State of Connecticut Office of Consumer Counsel NECPUC 2005

Who We Are Independent ratepayer advocate for Connecticut’s utility consumers In existence since 1975 Staff of 12 which includes: Attorneys, Financial and Administrative staff

What We Do Actively involved in regulatory work in the Water, Electric, Natural Gas, Telecommunications and Cable Industries The scale of our work ranges from a 50 customer water utility to The Connecticut Light & Power Company, which serves approximately 1.2 million customers Types of Water related dockets that we are involved in include rate increase requests and land sales

Our Role In Regulation Lowest cost for consumers while providing quality service that meets health and safety standards The OCC’s role is not to take positions that put the Utility in a situation where it cannot perform its public service obligation –Can create conflicts with ratepayers who want bare bones rates Jewett City Water Company, OCC advocated a 90% rate increase due to the installation of a filtration plant

Regarding Land Sales Recent Developments –Many environmental groups have emerged in the Utility area to promote open space (Connecticut Fund for the Environment, Nature Conservancy and Woodlands Coalition) Some groups have proposed a surcharge on water bills for future land acquisition (legislation failed) –Presents new issues from a consumer advocate standpoint as all customers would be asked to fund land acquisition –Must make sure the needs of all customers are heard, not just special interest groups

Land Sales, Cont. Thoughts On Surcharge –Under a proposed surcharge mechanism, details need to be worked out Fund management Smaller Utilities will not generate significant funds Need for customer input – Possible system by system referendum on this approach Gauge the need for this approach and how it fits with local municipality open space plans

Land Sales, Cont. Next Steps For The Surcharge –Endangered Lands Coalition has asked the Connecticut Water Planning Council to fully investigate the surcharge approach –Expect significant stakeholder involvement in this process –Likely back to the Legislature in next years session

Land Sales and The Consumer The Typical Consumer –Usually very little individual consumer involvement in land sales –OCC wants to insure that maximum benefit accrues to the ratepayer –Recent decisions have assured that consumers share in a fair allocation of land sale gains through a defined offset to ratebase

Land Sales, Cont. Getting The Message To The Consumer –Current land sale methodology The typical consumer cares about the bottom line In addition to open space benefits the economic benefits of land sales need to be conveyed –With the Aquarion land sale customers received approximately $1,000,000 in annual benefits

Rate Increases Customers are most vocal about water rate increases than any other type of utility rate increase –Largest turnout at public hearings –Some have unrealistic expectations water “should be free” philosophy linking the rate increase to salary or social security increases Customers do not always have a clear understanding of why rate increases are needed

How to Get The Point Across To Consumers Education is key –More upfront communication would lead to a greater understanding of the need for a rate increase Informational Town meetings More detailed mailing of rate increase request, not just boilerplate notice of increase Need to explain ratemaking process Some have the perception that utilities are trying to recapture expenses in one rate case –Capital additions depreciated over several years Elements of rate increase should be identified i.e. new plant accounts for 50% of rate increase New health requirements imposed on the Utility

How to Get The Point Across To Consumers Have staff ready to present overview of rate case components at the public hearing –Not required but a good public relations tool –Take questions and tailor answers to the customers level of understanding(depreciation can be confusing) Focus should be on health, quality and safety aspects of water –Let them know what they are paying for that affects them personally Increased fire protection, correction of discoloration, reduction in main breaks

Utility Approaches That Do Not Work Cost comparisons (cable TV, Coffee) do not seem to impress ratepayers Highlighting the length of time between rate cases is not a free pass

Outside The Normal Rate Case The OCC also has other avenues whereby it can work with Utilities to facilitate rate increases –Settlements Avoid prolonged litigation Saves ratepayers money through reduced rate expenses (legal, accounting, etc.) –Streamlined rate cases Simplified “fill in the blank” format tied to line items in the annual report Currently available to class C water utilities (up to $100k in annual revenues) Possible future expansion to Class B utilities (up to $500k in revenues)

Questions?