September 3, 2014
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Deal cuts water rate increase

Municipal and wholesale customers of Providence Water Supply who were faced with a 32.8 percent increase in rates this year have reached a settlement that reduces the increase to 2 percent. But retail customers, residential and commercial, including those in Cranston and Providence, can expect rates to increase by more than 23 percent, if the Public Utilities Commission (PUC) approves the agreement.

The PUC conducted a public hearing last week on the rate increases designed to finance the replacement of cast iron water mains, some of which were installed in the 1800s. According to testimony filed by Paul Gadoury of Providence Water, approximately 55 percent, or 550 miles, of water mains need to be replaced. Gadoury projected that rate increases would generate an additional $6 million to be dedicated to water main replacement-relining work for each year.

The proposed settlement reflects total revenues from retail, wholesale and fire protection of $69.9 million, or almost $10 million more in revenues.

Warwick, as well as the Kent County Water Authority, that are wholesale customers, argued that they should not foot the cost of replacing lines that largely service retail customers.

“The wholesale buyers are pleased,” said Timothy Brown, executive director of the Kent County Water Authority. There’s no guarantee that the settlement will gain PUC approval, or won’t go back to the drawing board.

Brown observed that either the stipulations of the agreement are accepted in full or not at all.

Despite the range of rate increases, especially on retail customers, there were no public comments during PUC consideration of the Providence Water request. Warwick was represented at the hearings by Daniel O’Rourke, director of the Water Division, and City Solicitor Peter Ruggiero.

Should the 2 percent wholesale rate increase gain PUC approval, Brown said it would be passed on to customers. The increase he projected at .5 percent.

According to the settlement filed with the PUC and a comparison of revenues by class, retail would climb from $39.2 million to $48.3 million, an increase of 23.2 percent. Wholesale revenues would climb from $16.4 million to $16.7 million. Of that, Warwick costs would go from $5.4 million to $5.5 million, while Kent County Water Authority costs would be $3.4 million, about a $70,000 increase. Other entities buying Providence Water that would likewise see a 2 percent increase are East Providence, North Smithfield, Greenville, Smithfield, Lincoln, Johnston and Bristol County.

According to a comparative analysis for retail customers, the average homeowner’s annual water bill would jump from $322.16 to $401.68. A commercial user with a two-inch meter would see a jump from $4,939.08 to $6,040.92, and an industrial user with a six-inch meter would see an increase from $24,435.80 to $29,827.72.

According to PUC spokesman Thomas Kogut, a PUC decision is expected before Thanksgiving.

O’Rourke said Warwick opposed the wholesale rate increase from the beginning because “a lot of the cost attributable to the retail customers was being allotted to wholesale customers.”

Asked what the 2 percent increase would mean to Warwick customers, O’Rourke said, “It’s miniscule; I don’t know what we’re going to do at this point. All I know is, it is good news.”

Even a slight increase was too much for Johnston Mayor Joseph Polisena.

“The PUC has never met an increase they don’t like,” said Polisena when informed of the possible settlement.

Johnston runs a system of 1,800 customers [many residents have their own wells], which Polisena said last week he would just as soon sell the system to Providence.

“I want to get out of it, we don’t belong in the water business,” he said.

He called the system of tanks, fire hydrants, metering and billing “a pain in the neck.” The system, he said, is run by the town’s Department of Public Works in concert with a private contractor.

Polisena said he has talked to Providence Water and he would give them “one more bite at the apple” before seeking other buyers. He couldn’t say what the system might be worth, although, he said, with commercial users connecting to the system, it should be of value. He would like to see the system expanded to the west, as that would offer increased opportunities for development, and he would make that a condition of a sale.

Kogut said Johnston would not require PUC approval to sell the system, but Providence would need approval to buy it because any expenditure would be financed by customer rates.

Kogut also took exception of Polisena’s characterization concerning rate increases and observed that the PUC has approved reduced natural gas and electric rates.


Comments
2 comments on this item

Congratulations to Mr. O'Rouke and Mr. Ruggiero for fighting and apparently winning this battle.

Good job Danny, Fast Fred

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