Sec. 1. 35-A MRSA §6112, sub-§1, as enacted by PL 1991, c. 221, §2, is amended to read:

1. Annual contingency allowance. A consumer-owned water utility may provide for an annual contingency allowance by including in rates an amount up to 5% of the revenues required to operate the water utility. Each year any contingency allowance, which may not exceed 5% of the prior year's total revenue, must be credited to a contingency reserve fund. Other revenue may not be credited to the account.

Sec. 2. 35-A MRSA §6112, sub-§§2 to 4, as enacted by PL 1991, c. 221, §2, are repealed.

Sec. 3. 35-A MRSA §6112, sub-§5, as enacted by PL 1991, c. 221, §2, is amended to read:

5. Commission review. If the commission determines that a water utility's contingency reserve fund has reached the maximum that may be accumulated under subsection 2 and that the utility is accumulating the utility has accumulated in its unappropriated retained earnings account an amount that is inconsistent with just and reasonable rates exceeds 30% of its gross annual revenues, the commission may, pursuant to chapter 13, order the utility to reduce its rates to the appropriate level either in the form of temporary rate adjustments, credits or reduction in rates.

Sec. 4. 35-A MRSA §6112, sub-§6, as enacted by PL 1991, c. 221, §2, is repealed.

Sec. 5. 35-A MRSA §6112, sub-§7 is enacted to read:

7.__Reporting requirements.__If a water utility in each of 3 consecutive years collects through rates an amount equal to or greater than 7% more than the utility's total annual operating expenses plus any contractual appropriations, the water utility shall notify the commission as part of its annual reporting requirements.

Sec. 6. 35-A MRSA §6113, sub-§1, as enacted by PL 1993, c. 30, §1, is amended to read:

1. Water supply protection fund. A consumer-owned water utility may establish a water supply protection fund to which a sum may be credited annually from surplus funds. The annual credit may not exceed 5% of the prior year's total revenue. If