PSC forecasts Artesian rate shakeout

By Sam Harvey
Staff Reporter

The PSC chopped Artesian’s 2004 request for 24 percent nearly in half, earlier this year (April), but then remanded the decision to recalculate on various matters, according to PSC Executive Director Bruce Burcat.

These included a matter related to the Alternative Minimum Tax (triggered when a profitable company files for too many deductions) and another tax issue, related to the fact that Artesian Water had paid higher tax rates than parent company Artesian Resources.

However, Burcat expected permitted revenue growth would likely increase only slightly from the original ruling — into the 12.8- to 13.5-percent range. “Even if they win the issues on remand, they’re still looking at some refund to the customers,” he said.

Throughout the proceedings, Artesian has continued to collect at temporarily increased rates calculated on the generation of “up to $2.5 million, or no more than 15 percent revenue growth,” Burcat noted.

This was typical for Delaware, he explained – in some states, public utilities had to wait until the governing body resolved their rate cases, before they could start collecting newly increased rates.

Here, the temporary rates went into effect as soon as the utility filed its case, with less “regulatory lag.” But they were always subject to refund, and the PSC placed utilities under bond indebtedness for surety, he added.

On one side, (although it was atypical) Burcat said the PSC sometimes called utilities back in, to readjust a rate downward again, if it appeared they were enjoying unduly exuberant revenue growth . The utilities are required to file quarterly rate of return reports, he added.

On the other, if the state raises taxes, a utility might qualify for an offsetting rate increase.

For instance, the state increased the assessment rate factor for public utilities by 0.001, to 0.003, back in July. (The state calculates the utilities’ annual assessment by multiplying gross profits by 0.003.)

The PSC granted Artesian permission to implement a tiny charge to offset this increase. The above referenced decisions, and others, are detailed on the state Web site, at www.state.de.us/delpsc, look for “Legal Matters” at the bottom left.

As Burcat noted, the utilities were entitled to expect a reasonable rate of return. “It’s tied to rates of return you’d see in the marketplace,” he pointed out. “It’s our job to make sure (the utilities) remain viable, and recover their expenses.”