photo by Tim Hundt

Viroqua Public Works approves water rate hike and forwards to City Council

VIROQUA, Wis. – The Viroqua Public Works Committee unanimously approved a 4.1 percent water rate increase for city water customers on Tuesday night, and to forward the issue to the full city council for their consideration. City utility Clerk Cheryl Purvis presented the committee with information on why the city water department is asking for a rate increase.

Purvis said the city has asked for three simplified rate cases (SRCs) since 2018. Those were approved in 2018, 2021 and the latest was in Jan. of 2023. Purvis said the water utility is regulated by the Wisconsin Public Service Commission (PSC) and all rate changes have to be approved by that agency.

Purvis said there are two ways to apply for a rate increase, a conventional rate case or a simplified rate case. Purvis said a conventional rate case requires a much more in depth analysis of the water departments revenues, operation expenses, maintenance expenses, age and deprecation of assets and debt. Purvis said conventional rate cases are labor intensive, requires public meetings and typically take six to 12 months to complete. Purvis said the last conventional rate case the city did was in 2013 at a cost of about $9,300, and resulted in a 26 percent rate increase.

By contract, Purvis said a simplified rate case uses and annual report from the department that considers the expenses versus revenues and depreciation. Purvis said the simplified process allows for inflationary increases so customers benefit from smaller more frequent increases rather than a large over a longer period of time. Purvis said an SRC takes less time and costs about $600.

Purvis said by doing smaller rate increases since 2018 they department was able to absorb $98,000 in unplanned well expenses while maintaining positive cash flow and increasing the departments rate of return.

Purvis said the rate of return or ROR is set annually for every utility with the PSC and accounts for cost of doing business for the year and sets target rates that will allow utilities to sufficiently fund operations and maintain assets. Purvis said for 2024 the PSC has sent the target ROR at 6.5 percent. After the target ROR is set the PSC then sets the rate increase a utility is allowed through the SRC application. The rate is lower than the target ROR but is meant to give the utility the ability to maintain cash flow accounting for increases, allow for increases in cash to maintain assets and still keep the rate low for consumers. Purvis said the rate increase set by the PSC for 2024 is 4.1 percent.

Purvis said the SRC allows for smaller more frequent increases that can soften the blow of a large increase in the future if the city does need to do a conventional rate case that often results in double digit increases.

Purvis said Viroqua’s ROR for the water department last year was 3.4 percent, which is better than the last 10 years. But, Purvis said, that was below the target of 6.5 percent for the year and that makes the city is eligible for a rate increase.

The chart below shows the potential impact for for the city of Viroqua consumers if the rates are increased by 4.1 percent.

The chart below reflects some examples of approximate impact to commercial customers in Viroqua with a 4.1 percent rate increase.

The chart below shows how the city of Viroqua water rates compare to surrounding communities. Right now Viroqua is third highest among the 10 on the list but Purvis cautioned the committee about the comparison. Purvis said several of those communities are in the process of doing in depth conventional rate cases because they have been showing negative or low ROR for several years.

“I wanna point out,” said Purvis. “Several surrounding utilities are going through full rate cases and that is mainly due because they’ve had negative rate of returns for several years in a row. Or they’ve had very low rate of returns where the PSC is wanting to step in and take a look at their utility. So, we have a La Farge. They’re getting better. Hillsborough had several years of negative ROR so the PSC is stepping in and they’re doing a full rate case. Viola the last five years had negative rate of returns. So, the PSC is requiring them to do a full rate case. Readstown, they’re going through a full rate case as well.”

Purvis said, even with the 4.1 percent increase Viroqua will still be number three on the list because the increase has minimal impact on the overall rate and Purvis again reminded the committee that a full rate case often result in a double digit increases which could result in pushing many of those communities past Viroqua even with the 4.1 percent increase.

Rate comparison with the 4.1 percent increase included

Purvis said if the rate increase is approved by the city council they have to allow 45 days for public input so the increase would not go into effect until Sept. That would mean the water utility would see an additional $9,000 for the year and an additional $48,000 for 2025. The issue will now move to the full city council for their consideration.

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