Current through September 24, 2024
(1) All public
wastewater utilities either holding or seeking to hold a CCN and owning
wastewater systems shall furnish to the Commission, an acceptable financial
security. The public wastewater utility shall ensure that such financial
security is maintained in continuous force in conformity with these
rules.
(2) Proof of financial
security shall be furnished to the Commission as follows:
(a) A public wastewater utility submitting an
initial application for a CCN shall present to the Commission, prior to
approval of the application, proof of financial security in the amount of
$20,000. Prior to providing service the public utility shall file proof of
financial security in the amount required by 1220-04-13-.07(2)(b) based on the
annual revenue forecast in the CCN application submitted to the
Commission.
(b) On or before July 1
of each year, any public wastewater utility holding a CCN and providing service
shall file proof with the Commission of a security in the amount of fifty
percent (50%) of annual wastewater revenues in the most recent annual or
$20,000, whichever is greater. The minimum financial security amount is
$20,000. The maximum required security is $300,000. When calculating wastewater
revenues, no monies received from customers for bonding under this rule or for
meeting bonding requirements of a local government shall be included in the
calculation of wastewater revenues.
(c) Initial compliance revenue is defined as
the amount of revenue upon which a public wastewater utility submits proof of
financial security for the first time after the effective date of this rule.
Notwithstanding (2)(b), a public wastewater utility is not required to submit a
new financial security until the initial compliance revenue increases by 10% as
reported on its annual report. Once the public wastewater utility submits a new
financial security, the revenues upon which the financial security is based
shall become the new initial compliance revenue. The public wastewater utility
must provide proof that its financial security is still in effect by July 1 or
each year.
(3) Financial
security shall be provided in one of the following manners:
(a) A bond issued by any surety company that
has been authorized to issue such security by the Tennessee Department of
Commerce and Insurance; or
(b) An
irrevocable letter of credit issued by a financial institution that is a
designated state depository under Tenn. Code Ann. §
9-4-107.
(4) The public wastewater utility
shall ensure that the Commission is notified within thirty (30) days prior to
any termination action concerning an irrevocable letter of credit that will not
be renewed or the expiration date for a bond of non-perpetual duration that is
not to be renewed.
(5) The
recurring cost of the financial security may be funded from customer
contributions by means of a pass-through mechanism that adjusts a customer's
monthly rate by a specified amount. The amount of the rate adjustment shall be
established by the Commission for a public wastewater utility on a case-by-case
basis.
(a) For the initial security, each
public wastewater utility shall submit for the Commission's consideration a
proposed tariff specifying the amount of the security, the amount of the
monthly rate adjustment to be billed to its customers for recovery of the cost
of such security and the percentage rate increase this represents, based on
currently approved rates. The tariff filing documentation shall contain at a
minimum a calculation of the rate adjustment based on the annual cost of the
security and the number of existing or projected customers at the time of the
tariff filing. The resulting cost per customer (total security cost divided by
the number of customers) shall be recovered from customers on a monthly basis
(total cost per customer divided by 12).
1.
For public wastewater utilities holding a CCN as of the effective date of this
rule, a proposed tariff to recover the cost of the required security shall be
submitted to the Commission within thirty (30) days of the effective date of
the financial security.
2. For
public wastewater utilities seeking a CCN after the effective date of this
rule, a proposed tariff to recover the cost of the required security shall be
submitted to the Commission with the CCN application.
(b) Thereafter, on or before July 1 of each
year, each public wastewater utility shall file with the Commission the
following information to update its financial security and true up the recovery
of its security costs:
1. Proof of financial
security compliant with this rule.
2. A proposed revised tariff to become
effective August 1, specifying the amount of security in place, the updated
monthly rate adjustment to be billed to customers and the percentage rate
increase this represents.
3.
Documentation supporting the calculation of the updated monthly rate
adjustment.
The documentation shall include but not be limited to:
(i) The annual cost of the new
security;
(ii) The current number
of customers;
(iii) The total
actual security costs paid in the previous reporting period or part thereof in
the public wastewater utility's first year of operations or the first year this
rule is in effect; and
(iv) The
security cost recovered from customers in the previous reporting period or part
thereof.
4. A true-up
calculation of the new monthly rate adjustment, calculated as follows:
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Where:
RA = New monthly rate adjustment to be effective August
1.
CP = Total security costs actually paid in the prior
reporting period or part thereof netted against any credits or refunds received
by the public wastewater utility from the holder of the financial
security.
CR = Total security costs actually recovered from customers
in the prior reporting period.
SC = Annual security costs associated with the new security
filed on July 1.
C = Number of customers at July 1.
(6) Upon the filing of
an initial CCN application, a determination shall be made regarding the
establishment of a reserve/escrow account. The Commission may review the
financial condition of any public wastewater utility at any time to determine
whether a reserve/escrow account balance is adequate or an account should be
established. The requirement for a public wastewater utility to maintain a
reserve/escrow account shall be determined by the Commission on a case-by-case
basis.
(7) Reserve/escrow accounts
established by a public wastewater utility shall be limited to paying for or
reimbursing the utility for extraordinary expenses of the utility or for
necessary capital projects, unless otherwise permitted by the Commission.
Extraordinary expenses are those resulting from events which are infrequent and
unusual in nature, and unrelated to the utilities' routine service or business
activities. The utility must first receive authorization from the Commission
via approved petition or, in emergency situations, authorization in writing
from the Chairman of the Commission upon written request by a representative of
the utility to use such funds. The Commission may require public wastewater
utility employees having signature authority over such account to obtain a
fidelity bond. The public wastewater utility's tariff shall set forth the
specific amount charged to customers to fund the reserve/escrow
account.
(8) The TPUC may waive or
modify requirements of this rule for good cause shown, including but not
limited to affordability of rates, minimization of rate shock or other
operating characteristics of the utility.
Authority: T.C.A. §§
65-2-102,
65-4-104,
65-4-111,
65-4-201, and 65-4-305.
