Elkhorn Light & Water Utility seeking 36 percent rate hike
In its first rate request since 2004, the utility asks for a 5 percent rate of return on its infrastructure investment, which would boost revenue by $715,378 this year to $1.99 million, according to the application.
City Administrator Sam Tapson said the effect of the rate request on residential customers hasn’t been determined, but the request was cut from a 7 percent rate of return, which the council finance committee said was too high.
Residents currently pay a $4.95 monthly service charge and $3.70 for the first 1,250 gallons of water.
The city added 2.5 full-time water department employees in 2004 in a consent decree with the Department of Natural Resources, which determined the utility was understaffed to operate a modern water treatment facility, said Tapson.
Adding the employees increased salary expense from $58,364 in 2006 to $105,000 this year, and the total cost of employee benefits rose from $101,612 to $184,000 during that same time.
The DNR also recommended the city expand and modernize the Lakeland treatment plant to keep up with daily water demand. In response, the utility borrowed $9.7 million and expanded Lakeland in 2007, which added more than $400,000 in annual debt repayment, said Tapson.
“We didn’t expand the plant when we needed to, and now we’re going to face the same situation with the Centralia treatment plant, which is 40 years past its useful service life,” said Tapson.
Modernizing Centralia has been “on the drawing boards” the past five years and Tapson expects the utility will seek another rate increase within a few years after it makes the improvements.
Water utility revenue increased only $24,924 between 2006 and 2009, from $1.94 million in 2006 to $1.97 million. During that same time, operating expenses rose from $831,747 to $1.16 million.
Including depreciation expense of $486,517 swells this year’s total expenses to $2.03 million, which would leave the utility with a net operating loss of $37,220, according to the application.
The PSC staff will review the rate application and recommend a revenue amount for the utility.
A public hearing will be held in Elkhorn and Madison before the commission acts on the request.
Tapson anticipates PSC action on the request by May.