OWSI submitted a general rate increase by surcharge to the UTC on March 5th.

The following summarizes the application:  General rate increase request that would generate approximately $100,440 (14.2 percent) additional annual revenue. The filing is requesting a surcharge to support a new manganese filtration treatment plant and full-time disinfection with chlorine.  This treatment plant is being designed to eliminate the manganese, arsenic and iron water quality issues.  This surcharge will cover the costs being incurred in the evaluation of the system and a construction estimate for the water treatment system. A surcharge of $5.00 per month ($10 per billing cycle) is being requested.  The surcharge will expire in 2038 or when $2,014,214 of the project costs are recovered.

Since the March 5th Informational Meeting, the Utilities Committee has had many communications with the UTC and DOH and met in person on March 22nd with UTC and DOH staff.  We’ve also had many Committee meetings in an effort to provide the best information to the community. I’m estimating that over 200 hours of volunteer time have gone into this effort.  The following is a summary of the facts as we know them today:

From UTC:

  1. OWSI applied for a surcharge request and has submitted all the supporting documents required for a surcharge pursuant to WAC 480-110-455.  When ruling on a surcharge request, the UTC only considers the project cost and owners ability to pay for that project.  The financial condition of the company and allocated expenses between business units are not considered as they would be in a full rate case.
  2. Annual Reports that OWSI submits are only used by the UTC to determine the amount of annual fees the company pays based on their revenues. There is no audit or evaluation of the information submitted unless something unusual jumps out relating to the fees owed.
  3. The UTC prefers at least a 70% ratepayer – 30% water company split of cost to ensure the owner has skin in the game.
  4. Surcharge monies are required to be deposited in a separate bank account which can only be used to pay project expenses and repay the loan.
  5. The application for surcharge assumes $2.2M project construction cost which is an estimate at this point. Once construction is completed, an application for a revision will be made by OWSI which would result in the specific surcharge being based on actual costs.
  6. The UTC Docket for OWSI’s application is 190160 and will be considered at the April 11th Open Meeting of the commission. It’s scheduled to be on the regular agenda.  Staff will present their recommendation, persons may make a short-concise public comment (usually 3 minutes) after which the Commissioners will deliberate and make a ruling.  They can make one of three rulings.  They can approve the application as submitted, they can suspend the ruling for further information, or they can suspend the ruling for a formal process in which case the attorneys take over.

From DOH

  1. The DOH has awarded OWSI a Loan of $2.1M with a 20-year repayment period. The interest rate is 2.25 percent which could go to 1.75 percent if the project completed in two years. The two-year time period begins the date the loan is countersigned by the DOH.
  2. An Environmental and Cultural Review must be completed and accepted by the DOH before the loan is approved and funds made available, but those are anticipated to be completed before the end of August.
  3. The DOH requires a progress report with every draw request and a Quarterly Report. Before the loan is closed out, the company must submit an audit.
  4. Strict bid, project management, and construction procedures are required due to the fact that both State and Federal regulations apply.

From OWSI:

  1. Greg Rae will be the project manager and HDR Engineers will handle the day-to-day details.
  2. The Environmental and Cultural Reviews are scheduled to be completed in August.
  3. Final engineering documents that will go out to bid are scheduled to be completed in February 2020.
  4. Construction is scheduled to begin in summer 2020.
  5. OWSI has indicated that they will make their best efforts to complete the project within two years.

Closing Comments: 

  1. Although many questions have been asked on the PLVC website and to Committee members, there is unanimous agreement within the Utilities Committee that the project needs to be done and completed as quickly as possible.
  2. It is obvious that the community is better off in the long run if the majority of the project costs are funded by the DOH loan at 2.25 percent or less and repaid by the surcharge. Any monies the company contributes to the project costs are subject to a return on investment of up to 12 percent and could be used in the future for a rate increase.
  3. OWSI ratepayers that want to submit a comment should look at the UTC website, http://www.utc.wa.gov, and click on “Submit a Comment” under Consumers in the middle of the page. Any received public comments should be submitted by tomorrow, April 5th as they will become part of the public record and used by staff to make their recommendation to the Commissioners.  The UTC Staff Memo will be available on the UTC website three days before the Open Meeting on April 11th – a week from today.

So, as a result of the Utilities Committee thorough research and deliberation, we unanimously recommend the following to the PLVC Board:

It is recommended that the Board take the position that clean water is essential within the Port Ludlow community and that Olympic Water and Sewer, Inc. (OWSI) should undertake appropriate steps necessary to ensure clean water is provided.  It is a further position that how such actions are paid for should be considered in a collaborative manner with OWSI, PLVC and the Washington State Utilities and Transportation Commission (WUTC). 

It is further recommended that the Board not take a position at this time on the water surcharge application due to a current lack of adequate information.