By Kim McDarison
The Whitewater Common Council Thursday approved a 30% rate increase for its water utility users.
The increase was approved by a vote of 5-0. Two council members — Jill Gerber and Lukas Schreiber — were not in attendance.
Director of Finance and Administration Steve Hatton said the Public Service Commission (PSC) approved the city’s request for a rate increase Feb. 15.
City staff, according to a memo to council written by Hatton, filed a rate case application with the PSC, after receiving approval from the city council last June.
Within his memo, Hatton noted that the average resident living in the city of Whitewater will likely see a $7.27 increase in their monthly water bill. The estimate was calculated based on water usage of 3,000 gallons per month, including public fire protection charges.
Council approved the rate increase to go into effect on April 28, which is in accordance with a 90-day period within which the rate must be implemented after its approval as stipulated by the PSC. While new rates will be applied to meter readings taken April 28, residents will see the increase represented in their bills in May, Hatton said.
According to information supplied within the PSC’s decision, the “final overall rate change authorized is $687,376, or a 30.07% increase over current rates, for the test year ending Dec. 31, 2022.”
The PSC noted in its document that the city of Whitewater sought the increase to replace two 100-plus-year-old reservoirs with a new water tower.
According to city officials, the new water tower, which came online Oct. 12 of last year, cost $2.77 million.
Other improvements associated with the water utility’s budget included lateral and main replacements on East Main Street, at a cost of $661,903, and Yoder Lane, at a cost of $117,475.
Funds for all three projects were borrowed, Whitewater Public Works Director Brad Marquardt, responding to questions from Fort Atkinson Online by email, wrote.
During Thursday’s meeting, Hatton said that among “ingredients” that led to the size of the rate increase was “some of our financial plannings and a water rate study in 2017,” which, he said “helped identify the vulnerability of our water system.” He noted that the city found that two of the three water reservoirs were more than 100 years old.
“So we moved forward on the replacement of the southwest water tank,” which, he said, “is a piece of this.”
In his memo, Hatton wrote that the rate case was filed by the city after officials identified “a need” to replace two water reservoirs in the city that were at least 100 years old.
“The planned replacement of these reservoirs was pulled forward into the 2022-2023 biennial budget due to the historically low interest rates, the availability of ARPA (federal American Rescue Plan Act) grant funding, and support of the newly established TIDs,” he added.
The PSC’s document stated: “This replacement has been on the capital planning horizon for a number of years, but was accelerated due to required investment to maintain the aged reservoirs and the availability of ARPA funds to lesson the impact on rate payers.”
Also, the document continued, “in 2022, there were two street reconstruction projects requiring the replacement of mains/laterals.”
Under a heading of “Finding of Fact,” the document noted that the city, before approval of the rate case, was authorized to charge rates for water utility service that would provide operating revenues of $2,402,721 for the 2022 test year.
“These rates fall short of the test year revenue needed by $687,376 and are unreasonable,” the document stated.
The rate change will allow the city to earn the necessary revenue requirement and are consistent with the cost of service and rate design, the document noted.
The document calculates the utility’s “estimated net investment base rate for the 2022 test year” at $13,831,166.
Further, the document stated that three water customers filed comments on the PSC’s electronic records filing system which were in opposition to the rate increase.
According to the document, “these customers expressed concern over the magnitude of the increase and its impact on customers, particularly those who are low income.”
Additionally, the document stated: “Three water customers appeared at the hearing and one spoke in opposition to the construction projects that are being funded through the rate increase.”
The document noted that the PSC “finds that the revenue resulting from the authorized rates is necessary to provide for the applicant’s financial needs over the long term.”
Within his memo, Hatton noted that the rate increase will provide $687,376 in additional water utility revenues that will be used to repay a project borrowing.
Hatton wrote: “These rates are expected to produce a rate of return on the utility’s net investment of 6.6%,” which, he noted, would provide the required rate of return by the PSC to maintain confidence in the utility’s financial integrity without resulting in rates to customers that are excessive.”
In addition, within his memo, Hatton provided a timeline of “previous actions,” which began in October of 2017, when, he wrote, Ehlers was selected as a municipal advisor.
An “initial financial management plan was completed in July of 2018, Hatton noted, adding that the last water rate change effective date was Aug. 27, 2020.
In October of 2021, the city’s Finance Committee reviewed the 2022-23 Capital Improvement Plans and corresponding financial model, along with the water utility’s operating budget, and in November of that year, the council adopted its 2022-23 budget and capital improvements plan, Hatton wrote.
In May of 2022, the Finance Committee recommended filing a rate case application with the PSC. The recommendation was approved by the council the following June.
In July, a “Utility Rate Comparison” was posted to the city’s website. A link is here: https://www.whitewater-wi.gov/554/Water-and-Sewer-Utility-Rates, and the city filed its rate case application.
A public hearing about the rate case application was scheduled in December. Water utility customers were notified about the public hearing on their bills and it was posted on the city’s website, Hatton wrote, adding that the public hearing was held in January.
Addressing council Thursday, Hatton said: “As part of this rate case, we did utilize Ehlers to help us with the process, They do have, as part of that service, they will produce an update to our cash flow forecast, so looking forward, and what the future path of rates and the health of the utility looks like, and that includes a presentation to this body if so desired.”
As provided in the Public Service Commission’s (PSC) decision document, shown above, the PSC calculated the utility’s “estimated net investment base rate for the 2022 test year” at $13,831,166.
According to Whitewater Director of Finance Steve Hatton, as stipulated by the PSC, a rate of return of 6.6% is required to maintain confidence in the utility’s financial integrity without resulting in rates to customers that are excessive. On Feb. 15, The PSC approved a 30% water utility rate increase for Whitewater’s utility users. Before the rate increase was approved, the PSC calculated the rate of return for Whitewater’s water utility, as shown above, at 1.63%. The Whitewater Common Council approved the rate increase Thursday. Utility users can expect to see the impact of the rate increase represented in their bills in May.
Whitewater Municipal Building, file photo/Kim McDarison.
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