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February 9, 2010

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State Regulatory Relations

NARUC Prepares to Host Winter Meetings

The National Association of Regulatory Utility Commissioners (NARUC) will soon host the Winter Committee Meetings Feb. 14-17 at the Renaissance Washington in Washington, D.C. NARUC’s Committee on Water and Staff Subcommittee on Water will meet Monday, Feb. 15 and Tuesday, Feb. 16. NAWC members will be well represented both days.

On Monday, Chuck Firlotte, CEO of Aquarion Water Company and president of NAWC, will participate on a panel, “Ratemaking Decisions in these Troubled Economic Times – Perspectives from Wall Street, a Consumer Advocate and the Water Industry.” Eric Thornburg, president and CEO of Connecticut Water Company, will participate on a panel, “Water System Sustainability – What is the Role for Economic Regulators? How Best Can Jurisdictional Water Companies Utilize the Aspen Institute Report Recommendations?” Dennis Ciemniecki, president of Regulated Business for United Water, will participate on a panel, “Ongoing Series on Green Initiatives: United Water’s New Electronic or ‘E-Billing’.” Nicholas DeBenedictis, president and chairman of the board of Aqua America, will participate on a panel, “Aesthetic Water Quality Issues and Small Systems: How Treatment Costs can be Met and the Role Played by Customer Education.”

On Tuesday, Lisa Sparrow, president of Utilities Inc., will provide an update on the National Drinking Water Council Advisory Group. Donald Correll, president and CEO of American Water, will present on, “American Water: Looking Ahead.” Michael Deane, executive director of NAWC, will provide an update on the association.

NARUC’s Critical Infrastructure Committee will meet on Sunday, Feb. 14. Nicholas Santillo Jr., senior manager of Operations Security at American Water, will present on a panel on “Assurance of Critical Utility Service Delivery.”

For more information and to register for the meeting, please click here.


California Governor Appoints New Commissioner

California Governor Arnold Schwarzenegger recently announced the appointment of Nancy E. Ryan, Ph.D., to the Public Utilities Commission.

Commissioner Ryan is an economist with expertise in energy markets, climate change policy, and the public health and ecological impacts of energy production. Since February 2009, she has served as the CPUC's deputy executive director for policy. She joined the CPUC in January 2006 as President Peevey's chief energy advisor and served as his chief of staff from April 2007 to February 2009. While at the CPUC, Commissioner Ryan has played a key role in developing policies in the areas of climate change, electricity market design and renewable energy. In the course of these efforts, she has helped to build and enhance the CPUC's working relationships with its sister energy agencies and the Federal Energy Regulatory Commission, as well as the legislature and Governor's office.

CPUC President Michael R. Peevey said, "I have worked with Nancy for a number of years and I am very pleased that she will now join myself and Commissioners Grueneich, Bohn and Simon on the dais and contribute her sound judgment and vast knowledge of regulatory and environmental policy to our decision making."

"I would like to thank Governor Schwarzenegger for this wonderful opportunity,” said Commissioner Ryan. “I will work to continue to make California a leader in energy, communications, water and transportation policies for the benefit of California and its consumers, environment, and economy."

Prior to joining the CPUC, Commissioner Ryan was senior economist and deputy California director at Environmental Defense Fund, where she led policy initiatives focusing on reducing greenhouse gas emissions from vehicles and power plants, curbing air pollution from diesel engines, and restoring rivers and watersheds. Prior to joining Environmental Defense in 2001, Commissioner Ryan worked as a consultant for a diverse set of clients in the energy field, including conservation groups, state government, electric utilities and the Electric Power Research Institute. From 1996 to 2007, Commissioner Ryan also taught a graduate-level course on applied Cost Benefit Analysis at University of California, Berkeley's Richard and Rhoda Goldman School of Public Policy.

Commissioner Ryan, 49, received her Ph.D. in economics from the University of California, Berkeley and a B.A. in economics from Yale.


New York Water Service Corporation Granted Rate Increase

By order issued Jan. 29, 2010, the New York Public Service Commission approved a settlement agreement establishing a three-year water rate plan for New York Water Service Corporation. Re: New York Water Service Corporation, Case No. 09-W-0237. Under the agreement, NYWSC will be allowed to raise its water rates by $1.915 million (8.47%) in 2010, $0.418 million (1.5%) in 2011, and $0.526 million (1.95%) in 2012. The stipulated rate levels reflect a return on equity of 10.5 percent, including a 0.2 percent stay-out premium that will be deferred for the benefit of customers in the event of a base rate or surcharge filing “of any consequence” to become effective during the three years covered by the rate plan. In addition, the company’s equity allowance is subject to a “customer service incentive mechanism” under which up to 30 basis points on equity, or up to $96,000 of NYWSC’s annual revenue requirement, is at risk should the company’s escalated customer complaint numbers exceed certain targets. The PSC described this provision as follows:

We are adopting the customer incentive mechanism terms of the Joint Proposal as Amended. Such terms will subject the Company to an incentive mechanism like that in effect for gas and electric utilities throughout the State. Adoption of such terms will help ensure the Company will have an incentive to pay close attention to service quality, something about which some of the Company’s customers are clearly concerned. In future cases, after experience is gained under these terms, we will consider whether a different escalated complaint rate should trigger a revenue disallowance as well as the amount to be disallowed at various performance levels.

The commission also attached conditions to the settlement in response to confusion over the scope of a customer service line protection program offered to company customers by Home Services. In particular, the commission directed NYWSC to: (1) notify its customers, by bill insert, that the repair and/or warranty services offered by Home Services were not provided by NYWSC, were optional and were not supported by NYWSC’s rates; and (2) remove the company’s name from all promotional materials for the services being offered by Home Services.

Finally, the PSC addressed several issues that had been raised during the public comment process. In response to those that argued municipal systems could provide comparable service at lower costs, the commission noted that the chief advantage enjoyed by municipalities was their exemption from various forms of taxation and observed that the property and/or income tax burden thereby avoided was undoubtedly picked up by others (and hence might not be a benefit to the public). And, to those who seemingly favored competition in the water supply business, the commission had this to say:

One final related point concerns public comments to the effect that the Company’s customers should be provided with a competitive alternative to the Company, which we understand to mean one or more other companies that would deliver water into homes using separate systems of wells, pumps, treatment facilities, mains, service lines, and other plant. The reason the Company is regulated, however, is that it is not practical to have multiple capital intensive water companies serving the same communities. There would be a large increase in the total amount of capital and operating costs with several competing systems, while the total number of ratepayers available to support such systems through rates would not change. Competition, accordingly, would not be sustainable. Moreover there would be negative environmental consequences of multiple companies constructing and maintaining multiple water systems.


Salmon Re-Elected President of NARUC’s Commissioners Emeritus

For the ninth year in a row, Dr. Edward H. Salmon, a former State utility regulator, was elected president of the National Association of Regulatory Utility Commissioners’ (NARUC) Commissioners Emeritus organization. Formed in 1979, the Commissioners Emeritus program represents former state public utility commissioners from around the country. It serves as a resource and network of experience for NARUC, and its officers and members.

Dr. Salmon served six years as a state utility regulator and three years as president of the New Jersey Board of Public Utilities. During that time, he became a highly active member of NARUC and served as vice president, president of Great Lakes Conference (16 states), chairman of NARUC Executive Committee, and founder of the Washington Action Committee.

In addition, Dr. Salmon served on the board of directors for the National Regulatory Research Institute and National Society of Rate of Return Analysts. Prior to his regulatory career, Dr. Salmon spent 26 years in government as a mayor, freeholder director, state legislator and member of the Governor’s Cabinet.

“Ed has been actively involved with NARUC and the national utility arena for nearly 20 years,” said NARUC President David Coen of Vermont. “He has been an invaluable resource and mentor to many in the organization. We are pleased to have him continue to serve as president of NARUC’s Commissioners Emeritus.”

Also elected as officers of NARUC’s Commissioners Emeritus were Vice President John M. Quain of Pennsylvania and Secretary/Treasurer Sandra Hochstetter Byrd of Arkansas.