Good evening ladies and gentlemen, my name is Diane Schulze. I am an attorney representing the New Jersey Division of the Ratepayer Advocate. Our office was created by Governor Whitman to represent and protect the interests of all utility customers in New Jersey in cases such as this where a water utility seeks an increase in its rates for service. The Ratepayer Advocate represents residential customers, small retail customers, small and large industrial customers, schools and libraries and other institutions in the community.

The Ratepayer Advocate’s 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 costs for all consumers. We work with a team of accountants, economists, engineers and lawyers to analyze and investigate public utility cases.

The Middlesex Water Company (Middlesex or Company) provides water service to customers in Middlesex and Union Counties. The Company has asked by way of petition to the Board of Public Utilities, for an increase in rates for water service. The overall rate increase proposed is 15.92% which the Company says will generate $6,574,485 additional annual revenue. Under the proposed rates, an average residential customer using 2,700 cubic feet of water per quarter (20,196 gallons) currently paying $70.78 per quarter would pay $82.02, an increase of $11.24 per quarter.

The Company claims that this increase is needed due to increased operating expenses and to support its capital improvement program. The Company also claims the increase is needed to enable it to continue to furnish safe, adequate and proper service to its customers and to enable it to maintain a satisfactory credit position, preserve its financial integrity and cash flow and, to earn a reasonable return upon the fair value of its property.

Under the laws of New Jersey, regulated utilities, such as Middlesex, are permitted to charge rates that are "just and reasonable." The law also allows a utility company a fair opportunity to earn a profit on its investment. We, at the Division of the Ratepayer Advocate, are conducting a comprehensive examination of the Company’s proposal to determine whether or to what extent the proposed rate increase is proper. For example, we have issued numerous questions to the Company, seeking detailed information regarding the financial structure of the Company, its expenses, and its financial obligations. The Company must justify its expenses and provide support for its calculations. The critical area to focus on is the level of additional revenue needed to allow the Company a reasonable return on the investment of it’s physical plant, and ultimately, whether the Company’s proposal will allow customers to pay the lowest rates possible consistent with receiving safe, reliable and proper service.

Specifically, we are focusing on certain critical issues, which include:

• The Company’s proposed accumulated depreciation reserve; proposed post-test year plant additions; proposed working capital allowance and the Company’s proposed amount of Accumulated Deferred Income Taxes.
  
• Evaluation of the cost of the Company’s debt financing and capital structure.
  
• An assessment of the impact on operating costs of the Super Pulsator Pretreatment Units, the cost effectiveness and the impact on water quality of the RENEW program, and justification for change orders and the resulting budget overrun for the improvements to the CJO water treatment plant.

The Ratepayer Advocate has an attorney and expert witnesses analyzing data from the Company to effectively addresses these critical issues. The Ratepayer Advocate expert witnesses will prepare and file testimony in opposition to various portions of this proposal to increase your rates. At the evidentiary hearings, scheduled for December 4 through December 8, 2000, we will cross-examine the Company’s witness and submit evidence to counter the conclusions made by the Company in support of the petition. However, it is important that you are 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 the Company and offer comments about the Company’s 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, which will help us evaluate the Company’s proposal and prepare for the evidentiary hearings.

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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