N.J. Admin. Code § 14:9-11.9

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

Section 14:9-11.9 - Calculating the WSIC rate

(a) The revenues to be recovered through the WSIC rate shall not exceed the WSIC 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 WSIC 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 WSIC revenue requirement recovery amount. The calculation of amounts over-recovered or under-recovered should start with the WSIC rate effective date for the previous WSIC filing.

3. The WSIC revenue requirement recovery amount shall be divided by the number of meter equivalents, weighted by meter capacity ratio, to arrive at the WSIC rate by meter size or other Board-approved charges.

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

Eligible Investment
(Qualified WSIC Additions to Utility Plant in Service (UPIS) During WSIC Period)	$ 15,000,000 (A)
Less: Accumulated Depreciation	$ (93,750) (B)
Less: Deferred Tax	$ (19,688) (C)
(net WSIC Additions to UPIS During WSIC 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)
WSIC Revenue Requirement
Recovery Amount	$ 2,382,680 (F)
(A) Includes six months actual WSIC-eligible projects closed to UPIS during WSIC Period
(B) Accumulated Depreciation:
WSIC-eligible projects closed to UPIS	$15,000,000
Composite Depreciation rate	2.5%
Depreciation Expense	$ 375,000
½ Year Convention (for first 6 months)	$ 93,750
(C) Deferred Taxes:
WSIC-eligible projects closed to UPIS	$15,000,000
MACRS rate for 1st year *wastewater* 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 WSIC Revenue Requirement Recovery Amount is limited by the WSIC cap defined in (a)2 above. For example, if the company's annual revenues established in its last base rate case were $ 100,000,000, then the WSIC 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 WSIC Revenue Requirement Recovery Amount in the above example cannot be greater than $ 5,000,000 per year.

N.J. Admin. Code § 14:9-11.9

Adopted by 52 N.J.R. 2115(a), effective 12/7/2020