By John Seidenberg
HAMPSTEAD – The Hampstead Area Water Company justified its temporary rate increase request during a May 28 hearing before the NH Public Utilities Commission.
The temporary water rates contained in a settlement agreement before the commission for approval will result in a reasonable return on the company’s costs, witnesses testified. HAWC has filed for temporary and permanent rate increases for proposed tariff changes based on 2019 as a test year showing revenue deficiencies.
Commission staff determined that, based on 2019 books and records on file, the company’s overall rate of return was 1.46 percent, below the last authorized rate of return of 6.35 percent, said Anthony Leone, PUC gas and water utility analyst.
For that reason, HAWC was entitled to a temporary rate increase of 12.31 percent for $248,960 in 2019 water revenues, he stated.
That temporary revenue rate increase, however, recommended in the settlement agreement is $52,099 lower than the $301,059 the company initially asked for in its rate filing.
Staff calculated the impact on the average residential customer from the temporary rate increase would be approximately $4.24 per month, Leone added.
As of the end of 2020, the company had approximately 3994 customers, said John Sullivan, HAWC controller. But Commissioner Kathryn Bailey pointed out the settlement agreement cited 3620 customers. She asked Charlie Lanza, HAWC general manager, what happens to rates if the settlement was based on a lower than actual customer number.
Stephen St. Cyr, outside consultant on accounting, tax management, and regulatory matters, responded that rates are designed to collect the overall revenue required. Once the base charge on a per-customer basis is collected from the number of customers, the difference is collected through the consumption charge.
Bailey asked whether the customer account had anything to do with how rates are established and if the rate was higher than it should be to collect the amount of money the company was seeking. “It looks like you’ve increased the base charge by 12.31 percent,” she said. “Did you increase the consumption charge by 12.31 percent as well?”
Once that percentage is applied to the base charge and to various customers within each class, St. Cyr said, the company gets revenue collected from the base charge. The difference between that amount and total revenue is what’s collected from the consumption charge.
“In order to get to that specific rate, the company looks at the amount of consumption charge period and divides the revenue remaining to be collected from consumption over the consumption itself to get to that rate,” he stated.
The consumption charge rate is 6.74 percent under the settlement agreement which is an increase from the current 6.11 percent, St. Cyr said.
Controller Sullivan pointed out the 2020 statement of income showed the company’s net loss then was $19,674, while the 2019 test year net loss was $51,967. Last year the company received a Paycheck Protection Program (PPP) loan of approximately $90,000 for which it is currently seeking forgiveness.
He said normally loan forgiveness would be added as income but this would be viewed from the company’s perspective as a one-time occurrence and wouldn’t figure in establishing rates going forward.
In an effort to reduce operating expenses, Lanza said the company dispensed with installation of new generators last year and has suspended meter replacement for now.
The water rate is going from $6.11 to $6.83 per hundred cubic feet (ccf) for customers using up to 400 cubic feet a month. For those using more, the rate would go from $6.11 to $10.24.
This proposal by the company will be a matter for the permanent rate proceedings but is not being taken into account for the proposed temporary increases, St. Cyr noted.
A cost of service study was done as part of the permanent rate case with the objective to transfer higher costs to those using substantially more water. “In doing that work with the consultant we came up with a tiered rate system…to try to limit the rate shock for the people that use a small amount of water,” Lanza explained.
The company proposal will be evaluated along with other ones in the permanent rate deliberations, said Crista Shute, staff attorney for the Office of the Consumer Advocate representing residential customers. The need exists in this rate case for relief prior to implementing current rates, she added, and her office supports a revenue increase of 12.31 percent through temporary rates.