Category Archives: Water

The PSC’s Milwaukee water rate decisions

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The Milwaukee Water Works went before the Public Service Commission with a pretty weak case for a major rate hike.  The good news is that PSC members made it pretty clear that they won’t support the money grab the Water Works is trying to make. The bad news is that two of three members of the PSC signalled support of a program to support water consumption by industry, likely subsidized by residential ratepayers.

First, the rate case. As the JS reported this week, the Water Works was looking for an average increase of 27% in Milwaukee, with widely varying increases in the suburbs. Think about it: 27%. The Water Works has a lot of excess capacity that isn’t generating revenue, but that still must be maintained, and that costs money. But the folks at the city who thought raising prices astronomically would help didn’t really think it through. Raising rates so gosh-darned much would only discourage water use — fewer people would use hoses to water their gardens, or would wash cars in their driveways, etc. etc. The city could do itself more harm than good by making people resist higher water bills by cutting water usage. (Ironically, the city might unintentionally do the environment a nice favor by discouraging water use, but that is not the Water Works intent.)

The city also hurt the Water Works’ cryin’ the blues case when it snagged $3 million in surplus Water Works revenue to fill a hole in this year’s city budget, a fact that suburban opponents of the water rate increase hammered home to the PSC. They also said that Milwaukee Water Works uses a lot more cash financing for capital projects than do other water utilities. There are arguments for and against cash financing, but there is no doubt the Water Works could lower its immediate cash needs by borrowing more for capital projects.

Finally, and it’s not a small point, the city’s own Legislative Reference Bureau reported that Water Works will cut expenses by 4% “without compromising service.”

All those things argue against the rate increase requested by the city. Does the Water Works need more money? Most likely. But 27%? C’mon. Let’s talk about the ability to pay of city residents, especially those in the central city with the lowest incomes and the leakiest — and thus more expensive — water service.

Unfortunately, two of the three commissioners seem ready to pile on residential ratepayers by approving an “economic development rate,” which basically gives a price break to industries that dramatically increase their water usage.Yes, a reward for behaving in a potentially environmentally irresponsible way.

This handy dandy favor for the big guys will quite possibly  shift additional costs on to residential and small business ratepayers. The idea behind the economic development rate is that the additional water use will absorb some of the Water Works excess capacity while also creating jobs, but if there has been a solid proposal for measuring  the impact of corporate water subsidies on job creation, I haven’t seen it. (If there is one out there, someone please point it out to me.) Is everyone just going to assume that any job added at any firm getting a water rate break was added because of the water rate break? That would be pretty silly.  It would make a lot more sense for the city to do a performance audit of its existing water marketing strategies and fixing those before asking residential ratepayers to chip in to supply industries with water.

Milwaukee and the water rate increase

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Ya gotta love it. Milwaukee is arguing before the Public Service Commission that it needs a significant — averaging 27% in the city — water rate increase. The argument has been going on so long and is so heated that the Milwaukee Water Works has to cut back a bit to make up for the lost projected revenue.

Cut to the 2011 city budget, slated for adoption today. Ald. Robert Donovan has proposed a 1% across-the-board cut for all departments, a budget amendment that has virtually no chance of adoption. But in its analysis, the council’s own Legislative Reference Bureau writes in response to the amendment that

“It should be noted, because of delays in its rate increase petition, the Water Works will cut operating expenses — including salary and overtime expense — just over 4% without compromising service. No one is suggesting this is a model for the City as a whole, but it does seem to indicate significant cuts can be made, at least in the short-run, without jeopardizing service levels if properly motivated.”

So why does the Water Works need such a big rate increase again?

Suburbs want economic development rate for Milwaukee water

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Will Milwaukee residents end up subsidizing corporate / industrial water use in the far suburbs? Unfortunately, that possibility exists in the Milwaukee water rate case now pending before the Public Service Commission.

The Milwaukee Water Works is seeking an economic development rate for major water users in the city that would give those users a lower water rate. The idea is that the industrial / corporate customers would use up some of the Milwaukee Water Works’ excess capacity (there’s a lot of it) and maybe create some jobs along the way. The danger with allowing some customers to pay less, of course, is that other customers — like residential water customers — might well have to pay more to compensate for the shortfall. Since, as the Journal Sentinel reported in July, water use is highest in the the central city due to building and pipe conditions, the poorest people will be billed proportionately the largest amounts for the corporate water subsidy.

The Water Works’ proposal for an economic development rate would apply only to the city of Milwaukee. Suburban customer would need to seek their own economic development rates under the city’s proposal. Lawyers representing  Mequon, New Berlin, Wauwatosa, West Allis, Menomonee Falls, Shorewood, Brown Deer, Butler and Greendale — known collectively as the “wholesale intervenors” — don’t like that idea much.

“The Wholesale Intervenors believe it would be discriminatory to provided an EDR (economic development rate) only to qualifying users within MWW’s retail area,” the group said in a brief filed with the Public Service Commission.

The city, the suburbs argue,

…cannot “have its cake and eat it too.” MWW and the City include the cost of the excess, unused capacity in its rate base, and ask the Commission to require that all ratepayers,including the wholesale customers, pay the carrying costs for this capacity. Yet, MWW and the City then seek to turn around and treat the excess capacity as a local asset the City can use to direct regional job growth to the City. If the excess capacity is to be considered an asset solely of the City, then the wholesale customers should not be expected to share in the cost of continuing to retain this excess capacity.

If the wholesale communities are expected to pay for the excess, unused capacity in MWW’s system, qualifying EDR users located in the wholesale communities should also have access to the EDR discount.

If the PSC buys the suburbs’ argument, then the suburbs would pay the Milwaukee Water Works less for their communities’ total water consumption, according to the brief.

“The amount the wholesale customer pays to MWW would…be similarly reduced to reflect the EDR reduction,” the brief said.

The ultimate impact of the proposed corporate rate breaks depends on whether suburban residential customers subsidize the lower rates in their own communities. But it appears entirely possible that corporations in the city and the suburbs get the breaks, which the poorest Milwaukee residents subsidize to the greatest proportional extent.

Santa Fe a water role model

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Wow. Let’s do it. From Newsweek:

While floods inspire tent-pole news coverage, the American Southwest has been quietly struggling with the opposite problem: a near-crippling drought. For the first time, water in the Lake Mead Basin, which feeds much of the region, is in danger of falling into the “shortage” zone, according to recent federal estimates. And the National Weather Service is predicting the worst seasonal drought since the mid-1950s.

There is, however, one city that’s still all wet. Santa Fe has a water surplus large enough to support at least 160 new houses thanks in part to an innovative conservation program approved in 2007: for every new toilet installed, developers must pay for 12 low-flow toilets in existing homes (roving plumbers have literally gone knocking on doors in search of customers). Now, with virtually no commodes left to retrofit, the city has moved on to washing machines, showers, and urinals. Though environmentalists worry about desert sprawl, water experts say it may be only a matter of time—and thirst—before other cities follow Santa Fe.

(There’s a good chance, unfortunately, that conserving water would lead the Milwaukee Water Works to seek even bigger rate breaks for heavy water users in an effort to encourage water use because the utility has too much capacity. Yeah, I know it defies logic and common sense, but it is exactly what is happening in a case before the Public Service Commission.)

Go slow on water charges, subsidies

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The city wants to increase water rates to subsidize its operating budget.

It’s logical, on one hand. The city sells water to the suburbs. Using water fees to help pay general city costs spreads those costs beyond the city borders.

It is very likely that the Common Council also will vote to seek permission to give water-intensive businesses who locate or expand in Milwaukee a break on their water rates.

Again, there is logic to that idea. We, after all, have the water; business have the jobs. Might be a nice trace.

But…but…but…

Water is so very fundamental to life that to increase rates on the poorest people in order to tap into the pockets of the wealthy could have some pretty awful consequences within the city, from conditions more favorable to grass and home fires to people dying because their water has been turned off. The city needs more money, no doubt. But is this the right way to get it?

Subsidizing water-intensive businesses also is problematic. Water rate reductions are not free — any break given to businesses must be paid for by somebody else. In this case that somebody else are residential water users and businesses who do not qualify for the rate break. The proposed legislation asks the Public Service Commission to give rate breaks to new or existing business who meet the criteria in the box below.

Criteria businesses would have to meet for a water rate reduction.

Criteria businesses would have to meet for a water rate reduction.

There also is the question of whether offering subsidies to businesses that use a certain amount of a natural resource encourages those businesses to use more of that natural resource. By offering subsidies only to the businesses who use certain amounts and not to those who conserve, what motiviation do those businesses who qualify for the reduced rates have to conserve? And isn’t that what we are all supposed to be doing?