Substitute House Bill No. 6777 establishes a framework for water utility systems to recover costs associated with eligible projects aimed at enhancing water quality and treatment. The bill defines "eligible projects" as significant upgrades or replacements of water infrastructure necessary to comply with updated state or federal drinking water regulations adopted after December 16, 2021. Water companies can file requests with the Public Utilities Regulatory Authority (PURA) to recover expenses through a water quality and treatment surcharge, which can be added to existing rates. Key provisions include the requirement for water companies to submit a water quality and treatment assessment report for PURA approval, and the surcharge is capped at 15% of the company's annual retail water revenues, with a maximum of 7.5% for any twelve-month period.

The bill also mandates that water companies submit an annual reconciliation report detailing costs incurred from eligible projects and comparing surcharge revenues collected to the authorized revenue requirement. It requires PURA to complete the surcharge approval process within 60 days, considering public comments, and clarifies that this process is not a contested case under the Uniform Administrative Procedures Act. Additionally, the bill ensures that customers are notified when the surcharge is applied and that it appears as a separate item on their bills. The effective date for these provisions is set for July 1, 2025, and the bill is expected to incur additional costs for PURA, estimated at approximately $395,841 annually. No deletions from current law are noted in the bill.