System Improvement Charge

Ohio law allows water and sewer public utility companies to collect infrastructure improvement surcharges from customers located in the affected service areas. This type of surcharge is commonly called a system improvement charge (SIC). The Public Utilities Commission of Ohio (PUCO) may authorize a SIC that is just, reasonable and sufficient to cover the costs of qualifying infrastructure plant investments and capital improvements since its last rate case.

The SIC must also allow the utility to obtain a fair and reasonable rate of return on its investments. The SIC rate must be uniform for each affected customer class and cannot exceed an increase of 4.25% for water companies or 3% for sewer companies. The Commission may reduce or terminate a SIC should it cause the utility to earn an excessive rate of return. Further, Ohio law states a water utility may not have more than three SICs in place at any given time.

What are the steps in the SIC process?

1. The PUCO staff performs an investigation of the facts and issues raised in the utility’s application. At the same time, parties to the case may file intervention petitions and begin the evidentiary process.
2. The PUCO attorney examiner dockets an “entry” setting the comment due date.
3. The PUCO staff prepares a report which advises the commissioners of the staff’s recommendations regarding the case. During its investigation, PUCO staff may review plant and financial records, interview utility personnel and review other internal reports.
4. Parties may also file comments for the Commission’s consideration.
5. The Commission may schedule the matter for hearing, where expert witnesses may present testimony.
6. The PUCO attorney examiner assigned to the case reviews the case record, including the transcripts of any hearings, and prepares a recommendation to the commissioners.
7. The five PUCO commissioners review the case record and the attorney examiner’s recommendation and then issue their decision through a “finding and order.”
8. The parties to the case have 30 days after the issuance of the finding and order to file an application for rehearing of the Commission’s opinion and order.
9. Within 30 days of the filing of an application for rehearing, the commissioners must issue an entry or the application for rehearing is automatically denied. When ruling upon an application for rehearing, the Commission may: (a) deny rehearing, (b) grant rehearing and modify the finding and order, or (c) grant rehearing and hold additional hearings then issue an “order on rehearing.”
10. Once the rehearing process is complete, parties may appeal the Commission decision to the Supreme Court of Ohio.

Rate regulation

The basic purpose of utility rate regulation is to balance the needs of the consumer and the utility. Consumers are interested in the lowest possible rates and safe and reliable utility service. The utility is interested in rates which are sufficient to cover the costs of providing utility service and adequate to attract and maintain investment capital. The role of the PUCO in this process is to assure that the needs of the consumer and utility are balanced for the benefit of both. 

PUCO authority and considerations

When considering SIC cases, the PUCO must adhere to laws passed by the state legislature and decisions made by the Supreme Court of Ohio.

The PUCO is authorized by law to consider the following facts and information: 

1. Existing rates
2. Proposed rates
3. Why a company is requesting a rate change
4. An inventory and appraisal of a company’s property used in rendering service

The commissioners cannot make arbitrary judgments. Only changes to Ohio law, made by the state legislature, can mandate changes in what the PUCO can and cannot consider during a SIC case proceeding.