§ 53.54. Small water and wastewater utilities.
(a) Procedures.
(1) Whenever a small water or wastewater utility desires to file a change in its tariff which increases annual revenues, it may advise the Commission of its intention in letter form and request the necessary Commission forms. When filing, the utility shall set forth its proposed tariff changes and reasons for the changes, together with the necessary completed Commission forms. If the utility is unable to fully complete the necessary forms, it may request assistance from the Commission staff.
(2) The small water utility or wastewater utility is required to fully cooperate with the Commission staff in providing the necessary information to complete these forms if the utility is unable to do so on its own.
(3) Upon completion of the Commission forms in a manner satisfactory to the Commission staff, the small water or wastewater utility shall file a tariff or tariff supplement, along with the completed forms, incorporating the proposed changes. The effective date of the proposed increase contained in the tariff or tariff supplements may not be less than 61 days after the filing, and customers shall be notified in accordance with § 53.45(a)(2) (relating to notice of new tariffs and tariff changes).
(4) On the basis of the tariff filing, the accompanying data and completed forms, the staff shall determine tentative allowable revenues and submit a report to the Commission.
(5) If the proposed revenues exceed the tentative allowable revenues, the Commission will suspend the supple- ment but with a ‘‘condition subsequent’’ added, to the effect that if the utility within a specified number of days files a superseding supplement which produces the allowable revenues found by the staff and which has a rate structure satisfactory to the Commission, the suspension and investigation orders of the Commission shall be deemed inoperative and terminated. However, if the utility fails to meet the ‘‘condition subsequent,’’ or if a customer files a formal complaint, the utility may present the supporting data and the additional facts referred to in this section in formal proceedings. Additionally, in these formal proceedings, the utility may agree to accept the most recent rate of return or operating ratio allowed a water or wastewater utility by the Commission in a fully-litigated water or wastewater utility rate case, but the agreement will not be binding on the Commission or any formal complainant.
(6) A water or wastewater utility with a gross revenue of less than $250,000 annually shall be considered a small water or wastewater utility for purposes of short-form rate filings.
(b) Operating ratio methodology.
(1) This ratemaking method develops a revenue requirement where little or no rate base exists. The operating ratio at present rates shall be calculated as a ratio of operating expenses to operating revenues, where the numerator shall include operations and maintenance expense, annual depreciation on noncontributed facilities, amortization of multiyear expenses and applicable taxes and the denominator shall consist of the utility’s operating revenues at present rates.
(2) The appropriate target operating ratio in a particular case shall be determined by considering at least the following factors:
(i) The operating ratios of comparable water or wastewater utilities.
(ii) Coverage of actual hypothetical, or both, interest expense.
(iii) A comparison of the cost of service with the cost of service of similar companies which do not employ an operating ratio rate methodology.
(iv) Current market conditions, including price inflation.
(v) The quality of service and efficiency of operations.
(vi) The rate case history.
(vii) Whether there is any rate base and, if so, whether any depreciation expense is being claimed in the filing.
(viii) An acquisition adjustment, if any.
(ix) Financial resources.
(x) The fairness of the resulting return.
(3) An increase or decrease in operating revenues shall be determined by dividing the utility’s reasonable and legitimate operating expenses by the target operating ratio determined in paragraph (2), and subtracting that amount from the test period operating revenues.
(4) The operating ratio methodology shall be available to water and wastewater utilities with annual gross revenues (excluding current year Contributions In Aid of Construction (CIAC)) of less than $250,000. If a water or wastewater utility wishes to employ an operating ratio methodology in calculating its rates, it shall make this request in the context of a rate case, and shall bear the burden of proving all necessary elements thereof.
(c) Purchased water cost adjustment—sliding scale of rates.
(1) A water utility with annual gross revenues of less than $250,000, may establish a sliding scale of rates under 66 Pa.C.S. § 1307 (relating to sliding scale of rates; adjustments) upon 60 days’ notice to customers, to recover the cost of purchased water obtained from municipal authorities or entities which are not affiliated interests as defined in 66 Pa.C.S. § 2101 (relating to the definition of affiliated interest). The purchased water cost adjustment filing shall be accompanied with a tariff or tariff supplement which establishes the new rates to be placed into effect, a calculation showing the application of the new rate schedule to the company’s average level of customer usage, an income statement demonstrating the effect of the tariff or tariff supplement upon the utility’s revenues for the period in which the proposed tariffs would be in effect, a copy of the notice provided to customers and a verification that all customers have received notice of the proposed rate change.
(2) A purchased water cost adjustment shall be revised and refiled within 60 days of a decrease in purchased water costs, and shall be designed to pass through to customers the entire reduction in purchased water costs from the date the reduction becomes effective. A purchased water adjustment may be revised and refiled at any time after an increase in purchased water costs, and shall be designed to recover cost increases prospectively from the date of filing only.
(3) Within 30 days following the end of the calendar year, every public utility utilizing a purchased water cost adjustment shall file the report prescribed by 66 Pa.C.S. § 1307(e) for the preceding 1-year period ending December 31st. These reports shall be reviewed by the Commission’s Bureau of Audits, and, if no complaint or objection is raised within 45 days after filing, either by the Commission’s Bureau of Audits or another person, the reports shall be deemed approved.
(d) Emergency Maintenance and Operation Fund (EMOF).
(1) EMOF. An expense claim in lieu of a cash working capital claim which may be allowable in anticipation of emergencies such as extraordinary repairs and maintenance, drought conditions, extraordinary environmental and physical damages to sources of supply, floods, storms, freeze-ups, or other health and welfare-threatening situations. The burden of demonstrating that actual or proposed disbursements from the fund are reasonable and in the public interest shall be borne by the utility.
(2) Methodology. The Fund expense may not exceed 45 days of average operating expenses, excluding taxes and depreciation. If a claim for Fund expense is made, no additional claim for cash working capital shall be made or considered.
(3) Procedures. The amounts allocated for an EMOF shall be kept in a separate cash account and disbursements shall be restricted to the uses in paragraph (1). The utility shall report all disbursements from the Fund to the Commission within 10 days and shall provide a summary of each year’s disbursements on its Annual Report. Disbursements from the Fund which are found by the Commission to have been made improperly, or in violation of a statute, regulation or order of the Commission or other Commonwealth agency shall be returned to the account or be refunded to ratepayers as the Commission may direct. A person or individual who makes, authorizes or directs disbursement from a Fund which is improper or in violation of any statute, regulation or order of the Commission shall be subject to 66 Pa.C.S. § 3301 or § 3301 (relating to civil penalties for violations); and criminal penalties for violations).
(4) Availability. The Commission may authorize funding a Fund for water and wastewater utilities with annual gross revenues (excluding current year CIAC) of less than $250,000.
(e) Reserve account
(1) Reserve account. A segregated account to be funded by customer contributions collected through base rates for the purpose of making capital improvements to utility plant pursuant to a long-range plan developed in conjunction with the Commission or the Department of Environmental Protection, or as required to assure compliance with State or Federal safe drinking water statutes or regulations. The burden of demonstrating that actual or proposed expenditures are reasonable and in the public interest shall be borne by the utility.
(2) Procedures. The amounts to be allocated to the reserve account will be determined by the Commission after review of the utility’s proposed capital budget and the justification for that budget. Funds in the reserve account shall be kept in a separate interest bearing cash account. Interest accrued shall be credited to the reserve account and shall become part of the corpus of the reserve account. Funds from the account shall not be employed for a purpose other than those permitted under this section. Disbursements from the fund shall not be made without written authorization by the Commission upon petition, shall be restricted to the uses in subsection (d)(1), and shall be made in accordance with a capital budget submitted with the initial rate filing or as modified with the consent of the Commission. In proposing any modifications of the capital budget, the Commission or a party may solicit the advice or testimony of the Department of Environmental Protection. The utility shall report all disbursements from the reserve account by written notice to the Commission and to other persons as the Commission may direct. Disbursements from the reserve account which are found by the Commission to have been made improperly, or in violation of any statute, regulation or order of the Commission or other Commonwealth agency shall be returned to the account or be refunded to ratepayers as the Commission may direct. A person who makes, authorizes or directs a disbursement from a reserve account without authorization by the Commission in accordance with these rules shall be subject to 66 Pa.C.S. § 3301 or § 3302.
(3) Accounting. Plant capitalized by means of the reserve account shall be accounted for as a contribution in aid of construction.
(4) Availability. The Commission may authorize funding of a reserve account for water and sewage utilities with annual gross revenues (excluding current year CIAC) of less than $250,000.
Authority The provisions of this § 53.54 amended under the Public Utility Code, 66 Pa.C.S. § § 1301—1304 and 1307—1309.
Source The provisions of this § 53.54 amended January 17, 1997, effective January 18, 1997, 27 Pa.B. 301. Immediately preceding text appears at serial pages (213673) to (213674).
Cross References This section cited in 52 Pa. Code § 53.52 (relating to applicability; public utilities other than canal, turnpike, tunnel, bridge and wharf companies).
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