Virginia Law

This section applies to public utilities holding a certificate of public convenience and necessity issued by the State Corporation Commission to provide either water or sewer service, or both, and having gross annual operating revenues of less than $1 million. Such utilities are subject to the Small Water or Sewer Public Utility Act (§ 56-265.13:1 et seq. of the Code of Virginia) and shall be referred to herein as "company." Companies shall perform their own tariff justification analysis in-house prior to changing their rates, tolls, charges, fees, rates or regulations ("tariffs" or "rate changes"). Companies should endeavor to meet with any organized group of customers, e.g., civic associations or property owners' organizations, on a regular basis at least once a year to advise them of company problems, any impending tariff changes and why such changes are necessary. Companies are also encouraged to meet with the staff, following any company meeting with its customers to review and discuss proposed rate changes. However, each company remains responsible for bearing the burden of proof regarding any changes in its tariffs.

Requirements

1. Companies shall maintain their books and records in accordance with the Uniform System of Accounts for Class C companies on an accrual basis.

2. A 3.0% composite rate of depreciation is usual and customary and presumed to be reasonable. Any company which desires to use a higher accrual rate shall notify the commission's Divisions of Energy Regulation and Utility Accounting and Finance of its intent to change this rate in advance of booking same and shall provide to these divisions a copy of a study or other documents which the company believes supports its proposed change. The staff shall review this change and advise the company of the results of its review. If the company wishes to contest the staff's conclusions regarding depreciation, it may, by motion, apply to the commission for a hearing. If a company wishes to depreciate contributed property, it must advise the commission, through its Divisions of Energy Regulation and Utility Accounting and Finance, before booking depreciation on such property, and provide appropriate documentation to support the need for such depreciation under the requested accrual rate. The staff shall review this change and advise the company of the results of its review. If the company wishes to contest the staff's conclusions regarding depreciation of such property or the rate to be accrued thereon, the company, by motion, may apply to the commission for a hearing.

In the event that staff and company agree that depreciation of contributed property is proper and agree on the accrual rate for such depreciation, the amount so depreciated shall be placed in an escrow account and used only for capital improvements, until a commission order is entered to the contrary.

3. Working capital may be accrued at the rate of 1/9th of the total operating and maintenance expenses for the test period.

4. Each company shall file with the commission's Division of Energy Regulation three copies of the tariff changes, the notice required by subdivision 5 below, and the following information: A narrative statement that sets forth the name of the company, the name, address and telephone number of the person company wishes to have contacted about the tariff change and a brief explanation about why the change is being made. This narrative statement shall also describe whether the company's customers are served on a flat or metered basis; whether billed in advance or in arrears; and shall separately identify the number of connected customers and the number of customers being assessed availability fees, if applicable.

5. Each company shall complete its written notification to all customers 45 days prior to the effective date of any change in tariffs. In cases of hearings resulting from customer requests, only a hearing request made by the individual in whose name the account is maintained shall be deemed a request by a customer. Customer petitions are acceptable.

If a company wishes to contest the number of customers requesting a hearing or whether one submitting a request is a customer, the company may request and those requesting a hearing shall provide to the company a copy of all requests for hearing or a copy of any customer petition filed with this commission. If it is determined that requests for hearing have been received from persons other than customers and that the requisite number of customer requests have not been presented, the company may seek dismissal of the case.

The Company's notice to its customers shall follow the following format to the extent applicable:

NOTICE OF (INCREASES IN, CHANGES IN) RATES, CHARGES, RULES AND REGULATIONS OF SERVICE OF (INSERT NAME OF COMPANY)

(Insert name of Company) will change its (tariffs) on file with the State Corporation Commission, effective for service rendered on and after (effective date). (Summarize existing rates, fees, and charges and all new rates, fees, and charges).

[If applicable] (Insert name of Company) also will change the following portions of its rules and regulations of service, effective on the same date: (Summarize changes).

Any interested party may review (insert name of Company)'s proposed changes during regular business hours at the utility's office where customer bills may be paid.

Any interested person may file written comments in support of or objecting to the proposed changes with the Division of Energy Regulation, State Corporation Commission, P.O. Box 1197, Richmond, VA 23218.

(NAME OF COMPANY)

6. The company is free to choose any test period it wishes to support its rate changes. However, a company having flat rate structures must annualize the level of revenues derived from their current rates based upon the number of customers served as of the end of its selected test period. A company with a metered rate structure must compute revenues in effect at the end of its selected test period based upon the number of customers and usage by customer block per billing period. In the event that a hearing is held, the company shall provide the foregoing information to the commission on or before a date specified in the order scheduling hearing.

7. A hearing shall be held after at least 30 days notice to the company and its customers if a request or petition therefor is received by the commission from at least 25 percent of all customers affected by any filed tariff change, or from 250 affected customers, whichever is the lesser, or from the company itself, or upon the commission's own motion. When a hearing is to be held, the commission shall, by order, establish a hearing date and a date by which the company shall file financial data containing the information set forth in subdivision 8 below. A copy of the order shall be sent by first class mail to the company and any customer requesting a hearing from whom the commission has a complete mailing address. This order shall also specify a filing schedule for the company, customers and staff.

8. Financial data regarding a rate increase filed pursuant to subdivision 7 hereof shall include:

Any company electing to use a calendar year as its test period may file a copy of its annual report and a statement prepared in the format of the form rate of return statement following this subdivision. The statement shall incorporate the per books data of revenues, expenses and plant stated in the annual report and appropriate adjustments. The commission accepts adjustments which reflect (i) annualized changes occurring during the test year, (ii) known and certain wage agreements, (iii) elimination of test year expenses pertaining to a prior year or elimination or amortization of expenses of a nonrecurring nature, and (iv) known and certain changes occurring within 12 months after the test year. The utility is not, however, precluded from making other adjustments which it can support and justify. The utility shall also file an explanation of all of its adjustments appearing in the attached rate of return statement.

Any company electing to use a noncalendar test year may, in lieu of an annual report, file a current balance sheet, income statement and tax return statement prepared in the format of the form rate of return statement following this subdivision. The statement shall incorporate per books data of revenues, expenses and plant and appropriate adjustments. The commission accepts adjustments which reflect (i) annualized changes occurring during the test year (ii) known and certain wage agreements, (iii) elimination of test year expenses pertaining to a prior year or elimination or amortization of expenses of nonrecurring nature, and (iv) known and certain changes occurring within 12 months after the test year. A utility is not, however, precluded from making other adjustments which it can support and justify. A utility using a noncalendar test shall also file an explanation of all adjustments and workpapers showing the calculation of the adjustments.