Water utilities may seek approval to recover certain upgrade costs

An eligible utility may ask the commission to approve a multiyear plan for certain infrastructure work and later seek a charge to recover eligible costs. This applies to investor-owned water or wastewater utilities regulated by the Iowa Utilities Commission. Covered work includes certain required infrastructure, qualifying relocations, and non-revenue-producing projects needed for resilience, health, safety, or environmental protection. It excludes plant already included in the utility’s latest general rate case. The utility must get plan approval before seeking cost recovery through a charge. The utility needs a final rate-case order for the same service type within the past five years to file a plan, and may file only once every twelve months. The commission cannot approve a plan if projected annual recovery would exceed ten percent of the utility’s latest approved revenue requirement, counting water and wastewater projects together. The utility must get plan approval before seeking a charge. The commission generally must issue its final order within eight months, but may extend that time for good cause.

A utility with an approved plan may seek a monthly charge based on meter size to recover eligible system enhancement costs. The charge is for eligible improvements placed in service before the utility files its charge application. Utilities with approved plans must file annual applications to set charge schedules. The charge cannot recover costs already covered by construction contributions. It recovers eighty percent of eligible costs incurred before the application; the remaining twenty percent is deferred to the utility’s next general rate case. Combined annual revenue from water and wastewater charges cannot exceed ten percent of the utility’s latest approved revenue requirement. Other costs above that limit are deferred for consideration in the next general rate case. Water charge revenue cannot pay wastewater costs, and the commission must prevent cross-subsidies between the services. Utilities must file annually to set charge schedules and reconcile earlier collections. The charge resets to zero when new base rates are approved.

A public utility acquiring a water, sewer, or stormwater utility may seek advance approval of its starting customer tariff; certain acquisition expenses are considered in its next rate case when the acquired utility does not meet specified requirements. This applies when a public utility acquires a water, sanitary sewer, or stormwater utility. Advance approval is available if the acquired utility meets requirements referenced in another paragraph. If it does not, the commission considers reasonable and customary closing, appraisal, regulatory, and legal expenses in the acquiring utility’s next rate case. The acquiring utility may apply for advance tariff approval before completing the acquisition. If the acquired utility does not meet the referenced requirements, expenses are considered in the next rate case.