State Regulatory Relations

NARUC Report Recommends State Involvement in Critical Infrastructure Plans

A new NARUC report explores the efforts of state and federal governments to create an environment in which sensitive information can be provided for the purpose of critical infrastructure protection in the regulatory context, and offers a series of next steps for states to consider.

The report, “Information Sharing in Regulated Critical Infrastructures,” focuses on the Protected Critical Infrastructure Information (PCII) Program, because it offers a new mechanism for states, local and federal government and private industry to share information about critical infrastructure.

In addition to exploring the role of the PCII Program in the context of state commissions, the report outlines other state-level information sharing protocols for gathering, storing and protecting hard copy and electronic information.

The report recommends that states and state PUCs consider: 1) adopting PCII into the state, explicitly making the PUC an authorized user; 2) promoting the consistent use of the term and definition of Critical Infrastructure Information; and 3) establishing a confidential hearing process for critical infrastructure information matters (where one does not exist).

The report recommends that State regulators need to be fully involved in Federal and State efforts to establish consistent critical infrastructure information programs.

The report is available online at http://www.naruc.org/cipbriefs.

Delaware Court Approves Facility Expansion Rules

On July 31, 2007, the Superior Court of Delaware (New Castle County) approved revised system expansion regulations adopted by the Delaware Public Service Commission. Reybold Group et al. v. Public Service Commission, 2007 Del. Super. LEXIS 210. Historically, water utilities in Delaware were accorded considerable discretion to determine whether to require developers to make non-refundable contributions or, alternatively, refundable advances to finance the extension of water facilities.

After reviewing the matter, the PSC concluded that excessive use was being made of the refundable advance mechanism, which, in the PSC’s view, was having the effect of precipitating the filing of more rate cases and ultimately imposing the costs of new development on existing customers. The PSC therefore amended its rules to mandate that developers absorb all direct system expansion costs (through non-refundable contributions) and pay a flat $1,500 fee for each new residential unit connected to the water utility’s distribution network.

In affirming the PSC’s decision, the court reasoned as follows. After an extensive regulatory process, the Commission basically identified three problems: overuse of advances, rather than contributions; failure to seek reimbursement for direct, off-site costs; and failure to charge indirect costs.

In response to the problems, the Commission decided to limit the use of advances, require that utilities demand contributions for off-site costs and impose a relatively conservative charge for indirect expansion costs.

Water Extraction Permit Upheld

The Supreme Court of Maine has upheld a permit authorizing Nestle Waters North America to extract bulk quantities of water, pump the water by pipeline to a nearby water load-out facility and then haul the water by tanker trucks to bottling facilities in Maine and Massachusetts. Griswold v. Town of Denmark, 2007 Me. LEXIS 94. The court determined there was sufficient evidentiary support for the local planning board’s findings that (1) water was not otherwise available naturally in the location to which it would be transported and (2) the failure to authorize transport of the water would impose a substantial hardship on the Poland Spring Bottling Company and its customers.

Governmental Immunity Defense Rejected

The United States District Court for the Southern District of Texas has held that United Water may pursue a counterclaim against the city of Houston, which has sued United for alleged breaches of its agreement to operate the Southwest Water Purification Plant. City of Houston v. Continental Insurance Co., 2007 U.S. Dist. LEXIS 54160. The city had argued that it was immune from suit due to its status as a governmental entity. The court disagreed, finding that the city’s instigation of litigation against United had served to waive its immunity claim.