Tapping into water rates

Water Distribution Operator Tim Behrens reaches up to catch a wrench as he works Friday to repair a water valve at a water plant in Crystal Lake.
Water Distribution Operator Tim Behrens reaches up to catch a wrench as he works Friday to repair a water valve at a water plant in Crystal Lake.

In 2011, Killarney Water Co. asked the Illinois Commerce Commission for permission to raise its rates 249 percent. The company had not seen an increase since 1995.

After a review, the commission allowed Killarney to bill $43.59 a month, up from $15.48 – an increase of 181.6 percent for customers who use 4,578 gallons a month. Customers, however, were allowed to phase in the higher rates.

However, the Killarney case is being re-reviewed by the ICC.

The commission regulates private water companies, ruling on rates when utilities ask for large increases, sometimes for the first time in many years. Large increases are meant to pay for maintenance costs, capital upgrades and other expenses in running a water utility.

“The revenue increase reimburses the company for what it has spent to upgrade or maintain the water system,” said Beth Bosch, spokeswoman for the ICC. 

In the Killarney case, there had not been a rate increase in several years, meaning a number of projects were included.

When the ICC reviews a rate request from a private entity, it looks at the company’s finances, such as its operations and maintenance budget, equipment costs, its proposed costs for insurance, and plans for staff pay. It has 11 months to review a rate request.

The ICC also “measures them against a comparable company to see if it’s a reasonable case,” Bosch said.

“The company presents its proposal for new revenue based on its expenses,” Bosch said. “We use a ‘test year’ when reviewing those expenses, and the commission evaluates the companies’ costs for operations and maintenance, among other items, to see if they are reasonable, before approving any increase in revenue.”

During the review process, residents have opportunities to comment.

With smaller companies, there are fewer customers over whom to spread the cost of the increase.

Locally, the Eastwood Manor Water Co. – the private water utility for the unincorporated subdivision on McHenry’s eastern border recently – asked for an increase to keep up with its costs and inflation.

McHenry Shores Water Co. owner Thomas P. Mathews asked in 2011 to raise rates nearly 200 percent for his 537 water customers to install new meters, repair hydrants and valves, and build up an inventory of parts and supplies. That case is pending.

Not all increases for water utilities are large hits. Municipally owned utilities can raise their rates without going through the ICC.

In Crystal Lake, higher rates were instituted in 2008 to cover rising energy and commodity costs to pump and treat water and wastewater, and to replace old infrastructure.

The city had an engineering study done to “review operations costs, capital projections, connections and expected water demand,” said AJ Reineking, assistant to the public works director for Crystal Lake.

The rate increases are being phased in over five years – 5 percent to 6 percent a year – and works out to about 60 cents to $1.20 a month for the average user.

“We’re not in the profit business,” Reineking said. “We just don’t want to be running in the red.”

The approach of smaller but regular increases protects users from big financial hits at one time.

“We want to take it as we need it,” Reineking said. “We don’t want a big impact of residents. You don’t want to have any surprises out there. We want to be as open and transparent about everything we can.”

Cary is in the process of studying its water rates. The last time it did so was in 2007.

The village has hired a company to evaluate operating expenses, short- and long-term debt obligations, and capital needs to ensure the overall financial health of the water and sewer enterprise funds.

Marengo planned a $12 million upgrade of its wastewater treatment plant to increase its pumping capacity. The city last year doubled wastewater rates to help pay for the expansion and then backed off part of the increase when the project was put on hold because a buried landfill was found on the site where the city intends to build.

Reineking said utility providers have increasing costs for operations and commodities, and pumping water from the ground and processing wastewater requires lots of energy.

“Energy costs, fuel costs, commodities, the same thing homeowners are seeing volatile prices on, we see those also ... on a larger industrial scale,” Reineking said.

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