N.J. Admin. Code § 14:9-10.9

Current through Register Vol. 56, No. 11, June 3, 2024

Section 14:9-10.9 - Calculating the DSIC rate

(a) The revenues to be recovered through the DSIC rate shall not exceed the DSIC cap, and shall be calculated as follows:

1. The eligible net investment reflects the eligible investment, less the per-book accumulated depreciation amount recorded for the specific projects, further adjusted for the recorded accumulated deferred income tax amount for the specific projects.

2. The eligible net investment shall be multiplied by the pre-tax adjusted weighted average cost of capital, plus depreciation expense, plus or minus any DSIC under-recovery or over-recovery, divided by the revenue factor, minus interest on any over-recovery, the sum of which shall be multiplied by the revenue factor, to arrive at the DSIC revenue requirement recovery amount. The calculation of amounts over-recovered or under-recovered should start with the DSIC rate effective date for the previous DSIC filing.

3. The DSIC revenue requirement recovery amount shall be divided by the number of meter equivalents, weighted by meter capacity ratio, to arrive at the DSIC rate by meter size.

DSIC Formula (example numbers shown are for illustrative purposes only)

Eligible Investment
(Qualified DSIC Additions to Utility Plant in Service (UPIS) During DSIC Period)	$ 15,000,000 (A)
Less: Accumulated Depreciation	$ (93,750) (B)
Less: Deferred Tax	$ (19,688) (C)
Eligible Net Investment (net DSIC Additions to UPIS During DSIC Period)	$ 14,886,562
Times Pre-Tax Rate of Return	x 11.1509% (D)
Pre-Tax Return on Investment	$ 1,659,986
Add Depreciation	$ 375,000
Revenue Recovery	$ 2,034,986
Revenue Factor	x 1.170858 (E)
DSIC Revenue Requirement
Recovery Amount	$ 2,382,680 (F)

(A) Includes six months actual DSIC-eligible projects closed to UPIS during DSIC Period

(B) Accumulated Depreciation:

DSIC-eligible projects closed to UPIS	$ 15,000,000
Composit Depreciation rate	2.50%
Depreciation Expense	$ 375,000
1/2 Year Convention (for first 6 months)	$ 93,750

(C) Deferred Taxes:

DSIC-eligible projects closed to UPIS	$ 15,000,000
MACRS rate for 1st year water plant	4%
Tax Depreciation 1st year	$ 150,000
Book Depreciation	$ 93,750
Tax Depreciation Greater than Book	$ 56,250
Deferred Taxes at 35%	$ 19,688

(D) Pre-Tax Rate of Return

Ratios	Cost Rate	Weighted AVG Cost of Capital	Pre-Tax Rate of Return
Long Term Debt	48.98%	6.26%	3.07%	3.066%
Common Equity	51.02%	10.30%	5.26%	8.08%
Subtotal Rate on Rate Base	8.23%	11.1509%

Revenue Factor:
Dollar of Revenue	$ 1.00000
Less: GRT Tax	(0.1376004) (per most recent base rate case)
Less: Bad Debts and Reg. Assessments	(0.0066000) (per most recent base rate case)
Less: BPU Assessment	(0.0014328) (per most recent assessment)
Less: DRC Assessment	(0.0002926) (per most recent assessment)
Revenue Remaining after taxes, bad debts, and assessments	$ .854074
(E) Revenue (Gross-up Factor)	$ 1.170858
(F) Revenue Requirement Recovery Amount

The DSIC Revenue Requirement Recovery Amount is limited by the DSIC cap defined in (a)2 above. For example, if the Company's annual revenues established in their last base rate case were $ 100,000,000, then the DSIC cap would be calculated as follows:

Total annual revenues from most recent base rate case of $ 100,000,000 x 5.00% = $ 5,000,000

The Company's DSIC Revenue Requirement Recovery Amount in the above example cannot be greater than $ 5,000,000 per year.

N.J. Admin. Code § 14:9-10.9

Amended and recodified from 14:9-10.8 by 49 N.J.R. 2542(a), effective 8/7/2017