65- 407 C.M.R. ch. 65, § 1

Current through 2024-25, June 19, 2024

Section 407-65-1 - DEFINITIONS

A.Customer. A person taking or proposing to take water service at an establishment.

B.Customer Contribution. The amount which a new customer on a water main extension must contribute to a water main extension. The amount of the customer contribution shall be the customer's share of the length of the extension up to the point of service minus the investment amount. The customer's share shall be: (1) the length of the main extension, if any, which serves that customer exclusively plus, (2) for each segment of extension serving 2 or more customers, the length of that segment divided by the number of customers served by it. In calculating the customer contributions the utility shall use the average cost per foot of the entire water main extension, including the fire protection allocation described in sections 3(A) and 4(A). The total contribution shall also include the net federal and state income tax liability resulting from the contribution, as calculated pursuant to section 3(C) and 4(C). The cost allocated among customers shall not include the cost of service lines.

EXAMPLE

Customer A is located at 200 feet on an extension.

Customer B is located at 120 feet.

Investment amount ($ amount to be invested by utility per customer) = $600

Cost of extension = $6000

Average cost of extension per foot = $30

1. Customer A pays for all of extension beyond 120 feet, i.e., 200 - 120 = 80 feet, and pays for half of first 120 feet, i.e., 120/2 = 60 feet. Customer A pays for 140 feet (80 + 60) of the 200 feet (70%).

2. Customer B pays for half of first 120 feet (30%) of the extension = 60 feet.

3. Customer A's share is 140 feet x $30 per foot = $4200 (70%). After deduction of utility's investment amount of $600, Customer A pays $3600.

4. Customer B's share is 60 feet x $30 per foot = $1800 (30%). After deduction of utility's investment amount of $600, Customer B pays $1,200.

If, after deduction of the investment amount for any customer, the contribution required from that customer is a negative amount, the customer shall make no contribution, but the utility shall make an investment on behalf of that customer equal only to that customer's share calculated as described above.

C.Alternative Calculation of Customer Contribution. As an alternative to the allocation of the customer contribution described in subsection B, where an extension is to serve an area which has lots of approximately equal size, the utility may require customers served by the extension to provide a customer contribution in equal shares of the total construction cost, after deduction of the utility's investment amount for each customer. The utility shall divide the total required customer contributions, after deduction of the total investment, equally among all customers each time a new customer is added.

D.Development. A water main extension shall be considered as serving a development, for purposes of section 4 of this rule, if a single person or business entity or a single association of persons or entities applying for a main extension to serve property owned or under the control of the single person, entity or association has offered two or more parcels for sale or it is reasonable to expect that two or more parcels will be offered for sale.

E.Establishment. A location at which water service is desired or is being rendered.

F.Investment Amount. The amount which a utility must invest in a water main extension for each customer. The investment amount is 75% of the amount of utility investment that will be supported by revenues from a new customer which are associated with fixed investment, provided that the utility shall invest no more than 50% of the cost of a line extension. The investment amount (LA) is established by multiplying the investment factor (IF) by the average annual customer revenue for the applicable customer classes, adjusted for public fire protection, as of the time the first customer was connected. For industrial, commercial and multi-unit residential customers, the average customer revenue shall be that of customers in the same class and same meter size subclass. The investment factor is determined (1) by dividing fixed costs by total operating revenues and other income in order to establish the percentage of costs related to embedded investment; and (2) then dividing this result by the sum of the applicable cost of capital plus capital recovery costs (.013 depreciation) based on a 75-year write-off (expressed decimally as .013) plus, for a non-investor owned utility, the principal payment percentage per year. The entire calculation is multiplied by .75.

In the formulas stated below the account numbers listed are from the Uniform System of Accounts for water utilities, contained in Chapter 61 of these rules (65-407 C.M.R. 61).

The basic formula for determining the investment amount (IA) is:

IA = IF x ACR

The formula for determining the investment fact (IF) for a non-investor owned utility is:

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The formula for determining the investment factor (IF) for an investor owned utility is:

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Where

ACR = Average Annual Customer Revenue per customer for the applicable class or meter size subclass, divided by the difference of 1 minus the percentage determined in the most recent rate case, expressed decimally, of the utility's revenue requirement paid for fire protection by the municipality in which the main extension is located. If a utility is not able to determine average revenue for a particular class or meter size subclass because of insufficient experience, it shall use an estimated average revenue, based on average usage amounts from other water utilities and approved by the Director Technical Analysis of the Commission.

D = Depreciation Expense from Account 403.

A = Amortization Expense from Account 407.

I = For non-investor-owned utilities, total Income Deductions from Accounts 427, 428, 429 and contractual appropriations of income included in Account 436. For investor-owned utilities, the weighted cost of debt times the rate base allowed in the utility's last rate case, unless a different amount is approved or set by the Commission or the Director of Finance.

R = Operating Revenues from Accounts 460 to 474 inclusive.

T= Total Non-operating Income from Accounts 415 to 421 inclusive and Account 426.

C = Overall cost of capital for non-investor owned utilities, expressed as a decimal. Unless otherwise approved or set by the Director of Finance or the Commission, the cost of capital shall be the average interest rate for the first 15 years of the most recent issues of the Maine Bond Bank for a serial bond, assuming equal annual principal payments.

CD = Cost of debt for an investor-owned utility, weighted by the debt ratio, expressed as a decimal. Unless otherwise approved or set by the Director of Finance or the Commission, the cost of debt and the debt ratio shall be those approved in the utility's most recent rate case.

CE = Cost of equity, weighted by the equity ratio, expressed as a decimal. Unless otherwise approved or set by the Director of Finance or the Commission, the cost of equity and the equity ratio shall be those approved in the utility's most recent rate case.

FIT = The utility's marginal federal income tax rate allowed in its most recent rate case, expressed as a decimal, unless a different tax rate is approved or set by the Director of Finance or the Commission.

P = Principal payment percentage annually, expressed as a decimal. Unless a different amount is approved or set by the Director of Finance or the Commission, the amount shall be .067 (15 years).

SIT = The utility's marginal state income tax rate allowed in its most recent rate case, expressed as a decimal, unless a different tax rate is approved or set by the Director of Finance or the Commission.

The investment amount shall be calculated each year on or before July 1. With the approval of the Commission, a utility may apply an adjustment to both the numerator and denominator of the fraction which determines the ratio of investment costs to total income in order to correct for past overinvestment in line extensions under the former investment factor contained in this chapter prior to its amendments effective May 7, 1986.

G.Limited Service Contract. A written agreement approved by the Commission pursuant to chapter 62, under which the company agrees to provide and the customer agrees to accept a level of pressure estimated in the contract. This agreement must be made on a form supplied by the utility.

H.Main and Main Extension. A main is a water line in a public way owned by the utility to serve one or more customer, multi-unit dwelling complex, or commercial or industrial development; or a water line owned by the utility on private property to serve more than one customer, multi-unit dwelling complex, or commercial or industrial development or to serve a single customer, multi-unit dwelling complex or commercial or industrial development if another person or entity has an easement or other right of access for water line purposes. A new main shall be a main extension for the 10 years following connection of the first customer. Pursuant to a decision by a utility under section 2(C), a new water line on private property to serve a single customer, multi-unit dwelling complex development shall be a main extension.

I.Person. An individual, partnership, company, public or private corporation, political subdivision or agency of the State, department, agency or instrumentality of the United States, or any other legal entity.

J.Public Way. A street or public right-of-way which has been accepted and is owned or controlled by a town, city, county, state or the federal government.

K.Private Line.

(1) A water line constructed prior to May 7, 1986 across private property to serve one or more customers and not considered by the utility to be a main;

(2) except as provided under section 2(C), a water line constructed after May 7, 1986 across private property to serve a single customer, a single multi-unit dwelling complex or a single commercial or industrial development upon which no other person has an easement or other right of access for water line purposes. All other water lines shall be considered mains.

L.Service Line. A water line installed at the customer's expense extending from a main to serve a single customer, a single multi-unit dwelling building or complex of a single commercial or industrial development. The service drop portion of the service line shall be owned by the utility and shall extend from the main to the curb stop (shut-off valve). The curb stop shall ordinarily be at the edge of the right of way.

M.Temporary Establishment. An establishment that the utility reasonably believes to be of a temporary nature after giving due consideration to the location, setting, structures and use of the structures and/or establishment. The absence of a cellar or a permanent foundation shall not be the sole criterion used by the utility in determining that an establishment is of a temporary nature.

65- 407 C.M.R. ch. 65, § 1