As used in this chapter, unless the context requires a different meaning: “EIRE” means eligible infrastructure replacement and enhancement. “EIRE plan” means a plan filed by a utility that identifies proposed eligible infrastructure projects and an EIRE rider. “EIRE rider” means a recovery mechanism that will allow for recovery of the eligible infrastructure costs, through a separate mechanism from the customer rates established in a rate case using the cost of service methodology set forth in § 56-235.2. “Eligible infrastructure” means water utility projects or wastewater utility projects that maintain or enhance safety, reliability, or efficiency or that facilitate compliance with state or federal environmental requirements. Eligible infrastructure does not include (i) the investment in water utility or wastewater utility infrastructure included in the utility’s rate base in its most recent rate case or (ii) projects designed primarily to serve new customers and increase revenues. “Eligible infrastructure costs” includes the following:
1. Return on investment. In calculating the return on investment, the Commission shall use the utility’s regulatory capital structure as calculated utilizing the weighted average cost of capital, including the cost of debt and the cost of equity used in determining the utility’s base rates in effect during the construction period of the water or wastewater utility project. If the utility’s cost of capital has not been changed by order of the Commission within the preceding five years, the Commission may require the utility to file an updated weighted average cost of capital, and the utility may propose an updated weighted average cost of capital. The utility may recover the external costs associated with establishing its updated weighted average cost of capital through the EIRE rider. Such external costs shall include legal costs and consultant costs;
2. A revenue conversion factor, which factor, including income taxes and an allowance for bad debt expense, shall be applied to the required operating income resulting from the eligible infrastructure costs;
3. Depreciation. In calculating depreciation, the Commission shall use the utility’s current depreciation rates specific to the applicable asset;
5. Carrying costs on the over-recovery or under-recovery of the eligible infrastructure costs. In calculating the carrying costs, the Commission shall use the utility’s regulatory capital structure as determined in subdivision 1 of the definition of eligible infrastructure costs;
6. Unreimbursed costs of relocating facilities due to highway projects; and
7. Operation and maintenance expenses that the Commission determines are associated with eligible infrastructure and that were not included in the revenue requirement of the utility last approved by the Commission. “Investment” means costs incurred on eligible infrastructure projects including planning, development, removal, and construction costs; costs of infrastructure associated therewith; and an allowance for funds used during construction. In calculating the allowance for funds used during construction, the Commission shall use the utility’s actual regulatory capital structure as determined in subdivision 1 of the definition of eligible infrastructure costs. “In-kind replacement” means replacement with new materials or equipment designed, constructed, and sized to meet current industry standards and to comply with federal, state, and local regulation. “Utility” means water utility or wastewater utility. “Wastewater utility” means an investor-owned public service company engaged in the business of furnishing wastewater service to the public. “Wastewater utility project” includes:
2. Facilities necessary to comply with applicable state and federal laws and regulations;
3. Improvements that enable compliance with National Pollutant Discharge Elimination System permits;
4. Unreimbursed costs of relocating facilities due to highway construction or relocation projects; and
5. In-kind replacement of pumps, motors, blowers, tanks, or mechanical equipment. “Water utility” means an investor-owned public service company engaged in the business of furnishing water service to the public. “Water utility project” includes:
1. In-kind replacement of transmission or distribution system mains as well as replacement of valves, utility service lines, including meter boxes and appurtenances, meters, including radio frequency meters, and hydrants connected to a replaced transmission or distribution system main;
2. Non-growth-related main extensions installed to eliminate dead ends that will address primary and secondary drinking water standards as defined by the Department of Environmental Quality, the Department of Health, and the federal Environmental Protection Agency;
3. Equipment and facilities installed to address primary and secondary drinking water standards as defined by the Department of Environmental Quality, the Department of Health, and the federal Environmental Protection Agency; and
4. Unreimbursed costs of relocating facilities due to highway projects.