PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

The Commission is considering requiring New York American Water, Inc. (NYAW) to hire an independent monitor, and whether certain costs associated with NYAW?s failures should be paid for by shareholders rather than ratepayers.

Overvaluing real property tax expense recovery in water rates.

To prevent unjust and unreasonable water rates.

The Commission is considering requiring New York American Water, Inc. (NYAW) to hire an independent monitor, and whether certain costs associated with NYAW’s failures should be paid for by shareholders rather than ratepayers. This is in response to the Department of Public Service (DPS) report which determined that NYAW purposely concealed property tax valuation problems, which resulted in excessive rates. On June 29, 2018, DPS Staff filed a report of its investigation into the causes of the overvaluation of NYAW property, and NYAW’s failure to promptly inform the Commission of the problem. The report found that NYAW personnel failed to accept the findings of the Office of Real Property Tax Services (ORPTS) that the Company had misreported the age of the assets for serval of its water systems, which resulted in inflated values for taxing purposes. When the problem was finally acknowledged by NYAW, and they began to work with ORPTS to correct the filings, the Company still failed to inform the Commission, even going so far as to provide incomplete and misleading responses to DPS information requests during the Company’s recent rate proceeding. It was only after current rates had been set that the Company informed the Commission of the error. Since reporting the error, NYAW has taken steps to reverse the rate effects of incorrect property tax valuations and refund ratepayers for the overvaluations. DPS Staff recommended, because of NYAW’s knowing concealment, the Commission should consider actions beyond making ratepayers whole, including requiring NYAW to hire an independent monitor and reviewing costs associated with NYAW’s failures in this matter. The full text of the report and the full record of the proceeding may be reviewed online at the Department of Public Service web page: www.dps.ny.gov. The Commission may adopt, reject or modify, in whole or in part, the action proposed and may resolve related matters.

John Pitucci, Public Service Commission, 3 Empire State Plaza, Albany, New York 12223-1350, (518) 486-2655, email: [email protected]

Kathleen H. Burgess, Secretary, Public Service Commission, 3 Empire State Plaza, Albany, New York 12223-1350, (518) 474-6530, email: [email protected]

60 days after publication of this notice.