1. (a) This section applies to the recalculation of costs described in section 7(2)(B) and 7(2)(C) of this chapter for purposes of an adjustment rider under section 12 of this chapter.

2. (b) Chemical costs described in section 7(2)(B) of this chapter may be recalculated as follows:

   1. (1) If:

      1. (A) at least two (2) years have elapsed since the date of the commission's most recent order adjusting the basic rates and charges of an eligible utility; and

      2. (B) the average actual annual cost of chemicals has increased or decreased by at least three percent (3%) over the course of the two (2) year period described in subdivision (2);

         the eligible utility may submit for the commission's review supporting documentation of the average actual annual cost of chemicals for the two (2) year period described in subdivision (2), as calculated under subdivision (2), along with documentation of how the average annual cost of chemicals over that period differs from the amount currently being collected for chemicals through the eligible utility's rates. However, if the average actual annual cost of chemicals has not changed or has increased or decreased by less than three percent (3%) over the course of the two (2) year period described in subdivision (2), an eligible utility may not seek an adjustment to the eligible utility's recovery of chemical costs under this section.

   2. (2) If the eligible utility has determined that the average actual annual cost of chemicals has increased or decreased by at least three percent (3%) over the course of the two (2) year period described in this subdivision, the eligible utility shall include in its submission under this subsection a calculation of the average actual annual cost of chemicals for the two (2) year period described in this subdivision, along with a comparison of that cost to the amount currently being collected for chemicals through the eligible utility's rates, as follows:

      1. (i) the STEP TWO result; minus
      2. (ii) the amount currently being collected for chemicals through the eligible utility's rates on an annual basis, as authorized in the commission's most recent base rate order for the eligible utility, and adjusted to reflect the change in volume from the volume level authorized in the commission's most recent base rate order. The authorized chemical costs in the commission's most recent base rate order shall be divided by the number of gallons projected to be sold in the commission's most recent base rate order to impute an original cost of chemicals per gallon of water sold per unit cost. This per unit cost shall be multiplied by the projected number of gallons of water to be sold by the eligible utility over the twelve (12) month period of the adjustment rider under section 12 of this chapter to impute an adjusted cost of chemicals from the most recent base rate case.

      STEP ONE: Calculate the actual cost of chemicals during the two (2) year period immediately preceding the date of the eligible utility's submission under this subsection by adding together the actual annual cost of chemicals in each year of the two (2) year period.

      STEP TWO: Calculate the quotient of the STEP ONE amount divided by two (2). This quotient is the average actual annual cost of chemicals for the two (2) years immediately preceding the eligible utility's submission under this subsection.

      STEP THREE: Calculate the difference between:

   3. (3) If the STEP THREE result under subdivision (2) is a positive number, the amount of the STEP THREE result shall be included in the adjustment rider under section 12 of this chapter as an expense in calculating an adjustment to the rider.
   4. (4) If the STEP THREE result under subdivision (2) is a negative number, the amount of the STEP THREE result shall be included in the adjustment rider under section 12 of this chapter as a credit in calculating an adjustment to the rider.

3. (c) Power costs described in section 7(2)(C) of this chapter may be recalculated as follows:

   1. (1) If:

      1. (A) at least two (2) years have elapsed since the date of the commission's most recent order adjusting the basic rates and charges of an eligible utility; and

      2. (B) the average actual annual cost of power has increased or decreased by at least three percent (3%) over the course of the two (2) year period described in subdivision (2);

         the eligible utility may submit for the commission's review supporting documentation of the average actual annual cost of power for the two (2) year period described in subdivision (2), as calculated under subdivision (2), along with documentation of how the average annual cost of power over that period differs from the amount currently being collected for power through the eligible utility's rates. However, if the average actual annual cost of power has not changed or has increased or decreased by less than three percent (3%) over the course of the two (2) year period described in subdivision (2), an eligible utility may not seek an adjustment to the eligible utility's recovery of power costs under this section.

   2. (2) If the eligible utility has determined that the average actual annual cost of power has increased or decreased by at least three percent (3%) over the course of the two (2) year period described in this subdivision, the eligible utility shall include in its submission under this subsection a calculation of the average actual annual cost of power for the two (2) year period described in this subdivision, along with a comparison of that cost to the amount currently being collected for power through the eligible utility's rates, as follows:

      STEP ONE: Calculate the actual cost of power during the two

   3. (2) year period immediately preceding the date of the eligible utility's submission under this subsection by adding together the actual annual cost of power in each year of the two (2) year period.

      1. (i) the STEP TWO result; minus
      2. (ii) the amount currently being collected for power through the eligible utility's rates on an annual basis, as authorized in the commission's most recent base rate order for the eligible utility, and adjusted to reflect the change in volume from the volume level authorized in the commission's most recent base rate order. The authorized power costs in the commission's most recent base rate order shall be divided by the number of gallons projected to be sold in the commission's most recent base rate order to impute an original cost of power per gallon of water sold per unit cost. This per unit cost shall be multiplied by the projected number of gallons of water to be sold by the eligible utility over the twelve (12) month period of the adjustment rider under section 12 of this chapter to impute an adjusted cost of power from the most recent base rate case.

      STEP TWO: Calculate the quotient of the STEP ONE amount divided by two (2). This quotient is the average actual annual cost of power for the two (2) years immediately preceding the eligible utility's submission under this subsection.

      STEP THREE: Calculate the difference between:

   4. (3) If the STEP THREE result under subdivision (2) is a positive number, the amount of the STEP THREE result shall be included in the adjustment rider under section 12 of this chapter as an expense in calculating an adjustment to the rider.
   5. (4) If the STEP THREE result under subdivision (2) is a negative number, the amount of the STEP THREE result shall be included in the adjustment rider under section 12 of this chapter as a credit in calculating an adjustment to the rider.

As added by P.L.127-2026, SEC.6.