The chart above depicts the trend showing the annual difference between revenues and expenses for the Kennebec Water District from 1993-2005. 1993 was the year that the Kennebec Water District's water treatment facility came online and the financial requirements of the District changed substantially. Adequate revenue was necessary to cover the new costs of debt service incurred in the construction of the plant and covered storage tanks as well as the added operational costs associated with the plant.
There are a few major points to be made regarding this chart. Point 1: in no year did revenues generated meet or exceed expenses. In order to ensure that KWD did not experience an operating loss for the year, funds intended for capital improvements such as main replacement projects had to be diverted to cover operating costs. Point 2: expense levels are very stable over the complete 13 year period. Kennebec Water District implemented many cost saving measures during the period to control expenses without compromising its service standards. Point 3: Beginning in 2005, there is a sharp jump in expenses due primarily to major price increases in electricity, chemicals, construction materials, health insurance, fuel oil, gasoline, and pavement - all of which were already prime expense contributors for the District. Our rate case proposal is based on projections of expenses and revenues for 2007. The year 2006 is not shown in our comparisons because it is still in progress and actual annual costs have not been determined, although half year costs indicate the 2007 projections are on track. KWD has a fiscal year running from January through December.
Rate Comparison - Maine Water Utilities
The chart above depicts the current and projected rates (with the proposed 19.65% increase in effect) of the Kennebec Water District in comparison to the other Maine water utilities. The comparision is not completely accurate in that the rates of the other utilities are only valid through 2005. Several utilties have had increases in 2006 and several more have proposed increases in process at this time. Data used was taken from the database of the Maine Public Utilities Commission. The rate comparison is based on a quarterly use of 2000 cubic feet, which is a standard measure for a typical Maine family.
One point to be made when comparing utility rates is that most of the utilities on the high end of the scale are utilities that have had to construct water treatment facilities in response to the requirements of the Safe Drinking Water Act. Utilities that use ground water supplies or utilities that have surface water supplies that have exceptional source water quality (such as Portland Water District, Bangor Water District, Auburn Water District, and Lewiston Water Department) have not been forced to invest in expensive filtration infrastructure and, therefore, typically have much less debt and operational expense. China Lake, the source of supply for the Kennebec Water District, has less than exceptional water quality and treatment is a requirement.
Comparison of Municipal Fire Protection Charges
The chart above depicts the comparison of public fire protection charges for service areas of Maine water utilities. The costs are shown on a per hydrant basis, meaning that the total public fire protection charge is divided by the number of hydrants actually in service. The Kennebec Water District is shown at both its current rate and proposed rate. The proportion of revenue that the Kennebec Water District derives from public fire protection is just over 12% of its total revenues.
---------------------------------------------------------
Table of Avoided Cost
Several customers, when made aware of the impending rate increase of 19.65%, asked District staff why the District did not increase rates on an annual basis to match inflation rather than hit them with the total increase all at once. The table below shows the impacts that would have occurred if the District had followed such a scenario. The cumulative effect of annual inflationary increases is shown in this table. As an example, a customer with an average quarterly bill of $75 (annual bill of $300) would have spent an additional $140.52 since the 2001 increase if rates had been raised annually. In addition, the customer would be required to pay the same amount going forward as the District is requiring in the new rates. The rate in 2007 would be the same under either scenario.
The District was fortunate to have had enough funds in a reserve account to adequately cover operating costs and capital improvement projects over the period. That reserve fund account became available after the refinancing of a major bond. The sharp increase in costs projected for the year 2007 combined with the fact that no reserve funds remain to offset another revenue shortfall, force the District to seek rates to ensure adequate revenue to meet those expected expense levels.
| Avoided Costs |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
|
|
|
|
|
|
|
|
| per quarter |
$50.00 |
$51.50 |
$53.05 |
$54.64 |
$56.28 |
$57.96 |
|
| annually |
$200.00 |
$206.00 |
$212.18 |
$218.55 |
$225.10 |
$231.85 |
|
|
|
$200.00 |
$200.00 |
$200.00 |
$200.00 |
$200.00 |
|
| total extra - per year |
|
$6.00 |
$12.18 |
$18.55 |
$25.10 |
$31.85 |
|
| total extra - cumulative |
|
|
|
|
|
|
$93.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| per quarter |
$75.00 |
$77.25 |
$79.57 |
$81.95 |
$84.41 |
$86.95 |
|
| annually |
$300.00 |
$309.00 |
$318.27 |
$327.82 |
$337.65 |
$347.78 |
|
|
|
$300.00 |
$300.00 |
$300.00 |
$300.00 |
$300.00 |
|
| total extra - per year |
|
$9.00 |
$18.27 |
$27.82 |
$37.65 |
$47.78 |
|
| total extra - cumulative |
|
|
|
|
|
|
$140.52 |
|
|
|
|
|
|
|
|
| per quarter |
$100.00 |
$103.00 |
$106.09 |
$109.27 |
$112.55 |
$115.93 |
|
| annually |
$400.00 |
$412.00 |
$424.36 |
$437.09 |
$450.20 |
$463.71 |
|
|
|
$400.00 |
$400.00 |
$400.00 |
$400.00 |
$400.00 |
|
| total extra - per year |
|
$12.00 |
$24.36 |
$37.09 |
$50.20 |
$63.71 |
|
| total extra - cumulative |
|
|
|
|
|
|
$187.36 |
-------------------------------------------------------------
The following table depicts the impact on residential customers at some typical use rates. The District has a minimum quarterly charge (currently $48.85 and proposed to be $58.45). That minimum bill covers 3 months of use and includes an allotment of 300 cubic feet of water (approximately 2250 gallons). Water consumption beyond the 300 cubic feet per quarter is billed at a cost of $1.232 per additional 100 cubic feet (750 gallons). That unit cost will be increased to $1.47 per 100 cubic feet with the new rates.
The table shows customer impacts for use rates of 1200 cubic feet per quarter and 2000 cubic feet per quarter as well as at the minimum rate.
Customer Impacts
|
Water |
|
|
|
|
|
|
|
|
|
| Proposed KWD rate increase |
charge |
Customer |
Demand |
Minimum |
|
Cost per |
1200 c.ft/qtr |
Impact at |
2000 c.ft/qtr. |
Impact at |
|
(Inc. 300 c.ft) |
charge |
charge |
charge/qtr. |
|
added 100 cu.ft. |
(added 900 c.ft) |
1200 c.ft/qtr |
(added 1700 c.ft) |
2000 c.ft/qtr |
|
|
|
|
|
|
|
|
|
|
|
| Current rates (5/8" residential) |
$3.70 |
$6.66 |
$38.49 |
$48.85 |
|
$1.23 |
$11.09 |
$59.94 |
$20.94 |
$69.79 |
|
|
|
|
|
|
|
|
|
|
|
| Qtr. bill with 1% increase |
$3.74 |
$6.73 |
$38.87 |
$49.34 |
|
$1.24 |
$11.20 |
$60.54 |
$21.15 |
$70.49 |
| Annual dollar increase over current |
|
|
$1.96 |
|
|
|
$2.40 |
|
$2.80 |
| Dollar increase per bill over current |
|
|
$0.49 |
|
|
|
$0.60 |
|
$0.70 |
| Per day increase over current |
|
|
|
$0.01 |
|
|
|
$0.01 |
|
$0.01 |
|
|
|
|
|
|
|
|
|
|
|
| Qtr. bill with 19.65% increase |
$4.43 |
$7.97 |
$46.05 |
$58.45 |
|
$1.47 |
$13.27 |
$71.72 |
$25.06 |
$83.51 |
| Annual dollar increase over current |
|
|
$38.40 |
|
|
|
$47.10 |
|
$54.87 |
| Dollar increase per bill over current |
|
|
$9.60 |
|
|
|
$11.78 |
|
$13.72 |
| Per day increase over current |
|
|
|
$0.11 |
|
|
|
$0.13 |
|
$0.15 |
-------------------------------------------------------------
|
