PURPOSE: This rule provides parameters and procedures for small water and/or sewer utilities to request a special fund to collect revenue from customers to make improvements necessitated by environmental regulations.

1. (1) For the purposes of this rule only, a water or sewer utility serving eight thousand (8,000) or fewer customers shall be considered a small utility.
2. (2) A small utility, Public Counsel, or commission staff may request establishment of an Environmental Improvement Contingency Fund (EICF) during the course of a rate case, whether filed pursuant to 4 CSR 240-10.075 or section 393.150, RSMo. The commission may establish an EICF if it finds that doing so is in the public interest.

3. (3) Following the request for an EICF, the staff will—

   1. (A) Investigate the small utility’s financial resources and its ability to finance capital improvements;
   2. (B) Conduct a managerial audit to determine the quality of the small utility’s management; and
   3. (C) Conduct a comprehensive review of the necessary improvements at the small utility. AND INSURANCE

4. (4) An EICF may only go into effect if, at the conclusion of the rate case where the small utility, Public Counsel, or commission staff requests an EICF, the commission approves the following items:

   1. (A) A list of necessary improvements.

      1. 1. The list of necessary improvements

may only include those improvements that—

1. A. Are directly related to environmen-

tal, health, or safety rules, regulations, or orders of the commission, the Missouri Department of Natural Resources (DNR), the United States Environmental Protection Agency (EPA), state or federal courts, or other regulatory authority including, but not limited to, federal, state, or local authorities, city ordinances, and the state attorney general; and

1. B. Are reasonably anticipated to be

completed within five (5) years of the effective date of new rates, although, for good cause shown, the commission may consider projects that require longer to complete; and

1. 2. During the rate case, upon request by

the small utility or by direction of the commission, staff will assist the utility in identifying a list of necessary improvements;

1. (B) An estimated amount of funds necessary for the improvements in the list described in subsection (4)(A).

   1. 1. Staff and the small utility will submit

the estimated amount of funds necessary for the improvements, which may include costs for preliminary engineering reports related to those improvements.

1. 2. The percentage of the estimated

amount collectable through an EICF will be based on an analysis of the needs of the small utility and its ability to secure financing through normal debt or equity sources. The commission may give special consideration to requests that do not require full funding of the estimated amount collectible.

1. 3. If a requested EICF includes funds

for a preliminary engineering report, the report must be completed and submitted to the commission prior to the first disbursement from the EICF account; and

1. (C) A schedule for completion of the list of improvements required by subsection (4)(A). Upon request by the small utility or by direction of the commission, staff will assist the small utility in preparing such a schedule.

1. (5) The EICF must be collected as a part of the customer charge on customers’ bills.

   1. (A) Revenues collected must be recorded by the small utility and placed into a commission-approved account specifically segregated from all other utility accounts, for the explicit purpose of regulatory review and tracking.
   2. (B) Funds held in the EICF account shall only be disbursed to pay for projects approved during the rate case as noted in section (4) above.

   3. (C) Disbursements from the EICF account shall only be made after notice to staff and public counsel.

      1. 1. The notice must be sent to staff and

public counsel at least thirty (30) days prior to a disbursement.

1. 2. If any party objects to the proposed

disbursement, detailed objections must be filed in the official case file in which the EICF was approved no later than ten (10) days after receiving the disbursement notice. The commission may then determine whether or not to approve the requested disbursement of the funds.

1. 3. If no timely objection is raised or

staff and public counsel notify the small utility they agree to the disbursement, the small utility may make the disbursement described in its notice no later than the date specified in that notice.

1. 4. The commission will resolve any dis-

pute regarding the proposed disbursements prior to the specified disbursement date.

1. (6) Not later than thirty (30) days following the end of every quarter after receiving commission approval of an EICF, the small utility shall submit documentation to staff and public counsel reporting—

   1. (A) Monthly EICF funds received from customers;
   2. (B) Monthly EICF deposits to the escrow account;
   3. (C) Monthly EICF expenditures; and
   4. (D) End-of-month balance of the EICF account.

2. (7) After an EICF is established, the small utility shall file a subsequent rate request no later than five (5) years after the effective date of the EICF, during which—

   1. (A) Any monies expended from the fund shall be treated as contributions-in-aid-ofconstruction for purposes of setting rates for the small utility. The EICF will be trued-up and will be reviewed to determine if it should—

      1. 1. Remain in effect at the current rate;

or

1. 2. Remain in effect at a different rate; or
2. 3. Be terminated.
3. (B) Any unallocated monies remaining in the fund when it is terminated shall be refunded to the utility’s ratepayers.

1. (8) If, upon review of documentation described in section (6) above, staff, public counsel, or another regulatory authority has indication that the small utility has used EICF funds for any purpose other than as approved by the commission. Staff or the public counsel may, at their discretion, bring a complaint before the commission against the small utility seeking an order from the commission directing the small utility to promptly stop all collection of an EICF, as well as direction from the commission for its general counsel to seek civil penalties against the small utility in circuit court. Nothing in this rule shall prohibit civil or criminal action by any state or federal authority against the small utility for misuse of customer funds.
2. (9) Provisions of this rule may be waived by the commission for good cause shown.

AUTHORITY: sections 386.040, 386.250, 393.140, and 393.270, RSMo 2016.* This rule originally filed as 4 CSR 240-10.095. Original rule filed May 30, 2018, effective Jan. 30, 2019. Moved to 20 CSR 4240- 10.095, effective Aug. 28, 2019.

*Original authority: 386.040, RSMo 1939; 386.250, RSMo 1939, amended 1963, 1967, 1977, 1980, 1987, 1988, 1991, 1993, 1995, 1996; 393.140, RSMo 1939, amended 1949, 1967; and 393.270, RSMo 1939, amended 1967.