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Substitute Senate Bill No. 323

PUBLIC ACT NO. 96-153

AN ACT IMPLEMENTING RECOMMENDATIONS OF THE DEPARTMENT OF PUBLIC UTILITY CONTROL CONCERNING WATER REGULATION.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 16-19h of the general statutes is repealed and the following is substituted in lieu thereof:

The Department of Public Utility Control may reopen proceedings on a proposed rate amendment filed under section 16-19 and amend its final decision on such filing to adjust the rates of a water company, as defined in section 16-1, [which supplies water to not more than two hundred fifty service connections or one thousand persons on a regular basis, to reflect the increased cost of (1) water purchased from another such water company or a municipal utility furnishing water, if such increased cost results from the approval by the department or the legislative body of the municipality in which such municipal utility is located, of a rate increase for the water company or municipal utility furnishing such water, (2) electricity purchased from an electric public service company or a municipal utility furnishing electricity, if such increased cost results from the approval by the department or the legislative body of the municipality in which such municipal utility is located, of a rate increase for the electric public service company or municipal utility furnishing such electricity or (3) taxes assessed pursuant to section 12-75 or 12-76] TO INCLUDE IN THE RATE BASE THE CONSTRUCTION COSTS ASSOCIATED WITH ADDITIONS TO A PLANT THAT ARE REQUIRED BY ORDER OF THE DEPARTMENT OF PUBLIC UTILITY CONTROL, THE DEPARTMENT OF PUBLIC HEALTH OR THE DEPARTMENT OF ENVIRONMENTAL PROTECTION. THE ADJUSTMENT AND APPROVAL OF ANY RATE UNDER THIS SECTION SHALL BE BASED ON THE CRITERIA SET FORTH IN SECTION 16-19e, AS AMENDED.

Sec. 2. Section 16-32c of the general statutes is repealed and the following is substituted in lieu thereof:

(a) Notwithstanding the provisions of section 16-19, a water company, as defined in section 16-1, may charge rates in excess of or less than those approved by the Department of Public Utility Control, after a limited hearing as deemed appropriate by the department, by adjusting existing rates to compensate for increases or decreases only in the company's following expenses: (1) The price of water purchased for redistribution to its customers from another water company or governmental authority whose rates have been adjusted; (2) the price of gas or electricity purchased from a gas or electric company or governmental authority whose rates have been adjusted; (3) federal, state and local taxes or other government assessments on revenue, income or property; [and] (4) fees charged by any federal or state agency or other government entity that has jurisdiction over the company(5) FEES, OR CHANGES IN FEES, CHARGED FOR FEDERAL AND STATE MANDATED MONITORING OF THE QUALITY OF THE COMPANY'S WATER SUPPLY; AND (6) CHANGES IN EXPENSES DUE TO INFLATION THAT, IN THE OPINION OF THE DEPARTMENT, ARE SUBJECT TO AN INFLATION ADJUSTMENT IN RATE SCHEDULE PROCEEDINGS HELD PURSUANT TO SECTION16-19. The amount of any adjustment of rates shall not exceed the aggregate net amount of increases and decreases in the expenses set forth in this subsection on an annualized basis, provided that such adjustment shall not cause the company's projected return on equity for the following twelve-month period to exceed the return on equity authorized in the company's most recent proceeding for an amendment of rates pursuant to section 16-19. A company may adjust its rates pursuant to this section only (A) when the aggregate effect of increases or decreases in such expenses equals or exceeds one half of one per cent of the company's operating revenues for [a] THE twelve-month period commencing after the department issued a decision on the company's most recent application for an amendment of rates pursuant to section 16-19, [(B) within one year of the occurrence of the increases or decreases in the company's expenses set forth in this subsection, and (C)] AND (B) once in any twelve-month period. A company shall not adjust its rates pursuant to this section in any twelve-month period following approval of an amendment of rates by the department pursuant to section 16-19.

(b) A company [shall apply] APPLYING to the department for an adjustment of rates pursuant to subsection (a) of this section [within twenty days of the twelve-month period on which the company bases its proposed adjustment. Such application] shall include IN ITS APPLICATION (1) the amount by which each of the expenses set forth in subsection (a) of this section shall increase or decrease, (2) the basis for each such increase or decrease, (3) the total amount of the proposed adjustment of rates, (4) the proposed amount by which each class of customers' rates will increase or decrease, (5) the date the proposed adjusted rates will be in effect, [and] (6) a sworn statement which attests to the accuracy of the figures and calculations upon which any proposed adjustment of rates is based and which states that the proposed adjustment will not cause the company to exceed the return on equity authorized in the company's most recent proceeding for an amendment of rates pursuant to section 16-19 AND (7) A COPY OF THE NOTICE THE COMPANY PROVIDED PURSUANT TO SUBSECTION (c) OF THIS SECTION TO ALL AFFECTED CUSTOMERS ADVISING THEM OF THE PROPOSED ADJUSTMENT OF RATES. The department may hold a public hearing [within thirty days of] NOT MORE THAN FORTY-FIVE DAYS AFTER receiving an application for an adjustment of rates to verify the accuracy of the figures and calculations submitted to the department by the company and to determine that such an adjustment shall not cause the company to exceed the return on equity authorized in the company's most recent proceeding for an amendment of rates pursuant to section 16-19. The department shall review the complete application to determine whether the proposed adjustment of rates reflects prudent and efficient management of the company's operations IN ACCORDANCE WITH THE CRITERIA SET FORTH IN SECTION 16-19e, AS AMENDED. The department shall issue a decision on an application for an adjustment of rates [within fifty days of] NOT MORE THAN NINETY DAYS AFTER the filing of the complete application. If, within fifteen months after the filing of a company's annual audit report, as required by section 16-32, the department finds that the company exceeded the return on equity authorized in the company's most recent proceeding for an amendment of rates pursuant to section 16-19 because of an adjustment of rates made pursuant to this section, the department shall order the company to refund, with interest and on an equitable basis, the amount realized by the company in excess of its return on equity authorized in the company's most recent proceeding for an amendment of rates pursuant to section 16-19 to its rate-paying customers and to adjust its rates as determined by the department to be necessary to prevent the company from further exceeding its authorized rate of return.

(c) [A company adjusting its] BEFORE A COMPANY APPLIES FOR AN ADJUSTMENT OF rates pursuant to SUBSECTION (a) OF this section THE COMPANY shall notify each customer who would be affected by the PROPOSED adjustment, by mail, [at least thirty days prior to the implementation of the adjustment that an adjustment will be implemented] THAT THE COMPANY IS APPLYING FOR AN ADJUSTMENT OF RATES, the total amount of the PROPOSED adjustment, the amount by which each class of customers' rates [will] WOULD increase or decrease and the date the PROPOSED adjusted rates [will be in] WOULD GO INTO effect.

[(d) The provisions of this section shall not apply to class "A" water companies after October 1, 1998, provided that any adjustment of rates of class "A" water companies approved by the department pursuant to this section before said date shall remain in effect. On or before January 1, 1999, the department shall submit a report regarding applications filed pursuant to this section and action taken on such applications to the joint standing committee having cognizance of matters relating to energy and public utilities. Said report shall include the effect of the provisions of this section on streamlining the rate-making process and the impact on affected customers, and may include a recommendation concerning the applicability of this section to class "A" water companies.]

Sec. 3. Section 2 of public act 95-174 is repealed and the following is substituted in lieu thereof:

The Department of Public Utility Control, in consultation with THE OFFICE OF POLICY AND MANAGEMENT, THE OFFICE OF CONSUMER COUNSEL, THE CONNECTICUT WATER WORKS ASSOCIATION the Department of Public Health and the Department of Environmental Protection, shall conduct [a proceeding] PROCEEDINGS to identify legislative action and incentives needed to (1) ensure that all residents of the state have a reliable, safe supply of quality water, (2) facilitate improvement of troubled or nonviable water systems, (3) improve the quality of water service to consumers, (4) minimize increases in rates due to compliance with state and federal water quality and related regulations, (5) streamline and reduce the cost of regulating water companies, and (6) achieve economies of scale in supplying water to consumers. The Department of Public Utility Control shall hold public hearings and encourage participation by the general public, public and private water companies, municipal and regional water authorities, and other interested participants, both public and private. [The] EACH proceeding shall not be considered a contested case, as defined in section 4-166 of the general statutes. The department shall report its findings and recommendations to the joint standing committees of the General Assembly having cognizance of matters relating to public service companies, public health and the environment not later than February 1, 1996. THE DEPARTMENT SHALL REPORT ADDITIONAL FINDINGS AND RECOMMENDATIONS TO SAID JOINT STANDING COMMITTEES NOT LATER THAN FEBRUARY 1, 1997, AND FEBRUARY 1, 1998. AT LEAST SIXTY DAYS PRIOR TO ISSUING SUCH REPORTS, THE DEPARTMENT OF PUBLIC UTILITY CONTROL SHALL ISSUE TO PARTICIPANTS OF SUCH PROCEEDINGS A DRAFT OF ITS FINDINGS AND RECOMMENDATIONS, AND SHALL, NOT MORE THAN THIRTY DAYS AFTER THAT, HOLD A PUBLIC HEARING TO HEAR COMMENTS ON THE DRAFT. THE DEPARTMENT SHALL TAKE INTO CONSIDERATION SUCH COMMENTS IN ITS FINAL REPORTS TO SAID JOINT COMMITTEES.

Approved May 31, 1996. Effective October 1, 1996.

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