A BILL TO BE ENTITLED
AN ACT to cap and sunset the rate adjustment mechanism for natural gas distribution companies for pipeline safety costs and to clarify the rate adjustment mechanism for water and sewer facilities.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 62‑133.7A reads as rewritten:
"§ 62‑133.7A.  Rate adjustment mechanism for natural gas local distribution company rates.
(a)	In setting rates for a natural gas local distribution company in a general rate case proceeding under G.S. 62‑133, the Commission may adopt, implement, modify, or eliminate a rate adjustment mechanism to enable the company to recover the reasonable and prudently incurred capital investment and associated costs of complying with federal gas pipeline safety requirements, including a return based on the company's then authorized return. Costs incurred for routine maintenance, repair, and replacement of system components shall not be included in a rate adjustment mechanism authorized under this section.The Commission shall adopt, implement, modify, or eliminate a rate adjustment mechanism authorized under this section only upon a finding by the Commission that the mechanism is in the public interest. The Commission may eliminate or modify any rate adjustment mechanism authorized pursuant to this section upon a finding that it is not in the public interest.
(b)	The Commission shall provide for audit and reconciliation procedures, including measures for refunds of any overcollections under the adjustment mechanism with interest pursuant to G.S. 62‑130(e).
(c)	Annual costs recovered under a rate adjustment mechanism authorized under this section shall not exceed four percent (4%) of the total base margin approved by the Commission in the Company's last general rate case. A rate adjustment mechanism authorized under this section shall terminate the earlier of the company's next general rate case or four years after the adoption of the mechanism by the Commission."
SECTION 2.  G.S. 133.12 reads as rewritten:
"§ 62‑133.12.  Rate adjustment mechanism based on investment in repair, improvement, and replacement of water and sewer facilities.
(a)	The Commission may approve a rate adjustment mechanism in a general rate proceeding pursuant to G.S. 62‑133 to allow a water or sewer public utility to recover through a system improvement charge the incremental depreciation expense and capital costs associated with the utility's reasonable and prudently incurred investment in eligible water and sewer system improvement projects. The Commission shall approve a rate adjustment mechanism authorized by this section only upon a finding that the mechanism is in the public interest. The frequency and manner of rate adjustments under the mechanism shall be as prescribed by the Commission. For the purposes of this section, "improvement projects" means unique, temporary endeavors that are beyond the scope of normal operations of the water or sewer utility.
(b)	For purposes of this section, "eligible water system improvement projects" or "eligible sewer system improvement projects" shall include only those improvement projects found necessary by the Commission to enable the water or sewer utility to provide safe, reliable, and efficient service in accordance with applicable water quality and effluent standards.
(c)	For purposes of this section, "eligible water system improvement projects" means:
(1)	In kind replacements of distribution system mains, hydropneumatic storage tanks, valves, utility service lines (including meter boxes and appurtenances), meters, and hydrants.
(2)	Main extensions installed to eliminate dead ends and to implement solutions to regional water supply in order to comply with primary and, upon specific Commission approval, secondary drinking water standards.
(3)	Equipment and infrastructure installed to comply with primary drinking water standards.
(4)	Equipment and infrastructure installed at the direction of the Commission to comply with secondary drinking water standards.
(5)	Facility relocations due to highway construction or relocation projects.
(d)	For the purposes of this section, "eligible sewer system improvement projects" means:
(1)	Collection main extensions installed   to alternative wastewater treatment facilities.
(2)	Improvements necessary to comply with applicable State and federal law and regulations regarding inflow and infiltration to collection system.
(3)	Facility relocations due to highway construction or relocation projects.
(4)	Replacements of collection system duplex pump stations, including pumps, controls, electrical and related equipment.
(e)	The Commission shall provide for audit and reconciliation procedures, including measures for refunds of any over‑collections under the system improvement charge with interest pursuant to G.S. 62‑130(e).
(f)	The Commission may eliminate or modify any rate adjustment mechanism authorized pursuant to this section upon a finding that it is not in the public interest.
(g)	Cumulative system improvement charges for a water or sewer utility pursuant to a rate adjustment mechanism approved by the Commission under this section may not exceed five percent (5%) of the total annual service revenues approved by the Commission in the water or sewer utility's last general rate case."
SECTION 3.  This act is effective July 1, 2015, and applies to rate adjustment mechanism adopted after that date.