The request for the overall permanent rate increase, as filed was based upon increased PAC
operating expenses since the last allowed rate increase in 2014 (for the 2012 test year), and
to provide sufficient revenues to pay for investments made in its treatment systems to ensure
its continued compliance with the Safe Drinking Water Act.
In addition to the rate increase requested, PAC is requesting certain modifications to its
ratemaking structure which were similarly approved for Pennichuck Water on November 7,
2017 by the NHPUC in Order No. 26,070 and July 24, 2020 by Order No. 26,383. These
modifications would include:
e use of a five-year trailing average of revenues and expenses as a test period;
e creating a “three bucket” RSF structure, comprised of: a Material Operating Expense
Revenue Requirement (MOERR) RSF, a DSRR RSF, and a City Bond Fixed Revenue
Requirement Rate Stabilization Fund (CBFRR) RSF to provide rate stabilization and
cash flow coverage for operating expenses, debt service, and the CBFRR portion of
revenues, between permanent rate filings;
e creating three “buckets” of allowed revenues comprising the allowed revenues for
the Company, in their component levels, including:
o Operating Expense Revenue Requirement (OERR)
= Comprised of the MOERR and the Non-material Operating Expense
Revenue Requirement (NOERR)
o DSRR
=" Comprised of the DSRR 1.0 and DSRR 0.1
o CBFRR
= Which already existed in PAC’s rate structure, but is being redefined as an
overall component in determining allowed revenues;
® creating a MOEF, an expense factor on top of its test year material operating
expenses, in defining the overall value of the MOERR portion of allowed revenues,
and to cover inflationary increases between rate filings, as a component of that
portion of its allowed revenues in determining permanent rates;
e inclusion of actual NHBET cash payments in its revenue requirement calculation; and
e the establishment of a revenue requirement structure, and the mechanics and
methodology for its approval, resetting and funding, inclusive of the RSFs and allowed
revenue “buckets” shown above, which is the same as approved for Pennichuck Water
by NHPUC Order Nos. 26,070, and 26,383.
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