PSC wants info on Madison Water budget problems before considering rate raise

Regulators asking about $6 million cash deficit
PSC wants info on Madison Water budget problems before considering rate raise

State regulators are asking the Madison Water Utility for information about its $6 million cash deficit before it moves forward on the utility’s request to raise rates. The utility’s answers could lead to an even higher rate increase for Madison Water customers in the future.

An auditor with the Wisconsin Public Service Commission wrote a letter this week to Madison Water officials asking about the fact Madison Water did not receive millions in revenue it had budgeted for in 2017 and the short-term financing loan from the City of Madison it will need to pay its bills. The auditor stressed Madison Water did not include information about the debt or the anticipated loan conditions at the time it filed its rate increase with the PSC. Madison Water Utility officials say they only discovered the extent of the cash deficit when they closed the 2017 books in April.

State regulators are currently reviewing Madison Water’s proposed 32.7 percent rate increase to cover its debt obligations plus to replace more of its water mains. The utility originally asked to raise rates 26 percent, but increased its request after PSC auditors raised questions about whether that would be enough to pay interest and principal on its already existing loans. It’s the largest proposed increase in Madison Water history.

“With regards to Madison’s rate adjustment, we are still obtaining information from the utility,” Matthew Spencer, the communications and legislative director with the PSC, wrote in an email to News 3. “In many cases, utility staff requests additional data from utilities when reviewing rate adjustment cases. A hearing date will be set for later this year, with a Commission decision to follow. The decision will take into consideration all information provided to staff through our Electronic Filing System and information provided at the hearing.”

Asked whether the $6 million cash deficit might cause Madison Water to ask for an even higher rate increase for its customers, Spencer referred back to his statement and said the PSC generally does not comment on active cases. Madison Water earlier this week insisted it did not increase the rate itself and that it doesn’t have anything to do with its 2017 budgeting problems.

“We have a high debt load and we want to make sure that’s manageable and sustainable over time,” Madison Water General Manager Tom Heikinnen said in an interview with News 3. “The rate increase has nothing to do with this cash deficit.

“We have a communications challenge if that’s the impression and we’ll work on that. We’ll try to get the message out that the two are unrelated.”

Madison Water estimated its customers would pay $5-$9 more per month under the proposed 32.7 percent rate increase, depending on how much water they use. The utility is also proposing to sell a number of properties it owns and significantly reduce nonessential spending in an effort to balance future budgets and limit the amount of money it needs to borrow from the city to make up the $6 million cash deficit.