H. B. No. 379 As Introduced

As Introduced

129th General Assembly

Regular Session

2011-2012

H. B. No. 379

Representative Blessing

Cosponsors: Representatives Beck, Stebelton

A BILL

To amend sections 4909.05, 4909.06, 4909.07, 4909.08,

4909.15, 4909.156, 4909.172, 4909.18, 4909.191,

and 4909.42 and to enact section 4909.173 of the

Revised Code to permit, for water-works and sewage

disposal system companies, certain

rate-calculation adjustments and a tax adjustment

surcharge, to make changes regarding water and

sewer infrastructure improvement surcharges, and

to alter language regarding utility requirements

for when rate increases may take effect in the

absence of administrative action.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 4909.05, 4909.06, 4909.07, 4909.08,	12
4909.15, 4909.156, 4909.172, 4909.18, 4909.191, and 4909.42 be	13
amended and section 4909.173 of the Revised Code be enacted to	14
read as follows:	15

Sec. 4909.05. As used in this section:

(A) A "lease purchase agreement" is an agreement pursuant to	17
which a public utility leasing property is required to make rental	18
payments for the term of the agreement and either the utility is	19
granted the right to purchase the property upon the completion of	20
the term of the agreement and upon the payment of an additional	21
fixed sum of money or title to the property vests in the utility	22
upon the making of the final rental payment.	23

(B) A "leaseback" is the sale or transfer of property by a	24
public utility to another person contemporaneously followed by the	25
leasing of the property to the public utility on a long-term	26
basis.	27

(C) The public utilities commission shall prescribe the form	28
and details of the valuation report of the property of each public	29
utility or railroad in the state. Such report shall include all	30
the kinds and classes of property, with the value of each, owned,	31
held, or, with respect to a natural gas, water-works, or sewage	32
disposal system company, projected to be owned or held as of the	33
date certain, by each public utility or railroad used and useful,	34
or, with respect to a natural gas, water-works, or sewage disposal	35
system company, projected to be used and useful as of the date	36
certain, for the service and convenience of the public. Such	37
report shall contain the following facts in detail:	38

(1) The original cost of each parcel of land owned in fee and	39
in use, or, with respect to a natural gas, water-works, or sewage	40
disposal system company, projected to be owned in fee and in use	41
as of the date certain, determined by the commission; and also a	42
statement of the conditions of acquisition, whether by direct	43
purchase, by donation, by exercise of the power of eminent domain,	44
or otherwise;	45

(2) The actual acquisition cost, not including periodic	46
rental fees, of rights-of-way, trailways, or other land rights	47
held, or, with respect to a natural gas, water-works, or sewage	48
disposal system company, projected to be held as of the date	49
certain, by virtue of easements, leases, or other forms of grants	50
of rights as to usage;	51

(3) The original cost of all other kinds and classes of	52
property used and useful, or, with respect to a natural gas,	53
water-works, or sewage disposal system company, projected to be	54
used and useful as of the date certain, in the rendition of	55
service to the public. Such original costs of property, other than	56
land owned in fee, shall be the cost, as determined to be	57
reasonable by the commission, to the person that first dedicated	58
or dedicates the property to the public use and shall be set forth	59
in property accounts and subaccounts as prescribed by the	60
commission. To the extent that the costs of property comprising a	61
coal research and development facility, as defined in section	62
1555.01 of the Revised Code, or a coal development project, as	63
defined in section 1551.30 of the Revised Code, have been allowed	64
for recovery as Ohio coal research and development costs under	65
section 4905.304 of the Revised Code, none of those costs shall be	66
included as a cost of property under this division.	67

(4) The cost of property constituting all or part of a	68
project leased to or used by the utility, or, with respect to a	69
natural gas, water-works, or sewage disposal system company,	70
projected to be leased to or used by the utility as of the date	71
certain, under Chapter 165., 3706., 6121., or 6123. of the Revised	72
Code and not included under division (C)(3) of this section	73
exclusive of any interest directly or indirectly paid by the	74
utility with respect thereto whether or not capitalized;	75

(5) In the discretion of the commission, the cost to a	76
utility, in an amount determined to be reasonable by the	77
commission, of property constituting all or part of a project	78
leased to the utility, or, with respect to a natural gas,	79
water-works, or sewage disposal system company, projected to be	80
leased to the utility as of the date certain, under a lease	81
purchase agreement or a leaseback and not included under division	82
(C)(3) of this section exclusive of any interest directly or	83
indirectly paid by the utility with respect thereto whether or not	84
capitalized;	85

(6) The proper and adequate reserve for depreciation, as	86
determined to be reasonable by the commission;	87

(7) Any sums of money or property that the company may have	88
received, or, with respect to a natural gas, water-works, or	89
sewage disposal system company, is projected to receive as of the	90
date certain, as total or partial defrayal of the cost of its	91
property;	92

(8) The valuation of the property of the company, which shall	93
be the sum of the amounts contained in the report pursuant to	94
divisions (C)(1) to (5) of this section, less the sum of the	95
amounts contained in the report pursuant to divisions (C)(6) and	96
(7) of this section.	97

The report shall show separately the property used and useful	98
to such public utility or railroad in the furnishing of the	99
service to the public, the property held by such public utility or	100
railroad for other purposes, and the property projected to be used	101
and useful to or held by a natural gas, water-works, or sewage	102
disposal system company as of the date certain, and such other	103
items as the commission considers proper. The commission may	104
require an additional report showing the extent to which the	105
property is used and useful, or, with respect to a natural gas,	106
water-works, or sewage disposal system company, projected to be	107
used and useful as of the date certain. Such reports shall be	108
filed in the office of the commission for the information of the	109
governor and the general assembly.	110

Sec. 4909.06. The investigation and report required by	111
section 4909.05 of the Revised Code shall show, when the public	112
utilities commission deems it necessary, the amounts, dates, and	113
rates of interest of all bonds outstanding against each public	114
utility or railroad, the property upon which such bonds are a	115
lien, the amounts paid for them, and, the original capital stock	116
and the moneys received by any such public utility or railroad by	117
reason of any issue of stock, bonds, or other securities. Such	118
report shall also show the net and gross receipts of such public	119
utility or railroad and the method by which moneys were expended	120
or paid out and the purpose of such payments. The commission may	121
prescribe the procedure to be followed in making the investigation	122
and valuation, the form in which the results of the ascertainment	123
of the value of each public utility or railroad shall be	124
submitted, and the classifications of the elements that constitute	125
the ascertained value. Such investigation shall also show the	126
value of the property of every public utility or railroad as a	127
whole, and if such property is in more than one county, the value	128
of its property in each of such counties.	129

"Valuation" and "value," as used in this section, may	130
include, with respect to a natural gas, water-works, or sewage	131
disposal system company, projected valuation and value as of the	132
date certain, if applicable because of a future date certain under	133
section 4909.15 of the Revised Code.	134

Sec. 4909.07. The public utilities commission, during the	135
making of the valuation provided for in sections 4909.04 to	136
4909.13~~, inclusive,~~ of the Revised Code, and after its completion,	137
shall in like manner keep itself informed through its engineers,	138
experts, and other assistants of all extensions, improvements, or	139
other changes in the condition and value of the property of all	140
public utilities or railroads and shall ascertain the value of	141
such extensions, improvements, and changes. The commission shall,	142
as is required for the proper regulation of such public utilities	143
or railroads, revise and correct its valuations of property,	144
showing such revisions and corrections as a whole and as to each	145
county. Such revisions and corrections shall be filed in the same	146
manner as original reports.	147

"Valuation" and "value," as used in this section, may	148
include, with respect to a natural gas, water-works, or sewage	149
disposal system company, projected valuation and value as of the	150
date certain, if applicable because of a future date certain under	151
section 4909.15 of the Revised Code.	152

Sec. 4909.08. When the public utilities commission has	153
completed the valuation of the property of any public utility or	154
railroad and before such valuation becomes final, it shall give	155
notice by registered letter to such public utility or railroad,	156
and if a substantial portion of said public utility or railroad is	157
situated in a municipal corporation, then to the mayor of such	158
municipal corporation, stating the valuations placed upon the	159
several kinds and classes of property of such public utility or	160
railroad and upon the property as a whole and give such further	161
notice by publication or otherwise as it shall deem necessary to	162
apprise the public of such valuation. If, within thirty days after	163
such notification, no protest has been filed with the commission,	164
such valuation becomes final. If notice of protest has been filed	165
by any public utility or railroad, the commission shall fix a time	166
for hearing such protest and shall consider at such hearing any	167
matter material thereto presented by such public utility,	168
railroad, or municipal corporation, in support of its protest or	169
by any representative of the public against such protest. If,	170
after the hearing of any protest of any valuation so fixed, the	171
commission is of the opinion that its inventory is incomplete or	172
inaccurate or that its valuation is incorrect, it shall make such	173
changes as are necessary and shall issue an order making such	174
corrected valuations final. A final valuation by the commission	175
and all classifications made for the ascertainment of such	176
valuations shall be public and are prima-facie evidence relative	177
to the value of the property.	178

"Valuation" and "value," as used in this section, may	179
include, with respect to a natural gas, water-works, or sewage	180
disposal system company, projected valuation and value as of the	181
date certain, if applicable because of a future date certain under	182
section 4909.15 of the Revised Code.	183

Sec. 4909.15. (A) The public utilities commission, when	184
fixing and determining just and reasonable rates, fares, tolls,	185
rentals, and charges, shall determine:	186

(1) The valuation as of the date certain of the property of	187
the public utility used and useful or, with respect to a natural	188
gas, water-works, or sewage disposal system company, projected to	189
be used and useful as of the date certain, in rendering the public	190
utility service for which rates are to be fixed and determined.	191
The valuation so determined shall be the total value as set forth	192
in division (C)(8) of section 4909.05 of the Revised Code, and a	193
reasonable allowance for materials and supplies and cash working	194
capital as determined by the commission.	195

The commission, in its discretion, may include in the	196
valuation a reasonable allowance for construction work in progress	197
but, in no event, may such an allowance be made by the commission	198
until it has determined that the particular construction project	199
is at least seventy-five per cent complete.	200

In determining the percentage completion of a particular	201
construction project, the commission shall consider, among other	202
relevant criteria, the per cent of time elapsed in construction;	203
the per cent of construction funds, excluding allowance for funds	204
used during construction, expended, or obligated to such	205
construction funds budgeted where all such funds are adjusted to	206
reflect current purchasing power; and any physical inspection	207
performed by or on behalf of any party, including the commission's	208
staff.	209

A reasonable allowance for construction work in progress	210
shall not exceed ten per cent of the total valuation as stated in	211
this division, not including such allowance for construction work	212
in progress.	213

Where the commission permits an allowance for construction	214
work in progress, the dollar value of the project or portion	215
thereof included in the valuation as construction work in progress	216
shall not be included in the valuation as plant in service until	217
such time as the total revenue effect of the construction work in	218
progress allowance is offset by the total revenue effect of the	219
plant in service exclusion. Carrying charges calculated in a	220
manner similar to allowance for funds used during construction	221
shall accrue on that portion of the project in service but not	222
reflected in rates as plant in service, and such accrued carrying	223
charges shall be included in the valuation of the property at the	224
conclusion of the offset period for purposes of division (C)(8) of	225
section 4909.05 of the Revised Code.	226

From and after April 10, 1985, no allowance for construction	227
work in progress as it relates to a particular construction	228
project shall be reflected in rates for a period exceeding	229
forty-eight consecutive months commencing on the date the initial	230
rates reflecting such allowance become effective, except as	231
otherwise provided in this division.	232

The applicable maximum period in rates for an allowance for	233
construction work in progress as it relates to a particular	234
construction project shall be tolled if, and to the extent, a	235
delay in the in-service date of the project is caused by the	236
action or inaction of any federal, state, county, or municipal	237
agency having jurisdiction, where such action or inaction relates	238
to a change in a rule, standard, or approval of such agency, and	239
where such action or inaction is not the result of the failure of	240
the utility to reasonably endeavor to comply with any rule,	241
standard, or approval prior to such change.	242

In the event that such period expires before the project goes	243
into service, the commission shall exclude, from the date of	244
expiration, the allowance for the project as construction work in	245
progress from rates, except that the commission may extend the	246
expiration date up to twelve months for good cause shown.	247

In the event that a utility has permanently canceled,	248
abandoned, or terminated construction of a project for which it	249
was previously permitted a construction work in progress	250
allowance, the commission immediately shall exclude the allowance	251
for the project from the valuation.	252

In the event that a construction work in progress project	253
previously included in the valuation is removed from the valuation	254
pursuant to this division, any revenues collected by the utility	255
from its customers after April 10, 1985, that resulted from such	256
prior inclusion shall be offset against future revenues over the	257
same period of time as the project was included in the valuation	258
as construction work in progress. The total revenue effect of such	259
offset shall not exceed the total revenues previously collected.	260

In no event shall the total revenue effect of any offset or	261
offsets provided under division (A)(1) of this section exceed the	262
total revenue effect of any construction work in progress	263
allowance.	264

(2) A fair and reasonable rate of return to the utility on	265
the valuation as determined in division (A)(1) of this section;	266

(3) The dollar annual return to which the utility is entitled	267
by applying the fair and reasonable rate of return as determined	268
under division (A)(2) of this section to the valuation of the	269
utility determined under division (A)(1) of this section;	270

(4) The cost to the utility of rendering the public utility	271
service for the test period used for the determination under	272
division (C)(1) of this section, less the total of any interest on	273
cash or credit refunds paid, pursuant to section 4909.42 of the	274
Revised Code, by the utility during the test period.	275

(a) Federal, state, and local taxes imposed on or measured by	276
net income may, in the discretion of the commission, be computed	277
by the normalization method of accounting, provided the utility	278
maintains accounting reserves that reflect differences between	279
taxes actually payable and taxes on a normalized basis, provided	280
that no determination as to the treatment in the rate-making	281
process of such taxes shall be made that will result in loss of	282
any tax depreciation or other tax benefit to which the utility	283
would otherwise be entitled, and further provided that such tax	284
benefit as redounds to the utility as a result of such a	285
computation may not be retained by the company, used to fund any	286
dividend or distribution, or utilized for any purpose other than	287
the defrayal of the operating expenses of the utility and the	288
defrayal of the expenses of the utility in connection with	289
construction work.	290

(b) The amount of any tax credits granted to an electric	291
light company under section 5727.391 of the Revised Code for Ohio	292
coal burned prior to January 1, 2000, shall not be retained by the	293
company, used to fund any dividend or distribution, or utilized	294
for any purposes other than the defrayal of the allowable	295
operating expenses of the company and the defrayal of the	296
allowable expenses of the company in connection with the	297
installation, acquisition, construction, or use of a compliance	298
facility. The amount of the tax credits granted to an electric	299
light company under that section for Ohio coal burned prior to	300
January 1, 2000, shall be returned to its customers within three	301
years after initially claiming the credit through an offset to the	302
company's rates or fuel component, as determined by the	303
commission, as set forth in schedules filed by the company under	304
section 4905.30 of the Revised Code. As used in division (A)(4)(b)	305
of this section, "compliance facility" has the same meaning as in	306
section 5727.391 of the Revised Code.	307

(B) The commission shall compute the gross annual revenues to	308
which the utility is entitled by adding the dollar amount of	309
return under division (A)(3) of this section to the cost, for the	310
test period used for the determination under division (C)(1) of	311
this section, of rendering the public utility service under	312
division (A)(4) of this section.	313

(C)(1) Except as provided in division (D) of this section,	314
the revenues and expenses of the utility shall be determined	315
during a test period. The utility may propose a test period for	316
this determination that is any twelve-month period beginning not	317
more than six months prior to the date the application is filed	318
and ending not more than nine months subsequent to that date. The	319
test period for determining revenues and expenses of the utility	320
shall be the test period proposed by the utility, unless otherwise	321
ordered by the commission.	322

(2) The date certain shall be not later than the date of	323
filing, except that it shall be, for a natural gas, water-works,	324
or sewage disposal system company, not later than the end of the	325
test period.	326

(D) A natural gas, water-works, or sewage disposal system	327
company may propose adjustments to the revenues and expenses to be	328
determined under division (C)(1) of this section for any changes	329
that are, during the test period or the twelve-month period	330
immediately following the test period, reasonably expected to	331
occur. The natural gas, water-works, or sewage disposal system	332
company shall identify and quantify, individually, any proposed	333
adjustments. The commission shall incorporate the proposed	334
adjustments into the determination if the adjustments are just and	335
reasonable.	336

(E) When the commission is of the opinion, after hearing and	337
after making the determinations under divisions (A) and (B) of	338
this section, that any rate, fare, charge, toll, rental, schedule,	339
classification, or service, or any joint rate, fare, charge, toll,	340
rental, schedule, classification, or service rendered, charged,	341
demanded, exacted, or proposed to be rendered, charged, demanded,	342
or exacted, is, or will be, unjust, unreasonable, unjustly	343
discriminatory, unjustly preferential, or in violation of law,	344
that the service is, or will be, inadequate, or that the maximum	345
rates, charges, tolls, or rentals chargeable by any such public	346
utility are insufficient to yield reasonable compensation for the	347
service rendered, and are unjust and unreasonable, the commission	348
shall:	349

(1) With due regard among other things to the value of all	350
property of the public utility actually used and useful for the	351
convenience of the public as determined under division (A)(1) of	352
this section, excluding from such value the value of any franchise	353
or right to own, operate, or enjoy the same in excess of the	354
amount, exclusive of any tax or annual charge, actually paid to	355
any political subdivision of the state or county, as the	356
consideration for the grant of such franchise or right, and	357
excluding any value added to such property by reason of a monopoly	358
or merger, with due regard in determining the dollar annual return	359
under division (A)(3) of this section to the necessity of making	360
reservation out of the income for surplus, depreciation, and	361
contingencies, and;	362

(2) With due regard to all such other matters as are proper,	363
according to the facts in each case,	364

(a) Including a fair and reasonable rate of return determined	365
by the commission with reference to a cost of debt equal to the	366
actual embedded cost of debt of such public utility,	367

(b) But not including the portion of any periodic rental or	368
use payments representing that cost of property that is included	369
in the valuation report under divisions (C)(4) and (5) of section	370
4909.05 of the Revised Code, fix and determine the just and	371
reasonable rate, fare, charge, toll, rental, or service to be	372
rendered, charged, demanded, exacted, or collected for the	373
performance or rendition of the service that will provide the	374
public utility the allowable gross annual revenues under division	375
(B) of this section, and order such just and reasonable rate,	376
fare, charge, toll, rental, or service to be substituted for the	377
existing one. After such determination and order no change in the	378
rate, fare, toll, charge, rental, schedule, classification, or	379
service shall be made, rendered, charged, demanded, exacted, or	380
changed by such public utility without the order of the	381
commission, and any other rate, fare, toll, charge, rental,	382
classification, or service is prohibited.	383

(F) Upon application of any person or any public utility, and	384
after notice to the parties in interest and opportunity to be	385
heard as provided in Chapters 4901., 4903., 4905., 4907., 4909.,	386
4921., and 4923. of the Revised Code for other hearings, has been	387
given, the commission may rescind, alter, or amend an order fixing	388
any rate, fare, toll, charge, rental, classification, or service,	389
or any other order made by the commission. Certified copies of	390
such orders shall be served and take effect as provided for	391
original orders.	392

Sec. 4909.156. In fixing the just, reasonable, and	393
compensatory rates, joint rates, tolls, classifications, charges,	394
or rentals to be observed and charged for service by any public	395
utility, the public utilities commission shall, in action upon an	396
application filed pursuant to section 4909.18 of the Revised Code,	397
require a public utility to file a report showing the	398
proportionate amounts of the valuation of the property of the	399
utility, as determined under section 4909.05 orof the Revised	400
Code, and the proportionate amounts of the revenues and expenses	401
of the utility that are proposed to be considered as attributable	402
to the service area involved in the application.	403

"Valuation," as used in this section, may include, with	404
respect to a natural gas, water-works, or sewage disposal system	405
company, projected valuation as of the date certain, if applicable	406
because of a future date certain under section 4909.15 of the	407
Revised Code.	408

Sec. 4909.172. (A) A waterworks company, or a sewage	409
disposal system company, that is a public utility may file an	410
application with the public utilities commission for approval to	411
collect an infrastructure improvement surcharge, determined in	412
accordance with this section, from customers located in the	413
company's affected service areas and subject to affected schedules	414
filed by the company under section ~~4905.31~~4905.32 of the Revised	415
Code. The application shall be in such form and contain such	416
information as the commission prescribes. At the time of filing,	417
the company shall serve a copy of the application upon the chief	418
executive of each municipal corporation, the board of township	419
trustees of each township, and the board of county commissioners	420
of each county in which affected customers are located. A company	421
for which aan infrastructure improvement surcharge is authorized	422
under this section may file an application for another such	423
surcharge not sooner than twelve months after the filing date of	424
its most recent infrastructure improvement surcharge application.	425

(B) The commission shall provide an opportunity for the	426
filing of comments on an application filed under division (A) of	427
this section. After considering those comments, the commission may	428
authorize aan infrastructure improvement surcharge for the	429
company that is just and reasonable and is sufficient, but does	430
not exceed, the revenue requirement necessary to do both of the	431
following:	432

(1) Cover such infrastructure plant costs of the company as	433
are described in division (C) of this section, incurred after	434
March 1, 2003, and before the date of filing, and not already	435
reflected in the affected schedules filed by the company under	436
section 4905.31 of the Revised Code;	437

(2) Provide a fair and reasonable rate of return on the	438
filing date valuation of that particular infrastructure plant.	439

The infrastructure improvement surcharge chargeable to each	440
affected customer class of the company shall not exceed ~~three~~five	441
per cent of the rates and charges applicable to the class and in	442
effect on the date the application was filed and, as to the	443
allowed percentage increase, shall be uniform for each such class.	444
The commission shall not authorize a company to have more than	445
three infrastructure improvement surcharges in effect at any time.	446

Additionally, the commission shall not authorize aan	447
infrastructure improvement surcharge under this section if it	448
determines that the surcharge causes the company to earn an	449
excessive rate of return on its valuation under section 4909.15 of	450
the Revised Code.	451

(C) For purposes of this section, a company's costs of	452
infrastructure plant may include depreciation expenses. Such	453
infrastructure plant ~~shall exclude any improvement providing the~~	454
~~company with additional revenue other than any minimal revenue~~	455
~~associated with the elimination of a dead end, and~~ may consist	456
~~only~~ of the following capital improvements that the commission	457
determines are used and useful in rendering public utility	458
service:	459

(1) In the case of a waterworks company, replacement of	460
existing plant including chemical feed systems, filters, pumps,	461
motors, plant generators, meters, service lines ~~for~~, ~~and~~ hydrants,	462
mains, and valves ~~installed as a part of, a replacement project~~	463
~~for an existing facility;~~, main extensions that eliminate dead	464
ends to resolve documented water supply problems presenting	465
significant health or safety issues to then existing customers;,	466
and main cleaning or relining;	467

(2) In the case of a sewage disposal system company,	468
replacement of existing infrastructure including chemical feed	469
systems, filters, pumps, motors, sludge-handling equipment, plant	470
generators, mains and lift stations ~~installed as part of a~~	471
~~replacement project for an existing facility;~~, main extensions	472
that resolve documented sewage disposal problems presenting	473
significant health or safety issues to then existing customers;,	474
and main cleaning, inflow and infiltration elimination, or	475
relining;	476

(3) Unreimbursed capital expenditures made by the waterworks	477
company, or the sewage disposal system company, for waterworks, or	478
sewage disposal, facility relocation required by a governmental	479
entity due to a street or highway project;	480

(4) Minimum land or land rights acquired by the company as	481
necessary for any service line, equipment, or facility ~~described~~	482
~~in divisions (A)(1) to (3) of this section~~.	483

(D) During the period that an authorized infrastructure	484
improvement surcharge is in effect, the commission, by order and	485
on its own motion or upon good cause shown, may reduce the amount	486
of or terminate aan infrastructure improvement surcharge if it	487
determines that the surcharge causes the company to earn an	488
excessive rate of return on its valuation under section 4909.15 of	489
the Revised Code.	490

(E) An order issued by the commission deciding an application	491
by a waterworks company or a sewage disposal system company for an	492
increase in rates and charges pursuant to an application filed by	493
the company under section 4909.18 of the Revised Code shall	494
provide for the termination~~, as of the earlier of the effective~~	495
~~date of the increase or the date specified in division (F) of this~~	496
~~section,~~ of any infrastructure improvement surcharges of the	497
company authorized under this section.	498

(F) ~~All surcharges authorized under this section shall~~	499
~~terminate by operation of law not later than December 31, 2014.~~	500

~~(G)~~ The company shall provide notice of any infrastructure	501
improvement surcharge authorized under this section to each	502
affected customer with or on the customer's first bill containing	503
the surcharge.	504

~~(H)~~(G) The commission may adopt such rules as it considers	505
necessary to carry out this section.	506

Sec. 4909.173. (A) A water-works company, or a sewage	507
disposal system company, that is a public utility may file an	508
application with the public utilities commission for approval to	509
collect a tax adjustment surcharge, determined in accordance with	510
this section, from customers located in the company's affected	511
service areas and subject to affected schedules filed by the	512
company under section 4905.32 of the Revised Code. An approved tax	513
adjustment surcharge shall authorize the company to adjust the	514
rates that the company charges to customers to recover or refund	515
an actual increase or decrease in federal or state taxes that	516
occurred since the most recent order establishing, modifying,	517
amending, changing, increasing, or reducing the rates to be	518
charged was issued by the commission under section 4909.18 or	519
4909.19 of the Revised Code.	520

(B) After considering the company's application, the	521
commission may authorize a tax adjustment surcharge that is just	522
and reasonable.	523

(C) The surcharge shall be applied to each affected customer	524
class of the company and, as to the allowed percentage increase or	525
decrease, shall be uniform for each such affected customer class	526
as prescribed by the commission.	527

(D) The surcharge shall be reconciled and updated on an	528
annual basis pursuant to documentation submitted by the company	529
and approved by the commission showing the federal or state tax	530
increases or decreases that have occurred since the most recent	531
order establishing, modifying, amending, changing, increasing, or	532
reducing the rates to be charged was issued by the commission	533
under section 4909.18 or 4909.19 of the Revised Code.	534

(E) During the period that an authorized tax adjustment	535
surcharge is in effect, the commission, by order and on its own	536
motion or upon good cause shown, may reduce the amount of or	537
terminate a tax adjustment surcharge if it determines that the	538
surcharge causes the company excessive recovery of the associated	539
taxes.	540

(F) An order issued by the commission deciding an application	541
by the company for an increase in rates filed under section	542
4909.18 of the Revised Code may provide for the termination of any	543
tax adjustment surcharges of the company authorized under this	544
section.	545

(G) The company shall provide notice of any tax adjustment	546
surcharge authorized under this section to each affected customer	547
with or on the customer's first bill containing the surcharge.	548

(H) The commission may adopt such rules as it considers	549
necessary to carry out this section.	550

Sec. 4909.18. Any public utility desiring to establish any	551
rate, joint rate, toll, classification, charge, or rental, or to	552
modify, amend, change, increase, or reduce any existing rate,	553
joint rate, toll, classification, charge, or rental, or any	554
regulation or practice affecting the same, shall file a written	555
application with the public utilities commission. Except for	556
actions under section 4909.16 of the Revised Code, no public	557
utility may issue the notice of intent to file an application	558
pursuant to division (B) of section 4909.43 of the Revised Code to	559
increase any existing rate, joint rate, toll, classification,	560
charge, or rental, until a final order under this section has been	561
issued by the commission on any pending prior application to	562
increase the same rate, joint rate, toll, classification, charge,	563
or rental or until two hundred seventy-five days after filing such	564
application, whichever is sooner. Such application shall be	565
verified by the president or a vice-president and the secretary or	566
treasurer of the applicant. Such application shall contain a	567
schedule of the existing rate, joint rate, toll, classification,	568
charge, or rental, or regulation or practice affecting the same, a	569
schedule of the modification amendment, change, increase, or	570
reduction sought to be established, and a statement of the facts	571
and grounds upon which such application is based. If such	572
application proposes a new service or the use of new equipment, or	573
proposes the establishment or amendment of a regulation, the	574
application shall fully describe the new service or equipment, or	575
the regulation proposed to be established or amended, and shall	576
explain how the proposed service or equipment differs from	577
services or equipment presently offered or in use, or how the	578
regulation proposed to be established or amended differs from	579
regulations presently in effect. The application shall provide	580
such additional information as the commission may require in its	581
discretion. If the commission determines that such application is	582
not for an increase in any rate, joint rate, toll, classification,	583
charge, or rental, the commission may permit the filing of the	584
schedule proposed in the application and fix the time when such	585
schedule shall take effect. If it appears to the commission that	586
the proposals in the application may be unjust or unreasonable,	587
the commission shall set the matter for hearing and shall give	588
notice of such hearing by sending written notice of the date set	589
for the hearing to the public utility and publishing notice of the	590
hearing one time in a newspaper of general circulation in each	591
county in the service area affected by the application. At such	592
hearing, the burden of proof to show that the proposals in the	593
application are just and reasonable shall be upon the public	594
utility. After such hearing, the commission shall, where	595
practicable, issue an appropriate order within six months from the	596
date the application was filed.	597

If the commission determines that said application is for an	598
increase in any rate, joint rate, toll, classification, charge, or	599
rental there shall also, unless otherwise ordered by the	600
commission, be filed with the application in duplicate the	601
following exhibits:	602

(A) A report of its property used and useful, or, with	603
respect to a natural gas, water-works, or sewage disposal system	604
company, projected to be used and useful as of the date certain,	605
in rendering the service referred to in such application, as	606
provided in section 4909.05 of the Revised Code;	607

(B) A complete operating statement of its last fiscal year,	608
showing in detail all its receipts, revenues, and incomes from all	609
sources, all of its operating costs and other expenditures, and	610
any analysis such public utility deems applicable to the matter	611
referred to in said application;	612

(C) A statement of the income and expense anticipated under	613
the application filed;	614

(D) A statement of financial condition summarizing assets,	615
liabilities, and net worth;	616

(E) Such other information as the commission may require in	617
its discretion.	618

Sec. 4909.191. (A) If the public utilities commission, under	619
division (D) of section 4909.15 of the Revised Code, incorporated	620
proposed adjustments to revenues and expenses into the	621
commission's determination under that section, the natural gas,	622
water-works, or sewage disposal system company shall, not later	623
than ninety days after actual data for all of the incorporated	624
adjustments becomes known, submit to the commission proposed rate	625
or charge adjustments that provide for the recalculation of rates	626
or charges, reflective of customer-class responsibility,	627
corresponding to the differences, if any, between the incorporated	628
adjustments to revenues and expenses and the actual revenues and	629
expenses associated with the incorporated adjustments.	630

(B) If the commission incorporated projected value or	631
valuation of property into the commission's determination under	632
division (A)(1) of section 4909.15 of the Revised Code, the	633
natural gas, water-works, or sewage disposal system company shall,	634
not later than ninety days after data for the actual value or	635
valuation as of the date certain becomes known, submit to the	636
commission proposed rate or charge adjustments that provide for	637
the recalculation of rates or charges, reflective of	638
customer-class responsibility, corresponding to the differences,	639
if any, between the projected value or valuation incorporated into	640
the commission's determination and the actual value or valuation	641
as of the date certain.	642

(C) The commission shall review the proposed rate or charge	643
adjustments submitted under divisions (A) and (B) of this section.	644
The review shall not include a hearing unless the commission finds	645
that the proposed rate or charge adjustments may be unreasonable,	646
in which case the commission may, in its discretion, schedule the	647
matter for a hearing.	648

(D) The commission shall issue, not later than one hundred	649
fifty days after the date that any proposed rate or charge	650
adjustments are submitted under division (A) or (B) of this	651
section, a final order on the proposed rate or charge adjustments.	652
Any rate or charge adjustments authorized under this division	653
shall be limited to amounts that are not greater than those	654
consistent with the proposed adjustments to revenues and expenses	655
that were incorporated into the commission's determination under	656
division (D) of section 4909.15 of the Revised Code, and not	657
greater than those consistent with the incorporated projected	658
value or valuation. In no event shall rate or charge adjustments	659
authorized under this division be upward.	660

After the commission has issued such a final order, the	661
natural gas, water-works, or sewage disposal system company, if	662
applicable, shall submit to the commission proposed reconciliation	663
adjustments that refund to customers the difference between the	664
actual revenues collected by the natural gas, water-works, or	665
sewage disposal system company, under the rates and charges	666
determined by the commission under section 4909.15 of the Revised	667
Code, and the rates or charges recalculated under the adjustments	668
authorized under this division. The reconciliation adjustments	669
shall be effective for a twelve-month period.	670

(E) The reconciliation adjustments ordered under division (D)	671
of this section may be subject to a final reconciliation by the	672
commission. Any such final reconciliation shall occur after the	673
twelve-month period described in division (D) of this section.	674

Sec. 4909.42. If the proceeding on an application filed with	675
the public utilities commission under section 4909.18 of the	676
Revised Code by any public utility requesting an increase on any	677
rate, joint rate, toll, classification, charge, or rental or	678
requesting a change in a regulation or practice affecting the same	679
has not been concluded and an order entered pursuant to section	680
4909.19 of the Revised Code at the expiration of two hundred	681
seventy-five days from the date of filing the application, an	682
increase not to exceed the proposed increase shall go into effect	683
upon the filing of ~~an undertaking~~a bond or a letter of credit by	684
the public utility. The ~~undertaking~~bond or letter of credit shall	685
be filed with the commission and shall be payable to the state for	686
the use and benefit of the customers affected by the proposed	687
increase or change.	688

~~The undertaking~~An affidavit attached to the bond or letter	689
of credit must be signed by two of the officers of the utility,	690
under oath, and must contain a promise on behalf of the utility to	691
refund any amounts collected by the utility over the rate, joint	692
rate, toll, classification, charge, or rental, as determined in	693
the final order of the commission. All refunds shall include	694
interest at the rate stated in section 1343.03 of the Revised	695
Code. The refund shall be in the form of a temporary reduction in	696
rates following the final order of the commission, and shall be	697
accomplished in such manner as shall be prescribed by the	698
commission in its final order. The commission shall exercise	699
continuing and exclusive jurisdiction over such refunds.	700

If the public utilities commission has not entered a final	701
order within five hundred forty-five days from the date of the	702
filing of an application for an increase in rates under section	703
4909.18 of the Revised Code, a public utility shall have no	704
obligation to make a refund of amounts collected after the five	705
hundred forty-fifth day which exceed the amounts authorized by the	706
commission's final order.	707

Nothing in this section shall be construed to mitigate any	708
duty of the commission to issue a final order under section	709
4909.19 of the Revised Code.	710

Section 2. That existing sections 4909.05, 4909.06, 4909.07,	711
4909.08, 4909.15, 4909.156, 4909.172, 4909.18, 4909.191, and	712
4909.42 of the Revised Code are hereby repealed.	713