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November 17, 2009

  State Regulatory Relations  
  Government Relations  
  Member News  

State Regulatory Relations

NARUC Holds Successful Annual Convention

The NARUC 121st Annual Convention was held this week at the Chicago Marriott in Chicago, Ill.

The Committee on Water met Monday, Nov. 16. NAWC members were well represented at the Committee meeting:

  • John Bigelow, president of New Jersey American Water, presented on, "The Impact of the Proposed Regulations for the International Financial Reporting Standards."
  • Nicholas DeBenedictis, chairman of the board and CEO, Aqua America Inc., presented on the panel, “Incorporating Renewables into Water/Energy Management.”
  • William Varley, president, Long Island American Water Company; and Walton Hill, senior sice president of Regulatory Relations, United Water, presented on the “Value of Water Educational Initiative-New York NAWC Chapter.”
  • Michael Deane, executive director of NAWC, provided an update on the association.
  • Walton Hill also presented on the panel, “United Water's MTBE Class Action Litigation and Unique Regulatory Treatment of Settlement Proceeds.”
  • Paul Foran, vice president of Regulatory Programs, American Water, presented on the panel, “5th National Drinking Water Symposium Recap.”

On Tuesday, Nov. 17, there was a concurrent session on, “Water Scarcity to Aging Water Infrastructure: Consumer Impacts and Possible Solutions.” Commissioner Jack Betkoski, vice chairman of Connecticut DPUC, moderated the panel. Panelists included Dr. Jan Beecher, director, IPU, Michigan State University; Peter Shanaghan, EPA; and Paul Foran, American Water.

The Committee on Critical Infrastructure met Sunday, Nov. 15.

At the committee meeting, Nicholas Santillo Jr., senior manager of Operations Security, American Water, presented on the panel, “Securing Critical Infrastructure/Key Resources for Utilities.” To help communities better protect the nation's assets, the Department of Homeland Security has placed Protective Security Advisors (PSAs) in metropolitan areas throughout the country and offer resources on voluntarily basis to utilities. The panelists discussed how in times of economic constraints these resources could assist utilities in their security effort including how utilities might utilize these resources to their advantage.

Cade Clark, director of State Relations for NAWC, presented on chemical security legislation as passed in the House and how it may impact state's various utilities, including new costs and regulatory requirements.

Presentations from the convention will be available shortly on NARUC's Web site.


Connecticut Court Upholds Interim Ruling

As reported in the Nov. 6 publication of PUR Utility Regulatory News, a Connecticut Superior Court has upheld a decision by the state Department of Public Utility Control (DPUC) directing a natural gas local distribution company (LDC) to reduce rates on an interim basis after finding that the LDC has earned more than the 10.10 percent allowed rate of return on equity, as determined in its most recent base-rate proceeding. Connecticut has a rule allowing the DPUC to examine utility earnings annually and to order refunds subject to reconciliation at the completion of the company’s next rate proceeding. The department ordered the utility to reduce its rates on a going forward basis, and subject to surcharge, by $0.0617 per hundred cubic feet, which on a prospective basis is expected to bring the plaintiff’s return on equity to the approved level of 10.10 percent.

The LDC, Connecticut Natural Gas Corp., had claimed that the interim proceedings were truncated such that it needed additional time to prepare detailed financial projections that might have changed the DPUC’s mind as to the level of overearnings and, as a result, its constitutional right to due process was violated. For its part, the DPUC tried to stop the appeal by claiming that the LDC’s remedies were not exhausted as a full rate hearing was scheduled for a time in the near future. According to the department, a party to an earnings review case must await the outcome of the full rate hearing, at which time the correct rate will be determined and a possible surcharge ordered. The court found that the interim proceeding was by definition separate from the rate case and, as such, the LDC has a right to appeal an order directing interim refunds. On the other hand, it ruled that the company had presented no evidence to show that the DPUC had failed to consider the full range of reasons why the overearnings presented on its books should be adjusted and therefore had not violated the company’s right to an adequate hearing on the matter.

Under Connecticut state law, a mandatory review process is triggered if a public service company has six consecutive months of return on equity in excess of one percentage point above its currently approved return on equity. In the current case, the LDC filed an earnings report with the department that indicated that the plaintiff had earned a return on equity in excess of the statutory threshold of one percentage point above the rates permitted in the March 14, 2007, rate decision. The department found that the record in this proceeding provides substantial evidence that overearnings existed for the time period, and that the company had not met its burden of proof demonstrating to the satisfaction of the department that its overearnings are directly beneficial to its customers. The department also found that using the recently achieved historical overearnings results as the basis for determining an appropriate interim rate decrease is more appropriate than modifying these results with “speculative and one sided adjustments” based on projected figures advanced by the company.

Upholding the DPUC ruling and rejecting the due process claim advanced by the LDC, the court pointed out that one of the requirements contained in the department’s final decision required the department to initiate a full rate case no later than January 1, 2009. During this full rate case proceeding, the department will consider adjustments for the pro forma period beginning on August 6, 2008. Although the plaintiff has a substantial financial interest in the outcome of these proceedings, the court finds that the existence of additional corrective procedures through a full rate case hearing are sufficient to constitute sufficient due process, especially considering the irrecoverable loss to the rate paying public, the court concluded. Connecticut Natural Gas Corp. v. Department of Pub. Utility Control et al., No. CV-08-4018533S, Apr. 28, 2009, 51 Conn. 307, 2009 WL 3109933 (Conn.Super.).