65- 407 C.M.R. ch. 65, § 4

Current through 2024-25, June 19, 2024

Section 407-65-4 - EXTENSIONS TO SERVE DEVELOPMENTS

A.Developer Requirements. Upon request, an applicant for a main extension to serve a development shall furnish all reasonable information concerning the development, including an approved recorded plan which will show the line and grade of any roadways and an easement giving the utility prior rights in the public right-of-way. The utility shall prepare the cost estimate. If a water utility includes public fire protection the estimate and the final cost for each foot of the extension shall include the average current per foot cost of providing hydrants. Averages shall be determined by dividing current installation cost by the spacing in feet between hydrants for areas of the same density and character.

B.Utility Investment. Unless a non-investor owned utility has chosen to make no investment in water main extensions pursuant to 35 M.R.S.A. §72-A(1), during the period of 10 years following connection of the first customer, the utility shall make an investment in a water main extension in the form of a payment to the developer each time a permanent customer is connected to the extension. The amount of the investment per customer shall be determined pursuant to section 1(F) at the time the first customer was connected shall remain unchanged over the 10 year period. The total amount of investment shall equal the investment amount multiplied by the number of additional customers served by the main extension, but shall not exceed one-half of the original cost of the extension. Additional service drops constructed at any time after the construction of the main extension shall be paid for in advance of construction by the developer or customer to be served.

C.Developer Contribution; Cost of Service Lines; Advances and Deposits; Contracts. The developer shall advance to the utility, no more than two weeks prior to the commencement of construction, the total estimated cost of the line extension including the fire protection allocation and, subject to section 2(G), and the total estimated cost of service drops to all lots or locations where future service may reasonably be anticipated. Developers shall also be responsible for the net federal and state income tax liability of an investor-owned utility 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 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 depreciation 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 weighted pre-tax cost of equity as determined in the investment amount formula; (5) deducting the total amount established by step 4 from the amount of the contributions 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 utility may require a deposit of the cost of materials and supplies or detailed engineering design, or some portion thereof, two months prior to the commencement of construction. 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.

No construction of a main extension or service drop shall be commenced until the utility and the developer 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.

Within 60 days following receipt by the utility of the final bills for the extension, the charge to the developer shall be adjusted to make up for any difference between the estimated and actual costs of the lines. For the purposes of these rules, actual cost 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 the Commission.

D.Customer Contributions by Customers Outside Development. If a main extension must cross property other than that within the development prior to reaching the development, and customers located on the property outside the development are connected to the main extension within ten years following connection of the first customer at any location on contribution. The total cost of the main extension shall be allocated between the development and the area outside the development on the basis of the number of feet within the development and the number of feet outside the development. After determining the total cost of the portion of the main extension outside the development on the basis of this allocation, customers outside the development should be required to make a contribution, less an investment amount per customer if applicable, as provided pursuant to section 1(B) or 1(C). For the purpose of determining the contribution or reallocating contributions when subsequent customers outside the development are connected, the developer shall be considered the equivalent of the number of customers within the development or the number of services constructed pursuant to subsection C of this section, whichever is greater, as if all those customers or services were located at the termination of the portion of the extension located outside the development. If a development is master-metered, the number of customers within the development, for purposes of this subsection, shall be considered as the number of residential, commercial or industrial units or establishments.

65- 407 C.M.R. ch. 65, § 4