N.J. Admin. Code § 14:3-8.10

Current through Register Vol. 56, No. 21, November 4, 2024

Section 14:3-8.10 - Suggested formula for allocating extension costs-multi-unit or nonresidential development

(a) This section governs how Board staff will apply the suggested formula to the cost of an extension that is not covered by the provisions for extensions to a single residential customer at N.J.A.C. 14:3-8.11. The requirements in this section apply in addition to the general provisions for the suggested formulae at N.J.A.C. 14:3-8.9. This section does not address how deposits, non-refundable contributions, and refunds will be grossed up to reflect the tax consequences incurred by the regulated entity *pursuant to* the Internal Revenue Code, which is addressed at N.J.A.C. 14:3-8.6. This section does not set forth the cost of an extension, but merely governs the allocation of those costs between the utility and the applicant for the extension.

(b) The deposit required for an extension subject to this section shall be the cost of the extension required to serve the development. Prior to construction of the extension, the regulated entity shall notify the applicant in writing of its estimated cost to construct an extension to serve the development for which service is requested.

(c) For purposes of calculating the amount of the deposit, the development for which service is requested shall be determined by reference to the subdivision map approved by the applicable local authorities. If a development is to be approved and constructed in phases, the applicant shall indicate which phases are to be treated as separate developments prior to commencement of installation of service for purposes of determining the deposit and applying the suggested formula. Any cost estimates shall be recalculated to reflect the division of the project into phases prior to commencement of the installation of service and new cost estimates shall be provided.

(d) As each customer begins receiving services, the regulated entity shall issue to the applicant an initial "startup" refund of a portion of the deposit. For each customer, this customer "startup" refund shall be the estimated annual distribution revenue that will result from the customer, multiplied by 10 for gas, electric and telecommunications regulated entities, and 2.5 for water and wastewater regulated entities. If additional customers who were not originally anticipated are supplied from this extension, the regulated entity shall:

1. Estimate the actual cost of the extension required to bring service to the customer from the nearest existing infrastructure;

2. Estimate the annual distribution revenue that will be derived from the customer, and multiply it by 10 for gas, electric, and telecommunications regulated industries and 2.5 for water and wastewater regulated industries to obtain the estimated distribution revenue over the applicable multi-year period;

3. Subtract the estimated cost of the extension determined under (d)1 above from the applicable multi-year period distribution revenue determined under (d)2 above;

4. Refund the amount determined in (d)3 above to the original applicant when the customer begins receiving service, if the amount determined in (d)3 above is a positive number. This "startup" refund shall be in addition to the annual refunds described in this section; and

5. Provide additional refunds to the original applicant if the actual annual distribution revenue from these additional customers exceeds the estimated annual distribution revenue from these customers. These additional refunds shall be made by including these customers in the refund calculations made pursuant to (f) and (g) below.

(e) One year after the regulated entity received the deposit, and each subsequent year thereafter, the regulated entity shall provide an annual refund to the applicant. The first annual refund shall be calculated in accordance with (f) below. Subsequent annual refunds shall be calculated under (g) below.

(f) TThe first annual refund shall be calculated by multiplying by 10 for gas, electric, and telecommunication regulated entities, and 2.5 for water and wastewater regulated entities the difference between:

1. The distribution revenue from all customers that were served by the extension for the entire previous year; and

2. The estimated annual distribution revenue, upon which the original customer startup refund was based, for all customers that were served by the extension for the entire previous year. If the distribution revenue for the first year, determined under (f)1 above, was less than the estimated annual distribution revenue (upon which the original customer startup refund amount was based), the regulated entity is not required to provide an annual refund.

(g) For each subsequent year, the annual refund shall be calculated as follows:

1. Sum the distribution revenue from all customers that were served by the extension for the entire previous year;

2. Determine the sum of:

i. The distribution revenue that was used in calculating the most recent annual refund provided to the applicant. This is the amount determined under (g)1 above when this subsection was applied to determine the most recent annual refund; and

ii. The original estimated annual revenue for all customers that were served by the extension for the entire previous year, but whose revenues were not included in the calculation of the most recent annual refund that the regulated entity provided to the applicant;

3. Subtract (g)2 above from (g)1 above. If the (g)2 above is greater than (g)1 above, the regulated entity is not required to provide a refund; and

4. If (g)2 above is less than (g)1 above, multiply the difference derived under (g)3 above by 10 for gas, electric, and telecommunication regulated entities, and 2.5 for water and wastewater regulated entities to determine the annual refund.

(h) In determining the revenue from a customer or set of customers for purposes of the suggested formula, the regulated entity may in its discretion use estimated or actual revenues, unless otherwise specified in this subchapter.

(i) See examples A1 and A2 below for an illustration of the use of the suggested formula for some sample multi-unit developments.

EXAMPLE A1

Suggested formula applied to an extension to provide gas, electric, telecommunications service, and water and wastewater to a 10-unit residential development

Each year produces more revenue

When?	Action	Amount for Gas, Electric, and Telecom	Amount for Water and Waste-water
Year one	Before construction	Applicant provides deposit.	$ 20,000.00	$ 5,000.00
	First customer comes online	Regulated entity gives a customer startup refund to applicant, calculated by multiplying estimated annual distribution revenue from first customer ($ 430.00) by 10 for gas, electric, and telecommunications regulated entities, and by 2.5 for water and wastewater regulated entities.	$ 4,300.00	$ 1,075.00
	After first customer's startup refund	Amount of deposit remaining with regulated entity.	$ 15,700.00	$ 3,925.00
	Second customer comes online	Regulated entity gives a customer startup refund to applicant, calculated by multiplying estimated annual distribution revenue from second customer ($ 500.00) by 10 for gas, electric, and telecommunication regulated entities, and 2.5 for water and wastewater regulated entities.	$ 5,000.00	$ 1,250.00
	After second customer's startup refund	Amount of deposit remaining with regulated entity.	$ 10,700.00	$ 2,675.00
End of year one	One year has passed since depostit was provided	Regulated entity gives applicant first annual refund, based on customers served for all of year one. Refund is calculated by multiplying by 10 for gas, electric, and telecommunication regulated entities, and by 2.5 for water and wastewater regulated entities the difference between: i. The actual distribution revenue from customer 1 ($ 480.00); and ii. The original estimate of annual distribution revenue from customer 1 ($ 430.00). This difference is $ 50.00.	$ 500.00	$ 125.00
Year two	After first annual refund	Amount of deposit remaining with regulated entity.	$ 10,200.00	$ 2,550.00
	Third customer comes online	Regulated entity gives a customer startup refund to applicant, calculated by multiplying estimated annual distribution revenue from third customer ($ 400.00) by 10 for gas, electric, and telecommunication regulated entities, and 2.5 for water and wastewater regulated entities.	$ 4,000.00	$ 1,000.00
	After third customer startup refund	Amount of deposit remaining with regulated entity.	$ 6,200.00	$ 1,550.00
End of year two	Two years have passed since deposit was provided	Regulated entity gives applicant second annual refund, based on customers that were served for all of year two. Refund is calculated as follows: i. Sum the actual distribution revenue from customer 1 ($ 520.00) and customer 2 ($ 580.00). This results in a total of $ 1,100; and ii. Determine the sum of: -- The actual distribution revenue used in calculating the most recent annual refund ($ 480.00); and -- The original estimated annual from customer 2 ($ 500.00); -- This results in a total of $ 980.00; iii. Subtract ii above from i above, resulting in a difference of $ 120.00; and iv. Multiply the difference derived under iii above by 10 for gas, electric, and telecommunication regulated entities, and by 2.5 for water and wastewater regulated entities.	$ 1,200.00	$ 300.00
Year three	After second annual refund	Amount of deposit remaining with regulated entity.	$ 5,000.00	$ 1,250.00
	Fourth customer comes online	Regulated entity gives a customer startup refund to applicant, calculated by multiplying estimated annual distribution revenue from fourth customer ($ 350.00) by 10 for gas, electric, and telecommunication regulated entities, and by 2.5 for water and wastewater regulated entities.	$ 3,500.00	$ 875.00
	After fourth customer startup refund	Amount of deposit remaining with regulated entity	$ 1,500.00	$ 375.00
End of year three	Three years have passed since deposit was provided	Regulated entity gives applicant third annual refund, based on customers that were served for all of year three. Refund is calculated as follows: i. Sum the actual distribution revenue from customer 1 ($ 550.00), customer 2 ($ 610.00), and customer 3 ($ 550.00). This results in a total of $ 1,710; and ii. Determine the sum of: -- The actual distribution revenue used in the calculations of the most recent annual refund ($ 1,100); and -- The original estimated annual revenue from customer 3 ($ 400.00); -- This results in a total of $ 1,500; iii. Subtract ii from i above, resulting in a difference of $ 210.00; and iv. Multiply the difference derived under iii above by 10 for gas, electric, and telecommunication regulated entities, resulting in an annual refund of $ 2,100. Since $ 2,100 exceeds the remaining deposit, the regulated entity gives the applicant the remainder of the deposit ($ 1,500). For water and wastewater regulated entities, multiply the difference derived under iii above by 2.5, resulting in an annual refund of $ 525.00. Since $ 525.00 exceeds the remaining deposit, the regulated entity gives the applicant the remainder of the deposit ($ 375.00). Transaction is complete.	$ 1,500.00	$ 375.00

EXAMPLE A2

Suggested formula applied to an extension to provide gas, electric, telecommunications service, and water and wastewater to a 10-unit residential development

Second year produces less revenue

When?	Action	Amount for Gas, Electric, and Telecom	Amount for Water and Waste-water
Year one	Before construction	Applicant provides deposit.	$ 20,000.00	$ 5,000.00
	First customer comes online	Regulated entity gives a customer startup refund to applicant, calculated by multiplying estimated annual distribution revenue from first customer ($ 430.00) by 10 for gas, electric, and telecommunication regulated entities, and by 2.5 for water and wastewater regulated entities.	$ 4,300.00	$ 1,075.00
	After first customer's startup refund	Amount of deposit remaining with regulated entity.	$ 15,700.00	$ 3,925.00
	Second customer comes online	Regulated entity gives a customer startup refund to applicant, calculated by multiplying estimated annual distribution revenue from second customer ($ 500.00) by 10 for gas, electric, and telecommunication regulated entities, and by 2.5 for water and wastewater regulated entities.	$ 5,000.00	$ 1,250.00
	After second customer's startup refund	Amount of deposit remaining with regulated entity.	$ 10,700.00	$ 2,675.00
End of year one	One year has passed since deposit was provided	Regulated entity gives applicant first annual refund, based on customers served for all of year one. Refund is calculated by multiplying by 10 for gas, electric, and telecommunication regulated entities, and by 2.5 for water and wastewater regulated entities, the difference between: i. The actual distribution revenue from customer 1 ($ 480.00); and ii. The original estimate of annual distribution revenue from customer 1 ($ 430.00). This difference is $ 50.00.	$ 500.00	$ 125.00
Year two	After first annual refund	Amount of deposit remaining with regulated entity.	$ 10,200.00	$ 2,550.00
	Third customer comes online	Regulated entity gives a customer startup refund to applicant, calculated by multiplying estimated annual distribution revenue from third customer ($ 400.00) by 10 for gas, electric, and telecommunication regulated entities, and by 2.5 for water and wastewater regulated entities.	$ 4,000.00	$ 1,000.00
	After third customer startup refund	Amount of deposit remaining with regulated entity.	$ 6,200.00	$ 1,550.00
End of year two	Two years have passed since deposit was provided	Regulated entity gives applicant second annual refund, based on customers that were served for all of year two. Refund is calculated as follows: i. Sum the actual distribution revenue from customer 1 ($ 520.00) and customer 2 ($ 370.00). This results in a total $ 890.00; and ii. Determine the sum of: -- The actual distribution revenue used in calculating the most recent annual refund ($ 480.00); and -- The original estimated annual revenue from customer 2 ($ 500.00) for gas, electric, and telecommunications, and ($ 500.00) for water and wastewater; -- This results in a total of $ 980.00; iii. Subtract ii above from i above, resulting in a difference of -$ 90.00; and iv. Because -$ 90.00 is less than 0, no refund is provided.	0.00	0.00
Year three	After second	Amount of deposit remaining with regulated entity	$ 6,200.00	$ 1,550.00
	annual refund
	Fourth customer comes online	Regulated entity gives a customer startup refund to applicant, calculated by multiplying estimated annual distribution revenue from fourth customer ($ 350.00) by 10 for gas, electric, and telecommunication regulated entities, and by 2.5 for water and wastewater regulated entities.	$ 3,500.00	$ 875.00
	After fourth customer startup refund	Amount of deposit remaining with regulated entity	$ 2,700.00	$ 675.00
End of year three	Three years have passed since deposit was provided	Regulated entity gives applicant third annual refund, based on customers that were served for all of year three. Refund is calculated as follows: i. Sum the actual distribution revenue from customer 1 ($ 550.00), customer 2 ($ 610.00), and customer 3 ($550.00). This results in a total of $ 1,710.00; and ii. Determine the sum of: -- The actual distribution revenue used in the calculation of the most recent annual refund ($ 480.00); -- The original estimated annual revenue from customer 2 ($ 500.00) and customer 3 ($ 400.00); -- This results in a total of $ 1380.00; iii. Subtract ii from i above, resulting in a difference of $ 330.00; and iv. Multiply the difference derived under iii above by 10 for gas, electric, and telecommunication regulated entities, and by 2.5 for water and wastewater regulated entities, resulting in an annual refund of $ 3,300.00 for gas, electric, and telecommunications. For water and wastewater, the annual refund would be $ 825.00. Since $ 3,300.00 exceeds the remaining deposit, the regulated entity gives the applicant the remainder of the deposit ($ 2,700.00) for gas, electric and telecommunications customers. For water and wastewater customers, since $ 825.00 exceeds the remaining deposit of $ 675.00, the regulated entity gives the applicant $ 675.00. Transaction is complete.	$ 2,700.00	$ 675.00

N.J. Admin. Code § 14:3-8.10

Amended by 47 N.J.R. 3133(c), effective 12/21/2015

Amended by 54 N.J.R. 1612(a), effective 8/15/2022