Water Utilities - User Guide
Setting Rates and Regulations
The Utility decides that a rate application is necessary (based upon the circumstances, the Board may determine that a rate review is required). A rate study is prepared either by staff or an external consultant. The Board’s Water Utility Accounting and Reporting Handbook provides a guide as to the type of information required in the rate application. The information that is required in a rate application includes: Proposed Rates and Revenue; System Description; Historical and Projected Financial Information; Methodology and Calculation of Water Rates. Appendix B in the Handbook has the details and format to be followed in an application for adjustments to existing rates, regulations, fire protection services, etc.
The completed rate study must first be presented to Municipal Council (or an equivalent body) for a resolution authorizing that the application be filed with the Board for approval.
The Utility files with the Board a copy of the completed rate study along with copies of a petition, affidavit and resolution supporting the application.
Board staff then reviews the application and supporting documents. Additional information may be required. If so, Board staff requests clarification through Information Requests (IRs). Once the application is complete, the Board drafts a notice of the public hearing and after consulting with the Utility, determines a date and location in the community for the hearing. The hearing date is usually eight to ten weeks following complete information being filed with the Board. This is necessary to allow time for advertising the notice and process for intervention. The notice is forwarded to the Utility, and the Utility’s consultants, if applicable, for verification. The notice further specifies a date by which formal intervenors should file their submissions with the Board and provides the Board’s contact information if any individuals wish to provide comments.
The Board issues an Order which specifies the dates, as required by the Public Utilities Act, that the notice is to appear for three consecutive weeks in a local newspaper(s). The Utility is responsible for ensuring the notice is included in the paper(s) on the specified date and is also responsible for payment of associated costs. Copies of the notice confirming it was placed in the paper on the dates specified in the Order are required to be filed at the start of the public hearing and are entered as exhibits, along with other pre-filed evidence.
The Utility must have copies of the rate study available at its offices and/or an agreed upon central location for public viewing.
The Board issues IRs to the Utility for response within a two week period. The Board usually specifies the number of copies required to be filed. The responses to the IRs are identified as a pre-filed exhibit at the public hearing.
The Public Hearing process is generally as follows:
- The Board reads the notice of hearing, outlining the proposed amendments.
- The parties are identified.
- The Board explains the procedure to be followed at the hearing.
- The hearing exhibits are marked.
- The witnesses are sworn/affirmed.
- The Applicant presents evidence (direct examination), which is generally a review of the rate study.
- There is cross-examination of the Applicant by Formal Intervenors.
- The Board questions the Applicant, and if a response cannot be given at the hearing, the Board may request that the answer be provided as an Undertaking within a specified period of time.
- The Formal Intervenors present evidence.
- The Formal Intervenors are cross-examined by the Applicant.
- The Board questions the Formal Intervenors, and if a response cannot be given at the hearing, the undertaking process noted above will be followed.
- Any members of the public who wish to speak are given the opportunity to do so.
- The Applicant/Formal Intervenors are given the opportunity to make an oral or written submission should they have further comment.
- The Board asks any additional questions/provides additional comments.
- The filing date for Undertaking(s) response is set.
- The hearing is adjourned and the Board’s decision is reserved.
If Undertakings are requested during the hearing, the Utility is usually given a one to two week time period to respond. Undertakings are set out at the hearing and are confirmed, including the filing date, in a letter from the Board soon after the hearing date.
Application Process by Water Utilities for Capital Expenditure
Capital assets include property, plant and equipment that are used and useful in the supply or purification of water.
As set out in s. 35 of the Public Utilities Act, Board approval is required for each capital acquisition or construction project costing $250,000 or more. In addition, Board approval is required for any capital projects for which the proposed source of funding includes the Utility’s depreciation funds, any utility reserve fund, and debt.
Capital costs requested for Board approval may include expenditures such as the purchase price of the asset; construction costs ( materials, labour, project management, overhead, etc.); site preparation costs; engineering costs; professional fees; and interest during construction.
There is no set or prescribed form for a water utility to use in requesting approval for a capital project. It can be as simple as a one page letter or a covering letter with several attachments or enclosures to describe the project. Additional guidance in this regard is available in section 4250 of the Water Utility Accounting and Reporting Handbook.
Generally, the information required by the Board is summarized as follows:
- Each capital expenditure and associated costs should be listed separately, with a brief description of the project and the need for the project. The project cost should, where possible, be identified by major category such as: contractor; materials/supplies; professional fees; engineering and design; communications; equipment purchase or rental; other labour; administrative; land purchase; capitalized interest; etc.
- The source of funding for the project should be identified. If the source of funding is through the Utility, information must be filed indicating that the funds are available for the project. For example, if the funding is through the Utility’s depreciation funds, an indication of the balance in this fund is required. For larger projects which involve long term debt financing, pro forma statements, setting out the annual non-operating expenditures associated with the debt charges, and the effect of these payments on the Utility’s financial health, should be provided. Any updates to the annual financial statements required by the Board from all water utilities should be filed with the Board in order to provide current information as to the fund balances and the Utility’s overall financial health.
- If external funding is to be used to cover the project’s costs, documentation indicating that the amounts specified have been approved by the funding sources should be filed.
- It is understood that for certain projects, the above noted level of detail may not be necessary to justify the capital expenditure.
- In some cases, the Board may determine that a hearing on the request should be held.
Submission of a Complaint
All complaints must be in writing (email, fax or regular mail) and directed to the office of the Clerk of the Board. The Complainant must identify in sufficient detail the matter which is the subject of the complaint. The processes under which complaints are heard are set out in ss. 83 - 89 of the Public Utilities Act.
Process followed by the Board for Complaints:
- The Clerk of the Board acknowledges the written complaint by letter which is copied to the Utility along with a copy of the complaint.
- The Board reviews the complaint and obtains any additional information required from the Utility and the Complainant. IRs to the Utility and the Complainant are issued by the Board and written responses to these IRs are necessary in order to proceed with the complaint.
- The Board reviews the material before it and, based on the information provided, determines whether further investigation is warranted. If the Board decides no further investigation is warranted, a letter is sent to both parties stating the reasons for this determination.
- If, after reviewing the file, the Board determines that further investigation is warranted, it shall conduct a more detailed investigation.
- After reviewing the results of the further investigation, the Board determines whether or not a hearing is warranted. A letter stating the decision is sent to both parties.
- If the Board determines, following either the initial review or further investigation, that an issue has been raised which should be heard, the Utility and the Complainant shall be notified of this decision and provided with an Order which sets out the nature of the complaint and gives the Utility an opportunity to satisfy the complaint within 20 days of the service of the Order. If the Utility fails to satisfy the complaint within the time frame set out in the Order, a formal hearing will be set down.
The Board will then consider the evidence presented and issue its written decision.