Fearing water customers would be paying for new facilities that are not fully designed, the Public Utilities Commission (PUC) recommended an agreement on Friday that would reduce projected rate increases for approximately 70,000 customers in Providence, Cranston, Johnston and North Providence.
If approved by the parties, the settlement would result in an increase in the volume rate of about 15 percent, as opposed to the 23 percent first proposed by the Providence Water Supply Board. Also, the settlement would not alter the 2 percent increase in wholesale rates paid by the Warwick Water Division and the Kent County Water Authority to Providence.
“By and large the agreement is a good one,” Commissioner Herbert DeSimone Jr. said. However, DeSimone reasoned that testimony does not support at least $2.4 million of the $9 million Providence Water proposes to raise with a series of rate hikes.
The $2.4 million was earmarked for a facility that Providence Water argues is needed but has not assigned to a site. The utility has rejected a Johnston location and is looking to build in Providence.
DeSimone said he has trouble supporting what Providence Water general manager Boyce Spinelli described as “not a known or measurable expense.”
Describing his visit to Providence Water operations, Commissioner Paul Roberti said, “Time has come for a new state-of-the-art facility. I support that.”
But Roberti had reservations about the proposed 23 percent retail rate increase, adding that it is a duty of the PUC to maintain the lowest rates possible. He also said he is “not comfortable” with $4 million in “soft costs” built into the rate increases.
“I want to make sure we get this right,” Roberti said.
He said the utility should be monitored closely so that funds aren’t flowing into soft costs at this point.
Commission Chair Margaret Curran raised a technical issue.
She noted that the settlement reached by Providence and its wholesale buyers stipulated that the agreement would be null and void if any of the terms changed.
Would the conditions sought by the commission enable parties, including Warwick and the Kent County Water Authority that are wholesale buyers, to back out of the settlement?
That didn’t appear likely to happen.
Warwick City Solicitor Peter Ruggiero said the city is happy with the agreement reached on wholesale rate increases. When the utility applied for the increases – the first in four years – it proposed a 32.8 percent hike in wholesale rates. Warwick and Kent County argued such an increase would have Warwick and Kent customers paying for system upgrades that should be borne by Providence Water Supply retail customers. About $6 million of new revenues generated by the higher rates will go toward replacing and relining cast iron pipes, not lines supplying water to wholesale buyers.
The settlement calls for a 2 percent increase in wholesale rates.
Providence is facing about 550 miles of cast iron pipes, some dating back to the 1800s. Replacing or relining those lines costs about $1 million a mile.
Following Friday’s meeting, Spinelli said the utility has filed a $360 million 20-year replacement plan with the Department of Health. He said the infrastructure program would upgrade 65 percent of the outdated pipes over the 20 years.
Commissioners wanted to ensure that savings resulting changes in the settlement benefit retail customers.
Addressing an issue raised during the Nov. 13 hearing, DeSimone said he found the cost of police details on Providence Water projects as excessive. The utility said police details would represent 9 percent of the cost of the program.
“This is really an issue that needs to be addressed. Obviously safety comes first, but obviously there is some abuse going on,” he said. DeSimone pointed out that ratepayer dollars are paying for the details. “The economy in the state is awful, we can’t afford to be spending that.”
Roberti called the amount spent on police details a “shocker.”
Curran said she wanted to hear from public safety officials, but clearly it is an issue the commission plans to look at.
As the extension for the water settlement expires Dec. 28, the utility was directed to return Tuesday with a decision over revisions requested by the PUC.
Spinelli said the amendment sought by the PUC “is not totally unexpected and that on the surface it seems fair.” But before making a commitment, he said, the request would need to be evaluated and agreed to by the parties.
PUC spokesman Thomas Kogut said Wednesday that a settlement excluding the $2.4 million was recorded Tuesday and that the commission would consider the matter at its Dec. 6 opening meeting.