The Lena Municipal Water Utility is seeking higher water rates to increase its revenue by 85 percent, according to a rate application filed Sept. 9 with the Wisconsin Public Service Commission.
Lena needs more revenue to build a $3.2 million radium reduction plant to comply with a Department of Natural Resources agreement. The plant should be operational early next year and bring the village’s drinking water back within acceptable levels for radium, a radioactive element that is considered a health hazard when consumed over a prolonged time period.
Residential customers pay some of the lowest water rates in the state, said Jon Cameron, an adviser with Ehlers Inc., the village’s financial consultant, but that will change if the PSC grants the rate request.
Customers pay a quarterly volume charge of $1.48 per 1,000 gallons of water, an $18 meter charge and Public Fire Protection charge. The average household of four uses about 18,750 gallons of water per quarter, according to the PSC, and pays $27.75 in volume charges.
If the PSC increases the volume charge by 85 percent, a typical residential household would pay $51.37 in volume charges for the same amount of water.
Cameron cautioned that individual water bills will vary based on usage and how the PSC sets rates for Lena’s residential, commercial, public entity and industrial customer classes.
“They will set rates based on the cost of service of each (customer) class and can set new (meter) charge rates, too,” he said.
Residents have been warned about a significant rate increase since October, when planning for the radium treatment plant was under way, Village Clerk Charlene Meier said.
“It’s something we put in the quarterly newsletter, on the website and Facebook,” she said. “We’ll hold another informational meeting in a few months on the construction progress and water rates.”
According to Meier, the rate increase is smaller than first anticipated by village officials.
While the utility will continue to issue quarterly water bills, individuals can set up monthly payment plans to more easily accommodate the pending increase, Meier said. The village also has begun accepting credit and debit card payments for bills in anticipation of the water rate increase, she said.
“We have a lot of residents on fixed incomes, and we’re trying to help so they can budget and pay their bill,” she said.
The rate request is the first for Lena since 2006, when the PSC authorized a 7 percent rate of return on the net value of the utility’s infrastructure investment.
The current rate request is based on a 5.5 percent rate of return, which is the benchmark the PSC is authorizing based largely on the cost of borrowing money, Cameron said.
According to the application:
The utility’s water sales have been steady over recent years, totaling $139,373 in 2011 and an estimated $144,464 next year. Meanwhile, operating expenses have ballooned from $71,453 in 2011 to an estimated $181,500 in 2015.
Next year’s expenses reflect the cost of adding an employee wholly dedicated to operating the water plant, which boosts annual wage expenses from $15,300 this year to $72,000 next year.
The new plant will also lead to increased fuel, chemical and supply expenses.
Without the rate increase, the utility would finish 2015 with an $89,717 income deficit, based on estimated revenue of $146,236 and total expenses of $235,953, which include payments in lieu of taxes and depreciation costs.
The new rates are expected to increase revenue by $123,041 and put the utility back in the black.
PSC staff will review Lena’s rate application and make a revenue recommendation. The utility can accept or contest the recommendation at a public hearing, which will be held simultaneously in Lena and Madison, before a decision on new rates is made.
Cameron said he expects the PSC to issue a new rate order within four to five months.
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