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Agency says water utility overcharges; suggests cut not hike


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One state agency thinks customers should pay lower water bills, instead of the rate increase proposed by a utility that serves thousands of local homes and businesses.

The Indiana Office of Utility Consumer Counselor, the state agency that represents consumers during proposed utility rate increases, researched the debt, income and expenses of Indiana American Water and determined the company doesn’t need more money and actually is charging too much. The agency representing consumers not only recommended rejecting the water company’s proposed rate increase but also suggested a decrease in the company’s monthly rates of about

5.5 percent.

 

Indiana American Water serves about 27,000 customers in Greenwood, Franklin and New Whiteland, along with portions of White River, Franklin and Needham townships. The average monthly household bill is $35.54 for customers using 4,600 gallons of water. The proposed rate change would increase those monthly bills by about $2.40, Indiana American Water external affairs manager Joe Loughmiller said.

The state agency’s recommendation was based on research that shows the water company used inaccurate predictions of future customer growth and revenues; needs to better track where water used is not being paid for; should cut several expenses, such as payroll and incentives; and not be allowed to increase the amount of profit made on investments, according to a news release from the Indiana Office of Utility Consumer Counselor.

The Indiana Utility Regulatory Commission, the state agency that ultimately will decide on the rate increase, will hear rebuttal testimony from the water company later this month. In a June hearing, the commission will question both the water company and state agency representing customers.

The water company can lower its expenses by addressing the issues outlined by the state agency, thus creating more revenue without a rate increase. But the office of utility consumer counselor’s recommendation doesn’t necessarily mean customers will see their water bills go down, said Anthony Swinger, director of external affairs for the Indiana Office of Utility Consumer Counselor.

For example, Indiana American Water asked for an 8 percent rate increase in 2012, and the office of utility consumer counselor recommended a 4 percent rate decrease in that case. In the end, the water company was allowed to raise rates by 1 percent. A proposed 29 percent increase a few years before that resulted in about a 19 percent increase.

The utility will file rebuttal testimony and evidence by a May 28 deadline but would not comment further on the recommendations made, Loughmiller said.

Indiana American Water did not give accurate predictions of future customer growth and revenue amounts because the company used only a four-month sample of data from January to April 2013 to create the projections. The sample size was taken during typical cold weather months when less water is used by residential customers and the sample size was considered too small to be accurate, according to testimony of office of utility consumer counselor analyst Charles Patrick.

The sample also was outdated because the last month used was about nine months before the water company filed its case. The water company’s estimated residential revenue should have been about $6.9 million higher than its $96 million projection, according to Patrick’s testimony.

Indiana American Water also is asking for its cost equity, which is the amount of profit it can give back to shareholders, to be increased from 9.7 percent to 10.8 percent. But the office of utility consumer counselor recommends that amount be cut to 8.6 percent.

The water company also needs to do a better job of monitoring and finding areas where improvements can be made in order to reduce the amount of water that is used but not paid for, testified Scott Bell, the director of wastewater/water division with the office of utility consumer counselor. A certain amount water is unaccounted for from the time it leaves the water plant to when it is used, according to customers’ meters, and typically occurs when pipes leak, people alter meter readers, or even when fire departments put out a fire, Swinger said.

Indiana American Water also requested about $38,000 in incentive payments for two positions — vice president of operations and director of engineering, contingent on how the company’s stock performs. Those incentives should be paid by shareholders, not ratepayers, because the shareholders will gain from stocks performing well, Patrick testified.

The utility also requested about $413,000 in incentive payments for employees who are salaried, or not eligible for overtime, but the recommendation from the office of utility consumer counselor called for eliminating 15 percent, or about $90,000, of that amount.

About 70 comments submitted by customers were part of the evidence the state considers, and all were against the proposed rate increase. Most of the comments came from residents in northwest Indiana.

Stephen Knott was one of few Johnson County residents who submitted comments. He’s been active in opposing rate increases in the past, which had drawn a few hundred people to past public hearings, he said. But no one came to the public hearing in Franklin about a month ago.

The Indiana Utility Regulatory Commission will decide what, if any, increases the utility should be allowed.

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