PA 17-138—HB 7105

Energy and Technology Committee

AN ACT CONCERNING WATER COMPANY RATE ADJUSTMENT MECHANISMS

SUMMARY: This act changes the methods the Public Utilities Regulatory Authority (PURA) uses to make certain determinations between rate cases for both public utilities and water companies.

The act expands and realigns the timeframe used to determine when a public utilityʼs excessive return on equity requires PURA to determine the need for an interim rate decrease. Under the act, PURA must make such a determination if the public utility has excessive return on equity for the rolling 12-month period ending with the two most recent consecutive financial quarters, rather than a period of six consecutive months.

By law, a water company whose rates are determined by PURA may receive a water infrastructure and conservation adjustment (WICA) to help defray the costs of funding certain infrastructure projects between general rate cases. Under prior law, PURA had to reset the WICA to zero if the water company exceeded its allowable rate of return by more than 100 basis points for any calendar year. The act eliminates this provision and instead requires PURA to establish an earnings sharing mechanism when a company, after any revenue adjustment mechanism, exceeds its allowable rate of return by more than 100 basis points for the rolling 12-month period ending with the two most recent consecutive financial quarters. Under the act, the earnings sharing mechanism must allow such excess return on equity to be shared equally between ratepayers and shareholders.

EFFECTIVE DATE: October 1, 2017