2007 Rate Increase
The Kennebec Water District is currently in the process of implementing a rate increase. The increase is 19.65% across-the-board. The across-the-board method was intended to make the increase equitable for ratepayers. The increase was effective on January 1, 2007.
To determine the potential impact on your own bill for 2007, simply increase your typical 2006 bill by 19.65%. KWD bills quarterly, so each bill represents three months of service.
Rate Case Questions and Answers (the following were frequently asked questions when the rate case was first proposed):
How much of an increase is KWD seeking from the Maine Public Utilities Commission? The District is seeking a total across-the-board increase of 19.65%. The District needs an increase of 16.87% to make up an expected deficit of $723,209 in 2007 and has included an additional 2.78% as a contingency reserve for the total 19.65%.
When will the increase take place? The increase is proposed to be effective on January 1, 2007.
When will I notice the increase on my bill? Because KWD bills on a quarterly cycle, you may receive a bill that partially reflects the old rate and partially at the new rate. The new rate will be in effect for the portion of the billing period after the effective date of January 1.
How much will the increase cost me? Your bill can be expected to increase by 19.65%. An average family of four using 2000 cubic feet (15,000 gallons) per quarter will see an increase of $13.72 per quarterly bill ($4.57 per month). A person used to the minimum bill of $48.85 will see an increase of $9.60 per bill ($3.20 per month).
Why is KWD applying for this increase? KWD has been impacted by many of the same increases as its customers. Substantial increases in the cost of electricity, chemicals, health insurance, and construction materials have been major contributors to the expected shortfall. KWD must have adequate funding to ensure it can continue to meet its operational requirements.
How did deficit get so large all of a sudden? KWD has actually been seeing increasing annual operating losses, beginning in 2004. We have been able to offset those losses and avoid increasing rates by using reserve funds that became available upon a bond refinancing. Those funds are now exhausted, however, and we must increase the rates to provide adequate revenue to cover the expected operating expenses going forward.
When was your last increase? The last KWD increase went into effect in February 2001.
Isn’t this increase greater than inflation? Actually, from January 2001 to January 2006, the CPI-W has increased 15.9%. Adding the expected increase of 4.0% for 2006 brings the inflation rate to 19.9% - slightly more than the requested rate.
Why didn’t you just have annual increases over the past 6 years instead of getting a large increase now? By using the reserve funds we had available, we were able to delay any increases, thereby saving KWD customers money over the past 6 years. For instance, assuming the inflation rate averaged 3% for each of the six years and KWD had raised its rates to match that inflation rate each year, a customer with an average bill of $50 per quarter ($200 per year) would have ended up paying a total of $93.68 more than under the current scenario and still would have the same quarterly bill going forward that the proposed rate increase will require. A customer with a $75 average quarterly bill will have saved $140.52 over the period without annual increases.
Isn’t water expensive from the Kennebec Water District? After the minimum charge for service (proposed to increase to $58.45 from $48.85) which includes 2250 gallons of water each quarter, each additional gallon of water will cost less than two tenths of one cent ($0.002). That means 100 gallons of water, delivered and treated to meet rigorous government quality standards, will cost 20 cents.
Remember, most water bills are quarterly bills. For a better comparison to the costs of other utilities such as electricity, telephone, and cable that are billed monthly, you should compute the cost of water per month.
How do the proposed rates of KWD compare with those of other Maine water utilities? The rates for KWD fall in the mid-range of Maine water utilities. Because KWD has to pay for the debt service related to its mandated water treatment facility, it has higher revenue needs than most utilities that do not have to filter or that have ground water supplies.
Why does KWD need to annually fund main replacement projects? KWD has over 170 miles of water main, over 8000 water service lines, and over 630 hydrants in its system. Parts of the system are over 100 years old. To maintain the system and continue to meet regulated water quality standards, KWD must annually replace a percentage of those facilities with the priority being those that show structural or water quality problems. With significantly increasing material and fuel costs, the amount of upgrade that can be completed per dollar spent decreases annually.
Why do you need a contingency reserve? The contingency reserve serves two primary functions. It is in place to be available to cover the costs in the event of a major system failure or emergency for which normal revenues are inadequate. In addition, the reserve can buffer the time needed before another increase is necessary.
Who oversees the operations and finances of KWD? As a public utility, KWD is subject to many regulations and considerable government oversight. Governmental agencies impose may of our operating procedures and closely review the District. Any rate increases we propose must be reviewed and approved in advance by the Maine Public Utilities Commission. MPUC requires and receives the District’s annual audit and a report on the District’s annual operations, including revenues, expenses, and statistical data.
KWD is in compliance with all state and federal regulations. We believe the District operates effectively and efficiently to provide the communities we serve with clean and safe drinking water.
Will I have a chance to comment on the increase? KWD will host a public hearing on the rate case at 7:00 PM on Wednesday, November 1, 2006 at the Waterville City Council Chambers. Details describing the need for the increase will be presented. The public will have the chance to comment and question. KWD Board of Trustees will be in attendance with KWD staff.
