A ruling Wednesday by the Public Service Commission (PSC), the regulating body for utilities in Wisconsin, has delayed and may ultimately sink a water deal between Oak Creek and Waukesha.
The ruling on Wednesday, a day after Oak Creek and Waukesha both agreed to proceed with a water deal, followed an appeal by Oak Creek in which they asked the commission to reconsider parts of a decision regarding a rate increase originally requested in May 2011.
An overall rate increase for Oak Creek was approved this July; however, Oak Creek appealed the ruling, requesting that the commission reconsider its decision to not allocate public fire protection costs to Franklin.
Wednesday, the commission affirmed the July decision with the exception of two other issues. These changes resulted in an additional increase of approximately $240,000 to Oak Creek retail customers, according to the PSC. The commission did not reverse its decision on allocation of fire protection costs to Franklin, determining that Franklin had the capacity to provide for its own fire protection needs.
Water Rates Higher for Oak Creek residents
Not only does the ruling call into question a deal with Waukesha, it unfairly impacts Oak Creek's retail customers, according to Oak Creek Water and Sewer Utility General Manager Steven Yttri.
As it stands, the current allocation between retail and wholesale rates is not equitable, according Yttri, leading to higher rate increases for residents in Oak Creek compared to residents in Franklin and Caledonia, communities that receive water wholesale from Oak Creek.
The average increase on residential bills per quarter was $8.14 for Franklin and $17.06 for Oak Creek, nearly twice the amount, Yttri said.
“We pump the water to them and they end up paying less than our retail customers," he said, an error on the part of the PSC in determining cost of service.
"An error in the cost of service affects our retail customers in a very significant way,” he said.
The PSC disagrees.
"The commission believes that its modified decision allocates costs appropriately between retail and wholesale customers. Franklin is paying the correct amount, and Oak Creek is not subsidizing Franklin," according to Kristin Ruesch, PSC communications director.
Under the final decision, Franklin will pay an estimated $2.8 million per year to Oak Creek, or 29.4 percent of Oak Creek’s total revenue requirement of $9.6 million and an increase to Franklin of 24 percent, according to the PSC.
Waukesha Water Deal on the Rocks
The Oak Creek Water and Sewer Commission will meet next Tuesday to consider the situation. Yttri predicts they will appeal the recent PSC decision but is less optimistic about continuing to move forward with a water deal with Waukesha.
“It destroys it. [But] our commission has to make that decision,” he said.
Oak Creek wouldn’t have even considered a deal with Waukesha had they thought the PSC would deny their appeal, according to Yttri.
“We’re not subsidizing wholesale customers. We’ll lose money on it,” he said.
Regarding future of a deal with Waukesha and subsequent water rate allocations, PSC indicated that it would consider alternative cost allocation methods in the future should Oak Creek and Waukesha reach an agreement, according to Ruesch.
While the exact impacts are still unknown, Waukesha Water Utility General Manager Dan Duchniak told the Milwaukee Journal Sentinel that he is "confident things will work out."
Council Approved Proceeding
Just two days ago, the Oak Creek Common Council approved a resolution authorizing a letter of intent to supply water to the City of Waukesha. Making the proposition attractive was an estimated 25 percent drop in residential water rates and initial payments to the city of $300,000 up to $1.2 million per year by 2030.
A letter of intent expresses a willingness to supply water to Waukesha but does not create a commitment. According to the terms, Oak Creek would make sufficient treatment plant capacity available, estimated to cost $20 million, to meet Waukesha's drinking water supply needs.
Waukesha would be responsible for the transmission of the water from the border of Oak Creek to Waukesha and for the return of the water back to the Great Lakes basin, as required by the Great Lakes Compact.
Waukesha is forced to either treat or replace its water supply by 2018 because radium levels have put the city's water supply out of legal compliance. The city's wells also face problems with declining water quality due to arsenic and saltwater and with a limited groundwater supply.