a company's cost allocation policies and related procedures. 4. Cost Allocations - the methods or ratios used to apportion costs. A cost allocator can be based on the origin of costs, as in the case of cost drivers; cost-causative linkage of an indirect nature; or one or more overall factors (also known as general allocators). 5. Common Costs - costs associated with services or products that are of joint benefit between regulated and non-regulated business units. 6. Cost Driver - a measurable event or quantity which influences the level of costs incurred and which can be directly traced to the origin of the costs themselves.

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7. Direct Costs - costs which can be specifically identified with a particular service or product. 8. Fully Allocated costs - the sum of the direct costs plus an appropriate share of indirect costs. 9. Incremental pricing - pricing services or products on a basis of only the additional costs added by their operations while one or more pre-existing services or products support the fixed costs. 10. Indirect Costs - costs that cannot be identified with a particular service or product. This includes but not limited to overhead costs, administrative and general, and taxes. 11. Non-regulated - that which is not subject to regulation by regulatory authorities. 12. Prevailing Market Pricing - a generally accepted market value that can be substantiated by clearly comparable transactions, auction or appraisal. 13. Regulated - that which is subject to regulation by regulatory authorities. 14. Subsidization - the recovery of costs from one class of customers or business unit that are attributable to another. B. COST ALLOCATION PRINCIPLES The following allocation principles should be used whenever products or services are provided between a regulated utility and its non-regulated affiliate or division. 1. To the maximum extent practicable, in consideration of administrative costs, costs should be collected and classified on a direct basis for each asset, service or product provided. 2. The general method for charging indirect costs should be on a fully allocated cost basis. Under appropriate circumstances, regulatory authorities may consider incremental cost, prevailing market pricing or other methods for allocating costs and pricing transactions among affiliates.

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3. To the extent possible, all direct and allocated costs between regulated and non-regulated services and products should be traceable on the books of the applicable regulated utility to the applicable Uniform System of Accounts. Documentation should be made available to the appropriate regulatory authority upon request regarding transactions between the regulated utility and its affiliates.

4. The allocation methods should apply to the regulated entity's affiliates in order to prevent subsidization from, and ensure equitable cost sharing among the regulated entity and its affiliates, and vice versa. 5. All costs should be classified to services or products which, by their very nature, are either regulated, non-regulated, or common to both. 6. The primary cost driver of common costs, or a relevant proxy in the absence of a primary cost driver, should be identified and used to allocate the cost between regulated and non-regulated services or products. 7. The indirect costs of each business unit, including the allocated costs of shared services, should be spread to the services or products to which they relate using relevant cost allocators. C. COST ALLOCATION MANUAL (NOT TARIFFED) Each entity that provides both regulated and non-regulated services or products should maintain a cost allocation manual (CAM) or its equivalent and notify the jurisdictional regulatory authorities of the CAM's existence. The determination of what, if any, information should be held confidential should be based on the statutes and rules of the regulatory agency that requires the information. Any entity required to provide notification of a CAM(s) should make arrangements as necessary and appropriate to ensure competitively sensitive information derived therefrom be kept confidential by the regulator. At a minimum, the CAM should contain the following: 1. An organization chart of the holding company, depicting all affiliates, and regulated entities. 2. A description of all assets, services and products provided to and from the regulated entity and each of its affiliates.

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3. A description of all assets, services and products provided by the regulated entity to non-affiliates. 4. A description of the cost allocators and methods used by the regulated entity and the cost allocators and methods used by its affiliates related to the regulated services and products provided to the regulated entity. D. AFFILIATE TRANSACTIONS (NOT TARIFFED) The affiliate transactions pricing guidelines are based on two assumptions. First, affiliate transactions raise the concern of self-dealing where market forces do not necessarily drive prices. Second, utilities have a natural business incentive to shift costs from non-regulated competitive operations to regulated monopoly operations since recovery is more certain with captive ratepayers. Too much flexibility will lead to subsidization. However, if the affiliate transaction pricing guidelines are too rigid, economic transactions may be discouraged. The objective of the affiliate transactions' guidelines is to lessen the possibility of subsidization in order to protect monopoly ratepayers and to help establish and preserve competition in the electric generation and the electric and gas supply markets. It provides ample flexibility to accommodate exceptions where the outcome is in the best interest of the utility, its ratepayers and competition. As with any transactions, the burden of proof for any exception from the general rule rests with the proponent of the exception. 1. Generally, the price for services, products and the use of assets provided by a regulated entity to its non-regulated affiliates should be at the higher of fully allocated costs or prevailing market prices. Under appropriate circumstances, prices could be based on incremental cost, or other pricing mechanisms as determined by the regulator. 2. Generally, the price for services, products and the use of assets provided by a non-regulated affiliate to a regulated affiliate should be at the lower of fully allocated cost or prevailing market prices. Under appropriate circumstances, prices could be based on incremental cost, or other pricing mechanisms as determined by the regulator. 3. Generally, transfer of a capital asset from the utility to its non-regulated affiliate should be at the greater of prevailing market price or net book value, except as

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otherwise required by law or regulation. Generally, transfer of assets from an affiliate to the utility should be at the lower of prevailing market price or net book value, except as otherwise required by law or regulation. To determine prevailing market value, an appraisal should be required at certain value thresholds as determined by regulators. 4. Entities should maintain all information underlying affiliate transactions with the affiliated utility for a minimum of three years, or as required by law or regulation. E. AUDIT REQUIREMENTS 1. An audit trail should exist with respect to all transactions between the regulated entity and its affiliates that relate to regulated services and products. The regulator should have complete access to all affiliate records necessary to ensure that cost allocations and affiliate transactions are conducted in accordance with the guidelines. Regulators should have complete access to affiliate records, consistent with state statutes, to ensure that the regulator has access to all relevant information necessary to evaluate whether subsidization exists. The auditors, not the audited utilities, should determine what information is relevant for a particular audit objective. Limitations on access would compromise the audit process and impair audit independence. 2. Each regulated entity's cost allocation documentation should be made available to the company's internal auditors for periodic review of the allocation policy and process and to any jurisdictional regulatory authority when appropriate and upon request. 3. Any jurisdictional regulatory authority may request an independent attestation engagement of the CAM. The cost of any independent attestation engagement associated with the CAM, should be shared between regulated and non-regulated operations consistent with the allocation of similar common costs. 4. Any audit of the CAM should not otherwise limit or restrict the authority of state regulatory authorities to have access to the books and records of and audit the operations of jurisdictional utilities. 5. Any entity required to provide access to its books and records should make arrangements as necessary and appropriate to ensure that competitively sensitive information derived therefrom be kept confidential by the regulator.

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F. REPORTING REQUIREMENTS 1. The regulated entity should report annually the dollar amount of non-tariffed transactions associated with the provision of each service or product and the use or sale of each asset for the following: a. Those provided to each non-regulated affiliate. b. Those received from each non-regulated affiliate. c. Those provided to non-affiliated entities. 2. Any additional information needed to assure compliance with these Guidelines, such as cost of service data necessary to evaluate subsidization issues, should be provided. Source: http://www.naruc.org/Publications/Guidelines%20for%20Cost%20Allocations%20and%20Affiliate%20Transactions.pdf

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APPENDIX 2 – DETAILED EXPLANATION OF APUC COSTS

1. APUC STRATEGIC MANAGEMENT COSTS

Strategic management decisions are critical for any public utility. The need for strategic management is even more pronounced for APUC as a publicly traded company, which depends on access to capital funding through public sales of units. APUC seeks to hire talented strategic managers that aid in running each facility owned by the company as efficiently and effectively as possible. This ensures the long term health of each utility and ensures that rates are kept as low as possible without compromising the level of service. It also facilitates each regulated utility’s access to necessary capital funding at reduced costs. The costs included in Strategic Management Costs fall into the following categories.

a. Board of Directors

The Board of Directors provides strategic oversight on all company affairs including high level approvals of strategy, operation and maintenance budgets, capital budgets, etc. In addition, the Board of Directors provides corporate governance and ensures that capital and costs are incurred prudently, which ultimately protects ratepayers.

b. General Legal Services

General legal services involve legal matters not specific to any single facility, including review of audited financial statements, annual information filings, Sedar filings, review of contracts with credit facilities, incorporation, tax issues of a legal nature, market compliance, and other similar legal costs. These legal services are required in order for APUC to provide capital funding to individual utilities, without which the utilities could not provide adequate service. Additionally, the services ensure that APUC’s subsidiaries remain compliant in all aspects of operations and prevent those entities from being exposed to unnecessary risks.

c. Professional Services

Professional Services including strategic plan reviews, capital market advisory services, ERP System maintenance, benefits consulting, and other similar professional services. By providing these services at a parent level, the subsidiaries are able to benefit from economies of scale. Additionally, some of these services improve APUC’s access to capital which benefits all of its subsidiaries.

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2. ACCESS TO CAPITAL MARKETS

One of APUC’s primary functions is to ensure its subsidiaries have access to quality capital. APUC is listed on the Toronto Stock Exchange, a leading financial market. In order to allow its subsidiaries to have continued access to those capital markets, APUC incurs the following costs. These services and costs are a prerequisite to the subsidiaries continued access to those capital markets.

a. License and Permit Fees In connection with APUC’s participation in the Toronto Stock Exchange, APUC incurs certain license and permit fees such as Sedar fees, annual filing fees, licensing fees, etc. These licensing and permit fees are required in order to sell units on the Toronto Stock Exchange, which in turn provides funding for utility operations.

b. Escrow Fees

In connection with the payment of dividends to unit holders, APUC incurs escrow fees. Escrow fees are incurred to ensure continued access to capital and ensure continuing and ongoing investments by shareholders. Without such escrow fees, APUC’s subsidiaries would not have a readily available source of capital funding.

c. Unit Holder Communications Unit holder communication costs are incurred to comply with filing and regulatory requirements of the Toronto Stock Exchange and meet the expectations of shareholders. These costs include items such as news releases and unit holder conference calls. In the absence of shareholder communication costs, investors would not invest in the units of APUC, and in turn, APUC would not have capital to invest in its subsidiaries. With such communications services, the subsidiaries would not have a readily available source of capital funding.

3. APUC FINANCIAL CONTROLS Financial control costs incurred by APUC include costs for audit services and tax services. These costs are necessary to ensure that the subsidiaries are operating in a manner that meets audit standards and regulatory requirements, which have strong financial and operational controls, and financial transactions are recorded

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accurately and prudently. Without these services, the regulated utilities would not have a readily available source of capital funding.

a. Audit Fees

Audits are done on a yearly basis and reviews are performed quarterly on all facilities owned by APUC on an aggregate level. These corporate parent level audits reduce the cost of the stand-alone audits significantly for utilities which must perform its own separate audits. Where stand-alone audits are not required, ratepayers receive benefits of additional financial rigor, as well as access to capital, and financial soundness checks by third parties. Finally, during rate cases, the existence of audits provides staff and intervenors additional reliance on the company records, thus reducing overall rate case costs. The aggregate audit is necessary for the regulated utilities to have continued access to capital markets and unit holders.

b. Tax Services

Taxes are paid on behalf of the regulated utilities at the parent level as part of a consolidated United States tax return. Tax services such as planning and filing are provided by third parties. Filing tax returns on a consolidated basis benefits each regulated utility by reducing the costs that otherwise would be incurred by such utility in filing its own separate tax return.

4. APUC ADMINISTRATIVE COSTS Finally, administrative costs incurred by APUC such as rent, depreciation of office furniture, depreciation of computers, and general office costs are required to house all the services mentioned above. Without these administrative costs, the employees of APUC could not perform their work and provide the necessary services to the regulated utilities. These administrative costs also include training for corporate employees.

LU 000275


Page 31 of 33

APPENDIX 3 – LIFE OF AN APUC INVOICE A schematic is provided below showing the trail of an invoice received by APUC for services to be charged to its subsidiaries. The schematic is intended to visually explain the distribution of charges from APUC to APCo and Liberty Utilities companies.

APUC Invoice

Direct Charge?

Yes

No

Specific Entity?

Indirect Corporate Costs

Liberty UtilitiesAPCo

Water, Electric & Gas Utilities

Direct Charge Specific Entity

APUC Factors / Driver Table 1

LUC Factors / Driver Table 2

Yes

LU 000276


Page 32 of 33

APPENDIX 4 – LIFE OF A LIBERTY UTILITIES INVOICE A schematic is provided below showing the trail of an invoice received by Liberty Utilities (LUC) for services to be charged to its subsidiaries. The schematic is intended to visually explain the distribution of charges from LUC to Liberty Utilities companies.

LUC Invoice

Direct Charge?

Yes

No

Specific Entity?





Yes

LU 000277


Page 33 of 33

APPENDIX 5 – LIFE OF A SHARED SERVICES INVOICE A schematic is provided below showing the trail of an invoice for shared services provided within Liberty Utilities for services to be charged to affiliates and subsidiaries. The schematic is intended to visually explain the distribution of charges from shared services to APCo and Liberty Utilities companies.

Shared Service Invoice

Direct Charge?

Yes

No

Specific Entity?


Liberty UtilitiesAPCo



LUC Factors / Driver Table 4a & 4b


Yes

LU 000278


APPLICATION OF LIBERTY UTILITIES (WOODMARK SEWER) CORP. AND LIBERTY UTILITIES (TALL TIMBERS SEWER) CORP. (CCN NOS. 20679 AND 20694) TO CHANGE RATES FOR SEWER SERVICE IN SMITH COUNTY, TEXAS

§§§§§§§§


COMMISSION OF TEXAS


OF

BRUCE H. FAIRCHILD

ON BEHALF OF

LIBERTY UTILITIES (WOODMARK SEWER) CORP. AND

LIBERTY UTILITIES (TALL TIMBERS SEWER) CORP.

September 2, 2016

LU 000279


BRUCE H. FAIRCHILD

TABLE OF CONTENTS

SECTION PAGE

I. INTRODUCTION ...................................................................................................1 A. Qualifications ...............................................................................................1 B. Purpose .........................................................................................................2 C. Summary of Conclusions .............................................................................5

II. OVERVIEW ............................................................................................................7A. Woodmark and Tall Timbers .......................................................................7 B. Preparing the Application ............................................................................9 C. Financial and Operating Information .........................................................11 D. Consolidated Tariff ....................................................................................14

III. NARUC ACCOUNT RATE SCHEDULES ..........................................................15A. O&M and A&G Expenses .........................................................................17 B. Taxes Other than Income ...........................................................................19 C. Depreciation Expense ................................................................................20 D. Rate Base ...................................................................................................21 E. Return on Investment .................................................................................24 F. Income Taxes .............................................................................................25 G. Rates ...........................................................................................................26

IV. RATE FILING PACKAGE SCHEDULES ...........................................................27

V. SECOND STEP TWO RATE INCREASE ...........................................................30

VI. SCHEDULES ...................................................................................................... 37

ATTACHMENTS

BHF-1 Resume of Bruce H. Fairchild

BHF-2 Bruce H. Fairchild Summary of Testimony Before Regulatory Agencies

BHF-3 Income Statements and Balance Sheets for Woodmark and Tall Timbers Systems for Test Year Ended December 31, 2015

BHF-4 Bruce H. Fairchild Workpapers

LU 000280

1

DIRECT TESTIMONY OF BRUCE H. FAIRCHILD

ON BEHALF OF

LIBERTY UTILITIES (WOODMARK SEWER) CORP. AND

LIBERTY UTILITIES (TALL TIMBERS SEWER) CORP.

I. INTRODUCTION


A. Bruce H. Fairchild, 3907 Red River, Austin, Texas 78751. 2

3

Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT POSITION? 4

A. I am a principal in Financial Concepts and Applications, Inc. (“FINCAP”), a firm 5

engaged in financial, economic, and policy consulting to business and government. 6

A. Qualifications

Q. DESCRIBE YOUR EDUCATIONAL BACKGROUND, PROFESSIONAL 7

QUALIFICATIONS, AND PRIOR EXPERIENCE. 8

A. I hold a BBA degree in accounting and finance from Southern Methodist University, an 9

MBA in finance and accounting from the University of Texas at Austin, and a PhD 10

degree in finance, accounting, and economics from the University of Texas at Austin. I 11

am also a Certified Public Accountant. My previous employment includes working in the 12

Controller’s Department at Sears, Roebuck and Company and serving as Assistant 13

Director of Economic Research at the Public Utility Commission of Texas (“PUCT”). I 14

have also been on the business school faculties at the University of Colorado at Boulder 15

and the University of Texas at Austin, where I taught undergraduate and graduate courses 16

in finance and accounting. 17

LU 000281

2

Q. BRIEFLY DESCRIBE YOUR EXPERIENCE IN UTILITY-RELATED 1

MATTERS. 2

A. While at the PUCT, I assisted in managing a division comprised of approximately 3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

twenty-five professionals responsible for financial analysis, cost allocation and rate

design, economic and financial research, and data processing systems. I testified on

behalf of the PUCT staff in numerous cases involving most major investor-owned and

cooperative electric, telephone, and water/sewer utilities in the state regarding a variety of

financial, accounting, and economic issues. Since forming FINCAP in 1979, I have

participated in a wide range of analytical assignments involving utility-related matters on

behalf of utilities, industrial consumers, municipalities, and regulatory commissions. I

have also prepared and presented expert testimony before a number of regulatory

authorities addressing revenue requirements, cost allocation, and rate design issues for

gas, electric, telephone, and water/sewer utilities. I have been a frequent speaker at

regulatory conferences and seminars and have published research concerning various

regulatory issues. A resume that contains the details of my experience and qualifications

is attached as BHF-1, with BHF-2 listing my prior testimony before regulatory agencies

since leaving the PUCT.

18

B. Purpose

Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY? 19

A. I was retained by Liberty Utilities (Sub) Corp. (“Liberty”) to assist in preparing 20

applications for changes in the sewer rates of Liberty Utilities (Woodmark Sewer) Corp. 21

(“Woodmark”) and Liberty Utilities (Tall Timbers Sewer) Corp. (“Tall Timbers”), 22

LU 000282

3

including completing the schedules contained in the PUCT’s Class B Rate/Tariff Change 1

Application (“Rate Filing Package”). The purpose of my testimony is to describe my 2

various analyses and the data being provided in support of the sewer rates being 3

requested in this case, including a second-step increase. 4

5

Q. HOW ARE A UTILITY’S RATES USUALLY DEVELOPED? 6

A. A utility’s rates are customarily based on its costs of providing service, including a fair 7

return on invested capital. Representative levels of the various components comprising a 8

utility’s cost of providing service—operation and maintenance expenses (“O&M”), 9

administrative and general expenses (“A&G”), taxes other than income (e.g., payroll and 10

property taxes), depreciation expense, return on invested capital (calculated as a 11

percentage rate of return applied to rate base), and income taxes—are determined and 12

then summed to calculate revenue requirements. These revenue requirements are then 13

divided by representative billing determinants to calculate unit rates that are included in a 14

utility’s tariff. 15

16

Q. HOW ARE REPRESENTATIVE LEVELS OF THE COMPONENTS OF A 17

UTILITY’S COST OF PROVIDING SERVICE USUALLY MEASURED? 18

A. In most jurisdictions, including Texas, the determination of a utility’s revenue 19

requirements begins with a historical period, which serves as a “test year”. Actual 20

financial and customer billing data from the utility’s books and records during the test 21

period provide a starting point. This actual financial and customer billing data are often 22

modified to account for unusual or non-recurring items, abnormal conditions, or 23

subsequent information through adjustments referred to as “normalizing” or “known and 24

LU 000283

4

measurable change” adjustments to the test year. While some adjustments will increase 1

and others decrease the amounts recorded on the utility’s books and records in the test 2

year, the ultimate objective is to develop levels of operating expenses, invested capital, 3

capital costs, and billing determinants that are matched and representative of those that 4

are expected to prevail when the rates being set will be in effect. 5

6

Q. HAVE YOU DEVELOPED THE REQUESTED RATES FOR THE TALL 7

TIMBERS AND WOODMARK SYSTEMS IN THIS MANNER? 8

A. Yes, for the first phase, or step, of requested rates requested. As will be discussed 9

subsequently, both the Woodmark and Tall Timbers systems are owned, managed, and 10

operated by Liberty. The first phase of the requested sewer rates are based on operating 11

expenses, invested capital, capital costs, and billing determinants recorded on 12

Woodmark’s and Tall Timbers’ books and records for calendar year 2015. As will be 13

explained subsequently, only a few adjustments were made to test year data, both because 14

the test year was judged reasonably representative of ongoing conditions, as well as to 15

minimize controversy and the cost of processing this case. 16

17

Q. HAVE YOU DEVELOPED THE SECOND-STEP REQUESTED RATES? 18

A. Yes. As provided for in the Commission’s rules, a second-step increase in rates is being 19

requested for the Woodmark and Tall Timbers systems to reflect the additional operating 20

and capital costs associated with three projects, all of which are necessary to achieve 21

compliance with Texas Commission on Environmental Quality (“TCEQ”) regulations 22

and one also being required by the Texas Department of Transportation (“TxDOT”). 23

This second-step rate increase is intended to eliminate the requirement that a subsequent 24

LU 000284

5

rate application be filed, thus saving the utilities, their customers, and the Commission 1

the time and expenses of another rate case. 2

C. Summary of Conclusions

Q. WHAT FIRST PHASE SEWER RATES ARE BEING REQUESTED FOR THE 3

WOODMARK AND TALL TIMBERS SYSTEMS? 4

A. Woodmark and Tall Timbers are proposing to consolidate the rates for their systems, 5

which are substantially similar in terms of facilities, quality of service, and cost of 6

service, because the combined operation of certain facilities would result in economies 7

and efficiencies to both systems. The current rates of each system are tied to a “base 8

equivalent rate” (“BER”), which is essentially the monthly rate for standard residential 9

service and the rates of other customer classes being multipes of the BER. Woodmark 10

and Tall Timbers are requesting a first-step BER for the combined systems of $76.54, 11

which compares with current BERs outside the City of Tyler and $66.92 and $56.18, 12

respectively, and a BER inside Tyler of $27.75. The requested BER of $76.54 is based on 13

annual net revenue requirements (or cost of service) of $3,719,747, which consist of the 14

following components: 15

LU 000285

6

Description Amounts O&M and A&G Expenses $ 1,983,847 Taxes Other than Income 208,074 Depreciation Expense 735,146 Invested Capital $ 7,076,376 Rate of Return 8.60% Return on Invested Capital 608,356 Income Taxes 270,993 Other Revenues (86,668) Revenue Requirements $ 3,719,747 Billing Units 48,600 Requested BER $ 76.54

Q. WHAT SECOND-STEP SEWER RATES ARE WOODMARK AND TALL 1

TIMBERS REQUESTING? 2

A. Woodmark and Tall Timbers are requesting a second-step BER for the combined systems 3

of $96.38. This is an increase in the BER of $19.84, which is based on the following 4

operating and capital costs for the expansion of the Woodmark wastewater treatment 5

plant: 6

Description Amounts O&M Expenses $ 53,109 Taxes Other than Income 94,293 Depreciation Expense 223,238 Invested Capital $4,779,218 Rate of Return 8.60% Return on Invested Capital 410,489 Income Taxes 183,022 Total $ 964,151 Billing Units 48,600 Requested BER Increase $ 19.84

LU 000286

7

II. OVERVIEW

Q. WHAT IS THE PURPOSE OF THIS SECTION? 1

A. The purpose of this section is to describe briefly the Woodmark and Tall Timbers 2

systems, Liberty Utilities, and its parent. I will also describe how I went about 3

assembling and preparing the attached Schedules 1 through 9 and the various schedules 4

in the Rate Filing Package. 5

A. Woodmark and Tall Timbers

Q. BRIEFLY DESCRIBE THE WOODMARK AND TALL TIMBERS SYSTEMS. 6

A. The Woodmark and Tall Timbers systems provide sewer service in east Texas. Most of 7

their customers are located in unincorporated rural areas, except for a small portion of 8

Tall Timbers’ service area, which is within the city limits of Tyler. Woodmark serves 9

approximately 1,660 primarily residential customers, while Tall Timbers serves 10

approximately 2,079 residential and commercial customers. As will be explained in more 11

detail subsequently, neither Woodmark nor Tall Timbers has any employees, with both 12

systems being owned, managed, and operated directly or indirectly by Liberty. 13

14

Q. PLEASE DESCRIBE LIBERTY UTILTITIES CO. 15

A. Liberty Utilities Co. is a Delaware corporation that operates regulated gas, water, sewer 16

and electric utilities in eleven states —Arizona, Arkansas, California, Iowa, Illinois, 17

Missouri, Montana, Georgia, Massachusetts, New Hampshire, and Texas. Liberty 18

Utilities Co. is a wholly owned subsidiary of Liberty Utilites (Canada) Corp. (“Liberty 19

Utilities Canada”). Woodmark and Tall Timbers are wholly owned by Liberty Utilities 20

(Sub) Corp., which in turn is wholly owned by Liberty Utilities Co. All of the Liberty 21

LU 000287

8

Utilities entities, including Woodmark and Tall Timbers, are ultimately owned by 1

Algonquin Power & Utilities Corp. (“APUC”). 2

3

Q. PLEASE DESCRIBE APUC. 4

A. APUC is a $4.1 billion electric generation, transmission and distribution utility company 5

based in Oakville, Ontario. Its stock is listed on the Toronto Stock Exchange and is a 6

registrant with the U.S. Security and Exchange Commission. APUC subsidiaries own and 7

operate regulated utilities in the United States, and own non-regulated generation 8

facilities and regulated electric transmission and natural gas pipelines throughout the 9

United States and Canada. The distribution business group operates in the United States 10

as Liberty Utilities and provides rate regulated water, wastewater, electricity, and natural 11

gas utility services to nearly half a million customers. The electric generation business 12

group operates as Algonquin Power Co. and owns or has interests in a portfolio of North 13

American based contracted wind, solar, hydroelectric and natural gas powered generating 14

facilities representing more than 1,150 MW of installed capacity. The transmission 15

business group invests in rate regulated electric transmission and natural gas pipeline 16

systems in the United States and Canada. 17

18

Q. WHAT IS LIBERTY UTILITIES SERVICE CORP.? 19

A. Liberty Utilities Service Corp. (“LUSC”) is a wholly owned subsidiary of Liberty 20

Utilities Co. whose purpose is to employ and provide labor for Liberty’s regulated U.S. 21

utilities, including Woodmark and Tall Timbers. The objective of this organization is to 22

streamline the administration of employees by consolidating all of Liberty’s domestic 23

human resources activities in a single entity. All of the costs of employees, including 24

LU 000288

9

salaries, benefits, insurance, and taxes are paid by LUSC and then directly charged, to the 1

extent possible, to the utility for which the employee performs the work. 2

B. Preparing the Application

Q. HOW DID YOU GO ABOUT OBTAINING THE DATA USED AS THE BASIS 3

FOR THIS RATE APPLICATION? 4

A. I requested that Woodmark and Tall Timbers provide me with their December 31, 2015 5

trial balances prepared in accordance with the National Association of Regulatory Utility 6

Commissioners (“NARUC”) Uniform System of Accounts, as required by 16 Tex. 7

Admin. Code Section 24.72 (“TAC”). These trial balances reflect the revenues, 8

expenses, assets, liabilities, and equity of Woodmark and Tall Timbers systems for the 9

test year recorded in their proper NARUC accounts. I also obtained monthly billing 10

records for each utility for the purpose of determining billing units with which to develop 11

specific rates. 12

13

Q. WHAT DID YOU DO NEXT? 14

A. Having obtained test year financial and billing information from the books and records of 15

Woodmark and Tall Timbers, I next obtained the Instructions for the Rate/Tariff Change 16

Application for Class B Investor-owned Utilities – Water and/or Sewer (“Instructions”) 17

and the Rate Filing Package from the Commission’s website. 18

19

Q. DID YOU EXPERIENCE ANY TROUBLE COMPLETING THE SCHEDULES IN 20

THE RATE FILING PACKAGE? 21

LU 000289

10

A. Yes. According to the Instructions, the Rate Filing Package is to be used by both water 1

and sewer utilities, but upon review it is principally designed for water, not sewer, 2

utilities. For example, the schedules calling for the breakdown of expenses between 3

volume and non-volume related expenses, meter sizes, water production, and pass-4

through expenses generally do not apply to sewer utilities, and it was unclear which 5

schedules could be ignored without risking a non-compliance finding. Second, the 6

different schedules in the Rate Filing Package identify revenues, expenses, and plant by 7

NARUC water account number, many of which do not correlate to NARUC sewer 8

account numbers. Therefore, it was not clear on which schedules the different sewer 9

accounts are to be reported. Third, the Rate Filing Package appears to be designed for a 10

small “Mom and Pop” utility, where there are just a few employees, and plant items are 11

readily identifiable and maintained on an asset-by-asset basis. It is not well suited for a 12

large, professionally managed and operated utility with multiple systems, where most 13

operating and administrative functions are performed centrally and allocated to individual 14

utilities, and where plant accounting is maintained more on a group basis following 15

NARUC plant instructions. 16

17

Q. HOW THEN DID YOU GO ABOUT COMPLETING THE SCHEDULES IN THE 18

RATE FILING PACKAGE? 19

A. Because not all regulatory commissions have standardized rate filing packages (e.g., the 20

Texas Railroad Commission), I have had occasion to develop a general set of schedules 21

that present and develop revenue requirements and rates based on accounting records 22

maintained using NARUC systems of accounts. Accordingly, I initially took the test year 23

financial and operating data for the Woodmark and Tall Timbers systems and entered this 24

LU 000290

11

information into this general rate format. This process organized the basic test year 1

information, which I then used to complete the Rate Filing Package schedules as best as I 2

could. 3

C. Financial and Operating Information

Q. HOW ARE THE WOODMARK AND TALL TIMBERS SYSTEMS OPERATED? 4

A. The day-to-day business operations of the Woodmark and Tall Timbers systems are 5

handled by employees that live and work in east Texas. These local operations are 6

supported by strategic management and administrative support services provided 7

centrally from Liberty, Liberty Utilities Canada, and APUC. These management and 8

administrative services can be provided more cost effectively and in a manner that 9

ensures consistent quality across all of Liberty’s operating utilities by providing them on 10

a shared services basis. Through the combination of local and shared services operations, 11

customers receive high quality utility service from local employees and enjoy significant 12

benefits from centralized shared services. 13

14

Q. PLEASE EXPLAIN WHY DAY-TO-DAY OPERATIONS ARE PROVIDED BY 15

EMPLOYEES LOCATED IN EAST TEXAS. 16

A. Local decision-making and operational control is intended to achieve the highest level of 17

customer satisfaction and maintain strong regulatory compliance. The needs of customers 18

can best be met when the people making the decisions affecting the communities they 19

serve are located near those customers and are in regular, close contact with customers. 20

Each state has a President (e.g., Matthew Garlick), who directs the utilities in that state, 21

LU 000291

12

with the state presidents having full local decision-making authority and responsibility, 1

including operational and financial authority. 2

3

Q. PLEASE EXPLAIN WHY MANAGEMENT AND ADMINISTRATIVE 4

FUNCTIONS ARE PROVIDED BY CENTRALIZED SHARED SERVICES 5

GROUPS. 6

A. Centralizing and sharing management and administrative function achieves economies of 7

scale that allow Liberty to provide quality service at a reasonable price. If Woodmark and 8

Tall Timbers were stand-alone utilities, they would have to hire and pay full time 9

engineering staff, human resources, safety and rates personnel, repair and maintenance 10

staff accounting and billing staff, and customer service and management, all of which 11

would have to be included in rates. Additionally, centralized and shared services allow 12

Woodmark and Tall Timbers access to personnel with experience and subject matter 13

expertise. For example, engineers are able to focus on capital improvements and 14

maintenance of the existing systems, billing clerks focus on getting bills out and 15

payments in, and customer service handles customer inquiries. This shared services 16

model provides these utilities with the right people with the right skills available to do the 17

job that otherwise would not be available or unduly expensive. By sharing costs and 18

expertise over multiple entities, the costs of providing quality service to the Woodmark 19

and Tall Timbers systems are reduced, which results in lower rates for customers. 20

21

Q. WHERE ARE THE OPERATING AND CAPITAL COSTS ASSOCIATED WITH 22

THE WOODMARK AND TALL TIMBERS SYSTEMS INCURRED? 23

LU 000292

13

A. As indicated earlier, all of the employees that, directly and indirectly, operate, manage, 1

and administer the day-to-day business of the Woodmark and Tall Timbers systems are 2

employed by LUSC. Meanwhile, the source of the capital for the utility plant investment 3

and operations of the Woodmark and Tall Timbers systems is Liberty Utilities Co. 4

5

Q. HOW DOES LIBERTY KEEP TRACK OF THE COSTS INCURRED TO 6

OPERATE AND MANAGE THE WOODMARK AND TALL TIMBERS 7

SYSTEMS? 8

A. All direct costs related to each of specific utility operations, including those of the 9

Woodmark and Tall Timbers systems, are charged directly to the applicable entity. 10

Common costs are pooled and allocated among entities, including Woodmark and Tall 11

Timbers, through a central cost allocation. A detailed description of the process by which 12

operating and capital costs attributable to specific operations are accounted-for is 13

contained in the testimony presented by William R. Killeen, Director, Regulatory 14

Operations for Liberty Utilities (Canada) Corp. 15

16

Q. WHAT FINANCIAL RESULTS ARE PRODUCED UNDER THE CURRENT 17

RATES OF THE WOODMARK AND TALL TIMBERS SYSTEMS? 18

A. Income statements and balance sheets for the Woodmark and Tall Timbers systems for 19

the year ended December 31, 2015 are attached as BHF-3. As shown there and 20

summarized below, while Tall Timbers earned a nominal return in 2015, Woodmark and 21

the combined systems incurred an operating loss during 2015 at their current rates. In 22

other words, the rates currently being charged by Woodmark and Tall Timbers are 23

insufficient to even cover O&M and A&G expenses, taxes other than income, and 24

LU 000293

14

depreciation expenses of the combined systems, let alone provide a fair return on 1

investment: 2

Description Amounts Revenues: Sewer Service $ 2,709,954 Miscellaneous 86,668 Total Revenues $ 2,796,622 Expenses: O&M and A&G $ 1,981,213 Depreciation Expense 679,596 Taxes Other than Income 172,327 Total Expenses 2,833,137 Operating Income (Loss) $ (36,515)

Clearly, the rates for the Woodmark and Tall Timbers systems need to be increased. 3

D. Consolidated Tariff

Q. WHY ARE WOODMARK AND TALL TIMBERS PROPOSING TO 4

CONSOLIDATE THEIR TARIFFS? 5

A. The certificates of convenience and necessity (“CCN”) of the Woodmark and Tall 6

Timbers systems are adjacent, with the natural slope of the ground sloping from the Tall 7

Timbers system toward the Woodmark system. Some of the sewage on the Tall Timbers 8

system is currently pumped to its wastewater treatment plant by several lift stations. If 9

the operations of the Woodmark and Tall Timbers systems were combined, there may be 10

a savings in pumping costs. Also, as will be discussed in more detail later, the Woodmark 11

wastewater treatment plant needs to be expanded to meet TCEQ regulations. A larger, 12

but proportionately less costly expansion, of the Woodmark plant would postpone the 13

need to expand the Tall Timbers plant and result in savings to the customers of both 14

systems. Finally, because Woodmark and Tall Timbers are adjacent, uniform rates on 15

LU 000294

15

both systems would avoid any impression of discrimination or unfairness between the 1

two systems. 2

3

Q. DO THE WOODMARK AND TALL TIMBERS SYSTEMS QUALIFY TO HAVE 4

A CONSOLIDATED, SINGLE TARIFF? 5

A. As described above, the Woodmark and Tall Timbers systems both have approximately 6

the same numbers of customers and provide only sewer service, with each having sewer 7

collection systems and a wastewater treatment plant. Because the Woodmark and Tall 8

Timbers systems are operated by the same employees and management applying the 9

same set of core values and operating procedures, the quality of service on both systems 10

is similar. Further, because the Woodmark and Tall Timbers systems are both operated 11

and managed by the same entities, whose costs are largely allocated between systems 12

based on the basis of the number of customers, the cost of service on the two systems are 13

substantially the same. The costs of service on the two systems would become even more 14

similar if the operations of the systems were combined to achieve the savings and 15

economies described above. 16

III. NARUC ACCOUNT RATE SCHEDULES

Q. WHAT IS THE PURPOSE OF THIS SECTION OF YOUR TESTIMONY? 17

A. As discussed earlier, the schedules in the Rate Filing Package are essentially designed for 18

small, stand-alone water utilities, and not particularly well suited to sewer systems owned 19

and operated by a large, centralized corporate entity. Accordingly, in this section, I take 20

test year financial and operating data for the Woodmark and Tall Timbers systems and 21

LU 000295

16

insert this information into a general rate format, which will subsequently be used as a 1

basis for completing the Rate Filing Package schedules. 2

3

Q. ON WHAT GENERAL RATEMAKING PRINCIPLE ARE THE SCHEDULES IN 4

THE GENERAL FORMAT PREMISED? 5

A. These general format schedules follow the conventional revenue requirements formula 6

of: 7

Revenue Requirements = Operation & Maintenance Expenses + 8 Administrative & General Expenses + Taxes Other 9 than Income + Depreciation Expense + Return 10 (Rate of Return X Rate Base) + Income Tax 11 Expense 12

The resulting revenue requirements are then essentially divided by total annual billing 13

units to calculate rates. 14

15

Q. WHAT RATE IS CALCULATED FOR THE WOODMARK AND TALL 16

TIMBERS SYSTEMS USING THE BASIC REVENUE REQUIREMENTS 17

FORMULA? 18

A. As summarized on Schedule 1, the total cost of providing sewer service on the combined 19

Woodmark and Tall Timbers systems is $3,806,415. These revenue requirements are 20

based on the adjusted results of operations during a 2015 test year, a rate base of 21

$7,076,376, and a rate of return of 8.60%. After reducing the total cost of sewer service 22

by other miscellaneous income of $86,668, the remaining $3,719,747 net cost of service 23

is divided by test year billing units of 48,600 BERs to produce a standard monthly rate of 24

$76.54. 25

LU 000296

17

A. O&M and A&G Expenses

Q. WHAT O&M AND A&G EXPENSES DID THE WOORMARK AND TALL 1

TIMBERS SYSTEM INCUR DURING THE TEST YEAR? 2

A. A breakdown by NARUC account of the O&M and A&G expenses incurred to operate, 3

4

5

6

7

8

manage, and administer the Woodmark and Tall Timbers systems during the calendar

year 2015 is presented in Schedule 2. The combined Woodmark and Tall Timbers

systems incurred total O&M and A&G expenses during the test year of $1,036,336 and

$944,877, respectively, for a total of $1,981,213. Additional breakdowns of the amounts

in each NARUC account for each system are shown in the trial balances contained in my

workpapers, which are provided as BHF-4. 9

10

Q. WERE ANY ADJUSTMENTS MADE TO TEST YEAR O&M AND A&G 11

EXPENSES? 12

A. In a typical rate case, it is customary to make a number of adjustments for known and 13

measurable changes to historical test year amounts to reflect current levels of expenses, 14

such as wages and salaries at current staffing levels, and increased operating expenses, 15

such as those due to inflation. However, discussions with management indicate that most 16

of the O&M and A&G expenses incurred during the test year are fairly representative of 17

ongoing levels. Furthermore, raising current rates to the cost of providing service during 18

the test year is a considerable rate increase. For these reasons, only a couple of 19

adjustments are made to test year O&M and A&G expenses. The first is to remove from 20

NARUC Account 766 the $6,670 amortization during the test year of expenses incurred 21

in Woodmark’s last rate case. The second adjustment is to increase bad debts expense 22

LU 000297

18

(Account 770) recorded during the test year by $9,313 to correspond to the higher 1

revenues associated with the requested rates. As shown in the right hand column on 2

Schedule 2, these adjustments increase O&M and A&G expenses a net of $2,633, to a 3

total of $1,983,847. 4

5

Q. ARE ANY OF THE O&M AND A&G EXPENSES INCLUDED IN THE ABOVE 6

TOTAL PAYMENTS TO AFFILIATES? 7

A. Yes. As noted earlier, virtually all of the O&M and A&G expenses recorded on the 8

books of Woodmark and Tall Timbers are directly or indirectly charged to them from 9

affiliated, shared services entities. However, the cost allocation methodologies described 10

by Mr. Killeen and the manner in which these direct and allocated O&M and A&G 11

expenses are calculated and charged to the Woodmark and Tall Timbers systems, satisfy 12

the PUCT’s affiliate transaction standards that the price charged is no higher than that 13

charged to other affiliates or unaffiliated entities. 14

15

Q. DO THE WOODMARK AND TALL TIMBERS SYSTEMS RECEIVE CHARGES 16

FROM AFFILIATES THAT DO NOT REFLECT ACTUAL COSTS INCURRED? 17

A. No. Although Account 734 is labeled Contractual Services – Management Fees, the 18

amounts included in this account consist of actual expenses incurred by affiliates that are 19

charged directly or allocated to the Woodmark and Tall Timbers systems. For example, 20

this account includes some $57,000 in wages and salaries, almost $4,000 in materials and 21

supplies, and $11,000 in accouting and legal support that benefit the Woodmark and Tall 22

Timbers systems. Again, Mr. Killeen addresses the manner in which these expenses are 23

incurred, and charged or allocated to the Woodmark and Tall Timbers systems. 24

LU 000298

19

1

Q. DO THE O&M AND A&G EXPENSES SHOWN ON SCHEDULE 2 INCLUDE 2

ANY IMPERMISSIBLE EXPENSES? 3

A. No. I inquired as to whether any impermissible expenditures per 16 TAC Section 4

24.31(b)(2), such as legislative advocacy, political contributions, or funds supporting 5

social, recreational, fraternal, or religious clubs or organizations, are included in test year 6

O&M or A&G expenses. I was advised that there are none. 7

8

Q. HOW DO WOODMARK AND TALL TIMBERS PROPOSE TO RECOVER 9

RATE CASE EXPENSES ASSOCIATED WITH THIS CASE? 10

A. Consistent with the Commission’s practice, Woodmark and Tall Timbers propose not to 11

include rate case expenses in the calculation of its BER. Rather, it proposes that the 12

amount and recovery process of rate case expenses be addressed separately, with allowed 13

rate case expenses being billed as a surcharge on customers’ bills until they are fully 14

recovered. 15

B. Taxes Other than Income

Q. WHAT TAXES OTHER THAN INCOME DID WOODMARK AND TALL 16

TIMBERS INCUR DURING THE TEST YEAR? 17

A. As shown in the “Per Books” columns of Schedule 3, the only taxes other than income 18

recorded for the Woodmark and Tall Timbers systems in 2015 were for ad valorem, or 19

property, taxes and Texas franchise tax expenses. 20

LU 000299

20

Q. WERE ANY ADJUSTMENTS MADE TO TEST YEAR TAXES OTHER THAN 1

INCOME? 2

A. Yes. As will be explained in more detail later, Woodmark and Tall Timbers had 3

Construction Completed not Classified (“CCNC”) at December 31, 2015 totaling 4

$952,750. Because no property taxes had been paid or accrued for this plant placed into 5

service during 2015, an adjustment to test year property tax expense is necessary. As 6

shown in footnote (a) on Schedule 3, multiplying the average test year property tax rate 7

of 1.70% times the $952,750 cost of CCNC results in additional property taxes of 8

$16,198, which when added to those recorded for the test year produces total property tax 9

expense of $179,525. Additionally, an adjustment was made to the Texas franchise tax 10

expense so that it corresponds to the requested level of revenues. As shown in footnote A 11

on Schedule 3, multiplying total revenue requirements from Schedule 1 by 70% to 12

calculate the taxable margin, and then applying the current margin tax rate of 0.75%, 13

produces Texas franchise tax expense for inclusion in the combined revenue 14

requirements of the Woodmark and Tall Timbers systems of $28,548. Combining 15

adjusted property taxes and Texas franchise taxes results in total taxes other than income 16

of $208,074. 17

C. Depreciation Expense

Q. WHAT DEPRECIATION EXPENSE WAS RECORDED ON THE BOOKS OF 18

WOODMARK AND TALL TIMBERS FOR 2015? 19

A. Schedule 4 displays the depreciation expense by NARUC plant account during the test 20

year for the Woodmark /Tall Timbers systems. Also shown there are the lives over 21

which the assets in each NARUC account are being depreciated. 22

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21

Q. WERE ANY ADJUSTMENTS MADE TO THE DEPRECIATION EXPENSE 1

BOOKED DURING THE TEST YEAR? 2

A. Yes. First, because Woodmark’s investment in Account 352 – Franchises will 3

subsequently be excluded from rate base, the $10,791 of amortization expense associated 4

with this intangible asset is also removed from depreciation expense. Second, test year 5

depreciation expense was adjusted to reflect that associated with the CCNC placed into 6

service during the test year. Specifically, additional depreciation expense of $103,716 7

was calculated based on the amount of CCNC in each plant account and its corresponding 8

life. Finally, a couple of minor errors were discovered in the depreciation expense 9

recorded for 2015. A $6,515 downward adjustment was made to NARUC Account 371 10

to correct these errors, which results in adjusted depreciation expense, net of the 11

amortization of contributions in aid of construction (“CIAC”), for the combined 12

Woodmark and Tall Timbers systems of $735,146. 13

D. Rate Base

Q. BRIEFLY SUMMARIZE THE CALCULATION OF RATE BASE. 14

A. Rate base is the amount of investment on which a utility is allowed the opportunity to 15

earn a fair rate of return. Rate base normally consists of the net investment in assets used 16

to provide service, less adjustments for non-investor supplied capital. The largest 17

component of rate base is net plant in service, which is usually the original cost of 18

property, plant, and equipment at the time it was dedicated to public use less accumulated 19

depreciation. Also included in rate base is a cash working capital allowance and other 20

working capital items, with deferred income taxes and other sources of non-investor 21

supplied capital serving to reduce rate base. 22

LU 000301

22

Q. WHAT IS THE NET ORIGINAL COST OF PROPERTY, PLANT, AND 1

EQUIPMENT RECORDED ON THE BOOKS OF THE WOODMARK AND 2

TALL TIMBERS SYSTEMS? 3

A. As detailed in the upper portion of Schedule 5 by NARUC plant account for each system, 4

the Woodmark and Tall Timbers systems have plant in service recorded on their books at 5

December 31, 2015 of $8,557,331 and $5,997,159, respectively, which total $14,554,490. 6

Shown directly below plant in service on Schedule 5 is accumulated depreciation for each 7

NARUC plant account, which totals $4,623,863 (i.e., $2,760,574 plus $ 1,863,289). 8

9

Q. WHERE ANY ADJUSTMENTS MADE TO PLANT? 10

A. Yes. First, as mentioned earlier, there is an intangible asset recorded in Account 352 on 11

the books of the Woodmark system totalling $431,640. Because this asset does not 12

represent the original cost of plant, it and the associated accumulated depreciation of 13

$107,466 were removed for purposes of calculating the rate base of the Woodmark and 14

Tall Timbers systems. Second, as also mentioned earlier, Woodmark and Tall Timbers 15

had CCNC at December 31, 2015 totaling $952,750. CCNC is plant that has been placed 16

in service and is used and useful, but the process of analyzing, classifying, and posting 17

the construction and purchase costs of the assets to their proper plant accounts has not 18

been completed. Because the test year-end CCNC was providing customers with service 19

and has now been assigned to its proper plant accounts, adjustments were made to reflect 20

these amounts in plant in service. As shown on Schedule 5, this results in adjusted plant 21

in service of $15,075,600 and adjusted accumulated depreciation of $4,515,396, or net 22

plant in service for the Woodmark and Tall Timbers systems of $10,559,204. 23

LU 000302

23

Q. WHAT WORKING CAPITAL ITEMS ARE INCLUDED IN THE RATE BASE 1

OF THE COMBINED WOODMARK AND TALL TIMBERS SYSTEMS? 2

A. Two working capital items are included in rate base. The first is a cash working capital 3

allowance, which accounts for the working capital required because of the delay between 4

the receipt of revenues and when expenses are paid. As shown in footnote A of Schedule 5

5, a cash working capital allowance for the combined Woodmark and Tall Timbers 6

systems was calculated as 1/12 of the sum of adjusted O&M and A&G expenses from 7

Schedule 2 and amounts to $165,321. The second working capital item is prepayments, 8

which over the test year for the combined Woodmark and Tall Timbers systems averaged 9

$2,937. 10

11

Q. WHAT SOURCES OF NON-INVESTOR SUPPLIED CAPITAL REDUCED THE 12

COMBINED WOODMARK AND TALL TIMBERS SYSTEMS’ RATE BASE? 13

A. Listed by NARUC account at the bottom of Schedule 5, several sources on non-investor 14

supplied capital serve to reduce rate base. First, different treatments of certain revenues 15

and expenses create temporary timing differences between book and taxable income, with 16

the income taxes paid before or after the tax expense is incurred being reflected as an 17

accumulated deferred income tax (“ADIT”) asset or liability, respectively. For the 18

combined Woodmark and Tall Timbers systems, the net total of NARUC accounts 190, 19

281, 282, and 283 results in a rate base deduction totaling $1,032,893. 20

The second source of non-investor supplied capital is that provided by customers 21

in the form of meter deposits and CIAC. Recorded in NARUC accounts 235, 271, and 22

272, a net total of $2,618,193 in customer-supplied capital also reduces the rate base of 23

the combined Woodmark and Tall Timbers systems. 24

LU 000303

24

1

Q. WHAT THEN IS THE RATE BASE FOR THE COMBINED WOODMARK AND 2

TALL TIMBERS SYSTEMS? 3

A. As calculated on Schedule 5, combining the net original cost of property, plant, and 4

equipment, plus a cash working capital allowance and prepayments, less net deferred 5

income taxes and net customer supplied capital, results in a rate base for the combined 6

Woodmark and Tall Timbers systems totaling $7,076,376. 7

E. Return on Investment

Q. WHAT IS THE PURPOSE OF A RETURN ON INVESTMENT IN SETTING A 8

UTILITY’S RATES? 9

A. Return on investment compensates investors for the use of their capital to finance the 10

plant and equipment necessary in providing service. Capital, like any other resource, has 11

a cost attendant with its usage. By identifying this cost and including a corresponding 12

return component in revenue requirements, customers pay a fair rent on the capital 13

employed in serving them and investors are fairly compensated for the use of their 14

money. 15

16

Q. WHAT RATE OF RETURN ON RATE BASE IS BEING REQUESTED IN THIS 17

CASE? 18

A. As shown on Schedule 6, all of the capital invested by Liberty Utilities Co. in the 19

Woodmark and Tall Timbers systems is recorded as common equity in NARUC 20

Accounts 201, 211, 214, and 216. However, Liberty proposes to use capital structure 21

ratios of 30% debt and 70% equity, which it believes is consistent with the risks of small 22

LU 000304

25

sewer systems such as Woodmark and Tall Timbers. Liberty also proposes a cost of debt 1

of 4.95%, which is an average cost of debt of affiliate companies providing Woodmark 2

and Tall Timbers capital, and a rate of return on equity (“ROE”) of 10.16%. This ROE 3

was determined using the Commission’s first method of adding a 6% risk premium to a 4

recent Moody’s Baa public utility bond yield, which in July 2016 was 4.16%. As shown 5

on Schedule 6, combining the requested capital structure ratios of the combined 6

Woodmark and Tall Timbers systems with the requested cost of debt and ROE results in 7

an overall rate of return of 8.60%. 8

9

Q. WHAT RETURN ON INVESTMENT IS INCLUDED IN THE REVENUE 10

REQUIREMENTS OF THE COMBINED WOODMARK AND TALL TIMBERS 11

SYSTEMS? 12

A. As shown in the upper portion of Schedule 7, multiplying the $7,076,376 rate base for the 13

combined Woodmark and Timbers systems developed in Schedule 5 times the overall 14

rate of return of 8.60% developed in Schedule 6 produces a dollar return on investment 15

for inclusion in revenue requirements of $608,356. 16

F. Income Taxes

Q. WHAT INCOME TAXES ARE ASSOCIATED WITH THIS RETURN ON 17

INVESTMENT? 18

A. Beginning with the $608,356 return on investment calculated in the upper portion of 19

Schedule 7, synchronized interest expense, calculated as the product of rate base and the 20

weighted cost of debt, was deducted to arrive at the after-tax return on equity of 21

$503,272. This after-tax return was then multiplied times a gross-up factor of 1.5385 22

LU 000305

26

(i.e., 1 / (1 - tax rate)), with income tax expense then being determined based on the 1

statutory marginal corporate tax rate of 35 percent. This produces an income tax expense 2

associated with the return on investment included in revenue requirements for the 3

combined Woodmark and Tall Timbers systems of $270,993. 4

G. Rates

Q. WHAT ARE THE TOTAL REVENUE REQUIREMENTS OF THE COMBINED 5

WOODMARK AND TALL TIMBERS SYSTEMS? 6

A. As summarized on Schedule 1, summing the adjusted O&M and A&G expenses, taxes 7

other than income, depreciation expenses, return on investment, and income taxes 8

developed above produces revenue requirements for, or a total cost of providing, sewer 9

service on the combined Woodmark and Tall Timbers systems of $3,806,415. 10

11

Q. ARE THESE THE REVENUE REQUIREMENTS USED TO CALCULATE 12

CONSOLIDATED RATES? 13

A. No. A portion of the total revenue requirements of the combined Woodmark and Tall 14

Timbers systems will be collected through various miscellaneous service charges (e.g., 15

service charges and late payment fees), to which no changes are being proposed. As 16

shown in the upper portion of Schedule 8, during the test year these miscellaneous 17

revenues totaled $86,668. As shown in the Schedule 1, subtracting these miscellaneous 18

revenues from total revenue requirements of $3,806,415 leaves net revenue requirements 19

to be recovered through sewer service rates of $3,719,747. 20

LU 000306

27

Q. WHAT ARE THE BILLING UNITS FOR THE WOODMARK AND TALL 1

TIMBERS SYSTEMS? 2

A. As mentioned earlier, the rates of Woodmark and Tall Timbers are based on a BER, 3

which is fundamentally the monthly rate for standard residential service, with the rates 4

for other customer classes being multiples of this base rate. For example, a residential 5

customer’s rate is equal to one BER and a commercial customer’s might equal to two 6

BERs, depending on his service characteristics. Using the current rates for the 7

Woodmark and Tall Timbers systems, the total number of BERs billed during 2015 were 8

determined from billing records. As shown in the bottom of Schedule 8, the total BERs 9

for the combined Woodmark and Tall Timbers systems for the twelve months of 2015 10

sum to 48,600. 11

12

Q. WHAT RATE DOES THIS EQUATE TO FOR THE COMBINED WOODMARK 13

AND TALL TIMBERS SYSTEMS? 14

A. At the bottom of Schedule 1, the net revenue requirements of $3,719,747 developed 15

above are divided by the total BERs of 48,600 to calculate the requested rate per BER per 16

month for the combined Woodmark and Tall Timbers systems of $76.54. 17

IV. RATE FILING PACKAGE SCHEDULES


A. As indicated earlier, the Rate Filing Package is principally designed for water utilities, 19

and must be modified for use by sewer utilities. This section briefly describes how I 20

inserted the financial data described above into the Rate Filing Package schedules for the 21

combined Woodmark and Tall Timbers systems. 22

LU 000307

28

Q. WHAT IS SHOWN ON SCHEDULE I-1 – REVENUE REQUIREMENT 1

SUMMARY OF THE RATE FILING PACKAGE? 2

A. Schedule I-1 of the Rate Filing Package basically corresponds to Schedule 1 attached to 3

my testimony and discussed above. Both summarize the major components of the 4

requested revenue requirements for the Woodmark and Tall Timbers systems. 5

6

Q. PLEASE SUMMARIZE HOW YOU CATEGORIZED VARIOUS O&M 7

EXPENSES IN THE RATE FILING PACKAGE SCHEDULES? 8

A. The schedules in the Rate Filing Package contemplate a utility where variable expenses 9

are largely included in volume charges and fixed expenses are included in monthly 10

service charges. Because Woodmark and Tall Timbers are sewer systems only, which 11

simply charge customers a fixed monthly amount, their accounts do not correspond 12

exactly to those identified in the schedules. This notwithstanding, I reflected those O&M 13

expenses that are largely variable (i.e., Accounts 710-718) in the Rate Filing Package 14

schedules that are identified as “volume related”. The remaining O&M expenses were 15

included in the “non-volume related” schedules. Because the NARUC account numbers 16

for A&G expenses closely correspond between water and sewer utilities, the completion 17

of these schedules, including the addition of historical data, was fairly straightforward. 18

19

Q. WERE THERE ANY SCHEDULES IN THE RATE FILING PACKAGE 20

RELATED TO O&M EXPENSES THAT WERE PROBLEMATIC? 21

A. Yes. As discussed earlier, Woodmark and Tall Timbers do not have any employees of 22

their own. The management and operations of the systems are performed by various 23

employees of LUSC, with payroll and benefits costs being charged wholly or partially to 24

LU 000308

29

the Woodmark and Tall Timbers systems based on the time each commits to the systems. 1

In addition, labor costs for numerous employees of other affiliates that provide indirect 2

services are also charged to the Woodmark and Tall Timbers systems through the various 3

cost allocation processes described by Mr. Killeen. Because costs associated with so 4

many employees is included in the various O&M and A&G expenses of the Woodmark 5

and Tall Timbers systems, it was not practical to complete Schedule II-6 – Payroll and 6

Schedule II-11 – Employee Pensions and Benefits. In a similar vein, Woodmark and Tall 7

Timbers do not acquire their own insurance coverage. Rather, Woodmark and Tall 8

Timbers are covered under policies purchased by various affiliates and then they are 9

allocated a share of the premiums directly or indirectly. Accordingly, the detail requested 10

on Schedule II-16 – Insurance or the numerous policies covering the Woodmark and Tall 11

Timbers systems was not provided. 12

13

Q. WERE ANY SCHEDULES IN THE RATE FILING PACKAGE RELATED TO 14

PLANT MODIFIED? 15

A. Yes. Schedule III-3 – Plant in Service contemplates a listing of each asset owned by the 16

utility, with its accumulated depreciation being cacluated based on when each item of 17

plant was placed in service and its service life. For the Woodmark and Tall Timbers 18

systems, such a listing would be impractical because of the extensive assets owned by 19

these systems. Therefore, the plant and accumulated depreciation balances by NARUC 20

account recorded on the books of Woodmark and Tall Timbers systems, adjusted to 21

reflect the CCNC discussed above, were used to complete this schedule. Likewise, 22

depreciation expense was based on the amounts recorded on the books of the Woodmark 23

and Tall Timbers systems for the test year instead of recalculating these amounts as 24

LU 000309

30

indicated in Schedule III-3 – Plant in Service, except for depreciation expense on CCNC, 1

which was calculated by dividing the amount of CCNC in each NARUC account based 2

on the corresponding lives shown on Schedule III-3. 3

4

Q. DO THE SCHEDULES IN THE RATE FILING PACKAGE PRODUCE THE 5

SAME END-RESULT AS THE SCHEDULES YOU DEVELOPED AND THAT 6

ARE ATTACHED TO THIS TESTIMONY? 7

A. Yes. Referring to Schedule VI-1 – Rate Design of the Rate Filing Package, the BER 8

shown there of $76.54 is identical to that developed at the bottom of my Schedule 1. 9

V. SECOND STEP TWO RATE INCREASE


A. As noted earlier, Woodmark and Tall Timers are requesting a second phase, or step, 11

increase in rates for the additional operating and capital costs associated with three 12

projects, all of which are necessary to improve service or achieve compliance with TCEQ 13

regulations and one also being required by TxDOT. This second-step rate increase is 14

intended to eliminate the requirement that a subsequent rate application be filed, thus 15

saving the utilities, their customers, and the Commission the time and expenses of 16

another rate case. The purpose of this section is to develop the amount of this second-step 17

rate increase. 18

Q. BRIEFLY DESCRIBE THE FIRST PROJECT. 19

A. Because of a hydraulic imbalance, Tall Timbers’ treatment plant was unable to properly 20

treat wastewater flows coming into the plant, resulting in the effluent not being in 21

compliance with TCEQ regulations. To remedy this problem, a hydraulic improvement 22

LU 000310

31

program was completed in February 2016 at a cost of $439,366. There are no expected 1

changes in O&M expenses associated with these capital improvements at the Tall 2

Timbers wastewater treatment plant. 3

4

Q. BRIEFLY DESCRIBE THE SECOND PROJECT. 5

A. TxDOT is requiring Tall Timbers to relocate its force main located in the Farm-to-Market 6

2493 right-of-way. As discussed by Mr. Garlick, in connection with this main relocation, 7

Woodmark and Tall Timbers are diverting certain flows to the expanded Woodmark 8

treatment plant, which will defer the need to expand the Tall Timbers treatment plant and 9

result in lower near-term costs to customers. This main relocation project is expected to 10

be completed in December 2016 and have a total cost, including both direct and indirect 11

expenditures, of $885,766. 12

13

Q. BRIEFLY DESCRIBE THE THIRD PROJECT. 14

A. Woodmark is in the process of completing the design, obtaining permits, ordering 15

equipment, and contracting for the construction of an increase in the treatment capacity of 16

its wastewater treatment plant from 360,000 gallons per day (“gpd”) to 700,000 gpd. 17

This expansion will not only bring the Woodmark plant into compliance with TCEQ 18

regulations to meet current wastewater flows, but provide additional capacity to meet 19

flows from current and future customers of both the Woodmark and Tall Timbers 20

systems. The expansion of the Woodmark plant is expected to be complete and placed in 21

service by the end of the first quarter of 2017 at a total cost of $3,449,650. 22

23

LU 000311

32

Q. HOW DID YOU DETERMINE THE AMOUNT OF THE SECOND-STEP 1

INCREASE TO REFLECT THE COSTS ASSOCIATED WITH THESE THREE 2

PROJECTS? 3

A. The second-step rate increase is developed in Schedule 9. Specifically, the additional 4

revenue requirements associated with these three projects are calculated and then divided 5

by billing units to determine the amount of the second-step increase. 6

7

Q. WHAT IS THE TOTAL CAPITAL COST OF THE THREE PROJECTS? 8

A. The capital costs of the three projects that are the basis for the requested second-step rate 9

increase are shown by NARUC account in the upper portion of Schedule 9. As indicated 10

earlier, the Tall Timbers wastewater treatment plant was completed in February 2016 at a 11

cost of $439,366. The schedule and cost estimates for the main relocation and expansion 12

of the Woodmark treatment plant were prepared by Brian E. Capps, P.E., of Capps 13

Capco Construction Inc., who is a licensed professional engineer in the State of Texas. 14

The respective $885,776 and $3,449,650 estimated total costs of the main relocation and 15

Woodmark plant expansion are also broken down by NARUC plant account in the upper 16

portion of Schedule 9. Please note that the costs certified by Mr. Capps are only those 17

over which a professional engineer has control. The difference between these and the 18

total estimated costs reflect internal labor, overheads, and construction financing costs 19

(i.e., AFUDC), which are prescribed by the NARUC Uniform System of Accounts to be 20

included in the total cost of property, plant, and equipment. 21

22

LU 000312

33

Q. WHAT ADDITIONAL OPERATING EXPENSES ARE EXPECTED TO BE 1

INCURRED IN CONNECTION WITH THESE PROJECTS? 2

A. As indicated earlier, there are no expected changes in labor, materials, and supplies 3

associated with the capital improvements at the Tall Timbers treatment plant, nor in 4

connection with the FM 2493 main relocation. There are, however, three items of O&M 5

expense that are projected to change with the Woodmark treatment plant expansion. 6

Electricity expenses are expected to increase approximately $50,426 per year. Annual 7

water expense is projected to decrease $12,000, while sludge disposal expense is 8

anticipated to increase $5,800. There are not expected to be any immediate increases in 9

personnel costs or A&G expenses with the Woodmark plant expansion, nor are there any 10

known and measureable reductions other operating costs of the systems. Thus, the net 11

increase in annual operating expenses associated with the Woodmark plant expansion is 12

projected to total $44,226, which is listed on Schedule 9. 13

14

Q. WILL ANY OTHER OPERATING EXPENSES CHANGE AS A RESULT OF 15

THE THREE PROJECTS? 16

A. Yes. Bad debt expense will rise as the result of the second-step increase in rates. 17

Accordingly, an adjustment of $8,883 is made to increase bad debts expense to 18

correspond to the higher revenues associated with the requested second-step rate increase. 19

Combining the $44,226 net increase in O&M expenses and $8,883 in bad debt expenses 20

results in total increase in O&M and A&G expenses associated with the plant Woodmark 21

plant expansion of $53,109. 22

23

LU 000313

34

Q. HOW MUCH DO THE THREE PROJECTS AFFECT TAXES OTHER THAN 1

INCOME? 2

A. The Tall Timbers plant improvements, main relocation, and Woodmark plant expansion 3

will impact two components of taxes other than income: 1) property taxes, and 2) Texas 4

franchise tax expenses. Applying the average property tax rate during the test year of 5

1.70% (developed in Schedule 9) to the $4,774,792 total cost of the three projects implies 6

that property taxes will increase by $89,231. Meanwhile, as also shown on Schedule 9, 7

multiplying the second-step cost of service by 70% to calculate the taxable margin, and 8

then applying the current margin tax rate of 0.75%, produces a Texas franchise tax 9

expense of $5,062, and total additional taxes other than income of $94,293. 10

11

Q. WHAT IS THE CHANGE IN DEPRECIATION EXPENSE AS A RESULT OF 12

THE THREE PROJECTS? 13

A. In the middle of Schedule 9, the costs of three projects, broken down by plant account, 14

are divided by their respective lives to calculate the additional annual depreciation 15

expense attributable to the plant improvements, main relocation and plant expansion. As 16

summed there, these amounts total $223,238. 17

18

Q. HOW MUCH DO THE THREE PROJECTS INCREASE RATE BASE? 19

A. The Tall Timbers plant improvements, FM 2493 main relocation, and Woodmark plant 20

expansion increase plant in service by their combined construction costs of $4,774,792. 21

There is no immediate increase in accumulated depreciation and no changes in 22

prepayments, customer deposits, and CIACs. Similarly, net ADIT does not change 23

because the increase in the ADIT – Accelerated Depreciation (Account 281) is exactly 24

LU 000314

35

offset by an increase in the ADIT – Net Operating Loss Carryforwards (Account 190). 1

There is, however, an increase in the cash working capital allowance of $4,426, which is 2

one-twelfth of the increase in O&M and A&G expenses of $53,109. Thus, as shown on 3

Schedule 9, the net increase in rate base attributable to the Woodmark plant expansion is 4

$4,779,218. 5

6

Q. HOW MUCH DOES THIS GREATER RATE BASE INCREASE RETURN ON 7

INVESTMENT AND INCOME TAXES? 8

A. As shown on Schedule 9, multiplying the $4,779,218 increase in rate base by the 9

requested rate of return of 8.60% produces an increase in return on investment of 10

$410,489. Meanwhile, as also shown on Schedule 9, the increase in income taxes 11

associated with this greater return on investment is $183,022. 12

13

Q. WHAT ARE THE ADDITIONAL REVENUE REQUIREMENTS ASSOCIATED 14

WITH THE TALL TIMBERS PLANT IMPROVEMENTS, FM 2493 MAIN 15

RELOCATION, AND WOODMARK PLANT EXPANSION? 16

A. As shown at the bottom of Schedule 9, summing the increased O&M expenses, taxes 17

other than income, depreciation expense, return on investment, and income taxes 18

produces an increase in revenue requirements attributable to these three projects of 19

$964,151. 20

21

Q. WHAT SECOND-STEP RATE INCREASE DOES THIS EQUATE TO FOR THE 22

COMBINED WOODMARK AND TALL TIMBERS SYSTEMS? 23

LU 000315

36

A. Dividing the increase in revenue requirements of $964,151 attributable to the Tall 1

Timbers plant improvements, FM 2493 main relocation, and Woodmark plant expansion 2

by total BERs of 48,600 produces the requested second-step rate increase for the 3

combined Woodmark and Tall Timbers systems of $19.84 per BER. 4

5

Q. HOW DO WOODMARK AND TALL TIMBERS PROPOSE TO IMPLEMENT 6

THE REQUESTED SECOND-STEP INCREASE? 7

A. Consistent with the Commission’s rules, Woodmark and Tall Timbers will notify 8

customers of the requested two-step increase in its original notice, provide customers and 9

the Commission notice of the second-step increase 30 days prior to implementation, and 10

not implement the second-step rate increase until the Woodmark plant expansion is 11

placed into service and verified by a licensed professional engineer or Commission 12

inspector/subcontractor. Woodmark and Tall Timbers will also compare the actual costs 13

of construction of the FM 2493 main relocation and Woodmark plant expansion with the 14

estimates presented above and handle the difference under one of the options provided 15

for by the Commission’s rules. 16

17

Q. DOES THAT CONCLUDE YOUR DIRECT TESTIMONY IN THIS CASE? 18

A. Yes, it does. 19

LU 000316

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 1COST OF SERVICE Page 37Test Year Ended December 31, 2015

ReferenceDescription Schedule

Operations and Maintenance Expenses Schedule 2 1,983,847$

Taxes Other than Income Schedule 3 208,074

Depreciation Expense Schedule 4 735,146

Return on Investment

Rate Base Schedule 5 7,076,376$ Rate of Return Schedule 6 8.60%

Return 608,356

Income Tax Expense Schedule 7 270,993

Total Cost of Service 3,806,415$

Other Income Schedule 8 (86,668)

Net Cost of Service 3,719,747$

Billing Units Schedule 8 48,600

BASE EQUIVALENT RATE 76.54$

Amount

LU 000317

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 2O&M AND A&G EXPENSES Page 38Test Year Ended December 31, 2015

AdjustedDescription Woodmark Tall Timbers Adjustments Ref. Amount

701 Salaries and Wages - Employees 328,819$ 300,759$ 629,578$ 710 Purchased Water 40,092 19,868 59,960 711 Sludge Removal Expense 29,964 72,687 102,652 715 Purchased Power 86,913 68,851 155,764 716 Fuel for Power Production 174 82 256 718 Chemicals 26,113 12,712 38,825 720 Materials and Supplies 29,921 23,187 53,107 731 Contractual Services - Engineering - - - 732 Contractual Services - Accounting 348 4,512 4,859 733 Contractual Services - Legal (4,027) (293) (4,319) 734 Contractual Services - Management Fees 145,692 172,756 318,448 735 Contractual Services - Testing 11,586 7,590 19,175 736 Contractual Services - Other 220,316 176,229 396,545 741 Rental of Building/Real Property 3,798 4,089 7,887 742 Rental of Equipment 19,188 6,053 25,241 750 Transportation Expenses 20,420 16,223 36,643 756 Insurance - Vehicle 2,364 1,918 4,282 757 Insurance - General Liability 7,273 2,306 9,579 766 Regulatory Commission Expenses 6,670 - (6,670) (a) - 767 Regulatory Commission Expenses - Other - - - 770 Bad Debt Expense 16,816 8,949 9,303 (b) 35,069 775 Miscellaneous Expenses 43,895 46,400 90,295

Total O&M and A&G Expenses 1,036,336$ 944,877$ 1,983,847$

(a) To remove amortization of previous rate case expenses.

(b) 2015 Bad Debt Expense 25,766$ 2015 Operating Revenues 2,796,622

Bad Debt Ratio 0.921%Total Cost of Service (Schedule 1) 3,806,415

Adjusted Bad Debts Expense 35,069$

Per Books

LU 000318

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 3TAXES OTHER THAN INCOME Page 39Test Year Ended December 31, 2015


408 Taxes Other than Income

Property Taxes 97,344$ 65,983$ 16,198$ (a) 179,525$

Texas Franchise Tax 9,000 - 19,548 (b) 28,548

Total Taxes Other than Income 106,344$ 65,983$ 208,074$

(a) To include property taxes on Construction Completed not Classified

Test Year Property Taxes Schedule 3 163,327$ Net Plant in Service Schedule 5 9,606,454$

Property Tax Rate 1.70% Construction Completed not Classified 952,750$

CCNC Property Taxes 16,198$

(b) Total Cost of Service Schedule 1 3,806,415$ Applicable Margin Percentage 70%

Taxable Margin 2,664,490 Texas Franchise Tax Rate 0.75%

Texas Franchise Tax 28,548$

Per Books

LU 000319

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 4DEPRECIATION EXPENSE Page 40Test Year Ended December 31, 2015

AdjustedDescription Life Woodmark Tall Timbers Adjustments Ref. Amount

352 Franchises 10,791$ -$ (10,791)$ (a) -$ 353 Land and Land Rights - 354 Structures and Improvements 30 114,420 73,439 3,268 (b) 191,127 355 Power Generation Equipment 20 (568) (568) 360 Collection Sewers - Force 50 928 12,388 13,316 361 Collection Sewers - Gravity 50 12,863 11,345 265 (b) 24,474 363 Services to Customers 20 10,948 5,302 561 (b) 16,811 364 Flow Measuring Devices 20 - 370 Receiving Wells 30 2,829 2,829 371 Pumping Equipment 5 171,223 194,428 75,105 (b)(c) 440,756 380 Treatment and Disposal Equipment 25 73,475 25,014 13,007 (b) 111,497 381 Plant Sewers 40 12,292 9,914 1,835 (b) 24,041 389 Other Plant and Miscellaneous Equipment 20 1,866 3,433 5,299 390 Office Furniture and Equipment 10 6,217 3,594 9,811

390.1 Computer & Softwear 5 297 824 925 (b) 2,047 391 Transportation Equipment 5 3,615 554 4,169 393 Tools, Shop and Garage Equipment 5 23,290 8,077 1,145 (b) 32,511 394 Laboratory Equipment 10 (9,094) 633 (b) (8,461) 395 Power Operated Equipment 20 - 259 259 396 Communication Equipment 15 309 504 456 (b) 1,268

272 Amortization of CIAC (77,770) (58,271) (136,041)

Total Depreciation Expense 357,932$ 290,804$ 735,146$

(a) To remove amortization of intangible asset.

(b) To include depreciation expense on Construction Completed not Classified

(c) To adjust depreciation expense recorded on books during 2015 to correct total.

Per Books

LU 000320

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 5RATE BASE Page 41Test Year Ended December 31, 2015

AdjustedDescription Woodmark Tall Timbers Adjustment Ref. Amount

Property, Plant & Equipment

352 Franchises 431,640$ -$ (431,640)$ (a) -$ 353 Land and Land Rights 25,000 164,003 189,003 354 Structures and Improvements 3,384,080 2,360,791 98,053 (b) 5,842,924 355 Power Generation Equipment 2,200 - 2,200 360 Collection Sewers - Force 46,402 619,378 665,780 361 Collection Sewers - Gravity 643,162 567,272 13,258 (b) 1,223,692 363 Services to Customers 218,960 111,909 11,229 (b) 342,098 364 Flow Measuring Devices 2,582 - 2,582 370 Receiving Wells 84,881 - 84,881 371 Pumping Equipment 1,047,618 1,122,876 408,100 (b) 2,578,593 380 Treatment and Disposal Equipment 1,836,113 625,338 325,184 (b) 2,786,635 381 Plant Sewers 490,008 198,286 73,405 (b) 761,699 389 Other Plant and Miscellaneous Equipment 37,315 83,485 120,800 390 Office Furniture and Equipment 91,225 49,607 140,833

390.1 Computer & Softwear 1,487 4,122 4,626 (b) 10,235 391 Transportation Equipment 82,240 32,229 114,469 393 Tools, Shop and Garage Equipment 118,327 42,540 5,723 (b) 166,590 394 Laboratory Equipment 9,459 - 6,332 (b) 15,791 395 Power Operated Equipment - 7,770 7,770 396 Communication Equipment 4,632 7,554 6,839 (b) 19,025

Plant in Service 8,557,331$ 5,997,159$ 15,075,600$


352 Franchises (107,466)$ -$ 107,466$ (a) -$ 354 Structures and Improvements (1,298,386) (1,040,715) (2,339,100) 354 Structures and Improvements 19,815 2,804 22,619 355 Power Generation Equipment (1,008) - (1,008) 360 Collection Sewers - Force (1,397) (64,884) (66,281) 361 Collection Sewers - Gravity (158,850) (96,361) (255,211) 361 Collection Sewers - Gravity 647 8,934 9,582 363 Services to Customers (103,617) (37,715) (141,331) 364 Flow Measuring Devices (2,582) - (2,582) 370 Receiving Wells (4,480) - (4,480) 371 Pumping Equipment (570,395) (478,512) (1,048,907) 380 Treatment and Disposal Equipment (287,235) (37,091) (324,326) 380 Treatment and Disposal Equipment 568 - 568 381 Plant Sewers (25,176) (12,393) (37,569) 389 Other Plant and Miscellaneous Equipment (22,955) (30,319) (53,275) 390 Office Furniture and Equipment (53,455) (23,563) (77,018) 390 Office Furniture and Equipment (489) (962) (1,451) 390 Office Furniture and Equipment - (358) (358) 391 Transportation Equipment (69,586) (30,219) (99,805) 393 Tools, Shop and Garage Equipment (55,551) (20,971) (76,522) 393 Tools, Shop and Garage Equipment 38 - 38 394 Laboratory Equipment (18,553) - (18,553) 395 Power Operated Equipment - (259) (259) 396 Communication Equipment (462) (704) (1,167)

Accumulated Depreciation (2,760,574)$ (1,863,289)$ (4,516,396)$

Working Capital

Cash Working Capital Allowance -$ -$ 165,321 (c) 165,321$ 162 Prepayments 1,877 2,051 (991) (d) 2,937

Working Capital 168,258$


190 ADIT -- Net Operating Loss Carry-Forwards 672,689 (e) 672,689$ 235 Customer Deposits (16,259) (12,952) (29,212) 271 Contributions in Aid of Construction (2,333,088) (1,443,850) (3,776,938) 272 Accumulated Amortization of Contributions in Aid of Constructio 830,861 357,096 1,187,957 281 ADIT -- Accelerated Depreciation of Property (1,636,298) (e) (1,636,298) 282 ADIT -- Other Property (71,289) (e) (71,289) 283 ADIT -- Other (Bad Debts) 2,005 (e) 2,005

Non-Investor Supplied Capital (3,651,086)$

RATE BASE 7,076,376$

(a) To remove intangible asset and associated accumulated amortization.

(b) To include Completed Construction not Classified.

(c) O&M Expenses (Schedule 2) 1,983,847$ 1/12th Factor 8.33%

Cash Working Capital Allowance 165,321$

(d) To adjust to 2015 13-month average balance.

(e) To reflect ADIT not recorded on books.

Per Books

LU 000321

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 6RATE OF RETURN Page 42Test Year Ended December 31, 2015

Component WeightedDescription Woodmark Tall Timbers Percent Cost Cost

Debt -$ -$ 30.00% 4.95% (a) 1.49%

Equity 2,210,756 2,559,492 70.00% 10.16% (b) 7.11%

Total 2,210,756$ 2,559,492$ 100.00%

Overall Rate of Return 8.60%

(a) Average Cost of Debt:Weighted

% of Total Cost CostSenior Unsecured Debt (AZ and TX) 50.00% 5.60% 2.80%Liberty Utilties Company General Debt 50.00% 4.30% 2.15%

Cost of Debt 4.95%

(b) Moody's July 2016 Baa utility yield of 4.16% plus 6.00% risk premium.

OVERALL RATE OF RETURN

RequestedPer Books

LU 000322

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 7RETURN AND INCOME TAXES Page 43Test Year Ended December 31, 2015

Description Reference

Return on Investment: Rate Base Schedule 5 7,076,376$ Rate of Return Schedule 6 8.60%

Return on Investment 608,356$

Interest Expense: Rate Base Schedule 5 7,076,376$ Weighted Cost of Debt Schedule 6 1.49%

Interest Expense (105,084)

Return on Equity 503,272$

Income Tax Factor (1+ (35%/(1 - 35%))) 1.538462

Taxable Income 774,264$

Federal Corporate Income Tax Rate 35.00%

Income Tax Expense 270,993$

Amount

LU 000323

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 8OTHER INCOME AND BILLING UNITS Page 44Test Year Ended December 31, 2015

Description Woodmark Tall Timbers Adjustment Ref. Adjusted

Other Income

536 Other WasteWater Revenues Establishment Fees (5,500)$ (19,225)$ (24,725)$ 536 Other WasteWater Revenues Service Charges (25,375) (8,025) (33,400) 536 Other WasteWater Revenues Late Payment Fee (17,826) (10,745) (28,571) 536 Other WasteWater Revenues Misc Income - 28 28

Total Other Income (48,701)$ (37,967)$ (86,668)$

2015 Billing Units (a)

January 1,876 2,135 4,011 February 1,783 2,307 4,089 March 1,760 2,184 3,944 April 1,763 2,214 3,977 May 1,781 2,212 3,993 June 1,794 2,231 4,025 July 1,781 2,516 4,297 August 1,798 2,241 4,038 September 1,783 2,266 4,048 October 1,785 2,273 4,058 November 1,791 2,267 4,058 December 1,794 2,267 4,061

Total Base Equivalent Rates 21,488 27,112 48,600

(a) Calculated from monthly billing records.

Per Books

LU 000324

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 9SECOND-STEP RATE INCREASE Page 47Test Year Ended December 31, 2015

Description Reference TT -- WWTP Relocation WM -- WWTP

Investment in Property, Plant, and Equipment:

354 Structures and Improvements 161,219$ 1,670,840$ 1,832,059$ 360 Collection Sewers - Force 885,776$ 885,776 371 Pumping Equipment 173,167 241,414 414,581 380 Treatment and Disposal Equipment 1,275,160 1,275,160 381 Plant Sewers 50,951 262,236 313,187 389 Other Plant and Miscellaneous Equipment 54,029 54,029

Second-step Investment 439,366$ 885,776$ 3,449,650$ 4,774,792$

Operations and Maintenance Expenses:

Operating Expenses:

710 Purchased Water -$ -$ (12,000) (12,000)$ 711 Sludge Removal Expense - - 5,800 5,800 715 Purchased Power - - 50,426 50,426

Second-step O&M Expenses 44,226$

Bad Debts Expense:

Second-Step Cost of Service 955,981$ Bad Debt Ratio Schedule 2 0.921%

Second-step Bad Debts Expense 8,808


Property Taxes:


Property Tax Rate 1.70% Additional Investment 4,774,792$

Second-step Property Taxes 81,180

Texas Franchise Taxes:

Second-Step Cost of Service 955,981$ Applicable Margin Percentage Schedule 3 70%

Taxable Margin 669,187$ Texas Franchise Tax Rate Schedule 3 0.75%

Second-step Texas Franchise Tax 5,019

Depreciation Expense:Life Cost Depr. Expense

354 Structures and Improvements Schedule 4 30 1,832,059$ 61,069$ 360 Collection Sewers - Force Schedule 4 50 885,776 17,716 371 Pumping Equipment Schedule 4 5 414,581 82,916 380 Treatment and Disposal Equipment Schedule 4 25 1,275,160 51,006 381 Plant Sewers Schedule 4 40 313,187 7,830 389 Other Plant and Miscellaneous Equipment Schedule 4 20 54,029 2,701

Second-step Depreciation Expense 223,238

Return on Investment:

Second-step Investment 4,774,792$

Cash Working Capital Allowance:Additional O&M and A&G Expenses 53,034$ 1/12th Factor 8.33%

Additional Cash Working Capital Allowance 4,419

Additional Rate Base 4,779,212$ Rate of Return Schedule 6 8.60%

Second-step Return on Investment 410,489

Income Taxes:

Additional Rate Base 4,779,212$ Weighted Cost of Equity Schedule 6 7.11%

Second-step Equity Return 339,898$ Income Tax Factor Schedule 7 0.538462

Second-step Income Taxes 183,022

Second-step Cost of Service 955,981$


SECOND-STEP BASE EQUIVALENT RATE INCREASE 19.67$

DescriptionAmounts

LU 000325

BHF-1

BRUCE H. FAIRCHILD

FINCAP, INC. 3907 Red River Financial Concepts and Applications Austin, Texas 78751 Economic and Financial Counsel (512) 458–4644

FAX (512) 458–4768 [email protected]

Summary of Qualifications

M.B.A. and Ph.D. in finance, accounting, and economics; Certified Public Accountant. Extensive consulting experience involving regulated industries, valuation of closely-held businesses, and other economic analyses. Previously held managerial and technical positions in government, academia, and business, and taught at the undergraduate, graduate, and executive education levels. Broad experience in technical research, computer modeling, and expert witness testimony.

Employment

Principal, FINCAP, Inc. (Sep. 1979 to present)

Economic consulting firm specializing in regulated industries and valuation of closely-held businesses. Assignments have involved electric, gas, telecommunication, and water/sewer utilities, with clients including utilities, consumer groups, municipalities, regulatory agencies, and cogenerators. Areas of participation have included revenue requirements, rate of return, rate design, tariff analysis, avoided cost, forecasting, and negotiations. Other assignments have involved some seventy valuations as well as various economic (e.g., damage) analyses, typically in connection with litigation. Presented expert witness testimony before courts and regulatory agencies on over one hundred occasions.

Adjunct Assistant Professor, University of Texas at Austin (Sep. 1979 to May. 1981)

Taught undergraduate courses in finance: Fin. 370 – Integrative Finance and Fin. 357 – Managerial Finance.

Assistant Director, Economic Research Division, Public Utility Commission of Texas (Sep. 1976 to Aug. 1979)

Division consisted of approximately twenty-five financial analysts, economists, and systems analysts responsible for rate of return, rate design, special projects, and computer systems. Directed Staff participation in rate cases, presented testimony on approximately thirty-five occasions, and was involved in some forty other cases ultimately settled. Instrumental in the initial development of rate of return and financial policy for newly-created agency. Performed independent research and managed State and Federal funded projects. Assisted in preparing appeals to the Texas Supreme Court and testimony presented before the Interstate Commerce Commission and Department of Energy. Maintained communications with financial community, industry representatives, media, and consumer groups. Appointed by Commissioners as Acting Director.

LU 000326

BRUCE H. FAIRCHILD Page 2 of 5

Assistant Professor, College of Business Administration, University of Colorado at Boulder (Jan. 1977 to Dec. 1978)

Taught graduate and undergraduate courses in finance: Fin. 305 – Introductory Finance, Fin. 401 – Managerial Finance, Fin. 402 – Case Problems in Finance, and Fin. 602 – Graduate Corporate Finance.

Teaching Assistant, University of Texas at Austin (Jan. 1973 to Dec. 1976)

Taught undergraduate courses in finance and accounting: Acc. 311 – Financial Accounting, Acc. 312 – Managerial Accounting, and Fin. 357 – Managerial Finance. Elected to College of Business Administration Teaching Assistants' Committee.

Internal Auditor, Sears, Roebuck and Company,

Dallas, Texas (Nov. 1970 to Aug 1972)

Performed audits on internal operations involving cash, accounts receivable, merchandise, accounting, and operational controls, purchasing, payroll, etc. Developed operating and administrative policy and instruction. Performed special assignments on inventory irregularities and Justice Department Civil Investigative Demands.

Accounts Payable Clerk, Transcontinental Gas Pipeline

Corp., Houston, Texas (May. 1969 to Aug. 1969)

Processed documentation and authorized payments to suppliers and creditors.

Education

Ph.D., Finance, Accounting, and Economics, University of Texas at Austin (Sep. 1974 to May 1980)

Doctoral program included coursework in corporate finance, investment theory, accounting, and economics. Elected to honor society of Phi Kappa Phi. Received University outstanding doctoral dissertation award

Dissertation: Estimating the Cost of Equity to Texas Public Utility Companies

M.B.A., Finance and Accounting, University of Texas at Austin, (Sep. 1972 to Aug. 1974)

Awarded Wright Patman Scholarship by World and Texas Credit Union Leagues. Professional Report: Planning a Small Business Enterprise in Austin, Texas

B.B.A., Accounting and Finance, Southern Methodist University,

Dallas, Texas (Sep. 1967 to Dec. 1971)

Dean’s List 1967-1971 and member of Phi Gamma Delta Fraternity.

Other Professional Activities Certified Public Accountant, Texas Certificate No. 13,710 (October 1974); entire exam passed in

May 1972. Member of the American Institute of Certified Public Accountants. Participated as session chairman, moderator, and paper discussant at annual meetings of Financial

Management Association, Southwestern Finance Association, American Finance Association, and other professional associations.

Visiting lecturer in Executive M.B.A program at the University of Stellenbosch Graduate Business School, Belleville, South Africa (1983 and 1984).

Associate Editor of Austin Financial Digest, 1974-1975. Wrote and edited a series of investment and economic articles published in a local investment advisory service.

LU 000327


Military

Texas Army National Guard, Feb. 1970 to Sep. 1976. Specialist 5th Class with duty assignments including recovery vehicle operator for armor unit and company clerk for finance unit.

Bibliography Monographs

“On the Use of Security Analysts’ Growth Projections in the DCF Model,” with William E. Avera, Earnings Regulation Under Inflation, J. R. Foster and S. R. Holmberg, eds., Institute for Study of Regulation (1982).

“An Examination of the Concept of Using Relative Customer Class Risk to Set Target Rates of Return in Electric Cost-of-Service Studies”, with William E. Avera, Electricity Consumers Resource Council (ELCON) (1981); portions reprinted in Public Utilities Fortnightly (Nov. 11, 1982).

“The Spring Thing (A) and (B)” and “Teaching Notes”, with Mike E. Miles, a two-part case study in the evaluation, management, and control of risk; distributed by Harvard's Intercollegiate Case Clearing House; reprinted in Strategy and Policy: Concepts and Cases, A. A. Strickland and A. J. Thompson, Business Publications, Inc. (1978) and Cases in Managing Financial Resources, I. Matur and D. Loy, Reston Publishing Co., Inc. (1984).

“Energy Conservation in Existing Residences, Project Director for development of instruction manual and workshops promoting retrofitting of existing homes, Governor's Office of Energy Resources and Department of Energy (1977-1978).

“Linear Algebra,” “Calculus,” “Sets and Functions,” and “Simulation Techniques,” contributed to and edited four mathematics programmed learning texts for MBA students, Texas Bureau of Business Research (1975).

Articles and Notes

“How to Value Personal Service Practices,” with Keith Wm. Fairchild, The Practical Accountant (August 1989).

“The Impact of Regulatory Climate on Utility Capital Costs: An Alternative Test,” with Adrien M. McKenzie, Public Utilities Fortnightly (May 25, 1989).

“North Arctic Industries, Limited,” with Keith Wm. Fairchild, Case Research Journal (Spring 1988). “Regulatory Effects on Electric Utilities' Cost of Capital Reexamined,” with Louis E. Buck, Jr.,

Public Utilities Fortnightly (September 2, 1982). “Capital Needs for Electric Utility Companies in Texas: 1976-1985”, Texas Business Review

(January-February 1979), reprinted in “The Energy Picture: Problems and Prospects”, J. E. Pluta, ed., Bureau of Business Research (1980).

“Some Thoughts on the Rate of Return to Public Utility Companies,” with William E. Avera, Proceedings of the NARUC Biennial Regulatory Information Conference (1978).

“Regulatory Problems of EFTS,” with Robert McLeod, Issues in Bank Regulation (Summer 1978) reprinted in Illinois Banker (January 1979).

“Regulation of EFTS as a Public Utility,” with Robert McLeod, Proceedings of the Conference on Bank Structure and Competition (1978).

“Equity Management of REA Cooperatives,” with Jerry Thomas, Proceedings of the Southwestern Finance Association (1978).

“Capital Costs Within a Firm,” Proceedings of the Southwestern Finance Association (1977). “The Cost of Capital to a Wholly-Owned Public Utility Subsidiary,” Proceedings of the Southwestern

Finance Association (1977).

LU 000328


Selected Papers and Presentations

“Perspectives on Texas Utility Regulation”, TSCPA 2016 Energy Conference, Austin, Texas (May 16, 2016).

“Legislative Changes Affecting Texas Utilities,” Texas Committee of Utility and Railroad Tax Representatives, Fall Meeting, Austin, Texas (September 1995).

“Rate of Return,” “Origins of Information,” Economics,” and “Deferred Taxes and ITC's,” New Mexico State University and National Association of Regulatory Utility Commissioners Public Utility Conferences on Regulation and the Rate-Making Process, Albuquerque, New Mexico (October 1983, 1984, 1985, 1986, 1987, 1988, 1990, 1991, 1992, 1994, and 1995, and September 1989); Pittsburgh, Pennsylvania (April 1993); and Baltimore, Maryland (May 1994 and 1995).

“Developing a Cost-of-Service Study,” 1994 Texas Section American Water Works Association Annual Conference, Amarillo, Texas (March 1994).

“Financial Aspects of Cost of Capital and Common Cost Considerations,” Kidder, Peabody & Co. Two-Day Rate Case Workshop for Regulated Utility Companies, New York, New York (June 1993).

“Cost-of-Service Studies and Rate Design,” General Management of Electric Utilities (A Training Program for Electric Utility Managers from Developing Countries), Austin, Texas (October 1989 and November 1990 and 1991).

“Rate Base and Revenue Requirements,” The University of Texas Regulatory Institute Fundamentals of Utility Regulation, Austin, Texas (June 1989 and 1990).

“Determining the Cost of Capital in Today's Diversified Companies,” New Mexico State University Public Utilities Course Part II, Advanced Analysis of Pricing and Utility Revenues, San Francisco, California (June 1990).

“Estimating the Cost of Equity,” Oklahoma Association of Tax Representatives, Tulsa, Oklahoma (May 1990).

“Impact of Regulations,” Business and the Economy, Leadership Dallas, Dallas, Texas (November 1989).

“Accounting and Finance Workshop” and “Divisional Cost of Capital,” New Mexico State University Current Issues Challenging the Regulatory Process, Albuquerque, New Mexico (April 1985 and 1986) and Santa Fe, New Mexico (March 1989).

“Divisional Cost of Equity by Risk Comparability and DCF Analyses,” NARUC Advanced Regulatory Studies Program, Williamsburg, Virginia (February 1988) and USTA Rate of Return Task Force, Chicago, Illinois (June 1988).

“Revenue Requirements,” Revenue, Pricing, and Regulation in Texas Water Utilities, Texas Water Utilities Conference, Austin, Texas (August 1987 and May 1988).

“Rate Filing – Basic Ratemaking,” Texas Gas Association Accounting Workshop, Austin, Texas (March 1988).

“The Effects of Regulation on Fair Market Value: P.H. Robinson – A Case Study,” Annual Meeting of the Texas Committee of Utility and Railroad Tax Representatives, Austin, Texas (September 1987).

“How to Value Closely-held Businesses,” TSCPA 1987 Entrepreneurs Conference, San Antonio, Texas (May 1987).

“Revenue Requirements” and “Determining the Rate of Return”, New Mexico State University Regulation and the Rate-Making Process, Southwestern Water Utilities Conference, Albuquerque, New Mexico (July 1986) and El Paso, Texas (November 1980).

“How to Evaluate Personal Service Practices,” TSCPA CPE Exposition 1985, Houston and Dallas, Texas (December 1985).

“How to Start a Small Business – Accounting and Record Keeping,” University of Texas Management Development Program, Austin, Texas (October 1984).

LU 000329


“Project Financing of Public Utility Facilities”, TSCPA Conference on Public Utilities Accounting and Ratemaking, San Antonio, Texas (April 1984).

“Valuation of Closely-Held Businesses,” Concho Valley Estate Planning Council, San Angelo, Texas (September 1982).

“Rating Regulatory Performance and Its Impact on the Cost of Capital,” New Mexico State University Seminar on Regulation and the Cost of Capital, El Paso, Texas (May 1982).

“Effect of Inflation on Rate of Return,” Cost of Capital Conference and Workshop, Pinehurst, North Carolina (April 1981).

“Original Cost Versus Current Cost Regulation: A Re-examination,” Financial Management Association, New Orleans, Louisiana (October 1980).

“Capital Investment Analysis for Electric Utilities,” The University of Texas at Dallas, Richardson, Texas (June 1980).

“The Determinants of Capital Costs to the Electric Utility Industry,” with Cedric E. Grice, Southwestern Finance Association, San Antonio, Texas (March 1980).

“The Entrepreneur and Management: A Case Study,” Small Business Administration Seminar, Austin, Texas (October 1979).

“Capital Budgeting by Public Utilities: A New Perspective,” with W. Clifford Atherton, Jr., Financial Management Association, Boston, Massachusetts (October 1979).

“Issues in Regulated Industries – Electric Utilities,” University of Texas at Dallas 4th Annual Public Utilities Conference, Dallas, Texas (July 1979).

“Investment Conditions and Strategies in Today's Markets,” American Society of Women Accountants, Austin, Texas (January 1979).

“Attrition: A Practical Problem in Determining a Fair Return to Public Utility Companies,” Financial Management Association, Minneapolis, Minnesota (October 1978).

“The Cost of Equity to Wholly-Owned Electric Utility Subsidiaries,” with William L. Beedles, Financial Management Association, Minneapolis, Minnesota (October 1978).

“PUC Retrofitting Program,” Texas Electric Cooperatives Spring Workshop, Austin, Texas (May 1978).

“The Economics of Regulated Industries,” Consumer Economics Forum, Houston, Texas (November 1977).

“Public Utilities as Consumer Targets – Is the Pressure Justified?,” University of Texas at Dallas 2nd Annual Public Utilities Conference, Dallas, Texas (July 1977).

LU 000330

BHF-2 BRUCE H. FAIRCHILD

SUMMARY OF TESTIMONY BEFORE REGULATORY AGENCIES

1

No. Utility Case Agency Docket Date Nature of Testimony

1. Arkansas Electric Cooperative Arkansas PSC U-3071 Aug-80 Wholesale Rate Design

2. East Central Oklahoma ElectricCooperative

Oklahoma CC 26925 Sep-80 Retail Rate Design

3. Kansas Gas & Electric Company Kansas CC 115379-U Nov-80 PURPA Rate Design Standards

4. Kansas Gas & Electric Company Kansas CC 128139-U May-81 Attrition

5. City of Austin Electric Department City of Austin -- Jun-81 PURPA Rate Design Standards

6. Tarrant County Water Control andImprovement District No. 1

Texas Water Commission

-- Oct-81 Wholesale Rate Design

7. Owentown Gas Company Texas RRC 2720 Jan-82 Revenue Requirements and Retail Rate Design

8. Kansas Gas & Electric Company Kansas CC 134792-U Aug-82 Attrition

9. Mississippi Power Company Mississippi PSC U-4190 Sep-82 Working Capital

10. Lone Star Gas Company Texas RRC 3757; 3794 Feb-83 Rate of Return on Equity

11. Kansas Gas & Electric Company Kansas CC 134792-U Feb-83 Rate of Return on Equity

12. Southwestern Bell TelephoneCompany

Oklahoma CC 28002 Oct-83 Rate of Return on Equity

13. Morgas Company Texas RRC 4063 Nov-83 Revenue Requirements

14. Seagull Energy Texas RRC 4541 Jul-84 Rate of Return


FCC 84-800 Nov-84 Rate of Return on Equity

16. Kansas Gas & Electric Company,Kansas City Power & LightCompany, and Kansas ElectricPower Cooperatives

Kansas CC 142098-U; 142099-U; 142100-U

May-85 Nuclear Plant Capital Costs and Allowance for Funds Used During Construction

17. Lone Star Gas Company Texas RRC 5207 Oct-85 Overhead Cost Allocation

18. Westar Transmission Company Texas RRC 5787 Nov-85 Jan-86 Jul-86

Rate of Return, Rate Design, and Gas Processing Plant Economics

19. City of Houston Texas Water Commission

RC-022; RC-023

Nov-86 Line Losses and Known and Measurable Changes

20. ENSTAR Natural Company Alaska PUC TA 50-4; R-87-2; U-87-2

Nov-86 May-87 May-87

Cost Allocation, Rate Design, and Tax Rate Changes

21. Brazos River Authority Texas Water Commission

RC-020 Jan-87 Revenue Requirements and Rate Design

22. East Texas Industrial Gas Company Texas RRC 5878 Feb-87 Revenue Requirements and Rate Design

23. Seagull Energy Texas RRC 6629 Jun-87 Revenue Requirements

LU 000331

Bruce H. Fairchild Summary of Testimony Before Regulatory Agencies

(Continued)

2


24. ENSTAR Natural Company Alaska PUC U-87-42 Jul-87

Sep-87

Sep-87

Cost Allocation, Rate Design, and Contracts

25. High Plains Natural Gas Company Texas RRC 6779 Sep-87 Rate of Return

26. Hughes Texas Petroleum Texas RRC 2-91,855 Jan-88 Interim Rates

27. Cavallo Pipeline Company Texas RRC 7086 Sep-88 Revenue Requirements

28. Union Gas System, Inc. Kansas CC 165591-U Mar-89 Aug-89

Rate of Return

29. ENSTAR Natural Gas Company Alaska PUC U-88-70 Mar-89 Cost Allocation and Bypass

30. Morgas Co. Texas RRC 7538 Aug-89 Rate of Return and Cost Allocation

31. Corpus Christi TransmissionCompany

Texas RRC 7346 Sep-89 Revenue Requirements

32. Amoco Gas Co. Texas RRC 7550 Oct-89 Rate of Return and Cost Allocation

33. Iowa Southern Utilities Iowa Utilities Board

RPU-89-7 Nov-89 Mar-90

Rate of Return on Equity


FCC 89-624 Feb-90 Apr-90


35. Lower Colorado River Authority Texas PUC 9427 Mar-90 Aug-90 Aug-90

Revenue Requirements

36. Rio Grande Valley Gas Company Texas RRC 7604 May-90 Consolidated FIT and Depreciation

37. Southern Union Gas Company El Paso PURB -- Oct-90 Disallowed Expenses and FIT

38. Iowa Southern Utilities Iowa Utilities Board

RPU-90-8 Nov-90 Feb-91


39. East Texas Gas Systems Texas RRC 7863 Dec-90 Revenue Requirements

40. San Jacinto Gas Transmission Texas RRC 7865 Dec-90 Revenue Requirements

41. Southern Union Gas Company Austin; Texas RRC

-- 7878

Feb-91 Feb-91

Rate of Return and Acquisition Adjustment

42. Southern Union Gas Company Port Arthur; Texas RRC

-- 8033

Mar-91 Aug-91 Oct-91

Rate of Return and Acquisition Adjustment

43. Cavallo Pipeline Company Texas RRC 8016 Jun-91 Revenue Requirements

44. New Orleans Public Service Inc. New Orleans City Council

CD-91-1 Jun-91 Mar-92


45. Houston Pipe Line Company Texas RRC 8017 Jul-91 Rate of Return

LU 000332


(Continued)

3


46. Southern Union Gas Company El Paso PURB -- Aug-91 Sep-91

Acquisition Adjustment

47. Southwestern Gas Pipeline, Inc. Texas RRC 8040 Jan-92 Feb-92

Rate Design and Settlement

48. City of Fort Worth Texas Water Commission

8748-A 9261-A

Mar-92 Aug-92 Dec-92 Oct-94 Nov-94

Interim Rates, Revenue Requirements, and Public Interest

49. Southern Union Gas Company Oklahoma Corp. Com.

-- Jun-92 Rate of Return

50. Minnegasco Minnesota PUC G-008/GR-92-400

Jul-92 Dec-92

Rate of Return

51. Guadalupe-Blanco River Authority Texas PUC 11266 Sep-92 Cost Allocation and Bond Funds

52. Dorchester Intra-State Gas System Texas RRC 8111 Oct-92 Nov-92

Rate Impact of System Upgrade

53. Corpus Christi TransmissionCompany GP and GPII

Texas RRC 8300 8301

Oct-92 Oct-92


54. East Texas Industrial Gas Company Texas RRC 8326 Mar-93 Revenue Requirements

55. Arkansas Louisiana Gas Company Arkansas PSC 93-081-U Apr-93 Oct-93


56. Texas Utilities Electric Company Texas PUC 11735 Jun-93 Jul-93

Impact of Nuclear Plant Construction Delay


Nov-93 Apr-94

Rate of Return

58. Gulf States Utilities Company Municipalities -- May-94 Oct-94 Nov-94


59. Louisiana Power & Light Company Louisiana PSC U-20925 Aug-94 Feb-95


60. San Jacinto Gas Transmission Texas RRC 8429 Sep-94 Revenue Requirements

61. Cavallo Pipeline Company Texas RRC 8465 Sep-94 Revenue Requirements

62. Eastrans Limited Partnership Texas RRC 8385 Oct-94 Revenue Requirements

63. Gulf States Utilities Company Louisiana PSC U-19904 Oct-94 Rate of Return on Equity

64. Entergy Services, Inc. FERC ER95-112-000

Mar-95 Nov-95


65. East Texas Gas Systems Texas RRC 8435 Apr-95 Revenue Requirements

66. System Energy Resources, Inc. FERC ER95-1042-000

May-95 Dec-95 Jan-96


LU 000333


(Continued)

4



Aug-95 Dec-95

Rate of Return

68. Entex Louisiana PSC U-21586 Aug-95 Rate of Return

69. City of Fort Worth Texas NRCC SOAH 582-95-1084

Nov-95 Public Interest of Contract

70. Seagull Energy Corporation Texas RRC 8589 Nov-95 Revenue Requirements

71. Corpus Christi TransmissionCompany LP

Texas RRC 8449 Feb-96 Revenue Requirements

72. Missouri Gas Energy Missouri PSC GR-96-285 Apr-96 Sep-96 Oct-96

Rate of Return

73. Entex Mississippi PSC 96-UA-202 May-96 Rate of Return

74. Entergy Gulf States, Inc. Louisiana PSC U-22084 May-96 Rate of Return on Equity (Gas)

75. Entergy Gulf States, Inc. Louisiana PSC U-22092 May-96 Oct-96


76. American Gas Storage, L.P. Texas RRC 8591 Sep-96 Revenue Requirements

77. Entergy Louisiana, Inc. Louisiana PSC U-20925 Sep-96 Oct-96


78. Lone Star Pipeline and GasCompany

Texas RRC 8664 Oct-96 Jan-97

Rate of Return

79. Entergy Arkansas, Inc. Arkansas PSC 96-360-U Oct-96 Sep-97


80. East Texas Gas Systems Texas RRC 8658 Nov-96 Revenue Requirements

81. Entergy Gulf States, Inc. Texas PUC 16705 Nov-96 Jul-97


82. Eastrans Limited Partnership Texas RRC 8657 Nov-96 Revenue Requirements

83. Enserch Processing, Inc. Texas RRC 8763 Nov-96 Interim Rates

84. Entergy New Orleans, Inc. City of New Orleans

UD-97-1 Feb-97 Mar-97 May-98


85. ENSTAR Natural Gas Company Alaska PUC U-96-108 Mar-97 Apr-97

Service Area Certificate


87. Missouri Gas Energy Missouri PSC GR-98-140 Nov-97 Apr-98 May-98

Rate of Return

88. Corpus Christi TransmissionCompany LP

Texas RRC 8762 Dec-97 Revenue Requirements

89. Texas-New Mexico Power Company Texas PUC 17751 Feb-98 Excess Cost Over Market

90. Southern Union Gas Company Texas RRC 8878 May-98 Rate of Return

LU 000334


(Continued)

5


91. Entergy Louisiana, Inc. Louisiana PSC U-20925 May-98 Jul-98

Financial Integrity

92. Entergy Gulf States, Inc. Louisiana PSC U-22092 May-98 Jul-98

Financial Integrity

93. ACGC Gathering Company, LLC Texas RRC 8896 Sep-98 Cost-based Rates

94. American Gas Storage, L.P. Texas RRC 8855 Oct-98 Revenue Requirements

95. Duke Energy Intrastate Network Texas RRC 8940 Jun-99 Rate of Return

96. Aquila Energy Corporation Texas RRC 8970 Aug-99 Revenue Requirements


98. Southern Union Gas Company El Paso PURB -- Oct-99 Rate of Return

99. TXU Lone Star Pipeline Texas RRC 8976 Oct-99 Feb-00

Rate of Return

100. Sharyland Utilities, L.P. Texas PUC 21591 Nov-99 Rate of Return

101. TXU Lone Star Gas Distribution Texas RRC 9145 Apr-00 Aug-00

Rate of Return

102. Rotherwood Eastex Gas Storage Texas RRC 9136 May-00 Revenue Requirements

103. Eastex Gas Storage & Exchange, Inc.

Texas RRC 9137 May-00 Revenue Requirements

104. Eastex Gas Storage & Exchange, Inc.

Texas RRC 9138 Jul-00 Revenue Requirements

105. East Texas Gas Systems Texas RRC 9139 Jul-00 Revenue Requirements

106. Eastrans Limited Partnership Texas RRC 9140 Aug-00 Revenue Requirements

107. Reliant Energy – Entex City of Tyler -- Oct-00 Rate of Return

108. City of Fort Worth Texas NRCC SOAH 582-00-1092

Dec-00 CCN – Rates and Financial Ability

109. Entergy Services, Inc. FERC RTO1-75 Dec-00 Rate of Return on Equity

110 ENSTAR Natural Gas Company Alaska PUC U-00-88 Jun-01 Aug-01 Nov-01 Sep-02 Dec-02

Revenue Requirements, Cost Allocation, and Rate Design

111. TXU Gas Distribution Texas RRC 9225 Jul-01 Rate of Return

112. Centana Intrastate Pipeline LLC Texas RRC 9243 Aug-01 Rate of Return

113. Maxwell Water Supply Corp. Texas NRCC SOAH-582-01-0802

Oct-01 Mar-02 Apr-02

Reasonableness of Rates

114. Reliant Energy Arkla Arkansas PSC 01-243-U Dec-01 Jun-01

Rate of Return

115. Entergy Services, Inc. FERC ER01-2214-000

Mar-02 Rate of Return on Equity

LU 000335


(Continued)

6


116. TXU Lone Star Pipeline Texas RRC 9292 Apr-02 Rate of Return

117. Southern Union Gas Company El Paso PURB -- Apr-02 Rate of Return

118. San Jacinto Gas Transmission Co. Texas RRC 9301 May-02 Rate of Return

119. Duke Energy Intrastate Network Texas RRC 9302 May-02 Rate of Return

120. Reliant Energy Arkla Oklahoma CC 200200166 May-02 Rate of Return

121. TXU Gas Distribution Texas RRC 9313 Jul-02 Sep-02

Rate of Return

122. Entergy Mississippi, Inc. Mississippi PSC 2002-UN-256 Aug-02 Rate of Return on Equity

123. Aquila Storage & Transportation LP Texas RRC 9323 Sep-02 Revenue Requirements

124. Panther Pipeline Ltd. Texas RRC 9291 Oct-02 Revenue Requirements

125. SEMCO Energy Michigan PSC U-13575 Nov-02 Revenue Requirements

126. CenterPoint Energy Entex Louisiana PSC U-26720 Jan-03 Rate of Return

127. Crosstex CCNG Transmission Ltd. Texas RRC 9363 May-03 Revenue Requirements

128. TXU Gas Company Texas RRC 9400 May-03 Jan-04

Rate of Return

129. Eastrans Limited Partnership Texas RRC 9386 May-03 Rate of Return

130. CenterPoint Energy Entex City of Houston Jun-03 Rate of Return

131. East Texas Gas Systems, L.P. Texas RRC 9385 Jun-03 Rate of Return

132. ENSTAR Natural Gas Company Alaska RCA U-03-084 Aug-03 Nov-03

Line Extension Surcharge

133. CenterPoint Energy Arkla Louisiana PSC Nov-03 Rate of Return

134. ENSTAR Natural Gas Company Alaska RCA U-03-091 Feb-04 Cost Separation and Taxes

135. Sid Richardson Pipeline, Ltd. Texas RRC 9532 Jun-04

Nov-04


136. ETC Katy Pipeline, Ltd. Texas RRC 9524 Sep-04 Revenue Requirements

137. CenterPoint Energy Entex Mississippi PSC 03-UN-0831 Sep-04 Rate Formula

138. Centana Intrastate Pipeline LLC Texas RRC 9527 Sep-04 Rate of Return

139. SEMCO Energy Michigan PSC U-14338 Dec-04 Revenue Requirements

140. Atmos Energy – Energas Texas RRC 9539 Feb-05 Regulatory Policy

141. Crosstex North Texas Pipeline, L.P. Texas RRC 9613 Sep-05 Revenue Requirements

142. SiEnergy, L.P. Texas RRC 9604 Dec-05 Rate of Return, Income Taxes, and Cost Allocation

143. ENSTAR Natural Gas Company Alaska RCA TA-140-4 Feb-06 Connection Fees

144. SEMCO Energy Michigan PSC U-14984 May-06 Dec-06


LU 000336


(Continued)

7


145. Atmos Energy – Mid-Tex Texas RRC 9676 May-06 Oct-06


146. EasTrans Limited Partnership Texas RRC 9659 Jun-06 Rate of Return

147. Kinder Morgan Texas Pipeline, L.P. Texas RRC 9688 Jul-06 Rate of Return

148. Crosstex CCNG Transmission Ltd. Texas RRC 9660 Aug-06 Revenue Requirements

149. Enbridge Pipelines (North Texas), LP Texas RRC 9691 Oct-06 Rate of Return

150. Panther Interstate Pipeline Energy FERC CP03-338-00 Mar-07 Revenue Requirements

151. El Paso Electric Company Texas PUC 34494 Jul-07 CCN

152. El Paso Electric Company NM PRC 07-00301-UT Jul-07 CCN

153. Atmos Energy Kansas CC 08-ATMG-280-RTS

Sep-07 Feb-08


154. Centana Intrastate Pipeline LLC Texas RRC 9759 Sep-07 Rate of Return

155. Texas Gas Service Company Texas RRC 9770 Nov-07 Rate of Return

156. ENSTAR Natural Gas Company Alaska RCA U-08-25 Jun-08 Rate Class Switching

157. ConocoPhillips Transportation Alaska Alaska RCA TL-131-301 Oct-08 Rate of Return

158. ExxonMobil Pipeline Co. Alaska RCA TL-140-304 Nov-08 Rate of Return

159. Crosstex North Texas Pipeline, L.P. Texas RRC 9843 Dec-08 Revenue Requirements

160. Koch Alaska Pipeline Company Alaska RCA TL 128-308 Dec-08 Rate of Return

161. Unocal Pipeline Company Alaska RCA TL 118-312 Dec-08 Rate of Return

162. ETC Katy Pipeline, Ltd. Texas RRC 9841 Dec-08 Revenue Requirements

163. Oklahoma Natural Gas Oklahoma CC 200800348 Jan-09 Rate of Return on Equity

164. Entergy Mississippi, Inc. Mississippi PSC EC-123-0082 Mar 09 Rate of Return on Equity

165. ENSTAR Natural Gas Company Alaska RCA U-09-69 U-09-70

Jun-09 Jul-09 Oct-09


166. EasTrans, LLC Texas RRC 9857 Jun-09 Rate of Return

167. Oklahoma Natural Gas Oklahoma CC 200900110 Jun-09 Rate of Return

168. Crosstex CCNG Transmission Ltd. Texas RRC 9858 Jun-09 Revenue Requirements

169. ConocoPhillips Transportation Alaska Alaska RCA TL-137-301 Jul-09 Rate of Return

170. ENSTAR Natural Gas Company Alaska RCA U-08-142 Jul-09 Gas Cost Adjustment

171. Kinder Morgan Texas Pipeline, LLC Texas RRC 9889 Jul-09 Rate of Return

172. Koch Alaska Pipeline Company Alaska RCA TL 133-308 Aug-09 Rate of Return

173. ExxonMobil Pipeline Co. Alaska RCA TL-147-304 Nov-09 Rate of Return

174. Texas Gas Service Company El Paso PURB -- Dec-09 Rate of Return

175. Unocal Pipeline Company Alaska RCA TL126-312 Dec-09 Rate of Return

LU 000337


(Continued)

8

176. Kuparuk Transportation Company Alaska RCA P-08-05 Apr-10 Rate of Return

177. Trans-Alaska Pipeline System FERC ISO9-348-000 Apr 10 Octo 10

Rate of Return

178. Texas Gas Service Texas RRC 9988 May 10 Aug 10

Rate of Return

179. SEMCO Energy Gas Company Michigan PSC U-16169 Jun 10 Dec 10


180. ConocoPhillips Transportation Alaska Alaska RCA TL-137-301 Jul 10 Rate of Return

181. Koch Alaska Pipeline Company, LLC Alaska RCA TL-138-308 Aug 10 Rate of Return

182. CPS Energy Texas PUC 36633 Sep 10 Apr 11

Rate of Return for MOU

183. ExxonMobil Pipeline Co. Alaska RCA TL-151-304 Dec 10 Rate of Return

184. Unocal Pipeline Company Alaska RCA TL132-312 Feb 11 Rate of Return

185. New Mexico Gas Company NM PRC 11-00042-UT Mar 11 Rate of Return

186. ConocoPhillips Transportation Alaska Alaska RCA TL-143-301 May 11 Rate of Return

187. Enbridge Pipelines (Southern Lights) FERC IS11-146-000 Jun 11 Nov 11

Rate of Return

188. Koch Alaska Pipeline Company, LLC Alaska RCA TL-138-___ Jul 11 Rate of Return

189. Unocal Pipeline Company Alaska RCA TL126-___ Dec 11 Rate of Return

190. Kansas Gas Service Kansas CC 12-KGSC-835-RTS

May 12 Oct 12

Rate of Return

191. ExxonMobil Pipeline Co. Alaska RCA TL-157-304 Jun 12 Rate of Return


193. Seaway Crude Pipeline Company FERC IS12-226-000 Aug 12 Feb 13

Rate of Return

194. Cross Texas Transmission, LLC Texas PUC 40604 Aug 12 Oct 12 Nov 12


195. Wind Energy Transmission Texas Texas PUC 40606 Aug 12 Nov 12


196. Lone Star Transmission LLC Texas PUC 40798 Nov 12 Revenue Requirements

197. West Texas Gas Company Texas RRC 10235 Jan 13 Rate of Return

198. Cross Texas Transmission, LLC Texas PUC 41190 Feb 13 Revenue Requirements

199. ExxonMobil Pipeline Co. Alaska RCA TL-162-304 Apr 13 Rate of Return

200. EasTrans,LLC Texas RRC 10276 Jul 13 Rate of Return


202. BP Pipelines (Alaska) Inc. Alaska RCA TL-143-311 Sep 13 Rate of Return

203. Wind Energy Transmission Texas Texas PUC 41923 Oct 13 Revenue Requirements

204. Oliktok Pipeline Company Alaska RCA P-13-013 Nov 13 Rate of Return

LU 000338


(Continued)

9

205. Aqua Texas Southeast Region-Gray Texas CEQ 2013-2007-UCR

Apr 14 Revenue Requirements

206. Entergy Mississippi Mississippi PSC EC-123-0082 Jun 14 Rate of Return on Equity

207. Westlake Ethylene Pipeline Texas RRC 10358 Jul 14 Aug 15

Rates

208. ExxonMobil Pipeline Co. Alaska RCA TL-164-304 Jul 14 Rate of Return

209. ConocoPhillips Transportation Alaska Alaska RCA TL-154-301 Aug 14 Rate of Return

210. Enstar Natural Gas Company Alaska RCA TA-262-4 Sep 14 Jun 15


211. Oliktok Pipeline Company Alaska RCA TL-44-334 Mar 15 Rate of Return

212. Entergy Arkansas, Inc. Arkansas PSC 15-0150U Apr 15 Oct 15 Dec 15


213. Wind Energy Transmission Texas Texas PUC 44746 Jun 15 Revenue Requirements

214. Texas City Texas RRC 10408 Jun 15 Nov 15

Pipeline Annual Assessment

215. Oklahoma Natural Gas Oklahoma CC 201500213 Jul 15 Nov 15

Rate of Return

216. PTE Pipeline LLC Alaska RCA P-12-015 Sep 15 Rate of Return

217. Northeast Transmission Development, LLC

FERC ER16-453 Dec 15 Formula Rates

218. Oncor Electric Delivery Texas PUC 45188 Dec 15 Public Interest of Acquisition

219. Corix Utilities (Texas) Texas PUC 45418 Dec 15 Rate of Return

220. Texas Gas Service Texas RRC 10488 Dec 15 Rate of Return

221. Texas Gas Service Texas RRC 10506 Mar 16 Jun 16

Rate of Return

222. Kansas Gas Service Kansas CC 16-KGSG-491-RTS

May 16 Rate of Return on Equity

223. Enstar Natural Gas Company Alaska RCA TA-285-4 Jun 16 Revenue Requirements, Cost Allocation, and Rate Design

224. Texas Gas Service Texas RRC 10526 Jun 16 Rate of Return

225. West Texas LPG Pipeline Texas RRC 10455 Aug 16 Rates and Rate of Return

LU 000339

of 2

Operating Revenues:

Residential 1,366,757 1,046,622 2,413,379 Commercial 57,857 238,719 296,575 Other 48,701 37,967 86,668

Total 1,473,315 1,323,307 2,796,622

Operating Expenses:

Salaries and Wages 328,819 300,759 629,578 Purchased Water 40,092 19,868 59,960 Sludge Removal 29,964 72,687 102,652 Purchased Power and Fuel 87,088 68,933 156,021 Chemicals 26,113 12,712 38,825 Materials and Supplies 29,921 23,187 53,107 Contractual Services 373,914 360,794 734,708 Building and Equipment Rental 22,987 10,141 33,128 Transportation 20,420 16,223 36,643 Insurance 9,637 4,224 13,861 Regulatory 6,670 - 6,670 Bad Debt 16,816 8,949 25,766 Miscellaneous 43,895 46,400 90,295 Depreciation and Amortization 377,746 301,850 679,596 Taxes Other than Income 106,344 65,983 172,327

Total 1,520,426 1,312,711 2,833,137

Operating Income (Loss) (47,112) 10,597 (36,515)

Non-Operating Income and Expenses:

Income 25,514 3,134 28,648 Expenses 1,021 767 1,788

Total 24,493 2,367 26,860

NET INCOME (LOSS) (22,619) 12,964 (9,654)

INCOME STATEMENTS

For the Year Ended December 31, 2015

Woodmark Tall Timbers Combined

BHF-3

LU 000340

of 2

Assets:

Cash 490 5,292 5,782 Accounts Receivable (net) 157,941 125,453 283,393 Prepayments 1,877 2,051 3,929 Deferred Debits 2,492 (0) 2,492

Plant in Service 8,557,331 5,997,159 14,554,490 Accumulated Depreciation (2,760,574) (1,863,289) (4,623,863)

Construction Work in Progress (a) 1,211,445 605,297 1,816,742

Liabilities and Capital:

Accounts Payable (3,154,589) (752,097) (3,906,686) Customer Deposits (16,259) (12,952) (29,212) Accrued Taxes (97,344) (77,256) (174,600) Miscellaneous Liabilities (207,954) (292,609) (500,563) Construction Advances (12,500) (17,500) (30,000)

Contributions in Aid of Construction (net) (1,502,227) (1,147,094) (2,649,321) Deferred Income Taxes 8,008 - 8,008

Common Stock (483,040) (1,100) (484,140) Additional Paid in Capital (92,457) 12,719 (79,738) Retained Earnings (1,612,641) (2,584,075) (4,196,716)

Total 7,171,003 (7,171,003) 4,871,964 (4,871,964) 12,042,967 (12,042,967)

(a) Includes Completed Construction not Classified of $739,822 for Woodmark and $212,928 for Tall Timbers, or a total of $952,750.

BALANCE SHEETS

At December 31, 2015


LU 000341

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 1COST OF SERVICE Page 1 of 1Test Year Ended December 31, 2015

ReferenceDescription Schedule

Operations and Maintenance Expenses Schedule 2 1,983,847$

Taxes Other than Income Schedule 3 208,074

Depreciation Expense Schedule 4 735,146

Return on Investment

Rate Base Schedule 5 7,076,376$ Rate of Return Schedule 6 8.60%

Return 608,356

Income Tax Expense Schedule 7 270,993

Total Cost of Service 3,806,415$

Other Income Schedule 8 (86,668)

Net Cost of Service 3,719,747$


BASE EQUIVALENT RATE 76.54$

Amount

1

BHF-4

LU 000342

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 2O&M AND A&G EXPENSES Page 1 of 1Test Year Ended December 31, 2015


701 Salaries and Wages - Employees 328,819$ 300,759$ 629,578$ 710 Purchased Water 40,092 19,868 59,960 711 Sludge Removal Expense 29,964 72,687 102,652 715 Purchased Power 86,913 68,851 155,764 716 Fuel for Power Production 174 82 256 718 Chemicals 26,113 12,712 38,825 720 Materials and Supplies 29,921 23,187 53,107 731 Contractual Services - Engineering - - - 732 Contractual Services - Accounting 348 4,512 4,859 733 Contractual Services - Legal (4,027) (293) (4,319) 734 Contractual Services - Management Fees 145,692 172,756 318,448 735 Contractual Services - Testing 11,586 7,590 19,175 736 Contractual Services - Other 220,316 176,229 396,545 741 Rental of Building/Real Property 3,798 4,089 7,887 742 Rental of Equipment 19,188 6,053 25,241 750 Transportation Expenses 20,420 16,223 36,643 756 Insurance - Vehicle 2,364 1,918 4,282 757 Insurance - General Liability 7,273 2,306 9,579 766 Regulatory Commission Expenses 6,670 - (6,670) (a) - 767 Regulatory Commission Expenses - Other - - - 770 Bad Debt Expense 16,816 8,949 9,303 (b) 35,069 775 Miscellaneous Expenses 43,895 46,400 90,295

Total O&M and A&G Expenses 1,036,336$ 944,877$ 1,983,847$

(a) To remove amortization of previous rate case expenses.

(b) 2015 Bad Debt Expense 25,766$ 2015 Operating Revenues 2,796,622

Bad Debt Ratio 0.921%Total Cost of Service (Schedule 1) 3,806,415

Adjusted Bad Debts Expense 35,069$

Per Books

2

LU 000343

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 3TAXES OTHER THAN INCOME Page 1 of 1Test Year Ended December 31, 2015


408 Taxes Other than Income

Property Taxes 97,344$ 65,983$ 16,198$ (a) 179,525$

Texas Franchise Tax 9,000 - 19,548 (b) 28,548

Total Taxes Other than Income 106,344$ 65,983$ 208,074$

(a) To include property taxes on Construction Completed not Classified


Property Tax Rate 1.70% Construction Completed not Classified 952,750$

CCNC Property Taxes 16,198$

(b) Total Cost of Service Schedule 1 3,806,415$ Applicable Margin Percentage 70%

Taxable Margin 2,664,490 Texas Franchise Tax Rate 0.75%

Texas Franchise Tax 28,548$

Per Books

3

LU 000344

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 4DEPRECIATION EXPENSE Page 1 of 1Test Year Ended December 31, 2015

AdjustedDescription Life Woodmark Tall Timbers Adjustments Ref. Amount

352 Franchises 10,791$ -$ (10,791)$ (a) -$ 353 Land and Land Rights - 354 Structures and Improvements 30 114,420 73,439 3,268 (b) 191,127 355 Power Generation Equipment 20 (568) (568) 360 Collection Sewers - Force 50 928 12,388 13,316 361 Collection Sewers - Gravity 50 12,863 11,345 265 (b) 24,474 363 Services to Customers 20 10,948 5,302 561 (b) 16,811 364 Flow Measuring Devices 20 - 370 Receiving Wells 30 2,829 2,829 371 Pumping Equipment 5 171,223 194,428 75,105 (b)(c) 440,756 380 Treatment and Disposal Equipment 25 73,475 25,014 13,007 (b) 111,497 381 Plant Sewers 40 12,292 9,914 1,835 (b) 24,041 389 Other Plant and Miscellaneous Equipment 20 1,866 3,433 5,299 390 Office Furniture and Equipment 10 6,217 3,594 9,811

390.1 Computer & Softwear 5 297 824 925 (b) 2,047 391 Transportation Equipment 5 3,615 554 4,169 393 Tools, Shop and Garage Equipment 5 23,290 8,077 1,145 (b) 32,511 394 Laboratory Equipment 10 (9,094) 633 (b) (8,461) 395 Power Operated Equipment 20 - 259 259 396 Communication Equipment 15 309 504 456 (b) 1,268

272 Amortization of CIAC (77,770) (58,271) (136,041)

Total Depreciation Expense 357,932$ 290,804$ 735,146$

(a) To remove amortization of intangible asset.

(b) To include depreciation expense on Construction Completed not Classified

(c) To adjust depreciation expense recorded on books during 2015 to correct total.

Per Books

4

LU 000345

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 5RATE BASE Page 1 of 1Test Year Ended December 31, 2015

AdjustedDescription Woodmark Tall Timbers Adjustment Ref. Amount

Property, Plant & Equipment

352 Franchises 431,640$ -$ (431,640)$ (a) -$ 353 Land and Land Rights 25,000 164,003 189,003 354 Structures and Improvements 3,384,080 2,360,791 98,053 (b) 5,842,924 355 Power Generation Equipment 2,200 - 2,200 360 Collection Sewers - Force 46,402 619,378 665,780 361 Collection Sewers - Gravity 643,162 567,272 13,258 (b) 1,223,692 363 Services to Customers 218,960 111,909 11,229 (b) 342,098 364 Flow Measuring Devices 2,582 - 2,582 370 Receiving Wells 84,881 - 84,881 371 Pumping Equipment 1,047,618 1,122,876 408,100 (b) 2,578,593 380 Treatment and Disposal Equipment 1,836,113 625,338 325,184 (b) 2,786,635 381 Plant Sewers 490,008 198,286 73,405 (b) 761,699 389 Other Plant and Miscellaneous Equipment 37,315 83,485 120,800 390 Office Furniture and Equipment 91,225 49,607 140,833

390.1 Computer & Softwear 1,487 4,122 4,626 (b) 10,235 391 Transportation Equipment 82,240 32,229 114,469 393 Tools, Shop and Garage Equipment 118,327 42,540 5,723 (b) 166,590 394 Laboratory Equipment 9,459 - 6,332 (b) 15,791 395 Power Operated Equipment - 7,770 7,770 396 Communication Equipment 4,632 7,554 6,839 (b) 19,025

Plant in Service 8,557,331$ 5,997,159$ 15,075,600$


352 Franchises (107,466)$ -$ 107,466$ (a) -$ 354 Structures and Improvements (1,298,386) (1,040,715) (2,339,100) 354 Structures and Improvements 19,815 2,804 22,619 355 Power Generation Equipment (1,008) - (1,008) 360 Collection Sewers - Force (1,397) (64,884) (66,281) 361 Collection Sewers - Gravity (158,850) (96,361) (255,211) 361 Collection Sewers - Gravity 647 8,934 9,582 363 Services to Customers (103,617) (37,715) (141,331) 364 Flow Measuring Devices (2,582) - (2,582) 370 Receiving Wells (4,480) - (4,480) 371 Pumping Equipment (570,395) (478,512) (1,048,907) 380 Treatment and Disposal Equipment (287,235) (37,091) (324,326) 380 Treatment and Disposal Equipment 568 - 568 381 Plant Sewers (25,176) (12,393) (37,569) 389 Other Plant and Miscellaneous Equipment (22,955) (30,319) (53,275) 390 Office Furniture and Equipment (53,455) (23,563) (77,018) 390 Office Furniture and Equipment (489) (962) (1,451) 390 Office Furniture and Equipment - (358) (358) 391 Transportation Equipment (69,586) (30,219) (99,805) 393 Tools, Shop and Garage Equipment (55,551) (20,971) (76,522) 393 Tools, Shop and Garage Equipment 38 - 38 394 Laboratory Equipment (18,553) - (18,553) 395 Power Operated Equipment - (259) (259) 396 Communication Equipment (462) (704) (1,167)

Accumulated Depreciation (2,760,574)$ (1,863,289)$ (4,516,396)$

Working Capital

Cash Working Capital Allowance -$ -$ 165,321 (c) 165,321$ 162 Prepayments 1,877 2,051 (991) (d) 2,937

Working Capital 168,258$


190 ADIT -- Net Operating Loss Carry-Forwards 672,689 (e) 672,689$ 235 Customer Deposits (16,259) (12,952) (29,212) 271 Contributions in Aid of Construction (2,333,088) (1,443,850) (3,776,938) 272 Accumulated Amortization of Contributions in Aid of Construction 830,861 357,096 1,187,957 281 ADIT -- Accelerated Depreciation of Property (1,636,298) (e) (1,636,298) 282 ADIT -- Other Property (71,289) (e) (71,289) 283 ADIT -- Other (Bad Debts) 2,005 (e) 2,005

Non-Investor Supplied Capital (3,651,086)$

RATE BASE 7,076,376$

(a) To remove intangible asset and associated accumulated amortization.

(b) To include Completed Construction not Classified.

(c) O&M Expenses (Schedule 2) 1,983,847$ 1/12th Factor 8.33%

Cash Working Capital Allowance 165,321$

(d) To adjust to 2015 13-month average balance.

(e) To reflect ADIT not recorded on books.

Detail of Completed Construction not Classified:

354 Lift Station Replacement 47,113 354 WWTP Replacement 16,453 361 Manholes Replacement 1,376 361 Collection Mains Replacement 6,190 363 Sewer Service Replacements 2,370 371 WM WWTP Improvements 210,915 371 Lift Station Replacement 45,199 371 WWTP Replacement 16,461 380 WM WWTP Improvements 302,274 380 WWTP Replacement 5,027 381 WM WWTP Improvements 73,405 393 Tools & Equipment Replacements 419 393 Tools & Equipment New 2,955 394 Lab Equipment Replacements 2,825 396 Lift Station Replacement 6,839

354 Lift Station Replacement 20,560 354 WWTP Replacement 13,927 361 Manholes Replacement 2,879 361 Collection Mains Replacement 2,813 363 Sewer Service Replacements 8,859 371 Lift Station Replacement 91,046 371 WWTP Replacement 4,551 371 Lift Station Replacement 39,927 380 WWTP Replacement 17,884 390 Equipment & Computer Replaceme 4,626 393 Tools & Equipment Replacements 1,146 393 Tools & Equipments New 1,203 394 Lab Equipment Replacements 3,507

739,822 212,928 952,750

Per Books

5

LU 000346

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 6RATE OF RETURN Page 1 of 1Test Year Ended December 31, 2015

Component WeightedDescription Woodmark Tall Timbers Percent Cost Cost

Debt -$ -$ 30.00% 4.95% (a) 1.49%

Equity 2,210,756 2,559,492 70.00% 10.16% (b) 7.11%

Total 2,210,756$ 2,559,492$ 100.00%

Overall Rate of Return 8.60%

(a) Average Cost of Debt:Weighted

% of Total Cost CostSenior Unsecured Debt (AZ and TX) 50.00% 5.60% 2.80%Liberty Utilties Company General Debt 50.00% 4.30% 2.15%

Cost of Debt 4.95%

(b) Moody's July 2016 Baa utility yield of 4.16% plus 6.00% risk premium.

OVERALL RATE OF RETURN

Per BooksRequested

6

LU 000347

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 7RETURN AND INCOME TAXES Page 1 of 1Test Year Ended December 31, 2015

Description Reference

Return on Investment: Rate Base Schedule 5 7,076,376$ Rate of Return Schedule 6 8.60%

Return on Investment 608,356$

Interest Expense: Rate Base Schedule 5 7,076,376$ Weighted Cost of Debt Schedule 6 1.49%

Interest Expense (105,084)

Return on Equity 503,272$

Income Tax Factor (1+ (35%/(1 - 35%))) 1.538462

Taxable Income 774,264$

Federal Corporate Income Tax Rate 35.00%

Income Tax Expense 270,993$

Amount

7

LU 000348

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 8OTHER INCOME AND BILLING UNITS Page 1 of 1Test Year Ended December 31, 2015

Description Woodmark Tall Timbers Adjustment Ref. Adjusted

Other Income

536 Other WasteWater Revenues Establishment Fees (5,500)$ (19,225)$ (24,725)$ 536 Other WasteWater Revenues Service Charges (25,375) (8,025) (33,400) 536 Other WasteWater Revenues Late Payment Fee (17,826) (10,745) (28,571) 536 Other WasteWater Revenues Misc Income - 28 28

Total Other Income (48,701)$ (37,967)$ (86,668)$

2015 Billing Units (a)

January 1,876 2,135 4,011 February 1,783 2,307 4,089 March 1,760 2,184 3,944 April 1,763 2,214 3,977 May 1,781 2,212 3,993 June 1,794 2,231 4,025 July 1,781 2,516 4,297 August 1,798 2,241 4,038 September 1,783 2,266 4,048 October 1,785 2,273 4,058 November 1,791 2,267 4,058 December 1,794 2,267 4,061

Total Base Equivalent Rates 21,488 27,112 48,600

(a) Calculated from monthly billing records.

Per Books

8

LU 000349

LIBERTY UTILITIES (WOODMARK/TALL TIMBERS SYSTEMS) Schedule 9SECOND-STEP RATE INCREASE Page 1 of 1Test Year Ended December 31, 2015

Description Reference TT -- WWTP Relocation WM -- WWTP

Investment in Property, Plant, and Equipment:

354 Structures and Improvements 161,219$ 1,670,840$ 1,832,059$ 360 Collection Sewers - Force 885,776$ 885,776 371 Pumping Equipment 173,167 241,414 414,581 380 Treatment and Disposal Equipment 1,275,160 1,275,160 381 Plant Sewers 50,951 262,236 313,187 389 Other Plant and Miscellaneous Equipment 54,029 54,029

Second-step Investment 439,366$ 885,776$ 3,449,650$ 4,774,792$

Operations and Maintenance Expenses:

Operating Expenses:

710 Purchased Water -$ -$ (12,000) (12,000)$ 711 Sludge Removal Expense - - 5,800 5,800 715 Purchased Power - - 50,426 50,426

Second-step O&M Expenses 44,226$

Bad Debts Expense:

Second-Step Cost of Service 955,981$ Bad Debt Ratio Schedule 2 0.921%

Second-step Bad Debts Expense 8,808


Property Taxes:


Property Tax Rate 1.70% Additional Investment 4,774,792$

Second-step Property Taxes 81,180

Texas Franchise Taxes:

Second-Step Cost of Service 955,981$ Applicable Margin Percentage Schedule 3 70%

Taxable Margin 669,187$ Texas Franchise Tax Rate Schedule 3 0.75%

Second-step Texas Franchise Tax 5,019

Depreciation Expense:Life Cost Depr. Expense

354 Structures and Improvements Schedule 4 30 1,832,059$ 61,069$ 360 Collection Sewers - Force Schedule 4 50 885,776 17,716 371 Pumping Equipment Schedule 4 5 414,581 82,916 380 Treatment and Disposal Equipment Schedule 4 25 1,275,160 51,006 381 Plant Sewers Schedule 4 40 313,187 7,830 389 Other Plant and Miscellaneous Equipment Schedule 4 20 54,029 2,701

Second-step Depreciation Expense 223,238

Return on Investment:

Second-step Investment 4,774,792$

Cash Working Capital Allowance:Additional O&M and A&G Expenses 53,034$ 1/12th Factor 8.33%

Additional Cash Working Capital Allowance 4,419

Additional Rate Base 4,779,212$ Rate of Return Schedule 6 8.60%

Second-step Return on Investment 410,489

Income Taxes:

Additional Rate Base 4,779,212$ Weighted Cost of Equity Schedule 6 7.11%

Second-step Equity Return 339,898$ Income Tax Factor Schedule 7 0.538462

Second-step Income Taxes 183,022

Second-step Cost of Service 955,981$


SECOND-STEP BASE EQUIVALENT RATE INCREASE 19.67$

AmountsDescription

9

LU 000350

Operating Revenues:

Residential 1,366,757 1,046,622 2,413,379 Commercial 57,857 238,719 296,575 Other 48,701 37,967 86,668

Total 1,473,315 1,323,307 2,796,622

Operating Expenses:

Salaries and Wages 328,819 300,759 629,578 Purchased Water 40,092 19,868 59,960 Sludge Removal 29,964 72,687 102,652 Purchased Power and Fuel 87,088 68,933 156,021 Chemicals 26,113 12,712 38,825 Materials and Supplies 29,921 23,187 53,107 Contractual Services 373,914 360,794 734,708 Building and Equipment Rental 22,987 10,141 33,128 Transportation 20,420 16,223 36,643 Insurance 9,637 4,224 13,861 Regulatory 6,670 - 6,670 Bad Debt 16,816 8,949 25,766 Miscellaneous 43,895 46,400 90,295 Depreciation and Amortization 377,746 301,850 679,596 Taxes Other than Income 106,344 65,983 172,327

Total 1,520,426 1,312,711 2,833,137

Operating Income (Loss) (47,112) 10,597 (36,515)

Non-Operating Income and Expenses:

Income 25,514 3,134 28,648 Expenses 1,021 767 1,788

Total 24,493 2,367 26,860

NET INCOME (LOSS) (22,619) 12,964 (9,654)

INCOME STATEMENTS

For the Year Ended December 31, 2015


10

LU 000351

Assets:

Cash 490 5,292 5,782 Accounts Receivable (net) 157,941 125,453 283,393 Prepayments 1,877 2,051 3,929 Deferred Debits 2,492 (0) 2,492

Plant in Service 8,557,331 5,997,159 14,554,490 Accumulated Depreciation (2,760,574) (1,863,289) (4,623,863)

Construction Work in Progress (a) 1,211,445 605,297 1,816,742

Liabilities and Capital:

Accounts Payable (3,154,589) (752,097) (3,906,686) Customer Deposits (16,259) (12,952) (29,212) Accrued Taxes (97,344) (77,256) (174,600) Miscellaneous Liabilities (207,954) (292,609) (500,563) Construction Advances (12,500) (17,500) (30,000)

Contributions in Aid of Construction (net) (1,502,227) (1,147,094) (2,649,321) Deferred Income Taxes 8,008 - 8,008

Common Stock (483,040) (1,100) (484,140) Additional Paid in Capital (92,457) 12,719 (79,738) Retained Earnings (1,612,641) (2,584,075) (4,196,716)

Total 7,171,003 (7,171,003) 4,871,964 (4,871,964) 12,042,967 (12,042,967)

(a) Includes Completed Construction not Classified of $739,822 for Woodmark and $212,928 for Tall Timbers, or a total of $952,750.


BALANCE SHEETS

At December 31, 2015

11

LU 000352

2015 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined Sum/Check Natural Account Title

Plant in Service

101 Utility Plant in Service - - - 14,554,490 Plant in Service - Sewer351 Organization - - - Intangible Plant -Organization352 Franchises 431,640 - 431,640 Int.Plt.Franchise & Consents353 Land and Land Rights 25,000 164,003 189,003 Land354 Structures and Improvements 3,384,080 2,360,791 5,744,871 Structures & Improvements355 Power Generation Equipment 2,200 - 2,200 Power Generation360 Collection Sewers - Force 46,402 619,378 665,780 Collection Sewer Forced361 Collection Sewers - Gravity 643,162 567,272 1,210,434 Collection Sewers Gravity362 Special Collecting Structures - - - Special Collecting Structures363 Services to Customers 218,960 111,909 330,869 Services To Customers364 Flow Measuring Devices 2,582 - 2,582 Flow Measuring Devices365 Flow Measuring Installations - - - Flow Measuring Installations366 Reuse Services - - - Reuse Services367 Reuse Meters and Meter Installations - - - Reuse Meters And Installation370 Receiving Wells 84,881 - 84,881 Receiving Wells371 Pumping Equipment 1,047,618 1,122,876 2,170,493 Pumping Equipment374 Reuse Distribution Reservoirs - - - Reuse Distribution Reservoirs375 Reuse Transmission and Distribution System - - - Reuse Transmission And Distribution System380 Treatment and Disposal Equipment 1,836,113 625,338 2,461,451 Treatment & Disposal Equipment381 Plant Sewers 490,008 198,286 688,293 Plant Sewers382 Outfall Sewer Lines - - - Outfall Sewer Lines389 Other Plant and Miscellaneous Equipment 37,315 83,485 120,800 Other Sewer Plant & Equipment390 Office Furniture and Equipment 91,225 49,607 140,833 Office Furniture & Equipment

390.1 Computer & Softwear 1,487 4,122 5,609 Office Furniture/Computers391 Transportation Equipment 82,240 32,229 114,469 Transportation Equipment392 Stores Equipment - - - Stores Equipment393 Tools, Shop and Garage Equipment 118,327 42,540 160,867 Tools, Shop And Garage Equip394 Laboratory Equipment 9,459 - 9,459 Laboratory Equip395 Power Operated Equipment - 7,770 7,770 Power Operated Equipment396 Communication Equipment 4,632 7,554 12,186 Communication Equip397 Miscellaneous Equipment - - - Plant & Misc Equipment398 Other Tangible Plant - - - Other Tangible Plant


108 Accumulated Depreciation - - - (4,623,863) Accum Ammortization Sewer108 Accumulated Depreciation - - - Accum Ammortization Retirement Sewer351 Organization - - - Accum Deprec Organization351 Organization - - - Accum Deprec Retirement Organization352 Franchises (107,466) (107,466) Int.Plt.Franchise & Consents354 Structures and Improvements (1,298,386) (1,040,715) (2,339,100) Accum Deprec Structures and Improvements354 Structures and Improvements 19,815 2,804 22,619 Accum Deprec Retirement Structures and Improvement355 Power Generation Equipment (1,008) - (1,008) Accum Deprec Power Generation Equip355 Power Generation Equipment - - - Accum Deprec Retirement Power Generation Equip360 Collection Sewers - Force (1,397) (64,884) (66,281) Accum Deprec Collection Sewers Force360 Collection Sewers - Force - - - Accum Deprec Retirement Collection Sewers Force -361 Collection Sewers - Gravity (158,850) (96,361) (255,211) Accum Deprec Collection Sewers Gravity361 Collection Sewers - Gravity 647 8,934 9,582 Accum Deprec Retirement Collection Sewers Gravity362 Special Collecting Structures - - - Accum Deprec Special Collecting Structures362 Special Collecting Structures - - - Accum Deprec Retirement Special Collecting Struct363 Services to Customers (103,617) (37,715) (141,331) Accum Deprec Services363 Services to Customers - - - Accum Deprec Retirement Services364 Flow Measuring Devices (2,582) - (2,582) Accum Deprec Flow Measuring Devices364 Flow Measuring Devices - - - Accum Deprec Retirement Flow Measuring Devices365 Flow Measuring Installations - - - Accum Deprec Flow Measuring Installations365 Flow Measuring Installations - - - Accum Deprec Retirement Flow Measuring Installatio366 Reuse Services - - - Accum Deprec Reuse Services366 Reuse Services - - - Accum Deprec Retirement Reuse Services367 Reuse Meters and Meter Installations - - - Accum Deprec Reuse Meters and Meter Instal367 Reuse Meters and Meter Installations - - - Accum Deprec Retirement Reuse Meters and Meter Ins370 Receiving Wells (4,480) - (4,480) Accum Deprec Receiving Wells370 Receiving Wells - - - Accum Deprec Retirement Receiving Wells371 Pumping Equipment (570,395) (478,512) (1,048,907) Accum Deprec Pumping Equipment371 Pumping Equipment - - - Accum Deprec Retirement Pumping Equipment374 Reuse Distribution Reservoirs - - - Accum Depreciation Reuse Distribution Reservoirs374 Reuse Distribution Reservoirs - - - Accum Deprec Retirementiation Reuse Distribution R375 Reuse Transmission and Distribution System - - - Accum Depre - Resue Transmission & Distribution375 Reuse Transmission and Distribution System - - - Accum Depre Retirement Resue Transmission & Distri380 Treatment and Disposal Equipment (287,235) (37,091) (324,326) Accum Deprec Treatment and Disposal Equip380 Treatment and Disposal Equipment 568 - 568 Accum Deprec Retirement Treatment and Disposal Equ381 Plant Sewers (25,176) (12,393) (37,569) Accum Deprec Plant Sewers381 Plant Sewers - - - Accum Deprec Retirement Plant Sewers382 Outfall Sewer Lines - - - Accum Deprec Outfall Sewer Lines382 Outfall Sewer Lines - - - Accum Deprec Retirement Outfall Sewer Lines389 Other Plant and Miscellaneous Equipment (22,955) (30,319) (53,275) Accum Deprec Other Plant Equip-389 Other Plant and Miscellaneous Equipment - - - Accum Deprec Retirement Other Plant and Misc Equip390 Office Furniture and Equipment (53,455) (23,563) (77,018) Accum Deprec Office Furniture and Equip390 Office Furniture and Equipment - - - Accum Deprec Retirement Office Furniture and Equip390 Office Furniture and Equipment (489) (962) (1,451) Accum Deprn. Office F/F - Computers390 Office Furniture and Equipment - (358) (358) Accum Deprn. Retirement Office F/F - Computers391 Transportation Equipment (69,586) (30,219) (99,805) Accum Deprec Transportation Equip391 Transportation Equipment - - - Accum Deprec Retirement Transportation Equip392 Stores Equipment - - - Accum Deprec Stores Equip392 Stores Equipment - - - Accum Deprec Retirement Stores Equip393 Tools, Shop and Garage Equipment (55,551) (20,971) (76,522) Accum Deprec Tools,Shop and Garage Equip393 Tools, Shop and Garage Equipment 38 - 38 Accum Deprec Retirement Tools,Shop and Garage Equi394 Laboratory Equipment (18,553) - (18,553) Accum Deprec Laboratory Equip394 Laboratory Equipment - - - Accum Deprec Retirement Laboratory Equip-395 Power Operated Equipment - (259) (259) Accum Dep Pwr Operated Equipment395 Power Operated Equipment - - - Accum Dep Retirement Pwr Operated Equipment396 Communication Equipment (462) (704) (1,167) Accum Deprec Communication Equip-396 Communication Equipment - - - Accum Deprec Retirement Communication Equip-397 Miscellaneous Equipment - - Accum Deprec Other Plant and Misc Equip-397 Miscellaneous Equipment - - - Accum Deprec Retirement Other Plant and Misc Equip

12

LU 000353

2015 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined Sum/Check Natural Account Title398 Other Tangible Plant - - - Accum Deprec Other Tangible Plant398 Other Tangible Plant - - - Accum Deprec Retirement Other Tangible Plant

Current Assets

103 Property Held for Future Use - - - Plant Held for Future Use105 Construction Work in Progress 990,230 346,698 1,336,928 Fixed Asset Clearing105 Construction Work in Progress 220,215 258,599 478,814 Fixed Asset Accural114 Utility Plant Acqusition 1,000 - 1,000 Goodwill - Woodmark

131.1 Cash on Hand 190 4,242 4,432 Cash In Bank131.2 Cash in Bank - - - Cash In Hand (Petty Cash)131.2 Cash in Bank 300 1,050 1,350 Petty Cash132 Special Deposits - - - Restricted Cash - Loan Payment132 Special Deposits - - - Restricted Cash - Bond Resv132 Special Deposits - - - Restricted Cash - HUF Account Sewer132 Special Deposits - - - Deposits141 Customer Accounts Receivable 39,400 21,034 60,434 Accounts Receivable142 Other Accounts Receivable - 575 575 Other Receivables143 Accumulated Provision for Uncollectible Accounts (1,494) (3,685) (5,179) Allowance for Doubtful Accounts145 Accounts Receivable from Associated Companies - - - Accounts Receivable Intercompany162 Prepayments - - - Prepaid Expenses162 Prepayments 1,877 2,051 3,929 Prepaid Licences Fees & Permits162 Prepayments - - - Prepaid Insurance173 Accrued Utility Revenues 120,035 107,528 227,563 Accrued Receivables173 Accrued Utility Revenues - - - Accrued Receivables LIT184 Clearing Accounts - - - Misc Billing Clearing186 Miscellaneous Deferred Debits - - - Current Regulatory Assets186 Miscellaneous Deferred Debits - - - Regulatory Assets - FAS 109186 Miscellaneous Deferred Debits (411) (0) (411) Deferred Rate Case Costs186 Miscellaneous Deferred Debits 2,903 - 2,903 Deferred Rate Case Costs in Progress186 Miscellaneous Deferred Debits - - - Deferred Lagoon Cleaning186 Miscellaneous Deferred Debits - - - Deferred AFUDC Equity Gross Up

Current Liabilities

231 Accounts Payable - (7) (7) Accounts Payable233 Accounts Payable to Associated Companies - - - Accounts Payable - Intercompany233 Accounts Payable to Associated Companies 1,109,373 1,415,929 2,525,303 Due to AWRA233 Accounts Payable to Associated Companies (4,263,962) (2,168,019) (6,431,982) Due to Liberty Water Co.235 Customer Deposits - - - Customer Deposit235 Customer Deposits (16,259) (12,952) (29,212) Long Term Meter Deposit236 Accrued Taxes (97,344) (66,046) (163,390) Property Tax Payable236 Accrued Taxes - (11,210) (11,210) Deferred Income Tax237 Accrued Interest (1,515) (1,537) (3,052) Accrued Customer Interest241 Miscellaneous Current and Accrued Liabilities (177,468) (274,298) (451,767) Accrued Liabilities241 Miscellaneous Current and Accrued Liabilities (21,875) 3,847 (18,028) Accrued Capital Retainage241 Miscellaneous Current and Accrued Liabilities 12,821 (1,991) 10,830 Accrued Purchases241 Miscellaneous Current and Accrued Liabilities (12,889) (11,587) (24,476) Accrued Corp. Commission Assesments242 Miscellaneous Current and Accrued Liabilities (7,028) (7,043) (14,071) Unapplied Payments252 Advances for Construction (12,500) (17,500) (30,000) Developers Initial Admin Deposit283 Accum Defered Income Tax 8,008 8,008


271 Contributions in Aid of Construction (2,333,088) (1,443,850) (3,776,938) Contribution in aid of Construction - CIAC271 Contributions in Aid of Construction - (60,340) (60,340) CIAC In Process - Sewer272 Accumulated Amortization of Contributions in Aid 830,861 357,096 1,187,957 Accumulated depreciation - CIAC Sewer

Capital

201 Common Stock Issued (483,040) (1,100) (484,140) Common Shares - Tall Timbers211 Other Paid-In Capital (499,946) (510,308) (1,010,254) Paid In Capital211 Other Paid-In Capital - (250) (250) Capital Contribution - Taylor Street211 Other Paid-In Capital - 164,353 164,353 Treasury Stock - Tall Timbers211 Other Paid-In Capital 407,489 358,924 766,413 Dividends Paid214 Appropriated Retained Earnings - - - Retained Earnings - Dividends/Distributions216 Reacquired Capital Stock (1,635,259) (2,571,111) (4,206,370) Retained Earnings

Operating Revenues

521.1 Residential Revenues (1,251,485) (957,555) (2,209,040) Unmetered Residential Revenues521.2 Commercial Revenues (53,094) (220,258) (273,351) Unmetered Commercial Revenues521.3 Industrial Revenues - - - Unmetered Industrial Revenues522.1 Residential Revenues (115,272) (89,067) (204,339) Residential Revenues (Usage)522.2 Commercial Revenues (4,763) (18,461) (23,224) Meter Commercial Revenues (Usage)522.3 Industrial Revenues - - - Commercial Effluent Revenues536 Other WasteWater Revenues - - - Connection Fees536 Other WasteWater Revenues (5,500) (19,225) (24,725) Establishment Fees536 Other WasteWater Revenues (25,375) (8,025) (33,400) Service Charges536 Other WasteWater Revenues - - - Returned Check Charge536 Other WasteWater Revenues (17,826) (10,745) (28,571) Late Payment Fee536 Other WasteWater Revenues - 28 28 Misc Income544 Reuse Revenues from Other Systems - - - Effluent Credits

Operating Expenses

701 Salaries and Wages - Employees - - - 629,578 Labour - Engineering701 Salaries and Wages - Employees 328,819 300,759 629,578 Labour-Ops-Collect710 Purchased Water 40,092 19,868 59,960 59,960 Purchased Water-Ops-Collect711 Sludge Removal Expense 26,464 72,687 99,152 102,652 Sludge Removal Expense-Ops-Treat&Disp711 Sludge Removal Expense 3,500 - 3,500 Sludge Removal Exp-Maint-Treat&Disp715 Purchased Power 53,807 66,890 120,697 156,021 Purchased Power-Ops-Collect715 Purchased Power - - - Purchased Power-Ops-Pump

13

LU 000354

2015 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined Sum/Check Natural Account Title715 Purchased Power 33,106 1,961 35,067 Purchased Power-Ops-Treat&Disp715 Purchased Power - - - Purchased Power-Ops-RWT715 Purchased Power - - - Purchased Power-Ops-RWT715 Purchased Power - - - Purchased Power-Ops-RWD715 Purchased Power - - - Purchased Power716 Fuel for Power Production 174 82 256 Fuel For Power Prod-Ops-Collect716 Fuel for Power Production - - - Fuel For Power Prod-Ops-Pump716 Fuel for Power Production - - - Fuel For Power Prod-Ops-Treat&Disp716 Fuel for Power Production - - - Fuel For Power Prod-Ops-RWT716 Fuel for Power Production - - - Fuel For Power Prod-Ops-RWD718 Chemicals - - - 38,825 Chemicals-Ops-Collect718 Chemicals - - - Chemicals-Ops-Pump718 Chemicals 25,693 12,202 37,895 Chemicals-Ops-Treat&Disp718 Chemicals - - - Chemicals-Ops-RWT718 Chemicals - - - Chemicals-Ops-RWD718 Chemicals - - - Chemicals-Maint-Collect718 Chemicals 395 395 790 Chemicals-Maint-Pump718 Chemicals 26 114 140 Chemicals-Maint-Treat&Disp718 Chemicals - - - Chemicals-Maint-RWT718 Chemicals - - - Chemicals-Maint-RWD720 Materials and Supplies 5,384 4,573 9,957 53,107 Material & Supp-Ops-Collect720 Materials and Supplies 560 275 835 Material & Supp -Ops-Pump720 Materials and Supplies 9,643 5,497 15,140 Material & Supp-Ops-Treat&Disp720 Materials and Supplies - 232 232 Material & Supp-Ops-RWT720 Materials and Supplies 16 - 16 Materials & Supp-Ops-RWD720 Materials and Supplies 1,923 1,045 2,968 Materials & Supp-Maint-Collect720 Materials and Supplies 2,426 310 2,736 Materials and Supplies-Maint-Pump720 Materials and Supplies 5,221 2,959 8,180 Materials & Supp-Maint-Treat&Disp720 Materials and Supplies (603) - (603) Materials & Supp-Maint-RWT720 Materials and Supplies - 36 36 Materials & Supp-Maint-RWD720 Materials and Supplies 5,351 8,260 13,611 Materials and Supplies731 Contractual Services - Engineering - - - 734,708 Contract Serv-Eng-Ops-Collect731 Contractual Services - Engineering - - - Contractual Services-Engineering732 Contractual Services - Accounting 348 4,512 4,859 Contractual Services-Accounting733 Contractual Services - Legal (4,027) (293) (4,319) Contractual Services-Legal734 Contractual Services - Management Fees - - - LABS Corp - Labour734 Contractual Services - Management Fees - - - LABS Corp - Admin734 Contractual Services - Management Fees 1,996 2,430 4,426 LABS Labor Allocations734 Contractual Services - Management Fees 585 732 1,317 LABS Corporate Service labour allocation734 Contractual Services - Management Fees 3,222 4,035 7,257 LABS Corp - Labour734 Contractual Services - Management Fees - - - LABS Corporate Service - Admin734 Contractual Services - Management Fees 9,868 10,720 20,588 LABS NonLabor Allocations734 Contractual Services - Management Fees 34,906 43,682 78,588 LU US Allocation - Labour734 Contractual Services - Management Fees 24,024 26,100 50,124 LU US Allocation - Admin734 Contractual Services - Management Fees 688 862 1,550 Admin Allocation-AWS734 Contractual Services - Management Fees 39,304 49,229 88,533 LU US Customer Care - Labour734 Contractual Services - Management Fees 6,463 7,023 13,486 LU US Customer Care - Admin734 Contractual Services - Management Fees 3,845 4,816 8,661 LU Canada Allocation - Labour734 Contractual Services - Management Fees 9,562 10,387 19,949 LU Canada Allocation - Admin734 Contractual Services - Management Fees 3,262 4,085 7,347 APUC Allocation - Labour734 Contractual Services - Management Fees 6,747 7,331 14,078 APUC Allocation - Admin734 Contractual Services - Management Fees - - - LABS Corporate Service - Labour734 Contractual Services - Management Fees 1,220 1,324 2,544 LABS Corp - Admin735 Contractual Services - Testing 400 - 400 Contract Serv-Test-Ops-Collect735 Contractual Services - Testing 11,186 7,590 18,775 Contract Serv-Test-Ops-Treat&Disp735 Contractual Services - Testing - - - Contract Serv-Testing-Maint-Collect735 Contractual Services - Testing - - - Contractual Services-Testing736 Contractual Services - Other 109,708 102,613 212,322 Contract Serv-Other-Ops-Collect736 Contractual Services - Other 444 669 1,113 Contract Serv-Outside Oper-Ops-Collect736 Contractual Services - Other 7,980 22,298 30,278 Contractual Services-Other736 Contractual Services - Other - 625 625 Contract Serv-Other-Ops-Pump736 Contractual Services - Other 8,006 18,474 26,480 Contract Serv-Other-Ops-Treat&Disp736 Contractual Services - Other - - - Contract Serv-Other-Ops-RWT736 Contractual Services - Other - - - Contract Serv-Other-Ops-RWD736 Contractual Services - Other 3,057 2,532 5,589 Contract Serv-Other-Maint-Collect736 Contractual Services - Other - - - Contract Serv-Other-Maint-Pump736 Contractual Services - Other 2,807 2,154 4,961 Contract Serv-Other-Maint-Treat&Disp736 Contractual Services - Other - - - Contractual Services-Other-Maint-RWT736 Contractual Services - Other (630) - (630) Contractual Services-Other-Maint-RWD736 Contractual Services - Other 88,943 26,864 115,808 Contractual Services-Other741 Rental of Building/Real Property 3,798 4,089 7,887 Rental of Building/Real Property742 Rental of Equipment 7,486 79 7,565 25,241 Rental of Equipment-Ops-Collect742 Rental of Equipment - - - Rental of Equipment-Ops-Pump742 Rental of Equipment 11,258 2,333 13,591 Rental of Equip-Ops-Treat&Disp742 Rental of Equipment - - - Rental of Equip-Ops-RWT742 Rental of Equipment - - - Rental of Equipment-Ops-RWD742 Rental of Equipment - - - Rental of Equip-Maint-Collect742 Rental of Equipment - - - Rental of Equip-Maint-Pump742 Rental of Equipment - 473 473 Rental of Equipment742 Rental of Equipment - - - Rental of Equipment742 Rental of Equipment - - - Rental of Equipment742 Rental of Equipment 444 3,169 3,613 Rental of Equipment750 Transportation Expenses 15,844 11,938 27,782 Transportation Expenses-Ops-Collect750 Transportation Expenses 4,576 4,285 8,861 Transportation Expenses756 Insurance - Vehicle 2,364 1,918 4,282 Insurance-Vehicle757 Insurance - General Liability 7,273 2,306 9,579 Insurance-General Liability766 Regulatory Commission Expenses 6,670 - 6,670 Regulatory Commission Expenses-Amortization of Rate Case 767 Regulatory Commission Expenses - Other - - - Regulatory Commission Expense767 Regulatory Commission Expenses - Other - - - Regulatory Commission Expense- Other770 Bad Debt Expense 16,816 8,949 25,766 Bad Debt Expense775 Miscellaneous Expenses 2,017 2,008 4,024 Meals and Entertainment775 Miscellaneous Expenses 2,908 3,496 6,403 Licences and Fees775 Miscellaneous Expenses 1,162 540 1,702 Public Relations775 Miscellaneous Expenses 13,955 15,532 29,487 Telephone Expense775 Miscellaneous Expenses 23,855 24,824 48,679 Bank Charges


14

LU 000355

2015 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined Sum/Check Natural Account Title

272 Amortization of CIAC (77,770) (58,271) (136,041) Amortization of CIAC403 Depreciation Expenses 435,701 349,077 784,778 Depreciation Expense403 Depreciation Expenses - - - Amortization of Vehicles403 Depreciation Expenses - - - Amortization of Equipment403 Depreciation Expenses 10,791 10,791 Amortization of Customer Relationships407 Amortization Expense 411 1,688 2,099 Amortization of Regulatory Assets407 Amortization Expense 8,613 9,357 17,969 LU Amort of Other Utility Plant


408 Taxes Other than Income 97,344 65,983 163,327 Property Taxes408 Taxes Other than Income - - - Utility Regulatory Assessment Fees

Income taxes

409 Income Taxes - - - Federal Income Tax Expense409 Income Taxes 9,000 - 9,000 State Income Tax Expense


414 Gains (Losses) from Disposition of Utility Property - - - Gain/Loss Fixed Asset Disposal419 Interest and Dividend Income - - - Interest income419 Interest and Dividend Income - - - Interest on LT Receivable420 Allowance for Funds Used During Construction (25,514) (3,134) (28,648) AFUDC - Equity Income420 Allowance for Funds Used During Construction - - - AFUDC - Borrowed427 Interest Expense 1,021 767 1,788 Interest Expense on short Term Debt427 Interest Expense - - - Interest on Long Term Debt427 Interest Expense - - - Interest Expense Intercompany428 Amortization of Debt Discount and Expense - - - Amortization of Debt Discount

Total (0) 0 (0)

15

LU 000356

2014 TRIAL BALANCES


Plant in Service

101 Utility Plant in Service 37,315 63,232 100,547 351 Organization - 7,299 7,299 352 Franchises 431,640 - 431,640 353 Land and Land Rights 25,000 164,003 189,003 354 Structures and Improvements 2,947,055 1,423,037 4,370,092 355 Power Generation Equipment 2,200 594,253 596,453 360 Collection Sewers - Force 9,678 527,846 537,524 361 Collection Sewers - Gravity 632,102 35,005 667,107 362 Special Collecting Structures - 111,909 111,909 363 Services to Customers 218,960 - 218,960 364 Flow Measuring Devices 2,582 - 2,582 365 Flow Measuring Installations - - - 366 Reuse Services - - - 367 Reuse Meters and Meter Installations - - - 370 Receiving Wells 84,881 - 84,881 371 Pumping Equipment 865,590 587,251 1,452,841 374 Reuse Distribution Reservoirs - - - 375 Reuse Transmission and Distribution System - - - 380 Treatment and Disposal Equipment 1,805,462 72,927 1,878,388 381 Plant Sewers 329,824 - 329,824 382 Outfall Sewer Lines - - - 389 Other Plant and Miscellaneous Equipment 118,327 - 118,327 390 Office Furniture and Equipment 91,225 49,607 140,833

390.1 Computer & Softwear 1,487 4,122 5,609 391 Transportation Equipment 75,104 - 75,104 392 Stores Equipment - - - 393 Tools, Shop and Garage Equipment - 39,304 39,304 394 Laboratory Equipment 10,300 - 10,300 395 Power Operated Equipment - - - 396 Communication Equipment 3,858 - 3,858 397 Miscellaneous Equipment - - - 398 Other Tangible Plant - - -


108 Accumulated Depreciation (4,688) (39,275) (43,963) 108 Accumulated Depreciation - - - 351 Organization - - - 351 Organization - - - 352 Franchises (96,675) (96,675) 354 Structures and Improvements (1,198,220) (962,574) (2,160,793) 354 Structures and Improvements 10,699 2,696 13,395 355 Power Generation Equipment (898) - (898) 355 Power Generation Equipment - - - 360 Collection Sewers - Force (469) (52,496) (52,965) 360 Collection Sewers - Force - - - 361 Collection Sewers - Gravity (146,796) (85,275) (232,071) 361 Collection Sewers - Gravity - 8,858 8,858 362 Special Collecting Structures - - - 362 Special Collecting Structures - - - 363 Services to Customers (92,669) (32,413) (125,081) 363 Services to Customers - - - 364 Flow Measuring Devices (2,582) - (2,582) 364 Flow Measuring Devices - - - 365 Flow Measuring Installations - - - 365 Flow Measuring Installations - - - 366 Reuse Services - - - 366 Reuse Services - - - 367 Reuse Meters and Meter Installations - - - 367 Reuse Meters and Meter Installations - - - 370 Receiving Wells (1,650) - (1,650) 370 Receiving Wells - - -

16

LU 000357

2014 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined371 Pumping Equipment (423,054) (288,855) (711,909) 371 Pumping Equipment - - - 374 Reuse Distribution Reservoirs - - - 374 Reuse Distribution Reservoirs - - - 375 Reuse Transmission and Distribution System - - - 375 Reuse Transmission and Distribution System - - - 380 Treatment and Disposal Equipment (214,736) (6,548) (221,284) 380 Treatment and Disposal Equipment - - - 381 Plant Sewers (12,259) - (12,259) 381 Plant Sewers - - - 382 Outfall Sewer Lines - - - 382 Outfall Sewer Lines - - - 389 Other Plant and Miscellaneous Equipment (21,089) (26,886) (47,976) 389 Other Plant and Miscellaneous Equipment - - - 390 Office Furniture and Equipment (47,238) (19,969) (67,207) 390 Office Furniture and Equipment - - - 390 Office Furniture and Equipment (192) (137) (329) 390 Office Furniture and Equipment - (358) (358) 391 Transportation Equipment (65,971) (29,488) (95,460) 391 Transportation Equipment - - - 392 Stores Equipment - - - 392 Stores Equipment - - - 393 Tools, Shop and Garage Equipment (32,260) (12,895) (45,155) 393 Tools, Shop and Garage Equipment 38 - 38 394 Laboratory Equipment (10,300) - (10,300) 394 Laboratory Equipment - - - 395 Power Operated Equipment - - - 395 Power Operated Equipment - - - 396 Communication Equipment (154) (201) (355) 396 Communication Equipment - - - 397 Miscellaneous Equipment - - - 397 Miscellaneous Equipment - - - 398 Other Tangible Plant - - - 398 Other Tangible Plant - - -

Current Assets

103 Property Held for Future Use - - - 105 Construction Work in Progress 718,651 2,435,805 3,154,457 105 Construction Work in Progress 104,563 69,472 174,035 114 Utility Plant Acqusition 1,000 1,000

131.1 Cash on Hand 14,890 3,037 17,928 131.2 Cash in Bank - - - 131.2 Cash in Bank 300 1,050 1,350 132 Special Deposits - - - 132 Special Deposits - - - 132 Special Deposits - - - 132 Special Deposits - - - 141 Customer Accounts Receivable 64,155 43,564 107,719 142 Other Accounts Receivable - - - 143 Accumulated Provision for Uncollectible Accounts (12,987) (11,213) (24,200) 145 Accounts Receivable from Associated Companies - - - 162 Prepayments - - - 162 Prepayments 1,786 2,210 3,996 162 Prepayments - - - 173 Accrued Utility Revenues 123,706 104,166 227,873 173 Accrued Utility Revenues - - - 184 Clearing Accounts - - - 186 Miscellaneous Deferred Debits - - - 186 Miscellaneous Deferred Debits - - - 186 Miscellaneous Deferred Debits - (950) (950) 186 Miscellaneous Deferred Debits - 2,638 2,638 186 Miscellaneous Deferred Debits 9,573 - 9,573 186 Miscellaneous Deferred Debits - - -

17

LU 000358

2014 TRIAL BALANCES


Current Liabilities

231 Accounts Payable - - - 233 Accounts Payable to Associated Companies - - - 233 Accounts Payable to Associated Companies 1,109,373 1,415,929 2,525,303 233 Accounts Payable to Associated Companies (3,486,487) (2,295,318) (5,781,805) 235 Customer Deposits (17,326) (12,213) (29,538) 235 Customer Deposits - - - 236 Accrued Taxes - - - 236 Accrued Taxes 8,008 (11,210) (3,202) 237 Accrued Interest (1,756) (1,591) (3,347) 241 Miscellaneous Current and Accrued Liabilities (117,117) (95,024) (212,141) 241 Miscellaneous Current and Accrued Liabilities (27,298) 3,847 (23,450) 241 Miscellaneous Current and Accrued Liabilities (519) 2,532 2,014 241 Miscellaneous Current and Accrued Liabilities (13,006) (11,271) (24,277) 242 Miscellaneous Current and Accrued Liabilities (12,688) (7,083) (19,771) 252 Advances for Construction (7,500) (7,500) (15,000) 283 Accum Deffered Income Tax


271 Contributions in Aid of Construction (2,333,088) (1,443,850) (3,776,938) 271 Contributions in Aid of Construction - (60,340) (60,340) 272 Accumulated Amortization of Contributions in Aid o 753,092 298,825 1,051,916

Capital

201 Common Stock Issued (483,040) (1,100) (484,140) 211 Other Paid-In Capital (499,946) (510,308) (1,010,254) 211 Other Paid-In Capital - (250) (250) 211 Other Paid-In Capital - 164,353 164,353 211 Other Paid-In Capital 407,489 358,924 766,413 214 Appropriated Retained Earnings - - - 216 Reacquired Capital Stock (1,608,494) (2,449,181) (4,057,676)

Operating Revenues

521.1 Residential Revenues (1,352,082) (1,015,627) (2,367,709) 521.2 Commercial Revenues (57,315) (210,861) (268,177) 521.3 Industrial Revenues - - - 522.1 Residential Revenues - - - 522.2 Commercial Revenues - - - 522.3 Industrial Revenues - - - 536 Other WasteWater Revenues - - - 536 Other WasteWater Revenues (3,300) (10,825) (14,125) 536 Other WasteWater Revenues (19,350) (6,675) (26,025) 536 Other WasteWater Revenues - - - 536 Other WasteWater Revenues (14,845) (8,813) (23,658) 536 Other WasteWater Revenues - - - 544 Reuse Revenues from Other Systems - - -

Operating Expenses

701 Salaries and Wages - Employees - - - 701 Salaries and Wages - Employees 32,516 25,797 58,313 58,313 710 Purchased WasteWater Treatment 22,814 15,658 38,472 531,884 711 Sludge Removal Expense 141,668 144,492 286,160 711 Sludge Removal Expense - - - 715 Purchased Power 44,817 47,491 92,309 715 Purchased Power - - - 715 Purchased Power 42,455 35,305 77,760 715 Purchased Power - - -

18

LU 000359

2014 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined715 Purchased Power - - - 715 Purchased Power - - - 715 Purchased Power - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 718 Chemicals - - - 718 Chemicals 48 - 48 718 Chemicals 26,290 10,846 37,136 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 720 Materials and Supplies 2,609 1,275 3,884 48,342 720 Materials and Supplies - 58 58 720 Materials and Supplies 6,763 6,388 13,151 720 Materials and Supplies - - - 720 Materials and Supplies - - - 720 Materials and Supplies 445 860 1,305 720 Materials and Supplies 150 1,786 1,936 720 Materials and Supplies 2,229 3,623 5,852 720 Materials and Supplies - - - 720 Materials and Supplies - - - 720 Materials and Supplies 9,232 12,925 22,157 731 Contractual Services - Engineering - - - 1,050,827 731 Contractual Services - Engineering - - - 732 Contractual Services - Accounting 150 (4,156) (4,006) 733 Contractual Services - Legal 7,411 886 8,296 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees 5,614 7,032 12,646 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees 11,799 12,817 24,616 734 Contractual Services - Management Fees 51,179 65,967 117,146 734 Contractual Services - Management Fees 26,972 27,281 54,253 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees 40,301 50,475 90,776 734 Contractual Services - Management Fees 5,775 6,015 11,790 734 Contractual Services - Management Fees 4,661 5,840 10,501 734 Contractual Services - Management Fees 7,766 8,438 16,204 734 Contractual Services - Management Fees 3,836 4,805 8,641 734 Contractual Services - Management Fees 7,818 7,933 15,751 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 735 Contractual Services - Testing - - - 735 Contractual Services - Testing 19,163 12,973 32,136 735 Contractual Services - Testing 425 565 990 735 Contractual Services - Testing - - - 736 Contractual Services - Other 39,922 51,299 91,221 736 Contractual Services - Other 184,450 189,209 373,659 736 Contractual Services - Other 10,725 840 11,565 736 Contractual Services - Other 135 6,922 7,057 736 Contractual Services - Other 36,006 22,303 58,309 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other 911 2,886 3,797 736 Contractual Services - Other - 415 415 736 Contractual Services - Other 8,031 788 8,819 736 Contractual Services - Other 630 - 630

19

LU 000360

2014 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined736 Contractual Services - Other - - - 736 Contractual Services - Other 78,990 16,623 95,614 741 Rental of Building/Real Property 3,274 3,551 6,825 742 Rental of Equipment 68 68 135 114,546 742 Rental of Equipment - - - 742 Rental of Equipment 12,474 94,652 107,127 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment 1,630 2,128 3,758 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment 535 2,992 3,527 750 Transportation Expenses 19,794 14,285 34,079 750 Transportation Expenses 7,310 4,278 11,588 756 Insurance - Vehicle 2,236 2,236 4,472 757 Insurance - General Liability 7,282 4,330 11,612 766 Regulatory Commission Expenses - Amortization o - - - 767 Regulatory Commission Expenses - Other - - - 767 Regulatory Commission Expenses - Other - - - 770 Bad Debt Expense 10,322 3,379 13,702 775 Miscellaneous Expenses 1,838 1,293 3,131 775 Miscellaneous Expenses 34,007 2,670 36,676 775 Miscellaneous Expenses 2,387 287 2,673 775 Miscellaneous Expenses 12,338 17,583 29,921 775 Miscellaneous Expenses 27,236 25,039 52,274


272 Amortization of CIAC (77,687) (58,271) (135,958) 403 Depreciation Expenses 10,791 197,561 208,352 403 Depreciation Expenses 354,910 1,066 355,976 403 Depreciation Expenses 6,225 3,066 9,291 403 Depreciation Expenses 5,671 5,671 407 Amortization Expense - 7,058 7,058 407 Amortization Expense 5,546 6,026 11,572



Income taxes



414 Gains (Losses) from Disposition of Utility Property - - - 419 Interest and Dividend Income - - - 419 Interest and Dividend Income - - - 420 Allowance for Funds Used During Construction (5,980) (72,852) (78,832) 420 Allowance for Funds Used During Construction - - - 427 Interest Expense 1,039 744 1,783 427 Interest Expense - - - 427 Interest Expense - - - 428 Amortization of Debt Discount and Expense - - -

Total (0) 0 (0)

20

LU 000361

2013 TRIAL BALANCES


Plant in Service

101 Utility Plant in Service 37,315 63,232 100,547 10,885,969 351 Organization - - - 352 Franchises 431,640 - 431,640 353 Land and Land Rights 25,000 164,003 189,003 354 Structures and Improvements 2,914,504 1,411,758 4,326,262 355 Power Generation Equipment 2,200 - 2,200 360 Collection Sewers - Force 2,521 594,253 596,773 361 Collection Sewers - Gravity 513,682 526,495 1,040,177 362 Special Collecting Structures - - - 363 Services to Customers 218,960 111,909 330,869 364 Flow Measuring Devices 2,582 - 2,582 365 Flow Measuring Installations - - - 366 Reuse Services - - - 367 Reuse Meters and Meter Installations - - - 370 Receiving Wells - - - 371 Pumping Equipment 809,180 514,880 1,324,060 374 Reuse Distribution Reservoirs - - - 375 Reuse Transmission and Distribution System - - - 380 Treatment and Disposal Equipment 1,797,529 51,810 1,849,339 381 Plant Sewers 329,824 - 329,824 382 Outfall Sewer Lines - - - 389 Other Plant and Miscellaneous Equipment 107,824 (24,044) 83,780 390 Office Furniture and Equipment 90,964 47,929 138,893

390.1 Computer & Softwear - - - 391 Transportation Equipment 69,747 29,488 99,235 392 Stores Equipment - - - 393 Tools, Shop and Garage Equipment - 30,484 30,484 394 Laboratory Equipment 10,300 - 10,300 395 Power Operated Equipment - - - 396 Communication Equipment - - - 397 Miscellaneous Equipment - - - 398 Other Tangible Plant - - -


108 Accumulated Depreciation - - - (3,503,088) 108 Accumulated Depreciation - - - 351 Organization - - - 351 Organization - - - 352 Franchises (85,884) (85,884) 354 Structures and Improvements (1,113,458) (931,187) (2,044,645) 354 Structures and Improvements - 1,005 1,005 355 Power Generation Equipment (788) - (788) 355 Power Generation Equipment - - - 360 Collection Sewers - Force (361) (40,611) (40,972) 360 Collection Sewers - Force - - - 361 Collection Sewers - Gravity (134,224) (74,314) (208,539) 361 Collection Sewers - Gravity - 8,840 8,840 362 Special Collecting Structures - - - 362 Special Collecting Structures - - - 363 Services to Customers (81,721) (27,111) (108,831) 363 Services to Customers - - - 364 Flow Measuring Devices (2,432) - (2,432) 364 Flow Measuring Devices - - - 365 Flow Measuring Installations - - - 365 Flow Measuring Installations - - - 366 Reuse Services - - - 366 Reuse Services - - - 367 Reuse Meters and Meter Installations - - - 367 Reuse Meters and Meter Installations - - - 370 Receiving Wells - - -

21

LU 000362

2013 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined Summary370 Receiving Wells - - - 371 Pumping Equipment (377,635) (302,697) (680,332) 371 Pumping Equipment - - - 374 Reuse Distribution Reservoirs - - - 374 Reuse Distribution Reservoirs - - - 375 Reuse Transmission and Distribution System - - - 375 Reuse Transmission and Distribution System - - - 380 Treatment and Disposal Equipment (142,686) (3,958) (146,644) 380 Treatment and Disposal Equipment - - - 381 Plant Sewers (4,013) - (4,013) 381 Plant Sewers - - - 382 Outfall Sewer Lines - - - 382 Outfall Sewer Lines - - - 389 Other Plant and Miscellaneous Equipment (17,355) - (17,355) 389 Other Plant and Miscellaneous Equipment - - - 390 Office Furniture and Equipment (40,519) (16,293) (56,811) 390 Office Furniture and Equipment - - - 390 Office Furniture and Equipment - - - 390 Office Furniture and Equipment - - - 391 Transportation Equipment (59,381) (28,423) (87,804) 391 Transportation Equipment - - - 392 Stores Equipment - - - 392 Stores Equipment - - - 393 Tools, Shop and Garage Equipment (11,809) (5,772) (17,582) 393 Tools, Shop and Garage Equipment - - - 394 Laboratory Equipment (10,300) - (10,300) 394 Laboratory Equipment - - - 395 Power Operated Equipment - - - 395 Power Operated Equipment - - - 396 Communication Equipment - - - 396 Communication Equipment - - - 397 Miscellaneous Equipment - - - 397 Miscellaneous Equipment - - - 398 Other Tangible Plant - - - 398 Other Tangible Plant - - -

Current Assets

103 Property Held for Future Use - - - 105 Construction Work in Progress 51,790 411,551 463,341 105 Construction Work in Progress 12,470 18,420 30,890 114 Utility Plant Acqusition 1,000 134,249 135,249

131.1 Cash on Hand 8,186 14,506 22,692 131.2 Cash in Bank - - - 131.2 Cash in Bank 300 1,050 1,350 132 Special Deposits - - - 132 Special Deposits - - - 132 Special Deposits - - - 132 Special Deposits - - - 141 Customer Accounts Receivable 54,045 32,649 86,695 142 Other Accounts Receivable - - - 143 Accumulated Provision for Uncollectible Accounts (11,139) (10,349) (21,488) 145 Accounts Receivable from Associated Companies - - - 162 Prepayments - - - 2,933 162 Prepayments 1,304 1,629 2,933 162 Prepayments - - - 173 Accrued Utility Revenues 115,286 100,517 215,804 173 Accrued Utility Revenues - - - 184 Clearing Accounts - - - 186 Miscellaneous Deferred Debits - - - 186 Miscellaneous Deferred Debits - - - 186 Miscellaneous Deferred Debits - 8,745 8,745 186 Miscellaneous Deferred Debits 9,573 - 9,573 186 Miscellaneous Deferred Debits - - - 186 Miscellaneous Deferred Debits - - -

22

LU 000363

2013 TRIAL BALANCES


Current Liabilities

231 Accounts Payable (9,657) (10,872) (20,529) 233 Accounts Payable to Associated Companies - - - 233 Accounts Payable to Associated Companies 1,109,373 1,395,929 2,505,303 233 Accounts Payable to Associated Companies (2,827,939) (359,068) (3,187,007) 235 Customer Deposits 300 300 600 (25,833) 235 Customer Deposits (15,559) (10,874) (26,433) 236 Accrued Taxes - - - 236 Accrued Taxes 8,008 (11,210) (3,202) 237 Accrued Interest (1,870) (1,702) (3,572) 241 Miscellaneous Current and Accrued Liabilities (25,899) (149,821) (175,720) 241 Miscellaneous Current and Accrued Liabilities 0 (3,251) (3,251) 241 Miscellaneous Current and Accrued Liabilities - - - 241 Miscellaneous Current and Accrued Liabilities - - - 242 Miscellaneous Current and Accrued Liabilities (11,582) (9,716) (21,299) 252 Advances for Construction (2,500) (2,500) (5,000) 283 Accum Deffered Income Tax


271 Contributions in Aid of Construction (2,223,608) (1,443,850) (3,667,458) (2,777,000) 271 Contributions in Aid of Construction (14,500) (11,000) (25,500) 272 Accumulated Amortization of Contributions in Aid o 675,405 240,554 915,959

Capital

201 Common Stock Issued (483,040) (1,100) (484,140) (4,238,803) 211 Other Paid-In Capital (499,946) (510,308) (1,010,254) 211 Other Paid-In Capital - (250) (250) 211 Other Paid-In Capital - 164,353 164,353 211 Other Paid-In Capital 407,489 358,924 766,413 214 Appropriated Retained Earnings - - - 216 Reacquired Capital Stock (1,525,155) (2,149,770) (3,674,924)

Operating Revenues

521.1 Residential Revenues (1,028,600) (979,218) (2,007,818) 521.2 Commercial Revenues (51,338) (206,591) (257,930) 521.3 Industrial Revenues - - - 522.1 Residential Revenues - - - 522.2 Commercial Revenues - - - 522.3 Industrial Revenues - - - 536 Other WasteWater Revenues (5,500) - (5,500) 536 Other WasteWater Revenues (19,575) (6,850) (26,425) 536 Other WasteWater Revenues (1,320) - (1,320) 536 Other WasteWater Revenues (11,985) (380) (12,365) 536 Other WasteWater Revenues (85) (7,435) (7,520) 536 Other WasteWater Revenues - (7,300) (7,300) 536 Other WasteWater Revenues - (82) (82) 544 Reuse Revenues from Other Systems - - -

Operating Expenses

701 Salaries and Wages - Employees - - - 701 Salaries and Wages - Employees 194,482 160,732 355,213 710 Purchased WasteWater Treatment 14,301 3,511 17,812 444,106 711 Sludge Removal Expense 101,817 94,773 196,590

23

LU 000364

2013 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined Summary711 Sludge Removal Expense - - - 715 Purchased Power 46,756 31,396 78,152 715 Purchased Power 45,498 62,754 108,252 715 Purchased Power - - - 715 Purchased Power - - - 715 Purchased Power - - - 715 Purchased Power - - - 715 Purchased Power - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 716 Fuel for Power Production - - - 718 Chemicals 511 2,498 3,008 718 Chemicals 27,885 710 28,594 718 Chemicals - 11,698 11,698 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 718 Chemicals - - - 720 Materials and Supplies 1,837 1,197 3,033 42,545 720 Materials and Supplies 2,227 3,231 5,458 720 Materials and Supplies 1,917 863 2,781 720 Materials and Supplies 3,491 5,178 8,670 720 Materials and Supplies 8,317 14,287 22,604 720 Materials and Supplies - - - 720 Materials and Supplies - - - 720 Materials and Supplies - - - 720 Materials and Supplies - - - 720 Materials and Supplies - - - 720 Materials and Supplies - - - 731 Contractual Services - Engineering - - - 731 Contractual Services - Engineering - - - 732 Contractual Services - Accounting - - - 733 Contractual Services - Legal 1,386 3,861 5,247 734 Contractual Services - Management Fees 6,174 4,045 10,219 734 Contractual Services - Management Fees 48,354 60,027 108,381 734 Contractual Services - Management Fees 22,791 24,760 47,550 734 Contractual Services - Management Fees 42,449 52,810 95,259 734 Contractual Services - Management Fees 6,470 7,029 13,499 734 Contractual Services - Management Fees 4,425 5,500 9,925 734 Contractual Services - Management Fees 12,673 13,770 26,443 734 Contractual Services - Management Fees 4,764 6,048 10,813 734 Contractual Services - Management Fees 5,233 5,684 10,917 734 Contractual Services - Management Fees 5,285 5,744 11,029 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 734 Contractual Services - Management Fees - - - 735 Contractual Services - Testing 6,856 6,815 13,671 735 Contractual Services - Testing - - - 735 Contractual Services - Testing - - - 735 Contractual Services - Testing - - - 736 Contractual Services - Other 45,398 26,118 71,516 736 Contractual Services - Other 11,446 4,050 15,496 736 Contractual Services - Other 2,258 1,388 3,645 736 Contractual Services - Other 1,214 1,850 3,064 736 Contractual Services - Other 51,760 37,166 88,926 736 Contractual Services - Other - - -

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LU 000365

2013 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined Summary736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 736 Contractual Services - Other - - - 741 Rental of Building/Real Property 3,151 3,152 6,303 742 Rental of Equipment 65 65 130 95,878 742 Rental of Equipment 17,831 67,323 85,155 742 Rental of Equipment 5,069 568 5,637 742 Rental of Equipment 2,334 2,623 4,957 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 742 Rental of Equipment - - - 750 Transportation Expenses 14,417 12,933 27,350 34,790 750 Transportation Expenses 3,855 3,585 7,440 756 Insurance - Vehicle 2,050 1,925 3,975 757 Insurance - General Liability 9,765 8,119 17,884 766 Regulatory Commission Expenses - Amortization o - - - 767 Regulatory Commission Expenses - Other - - - 767 Regulatory Commission Expenses - Other - - - 770 Bad Debt Expense 3,476 1,516 4,991 775 Miscellaneous Expenses 1,850 878 2,728 775 Miscellaneous Expenses 1,817 2,829 4,646 775 Miscellaneous Expenses 290 290 581 775 Miscellaneous Expenses 10,308 18,379 28,687 775 Miscellaneous Expenses 21,581 22,264 43,845


272 Amortization of CIAC (73,337) (58,271) (131,609) 403 Depreciation Expenses 10,791 115,877 126,668 403 Depreciation Expenses - 4,264 4,264 403 Depreciation Expenses 10,010 938 10,948 403 Depreciation Expenses 7,006 7,006 407 Amortization Expense 236,710 7,965 244,676 407 Amortization Expense (10) (11) (21)



Income taxes



414 Gains (Losses) from Disposition of Utility Property - - - 419 Interest and Dividend Income - - - 419 Interest and Dividend Income - - - 420 Allowance for Funds Used During Construction (32,791) (26,783) (59,574) 420 Allowance for Funds Used During Construction - - - 427 Interest Expense 1,278 894 2,172 427 Interest Expense - - -

25

LU 000366

2013 TRIAL BALANCES

NARUC Description Woodmark Tall Timbers Combined Summary427 Interest Expense - - - 428 Amortization of Debt Discount and Expense - - -

Total (0) 0 0

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LU 000367

2015 DEPRECIATION EXPENSE

NARUC Woodmark Tall Timbers Combined

352 10,791 10,791 354 114,420 73,439 187,859 355 (568) (568) 360 928 12,388 13,316 361 12,863 11,345 24,209 363 10,948 5,302 16,250 370 2,829 2,829 371 171,223 194,428 365,651 380 73,475 25,014 98,489 381 12,292 9,914 22,206 389 1,866 3,433 5,299 390 6,217 3,594 9,811

390.1 297 824 1,122 391 3,615 554 4,169 393 23,290 8,077 31,367 394 (9,094) (9,094) 395 259 259 396 309 504 812

Book 435,701 349,076 784,777

Correct 429,186 349,076 778,262

272 77,770 58,271 136,041

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LU 000368

2015 DEFERRED INCOME TAXES


190 ADIT -- Net Operating Loss Carry-Forwards 597,191 75,498 672,689 281 ADIT -- Accelerated Depreciation of Property (736,667) (899,631) (1,636,298) 282 ADIT -- Other Property (71,289) - (71,289) 283 ADIT -- Other (Bad Debts) 578 1,427 2,005

(210,188) (822,706) (1,032,894)

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LU 000369

2015 PREPAYMENTS

NARUC Month Year Woodmark Tall Timbers Combined DescriptionPrepaid Licences Fees & Permits

162 12 2014 1,786 2,210 3,996 Prepaid Licences Fees & Permits162 1 2015 1,725 2,132 3,857 Prepaid Licences Fees & Permits162 2 2015 1,725 2,132 3,857 Prepaid Licences Fees & Permits162 3 2015 1,569 1,938 3,507 Prepaid Licences Fees & Permits162 4 2015 1,412 1,744 3,156 Prepaid Licences Fees & Permits162 5 2015 1,255 1,551 2,805 Prepaid Licences Fees & Permits162 6 2015 1,098 1,357 2,455 Prepaid Licences Fees & Permits162 7 2015 941 1,163 2,104 Prepaid Licences Fees & Permits162 8 2015 784 969 1,753 Prepaid Licences Fees & Permits162 9 2015 471 775 1,246 Prepaid Licences Fees & Permits162 10 2015 314 581 895 Prepaid Licences Fees & Permits162 11 2015 1,983 2,644 4,627 Prepaid Licences Fees & Permits162 12 2015 1,877 2,051 3,929

Total 38,187

Average 2,937

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LU 000370

2015 BILLING UNITS (Base Equivalent Rate Units)

Month Year Woodmark Tall Timbers Combined

January 2015 1,876 2,135 4,011 February 2015 1,783 2,307 4,089 March 2015 1,760 2,184 3,944 April 2015 1,763 2,214 3,977 May 2015 1,781 2,212 3,993 June 2015 1,794 2,231 4,025 July 2015 1,781 2,516 4,297 August 2015 1,798 2,241 4,038 September 2015 1,783 2,266 4,048 October 2015 1,785 2,273 4,058 November 2015 1,791 2,267 4,058 December 2015 1,794 2,267 4,061

Total 21,488 27,112 48,600

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LU 000371

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