MADISON — “Things are pretty busy around here.”
That is how Lake Mills’ Department of Public Works director Paul Hermanson explains why the water utility is seeking its third rate increase in three years.
After a 15-percent rate increase in January 2017 and a 26-percent rate hike implemented in January 2019, the Light & Water Department is seeking an 8.4-percent bump, according to an application filed Tuesday with the Wisconsin Public Service Commission.
If approved as requested, an 8.4-percent increase would add about $2.80 to an average residential customer’s monthly water bill that currently is $33.57 for 3,000 gallons of water and the Public Fire Protection charge.
Driving the need for more revenue is the city’s large number of lead service laterals, which are mostly on private property, said Hermanson.
“When the resident replaces their lead service lateral, we’re required to replace ours, too … which costs us about $5,000 per location,” he said.
The city initially estimated that there were 1,000 laterals, the pipe that connects a house to a city water main, on residential properties. However, a house-by-house inspection revealed the number to be closer to 325, Hermanson said.
Lake Mills received a $300,000 grant from the state Department of Natural Resources to fund lateral replacement on residential properties. While those dollars have covered replacing about 120 lead service lines, the money has been fully committed and no more is expected, Hermanson said.
Residents who still have lead service lines are urged to let water to be used for drinking or cooking to run for 30 seconds to about one minute to flush out the lines, he said. The other alternative is to purchase and install an EPA-approved filter system that will remove lead and copper in water lines.
A third option under consideration is passing an ordinance that requires replacement of all lead service lines in the city, which would allow the utility to recover the replacement cost in water bills.
“It’s being looked at, but we’re not sure if we want to do that,” Hermanson said.
The water system doesn’t have a lead problem, Hermanson emphasized. However, lead service laterals and fixtures remain in some houses that are fused with lead solder that leach lead into the water.
The DNR mandated that the utility address the lead leaching problem, and since June 2018, the utility has spent $30,000 testing ways to stop the leaching. A phosphate product has been added to the water that is designed to coat pipes and reduce leaching, but to date, results have been ineffective, Hermanson.
“By the end of the year, the utility will have confirmation that this is the best we can do or we will have to make slight tweaks,” he said.
Radium has been found in higher concentrations than the DNR accepts and the water utility has spent $50,000 to identify the source and research a mitigation plan to lower radium within acceptable levels, Hermanson said.
Radium is formed by decayed uranium. Radium emits alpha and gamma rays which decay and form radon another health hazard in water and air at certain concentration levels. Radium in drinking water is of primary concern because when consumed over many years it may cause cancer, kidney damage, and birth defects, according the Water Quality Association in the city’s 2018 water quality report.
The utility needs more revenue to continue to replace aging water mains. Mains are being replaced this summer and next in South Main Street, a $1.5 million utility project that runs from Madison Street to the southern limits of the city. South Main Street reconstruction will reach Pinnacle Street this year and resume next year from Pinnacle Drive to the city limits.
Mulberry Street also is under reconstruction this summer, but it has few water mains in it, and isn’t a substantial factor in the need for additional utility revenue, Hermanson said.
Without a rate increase, the utility would have a net income of $259,431 after projected revenue of $1.458 million and expenses of $1.22 million. The new rates would increase annual revenue by $121,999 and earn the utility a 5.2-percent rate of return on the net value of its infrastructure investment.
Officials were “quite surprised,” that the requested increase was 8.4 percent compared to much larger ones in the recent past, said Hermanson. It also reflects a change in approach to seeking new water rates.
“They’ve taken the attitude that it’s better to review this every single year and seek smaller annual rate increases instead of big increases every five to 10 years. That’s more financially responsible for the utility in that it maintains better cash flow and allows for better budgeting; and for the consumer, the slight increases are easier to absorb than larger ones,” he said.
The PSC will review the rate request and schedule a public hearing in Lake Mills and Madison to take public comment on it before setting new rates, which Hermanson expects to take place by February 2020.