My View

Carolina Water’s proposed water rate hike unjustified

January 10, 2014 

EDITOR’S NOTE: The next hearing on the proposed water rate hike by Carolina Water Service Inc. is scheduled Jan. 13 in the Public Service Commission hearing room in Columbia.

Carolina Water Service Inc. is asking for what amounts to approximately a 25 percent increase in its current rates. For several reasons, I believe this is totally unjustified.

First, Lake Wylie accounts for more than 48 percent of CWS’ water customers and nearly one-third of its sewer customers in South Carolina. Nearly 40 percent of CWS’ South Carolina presence is in Lake Wylie. Across CWS’ system, the average number of customers in each of the 50 subdivisions listed in CWS’ pre-filed testimony is 450. Only eight (16 percent) of the subdivisions exceed that number while 42 (84 percent) are smaller. Lake Wylie is one of the 50, and alone has nearly 20 times the average number. This imbalance indicates Lake Wylie significantly subsidizes many of the smaller systems. Without any financial statements for the individual systems, and even more significantly, no audited financial statements, it’s impossible to cite the actual amount of subsidization.

Second, the CWS system serving Lake Wylie has the highest water and sewer rates of any system in and around York County. By comparison with eight other systems nearby (within 12 miles of Lake Wylie) in York, Mecklenburg and Gaston counties, the overall water and sewer rates in Lake Wylie are currently 37 percent higher than the average of the other eight. If the requested rate structure is approved, the Lake Wylie rates will be more than 51 percent higher than the average of the other eight systems and more than 35 percent higher than any other individual system. This is outrageous. Lake Wylie water rates are 54 percent higher than the average of the other eight systems. Sewer rates are 23 percent higher. With the new rates, the water rates would be 73 percent higher and the sewer rates 36 percent higher than the area average. The average Lake Wylie household could pay more than $560 more annually than the average household elsewhere in the area.

Third, because of the overall disparity in rates, the county is getting less of the pie and CWS is getting more. This is with no appreciable change in what the system is doing, how it is getting it done or who is doing it. While the county’s rates have remained stable, CWS has gone from a share of revenue generated that was less than 50 percent to a share which, with the proposed rates, is approaching 60 percent of the revenues generated, while the county is going proportionally in the other direction to the disadvantage of local residents.

Fourth, much was made by Utilities Inc. in the cover letter of the Notice of Filing and Hearing about spending $4.8 million for capital improvements across its South Carolina systems. Only $2.2 million is detailed in exhibits in CWS’ pre-filed testimony. It’s not clear where the rest went. The portion CWS has allocated to Lake Wylie (which provides about 40 percent of the business revenue) appears to be between 3 percent and 7 percent of the total, although, as in previous filings, it’s really hard to tell. This same tactic with similar characteristics was employed in the last rate increase application.

Fifth, the cover letter on the Notice of Filing and Hearing showed a lack of class on the part of Utilities Inc. and a lack of oversight on the part of the PSC. Covers on hearing notices shouldn’t be blatant advertising vehicles for the applicant in what is supposed to be a fair and unbiased process. The PSC should be in full charge of the content and characteristics of the Public Notice.

Sixth, the financial data presented in the application is unaudited. The excuses for this situation range from there being no detailed statements for subsidiaries to “there will be a cost to auditing, which we’ll have to pass on to the customer.” Most accountants would say unaudited information is “worthless” when trying to do a meaningful analysis of such a proposal.

Seventh, CWS claims financial data for each of the operating entities within the CWS system is not available.

Eighth, at the last rate adjustment hearing for the Lake Wylie area held in 2011, it was pointed out that CWS had made a subtle billing error for more than 31 months and resulted in a $108,000 overcharge. The error was corrected, but not acknowledged. It’s not clear whether any effort was made to reimburse the customers who were overcharged.

Ninth, York County evaluated the Lake Wylie system twice prior to the last rate hearing with the intent of considering acquiring the system. The first instance resulted in an offer by York County, which was countered with a offer by CWS. In a later, less formal instance, the conclusion was the CWS system in York County had no value because it needed more maintenance and improvements than it was worth.

I ask the Public Service Commission to deny all requests by Carolina Water Service Inc. for rate increases for water and sewer service in the Lake Wylie area.

To voice your view, contact South Carolina Public Service Commission Chief Clerk Jocelyn Boyd at 803-896-5100 or contact@psc.sc.gov or SC Office of Regulatory Staff Consumer Services Division Director Dawn M. Hipp at 1-800-922-1531 or dhipp@regstaff.sc.gov.

Donald G. Long is a Lake Wylie resident.

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