Arkansas Code Annotated

Ark. Code Ann. § 23-4-406 (2026)

Test periods to justify new rates

✓ current as of May 2026

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For the purpose of justifying the reasonableness of a proposed new rate schedule, a utility may utilize either a historical test period of twelve (12) consecutive calendar months or a forward-looking test period of twelve (12) consecutive calendar months consisting of six (6) months of actual historical data derived from the books and records of the utility and six (6) months of projected data which together shall be the period or test year upon which fair and reasonable rates shall be determined by the Arkansas Public Service Commission. However, the commission shall also permit adjustments to any test year so utilized to reflect the effects on an annualized basis of any and all changes in circumstances which may occur within twelve (12) months after the end of the test year where such changes are both reasonably known and measurable.

History. Acts 1981 (1st Ex. Sess.), No. 30, § 4; A.S.A. 1947, § 73-217.5.

Case Notes

Adjustments to Test Year.

This section does not require the Arkansas Public Service Commission to make adjustments to any test year, but only requires that the utility be permitted to adjust its test period data to reflect reasonably known and measurable changes which may occur within 12 months of the end of the test year. Southwestern Bell Tel. Co. v. Arkansas Pub. Serv. Comm'n, 18 Ark. App. 260, 715 S.W.2d 451 (1986); Associated Natural Gas Co. v. Arkansas Pub. Serv. Comm'n, 25 Ark. App. 115, 752 S.W.2d 766 (1988).

Any proposed adjustment stands alone when measured by the “known and measurable” standard of this section. Southwestern Bell Tel. Co. v. Arkansas Pub. Serv. Comm'n, 18 Ark. App. 260, 715 S.W.2d 451 (1986).

The Arkansas Public Service Commission correctly included the revenues and expenses associated with Yellow Page operations of a related company for both the test year and the pro forma year in determining the telephone company's revenue requirement, where the commission found that the adjustment was based on reliable data supplied by telephone company and it was reasonably known and measurable within the guidelines of this section. Southwestern Bell Tel. Co. v. Arkansas Pub. Serv. Comm'n, 18 Ark. App. 260, 715 S.W.2d 451 (1986).

The Arkansas Public Service Commission's finding that the telephone company's evidence on demand repression adjustments did not meet the reasonably known and measurable standard of this section was not arbitrary and capricious, was supported by substantial evidence, and was therefore affirmed. Southwestern Bell Tel. Co. v. Arkansas Pub. Serv. Comm'n, 18 Ark. App. 260, 715 S.W.2d 451 (1986).

Cost-Saving Projects.

Giving effect to certain cost-saving projects by the Arkansas Public Service Commission in evaluating a rate increase request was not improper where the savings projects would be implemented during the pro forma year. General Tel. Co. v. Arkansas Pub. Serv. Comm'n, 23 Ark. App. 73, 744 S.W.2d 392, aff'd, 295 Ark. 595, 751 S.W.2d 1 (1988).

Discretion of Commission.

The test year to be used in setting utility rates is a matter lying within the discretion of the Arkansas Public Service Commission, although the commission should consider complete and accurate information with respect to a later period of time, when available, as a check on the continuing validity of the test year experience in a period of rapid change. Southwestern Bell Tel. Co. v. Ark. Pub. Serv. Comm'n, 267 Ark. 550, 593 S.W.2d 434 (1980) (decision prior to enactment of this section).

Commission did not abuse its powers where “changes in circumstances” were “reasonably known and measureable” and they occurred during 12 months after the test year. General Tel. Co. of Southwest v. Arkansas Pub. Serv. Comm'n, 295 Ark. 595, 751 S.W.2d 1 (1988).

Reliability of Data.

General disclaimer included in report did not prevent report's analysis of data from meeting the required level of certainty. Bryant v. Arkansas Pub. Serv. Comm'n, 50 Ark. App. 213, 907 S.W.2d 140 (1995).

Test Components.

Matters not completely within the control of a company may still be measured; analytical studies, historical data, and expert projections often must provide the basis for certain components of ratemaking. Bryant v. Arkansas Pub. Serv. Comm'n, 50 Ark. App. 213, 907 S.W.2d 140 (1995).

Notes of Decisions

Cited in 7 cases, 1988–2008 · leading case: Arkansas Gas Consumers, Inc. v. Arkansas Pub. Serv. Comm'n, 118 S.W.3d 109 (Ark. 2003).

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Arkansas Gas Consumers, Inc. v. Arkansas Pub. Serv. Comm'n, 118 S.W.3d 109 (Ark. 2003). · cites it 4× “§ 23-4-108 must be read in harmony *132 with Ark.Code Ann. § 23-4-406 (Repl. 2002), which provides: For the purpose of justifying the reasonableness of a proposed new rate schedule, a utility may utilize either an historical test period of twelve (12) consecutive calendar months…”

Bryant v. Arkansas Pub. Serv. Comm'n, 907 S.W.2d 140 (Ark. Ct. App. 1995). · cites it 10× “The Attorney General contends that to include the plant changes without including their resulting effects would be in violation of Arkansas Code Annotated § 23-4-406 (1987) and the “test year matching principle,” i.”

Entergy Arkansas, Inc. v. Arkansas Pub. Serv. Comm'n, 289 S.W.3d 513 (Ark. Ct. App. 2008). · cites it 4× “See Ark. Code Ann. § 23-4-406 (Repl. 2002). The Commission views the evidence and other historical information to establish future rates that are just and reasonable.”

Associated Nat. Gas Co. v. Arkansas Pub. Serv. Comm'n, 752 S.W.2d 766 (Ark. Ct. App. 1988). · cites it 4× “Section 23-4-406 (1987)] provides in pertinent part as follows: “.”

Bryant v. Arkansas Pub. Serv. Comm'n, 924 S.W.2d 472 (Ark. Ct. App. 1996). · cites it 2× “In both dockets, the Commission was reviewing evidence of twelve months of historical data from SWBT's books and records for a test year ending May 31, 1993, with adjustments for reasonably known and measurable changes occurring in the pro forma year in accordance with Arkansas…”

Gen. Tel. Co. v. Arkansas Pub. Serv. Comm'n, 751 S.W.2d 1 (Ark. 1988). · cites it 2× “Ark. Code Ann. § 23-4-406 (1987). The statute also provides, in part: However, the commission shall also permit adjustments to any test year so utilized to reflect the effects on an annualized basis of any and all changes in circumstances which may occur within twelve (12)…”

Arkansas Gas Consumers, Inc. v. Arkansas Pub. Serv. Comm'n, 91 S.W.3d 75 (Ark. Ct. App. 2002). · cites it 8× “Arkansas Code Annotated section 23-4-406 sets forth the implementation of rate increases within the context of a general rate case as follows: For the purpose of justifying the reasonableness of a proposed new rate schedule, a utility may utilize either a historical test period…”

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