(a) Adequacy.  The rates of water suppliers subject to commission rate regulation shall be responsible and adequate to pay for all costs associated with water supply, including, but not limited to, the costs of:

(1)  Acquisition, treatment, transmission, distribution, and availability of water;

(2)  System administration and overhead, including the prudent cost and/or value of all services and facilities provided by the city or town to the water supplier, including, but not limited to, testing, operation, maintenance, replacement, repair, debt service, and associated with, but not limited to, supply, production, treatment, transmission, administration facilities, and metering and billing;

(3)  Programs for the conservation and efficient use of water, including costs of developing, implementing, enforcing, and evaluating the conservation programs and including conservation pricing as described in subsection (d);

(4)  Sufficient operating reserves, revenue stabilization funds, debt service reserves, and capital improvement/infrastructure replacement funds to implement water supply system management plans.

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(b) Equitability.  Except for service charges and other fixed fees and charges approved as reasonable by the commission, where practicable, rates:

(1)  Shall be based on metered usage and fairly set among and within the classes and/or types of users;

(2)  Shall provide that within any class of users the full cost of system capacity, administration, operation, and water supply costs for peak and seasonal use is borne by the users that contribute to such peak and seasonal use; and

(3)  May provide a basic residential use rate for water use that is designed to make a basic level of water use affordable. Rates may require implementation of demand management practices, consistent with the standards and guidelines of the water resources board, established pursuant to § 46-15.8-5(1), by wholesale and retail customers.

(c) Revenue stabilization.  Water suppliers subject to commission rate regulation shall in the absence of other sufficient funds available for similar purposes, establish as part of their next general rate filing before the commission a revenue-stabilization account to ensure fiscal stability during periods when revenues decline as a result of implementing water conservation programs, or due to circumstances beyond the reasonable control of the water supplier, including, but not limited to, the weather and drought. A revenue-stabilization account shall accumulate a maximum of ten percent (10%) of the annual operating expenses of the supplier and shall be used to supplement other revenues so that the supplier’s reasonable costs are compensated. A supplier may draw upon its revenue-stabilization account without further action of the commission if revenues in any fiscal year fall below the level sufficient to provide reasonable compensation for services rendered, subject to periodic review by the commission to ensure that the purposes of § 39-15.1-1 are fulfilled.

(d) Conservation.  Water suppliers subject to commission rate regulation shall take effective action to reduce waste of water and to reduce non-agricultural seasonal increases in the use of water, and may adopt conservation pricing as part of a demand management program or otherwise revise their rates as a means to achieve their goals. For the purpose of encouraging conservation of water, suppliers are authorized to request increased rates based on quantity used either throughout the year or seasonally and to seek expedited review by the commission of such revised rates, provided that the supplier shall not have the burden of proof to link the increased rate to obtaining reasonable compensation for the service rendered as established in § 39-3-12. Conservation pricing shall be designed to promote efficient water use, and to limit seasonal non-agricultural outdoor water use, and to the extent possible shall not increase prices for water users with no significant seasonal increase in water use. Revenues generated from the adoption of conservation rates shall be used to fund the revenue-stabilization account established pursuant to subsection (c) above, operating reserves, debt-service reserves or capital improvement/infrastructure replacement funds.

(e) Billing.  Billing shall be at a minimum quarterly by December 31, 2013.