FIRE PROTECTION
Fire protection rates
refined in Maine
A task force established
by the Maine PUC recommends
new fire protection charges.
Christopher P.N. Woodcock and Normand R. Lamie
T
he state of Maine and the Maine Public Utilities
Commission (PUC) have been at the forefront in
developing new allocation methods and rate design
for fire protection charges. As discussed in AWWA’s
Manual M26,1 the Maine Water Utilities Association
Committee on Fire Protection Charges published a
survey 35 years ago indicating the percentage of total
revenues that ought to be derived from fire protection charges (see the sidebar on pages 54 and 55). This
curve was adopted by the Maine PUC as a guideline
that has been used in rate
proceedings. The “Maine
In response to assertions by Maine Public Utility Commission
curve” has been pub(PUC) staff members that private fire protection charges
lished in various AWWA
duplicated public fire protection charges and should be
rate manuals since it first
substantially reduced or eliminated, the Maine PUC established
appeared in the third edia Task Force to examine the issue. This article describes the
tion of the M1 Manual.2
approach the task force recommended for determining private
In 1987, the Maine PUC
fire protection charges, an approach that was adopted by the
formally adopted use of
Maine PUC. The task force’s alternative suggestion is also
the curve in the absence
presented.
of a fully allocated costof-service study.
Copyright (C) 1996 American Water Works Association
OCTOBER 1996
53
Because Maine water utilities and the Maine PUC
have seemed to be on the cutting edge in the development of innovative treatment of fire protection
charges, recent developments in Maine’s treatment of
fire protection charges are particularly noteworthy.
PUC opposes proposed increase
In 1991, a proposed water rate increase by the
Portland Water District was brought before the Maine
PUC, which regulates the rates of investor-owned
water utilities and quasi-municipal water districts, in
Docket No. 91-162.3 One element of contention was
the water district’s proposed public and private fire
protection charges. The district had conducted a costof-service study using the guidelines in AWWA’s various manuals. Fire protection costs were allocated
between public and private fire service based on the
relative potential demands as measured by the crosssectional area of public hydrant branches and private sprinkler connections. This method conforms
generally with the guidelines contained in AWWA’s
rate manuals.1,2,4
PUC staff members took exception to the proposed private fire protection charges, asserting that
they were not based on the cost of providing service. They argued that no capacity costs should be
allocated to private fire service—that the fire capacity designed into the system was all for general or
public fire protection purposes. PUC staff members
testified that private fire protection simply takes
advantage of the capacity installed for public protection—a service the property owner already pays
for through property tax. It was noted that the current private fire sprinkler systems only activate the
sprinkler heads nearest the fire and thus tend to put
out fires faster and use less water. Last, it was argued
that private fire sprinklers save lives and reduce property damage, and their use should therefore be
encouraged. In summary, the staff members recom-
mended that private fire service charges only recover
the costs associated with account maintenance and
the cost of the part of the service line the utility
owns and maintains.
The PUC agreed that “private sprinkler systems
put a much smaller demand on the water system
than fire hydrants and should thus be allocated a
reduced portion of backup facility costs.”5 It found
that a sprinkler structure seldom needs the support of
a public fire protection system and that the rate-making process should consider the reduced demands.
However, the PUC could not determine the degree to
which demands may be reduced.
After the Portland case, two other dockets 6,7
brought the issue of fire protection charges to the
forefront. Lausten et al v. Camden & Rockland Water
Company requested a PUC investigation into the private fire protection charges of Maine’s largest investorowned water company. Maine Association of Fire Sprinkler Contractors v. Maine Public Utilities Commission
requested an investigation by the PUC into the connection fees for private fire protection. In light of the
various dockets associated with the issue of private fire
protection charges, the questions raised in the Portland case, and the concern that implementation of the
PUC staff recommendations would result in a fundamental policy change, the commissioners ordered
a further investigation into the issue with a proposed
rule-making.
PUC invites comment on eight issues
In August 1994, the Maine PUC issued a proposed
rule-making on private fire protection8 and invited
comments on eight specific issues:
• Should backup capacity and facilities be allocated to private fire protection? If so, is there a double charging? What is the correct backup capacity?
• What is the proper basis for the billing of private
fire protection? Should it be the size of the connec-
Public Versus Private Fire Protection
When the Maine Water Utilities Association Committee on Fire Protection Charges presented its
repor t in 1961, the intent of its proposed cur ve
was clearly to reflect total fire protection revenues.
No mention of private fire protection or sprinkler
connections is made in the March 1961 ar ticle in
the Journal of the Maine Water Utilities Association. 13 However, the ar ticle also discusses the
recover y of “the fire protection charge” through
proper ty taxes, suggesting that the total fire protection charge was the same as public fire protection. The curve published with the article is labeled,
“Determination of Percentage of Gross Revenue
for Public Fire Protection Charge.” The lack of dis-
tinction between public and private fire protection
charges may well be due to the sparse number of
private fire connections in smaller, more rural communities in the late 1950s when the committee
prepared its repor t.
When the Maine Public Utilities Commission (PUC)
adopted the curve in 1987 (as Chapter 69),15 the use
of private sprinklers was far more common. In discussing the use of the curve in section 2 of Chapter
69, the Maine PUC clearly refers to “the percentage
of gross revenue that a water utility shall allocate
to public fire protection charges” [italics added]. The
cur ve included in Chapter 69 is copied from the
1961 article and carries the same title, “Determi-
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JOURNAL AWWA
Private fire protection service helps prevent injuries
and reduces fire department personnel and
equipment costs.
tion? Should it be the size of the riser after it enters
the building?
• Should charges for different types of private
fire service differ (sprinklers versus private hydrants)?
On what basis should the charges differ? Should private fire hydrant charges differ from public hydrants?
• Should benefits to the owner of having a private
sprinkler be considered?
• Should the determination of charges account
for the fact that buildings that have sprinkler systems
use less water to fight fires than other buildings?
• Are there reasons for encouraging private fire
protection devices? Should they be considered in rate
setting?
• How quickly should new rules be implemented?
• Under what circumstances should private fire
service be metered?
The proposed rule-making resulted in numerous comments from diverse interests throughout
Maine. Sprinkler providers were interested in pro-
nation of Percentage of Gross Revenue for Public
Fire Protection Charge.”
When the Maine cur ve was first published in
AWWA’s manual M1,2 the discussion again only
involved public fire protection. There is no mention
of a private fire service or sprinkler component to the
fire protection charges.
The first mention of private fire protection charges
in AWWA’s rate-related manuals is in the first edition
of manual M26.1 In this manual, it is suggested
that if charges are to be levied for private fire or
sprinkler service, the total fire protection revenues
ought to be split between public and private fire service based on the relative demands of each type of
service. Splitting total fire protection costs between
public and private fire ser vice based on relative
demand potential is also discussed in the fourth
edition of AWWA’s manual M1. Clearly, the various
AWWA rate manuals viewed private fire protection as
moting cost-effective sprinkler systems. Fire
officials were interested in fire protection
systems that would reduce fires, save lives,
and protect health and safety. Municipal
officials were concerned about shifting costs
from private fire service to public fire protection because an increase in costs would
result in increased property taxes. Some
municipalities also raised the concern that
the recovery of public fire protection charges
through property taxes was inequitable,
because tax-exempt properties were able to
avoid any responsibility. The water utilities
expressed a belief that the service being provided
should be paid for by those who benefit.
Task force attempts to balance interests
After receiving numerous comments from interested parties, the PUC decided to appoint a Private Fire
Protection Task Force by its order of Apr. 11, 1995.9
It charged the task force with considering all stakeholders involved in the complicated issue of private
fire protection and with developing recommendations that accommodate all legitimate interests. The
ultimate goal of the task force was to balance the
complex interrelationship of municipal customer,
utility, business, and society while satisfying the PUC’s
long-standing policy of setting cost-based rates for
private fire service.10
The task force had 20 members, including representatives from the Public Advocate’s Office, several
water utility districts, the Maine Municipal Association, the Maine Rural Water Association, the Maine
part of total fire protection costs. Although the Maine
curve is also presented in the fourth edition of manual M1,4 it is included in the section “Rate Design
for Small Utilities,” in which only public fire protection charges are discussed.
Method A, recommended by the Maine Task
Force, uses the Maine curve to determine public
(municipal) fire protection, not total fire protection revenue. Based on the number of hydrants and the
demand requirements, a unit cost per gallon per
minute is derived for public fire protection. This unit
rate is proposed for private fire protection under
method A. As a result, the total fire protection revenues include both the public fire revenues derived
from the curve and the private fire protection revenues. This amounts to a somewhat different treatment of the interrelationship of public and private fire
protection costs and related charges than is presented in the recent AWWA rate manuals.
Copyright (C) 1996 American Water Works Association
OCTOBER 1996
55
Maine PUC Fire Protection Task Force:
Example of Method A, Demand-based private fire protection charges
Step 1: Determine total revenue needs.
From rate filing
$1,750,080.00
Step 2: Determine total revenues from municipal fire protection.
From Maine PUC Chapter 65 “curve” (15.7 percent)
$274,763
Step 3: Determine total fire flow demand for municipal fire protection.
Residential hydrants
Commercial hydrants
Industrial hydrants
Total
Number
343
128
68
539
ISO Flow Demand
gpm (m3/s)
500 (0.032)
1,000 (0.063)
1,000 (0.063)
Total Demand
gpm (m3/s)
171,500 (10.82)
128,000 (8.07)
68,000 (4.29)
367,500 (23.18)
Step 4: Determine unit cost of fire flow demand for municipal fire protection (MFP).
Total revenue from MFP (from Step 2)
$274,763
Total fire flow demand from MFP (from Step 3)
367,500 gpm (23.18 m3/s)
Unit cost for fire protection
$0.74765/gpm ($11,852/m3/s)
Step 5: Determine total fire flow demand of private fire protection.
Private hydrants
Sprinklers with 0–99-gpm
(0–0.006-m 3/s) demand
Sprinklers with 100–199-gpm
(0.006–0.013-m 3/s) demand
Sprinklers with 200–399-gpm
(0.013–0.025-m 3/s) demand
Sprinklers with 400–599-gpm
(0.025–0.038-m 3/s) demand
Sprinklers with 600–999-gpm
(0.038–0.063-m 3/s) demand
Sprinklers above 1,000-gpm
(0.063-m 3/s) demand
Total private fire protection
Number X
Average Flow
gpm (m3/s)
23,500 (1.482)
2,080 (0.131)
Number
47
26
Average Flow
Demand
gpm (m3/s)
500 (0.032)
80 (0.005)
4
196 (0.012)
784 (0.049)
130
200 (0.013)
26,000 (1.640)
32
535 (0.034)
17,120 (1.080)
3
881 (0.056)
2.643 (0.167)
2
1,800 (0.114)
3,600 (0.227)
244
Step 6: Determine total cost for private fire protection (PFP).
Total private fire protection demand (from Step 5)
Unit cost of fire protection (from Step 4)
Total revenue from PFP
75,727 (4.777)
$75, 727 gpm (4.777 m3/s)
$0.74765/gpm ($11,852/m3/s)
$56, 618
Step 7: Allocate private fire protection based on individual flow demand.
Number Average Cost
Private hydrants
47
$373.83
Sprinklers with 0–99-gpm (0–0.006-m 3/s) demand
26
59.81
Sprinklers with 100–199-gpm (0.006–0.013-m 3/s) demand
4
146.54
Sprinklers with 200–399-gpm (0.013–0.025-m 3/s) demand
130
149.53
Sprinklers with 400–599-gpm (0.025–0.038-m 3/s) demand
32
399.99
Sprinklers with 600–999-gpm (0.038–0.063-m 3/s) demand
3
658.68
Sprinklers above 1,000-gpm (0.063-m 3/s) demand
2
1,345.78
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JOURNAL AWWA
Revenues
$17,570.01
1,555.06
586.16
19,438.90
12,799.68
1,976.04
2,691.56
Merchants Association, fire chiefs, the State Fire Marshal’s Office, the Maine Association of Fire Sprinkler
Contractors, and an investor-owned water company.
The task force selected two co-chairs and was provided
a coordinator from the PUC’s staff and a facilitator. It
met 11 times over five months. During deliberations,
several presentations were provided from outside
sources to inform the members. These presentations
included viewpoints on how issues affect representative groups and society in general, the thoughts of
the PUC staff members who had originally recommended revisions to private fire protection charges,
and a national perspective from the chair of AWWA’s
Rates and Charges Subcommittee. Based on the input
they received and their internal discussions, task force
members prepared a report.
The task force submitted its report11 to the Maine
PUC Jan. 10, 1996. The report recommended that
private fire service charges be assessed based on actual
demands created by individual customers—the socalled method A, described in detail on page 56. A further recommendation (method B) was that all fire
protection charges, private and public, be demandbased. Because method B was a late consideration, the
task force had insufficient time to fully explore its
effects and implications. As a result, method B was
recommended for further analysis.
In summary, the task force made the following
recommendations:
• Private fire protection customers should be
charged for the costs associated with providing
demand capacity created by their private fire system
in accordance with method A.
• The allocation of costs between public and private fire protection charges should be determined on
a case-by-case basis for each utility based on relative
demand flows required for each service.
• Method A charges for private fire protection
services (hydrants and sprinklers) are based on the
design flow demand required by the customer’s fire
protection system; demand is not to exceed the flow
available at the utility’s main.
• Method A should not automatically be imposed
on water utilities. Utilities may implement the
methodology for fire protection at their discretion.
• The legislature should consider authorizing
municipalities to exempt fire sprinkler systems from
property taxation.
• The legislature should investigate the fiscal effect
of allowing municipalities to impose a service charge
on tax-exempt properties for public fire protection
services and investigate the equity of the current
method of charging only taxable properties.
• Municipalities and water utilities should jointly
investigate innovative ways to encourage the installation of fire sprinkler systems.
• The task force recommends further analysis of
a method by which a utility or municipality would
apportion the total fire flow demand of the municipality (private plus public) structure by structure as
outlined in method B.11
Task force categorizes
its recommendations
In responding to the eight issues posed by the
PUC in its original proposal, the task force divided
its recommendations into two categories: those within
the jurisdiction of the PUC and those not within the
PUC’s authority but that should be pursued.
Six recommendations within PUC’s jurisdiction. Six of the recommendations were believed to be
within the PUC’s jurisdiction:
(1) Should backup capacity and facility costs be
allocated to private fire protection customers? Because
private fire service customers use a service provided
by the water utility, it was felt they should pay. A
cost allocation study will divide total fire protection
costs between public and private fire service. Revenues from public fire protection charges are thus
reduced by the amount allocated to private fire protection, so there is no double charging from the perspective of utility revenue. The task force acknowledged, however, that from the perspective of the
customer who has a private fire connection, the combination of the tax payment for public fire protection and the private fire service charge could appear
as a double charge.
(2) What is the proper basis for billing of private
fire protection service? The task force recommended
that billing be done on the basis of design flow demand
required by the customer’s private fire protection system (demand not to exceed the capacity available in
the main). Fire demands are related to building construction and occupancy, not the size of the connection. The design flows should be determined using
the National Fire Protection Association’s (NFPA’s)
Standard 1312 and associated standards. It should be
the customer’s responsibility to furnish the utility with
design flow demand information. If the information is
not available, it was recommended that the charges be
based on the best estimate of the utility using available
information. The estimate should not exceed the maximum flow available through connections of similar
size. Sprinkler design data for many structures are
available from the offices of the Maine state fire marshal; it is unknown if fire marshals in other states
have such data.
If a property has multiple systems, the charges
should be based on the cumulative demand of each
system. This proposal would eliminate any incentives to undersize or oversize connections. This also
addresses issues when connections are oversized or
undersized because of unique pressure situations at
the point of connection.
(3) How should charges for different types of private fire protection installations differ (hydrants versus sprinkler systems)? There should be no difference, because the design flow is what matters to the
utility. The only differences between costs for sprinkler systems and private hydrants should be to reflect
other utility services such as inspection or maintenance services. In general, it was believed that private
hydrant charges should be less than public hydrant
Copyright (C) 1996 American Water Works Association
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charges to reflect the fact that there is no
utility investment in private hydrants,
and typically no maintenance or replacement costs are involved.
(4) In rate-making, should the fact
be considered that private fire installations normally reduce water demands
for fire fighting compared with structures without private fire protection systems? The task force addressed two
issues in relation to this topic: the total
volume of water required to extinguish
fires and the instantaneous demands
required. Whether fire protection is public or private, the total volume of water
required for fire fighting is minimal
compared with total utility production
and is thus of little relevance. Most costs
are associated with providing capacity to
meet instantaneous demands. With
charges based on the design demand
flow, the variability in demand potential
will be reflected.
(5) Under what conditions should private fire
protection services be metered? It was felt that metering degraded the reliability of fire protection systems. Because the volume of water used is minimal,
there is typically no need to meter this service. (A
detector check meter may be appropriate to ensure
that no water is used for purposes other than fire
fighting.) The PUC’s rules dealing with circumstances
in which a meter may be suitable were deemed
appropriate.
(6) What is a reasonable period during which
utilities might establish and phase in new recommendations? The task force recommended that
method A not be automatically imposed; rather, utilities should be allowed to implement demand-based
private fire service charges at their own discretion
unless ordered to do so more quickly by the PUC. If
use of the new method results in a significant shifting of charges, the new method should be phased in
on a case-by-case basis.
Some issues beyond PUC’s jurisdiction. Several
issues raised by the PUC and about which the task
force provided recommendations were believed to
be beyond the PUC’s jurisdiction.
(1) Are there reasons to encourage installation of
private fire protection services? The task force concluded there were a number of convincing reasons to
encourage private fire protection service. If structures
have sprinkler systems, fire flow demand is dramatically
reduced, because fires are extinguished more quickly.
Sprinkler systems prevent injuries, reduce fire department personnel and equipment costs, and benefit the
community when jobs are saved and businesses are
not disrupted. The more properties that have private
sprinkler service, the lower the insurance rates for all
properties and citizens. Based on the analysis, the task
force recommended that the legislature consider legislation that would permit municipalities to exempt
If structures have sprinkler systems, fire
flow demand is dramatically reduced
because fires are extinguished more quickly.
fire sprinkler systems from property taxes
or allow a tax credit to all property owners with sprinkler systems.
(2) What can be done to address the
issue of tax-exempt organizations that
do not contribute to public fire service
charges? The only dependable current
source of funds available to municipalities for this service is the local property
tax. The task force recommended that
the legislature investigate the fiscal
effects of allowing municipalities to
impose a service charge on tax-exempt
properties for public fire protection service. Two methods were discussed. The
first would be a charge to tax-exempt
properties similar to what they would
pay for the service if they were not taxexempt. The second method would eliminate the
distinction between public and private fire service
and allow all customers to be charged for fire service
based on demand. It was clear that this issue required
further analysis.
Method A makes use of “Maine curve”
Under the proposed demand-based system of private fire protection charges (method A), it is first necessary to determine the total cost of service and related
revenues that could be derived from public or municipal fire protection. The task force recommended the
continued use of the allocation curve first developed
in 196113 by the Maine Water Utilities Association
Committee on Fire Protection Charges (see the sidebar on page 56). It was found that when compared
with the allocations that result from cost-of-service
studies, this curve provides a remarkably accurate
determination of the revenues that should be derived
from public fire protection charges. In the absence
of a fully allocated cost-of-service study, this curve
should continue to be used to derive the public fire
service revenue requirements.
The curve is determined as follows: using Insurance Services Office or NFPA design flow ratings for
fire hydrants, the total fire flow demand for all public fire hydrants is estimated. Dividing the public fire
protection revenue requirements by the estimated
total public fire flow demand results in a unit cost
for fire flow demand.
The fire flow demand for each individual private
fire protection system is determined. All fire sprinklers
in new buildings in Maine must have a fire flow
design that is approved by the state fire marshal’s
office. The demands for systems in older buildings
can be estimated using NFPA code manuals. To determine the private fire protection charge for a building,
the design fire flow demand (in gallons per minute or
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JOURNAL AWWA
cubic metres per day) is multiplied by the derived
unit cost for fire flow demand.
Method B to be analyzed in greater depth
The task force considered another demand-based
concept for total (public and private) fire protection
charges known as method B. The distinction is that
method A applies only to private fire protection;
method B expands the approach and requires the
determination of fire flow demand for all buildings,
whether they have sprinkler systems or not. Under
method B, the total system capacity and facility costs
related to fire protection are determined and then
divided by the total fire demands from all properties
in the protected area. Ideally, this method would
include tax-exempt properties.
This method would allow utilities to directly charge
the properties without relying on municipal property taxes. All charges would be based on the property’s design or needed fire flow. This method is
intended to create incentives to install private fire
protection systems, thereby reducing system demands
and providing greater public benefits.
Conceptually, the task force favored method B but
had insufficient time to test its effects or analyze its
implications. Because its implementation would require
change to Maine’s statutes relating to fire protection
charges, the task force recommended that a legislative
task force be created to analyze this option in greater
depth. In addition, the utility and municipal members
of the task force were concerned that implementation
and administration of method B could be expensive
and cumbersome. The two co-chairs of the task force
have discussed trying method B on a demonstration
basis with one or two utilities in the near future.
Several task force members issued a minority
report, which was included in the task force report.
This minority report stated a clear preference for
method B over method A.
Maine PUC endorses recommendations
In response to the report of the task force,11 the
Maine PUC issued an Order Adopting the Task Force
Recommendations14 on Mar. 26, 1996. The PUC initiated a rule-making to adopt method A, demandbased private fire protection. In its March 1996 order,
the PUC instructed its staff members to draft proposed
rules to implement method A. The order expresses
the PUC’s desire to not immediately force the new
method on all water utilities and to develop a workable method that does not burden the state’s utilities.
The PUC also endorsed the recommendation that
method B be further developed and investigated.
Recognizing the work and effort of members of the
private fire protection task force, the PUC invited
them to continue analysis with a broad representation
of other interested parties.
Conclusion
The Maine PUC has once again taken steps to help
define appropriate levels and mechanisms for fire pro-
tection charges. Basing private fire service charges on
the fire demands of specific customers may cause some
initial administrative concerns and confusion. As with
most new ideas, these initial concerns are expected to
lessen over time. In the long run, it is hoped that the
ideas developed by the task force will become accepted
by and useful to a wide range of water suppliers.
References
1. Water Rates and Related Charges. Manual M26,
AWWA, Denver (1986).
2. Water Rates. Manual M1, AWWA, Denver (3rd
ed., 1983).
3. Docket 91-162, Maine PUC, Augusta, Maine
(1991).
4. Water Rates. Manual M1, AWWA, Denver (4th
ed., 1991).
5. Order of Maine PUC, Augusta, Maine (May 4,
1992).
6. Docket 92-091, Maine PUC, Augusta, Maine
(ongoing).
7. Docket 92-285, Maine PUC, Augusta, Maine
(ongoing).
8. Docket 94-285, Maine PUC, Augusta, Maine
(Aug. 1994).
9. Order of Maine PUC, Augusta, Maine (Apr. 11,
1995).
10. Notice of Invitation, Docket 94-285, Maine PUC,
Augusta, Maine (May 23, 1995).
11. Recommendations to Maine PUC of Fire Protection Task Force (Jan. 10, 1996).
12. Standard for the Installation of Fire Sprinkler
Systems in One- and Two-Family Dwellings and
Mobile Homes. Natl. Fire Protection Assn., Patterson, N.Y. (1991).
13. Report of the Maine Water Utilities Association
Committee on Fire Protection Charges. Jour.
Maine Water Utilities Assn., 3:35 (Mar. 1961).
14. Order of Maine PUC, Augusta, Maine (Mar. 26,
1996).
15. Chapter 69 of Maine statutes, Augusta, Maine
(1987).
About the authors: Christopher
P.N. Woodcock is president of Woodcock & Associates Inc., 231 Boston
Post Rd., POB 118, Wayland, MA
01778, a utility rate and financial
consulting firm. He was engaged by
the Maine PUC to advise the task
force. He is the primary author of
the sections on fire protection charges
in AWWA’s Manual M26, and his work has been published in several professional journals. Woodcock is chair of
AWWA’s Rates and Charges Subcommittee and is active in
the New England Water Works Association and Water
Environment Federation. He holds a BS in engineering
and a BA in economics, both from Tufts University, Medford, Mass. Normand R. Lamie is general manager of the
Auburn Water District, 268 Court St., POB 414, Auburn,
ME 04212-0414.
Copyright (C) 1996 American Water Works Association
OCTOBER 1996
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