Utility case prompts Wallingford to file bill to prevent future steep rate hikes

State Sen. Wayne Wallingford has filed legislation to prevent future steep rate increases for customers of small water and sewer utility systems.

Rep. Wayne Wallingford

The Cape Girardeau Republican said he filed Senate Bill 145 recently in response to the Missouri Public Service Commission’s decision earlier this year to grant a steep rate increase for a small, private utility system in Cape Girardeau County.

The small system serves nearly 250 residential and commercial customers in the Hillcrest Manor Subdivision between Cape Girardeau and Gordonville.

The ruling allowed Hillcrest Utility Operating Co., owned by Central States Water Resources Inc. of St. Ann, Missouri, to raise the monthly charge for customers by more than $100. As a result, customers saw the average, monthly bill jump from $25 to $150.

Residents voiced outrage at the decision. The Missouri Office of Public Counsel appealed the decision.

In a brief filed with the Missouri Court of Appeals Western District, the public counsel said the decision was “unlawful, arbitrary and capricious and not supported by the evidence.”

Wallingford said his bill would not help Hillcrest customers but could help customers of other systems.

The bill would force the Public Service Commission (PSC) to require small utilities to provide proof of financing. It would limit the “return on investment” of such companies in rate cases to a maximum of 7 percent plus prime rate of interest.

Under the measure, the PSC would be required to provide a link on its website listing all small water and sewer corporations that have notified the commission staff of their intent to be acquired or purchased.

In addition, all small water and sewer corporations would have to file a “general rate proceeding” with the PSC every three years.

Any capital expenditures for water or sewer system additions or upgrades that would result in a maximum average retail rate increase of 5 percent or more for residential customers would be required to be amortized over a “a reasonable period of time as determined by the commission.”

The goal, Wallingford said, is to prevent “huge rate hikes.”

Requiring utility companies to bring rate adjustments before the PSC every three years would prevent the large rate increase experienced by Hillcrest customers, he said.

James Owen, acting director of the Office of Public Counsel, welcomed the legislation.

“We are very excited about it,” he said. “I think it has a lot of great consumer protections in it.”

Owen said the provisions in the bill are “common-sense stuff.”

In the Hillcrest case, utility rates had not increased since 1989. Central State Water Resources acquired the utility system in March 2015 and spent more than $1.2 million to repair the failing system before requesting the PSC approve increases in water and sewer charges.

The commission in its ruling said in approving the steep rate increase, it took into account the fact utility company president Josiah Cox obtained a loan with a 14 percent interest rate.

But Wallingford questioned the lending arrangement, which involved securing funding from two other officers of the utility company.

He said the PSC commissioners “failed their financial duty” to the Hillcrest residents.

Wallingford said his bill would have prevented the PSC from approving the rate increase it did in the Hillcrest case.

He said the PSC was “totally off base” in allowing the steep rate increase.

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

But the commission said it must set rates that provide a return to the utility company that is “reasonably sufficient” for the company to attract the capital needed to meet financial obligations and serve customers adequately.

Wallingford said the Hillcrest case is not an isolated issue.

Without legislative action, steep rate increases could be repeated for other small utility systems across the state, he said.

He said he expects Senate colleagues will support the measure.

“I would think it would have a lot of bipartisan support,” he said.

mbliss@semissourian.com

(573) 388-3641

Pertinent address:

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