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OLR Bill Analysis
sHB 6777
AN ACT CONCERNING WATER UTILITY SYSTEMS AND WATER
QUALITY AND TREATMENT SURCHARGES.
SUMMARY
This bill authorizes the Public Utilities Regulatory Authority (PURA)
to allow PURA-regulated water companies to recover their expenses for
certain projects the authority determines are necessary to meet state or
federal drinking water regulations. To do so, it establishes a process for
water companies to apply for, and PURA to approve, these expenses the
company incurs between rate cases. If approved, the water company
may recover them through a separate line item on customers’ bills, a
water quality and treatment surcharge that the bill establishes.
EFFECTIVE DATE: July 1, 2025
ELIGIBLE PROJECTS
Under the bill, eligible projects are those that PURA determines are
major additions, upgrades, improvements, or replacements of critical
elements of water infrastructure that are necessary to meet state or
federal drinking water regulations adopted or amended after December
16, 2021. To be eligible, a project may not be covered by either the water
company’s rate base or a water infrastructure and conservation
adjustment (see BACKGROUND). Eligible projects may be completed
in a single year or over multiple years.
PURA APPROVA L
The bill establishes a process through which a water company may
request authority to recover its expenses for eligible projects and PURA
may approve it. The water company may not impose the surcharge to
recover its expenses unless PURA has approved (1) a water quality
treatment assessment report, which the company must file, and (2) the
surcharge amount. 2025HB-06777-R000345-BA.DOCX
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Water Quality and Treatment Assessment Report
Before imposing the surcharge, the water company must file with
PURA a report that identifies any eligible projects meeting the following
criteria that the company plans to complete within five years of filing:
1. compliance with state, federal, or other drinking water quality
standards;
2. the nature and extent of water treatment required to meet these
water quality standards; and
3. water source development, system consolidation, treatment or
other means necessary to comply with state or federal water
quality standards on perfluoroalkyl and polyfluoroalkyl
substances (i.e. PFAS), lead, or other contaminants, or the public
health commissioner’s action levels on them.
After it receives the report, PURA must decide on it in 180 days or
less. Within that time, PURA may hold a public hearing to solicit input.
PURA must approve the report if it finds the company demonstrated
that:
1. the projects adhere to the above criteria for determining eligible
projects’ priority;
2. any infrastructure projects for renewal or replacement are
eligible projects; and
3. any addition, upgrade, improvement, or replacement projects
provide public health benefits by improving water quality for
customers.
Administrative Proceeding on Surcharge Amount
The bill prohibits water companies from imposing the water quality
and treatment surcharge unless PURA has approved the surcharge
amount through an administrative proceeding.
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Process and Public Comment. After the water company files a
surcharge approval application, PURA has 60 days to complete the
proceeding and issue a decision. At the proceeding, PURA must receive
and consider comments from interested persons and members of the
public.
The bill specifies that the proceeding should not be considered a
contested case under the Uniform Administrative Procedures Act or any
regulation and PURA’s decision on the application should not be
considered an order, authorization, or decision for purposes of appeals
to Superior Court.
Updated Assessment Report. As part its application filing, the
water company must provide another water quality and treatment
assessment report (referred to in the bill as an “updated” report). The
report must detail any significant changes in its capital spending on
water quality projects it plans to complete in the next 10 years. For each
project that is an eligible project, as defined under the bill, the company
must also provide a detailed capital spending plan for the three years
following the filing.
WATER QUALITY AND TR EATMENT SURCHARGE
If approved, the water company may recover, on an annual basis, its
eligible expenses to date through a water quality and treatment
surcharge. The surcharge must be billed in at least 12-month increments,
starting on January 1, April 1, July 1, or October 1 of any year. (It is
unclear if the recovery must be applied to bills as a single, yearly charge
or may be spread across multiple billing cycles, as suggested by the
calculation described below.)
The bill requires the company to notify customers, through a bill
insert or other direct communication, when the surcharge is first
applied.
Surcharge Calculation
The surcharge must be calculated as a percentage, based on (1) the
eligible project’s actual, PURA-authorized cost multiplied by the water 2025HB-06777-R000345-BA.DOCX
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company’s rate of return (as approved in its most recent general rate
case), plus associated depreciation, income tax, and property tax
expenses related to the project and (2) any reconciliation adjustment
calculated as a percentage of the retail water revenues approved in the
company’s most recent general rate case.
Surcharge Cap
The bill caps the surcharge amount relative to the company’s annual
retail water revenues that were approved in its most recent rate filings.
The surcharge cannot exceed 15% of the company’s water revenues
across all years until its next rate filing and 7% in any 12-month period.
The surcharge amount is in addition to any existing rates and charges
that are authorized at the time of the filing.
Earnings Sharing Mechanism
If, after a revenue adjustment mechanism proceeding is held, the
company’s rate of return for the rolling 12-month period (ending with
the two most recent financial quarters) exceeds what is authorized,
PURA must allocate any excessive return according to any earnings
share mechanism in effect that applies to the company’s base rate
revenues.
Surcharge Reset Following a New Rate Case
Under the bill, once the adjustment (i.e. surcharge) amount is
included in the company’s new base rate and the base rate goes into
effect, the surcharge amount resets to zero. But the company may
continue to impose the surcharge for costs it incurs for any eligible
projects, including additional costs for multiyear projects. (Once the
surcharge is incorporated into the base rate, it is unclear what expenses
may be recovered under the surcharge.)
RECONCILIATION REPORT
By February 28 of each year, the bill requires the water company to
submit to PURA an annual reconciliation report. The report must cover
any water quality and treatment surcharge the company applied to
customer rates through December 31 of the prior year. The report must: 2025HB-06777-R000345-BA.DOCX
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1. identify costs incurred on any eligible project,
2. demonstrate that the surcharge is limited to eligible projects,
3. compare the collected surcharge revenues to the applicable
revenue requirement, and
4. include any other information PURA requires.
After reviewing the report, if PURA determines the company has
over-collected or under-collected the surcharge, the bill requires the
company to refund or recover, respectively, the appropriate amount as
a reconciliation adjustment over a one-year period starting on April 1.
With respect to carrying costs, the company must refund customers for
over-collections at the company’s authorized overall rate of return, but
it may not recover carrying costs for under-collections.
BACKGROUND
Water Company Infrastructure and Conservation Adjustment
By law, PURA may authorize water companies to use a rate
adjustment in the period between rate cases in order to recover the
depreciation, property taxes, and related return, primarily for certain
company capital projects they have completed (e.g., replacing worn out
infrastructure, cleaning mains, purchasing energy efficient equipment
for its operations).
COMMITTEE ACTION
Energy and Technology Committee
Joint Favorable Substitute
Yea 25 Nay 0 (03/13/2025)