The Madison Water Utility has applied for a 30 percent overall rate increase, which would add about $7.40 a month to the average residential customer’s bill.
The increase would result in over $10 million in new revenue, but none of the new revenue would be used to cover a $6 million deficit in the utility’s 2017 budget, officials said.
The increase would be the first for the utility in three years.
The Public Service Commission, the body that considers rate increases for Wisconsin’s utilities, has scheduled a public hearing for the Madison Water Utility application at 2 p.m. Aug. 29 at the PSC offices, 4822 Madison Yards Way.
The utility initially applied for an overall revenue rate increase of 26 percent in October, but the PSC in May recommended the utility increase the request to 33 percent to provide for better debt coverage for bonds issued by the utility.
After some adjustments, the request in the application became 30.44 percent, but the number could change after the public hearing.
The increase only applies to water and fire protection charges on the municipal services bill, which is about one-third of the total bill.
Madison Water Utility spokeswoman Amy Barrilleaux said the rate increase “has nothing to do” with the $6 million cash deficit found when the utility was preparing for its annual audit in April.
“The increase in rates will largely be used to fund water main replacements and other water infrastructure upgrades,” Barrilleaux said.
“It also covers operational costs, like energy used to pull water from the ground and pump it throughout the city, facility maintenance, main break repairs, etc.,” she said.
According to the public notice from the city on Friday, the water bill for general service and public fire protection service for the average residential customer with a 5/8-inch meter using 4,000 gallons a month would increase by $7.40, from $19.51 to $26.91 a month, or 37.9 percent.
Other rate increases for different types of users brings the overall hike to 30.44 percent.
To make up for the $6 million shortfall from 2017, the utility is proposing to sell eight surplus properties, get a low-interest loan from the city, delay capital spending and reduce operational costs.
The reason for the shortfall was a drop in revenues from the budgeted $45.6 million to about $38.1 million.
The application for the rate increase includes an eight percent rate of return, which would help the utility get to a positive cash flow instead of the negative cash flow in 2017.
On Tuesday, the City Council didn’t give a five-year contract extension to Madison Water Utility general manager Tom Heikkinen, referring the matter to the Water Utility Board.
Mayor Paul Soglin included directives in the new contract to address the deficit, so council members felt it was better for the board to look at the deal.