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Regulatory Practices

The NAWC Regulatory Program serves as a clearinghouse for information on regulatory practices.

The National Association of Regulatory Utility Commissioners (NARUC) Water Committee supports review and consideration of a broad array of regulatory policies as detailed in its July 2005 resolution. The Water Committee recommends that economic regulators consider and adopt as many of the regulatory practices as appropriate.

Regulatory Practices Contact List

At the conclusion of the 2010 NAWC Water Policy Forum, participants agreed to create a contact list of commissioners and commission staff who have experience with various regulatory practices.

The following regulatory practices were identified during the Water Policy Forum. The professionals listed have agreed to be a contact for others who would like more information on how the regulatory practice has been used in their respective states. Read more.

Distribution System Investment Charge (DSIC) for Water and Wastewater Systems

This program allows for rate increases for non-revenue-producing investments to replace aging infrastructure. Benefits of the DSIC program include more efficient and timely investment of capital, significant progress in replacing aging infrastructure, enhanced service quality, reduction of water lost through leaks, avoidance of rate shock, and many others. Read more.

Prospectively Relevant Test Year

In a rising-cost industry with heavy capital investment requirements, the use of historic test years assures there will be no return on or recovery of capital that is invested during the test year and thereafter, until the utility files another rate case. A "best practice" in this area would provide the utility with the obligation to identify the most prospectively relevant test year and the choice to use that test year in a rate proceeding. The utility would have the choice of utilizing a historic, current or future test year and would have the burden of demonstrating the propriety of that choice in the rate proceeding. Read more.

Acquisition Adjustment

Allowance of an acquisition adjustment provides for the difference between depreciated original cost and a purchase price. Such policies should be recognized as a "best practice" for the water industry, but should be extended to include acquisitions that involve entities that may not be small or non-viable. Read more.

Construction Work in Progress (CWIP)

New major treatment facilities or development of long-term sources of supply may take a number of years before they become operational. Typically, these costs have been accounted for in one of two ways — the use of CWIP in ratebase or Allowance for Funds Used During Construction (AFUDC). Read more.

Decoupling

As source of supply constraints increase, drought conditions affect certain areas of the country with greater frequency, and the cost of treating water continues to rise, water utilities have an increasing responsibility to encourage the wise use of this precious resource by their customers and, where appropriate, to implement programs that could have the effect of reducing per capita consumption. Read more.

Pass-Through Adjustments

Pass-throughs include automatic adjustment mechanisms for costs beyond the utility's control, such as purchased water. Read more.

Rate Consolidation

Rate Consolidation or single-tariff pricing has been recognized as the norm for electric, natural gas and telephone utilities. Read more.

Mediation and Settlement Procedures

These regulatory practices include establishment of procedures and encouragement for mediation and settlement in order to both settle cases as a whole and to narrow issues that need to be litigated and resolved. Read more.

Defined Timeframes for Rate Cases (i.e., suspension period)

This would help impose a desirable discipline in presenting and litigating proceedings on commissions, utilities and other parties. It would improve the opportunity of the utility to actually earn its allowed return, cut down the costs of rate proceedings, and facilitate capital recovery and investment. Read more.

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