A.
Cost
Estimate, Advances and Deposits. Upon request of a potential customer or
customers for a main extension, the utility shall prepare, without charge, a
preliminary sketch, general specifications such as size and type of pipe, an
estimate of the cost of the proposed water main extension and separate
estimates of the cost of service lines to serve the customers requesting the
main extension. If a water utility provides public fire protection the estimate
and final cost for each foot of the extension shall include the average current
per foot cost for the utility of providing hydrants. Averages shall be
determined by dividing current installation costs by the spacing in feet
between hydrants for areas of the same density and character.
The main extension estimate shall serve as a basis for
determination of any required customer contribution. The costs of the main
extension and the service lines shall be kept separate in order to allow
reallocation among customers of the cost of the main extension alone pursuant
to subsection D. For the purposes of these rules, actual costs shall be
reasonable and shall not exceed costs recorded in conformity with accepted
water utility accounting practice as defined in the Uniform System of Accounts
for Water Utilities prescribed by this Commission.
B.
Utility Requirement. Unless a
non-investor owned utility has chosen to make no investment in main extensions
pursuant to 35 M.R.S.A. § 72-A(1), the utility shall invest in the
extension of its water mains the investment amount multiplied by the number of
customers served by the main extension. Each time a permanent customer is
connected to the line extension during the 10 years following connection of the
first customer, the utility shall invest an additional investment amount,
except that it shall not invest in more than one-half of the original cost of
construction. The investment amount shall be the amount calculated as of the
time the first customer was connected.
C.
Customer Contribution to Maine
Extension and Other Requirements; Cost of Service lines; Advances and Deposits;
Contracts. Applicants either for a new water main extension, or for
service from an existing water main extension, during the period of 10 years
following connection of the first customer (on extensions to which the first
customer was connected after May 7, 1986), shall, subject section 2(G), be
responsible for customer contributions of all costs of construction of the main
extension including the fire protection allocation, less the amount which the
utility must invest. All applicants for service from a main, whenever
constructed, shall be responsible for the cost of both portions of the service
line that will serve each customer. Applicants for either a main extension or
the utility's portion of the service line from an investor-owned utility shall
also be responsible for the net federal and state income tax liability
resulting from the contribution in aid of construction. The total amount which
the applicant must pay shall be determined by (1) determining the amount of
contribution before taxes (construction cost allocated pursuant to section 3(D)
minus investment amount); (2) determining the amount of depreciation for tax
purposes for each year over the tax depreciable life of the asset; (3)
determining the amount of tax reduction resulting from tax depreciation over
each year of the tax depreciable life of the asset, using the utility's
expected marginal federal and state tax rates; (4) determining the present
value of the amounts established by step 3, using as a discount rate the
weighted cost of debt plus the pre-tax weighted cost of equity as determined in
the investment factor formula; (5) deducting the total amount established by
step 4 from the amount of the contribution established by step 1; (6) grossing
up the amount established by step 5 for federal and state taxes pursuant to the
following formula:
Click
here to view Image
Where
TC = Total contribution including taxes
C = Contribution after deduction of present value of tax
reductions resulting from tax depreciation (step 5)
FIT = Federal Income Tax marginal rate
SIT = State Income Tax marginal rate
The applicant(s) shall be required to advance the customer
contribution, if applicable, and the cost of the service drop to the utility no
more than two weeks prior to the start of construction, of a utility no more
than two weeks prior to the start of construction, of a new main or connection
to an existing main extension or main. The utility may require a deposit of the
cost of materials and supplies and detailed engineering design, or some portion
thereof, two months prior to the commencement of construction of a main
extension. Any portion of the deposit actually spent for detailed engineering
design or for materials and supplies which cannot readily be used for other
projects by the utility shall not be refundable. Within 60 days following
receipt by the utility of the final bills for the extension, adjustment shall
be made for any differences between the estimates and actual costs of the
extension and service line or lines.
No construction of a main extension or service drop shall be
commenced until the utility and the customer have executed a written contract.
The contract shall incorporate this rule by reference, shall state that in the
case of a conflict between the contract and the rule, the rule shall govern,
and shall state that the provisions of the contract are subject to alteration
by Public Utilities Commission decision or rule.
When new customers are added to an extension, customer
contributions to the line extension for existing and new customers shall be
recalculated as provided in Paragraph D.
D.
Distribution of additional
Investment Amounts and Reallocation of Customer Contributions. When
additional customers are connected to an extension within the ten years
following connection of the first customer, the utility shall make payments
without interest to the existing customers of (1) the additional amount, if
any, which the utility must invest in the main extension; and (2) the
additional customer contribution to the main extension. The amounts to be paid
to customers shall be determined by recomputation of the contribution by each
customer (after deduction of the new total utility investment amount) pursuant
to section 1(B) or 1(C), as applicable, as if all customers had been connected
simultaneously. If the utility has ceased investing because it has invested an
amount equal to one-half of the original cost of the extension, customer
contributions and reallocations among customers shall nevertheless continue
until the expiration of the 10-year period.
E.
Further Extension to Serve New
Customer. All further extensions to serve other customers shall be
separate and customers served by further extensions shall not be required to
contribute to any prior extension.
