DECISION  
2022 NSUARB 101  
M10427  
NOVA SCOTIA UTILITY AND REVIEW BOARD  
IN THE MATTER OF THE PUBLIC UTILITIES ACT  
- and -  
IN THE MATTER OF an application by the PUBLIC SERVICE COMMISSION OF  
BRIDGEWATER, on behalf of its WATER UTILITY, for approval to amend its Schedule  
of Rates and Charges for Water and Water Services and its Schedule of Rules and  
Regulations  
BEFORE:  
Stephen T. McGrath, LL.B, Chair  
APPEARING:  
PUBLIC SERVICE COMMISSION OF BRIDGEWATER  
Gerry Isenor, P.Eng.  
G.A. Isenor Consulting Limited  
Blaine Rooney, CPA, CA  
Blaine S. Rooney Consulting Limited  
Tammy Crowder  
Chief Administrative Officer  
Audrey Buchanan, P. Eng.  
Environmental Services Manager  
Kim Hopkins, CPA, CA  
Director of Finance  
Larry Feener, P. Eng.  
Director of Engineering  
HEARING DATE:  
DECISION DATE:  
DECISION:  
May 10, 2022  
June 21, 2022  
The application is approved as amended by the  
Commission.  
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I
SUMMARY  
The Public Service Commission of Bridgewater (Commission) applied to the  
[1]  
Nova Scotia Utility and Review Board, under the Public Utilities Act, R.S.N.S. 1989, c.  
380 (Act), to amend its Schedule of Rates and Charges for Water and Water Services  
(Rates and Charges) and its Schedule of Rules and Regulations (Rules and Regulations).  
The utility’s existing Rates and Charges and Rules and Regulations have been in effect  
since April 1, 2018, and July 1, 2016, respectively.  
[2]  
The Commission presented the application to the Board based upon a need  
to adjust rates because of increased operating costs and to fund an ambitious capital  
program to replace or upgrade existing aging infrastructure. The Commission supported  
its application with a rate study prepared by G. A. Isenor Consulting Limited, in association  
with Blaine S. Rooney Consulting Limited. The rate study was dated January 7, 2022,  
and filed with the Board on January 21, 2022.  
[3]  
In preparing responses to Board staff Information Requests (IRs), the utility  
realized that it had not included upgrades to the Hebb Lake Lift Station and the installation  
of a watermain on Veterans Memorial Bridge (capital projects in 2019/20) in the rate  
study. The Commission’s consultant revised the rate study to include these projects, and  
the Commission adjusted its proposed capital program during the study period to avoid  
significant changes in rates compared to the original rate study. The Board reviewed this  
revised rate study during the public hearing.  
[4]  
The Board held a public hearing by GoToWebinar videoconferencing on  
May 10, 2022, after due public notice. Gerry Isenor, P.Eng., of G. A. Isenor Consulting  
Limited, and Blaine Rooney, CPA, CA, of Blaine S. Rooney Consulting Limited,  
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represented the Commission. The following municipal staff joined them: Tammy  
Crowder, Chief Administrative Officer; Audrey Buchanan, P. Eng., Environmental  
Services Manager; Kim Hopkins, CPA, CA, Director of Finance; and Larry Feener,  
P. Eng., Director of Engineering. There were no formal intervenors in the proceeding and  
there were no letters of comment or requests to speak at the hearing.  
[5]  
During the public hearing, the Board requested other information and  
clarifications and the Commission identified corrections to the operating fund balance  
sheet and worksheet C-2 in the rate study. The utility filed the additional information and  
corrections as undertakings.  
[6]  
In response to undertaking U-4, which asked for more information about a  
Service Boundary Review/Update noted in the depreciation worksheets in the rate study,  
the Commission determined information used in the budgets to prepare the study had  
changed. The Commission did not undertake the Boundary Review/Update Study in  
2021/22 as planned, and Hebb Lake Lift Station project costs had increased. The utility  
decided to defer the Boundary Review/Update Study and use that funding for part of the  
increased cost of the Hebb Lake Lift Station project. The Commission will fund the  
balance of that project from borrowing and its depreciation fund. As a result, the  
undertaking response included another revised rate study, which the Commission filed  
with the Board on May 13, 2022. Unless indicated otherwise, references to the rate study  
in this decision are to the revised study the Commission filed with its undertaking  
responses.  
[7]  
The application proposes rate increases for the fiscal years 2022/23,  
2023/24 and 2024/25 (Test Years). The proposed average increases for 5/8” metered  
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customers are 3.9%, 2.2%, and 3.3%, respectively, in each of the three Test Years. For  
all other metered customers, except for the utility’s largest customer, the proposed  
increases range from 5.3% to 7.3% in 2022/23, -3.0% to 0.9% in 2023/24, and 0.9% to  
2.9% in 2024/25.  
[8]  
The utility currently has a two-block rate structure, but the second lower-  
rate block only applies to its largest customer, the Michelin Tire Manufacturing Plant  
(Michelin). This is because the volume of water consumed by Michelin exceeds the  
consumption limit for the first block. In this application, the Commission proposes  
increases to the consumption limits for the first block, which results in larger increases in  
water rates for Michelin: 14.9% in 2022/23, 11.1% in 2023/24, and 10.4% in 2024/25.  
[9]  
The Commission proposed to set the annual public fire protection charge at  
$931,479 in 2022/23, $1,048,238 in 2023/24, and $1,141,672 in 2024/25. The proposed  
charge is blended with the existing charge in the first year to account for service for part  
of the year under the former charge.  
[10]  
The Commission updated other charges to align them with actual costs for  
services. The utility revised its Rules and Regulations to align them with similar  
regulations for other water utilities in Nova Scotia.  
[11]  
The Board approves the rate increases proposed in the revised rate study  
the Commission filed with its undertaking responses, subject to small errors in Schedule  
B, which the utility corrected and filed with the Board on June 3, 2022, and Schedule A,  
which the utility corrected and refiled with the Board on June 13, 2022. The Board  
approves the Rules and Regulations, as requested by the Commission.  
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II  
INTRODUCTION  
The Commission has a surface water source of supply from three  
[12]  
interconnected lakes: Hebb Lake, Minamkeak Lake and Leipsigate Lake. The  
Commission owns and operates dam structures on the three lakes. An intake pipe at  
Hebb Lake draws in raw water which the system pumps to a water treatment plant  
commissioned in 2002. The system then pumps treated water into two transmission  
mains. One main provides water to the south end of the Town of Bridgewater (Town),  
with the other serving the north end of the Town, including the Industrial Park. The utility  
also serves parts of the Municipality of the District of Lunenburg (Municipality).  
[13]  
The Commission has two storage reservoirs, each with a capacity of one  
million gallons. There are 94 km of transmission and distribution mains that serve the  
Town and the Municipality, ranging in size from 6” to 16” diameter. In addition to the  
gravity fed zone at its water treatment plant, there are currently three boosted zones in  
the system to serve the higher areas of the Town and the nearby areas in the Municipality.  
[14]  
Since the Commission’s last rate application in 2016, it has replaced or  
added several watermains. There have also been upgrades to the Hebb Lake  
infrastructure as well as the water treatment plant and distribution system. The  
Commission completed several studies, including a dam evaluation study, water  
treatment plant study, a watermain update to the Commission’s master plan for Exit 12,  
and a water quality monitoring assessment.  
[15]  
About 35% of the water treated by the utility does not generate revenue.  
This non-revenue water includes water used for maintenance of water quality, fire  
protection, and hydrant flushing, and water lost through leakage. The utility has  
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implemented a more robust leak detection program since the last rate study. Advanced  
Metering Infrastructure (AMI) meters make up approximately 50% of the meters in the  
system and the Commission expects investments in replacing aging infrastructure and  
meters over the Test Years to reduce water leakage in the system.  
[16]  
The Commission currently serves 3,057 metered service connections, with  
a projected annual increase of 13 customers over the Test Years. Michelin is the largest  
customer and consumes approximately 30% of the water sold. It is the only customer on  
the system able to take advantage of the utility’s two-block rate structure. The  
Commission decided to phase out the two-block structure over time to limit the effect of  
the cost increases. The utility estimates it will take six years to phase out and eliminating  
it will require block size adjustments in future rate hearings.  
[17]  
The average consumption for a 5/8” meter residential customer is currently  
172 cubic meters based on 2021 data. The rate study assumes a decrease of 0.5% in  
consumption per year for the average residential customer. This is based on the phasing  
in of a sewer charge that is based on water consumption starting April 2022. Other areas  
that have implemented a similar sewer charge saw a conservation effect on water usage.  
III  
REVENUE REQUIREMENTS  
(A)  
[18]  
Non-revenue Water  
The Commission explained that they use a spreadsheet provided by the  
American Water Works Association to estimate non-revenue water and it ranks the results  
against other utilities. The utility enters data into the spreadsheet, which calculates the  
amount of non-revenue water and generates a score in comparison to similar sized  
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utilities. The Commission noted that for smaller sized utilities, like Bridgewater, the tool  
is not as accurate. The tool calculates the non-revenue water to be 35%, which is high.  
[19]  
Since its last rate case, the Commission has taken several steps to  
minimize non-revenue water. It brought in experts to identify areas for improvement. It  
conducts water loss audits and undertakes leak detection activities more often. The utility  
has been changing out older water meters, and this is an area it will continue to focus on.  
Additionally, the utility said it has oversized meters on the system and it intends to replace  
those with smaller meters it believes will perform better. The utility also said it tries to be  
proactive in dealing with service lateral leaks and works with the residential customers to  
address these leaks promptly. The Commission also noted that it watches the Michelin  
flow meters almost daily and it sends notifications if consumption increases in case there  
is a leak.  
[20]  
The utility’s capital budget includes an ongoing meter replacement program,  
replacement of outdated equipment and software, the installation of a meter chamber at  
the Dufferin Reservoir to monitor flows into and out of the reservoir, and the installation  
of two district metered areas at two booster stations. The operating budget includes  
funding to provide staff resources to complete annual leak detection throughout the  
distribution system along with funds to repair any leaks found.  
Findings  
[21]  
Although the non-revenue water percentage is the same as it was when the  
Commission last applied for rates in 2016, the Board is satisfied the utility understands  
the importance of tracking and minimizing non-revenue water and finds it has made  
several significant improvements since the last rate study. The utility has implemented  
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programs and has a robust capital spending budget to achieve water loss reductions.  
The Board finds this approach to be reasonable and encourages the utility to continue  
with its efforts in this area.  
(B)  
[22]  
Operating Expenditures  
The Commission’s financial information for the year ended March 31, 2021,  
included in the application, indicated that its expenses exceeded its revenues by $4,241  
with an accumulated surplus of $1,327,395. Without a rate adjustment, however, the  
utility expects a revenue deficiency of $709,339 in the final Test Year, and an  
accumulated deficit of $571,454 at the end of 2024/25.  
[23]  
In response to IRs, the utility described its operating budget process, which  
involves a review of the previous seven years and considers the current year’s operating  
budget. The utility applies an assumed inflation rate, increases or decreases to the  
previous year’s budget, and identifies any out of the ordinary expenditures. The rate  
study projects a 3% increase in each of the Test Years for the operating expense items.  
[24]  
The utility also described how it splits costs with the Town. They share the  
costs for salaried employees based on an estimated percentage of time working and use  
actual time for hourly employees. The Commission’s representatives at the hearing were  
not able to explain how or when the percentage allocations for salaried employees were  
derived. These percentages are also applied to split other costs for things like phones,  
internet, computers and human resources costs. Costs that are only for the utility, such  
as treatment plant vehicles, are directly assigned 100% to the utility. It does not appear  
that the utility is allocated costs for its use of shared office space.  
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[25]  
In response to IR-19, the Commission provided operating costs for the year  
2020/21 for comparison to the costs estimated in the rate study. Some operating and  
maintenance (O&M) categories had some jumps from the fiscal year 2020/21 data. Most  
differences were due to COVID-19 restrictions that reduced spending due to some  
deferral of normal maintenance. Lifting those restrictions results in an increase in  
spending by comparison. Supply chain issues and a collective agreement salary increase  
resulted in cost increases over most categories. The 25% increase in Source of Supply  
also included costs for watershed testing and algal bloom assessments.  
[26]  
The water treatment expense is increasing as the water treatment facility  
has reached the age where it requires major capital upgrades. The utility fully assessed  
the equipment inside the plant and included needed upgrades in its long-term capital  
budget. The utility will undertake the proposed capital upgrades over the next several  
years and until then, the Commission predicts that some equipment failures will result in  
increasing O&M costs.  
[27]  
The depreciation expense projected in each of the Test Years is based upon  
the depreciation associated with capital additions as set out in the Water Utility  
Accounting and Reporting Handbook (Accounting Handbook). In response to IR-28, the  
utility noted that it has developed depreciation rates for proposed capital expenditures not  
addressed in the Accounting Handbook. In these cases, the Commission based the rates  
on the estimated useful life of the capital work.  
[28]  
The utility is paying down a significant amount of debt in the first Test Year  
and has asked for a one year deferral of the depreciation expense for the $2,940,000  
distribution piping project in 2022/23. The annual depreciation expense is approximately  
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$39,000. The deferral is for rate design purposes to balance the rate of increase for the  
residential customers.  
[29]  
At the hearing, the Board asked the utility about the risk of algal blooms as  
other areas in the Atlantic region have experienced impacts to their treatment plants. The  
utility has not had algal bloom issues to date. The utility completed a study to proactively  
assess the risk posed by algal blooms and noted its water treatment plant was not  
designed to deal with that issue. The Commission did not increase its budget to address  
algal blooms but will review mitigation measures during the design phase of the water  
treatment plant upgrades.  
[30]  
The utility explained that the Hebb Lake Dam is the major dam in its system.  
The Hebb Lake Dam is a rock-filled dam that has a concrete structure and spillway. In  
Undertaking U-2, the Board asked the utility to provide a 2019 dam study completed by  
Hatch Ltd. The utility commissioned this study to ensure that the dams in the system  
were following the Canadian Dam Association’s Dam Safety Guidelines. The study did  
not identify any immediate concerns. There were several recommendations, mostly  
requiring monitoring of areas of potential concern. The utility advised that there is ongoing  
monitoring and management, and it has incorporated these practices in its operations  
manual. There have been no archaeological reconnaissance studies done in the vicinity  
of the dams or related structures. The 2019 study noted that the next Dam Safety  
Assessment should be in 2026 according to Canadian Dam Association  
recommendations.  
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Findings  
The operating expenses over the Test Years are generally based upon an  
[31]  
annual increase of approximately 3%, and the utility explained the reasons for the items  
that differed from the 3% annual increase. The Board accepts the operating and  
depreciation expenses projected by the utility for the Test Years.  
[32]  
$39,000 on the distribution piping project for one year for the purpose of rate design.  
[33] Included in the operating expenses are leak detection costs to aid in  
The Board approves the deferral of the annual depreciation payment of  
reducing the utility’s amount of non-revenue water. The Board sees this as an important  
initiative, given the cost of the amount of water that appears to be lost in the system. The  
Board notes the improvements that the utility has made since the last rate study and the  
plan to continue to improve the situation.  
[34]  
The Board encourages the utility to continue to review the costs shared  
between the Town and the utility at regular intervals to ensure that the utility’s expenses  
are properly allocated. The Board directs the Commission to review these allocations  
before its next general rate application, and to provide the Board with the results of this  
review with its rate application.  
[35]  
The Board encourages the utility to consider an archaeological study in the  
vicinity of its dams and related structures as other utilities have incurred significant  
archaeological related spending overruns and issues during recent dam upgrade projects.  
(C)  
[36]  
Capital Budget and Funding  
The Commission described its capital budget process in response to IR-17.  
The utility keeps a list of upcoming capital projects for at least the next three years. Items  
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are added and removed, prioritized and allocated in the appropriate year as required.  
Budgets are based on estimates prepared by consultants or the Town’s Engineering  
Department on behalf of the Commission. The budget is then sent to the Commission for  
approval.  
[37]  
When it filed its application, the utility projected capital additions in 2021/22  
totaling $1,420,397. The utility’s capital budget in each of the Test Years is $5,823,200,  
$4,849,000, and $2,456,000, respectively. The table below summarizes the capital  
projects and proposed funding.  
[38]  
In response to IR-29, the utility supplied details of its major budgeted capital  
expenses and funding. Projects the utility had started that were previously approved by  
the Board are the Hebb Lake Lift Station project and a watermain installation on Veterans  
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Memorial Bridge. The Board approved replacement of the Hebb Lake Lift Station on May  
26, 2020 (M09714) for $1,800,000. That facility was originally built in the 1970’s. It was  
retrofitted 20 years ago but required replacement. The Board also approved the Veterans  
Memorial Bridge watermain installation on April 29, 2019, (M09162) for $850,000 to  
replace a failed watermain that served the east side of the Town.  
[39]  
On May 17, 2021, the Board approved $709,000 for water treatment plant  
upgrades, scheduled to have begun in 2021/22 (M10081). The water treatment plant has  
reached the age where it requires major capital upgrades. The Commission fully  
assessed the equipment inside the plant and included the needed upgrades in its long-  
term capital budget. These projects will take place over the next several years and bring  
the plant up to current standards. The utility deferred this work to 2023/24 for other higher  
priority projects and explained that the utility is not at immediate risk despite delaying the  
needed upgrades.  
[40]  
The utility explained that the distribution reservoirs and standpipes project  
costs of $2,905,000 include the contribution of a new asset, a water tower at Exit 12, from  
the Municipality. The Municipality will construct and fund the tower, and the utility will  
take it over when it is completed in 2023/24. The tower will service utility customers in  
the Municipality.  
[41]  
The multi-year meter replacement project is for the purchase and  
replacement of water meters to improve measurement accuracy, which should aid in  
reducing the amount of water recorded as lost in the system. The utility estimates that  
approximately 50% of the meters in the system are AMI meters.  
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[42]  
The Energy Management Program includes LED light replacement, heat  
pump installation and solar photovoltaic (PV) installations for electric generation at  
several locations. The Board requested an undertaking from the utility to show the  
economic benefits of the projects for ratepayers. The Commission filed the Town of  
Bridgewater Energy Management Plan 2021–2025, which outlines a plan for a 34%  
reduction in greenhouse gas emissions (GHG) by 2025 and requires approximately  
$2 million in capital investment. Future energy consumption reductions are expected  
through ongoing efficiency improvements and the generation of renewable energy.  
[43]  
The Commission’s water treatment plant and lift stations produce  
approximately 15% of the total emissions from the facilities and infrastructure included in  
the plan. The Energy Management Program lists the capital projects included in the  
utility’s current rate study in Appendix B: Energy Management Opportunities. The LED  
and heat pump capital projects have a payback period of approximately 5 years and the  
solar PV installations have a payback between 15 and 24 years. The utility explained  
that the benefits of these projects are a reduction in overall energy costs and GHG  
emissions.  
[44]  
The utility confirmed that the deferral or reduction of the capital projects  
made to incorporate the Hebb Lake Lift Station and the Watermain on Veterans Memorial  
Bridge projects was of no immediate risk to the utility.  
[45]  
The proposed funding for the utility’s capital budget in the Test Years is  
through external funds, depreciation and new long-term borrowing. The external funding  
is from a combination of the Nova Scotia Provincial Government, the Town, and the  
Municipality.  
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[46]  
With the corrections made in the IRs and undertaking responses, based on  
the projected expenses and funding, the utility expects the balance of its depreciation  
fund to be $232,317 at the end of the Test Period. The utility described the projected  
depreciation fund balance as adequate. The Commission said it was using the fund to  
address its aging infrastructure and noted that the annual depreciation expense in the  
final Test Year will contribute $870,711 to its depreciation fund. The utility has a robust  
capital program and is using almost all its annual contribution to fund, in part, its capital  
plan.  
Findings  
[47]  
The Board has considered the proposed capital projects included in the rate  
study and associated funding. The Board finds the proposed capital budget to be  
reasonable and necessary for the replacement of aging infrastructure and energy  
management.  
[48]  
The Board notes the long payback period of the solar PV installations.  
While the Board commends the Town and the Commission for considering GHG emission  
reduction initiatives, for the utility to use ratepayer funds for such purposes, the utility must  
show that the initiatives are related to the provision of a water service under the Public  
Utilities Act and that they have a beneficial impact on rates. Appendix B in the Town’s  
Energy Management Plan included energy cost savings for each project but did not  
include details for the cost savings calculations. The Board is satisfied that the installation  
of LED lighting and heat pumps in water utility infrastructure to reduce energy costs in  
those facilities could be reasonable investments. Given the relatively modest cost and  
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quick payback period reflected in the Energy Management Plan, the Board has no  
concerns with these investments.  
[49]  
However, the addition of solar PV generating assets does raise some  
concerns. The Commission’s capital plan includes two such projects over the Test Years:  
a $58,000 solar PV installation at the utility’s Hebb Lake Lift Station in 2023/24, and a  
$170,000 solar PV installation at the utility’s Dufferin Street Booster Station in 2024/25.  
The Energy Management Plan estimates annual energy cost savings of approximately  
$14,000 from these projects. It is not clear that the Commission reduced its electricity  
costs in the rate study to account for these savings, although the Board notes that most  
of the annual energy savings is attributable to the Dufferin Street project which the utility  
plans to construct in the final Test Year. The first full year of energy savings would,  
therefore, be after the period covered by the rate study.  
[50]  
If the Commission is fully using the energy savings to offset the operating  
costs of its water system and there is an overall economic benefit to ratepayers, the water  
utility’s investment in solar PV generation may be prudent. The analysis in Appendix B  
of the Energy Management Plan suggests that the payback period for these projects is  
15 or 16 years, based upon a simple calculation of the annual energy savings against the  
cost of the solar PV system. However, an assessment of the economic benefit to  
ratepayers should also consider how constructing the project and adding it to the utility’s  
rate base affects customer rates. While the annual energy savings would reduce the  
utility’s revenue requirement, this is offset by depreciation, debt, and operating costs.  
[51]  
The rate study proposes to depreciate the solar PV assets over 25 years,  
resulting in an annual depreciation expense of approximately $9,000 (approximately 65%  
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of the annual energy savings). It is possible, but not clear from the evidence in this  
proceeding, that these projects may result in an overall benefit for ratepayers. At this  
stage, the Board is satisfied that no adjustments to the proposed rates relating to these  
proposed investments is necessary.  
[52]  
The cost of these solar PV systems is below the $250,000 threshold  
requiring Board approval under the Public Utilities Act. If the Commission decides to  
proceed with these projects, the Board will, at the utility’s next general rate application,  
require the Commission to demonstrate their overall economic benefit to ratepayers. If  
the utility is not able to do so, the Board may disallow those costs in future rate studies.  
[53]  
The utility projects a need for new borrowing for capital project funding in  
the Test Years. The utility confirmed that the external funding sources have been  
committed. With the proposed use of depreciation funding, the utility’s projected  
depreciation fund balance at the end of the Test Period appears reasonable. The Board  
accepts the proposed funding of the utility’s capital budget.  
[54]  
The Board reminds the utility that the inclusion of proposed capital projects  
in the rate study is not Board approval of these projects. The Commission needs separate  
Board approval for projects exceeding $250,000, as set out in s. 35 of the Public Utilities  
Act.  
(D)  
[55]  
Non-Operating/Other Revenue and Expenditures  
The utility’s projected revenue requirements for the Test Years include  
estimated non-operating and other revenues and expenditures.  
[56] The Commission projects revenue from the bulk sale of water to be $38,800  
in 2022/23, $41,800 in 2023/24 and $44,300 in 2024/25. Based upon the projections in  
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the application, and the corrections made in response to the IRs and the undertakings,  
the proposed bulk water rate per cubic meter of water sold are $3.41, $3.58, and $3.79,  
respectively, in each of the Test Years.  
[57]  
The Commission identifies other annual operating revenue in each of the  
Test Years in the rate study for sprinkler service ($17,950), private hydrants ($7,800), and  
other ($18,500) charged annually. The Commission explained that the amount identified  
as “other” relates to revenue from the utility’s special service charges as well as other  
connection fees. The Commission projects non-operating revenue in each of the Test  
Years in annual amounts of $15,000 for interest and other income, $500 for jobs and  
contract work, and a $10,000 HST offset.  
[58]  
The non-operating expenses include current debt payments in each of the  
Test Years, and new debt payments associated with funding the capital budgets in the  
Test Years. The utility projects that its debt charge, including principal and interest, to be  
$562,955 in 2022/23, $534,778 in 2023/24 and $689,070 in 2024/25.  
[59]  
The utility calculates its return on rate base using its non-operating  
expenditures less non-operating and other revenue. Using the assumptions and  
projections in the rate study, and the corrections in response to the IRs and undertakings,  
the rate of return on rate base is calcuted as 1.76% in 2022/23, 1.70% in 2023/24, and  
2.16% in 2024/25. The utility explained that the magnitude of the calculated rate of return  
on rate base over the Test Period is relatively low and is related to the utility’s relatively  
low level of debt in relation to its rate base.  
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Findings  
The Board finds the utility’s other operating revenues over the Test Period  
[60]  
to be reasonable and accepts them as presented in the rate study. The Board further  
accepts the proposed new bulk water rates.  
[61]  
The Board also accepts the non-operating expenditures in the Test Period,  
related to the existing debt, as set out in response to the undertakings. The Board notes  
that the annual debt expenses are increasing during the Test Years but that is due to the  
robust capital expenditure profile.  
[62]  
The Board further finds the utility’s proposed return on rate base over the  
Test Years to be reasonable.  
IV  
REVENUE REQUIREMENT ALLOCATION  
Public Fire Protection  
(E)  
[63]  
The utility divides the total public fire protection charge between the Town  
and the Municipality based on the number of hydrants serving each jurisdiction. The rate  
study calculates the public fire protection charge using a method that is consistent with  
the Commission’s last rate application, including the allocation of the water treatment  
plant as 85% to general service and 15% to fire protection, due to the ability to use the  
storage reservoir for fire protection. This allocation differs from the 90% to general service  
and 10% to fire protection set out in the Accounting Handbook. The remaining allocations  
are consistent with the Accounting Handbook.  
[64]  
The rate study calculated the allocation of the utility plant in service to public  
fire protection as 36.4%, 37.9% and 38.2%, respectively, in each of the Test Years. Using  
the methodology set out in the Accounting Handbook, the projected annual fire protection  
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charge in the application increases from the current level of $843,780 to $960,712,  
$1,048,238, and $1,141,672, respectively, in each of the Test Years.  
Findings  
[65]  
The allocations of utility plant in service to fire protection are consistent with  
those set out in the Accounting Handbook except for the water treatment plant. The utility  
explained that the higher allocation used in the rate study is due to the availability of  
storage for fire protection, which the Board finds to be reasonable. The Board accepts  
the public fire protection charge as presented in the application.  
(F)  
[66]  
Customer Revenue Requirement  
After distributing part of the utility’s revenue requirement to charges for fire  
protection, collected from the Town and the Municipality, the utility assigns its remaining  
revenue requirement for recovery from the utility’s customers.  
[67]  
The method used in the rate study to distribute the rest of the revenue  
requirement to the various components of customer rates is generally the same as in the  
Accounting Handbook, except for administration and general expenses, and depreciation.  
The Accounting Handbook distributes 10% of administration and general expenses to  
customer charges and 90% to base charges, while the application allocates 10% to  
customer, 40% to base and 50% to delivery charges, consistent with the utility’s rate study  
in its previous general rate application. The Accounting Handbook allocates 40% of the  
depreciation expenses to base charges, 30% to delivery and 30% to production, while the  
utility allocates these expenses entirely to the base charge, consistent with the previous  
study.  
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[68]  
The utility explained that it proposed the deviations from the Accounting  
Handbook for rate design purposes to help stabilize rates while phasing out the two-block  
rate structure. Mr. Isenor explained that with these allocations, approximately 35% of the  
utility’s revenue will come from base charges, and the higher allocation to commodity  
charges will aid in water conservation. At the hearing, Mr. Isenor said these allocations  
should be reviewed for the next rate study because they are different than would normally  
be carried. The Commission did not review these allocations in this application as its  
priority was on addressing the two-block rate structure.  
[69]  
The utility currently has 3,057 metered service connections, and projects  
annual increases of 13 connections each Test Year. Mr. Isenor said at the hearing that  
average customer growth over the past few years was 10 per year. The Town is  
experiencing significant development, but the Commission is projecting growth  
conservatively to avoid overstating future revenue. The application is based upon an  
annual decrease in residential consumption of 0.5% based on the new consumption-  
based sewer charge, which the Commission estimates will lead to overall water  
conservation.  
[70]  
The application proposes to continue using the two-block consumption  
structure, but the Commission intends to phase it out over time. The utility proposes to  
amend the first block of consumption from the first 100,000 cubic meters per year to the  
first 110,000 in 2022/23, 155,000 in 2023/24 and 195,000 in 2024/25. This will result in  
Michelin water cost increases of 14.9% in 2022/23, 11.1% in 2023/24 and 10.4% in  
2024/25. The utility notes that Michelin is aware of the increase and has decreased  
consumption in recent years.  
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Findings  
The Board accepts the method used by the utility to distribute expenses to  
[71]  
base, customer, delivery, and production charges, which is consistent with the last rate  
application. An anticipated decrease in residential consumption is included in the  
determination of rates, consistent with the experience of many other water utilities that  
have implemented a consumption-based sewer charge.  
[72]  
Most regulated water utilities in the province have a single-block rate  
structure. However, given the utility’s situation of having one customer that accounts for  
a sizable part of its water sales, the Board accepts the retention of the two-block rate  
structure for the time being. The Board directs the utility to review the retention of the  
two-block consumption rate structure in its next rate application.  
[73]  
The Board accepts the utility’s explanation for deviating from the suggested  
allocations in the Accounting Handbook to mitigate risk by providing revenue stability.  
The Board directs the utility to review the administration and general expenses and  
depreciation allocations as part of its next rate application.  
V
SCHEDULE OF RATES AND CHARGES  
[74]  
The utility proposed amendments to its Rates and Charges, other than the  
rates charged to its customers and the fire protection charge, discussed above. The  
utility’s response to IR-40 outlined these proposed revisions.  
[75]  
The application proposes to increase the rates charged for re-establishing  
water service, disconnection fees, special service charges and charges for missed  
appointments. The utility proposes an added charge for the collection of overdue bills as  
the utility incurs additional staff time to collect past due payments.  
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[76]  
The utility explained that the amendments and additions are to reflect the  
utility’s cost of providing the service and that the charges are in line with those of other  
water utilities in the province.  
[77]  
In response to undertaking U-9 the utility filed a revised version of Schedule  
A, providing for the prorating of the fire protection charge assuming new rates would be  
in effect as of July 1, 2022.  
[78]  
The utility filed updated Schedules A, B, and C as part of its response to the  
undertakings. It later corrected typographical errors in Schedule B, which was refiled on  
June 3, 2022, and Schedule A, which was refiled on June 13, 2022.  
Findings  
[79]  
The Board finds the proposed changes to the utility’s miscellaneous  
charges, based upon the cost to supply the service, to be reasonable and accepts them  
as proposed.  
[80]  
The Board accepts and approves Schedules A, B, and C, as filed in  
response to the undertakings, with the later corrections.  
VI  
SCHEDULE OF RULES AND REGULATIONS  
[81]  
In response to IR-47, the utility listed the proposed amendments to its Rules  
and Regulations. The main reason for the proposed revisions is to update the  
Regulations to make them comparable to other water utilities in the province, update  
charges to cover the cost of service, and give the utility better control over the system.  
[82]  
The Commission proposed several changes and additions to the Rules and  
Regulations to address issues arising from the recent increase in large developments and  
land lease community developments. The Commission added Regulation 14, Master  
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Meter, to give the property owner of these larger developments more information on the  
water losses within their systems with the goal for them to address and repair losses more  
efficiently. If there is a shortfall in water consumption between the master meter and the  
individual meters the utility would distribute the charges for the water passing through the  
master meter amongst all the users on the private system.  
[83]  
The utility has been receiving frequent requests for temporary, seasonal  
and construction water to properties. The setups are extending longer than expected and  
resulting in system leaks and breaks when used through the winter months. The  
Commission added Regulation 27, Pipe Installations, in the hopes of limiting these  
requests and resulting repairs.  
[84]  
New developments require fire hydrant flow testing, and the utility must  
monitor these tests, which results in hours of technician and administration time to  
complete. The Commission is adding Regulation 37, Fire Hydrant Testing, to cover the  
costs associated with administering these tests.  
[85]  
The Commission added Regulation 29, Theft of Service, to ensure  
customers cover the expenses for investigations, administration, and engineering time to  
resolve theft issues. There have been two cases of water theft since the last rate study.  
[86]  
The Commission added Regulation 42, Water Conservation Directive, to  
allow the utility the ability to enforce water conservation directives during periods of  
drought or while working on a source of supply. There have not been any utility wide  
conservation directives, but over the last three years the Commission asked certain  
service areas or industrial customers that have larger water requirements at peak water  
demand times of the year to reduce their consumption.  
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[87]  
The Commission added Regulation 43, Curb Stop/Control Valve Service  
Box, to charge the customer for the recovery of buried curb stop control valve service  
boxes. Some are difficult to access and often require repair due to landscaping and  
damage over the years.  
[88]  
The utility filed undertakings U-6, U-7, U-8 identifying the similar regulations  
used in the Halifax Water Regulations.  
Findings  
[89]  
The Board finds that the proposed amendments to the Rules and  
Regulations are reasonable and consistent with other water utilities in the province. The  
Board approves the Rules and Regulations, as filed in response to the IRs, with an  
effective date of July 1, 2022.  
VII  
CONTINGENCY PLANNING  
[90]  
In response to IR-66, the Commission provided general information on its  
efforts related to contingency planning and emergency preparedness for the utility. It  
stated that as a part of the utility’s license and permit from Nova Scotia Environment, it  
must have an operational plan that includes a review of risks and strategies to mitigate  
risk to the utility and its water supply. The Commission noted that it reviews its operations  
manual, including contingency plans and emergency response plans, on an annual basis.  
[91]  
The Board reminds the utility of the importance of maintaining and updating  
its contingency and emergency preparedness strategies and associated communication  
plans.  
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VIII CONCLUSION  
[92] The Board approves the Rates and Charges, including the public fire  
protection charge, effective July 1, 2022, April 1, 2023, and April 1, 2024, as shown in  
Schedules A, B, and C, as received by the Board in response to the undertakings and  
later corrected.  
[93]  
shown in Schedule D, as filed in response to the undertakings.  
[94] When it files its next general rate application, the Board directs the  
The Board approves the Rules and Regulations, effective July 1, 2022, as  
Commission to include the following:  
a review of how costs relating to the use of shared assets and services is allocated  
between the Town and the utility;  
justification for the inclusion of any costs relating to solar PV installation in the  
utility’s revenue requirement in the new rate study;  
a review of the extent to which the utility is keeping its two-block rate structure; and  
a review of the allocation of administration and general and depreciation expenses  
to rates.  
[95]  
An Order will issue accordingly.  
DATED at Halifax, Nova Scotia, this 21st day of June, 2022.  
______________________________  
Stephen T. McGrath  
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