HAGÅTÑA (The Guam Daily Post) — Water rates across the board will increase by 16.7% next fiscal year, meaning the new rate will apply beginning October. The Guam Daily Post does not have exact calculations for the rate increase, but for residential customers with 3/4 inch meters using 3,000 gallons per month, the rate hike should represent an increase of more than $10 to their current billings, going from about $63 to more than $74 per month.
However, more residential customers likely fall in the 6,000 gallons-per-month range. Their bills are set to go up more than $13, from about $82 to more than $96 per month.
The Public Utilities Commission, the rate setting body on Guam, authorized the increase Tuesday night after more than two hours of discussion.
Could have been higher
While the new rate certainly poses a significant percentage spike for ratepayers, it is still just more than half of the 27% rate increase that the Guam Waterworks Authority had requested.
GWA has been pursuing rate increases at the PUC over the last few years as part of the utility’s current five-year plan. GWA lays out capital improvement and financial plans in five-year intervals as part of larger plans for system development.
Before Tuesday, the last rate decision occurred in FY 2022, when the PUC authorized a 5.5% increase for fiscal 2023 and another 5.5% increase for fiscal 2024, although the latter would be subject to a true-up, or review process.
Shortly after Typhoon Mawar struck Guam in late May, GWA presented to the Consolidated Commission on Utilities, the governing board behind the power and water agencies, a proposed 27% rate increase for basic, lifeline and nonlifeline rates across all rate structure and customer classes, as well as a legislative surcharge increase from 3.5% to 3.8%.
While significant, GWA’s proposed rate hike was intended to get the utility up to its minimum debt service coverage, while also leaving enough revenues to reestablish reserves, GWA General Manager Miguel Bordallo had said in a meeting with the CCU. Since the PUC authorized the rate hikes in fiscal 2022, GWA has dealt with inflationary pressures, and has had to use more of its rate stabilization fund than anticipated, according to Bordallo.
‘Rate shock’
PUC staff actually recommended a 16.1% increase. That was raised slightly by PUC members through a vote Tuesday. But Fred Horecky, the commission’s chief administrative law judge, acknowledged that even the 16.1% rate hike wouldn’t amount to “peanuts” for ratepayers.
“It’s what we would call rate shock, generally. It’s over 10%. That’s what we’re recommending. Again, the largest recommended true-up rate increase in history,” Horecky said, adding that rate evaluations did find legitimate costs for GWA that needed to be addressed, including power expenses and debt service coverage.
“It’s certainly not ideal, but it’s more bearable for the ratepayers than what GWA is requesting. … In my opinion, GWA has not enough taken into account moderating this rate increase,” Horecky added.
According to Horecky, the major difference between GWA and the PUC’s rate consultant and staff is whether the utility’s rate stabilization fund should be funded through the rate increase.
“If you follow GWA’s request to put $7.5 million in the rate stabilization fund, that would alone be the largest part of the (GWA proposed) increase,” Horecky said.
According to Horecky, the rate stabilization fund was created by GWA in 2020, has never been sanctioned or approved by the PUC, and has never been examined in any rate case whether the PUC has any obligation to fund it. He added that if the PUC approved the 27% increase to accommodate GWA’s rate stabilization fund, that would do exactly what the fund was intended to prevent – cause a rate spike.
‘Real reason’
Bordallo said Tuesday that the “real reason” why GWA’s proposed rate hike was so high was because of the deferral of requested rate relief. GWA received no rate increases for nearly two years of this past five-year period due to PUC decisions, stemming from recommendations made by the ALJ and the PUC’s consultant, Georgetown Consulting Group, Bordallo added.
“Every time you defer a rate increase, it means that if we ask for it in the subsequent year. … In fact, it’s going to be higher,” Bordallo said.
The general manager also addressed Horecky’s remarks regarding GWA’s rate stabilization fund, stating that in a prior decision, the PUC agreed to change the way that GWA’s debt service coverage ratio was calculated by using reserves to count toward a targeted 1.75 times ratio. That wasn’t standard for the industry and was changed to a standard way of calculating debt service ratios, according to Bordallo.
“Extra reserves that were used to boost the calculation, to get to 1.75 (debt service ratio) were put into a separate reserve account. But when the (COVID-19) pandemic hit, the RSF, … that’s in the (bond) indenture. And so, it’s a mechanism by which bonds are protected, by putting revenues into a rate stabilization fund. So, when times are good, you put money into a rate stabilization fund, you take it out of your revenues. And then when you need it, when times are bad, you can pull it out of the reserve and count it as revenues so that your debt service coverage ratio is protected,” Bordallo explained.
‘Protect the debt service’
GWA is currently maintaining the lowest debt service ratio of 1.31 times compared to certain other autonomous agencies, he added later.
“We’re saying it is imprudent to move forward … and not have anything to protect the bonds in the event that there are unexpected expenses,” Bordallo said. “We’re not asking to double the expenses. … We’re simply asking to replenish what the ALJ’s prior decision and the PUC’s prior decisions have caused us to deplete, in order to protect the debt service coverage ratio.”
CCU Chairman Joey Duenas also addressed the PUC briefly Tuesday. In an attempt to provide some perspective on the impact of GWA’s proposal specifically to residential ratepayers, stating that at the minimum wage, a worker would have to work about eight hours to pay a monthly water bill at the current rate.
With GWA’s proposal, that worker would have to work about 10 and a half hours to pay their monthly bill. With Georgetown’s recommendation, the worker would need to work nearly 10 hours.
On Wednesday morning, Duenas told the Post that he didn’t believe that GWA’s recommendation would have been an undue burden for residential ratepayers.
“The water company needs to increase its revenue because we need to expand what we’re doing to rebuild. … We have so many things to do besides what (the U.S. Environmental Protection Agency) wants us to do, we have to be responsible and redo what was not done well in the past. So, all those leaking lines, we have to replace it,” Duenas said.
The revenue is also needed for more GWA personnel, “because we’re dealing with a system that is old, was not well-designed, was not well constructed, and we have to rebuild,” Duenas said.
But on Tuesday night, Duenas acknowledged that there are two groups of ratepayers that the water utility “cannot help.” In one example, Duenas described a phone call from an unemployed single parent with seven children.
“I said, ‘Oh my God, I don’t know how to help this person, … I don’t know what to say,'” Duenas said Tuesday.
The other ratepayer group is made up of those with unidentified system leaks, leading to higher than expected water bills, according to Duenas.
“I’m just telling you, there are people we can’t help. … I wish you could. But I don’t know what to do,” he added.
Guam Waterworks Authority General Manager Miguel C. Bordallo speaks during a Guam Public Utilities Commission special meeting at the GCIC building in Hagåtña on Tuesday, Sept. 26, 2023.
