65- 407 C.M.R. ch. 65, § 3

Current through 2024-25, June 19, 2024

Section 407-65-3 - EXTENSIONS TO SERVE INDIVIDUALS

A.Cost Estimate, Advances and Deposits. Upon request of a potential customer or customers for a main extension, the utility shall prepare, without charge, a preliminary sketch, general specifications such as size and type of pipe, an estimate of the cost of the proposed water main extension and separate estimates of the cost of service lines to serve the customers requesting the main extension. If a water utility provides public fire protection the estimate and final cost for each foot of the extension shall include the average current per foot cost for the utility of providing hydrants. Averages shall be determined by dividing current installation costs by the spacing in feet between hydrants for areas of the same density and character.

The main extension estimate shall serve as a basis for determination of any required customer contribution. The costs of the main extension and the service lines shall be kept separate in order to allow reallocation among customers of the cost of the main extension alone pursuant to subsection D. For the purposes of these rules, actual costs shall be reasonable and shall not exceed costs recorded in conformity with accepted water utility accounting practice as defined in the Uniform System of Accounts for Water Utilities prescribed by this Commission.

B.Utility Requirement. Unless a non-investor owned utility has chosen to make no investment in main extensions pursuant to 35 M.R.S.A. § 72-A(1), the utility shall invest in the extension of its water mains the investment amount multiplied by the number of customers served by the main extension. Each time a permanent customer is connected to the line extension during the 10 years following connection of the first customer, the utility shall invest an additional investment amount, except that it shall not invest in more than one-half of the original cost of construction. The investment amount shall be the amount calculated as of the time the first customer was connected.

C.Customer Contribution to Maine Extension and Other Requirements; Cost of Service lines; Advances and Deposits; Contracts. Applicants either for a new water main extension, or for service from an existing water main extension, during the period of 10 years following connection of the first customer (on extensions to which the first customer was connected after May 7, 1986), shall, subject section 2(G), be responsible for customer contributions of all costs of construction of the main extension including the fire protection allocation, less the amount which the utility must invest. All applicants for service from a main, whenever constructed, shall be responsible for the cost of both portions of the service line that will serve each customer. Applicants for either a main extension or the utility's portion of the service line from an investor-owned utility shall also be responsible for the net federal and state income tax liability resulting from the contribution in aid of construction. The total amount which the applicant must pay shall be determined by (1) determining the amount of contribution before taxes (construction cost allocated pursuant to section 3(D) minus investment amount); (2) determining the amount of depreciation for tax purposes for each year over the tax depreciable life of the asset; (3) determining the amount of tax reduction resulting from tax depreciation over each year of the tax depreciable life of the asset, using the utility's expected marginal federal and state tax rates; (4) determining the present value of the amounts established by step 3, using as a discount rate the weighted cost of debt plus the pre-tax weighted cost of equity as determined in the investment factor formula; (5) deducting the total amount established by step 4 from the amount of the contribution established by step 1; (6) grossing up the amount established by step 5 for federal and state taxes pursuant to the following formula:

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Where

TC = Total contribution including taxes

C = Contribution after deduction of present value of tax reductions resulting from tax depreciation (step 5)

FIT = Federal Income Tax marginal rate

SIT = State Income Tax marginal rate

The applicant(s) shall be required to advance the customer contribution, if applicable, and the cost of the service drop to the utility no more than two weeks prior to the start of construction, of a utility no more than two weeks prior to the start of construction, of a new main or connection to an existing main extension or main. The utility may require a deposit of the cost of materials and supplies and detailed engineering design, or some portion thereof, two months prior to the commencement of construction of a main extension. Any portion of the deposit actually spent for detailed engineering design or for materials and supplies which cannot readily be used for other projects by the utility shall not be refundable. Within 60 days following receipt by the utility of the final bills for the extension, adjustment shall be made for any differences between the estimates and actual costs of the extension and service line or lines.

No construction of a main extension or service drop shall be commenced until the utility and the customer have executed a written contract. The contract shall incorporate this rule by reference, shall state that in the case of a conflict between the contract and the rule, the rule shall govern, and shall state that the provisions of the contract are subject to alteration by Public Utilities Commission decision or rule.

When new customers are added to an extension, customer contributions to the line extension for existing and new customers shall be recalculated as provided in Paragraph D.

D.Distribution of additional Investment Amounts and Reallocation of Customer Contributions. When additional customers are connected to an extension within the ten years following connection of the first customer, the utility shall make payments without interest to the existing customers of (1) the additional amount, if any, which the utility must invest in the main extension; and (2) the additional customer contribution to the main extension. The amounts to be paid to customers shall be determined by recomputation of the contribution by each customer (after deduction of the new total utility investment amount) pursuant to section 1(B) or 1(C), as applicable, as if all customers had been connected simultaneously. If the utility has ceased investing because it has invested an amount equal to one-half of the original cost of the extension, customer contributions and reallocations among customers shall nevertheless continue until the expiration of the 10-year period.

E.Further Extension to Serve New Customer. All further extensions to serve other customers shall be separate and customers served by further extensions shall not be required to contribute to any prior extension.

65- 407 C.M.R. ch. 65, § 3