Water Company (IAWC) is currently seeking its seventh rate hike since 2002
and one which, if approved, would increase its annual operating revenues by
$19.6 million (and incidentally raise the rate of an average Northwest
Indiana residential customer by more than 17 percent).
The Indiana Office
of Utility Consumer Counselor (OUCC) has something to say to that: Nuts.
Far from endorsing
IAWC’s proposed 9.8 percent increase in annual operating revenues, the OUCC
is actually recommending a 5.5 percent decrease in those revenues,
that is, a cut of $11.4 million per year.
On Friday the OUCC
filed its testimony before the Indiana Utility Regulatory Commission (IURC).
The OUCC--the state
agency representing consumer interests in cases before the IURC--has
conducted a technical and legal review of IAWC’s request over the last three
months. Its key recommendations include the following:
currently authorized cost of equity from 9.7 percent to 8.6 percent. IAWC is
asking that its cost of equity be increased to 10.8 percent in this case.
realistic projections of customer growth, declining usage, and property tax
expenses than those included in the utility’s testimony.
adjustments to the company’s requested operating expenses. Examples include
recommended reductions to requested increases in business development,
management, planning, rental, marketing, payroll, and depreciation expenses.
reduction of non-revenue water and implementation of industry benchmarking
standards, consistent with performance recommendations the OUCC is making in
other water rate cases.
“The analysis by
our attorneys and technical staff in this case shows that a revenue
reduction is warranted,” said Indiana Utility Consumer Counselor David
Stippler. “The revenue requirement the OUCC is recommending will ensure
sufficient funds to address IAWC’s operational and infrastructure needs, and
to address the utility’s obligation to provide safe and reliable service to
all of its customers.”
IAWC has until May
28 to file rebuttal testimony. An IURC technical evidentiary hearing, at
which IAWC may cross-examine witnesses for the OUCC and other parties, is
scheduled to start on June 23 in Indianapolis and continue into July.
filing does not break down the recommended revenue decrease by service
territory, but focuses on the utility’s overall revenue requirement. After
the IURC issues its final order in the case, the company will file a tariff
demonstrating how it intends to implement the order’s terms including rates
by service territory. The OUCC has the right to object to the proposed
tariff if necessary.
IAWC is a wholly
owned subsidiary of New Jersey-based American Water Inc., providing service
to approximately 290,000 residential, commercial, and industrial customers
throughout Indiana. The utility’s current base rates and charges were
approved in June 2012 and have since been raised through distribution system
improvement charge (DSIC) adjustments in December 2012 and December 2013 to
repair or replace aging infrastructure.
proposed rate hike, the average residential customer’s bimonthly bill in
Northwest Indiana would increase from $67.81 to $79.48 or--on a monthly
basis--from $33.90 to $39.74, a spike of 17.21 percent.
Last month, the
Chesterton Utility Service Board voted unanimously to join three other
municipalities--Gary, Schererville, and West Lafayette--in an intervention
in IAWC’s case before the IURC. Ted Sommer, a CPA with the Service Board’s
contracted financial consultant, London Witte Group, said that the rationale
for the intervention is the new state law under which IAWC filed for its
rate hike. That law permits a utility to seek an increase based on future
test years, in other words, on the company’s future projected costs.
“This is the first
time anyone has done this,” Sommer told the Chesterton Tribune at the
time. “And it’s a little scary. We’re doing what we can to put together
findings to ensure that the precedent set is the best possible one from the
perspective of the consumer.”