Pennichuck East Utility. Inc.
On October 18, 2017, Pennichuck East Utility, Inc. (““PEU”) filed a request with the NHPUC
for a rate increase of 20.78% over its current rates for the test year 2016, for which 19.36% of
this increase is related to a permanent rate increase and 1.42% is related to a prospective step
increase (associated with capital investments and other allowable expenditures in the twelve
months following the test year). The overall rate increase is subject to the normal regulatory
filing process with the NHPUC, as followed for all prior rate case filings, and as such, the final
permanent rate increase granted will be effective retroactive back to the filing date, once
approved by the NHPUC. The step increase, once approved and granted, would be earned on
a forward-looking basis, as of the date of the order granting such increase. As a part of this
overall rate setting process, PEU entered into a settlement agreement with the NHPUC staff
and the OCA staff, requesting a temporary rate increase of 12.24% be granted as a subset of
the final permanent rate increase, with the intention that this temporary rate increase would be
approved in early 2018, and with permanent rates being set in the summer or fall of 2018.
The last general rate increase for PEU was in 2014, based upon 2012 as a test year. Since then,
PEU’s operating expenses have increased ratably, and for some items like local property taxes,
well above the rate of inflation. Additionally, since the beginning of 2013, the Company has
borrowed and invested over $7.5 million in new capital assets to serve its customers through
ongoing investments in infrastructure replacements and system improvements. The rate increase
being requested would allow PEU to pay the debt service attributable to these new capital
investments, pay its necessary operating costs, and continue to meet the needs of its customers.
On May 31, 2018, the NHPUC issued Order No. 26,136 approving the requested 12.24%
increase in temporary rates effective on a bills-rendered basis as of January 8, 2018.
On October 4, 2018, the NHPUC issued Order No. 26,179 approving an overall permanent rate
increase of 17.86%, inclusive of the 12.24% increase in temporary rates previously approved
on May 31, 2018 on a bills-rendered basis as of January 8, 2018. This overall rate increase also
includes a 1.43% Step increase earned on a forward-looking basis for bills rendered on or after
November 16, 2018.
In addition to the rate increases granted in the order the NHPUC approved the following
modifications to PEU’s rate structure:
e the establishment of a five-year average of revenues versus the previous test-year
revenues methodology for allowed revenue calculations, and
e the creation of the following additional revenue requirements as similarly adopted for
PWW in 2017:
o Operating Expense Revenue Requirement (OERR), and
o Debt Service Revenue Requirement (DSRR)
e the establishment of dedicated Rate Stabilization Funds (RSFs) in support of the
revenue requirement structure, and
e the establishment of aQCPAC (Qualified Capital Project Annual Adjustment Charge) that
will assess annual surcharges between rate cases for capital expenditures placed in service
in the prior year to fund the annual principal and interest payments of the associated new
debt, in addition to the incremental property taxes associated with that capital.
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