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REGULATORY PROCEEDINGS | 12 Months Ended
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Dec. 31, 2017
REGULATORY PROCEEDINGS [Abstract] |
REGULATORY PROCEEDINGS | NOTE 12 REGULATORY PROCEEDINGS Our water and wastewater utilities generate operating revenue from customers based on rates that are established by state Public Service Commissions through a rate setting process that may include public hearings, evidentiary hearings and the submission of evidence and testimony in support of the requested level of rates by the Company. We are subject to regulation by the following state regulatory commissions: · The Delaware Public Service Commission, or DEPSC, regulates both Artesian Water and Artesian Wastewater. · The Maryland Public Service Commission, or MDPSC, regulates both Artesian Water Maryland and Artesian Wastewater Maryland. · The Pennsylvania Public Utility Commission, or PAPUC, regulates Artesian Water Pennsylvania. Rate Proceedings Our regulated utilities periodically seek rate increases to cover the cost of increased operating expenses, increased financing expenses due to additional investments in utility plant and other costs of doing business. In Delaware, utilities are permitted by law to place rates into effect, under bond, on a temporary basis pending completion of a rate increase proceeding. The first temporary increase may be up to the lesser of $2.5 million on an annual basis or 15% of gross water sales. Should the rate case not be completed within seven months, by law, the utility may put the entire requested rate relief, up to 15% of gross water sales, in effect under bond until a final resolution is ordered and placed into effect. If any such rates are found to be in excess of rates the DEPSC finds to be appropriate, the utility must refund customers the portion found to be in excess with interest. The timing of our rate increase requests are therefore dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase. We can provide no assurances that rate increase requests will be approved by applicable regulatory agencies and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase. On August 18, 2015, the DEPSC made a preliminary ruling in response to Artesian Water's April 2014 application to implement new rates to meet a requested increase in revenue of 15.90%, or approximately $10.0 million, on an annualized basis. The preliminary ruling recommended a permanent rate increase in revenue of approximately $6.0 million, or 9.50%, on an annualized basis, which was an incremental increase for customers of approximately 6.20% above the Distribution System Improvement Charge, or DSIC, rate previously in effect. On October 6, 2015, a DEPSC order was issued concurring with the preliminary ruling issued on August 18, 2015. On January 19, 2016, a final DEPSC order was issued related to the permanent rate increase and concurred with the October 6, 2015 order. Because the permanent rate increase was less than amounts collected under previously approved temporary increases in rates, Artesian Water was required to refund a portion of the temporary rate increases to its customers. The refund, plus interest, at the average prime rate, for the overpayment from customers was applied to current and future customer bills in October 2015. Because the final rate award was at a level not less than the amount previously reported as income, there was no material impact upon previously reported water sales revenue. The new rates are designed to allow recovery of capital investments made by Artesian Water and to cover increased costs of operations, including water quality testing, chemicals and electricity for water treatment, taxes, labor and benefits. On January 16, 2018, the DEPSC approved the opening of Docket No. 17-1240 requiring Delaware utilities to determine the impact that the Tax Cuts and Jobs Act of 2017 (TCJA) had on its customers and potential rate relief due to customers. Delaware utilities are required to report their findings back to the DEPSC by March 31, 2018. The Company expects any reduction in corporate income tax expense resulting from the TCJA will be passed through to customers in the form of reduced tariff rates or approved DSIC rate. Other Proceedings Delaware law permits water utilities to put into effect, on a semi-annual basis, increases related to specific types of distribution system improvements through a Distribution System Improvement Charge, or DSIC. This charge may be implemented by water utilities between general rate increase applications that normally recognize changes in a water utility's overall financial position. The DSIC approval process is less costly when compared to the approval process for general rate increase requests. The DSIC rate applied between base rate filings is capped at 7.50% of the amount billed to customers under otherwise applicable rates and charges, and the DSIC rate increase applied cannot exceed 5.0% within any 12-month period. The following table summarizes (1) Artesian Water's applications with the DEPSC to collect DSIC rates and (2) the rates upon which eligible plant improvements are based:
Application Date |  | 11/26/2014 |  |  | 5/28/2015 |  |  | 11/24/2015 |  |  | 05/31/2016 |  |  | 11/29/2016 |
DEPSC Approval Date |  | 12/16/2014 |  |  | 6/16/2015 |  |  | 12/15/2015 |  |  | 06/28/2016 |  |  | 12/20/2016 |
Effective Date |  | 1/1/2015 |  |  | 7/1/2015 |  |  | 01/01/2016 |  |  | 07/01/2016 |  |  | 01/01/2017 |
Cumulative DSIC Rate |  |  | 0.34 | % |  |  | 1.15 | % |  |  | 1.57 | % |  |  | 2.30 | % |  |  | 4.71 | %
Eligible Plant Improvements – Cumulative Dollars (in millions) |  | $ | 1.3 |  |  | $ | 4.6 |  |  | $ | 7.0 |  |  | $ | 10.3 |  |  | $ | 16.6 |
Eligible Plant Improvements – Installed Beginning Date |  | 10/1/2014 |  |  | 10/1/2014 |  |  | 10/01/2014 |  |  | 10/01/2014 |  |  | 10/01/2014 |
Eligible Plant Improvements – Installed Ending Date |  | 10/31/2014 |  |  | 4/30/2015 |  |  | 10/31/2015 |  |  | 04/30/2016 |  |  | 12/20/16 |
DEPSC has completed audits for all filings for rates effective through 2016 noted in the table above. The rate effective in 2017 noted in the table above is subject to audit at a later date. For the years ended December 31, 2017, December 31, 2016 and December 31, 2015, we earned approximately $3,160,000, $1,306,000 and $520,000 in DSIC revenue, respectively.

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