PSC Hits Consumers with Grinchian Rate Hikes

‘Twas the week before Christmas and all through the state, it’s time for a visit from the PSC, to jack up your water rate.

The jolly bureaucrats at the Public Service Commission may be adverse to coal, but they are leaving something worse in your stocking this December,  a nice new, larger, water bill—especially if you get your water from Milwaukee.

The PSC approved a 20.8 percent overall increase in annual revenues for the Milwaukee Water Works. This is a 23.1 percent rate increase for retail customers and a 7.9 percent increase for wholesale customers.

To be contemporary, Parker Brothers is going to have to raise the price of the Water Works utility in their Monopoly game, that’s for sure.

Milwaukeeans in single-family homes will see their average water bill jump from $145 to $182 annually. Commercial consumers can expect a 23 percent increase and industrial customers can expect a 26.5 percent increase.

Most of Milwaukee’s suburban water customers were adversely affected by the rate increases as well. Mequon will see a 32.6 percent increase in their rates and New Berlin will see a 25 percent increase.

On the other hand, Butler won the lottery and will actually see a 21.3 percent decrease in their rates.

Milwaukee Water Works officials pointed to a slightly negative rate of return last year by the utility, -.69 percent, the result of increased costs of the chemicals used for water treatment and less demand for water.

The city of Milwaukee also took $3 million of “surplus earnings” last year from the Water Utility and put it in the city’s general fund for 2010. This was part of a plan to increase rates overall to generate revenue for the city of Milwaukee that was not property based.

The city of Milwaukee’s Budget Summary for 2010 said, “In 2009, the Water Works received Common Council approval to pursue a two part plan to increase Water Works revenue. This plan will stabilize the utility finances, preserve enough positive cash flow to transfer $3 million of surplus earnings to the city General Fund, while keeping water rates highly competitive.”

However, after the $3 million was taken for the 2010 budget and the intended rate increases were announced, Milwaukee’s suburban customers balked. The issue even became an issue in the 2010 race for governor when Milwaukee County Executive Scott Walker questioned whether the sudden proposed jump in rates would be detrimental to employers such as Cintas that were heavily affected by water rate increases.

Milwaukee originally requested in September 2009 a 28.5 percent in water revenue. An audit by the staff of the PSC reduced the request to 25.3 percent. PSC commissioners expressed concern about such a dramatic increase in the rates in a poor economy and settled on the 20.8 percent overall increase in annual revenues. The Milwaukee Water Works will collect $19 million more in revenue.

Milwaukee is not planning on any revenue from the water utility for the city’s general fund in 2011. However, if the city of Milwaukee’s budget takes another hit, such as a need to increase funding for the city’s pension liability, will the city be tempted to go to the well again for more “surplus earnings?”

The other question is whether this is just the beginning of spiraling rate increases. Milwaukee has drained the cash reserves of the Water Works. The Water Works has double the capacity it needs, and therefore has more to maintain. Will the new revenue stream be enough, and could the higher rates actually mean a decrease in water sales?

The PSC’s decision came in the same week that the Joint Finance Committee approved the PSC’s plan to dramatically increase the assessment on energy utilities to pay for more energy conservation projects. The assessment will jump from $94 million to $256 million in just four years.

The legislature rejected a plan earlier in the year to create a renewable energy mandate because the mandate would have increased energy rates for consumers. Dubbed the “Clean Energy Jobs Act,” the PSC endorsed-plan would have raised energy rates between 6.4 percent and 12.5 percent.

Unable to force an increase in the cost of energy through the legislature, the PSC pushed a new energy assessment through the backdoor as a regulatory measure.

These large increases in the cost of energy and water are coming at a bad time for the economy. A new poverty report indicates 18 percent of Milwaukee County residents are living in poverty. November employment figures show 4800 fewer private sector jobs in Wisconsin.

Unfortunately, because of the staggered six-year terms commissioners serve, legislators will have to contend with a liberal majority on the PSC for some time yet. The legislature will need to find out who’s naughty and nice as they watch the PSC puruse policies that run counter to Governor-elect Scott Walker’s pro-growth agenda.

Because, left unchecked, the naughty little elves at the PSC intend on soaking Wisconsinites.

Bah. Humbug.

By James Wigderson
Special Guest Perspective for the MacIver Institute