Georgetown Consulting Group said the water rate increase will raise “an insignificant amount” of $375,000 in yearly revenue for the water division.
“There will be a significant amount of revenues and cash without rate increase to pay for all operating expenses that CUC projects is necessary for FY 2010 and FY 2011,” Georgetown said in its testimony to the Commonwealth Public Utilities Commission.
Georgetown, represented by Jamshed K. Madan and Larry R. Gawlik, was tasked by CPUC to review CUC’s rate hike proposals.
CUC wanted to increase its water rate by 3 percent starting on June 1, 2010 but with no further increases in 2011 and 2012.
But Georgetown said “there will be a cash surplus in the water division of approximately $1.68 million during the test period without a rate increase.”
Financial plan
CUC filed its rate petition with CPUC on Jan. 31, 2010 and filed an updated testimony on April 1. CUC filed its revised Interim Financial Plan on March 26, 2010.
CUC has engaged the services of the Economist.com as its rate consultant.
In his testimony on April 1, Dan V. Jackson, Economist.com managing director, said the largest single advantage of CUC’s rate proposal is that it will result in rates that are significantly lower than the original full cost recovery alternative.
Another advantage is that it will allow CUC to fulfill its mandate for full cost recovery while setting the water and wastewater utility on the path toward financial recovery, Jackson said.
The proposed rate plan, he added, will allow CUC to issue as much as $70 million in long-term debt in the next five years for water and wastewater related capital improvements.
Recommendation
Georgetown said the rates imposed on metered and unmetered customers for the residential and commercial class should be equal.
Currently, the rate per 1,000 gallons of unmetered water is one-half of the rate for metered water.
Residential and commercial unmetered customers are assumed to use water substantially less than the average usage for the residential and commercial class, Georgetown said.
“We recommend that for the residential and commercial unmetered customers, the assumed volume of use should be moved to 90 percent of the current average usage for the class.” Georgetown said.
Wastewater
It said the proposed rate for wastewater is reasonable but it also asked CUC and CPUC to consider implementing a single rate increase instead of two rate increases within four months.
“There is no way to avoid a large increase for the wastewater division. But a single increase should be considered in place of the two increases proposed,” the regulatory consultant said.
CUC proposed to increase the rate twice: first, a 95 percent across the board on June 1 with a second rate increase of 35 percent effective on Oct. 1.
The current rates will therefore increase 164 percent in four months, Georgetown said.
The current customer charge of $8.20 per month, for example, will amount to $21.59 per month starting on Oct. 1.
Georgetown said it would be prudent to have a second set of hearings to advise the public about the second increase.
However, it added, a single rate increase of 128.3 percent on June 1 will amount to the same thing and require only one public hearing.
“Having a single set of hearings and a single increase appear to us to be the preferred alternative,” Georgetown said.
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