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Utility Legislative Update (Part Two in a Series)

By Scott A. Miller, CPA, Partner, July 27, 2017

Legislature Gives IURC Authority to Allow a Customer Assistance Program for Water and Wastewater

The first part in this series discussed the new Infrastructure Assistance Program created by Public Law 233 (formerly Senate Enrolled Act 416).  In this part of the series, we look at a different section of the new law that may give water and wastewater utilities the ability to implement what are sometimes known as “lifeline” rates. 

In its Principles of Water Rates, Fees and Charges, the American Water Works Association defines lifeline rates as follows:

“Rates applicable to usage up to a specified level that are below the cost of service for the purpose of meeting the social goal of providing so-called minimum annual water requirements to qualified customers at a below-cost price.”

The new legislation states that “upon request by a water or wastewater utility in a general rate case, the commission may allow, but may not require, a water or wastewater utility to establish a customer assistance program that:          

  1. uses state or federal infrastructure funds; or
  2. provides financial relief to residential customers who qualify for income related assistance.”

The law goes on to say that a customer assistance program that affects rates and charges for service is not discriminatory under any law regulating rates and charges for service.  This point is key as water and sewer rates in Indiana have historically been required to follow cost-based principles and such a program in the past could likely have been challenged.

There are several issues that remain unknown at this time.  First, the statute specifically refers to a general rate case before the Indiana Utility Regulatory Commission (“IURC”). It is unclear whether or not a utility that has removed itself from IURC jurisdiction has the legal authority to implement a customer assistance program.  Second, it is unclear how the courts might react to the non-discriminatory provision of the law should a challenge to this new type of rate structure be pursued.  Finally, there are a number of ways a customer assistance program could be designed and implemented in order to achieve the stated goal of assisting the most economically disadvantaged customers with obtaining affordable water and wastewater service.  The statute directs the IURC to adopt new rules to implement the new law.  What exact form these programs might take remains to be seen.

In the next part of this series, we will discuss new legislation related to infrastructure development zones and lead service lines.

If you would like additional information regarding implementing a Customer Assistance Program, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.


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