NARUC Staff Committee on Accounting and Finance October 10, 2007. Commodity Cost Adjustment Clauses Steve L. Klick Manager-Rates and Regulation Pennsylvania American Water. Facts at a Glance. Wholly-owned subsidiary of American Water Works Company, Inc.
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NARUC Staff Committee on Accounting and FinanceOctober 10, 2007
Commodity Cost Adjustment Clauses
Steve L. KlickManager-Rates and RegulationPennsylvania American Water
Rate mechanisms to pass-through periodically increases or decreases in the per unit cost of producing water
Not a pass through of the cost of increased units of the commodity. For example, increases in greater sales of water requiring greater power, chemicals or sludge hauling.
Not a pass through of increases in commodity costs because of growth.
Not a pass through of commodity costs if the water company is earning in excess of its last allowed rate of return.
Not a pass through of Administrative and General Costs (A&G) or affiliate charges
Source: 2005 NAWC F&O Statistics
Rating Agencies (S&P, Moody's, Fitch)
Purchased Water and Power Rates are typically set by the same utility commission that regulates the water company
Chemicals, Sludge Hauling and Property Taxes
Pass through only a portion (85%/15%) to provide incentive to challenge costs. (NY PSC and property taxes)