Steep water-rate hike angers Hillcrest subdivision customers, prompts meeting

Editor's note: The following story has been edited to clarify the specific role of the Missouri Office of Public Counsel.

A steep rate hike has angered customers of a small, private utility system in Cape Girardeau County who are bracing for water and sewer bill increases of more than $100 a month.

Missouri’s Office of Public Counsel, which argued against such a large rate hike, plans to hold a public meeting on Aug. 2 from 6 to 8 p.m. at the Osage Centre in Cape Girardeau to explain why the Missouri Public Service Commission approved the rate hike and hear from affected customers and the public.

The Public Service Commission, which regulates utilities in the state, approved the rate hike last week by a 4-1 vote. The rate hike, which will take effect Aug. 11, will mark the first rate increase since 1989, commission officials said.

Hillcrest Utility Operating Co., based in the St. Louis suburb of St. Ann, Missouri, requested the rate hike after acquiring the utility system in March 2015 and spending more than $1.2 million to repair the failing system for the Hillcrest Manor subdivision. The subdivision is west of Cape Girardeau on Route K.

Improvements were completed to the utility system last fall.

The system serves about 218 residential customers, 20 apartment customers and four commercial customers, according to the Public Service Commission (PSC).

As a result of the commission's action, monthly utility rates will rise from about $25 to more than $152 on average, said James Owen, acting director of the PSC's Office of Public Counsel. The public counsel office unsuccessfully proposed a phased-in increase that ultimately would have raised the monthly bill to about $104.

Owen said his office has received telephone calls from irate customers who are "confused, angry and frustrated."

He said the upcoming meeting won't change the situation.

"People are probably still going to be upset," he said.

Tyson Glaser, who lives in the subdivision, objects to the steep rate hike.

"I think anyone whose utility bill is going from $25 to $150 a month would be angry," he said Wednesday.

While the average bill may amount to about $150 a month, some families will see even larger bills because of higher water usage, Glaser said.

He added there is no guarantee the utility rate will decrease once the utility company has recovered its costs associated with fixing the system.

Glaser said the PSC's action means Hillcrest customers will have "one of the highest sewer and water rates in the state."

Glaser said he understands the need for a rate increase, but the approved rate hike is too large. The rate hike protects investors at the expense of consumers, he said.

Daniel Phelps, president of the Hillcrest Manor Homeowners Association, criticized the PSC's action.

"It is a shame that the very organization that is supposed to protect us hurt us," he said.

The president of the utility company, Josiah Cox, bought the utility system as an investment, Phelps said.

"He wanted a big return," Phelps said.

Alex Patel, who owns and operates One Stop convenience store on Route K, said the rate hike will be costly to his business.

Patel said "it is not right" he and other utility customers are paying for repairs to a system that was poorly maintained by the previous owner.

"It frustrates everybody," he said.

The current utility owner bought the system from Brandco Investments, according to the PSC report.

The Missouri Department of Natural Resources (DNR) previously cited the utility for discharging wastewater directly into a creek without treatment and failing to disinfect sanitary sewer waste before the discharge. In addition, the PSC said the existing lagoon berm system was at risk of failing "due to slope erosion and a lack of maintenance."

DNR also cited the previous utility owner for violations dealing with the drinking water system. Starting in May 2014, a boil-water order was issued and remained in effect for eight weeks, the PSC reported.

In the ruling, commissioners voiced concern about "the effect dramatically increasing water and sewer rates will have on Hillcrest's customers."

But commissioners said they must set rates that provide a return to the utility that is "reasonably sufficient" for the company to attract capital to meet financial obligations and adequately serve customers.

The public counsel questioned whether a 14 percent interest rate on a loan made to Hillcrest to improve the water and sewer system and bring it into compliance provided the best financing.

According to the commission, evidence showed the utility company had no other source of funding.

"Penalizing Hillcrest now for that decision would be unfair and may discourage other companies from acquiring and improving troubled water and sewer systems in the future, which would be contrary to good public policy," the ruling said.

But commissioner Stephen Stoll, who filed a dissenting opinion, said the ruling "shifts virtually all of the risk of the venture" to the customers rather than investors and removes any incentive to manage the company "in the most prudent manner."

mbliss@semissourian.com

(573) 388-3641

Pertinent address:

Hillcrest Manor subdivision, Route K, Cape Girardeau County, Mo.