Good evening, ladies and gentlemen, my name is Debra F. Robinson. I am here on behalf of the New Jersey Division of the Ratepayer Advocate. Our office was created by Governor Christine Todd Whitman to represent all utility consumers in New Jersey in cases such as this where a water and /or wastewater utility seeks an increase in its rates for service. The Ratepayer Advocate represents and protects the interests of residential customers, small retail customers, small and large industrial customers, schools, libraries, and other institutions in our communities alike.

Our goal is to advance the interests of all consumers and to promote the economic vitality of the state, in part by seeking just and reasonable water and sewer costs for consumers like yourselves.

As you may know, Pinelands Water Company and Pinelands Wastewater Company has asked the Board of Public Utilities (the "Board") for an increase in rates for water and wastewater services.

Pinelands Water Company

Pinelands Water Company ("Pinelands Water") is a public utility subject to the jurisdiction of the Board of Public Utilities (the "Board"), and is seeking an increase in its water service rates. Pinelands Water is in the business of providing potable water service to residential and commercial franchise customers in this area. Pinelands Water also provides private and public fire protection services to customers in Southampton Township, Burlington County. Pinelands Water also is a wholly-owned subsidiary of Middlesex Water Company. Pinelands Water Petition seeks a total rate increase of $119,985.00 or 31.3%.

The proposed water rate increase will increase both the fixed rate (which varies by meter size) and consumption charges . Under the Company’s proposal, both charges will experience a system average increase of 31.3%. For example, for a 5/8" meter, the quarterly service charge will increase from $13.50 to $17.73. The consumption charge will increase from $1.1200 to $1.4706 per thousand gallons or 31.3%. The average residential customer using approximately 20,000 gallons per quarter will experience an increase from $36.12 to $47.43 or 31.3%.

Pinelands Water filed it’s last rate increase in February 1996 with final rates not becoming effective until January 1997. The last rate proceeding involved Pinelands Water phasing in, over a three-year period the two-part rate structure I just described in order to mitigate the impact of the rate increase. The first year’s consumption increase was $0.71, the second year’s consumption increase was $0.92 and the third year’s increase was $1.12.

The current case has been initiated by Pinelands Water to recover what it claims are expense increases, including those in the cost of power, chemicals, testing equipment, water quality requirements, maintenance, taxes, insurance, labor and employee benefits. In addition, Pinelands Water asserts that the additional revenue requested will enable it to maintain a satisfactory credit position, to preserve its financial integrity, to permit proper maintenance, development and improvement of the utility plant required to furnish safe, adequate and proper service, to encourage continued good management and provide an incentive for efficiency, to prevent confiscation or diminution of its property and to earn a reasonable return upon the fair value of its property used and useful in the public service.

Pinelands Wastewater Company

Pinelands Wastewater is a public utility in the business of providing collection and wastewater treatment and disposal services to residential and commercial franchise customers in Southampton Township, Burlington County, including contract service for part of the Township itself. Pinelands Wastewater owns and operates wastewater collection and treatment facilities for these purposes. Pinelands Wastewater is a wholly-owned subsidiary of Middlesex Water Company, a New Jersey corporation and public utility also subject to the jurisdiction of the Board. Pinelands Wastewater has asked, by way of this Petition to the Board, for an increase in wastewater service rates. Pinelands Wastewater Petition seeks a total rate increase of $163,339.00 or 22.3%.

The proposed wasterwater rate increase will impact both the fixed rate and volumetric charges . As proposed by the Company, the average single family dwelling quarterly fixed service charge will increase from $40.00 to $48.93 or 22.3%. The volumetric charge would increase from $3.04 to $3.7179 per thousand gallons or 22.3%. The average residential customer using approximately 20,000 gallons of water per quarter will experience an increase from $101.40 to $124.02, or 22.3%.

Pinelands Wastewater filed it’s last rate increase in February 1996, with final rates not becoming effective until January 1997. The last rate proceeding involved Pinelands Wastewater phasing in over a three-year period the two-part rate structure referenced above in order to mitigate the impact of the change from the previous flat rate. The first year’s volumetric increase was $1.69, the second year’s volumetric increase was $2.38 and the third year’s increase was $3.04.

The current case has been initiated by Pinelands Wastewater to recover what it claims are expense increases, including those in the cost of power, chemicals, testing equipment, water quality requirements, maintenance, taxes, insurance, labor and employee benefits. In addition, Pinelands Wastewater has stated that it is engaged in a capital improvement program to maintain and improve safe, adequate and proper service to its customers.

Under the laws of New Jersey, regulated utilities, such as Pinelands Water and Pinelands Wastewater are permitted to charge rates that are "just and reasonable". The law allows a utility company a fair opportunity to earn a profit on its investment. Pinelands Water and Pinelands Wastewater both claim that a rate increase is needed for it to earn a fair and adequate rate of return on investment in property that is used and useful in providing utility service. The Ratepayer Advocate staff is conducting a comprehensive examination of these utilities to determine whether or to what extent their proposed rate increases are proper. For example, we have issued numerous questions seeking to discover detailed information regarding their financial structure, operation and maintenance expenses, and other financial obligations. These utility companies must justify all of their expenses and other claims, and provide evidence to support their calculations. These are all factors to be considered when analyzing Pinelands Water and Pinelands Wastewater proposals. Specifically, the Ratepayer Advocate is focusing on the following critical issues:

Accounting Issues:

• The Ratepayer Advocate has identified several issues in this area that we will concentrate our analysis and counter proposals upon; The companies proposed accounting treatment of its cash working capital; revenue projections and a close examination of claimed operation and maintenance expenses and treatment of depreciation reserve balances, among others.

Rate of Return:

• Evaluation of the cost of debt financing and capital structure.

Rate Design:

• Evaluation of proposed rate allocation among customer classes.

In addition, the Ratepayer Advocate will be focusing on what level of additional revenue, if any, is needed to allow Pinelands Water and Pinelands Wastewater a reasonable return on it’s investment and ultimately whether their proposals will allow customers to pay the lowest rates possible consistent with receiving safe, reliable and proper service.

The Ratepayer Advocate has an attorney and accounting experts analyzing data to effectively address these critical issues. At evidentiary hearings to be held in January, we will cross-examine the companies witnesses and submit evidence to counter the conclusions reached in support of their Petitions. A joint evidentiary hearing is scheduled for January 3 and 18, 2001 at the Office of Administrative Law in Trenton, Mercer County, New Jersey, before the Honorable Louis G. McAfoos, III., who is presiding over this public hearing tonight. However, it is important that you be aware that the ultimate decision regarding all rate modifications in New Jersey is made by the Board of Public Utilities.

The purpose of this open public hearing is for you, the customer to voice your opinion, relate your experiences with Pinelands Water and Pinelands Wastewater and offer comments about their rates and any service problems you may be experiencing. It is important that you express your views, because they will become part of the record on which the Administrative Law Judge and the Board of Public Utilities make their decisions. The Ratepayer Advocate also needs to hear your views in order to represent your interests in this legal process. We strongly encourage your participation. This public hearing is being transcribed and your comments will become part of the record. Judge McAfoos will instruct you to give your name and address before you speak. I would like to reiterate the importance of your input so that the Ratepayer Advocate can have a clear record of your concerns and interests.

On behalf of the Ratepayer Advocate, I thank you for attending this public hearing.

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