Garden City water rates to increase, pending ordinance

8/21/2013

By SCOTT AUST

By SCOTT AUST

saust@gctelegram.com

Garden City residents will soon be paying more for water.

On Tuesday, the Garden City Commission directed the city attorney to draft the necessary ordinance to increase the minimum base charge that all water customers pay and also increase water usage rates slightly.

When approved, the minimum monthly charge for all water accounts will increase by $5.15. That increase will raise enough money to cover a $505,000 increase passed down to the city from Wheatland Electric Cooperative.

The city pays Wheatland to treat water from Garden City's wells through Wheatland's reverse osmosis plant and also buys about 3 million gallons per day of Wheatland's water to blend with the water the city provides to customers.

Wheatland conducted a cost-of-service analysis of its water utility and decided the electric side of its business had been subsidizing the water side for some time. Wheatland now wants to end that subsidy.

Mike Muirhead, public utilities director, said the base charge increase covers the amount of water the city has been using from Wheatland each year.

"Obviously, if we use more of the Wheatland water than we have in the past, then that amount would increase. But the way it is right now, that's not going to be the most economical water to purchase first. We have other sources of water we can use that may not be quite as soft but certainly will serve the purpose," he said.

The commission also agreed with a staff recommendation to raise water usage rates slightly to help generate money each year to address aging water system infrastructure. Several citizens have complained to the commission in the past several months about low water pressure and discolored water in certain areas of town.

Rates will rise from $1.66 to $1.80 per 1,000 gallons for up to 15,000 gallons used per month, and from $2 to $2.05 per 1,000 gallons for 15,001 to 30,000 gallons. The city is also increasing the tank water and miscellaneous sales rate from $1.91 to $5 per 1,000 gallons.

The rate increase will generate an additional $372,000 to improve the city's water system.

Muirhead said he tried to come up with a number that would be reasonable.

"It could be more, but to be honest, I think we'd have a hard time spending more than that per year on getting some projects done," he said.

At an average cost estimated at $50 per lineal foot, the $372,000 would mean the city could address about 7,500 lineal feet of its water system per year, Muirhead said. In response to a commission question, Muirhead said rates were last raised in 2007 or 2008.

Commissioners agreed the city ought to address and upgrade some of its aging water infrastructure.

"We do need to have something put aside to address those things," Commissioner Melvin Dale said.

Commissioner Chris Law said of all the things the city does, water may be number one.

"We wouldn't be doing our residents any favors by not being responsible with our charges. At the same time, we wouldn't be doing anyone any favors by just picking a really high number," he said.

In the future, Law said, the city will also likely need to address water quality issues and will need to be in a better position to deal with them as well. Also, he said, past commissions have talked about trying to avoid instances where rates stay unchanged for a long time and then need to be raised in a large chunk.

"More often and smaller increases is really the way to go," he said. "I think if you look at these new charges, they're still pretty reasonable. When people come in with brown water coming out of their tap, they need some help. It doesn't matter what part of town. That's the most basic thing there is."

Initially, the Wheatland increase was slated to begin Aug. 1. But the Kansas Corporation Commission notified Wheatland they wanted to review the rate increase. Wheatland then filed an application with the KCC in mid-July, but withdrew the application last week.

When contacted after the meeting, Bruce Mueller, Wheatland Electric general manager, said Wheatland has contracts with four water customers, including Garden City, which have been approved by the KCC in the past and can be amended.

In 2008, Wheatland amended its contract with Garden City to adjust rates and is essentially asking for another amendment. Mueller said the application was withdrawn last week at the request of the KCC because Garden City had not yet signed the amendment.

Mueller said Wheatland will again submit the amendment, as allowed under current contract. If the city agrees it will go to the KCC along with supporting documentation from the cost of service study to determine if the rates are acceptable.

"One of the things I want to stress is our 39 percent rate increase generates a zero-percent margin for Wheatland Electric water division. We're just trying to recover our cost, and that's what our contract says we're allowed to do. That's all we're asking," Mueller said.

Mueller said the increase can't be broken up into smaller pieces and paid over a period of time because it wouldn't satisfy revenue requirements.

"The problem is we lost money in 2011 and 2012, so we'd have to come back with another rate increase, quicker," he said.

Mueller said it is also "totally false" that the water increase is any kind of retaliation for Garden City's decision earlier this year to cancel the power supply agreement with Wheatland. He said the cost of service study was going on last summer while the electric rate increase was being discussed with the city.

"We didn't want two things going on at the same time so we held back on (the water increase). We would have submitted this request to Garden City regardless if they would have signed an electric contract with us or not," Mueller said.

Mueller said there is no rift in Wheatland's relationship with Garden City from his perspective.

"We value our relationship with Garden City and we want to continue that relationship in the future. We're in negotiation right now for an electric facilities contract with Garden City and Wheatland," he said

Mueller couldn't provide more specifics about the possible electric facilities contract, but did say it involves providing 34.5 kV voltage to the city, a type of sub-transmission system.

It's unclear when Wheatland's rate increase will begin, though the amendment calls for it to start Sept. 1. The city's ordinance concerning the water rate increases will be considered at the Sept. 3 commission meeting.

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