Brown County Water Utility is proposing changes to its water rates that could more than double water bills for Nashville Utilities customers, but lower them for BCWU’s direct residential customers.
BCWU, a private, member-owned utility, has filed a request with the Indiana Utility Regulatory Commission to raise the price of the water it sells to its 165 small commercial/industrial customers and to its one wholesale customer: the Town of Nashville.
BCWU’s rate consultant recommended a 14.24 percent rate decrease for the 5,293 residential water customers who are served directly by BCWU.
The consultant recommended a 35.56 percent increase for small commercial/industrial customers.
Nashville Utilities would see a 154 percent rate increase, said Town Attorney James T. Roberts. If the IURC approves it, Nashville’s approximately 1,300 water customers will bear that burden, he said.
The Town of Nashville buys all of the water it resells to Nashville Utilities customers from BCWU.
Rate increases are needed because revenue is insufficient to pay for operations, debt and other expenses required by state law, wrote BCWU attorney Peter Campbell King in his petition to the regulatory commission. Making these changes will raise revenue for the company overall by about 9 percent.
The company submitted more than 100 pages of financial data to the IURC to back up its request.
BCWU did a cost of service study earlier this year which determined that there was an imbalance in what BCWU direct residential water customers were paying versus other types of users. That is why a rate decrease was suggested for residential customers, water company board President Ben Phillips explained last week.
The average residential user of 4,000 gallons will see their bill decrease from $53.12 to $48.25 per month, he said.
The cost of service study also determined that Nashville wasn’t paying its “fair share,” Phillips said.
Forty percent of the BCWU plant’s water goes to the town and Nashville is only providing 11 percent of BCWU’s revenue, he said. That amounts to “subsidizing” water for Nashville customers, Phillips said. Under the proposed rate structure, Nashville Utilities’ part of the revenue would be bumped up to 24 percent.
Nashville Utilities pays BCWU $1.47 per 1,000 gallons now, plus monthly charges of $11,264.32. The new charges would be $4.07 per 1,000 gallons plus monthly charges of $21.999.67, he said.
Phillips said BCWU had known for awhile that Nashville’s rates were off, but they didn’t want to raise them and jeopardize that relationship with their larges customer while they were trying to get federal loans and grants to complete some major projects.
“The bottom line for us is they’re still getting a bargain,” Phillips said. “They use 40 percent of our capacity and only paying 11 percent, and with this rate hike or cost of service hike, they’re going to be paying 24 percent.
“I would have to say we haven’t done our due diligence in the last several years,” Phillips added. “We should have had the cost of service study done 15 years ago. … Now, we’re selling them water cheaper than we can produce it. And if you were a Brown County Water user, you would not be happy with a board that did that.”
Jeffery Earl, one of the town’s specialty attorneys, has filed a petition to intervene with the IURC on the town’s behalf. He calls the proposed charges to the town “clearly exorbitant and unreasonable.”
At their April 18 meeting, the Nashville Town Council OK’d hiring an expert at an estimated cost of $20,000 to $50,000 in hopes of getting the regulatory commission to turn down BCWU’s petition. The hearing will include written testimony only, Roberts said.
“They want our customers to suffer and pay the price for a rate decrease for their customers,” Roberts said.
On paying the expert, “we’re going to have to bite the bullet on this, I think, because once this rate goes up, it ain’t ever going to go down,” he said.
The IURC is required to “make decisions in the public interest to ensure the utilities provide safe and reliable service at just and reasonable rates.”
Phillips thinks the regulatory commission will side with his board because of the data that shows Nashville’s demand versus what it has been paying in. “The Office of Utility Consumer Counselor is all about seeing residential prices come down, and they take a real dim view of us subsidizing the town of Nashville,” he said.
If the IURC does approve the 154 percent increase on the town, he said he could see them possibly splitting it up over several years to lessen the “shock value.”
Cassiday said he wasn’t aware of the town having done the type of study on its own water rates that BCWU did, comparing the demand for different types of water customers versus how much they were paying into the system.
The town’s rates are based on the size of the customer’s meter and how much water they use, he said. The last time the town did any kind of rate study was in 2015 when it was getting ready to do a project, and at that time, the consulting firm did not recommend any changes, he said.
The town council hasn’t yet seen its water department’s financial report for the past year due to a recent software change.
For 2017, the water department finished 2017 in the black by $5,686.77, according to financial documents on Indiana Gateway.
The town’s water and sewer departments struggled for years to keep afloat financially, often borrowing money from each other. In 2013, the council briefly considered selling the water utility. By the end of 2015, then-Town Manager Scott Rudd and Clerk-Treasurer Brenda Young righted the ship by cutting staff costs and purchases, and more closely splitting up expenses to reflect the amount of time staff worked for each department.
In 2016, the water department was spending 26.6 percent of its budget to buy the water it resells to its customers.
Other options?
In the meantime, the town is again looking into alternate sources of water.
In times of emergency, it can use water from East Monroe Water Corporation, but it doesn’t often do that because of the cost and other factors, said Nashville Utility Coordinator Sean Cassiday. If the rate change takes effect, East Monroe water will be cheaper than BCWU water, he said.
However, East Monroe doesn’t want Nashville to draw more than 9 million gallons a month, Cassiday said. Nashville is buying 13 to 14 million gallons from BCWU now, he said.
Cassiday mentioned another possible source to the town council: looking for a grant to tap into Eastern Bartholomew Water Corporation’s pipes. The council and Roberts didn’t yet know if that would actually be possible.
Phillips and Roberts both said they didn’t think so because Nashville is in BCWU’s service territory, and that territory is protected while BCWU is federally indebted.
Likewise, Phillips didn’t believe it would be possible for Nashville Utilities water users to switch over to Brown County Water Utility as customers if their rates became cheaper than the town’s, even if a BCWU line was already near them.
Legal matters
In 2017, BCWU spent about $100,000 to install a larger water line on the outskirts of town limits to reach Hard Truth Hills, a new commercial development. Hard Truth Hills had signed a contract with Nashville Utilities for water service, but BCWU maintains that the land is in its service territory and not the town’s and that Hard Truth Hills should be its direct customer. That sparked a federal lawsuit which is still under way.
At the April 18 meeting, the town council approved spending an estimated $10,000 to $12,000 to prepare for a trial in federal court, in addition to money it has already spent on the case.
BCWU’s legal expenses were estimated at over $190,000 between July 2017 and June 2018, according to IURC paperwork.
Nashville and BCWU are both claiming that they have exclusive rights to serve Hard Truth Hills because of a 1961 federal act which protects utilities when they are paying back federal loans.
“BCWU’s legal defense of its service area is critical and necessary to its ability to repay existing long-term debt,” says written testimony by consultant Ben Foley in support of BCWU.
Big Woods as a whole is one of Nashville’s largest water customers; in turn, Nashville is BCWU’s biggest customer.
There is still a chance that the federal case could be decided by a judge without a trial, but Roberts told the town council that he did not think that was likely.
Speaking to the council, Roberts called the lawsuit “really predatory” and said that BCWU was “trying to raid one of our customers and make us pay the tab for it.” He said the fact that both parties are involved in this lawsuit is one point the town could make to the IURC in the rate increase argument.
Phillips said on April 24 that the wholesale water rate increase proposed for Nashville Utilities is “absolutely not, in any way, shape or form” in response to the federal lawsuit. “It has nothing to do with Big Woods. It has everything to do with 40 percent (usage) and 11 percent (revenue from the town),” he said.
When asked last week what BCWU’s break-even point would be in their quest to get Hard Truth Hills as a customer, Phillips said that he doesn’t think anyone expected the lawsuit to go on this long.
“I hate the legal bills, but then, what are you going to do? Just roll over?” he said.
Last year, in the midst of the debate over service territories, the town and BCWU negotiated a possible sale of Nashville’s water business to BCWU, Phillips said last week. It didn’t work out because they couldn’t agree on the terms or price. One of BCWU’s concerns was the town’s aging infrastructure, which was a financial liability, Phillips said. “We came to a conclusion of no, we weren’t interested.”
