Water Rate Request Q & A
The following questions and answers are meant to provide additional information on the Water Companies recent rate application.
Background
B&B Water Project (B&B) was formed in the late 1960’s to provide a reliable source of treated water to residents of Benton and Bloomington Townships. B&B is a Not-for-Profit corporation owned and operated by its members. The corporation is managed by a Board of Directors consisting of nine (9) board members elected by the members. These directors serve 3-year staggered terms. Three directors are elected each year.
We purchase our treated water from the City of Bloomington Utilities Department (CBU). B&B is responsible for providing that water to its customers. In doing so, we install and maintain pumping stations, storage tanks, water mains, valves, hydrants, and meters. In addition, we are responsible for the overall management of the corporation including all administrative and office functions.
The Board currently contracts with Bynum Fanyo Utilities to provide both Field and Office/Administrative functions.
1) Describe what has taken place.
B&B is currently under the jurisdiction of the Indiana Utility Regulatory Commission commonly known as the IURC. Any changes to rates and charges are subject to review and approval by the IURC.
To have the IURC begin the process of revieing and approving a change B&B must file and follow the process laid out in the IURC’s rules and procedures. This includes a rate application, a description of the request, a notice sent to each current customer and a public notice file in the local paper along with a proof of publication.
2) What happens next?
In addition to review by the IURC the Office of the Utility Consumer Commission (OUCC) will review our request. The OUCC was established by the State to specifically represent rate payers.
The filing of a rate application is a first step and will receive a through review by both groups who will make a recommendation to the IURC on a final rate amount. If the Board is satisfied with the proposed rate the IURC will then issue a final order. If the Board is not satisfied, they can request a formal hearing before with the IURC. This process will take several months and will include numerous communications between B&B and both groups. Once the final order is issued the new rates will be applied to the next billing cycle.
3) Describe why the need to increase rates
The need to increase rates consists of two factors. The first factor is the need to cover increases in costs (other than the costs to purchase water from CBU) in the operation of the corporation. The last general rate increase was in 2016. Generally, rates are meant to last 3 to 5 years. The second part is a request for a significant increase in funds to be used to replace aging infrastructure (main mains, valves, tanks, pump stations, hydrants, and water meters).
4) Provide additional information on the rate request
We are requesting a 47.7% increase in our rates. As noted above this consists of two parts. A general rate increase and funding for infrastructure.
The general rate increase is approximately 10.6% and is meant to cover general increase in operational costs since our last rate case approved in 2016.
The request for infrastructure represents the lion’s share of our request at approximately 37.1%. One of the statistics that the both the State and the Board tracks is the percentage of water sold/lost. This measures the amount of water the corporation sells versus the amount of water we purchase from CBU. There are two main factors that impact this statistic. Water leaks and inaccurate meter readings.
5) Why is measuring lost water important?
The reason this is important Is that the goal is to maximize the amount of water we sell versus the amount of water we purchase. Purchased water is the largest single cost the corporation incurs so the lower percentage of water sold means we as members are paying for water that does not get used meaning higher rates to cover that loss. Every water provider experiences water loss however the goal is to minimize the amount.
6) What is our historic water sold rate and what is the target rate?
Our water sold rate average over the last 5 years is 57%. The IURC would like to see that rate to be no less than 70%.
7) What has the Board done to date to increase the rate.
The Board has implemented several changes to increase this rate including the following:
- Upgraded an outdate pumping station located on Hinkle Road
- Upgrading our telemetry system along with adding new components to increase reliability
- Monthly replacements of radio read water meters
- Updating our system maps, purchasing a GPS locating system, mapping meters, valves, hydrants, and mains.
- Upgraded our billing system, replacing postcard billings with 8.5×11 invoices that show past usage, allows for additional information and messaging from the company with an emphasis on having our customers report suspected leaks.
- Installation of valves and master meters allowing us to isolate smaller sections of mains and measure for water loss.
- Aggressively verifying meter, valve, hydrant, and main locations allowing us to update our system map.
- Adopted a policy to locate meters within the normal utility right-of-way closer to our mains. As a part of this policy when we find a meter out of compliance with this policy, we relocate the meter to the proper location eliminating long service lines that we must maintain.
- Locating all meters, reviewing zero read meters, and inactive meters.
- Responding quickly to any visible signs or water leaks or calls by customers to investigate and repair leaks
- Receive and review monthly reports from our operator discussing repairs, replacements, locates, valve program, hydrant program and other system & administration issues.
- Working with our operator to develop a water main replacement plan that prioritizes those mains with frequent leaks, undersized or inconsistent main size while adding valves and hydrants.
8) What are the next steps to address this issue?
As noted above we are requesting a significant increase in the amount of funds to be used for repair and replacement of aging infrastructure. Many of the water mains in use today were installed in the late 1960’s and early 1970’s. These pipes are typically expected to last 40 to 50 years. We serve over 1800 customers spread over a large geographic area that includes over 70 miles of water mains. We are experiencing frequent breaks in those lines resulting in the loss of water. We also believe there are many undetected leaks that also leads to unaccounted for water loss. We are well past those time frames and need to begin aggressively replacing and increasing the size of those mains. In addition, we need to replace and install additional valves and hydrants in our system.
Finally, we are currently experiencing a high rate of failure in the components on our meters that allows us to read them remotely. Over 15 years ago B&B installed radio read devices on the existing meters, as noted those are now failing at a high rate. The meters themselves were not replaced and have greatly exceed their useful life. As a meter reaches the end of its useful it begins to under read the actual amount of water that flows through the meter resulting in additional water loss. We have begun the process to replace both the meter head and the meter itself.
9) How is this addressed in the current rate request?
It’s addressed in two ways. The first is a request to increase the amount of capital funds from approximately $67,000 per year to $400,000 per year. This will allow us to begin the replacement of mains that are the oldest and that experience the highest rate of failure. It will also allow us to complete the meter replacement program over the next several years.
The second way it’s addressed is a request to allow B&B to seek long term debt financing. This would provide us access to a larger sum of fund that would allow for a higher replacement over a shorter time-period. We have started the process of exploring this option.
10) Are there other factors that impact this request?
Yes, we have seen dramatic increases in the cost of materials along with delays in obtaining them. This is coupled with a lack of labor in the manufacturing of these materials. We are competing with other water providers for these products and services meaning we have had to increase the amount requested for this project.
The Board does not take lightly the amount requested and please remember that we are also customers of B&B and pay the same rates and charges as all our customers. However, it is our duty to ensure the future success of B&B and want to keep providing safe and reliable drinking water for the next 50 years as those before us did for the last 50 years. We are committed to doing this at the most reasonable rates and we are always looking to as efficient as possible and being good stewards.
11) B&B has had requests for fire hydrants and or isolation valves.
B&B adds valves as needed. Currently, B&B does not have a program for adding fire hydrants to our system. Additional valves and fire hydrants are located for installment by our engineering firm.
12) B&B has been asked about customer-owned lead pipes.
We are pleased that B&B has no transmission line with lead. B&B follows Federal and State requirements for testing for lead and copper in Customer lines. We will continue to monitor and work with Federal and State authorities on any required program to address the possibility of lead within a customer-owned property.
We will continue to update this and other information as we move forward this process.
Respectfully
The Board of Directors.