June 21, 2007

Water rates could go up

A staffer for the Public Utilities Commission calls one piece of pending legislation “the equivalent of a … tax” on water utility bills.

By Timothy C. Barmann, Journal Staff Writer

The General Assembly is considering two municipal water-related bills that could raise rates for some 150,000 customer in the state, with increases as high as 16.3 percent in some communities.

The two pieces of legislation are expected to be voted on today by the House Finance Committee.

One bill would allow the five municipal water systems that are regulated by the Public Utilities Commission to earn a “reasonable rate of return” – essentially a profit – of at least 8 percent of annual revenues.

The PUC would determine what is reasonable. Conceivably, it could implement a rate of return higher than 8 percent, said Eric Palazzo, legislative liaison for the Division of Public Utilities and Carriers.

Currently, those water systems are not permitted to earn a profit on the sale of water. The proposed legislation would essentially raise rates of those water systems by at least 8 percent, Palazzo said.

Shareholder-owned water systems, as well as those specifically exempted from PUC regulation, such as Bristol County Water Authority, would not be affected.

The new profits would not go to improve the water systems, but rather to the municipalities that own them, according to the PUC.

Affected would be the 75,000 customers of the Providence Water Supply Board; the 25,000 customers of the Pawtucket Water Supply Board; the 27,000 customers of the Kent County Water Authority; the 15,000 customers of the Newport Water Division; and the 10,000 customers of the Woonsocket Water Division, according to the DPUC.

The PUC wrote a letter to the House Finance Committee, in which it said the legislation would impose “the equivalent of a … tax” on water utility bills. The letter is dated June 7 and is signed by commission staffer Patricia S. Lucarelli.

“The effect of the proposed legislation would be to increase wholesale and retail rates without a corresponding increase in the utility’s service, in effect, an 8-percent tax,” Lucarelli wrote.

The legislation was put forth on behalf of the City of Providence, said Larry Berman, a spokesman for House Speaker William Murphy. A House version of the bill was sponsored by Rep. Edith H. Ajello, Rep. David A. Segal, Rep. Joseph F. Almeida, House Majority Leader Gordon D. Fox, and Rep. Joanne M. Giannini. All are Democrats representing Providence.

A Senate version of the bill was introduced by Sen. Rhoda E. Perry, Senate Majority Whip Dominick J. Ruggerio, Sen. Juan M. Pichardo and Sen. Maryellen Goodwin. All are Democrats representing Providence. The Senate Finance Committee was expected to vote on the bill yesterday.

The other bill that could raise water rates would prohibit municipal water providers from charging rental fees to cities and towns.

Municipalities pay these rental fees, which range from $110 for each hydrant in Woonsocket to $675 for each hydrant in Newport, in order to maintain the infrastructure necessary to make sure that the water system can deliver large amounts of water in the event of a major fire, according to Palazzo of the DPUC.

The loss of these fees would essentially mean that municipal water systems would have to make them up by charging higher rates, Palazzo said.

According to DPUC calculations, these are the rate increases that would be needed to make up the lost water revenue: Kent County Water Authority, 6.68 percent; Newport Water Division, 7.33 percent; Pawtucket Water Supply Board, 6.37 percent; Providence Water Supply Board, 3.15 percent; and Woonsocket Water Division, 8.29 percent.

The so-called “fire-hydrant” bill is supported by the League of Cities and Towns, which said that taxpayers bear the cost of these rentals through property taxes. Eliminating the rental fees would offset – although not necessarily reduce – local property taxes, the League said.

The impact of both pieces of legislation could raise water rates, ranging from 11 percent to 16 percent, according to the DPUC.

The agency’s position on both bills is “tread very carefully,” Palazzo said.

“We’re opposed to anything that raises utility rates unnecessarily.”