Department of State

Public Service Commission

final

ORDER NO. 8138

AND NOW, this 17th day of April, 2012:

WHEREAS, the General Assembly has enacted statutes creating a Water Utility Distribution System Improvement Charge ("DSIC") and a Utility Facility Relocation Charge ("UFRC") (26 Del. C. §§314 and 315); and

WHEREAS, 26 Del. C. §314(d) provides that the Delaware Public Service Commission (the "Commission") may adopt rules and regulations to administer the DSIC that are not inconsistent with the Public Utilities Act of 1974 (the "Act"); and

WHEREAS, 26 Del. C. §315(f) similarly provides that the Commission may adopt rules and regulations to administer the UFRC that are not inconsistent with the Act; and

WHEREAS, in Order No. 8011 dated August 9, 2011, the Commission directed its Staff to prepare proposed regulations to govern the administration and operation of the DSIC and UFRC; and

WHEREAS, in November 2011 Staff convened a workshop to which the Division of the Public Advocate and all utilities were invited to review proposed draft DSIC and UFRC regulations; and

WHEREAS, Staff presented the Commission with proposed regulations (the "Regulations"); and

WHEREAS, in Order No. 8103 dated January 31, 2012, the Commission ordered that the proposed Regulations be proposed for public comment in the Delaware Register of Regulations and that notice of the proposed Regulations be published in the News Journal and the Delaware State News; and

WHEREAS¸ the Commission established a deadline of April 2, 2012 for written public comment on the Regulations, and set a public hearing to be held during its regularly-scheduled meeting on April 17, 2012; and

WHEREAS, the Regulations were published in the March 2012 issue of the Delaware Register of Regulations, and notice of the proposed Regulations was published in the News Journal and the Delaware State News; and

WHEREAS, no comments were submitted regarding the proposed Regulations by the April 2, 2012 deadline; and

WHEREAS, the Commission now approves the proposed Regulations as final;

NOW, THEREFORE, IT IS HEREBY ORDERED BY THE AFFIRMATIVE VOTE OF NO FEWER THAN THREE COMMISSIONERS:

1. That, pursuant to 26 Del. C. §§209(a), 314 and 315 and 29 Del. C. §10111 et seq., the Commission approves the proposed Regulations Governing Administration of the Distribution System Improvement Charge and the Utility Facility Relocation Charge (attached hereto as Exhibit A) as final.

2. That the Commission Secretary shall transmit this Order and the Final Regulations to the Registrar of Regulations for publication in the June 2012 Delaware Register of Regulations.

3. That the Commission reserves the jurisdiction and authority to enter such further Orders in this matter as may be deemed necessary or proper.

1009 Regulations Implementing the Water Utility Distribution System Improvement Charge (“DSIC”) and the Utility Facility Relocation Charge (“UFRC”)

1.1 Authority. These regulations are adopted pursuant to 26 Del.C. §§209(a), 314(d) and 315(f) and 29 Del.C. ch. 101.

1.2 Purpose. The purpose of these regulations is to standardize the format utilities shall use to present financial and operating data that support the recovery of eligible capital improvements costs, made pursuant to 26 Del.C. §§314 and 315.

1.3 Capitalized Terms. Capitalized terms used herein that are defined in 26 Del.C. §§314 and 315 shall have the same meaning as they have in those sections. Other capitalized terms shall have the meaning ascribed to them in these regulations.

2.1 A utility may initiate or seek a change in its DSIC or UFRC rate by filing an application and supporting schedules as required by these Regulations with the Commission to be effective on January 1st or July 1st of each year. Applications shall be filed with the Commission at least 30 days prior to the effective date.

2.2 New DSIC and UFRC rates shall be effective for bills rendered on and after January 1 and July 1 each year without proration.

2.3 The DSIC rate shall be adjusted semi-annually for Eligible Distribution System Improvements placed in service during the six-month period ending two months prior to the effective date. For a January 1 effective date, the applicable recovery period is May 1 through October 31; for a July 1 effective date, the applicable recovery period is November 1 through April 30.

2.4 The UFRC rate shall be adjusted semi-annually for Eligible Utility Facility Relocations occurring during the six-month period ending two months prior to the effective date. For a January 1 effective date, the applicable recovery period is May 1 through October 31; for a July 1 effective date, the applicable recovery period is November 1 through April 30.

2.5 The DSIC/UFRC rate shall be reset to zero as of the effective date of new base rates that provide for the prospective recovery of the annual costs theretofore recovered under the DSIC/UFRC rate.

2.6 Utilities may file DSIC/UFRC applications while a base rate case is pending; however, where the application includes Eligible Distribution System Improvements or Eligible Utility Facility Relocations that fall within the utility’s selected test period in the base rate case, the utility shall demonstrate in the DSIC/UFRC application that the Eligible Distribution System Improvements or Eligible Utility Facility Relocations were not included in the test period rate base.

3.1 Each DSIC / UFRC filing shall include the following information:

3.1.1 A PSC filing cover sheet (which can be found at the Commission website;

3.1.2 A cover letter from the utility;

3.1.3 The appropriate filing fee as required by 26 Del.C. §114(a);

3.1.4 An original application and five (5) copies (Staff reserves the right to request additional copies), which shall include:

3.1.4.1 A request to place rates into effect in no less than thirty (30) days from the date of the application;

3.1.4.2 The new DSIC/UFRC rate expressed as a percentage carried to two (2) decimal places; and

3.1.4.3 The dollar amount and percentage of the proposed DSIC/UFRC rate change.

3.1.5 The identification of a utility contact person responsible for the application.

3.1.6 A DSIC / UFRC Application shall include the following schedules:

3.1.6.1 Schedule 1: Development of rate and supporting data (see Form 1);

3.1.6.2 Schedule 1A: Capital structure approved in the utility’s most recent base rate/general rate case (see Form 2);

3.1.6.3 Schedule 1B: Overcollections or Undercollections from the utility’s previous DSIC/UFRC filing (see Form 3);

3.1.6.4 Schedule 2 (see Form 4):

3.1.6.4.1 For DSIC Filings: Net cost of projects (identified by utility’s internal project number) placed into service, and unreimbursed plant additions and plant retired, for the appropriate DSIC filing period.

3.1.6.4.2 For UFRC Filings: Identification (by utility’s internal project number) of relocated unreimbursed utility plant or facilities and plant retired for the appropriate UFRC filing period.

3.1.6.5 Schedule 2A: Net Accumulated Depreciation, identified by NARUC account number for DSIC Filings and by FERC USOA account number for UFRC Filings (see Form 5);

3.1.6.6 Schedule 3: Revised tariff page(s). Additions should be indicated by underlining; deletions should be indicated by strikethroughs.

3.2 The utility shall serve the Division of the Public Advocate’s office with a copy of the Filing at the same time that the utility files the Filing with the Commission.

3.3 The utility shall notify its customers of changes in the DSIC or UFRC rate by including appropriate information in the first bill that customers receive following any change in the DSIC or UFRC rate. A message printed directly on the bill shall be acceptable notice.

4.1 Staff will review each utility’s DSIC/UFRC application to ensure compliance with the provisions of 26 Del.C. §§314 and 315 and these regulations. Staff has five (5) days to review a Filing for compliance.

4.2 Staff shall notify the utility of any defect(s) in its Filing within five (5) business days of its submission to the Commission. The utility shall have five (5) business days to correct such defect(s) and resubmit the Filing.

4.3 Within five (5) business days of a utility’s Filing, Staff and the Division of the Public Advocate may issue data requests to the utility concerning the Filing. Staff will attach a Certificate of Service identifying the person upon whom electronic service was made. Such data requests shall be deemed served if sent to the utility’s identified representative(s) via electronic mail at the correct electronic mail address.

4.4 The utility shall submit its written responses to any data requests issued by Staff and/or the Division of the Public Advocate to the Staff analyst, Staff counsel, and the Division of the Public Advocate within five (5) business days of their receipt.

4.5 As soon as reasonably practicable, but in no event fewer than seven (7) calendar days before the Commission meeting at which the Filing is scheduled for consideration, Staff shall advise the utility in writing whether it intends to recommend that the Commission approve or deny the Filing. If Staff will recommend that the Commission deny the Filing, Staff shall fully set forth its reasons therefore. Staff shall also provide its recommendation to the Commission in writing.

4.6 The Filing will be scheduled for consideration at the Commission meeting that is the closest meeting prior to the thirty (30) day deadline. If Staff has recommended that the Commission deny the Filing, the utility will be permitted to submit evidence contesting that recommendation.

4.7 Upon Commission approval of the Filing, the DSIC/UFRC rate will be implemented pending the year-end Staff audit discussed in Section 6.

5.1 The DSIC/UFRC charge shall be broken out as a separate line item on customers’ bills.

5.2 The DSIC/UFRC rate shall be expressed as a percentage carried out to two (2) decimal places.

5.3 The DSIC shall be applied to the total amount billed to each customer under the utility’s applicable water rates and charges.

5.4 The UFRC shall be applied to the portion of the customer’s charge related to the delivery or distribution of natural gas or electricity.

5.5 The DSIC/UFRC rate applied between base rate filings shall be capped at 7.5% of the amount billed to customers under otherwise applicable rates and charges. The DSIC/UFRC rate increase applied shall not exceed 5% within any twelve (12)-month period. With respect to any UFRC rate filed by any electric or natural gas utility, the aforesaid level of increase, consistent with 26 Del.C. §315(c), is limited to the portion of the customer’s charge related to the delivery or distribution of natural gas or electricity.

6.1 DSIC and UFRC rates shall be subject to an annual reconciliation based on a period consisting of the twelve months ending December 31 of each year.

6.2 DSIC and UFRC rates shall be subject to audit by the Staff. Such audits will be conducted between February and May of each year. Staff will visit the utility’s Delaware administrative offices to review the utility’s documents. The utility must make staff available to assist with the field audit.

6.3 Discovery.

6.3.1 Staff may issue data requests to the utility during the annual audit to obtain information regarding but not limited to:

6.3.1.1 Whether the plant included in the calculation of the proposed DSIC/UFRC was an Eligible Distribution System Improvement or an Eligible Utility Facility Relocation;

6.3.1.2 Whether the utility used the correct depreciation and cost of capital rates in the calculation;

6.3.1.3 Whether the utility correctly accounted for all retirements corresponding to the Eligible Distribution System Improvement or the Eligible Utility Facility Relocation;

6.3.1.4 Whether the approved DSIC/UFRC rate was applied correctly to customers’ bills; and

6.3.1.5 Whether any over- or undercollections were properly reflected in the calculation of the DSIC/UFRC rates.

6.3.2 26 DE Admin. Code §1001-2.6.6 shall govern the deadline for responses to such data requests.

FORM 1

SCHEDULE 1: DEVELOPMENT OF RATE AND SUPPORTING DATA

FORM 2

SCHEDULE 1A: CAPITAL STRUCTURE APPROVED IN MOST RECENT GENERAL/BASE RATE CASE

FORM 3

SCHEDULE 1B: OVER/UNDERCOLLECTIONS FROM PREVIOUS DSIC/UFRC FILINGS

FORM 4

SCHEDULE 2: PROJECTS PLACED INTO SERVICE AND/OR RETIRED

FORM 5

SCHEDULE 2A: NET ACCUMULATED DEPRECIATION