What's News in Pleasant Prairie, Wisconsin
During 2012, the Kenosha Water Utility submitted a request to the Public Service Commission to raise water rates. This gave Pleasant Prairie the opportunity to contest the Kenosha Utility’s request. Below are some of the highlights related to the petition, along with their responses.
The petition submitted by the Kenosha Water Utility requests a rate of return of 5.50% for wholesale customers and a 4.00% rate of return for retail customers. The petition further requests, that if the Public Service Commission doesn’t approve the different rates, that all customers be charged the higher rate of return of 5.50%.
The petition states that a higher rate for wholesale customers is justified because retail customers deserve, by law, a return on their investment, although, Pleasant Prairie has always paid a return on investment to the Kenosha Water Utility by paying water rates.
As a general rule, rates paid by wholesale customers are typically lower than retail rates because less overhead is required to serve a wholesale customer. This rule particularly applies to Pleasant Prairie’s water utility, given its capabilities and its current schedule of taking water.
A different rate of return for wholesale and retail water customers amounts to a subsidy, when one customer class pays more and another customer class pays less for the same cost item. The 1997 agreement between the two utilities prohibits the Kenosha Water Utility from subsidizing other Utility customers with payments from the Pleasant Prairie Utility.
The petition submitted by the Kenosha Water Utility also states that a higher rate for wholesale customers is justified because there is extra risk and cost involved in serving a wholesale customer. The petition referred to the Pacific Gas and Electric plant that decided against locating in Pleasant Prairie. It stated that additional infrastructure to support anticipated water needs was installed, and that when PG&E decided not to locate in Pleasant Prairie, the infrastructure went unused.
The 2001 contract between the two utilities drawn to facilitate PG&Es potential plant in the Village made the Village a captive customer (the largest customer) of the Kenosha Utility indefinitely, barring any breach of contract.
As a result of the discussions with PG&E, both utilities made investments in additional infrastructure. The fact that the increased demand didn’t come to pass affected both utilities. Nonetheless, Kenosha has a captive, high volume customer for life; and Pleasant Prairie’s water utility rates continue to take into account the appropriate amount of the cost associated with the Kenosha Water Utility’s investment in this infrastructure.
The Kenosha Water Utility’s cost of service study recommends a 34% increase in the wholesale rates it charges to Pleasant Prairie’s Water Utility. A cost of service study conducted by Baker Tilly on behalf of the Village indicates that Pleasant Prairie’s rate should increase by 1% or even decrease. Why is there such a great difference between the two recommendations?
A cost of service study helps ensure that the utility is charging a fee based on the level of service provided. This helps ensure that customers are not charged arbitrarily, but are instead charged based on the actual service they receive. The cost of service study conducted by Baker Tilly, takes into account the impact that Pleasant Prairie’s water infrastructure has on the Kenosha Utility.
The Village takes water from the Kenosha Water Utility through a single 36 inch water main that runs from the Kenosha Utility to the Village limits. From this point on, Pleasant Prairie’s infrastructure is used to pump, store, test and distribute the water to utility customers. The Village takes water during overnight (off peak) hours at a consistent rate and stores enough water to meet average residential use for multiple days while still having enough water in reserve to fight fires.
The Baker Tilly cost of service study takes into account all of the Kenosha Utility infrastructure that helps transport safe drinking water from Lake Michigan to the Village limits: from the intake pipe that extends into the lake, to the treatment facilities, supplies and personnel to maintenance, the transmission of the water from its origin until delivery in the Village, and all factors in between.
The Kenosha Water Utility’s cost of service study, however, assumes that Pleasant Prairie as a customer should pay for a portion of ALL of the utility’s infrastructure, instead of just the infrastructure that is used to serve Pleasant Prairie customers. The Kenosha Water Utility has three pressure zones that extend from east to west. Pleasant Prairie uses one 36 inch transmission main in the first pressure zone.
Kenosha’s study assumes that Pleasant Prairie customers should pay for the distribution lines running to homes and businesses throughout all three zones that serve the city, Somers and Bristol. Kenosha’s study assumes that Pleasant Prairie customers should pay for water towers and public fire protection storage throughout all three zones (as far away as UW-Parkside, Bristol and Somers).
The Kenosha Study assumes this despite the fact that the Village takes water through only one 36” transmission main in Zone 1 and despite the fact that Pleasant Prairie customers don’t use Kenosha’s public fire protection storage (the Village has adequate storage of its own). This would amount to a Pleasant Prairie Water Utility Customer not only paying for their own water infrastructure costs, but also for all of Kenosha’s customers’ costs as well.
The Village continues to believe that the best way to resolve the matter presents a winning alternative, not just for Pleasant Prairie rate payers, but for the entire Kenosha Community. In both the short- and long-term, fair water rates based on the actual cost of services will help attract businesses that are larger water users who are looking to locate in the area. Businesses that are large water users, have typically proven to be longer term members of a community and are more labor intensive - providing more jobs.
Fair water rates will allow these businesses a choice to locate in any municipality throughout our county. Even more importantly, this would demonstrate to developers and corporations from other parts of the country that the entire Kenosha community welcomes quality growth and cooperatively supports strong and sustainable businesses. Simply said, it makes the Kenosha area more competitive with other regional business destinations.
WHAT CAN YOU DO
On April 22, at 10:00 a.m. the Public Service Commission will hear testimony regarding the water rate matter. While the hearing will be held in Madison, ratepayers, members of the business community and anyone with an interest is invited to the Kenosha Water Utility location at 4401 Green Bay Road to both listen and share comments related to the testimony. Comments can be shared at the hearing both verbally and in written form.
You can also submit your comments by clicking here.
Those interested, can also read testimony and see related documents first hand by clicking here. Select the "Documents" tab. More information about the Kenosha Water Utility is available at KenoshaWater.org. There you can learn more about the Kenosha Water Utility facilities that help provide clean, safe drinking water to Kenosha Area customers and learn about recent utility updates through their quarterly newsletter.
Back to News