In determining the rates to be charged by each water company subject to its jurisdiction, the commission:
(1) Must adopt rules that establish a structure for incorporating the allowable cost of capital in the determination of rates or charges under this chapter that:
(a) Accounts for any federal, state, or other external funding sources for system improvements;
(b) Requires a showing that the water company is following its water system plan approved by the department of health and provides for a waiver process in the rate setting process for emergency improvements that are necessary for public health and safety;
(c) Considers the extent to which the water company provided notice of planned capital projects to consumers and the impact of the projects on rates;
(d) Promotes rate smoothing and the avoidance of excessive or sudden rate changes; and
(e) Considers the extent to which a public water system, as defined in RCW 70A.125.010, is able to comply with the planning requirements given the size and capability restraints of the system;
(2) May provide for the funding of a reserve account exclusively for the purpose of making capital improvements approved by the department of health as a part of a long-range plan, or required by the department to assure compliance with federal or state drinking water regulations, or to perform construction or maintenance required by the department of ecology to secure safety to life and property under RCW 43.21A.064(2). Expenditures from the fund shall be subject to prior approval by the commission, and shall be treated for rate-making purposes as customer contributions; and
(3) Must allow any water company filing a general rate case, beginning January 1, 2027, to include a proposal for a multiyear rate plan. The commission may, by order after an adjudicative proceeding as provided by chapter 34.05 RCW, approve, approve with conditions, or reject, a multiyear rate plan proposal made by a water company or an alternative proposal made by one or more parties, or any combination thereof. The commission's consideration of a proposal for a multiyear rate plan is subject to the same standards applicable to other rate filings made under this title, including the public interest and fair, just, reasonable, and sufficient rates.
(a) The commission may approve, disapprove, or approve with modifications any proposal to recover from ratepayers up to five percent of the total revenue requirement approved by the commission for each year of a multiyear rate plan for tariffs that reduce the water burden of low-income residential customers including, but not limited to: (i) Bill assistance programs; or (ii) one or more special rates.
(b) If it approves a multiyear rate plan, the commission shall separately approve rates for each of the initial rate year, the second rate year, and if applicable, the third rate year, and the fourth rate year.
(i) The commission shall ascertain and determine the fair value for rate-making purposes of the property of any water company that is or will be used and useful under RCW 80.04.250 for service in this state by or during each rate year of the multiyear rate plan. For the initial rate year, the commission shall, at a minimum, ascertain and determine the fair value for rate-making purposes of the property of any water company that is used and useful for service in this state as of the rate effective date. The commission may order refunds to customers if property expected to be used and useful by the rate effective date when the commission approves a multiyear rate plan is in fact not used and useful by such a date.
(ii) The commission shall ascertain and determine the revenues and operating expenses for rate-making purposes of any water company for each rate year of the multiyear rate plan.
(iii) In ascertaining and determining the fair value of property of a water company pursuant to (b)(i) of this subsection and projecting the revenues and operating expenses of a water company pursuant to (b)(ii) of this subsection, the commission may use any standard, formula, method, or theory of valuation reasonably calculated to arrive at fair, just, reasonable, and sufficient rates.
(c) The commission may by order establish terms, conditions, and procedures for a multiyear rate plan and ensure that rates remain fair, just, reasonable, and sufficient during the course of the plan.
(d) Nothing in this section precludes any water company from making filings required or permitted by the commission.
Notes:
Intent—Findings—2026 c 237: See note following RCW 70A.125.060.
Legislative findings—Severability—1990 c 132: See note following RCW 43.20.240.