Kevin Murphy, Leader Correspondent
The city of Shawano is seeking a 22 percent increase in water rates, the first rate request in about seven years, according to a rate application recently filed with the Wisconsin Public Service Commission.
Increasing costs and relatively flat water sales have eroded the utility’s rate of return on its infrastructure investment from the 6.5 percent authorized by the PSC in 2007 to an estimated 3.2 percent this year, said Nancy Schauer, Shawano Municipal Utilities’ financial manager.
The Shawano Department of Public Works, which oversees the water utility, is applying for the rate increase, but SMU prepared the financial information because its staff is familiar with the billing history.
If approved as submitted, the rate request would increase revenue by $323,163, earning the water utility a 6.5 percent return on the net value of its $9.726 million infrastructure investment.
“We’re asking for 6.5 percent return again … that’s the (benchmark) the (PSC) is approving,” Schauer said.
Residential customers pay a $7 meter charge and volume charges of $1.58 monthly per 1,000 gallons of water. If residential rates increased by 22 percent, the cost of 3,700 gallons of water consumed monthly would rise from $58.46 to $71.32, an increase of $12.86.
However, the PSC may not apply the 22 percent increase equally to the utility’s four main customer classes. Instead, the PSC will review the utility’s application and recommend a revenue amount based on the cost to serve the city’s residential, commercial, public entity and industrial classes.
The city can adopt or contest the PSC’s revenue recommendation at a to-be scheduled public hearing. The PSC will then set new rates.
Schauer anticipates the rates will be determined by the end of the year.
In the past four years, city water sales have increased from $1.424 million to an estimated $1.451 million this year. Meanwhile, the cost to pump, treat and distribute water was $509,998 in 2010 and is projected to total $520,562 this year, according to the application. The costs peaked at $590,626 in 2012.
Taxes and depreciation increase the 2014 total expenses to an estimated $1.188 million against estimated revenue of $1.497 million, leaving the water utility with a $309,057 net income this year, according to the application.
The DPW’s request would increase annual revenue by $323,163 and net income to $632,220, according to the application.
The PSC last month approved an increase in electric rates for SMU sufficient to provide the utility with a 6 percent rate of return. The increase will start to show up on September bills covering usage for the month of August.
Bills for residential customers will go up 0.9 percent, while the largest industrial customers will pay 0.93 percent more. The remaining commercial classes will see larger increases ranging from about 2 to 6.5 percent.