New Jersey Administrative Code › Title 14 - PUBLIC UTILITIES › Chapter 9 - WATER AND WASTEWATER › Subchapter 10 - DISTRIBUTION SYSTEM IMPROVEMENT CHARGE › Section 14:9-10.9 - Calculating the DSIC rate

Current through Register Vol. 56, No. 14, July 15, 2024
(a) The revenues to
				be recovered through the DSIC rate shall not exceed the DSIC cap, and shall be
				calculated as follows:
1. The eligible net
				investment reflects the eligible investment, less the per-book accumulated
				depreciation amount recorded for the specific projects, further adjusted for
				the recorded accumulated deferred income tax amount for the specific
				projects.
2. The eligible net
				investment shall be multiplied by the pre-tax adjusted weighted average cost of
				capital, plus depreciation expense, plus or minus any DSIC under-recovery or
				over-recovery, divided by the revenue factor, minus interest on any
				over-recovery, the sum of which shall be multiplied by the revenue factor, to
				arrive at the DSIC revenue requirement recovery amount. The calculation of
				amounts over-recovered or under-recovered should start with the DSIC rate
				effective date for the previous DSIC filing.
3. The DSIC revenue requirement recovery
				amount shall be divided by the number of meter equivalents, weighted by meter
				capacity ratio, to arrive at the DSIC rate by meter size.
DSIC Formula (example numbers shown are for illustrative
				  purposes only)
Eligible Investment
(Qualified DSIC Additions to Utility Plant in Service
						  (UPIS) During DSIC Period)
$ 15,000,000 (A)
Less: Accumulated Depreciation
$ (93,750) (B)
Less: Deferred Tax
$ (19,688) (C)
Eligible Net Investment (net DSIC Additions to UPIS
						  During DSIC Period)
$ 14,886,562
Times Pre-Tax Rate of Return
x 11.1509% (D)
Pre-Tax Return on Investment
$ 1,659,986
Add Depreciation
$ 375,000
Revenue Recovery
$ 2,034,986
Revenue Factor
x 1.170858 (E)
DSIC Revenue Requirement
Recovery Amount
$ 2,382,680 (F)
(A) Includes
				six months actual DSIC-eligible projects closed to UPIS during DSIC
				Period
(B) Accumulated
				Depreciation:
DSIC-eligible projects closed to UPIS
$ 15,000,000
Composit Depreciation rate
2.50%
Depreciation Expense
$ 375,000
1/2 Year Convention (for first 6 months)
$ 93,750
(C) Deferred
				Taxes:
DSIC-eligible projects closed to UPIS
$ 15,000,000
MACRS rate for 1st year water plant
4%
Tax Depreciation 1st year
$ 150,000
Book Depreciation
$ 93,750
Tax Depreciation Greater than Book
$ 56,250
Deferred Taxes at 35%
$ 19,688
(D) Pre-Tax
				Rate of Return
Ratios
Cost Rate
Weighted AVG Cost of Capital
Pre-Tax Rate of Return
Long Term Debt
48.98%
6.26%
3.07%
3.066%
Common Equity
51.02%
10.30%
5.26%
8.08%
Subtotal Rate on Rate Base
8.23%
11.1509%
Revenue Factor:
Dollar of Revenue
$ 1.00000
Less: GRT Tax
(0.1376004) (per most recent base rate case)
Less: Bad Debts and Reg. Assessments
(0.0066000) (per most recent base rate case)
Less: BPU Assessment
(0.0014328) (per most recent assessment)
Less: DRC Assessment
(0.0002926) (per most recent assessment)
Revenue Remaining after taxes, bad debts, and assessments
$ .854074
(E) Revenue (Gross-up Factor)
$ 1.170858
(F) Revenue Requirement Recovery Amount
The DSIC Revenue Requirement Recovery Amount is limited by
				  the DSIC cap defined in (a)2 above. For example, if the Company's annual
				  revenues established in their last base rate case were $ 100,000,000, then the
				  DSIC cap would be calculated as follows:
Total annual revenues from most recent base rate case of $
				  100,000,000 x 5.00% = $ 5,000,000
The Company's DSIC Revenue Requirement Recovery Amount in the
				  above example cannot be greater than $ 5,000,000 per year.