The Gillett Sewer and Water Commission is seeking a 27 percent increase in water rates to boost annual income and fund future projects, according to its application filed with the Wisconsin Public Service Commission.
Average residential customers paying $8.04 monthly in volume charges for 3,000 gallons of water would pay $10.21, or $2.17 more, for the same amount of water if the rate request is approved as submitted.
Also subject to adjustment by the PSC are the $6.19 monthly meter charge residential customers pay and the public fire protection charge assessed for hydrant maintenance and other costs associated with firefighting. Rates for industrial, commercial and public authority customer classes will also be subject to change in the pending rate request.
Gillett’s rates were last increased in March 2007, a 47 percent hike for residential customers, that earned the water utility a 1.5 percent rate of return on the value of its investment in its infrastructure.
The rate of return requested in 2007 was kept below the utility’s cost of borrowing money, which the PSC generally recommends against. It was permitted in order to lessen the rate increase’s impact on customers.
Since then, revenue has kept ahead of expenses, but this year the utility projects an annual net income of only $18,699 after estimated revenue of $471,934 and total expenses of $453,235, according to the application.
If approved as submitted, the new rates would boost annual income by $144,889 and net income to $126,190 and earn the utility a 5.5 percent rate of return, the highest rate the PSC authorizes without exceptional circumstances.
Annual revenue has surged in recent years from $318,963 in 2011 to an estimated $407,487 last year to the projected $471,934 this year, according to the application.
Meanwhile, operating and maintenance expenses also have climbed from $143,878 in 2011 to $245,527 last year, to 2015’s projected $245,527. Adding payments in lieu of taxes and depreciation brings the utility’s total expenses to the projected $453,235.
According to the application, Seneca Foods, one of the city’s largest customers, has a great impact on the utility’s revenue and expenses.
Mayor Irene Drake noted several reasons for the request to increase water rates.
“Part of it is, the PSC says we have to have certain return on our money,” she said
In addition, the city will bear the expense of replacing the state Highway 22 utility infrastructure when the state Department of Transportation reconstructs the road in the city. The work is scheduled to begin in 2023.
“That will be a very expensive project,” Drake said.
The utility is not interested in a rate structure that would encourage water conservation, but stated on the application that it is interested in moving the public fire protection charge from property tax bills to water bills to include customers that are tax exempt.
Before new rates are set, PSC staff will review the application and recommend an amount of revenue it believes the utility needs to remain financially viable. The utility can adopt or contest the recommendation at a public hearing the PSC will schedule and hold simultaneously in Gillett and Madison.
