Note 15 — Rate Cases
Pennichuck Water Works, Inc.
On September 23, 2016, Pennichuck Water Works, Inc. (“PWW’”) filed a request with the New
Hampshire Public Utilities Commission (“NHPUC”) for a rate increase of 17.21% over its
current rates for the test year 2015, for which 7.86% was related to a permanent rate increase,
and 9.35% was 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. In addition, PWW requested that a temporary rate increase of 6.21%
be granted as a subset of the final permanent rate increase, with the intention that this temporary
rate increase would be approved very early in 2017. The Company, NHPUC Staff and the
Office of Consumer Advocate (OCA) agreed to a temporary rate increase at “current rates,”
and as such, there was no impact on ratepayers for any temporary rate increases.
The request for the overall permanent rate increase was based upon increases in PWW’s
operating costs since the last allowed rate increase in 2010/2011 (for the 2009 test year), as
well as revenues needed to pay the debt service on over $40 million of infrastructure
replacements made since the last rate case, with those dollars being invested in its real property
assets, distribution and treatment systems, and other necessary capital items, to ensure
continued compliance with the Safe Drinking Water Act and prudent ongoing replacement of
aging infrastructure to properly maintain the company’s operating systems.
On November 7, 2017, the PUC issued Order No. 26,070 approving a permanent rate increase
of 3.12% and a 7.69% step increase for its customers. The permanent rate increase was
effective on a bills-rendered basis on and after December 7, 2016. The step increase is effective
the date of the order, November 7, 2017.
In addition to the rate increases granted in the order the NHPUC approved the following
modifications to PWW’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:
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 new
revenue requirement structure, and
e the establishment of a QCPAC (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.
42
