Sec.16-262o-3. Surcharge to be permitted if acquisition ordered

(a) In the case of any proposed acquisition of a water company, if the Department orders such acquisition after providing notice of a hearing pursuant to Section 16-262n of the General Statutes of Connecticut, the Department shall permit the acquiring water company to implement a rate surcharge.

(b) Any rate surcharge and any revision of a rate surcharge shall be subject to the approval of the Department.

(c) Such surcharge shall be implemented and revised on a calendar quarterly basis.

(d) Only actual expenditures shall be included on a quarterly basis.

(e) The surcharge to be allowed shall be based on 100% of the acquisition costs, and 90% of the amount of construction expenditures for needed improvements as of the last date of the particular quarterly period, as confirmed on project work orders.

(f) The rate of return used in computing the surcharge shall be the same as that allowed in the last rate case of the acquiring company computed on a simple interest basis and not compounded or, if the rates of the acquiring company are set by the Department other than on the basis of rate base, the surcharge may be computed using the method employed by the Department in the last rate case of the acquiring water company, and the surcharge shall include a specific revenue adjustment to offset applicable state and federal taxes payable on the revenues collected pursuant to the surcharge.

(g) Ten (10) percent of the quarterly construction expenditures, and an amount calculated to provide a return on the construction expenditures at a rate of return equivalent to that authorized for the acquiring water company in its last general rate proceeding, shall be retained in "allowance for funds used during construction" (AFUDC), and the entire project shall be reviewed for efficiency of construction at the time the needed improvements are entered into service as being used and useful and any expenses resulting from inefficiency shall be disallowed for regulatory purposes.

(h) The rate surcharge arising from acquisition costs and inclusion of needed improvements in rate base shall be allocated across the board on a rate structure basis and shall appear as a separate item on the customer's bill until the acquisition costs and needed improvements are included in rate base.

(Effective March 22, 1990)