Public Service Commission presses for customer protections in small water companies' rate settlement

The Public Service Commission heard testimony and argument from staff, the Office of People's Counsel and representatives of small private water companies about a negotiated rate settlement that would phase in large increases to flat monthly charges for residential customers.

Commission Chair Hoover said the commission needed a clearer path that mitigates the sharp bill jump customers will see: "the customers of this company are gonna get a fairly nasty surprise, and ... they're not a responsible party in this sense," he said, and directed the parties to submit written explanations and proposed customer-notice and payment-plan provisions.

The matter grew out of a settlement filed in a staff-assisted rate case. Staff witness Dave Valcarangi told commissioners the companies had rates that in many cases dated to the early 1990s and that, using a 02/2021 test year, "for the 10 year period ended 02/2021, all of the companies have produced in excess of $2,000,000 of operating losses," a condition staff said required prompt action. Under the settlement, the parties agreed to a two-year phase-in that staff says brings first-year revenue to cover 2021 operating expenses and makes the company cash-positive in year one; a second-year adjustment would add the agreed return on rate base (about 7.26%), and the companies agreed to waive carrying charges during the two-year phase-in.

The Office of People's Counsel (OPC) counsel Brock Miller said OPC sought to balance customers' near-term impacts with long-term cost avoidance. "We didn't want the customers to end up paying more in the long term" due to carrying charges, Miller said, and described OPC's support for a settlement that avoids long-term carrying costs while providing enough near-term revenue to keep service safe and reliable.

Company representatives, including owner Ed Crooks and counsel Bob Weiser (McNeal), described a long delay in prior filings and argued the settlement's first-year cash relief was necessary to prevent insolvency. Crooks said he would work with customers individually and offered to set up payment plans: "If a customer comes to me and says, Ed ... I can't do this, I will indeed make every opportunity to work out for him a weekly payment schedule ... If they come and say, I don't have it this month, but I'll have it next month, I'm not gonna turn the water off." Company CPA Craig Kuz summarized the settlement mechanics: "the first year's, adjusted rate is strictly the cash flow. It doesn't include any depreciation or cost recovery of any of the capital improvements. So it's strictly cash flow."

Commissioners explored alternatives to the two-year phase-in, including three- and four-year plans that would allow carrying charges, but staff and OPC warned those alternatives would shift higher long-term costs to ratepayers and could prolong the companies' cash shortfalls. Staff explained its earlier filings compared settlement outcomes: a three-year plan with carrying charges in staff's calculation led to larger aggregate payments by customers (staff estimated an added $227,000 under one three‑year scenario and $373,000 for a four‑year example, compared with the parties' two‑year settlement), while the negotiated two‑year agreement reflected the companies voluntarily foregoing roughly $199,000 of revenue relative to a full revenue‑requirement result.

Commissioners repeatedly emphasized customer notice and affordability. Several commissioners asked the company and OPC to propose concrete, written payment-plan rules and consumer notification language so customers understand the amount and timing of the increase before they receive a bill. Chair Hoover directed the parties to file explanations of why the negotiated settlement is the appropriate outcome, and to include a proposed customer notice and proposed guidelines for customers who cannot pay. The chair asked that the parties submit the joint proposal no later than the following Monday; the company said it could send direct mail and bill stuffers and was prepared to implement notice quickly if the commission approves the settlement rates to take effect.

No formal vote was taken during the session. All parties on the record said they continue to stand by the negotiated settlement presented to the public utility law judge, but the chair requested the written filings and a short joint filing that includes the proposed customer notice and payment-plan framework so the commission can act promptly and with clearer consumer protections in the record.

Next steps: the chair asked for a filing from each party (or a single joint filing if the parties prefer) explaining why the negotiated settlement is the proper outcome and including the proposed customer notice and proposed payment-plan rules; the commission indicated it would review that filing quickly and decide whether to allow the settlement rates to take effect as proposed.