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Public Hearing on Housatonic Water Works proposed rate increase on June 20

After the proposed settlement in the Housatonic Water Works rate-increase case was filed on April 26, the DPU received comments from town officials in Great Barrington, Stockbridge, and West Stockbridge.

Great Barrington — A virtual hearing on the rate increase proposed by Housatonic Water Works will be held via Zoom on Thursday, June 20, at 7 p.m. The meeting can be accessed here.

Back in June 2023, the controversial company originally filed an application with the state’s Department of Public Utilities requesting a 112.7 percent overall revenue increase. According to a press release issued by HWW announcing the rate-increase proposal, the request would have reflected an $808,808 overall increase over the existing water rates. The company announced that it would spend $4.5 million to upgrade its treatment and distribution systems if the rate increase were to be approved.

If the DPU were to approve the rate increase as originally proposed by the company, it would mean an across-the-board increase for customers, including a monthly minimum service charge of $98.38 and a $23.24 charge per thousand gallons for all water usage over the 2,500-gallon monthly allowance. The annual cost of water service for the average residential customer would increase from $746.40 to $1,641.48.

Great Barrington, Stockbridge, West Stockbridge, and the Office of the Attorney General, all filed as intervening parties with DPU.

In late September 2023, HWW customers spoke out against the proposed increase during a public hearing.

On March 11, DPU Chair James Van Nostrand and Commissioners Cecile Fraser and Staci Rubin co-signed a memo that stated that “further investigation is necessary” before any decision were to be made and that a decision would not come until at least August.

On April 26, the Office of the Attorney General, along with HWW, filed a proposed settlement in the rate case. According to the proposed settlement agreement, “As an alternative to a fully litigated rate case, the Settling Parties agree to reduce the company’s proposed base distribution rate increase of $808,808 to $211,222 and to implement rate increases in phases. The Settling Parties agree that the company’s revenue requirement is $928,882, an increase of $211,222 or 29.43 percent over currently effective rates.”

The settlement would also include a capital project list, including a manganese filter system, an interconnection with the Great Barrington Fire District, a new water storage tank, and a main replacement.

If approved by the DPU, the rate increase would be implemented in five phases: Phase one would include an 18 percent increase in customer rates on August 1; phase two would mean a 39.68 percent increase over phase one rates and would be implemented on August 1, 2025; phase three would be effective on August 1, 2026, and include a 7.33 percent rate increase; phase four would be effective August 1, 2027, and would include a 13.47 percent increase over phase 3 rates; and phase five would go into effect on August 1, 2028, and would include a 12.51 percent increase over phase four rates. If approved by the DPU, HWW customer rates would be increased by over 90 percent over five years.

As noted by Great Barrington Town Manager Mark Pruhenski after the proposed settlement was filed, neither Great Barrington, Stockbridge, nor West Stockbridge signed onto the proposed settlement.

Comments from town officials, HWW responds

After the proposed settlement was filed on April 26, the DPU received comments from town officials in Great Barrington, Stockbridge, and West Stockbridge, which have been posted on the DPU’s website.

Stockbridge Select Board member Patrick White submitted comments on the proposed settlement on behalf of the town and wrote that town representatives have “significant reservations about the proposal that remain unresolved.”

“The root of the problem that now confronts the [DPU] is one created by the company,” White wrote. “The company has—for decades—engaged in no substantial capital investment plan to keep its infrastructure up to date. As a result, the Company’s original petition giving rise to this proceeding sought approval for a slew of capital investments, all to the tune of a 112 percent rate increase. These capital investments, however, were not unlooked for nor unforeseeable many years ago. In particular, water quality issues have long plagued the Company and the company has known for years now that it has a manganese contamination problem.”

White wrote that HWW infrastructure facilities “have been allowed to fall into disrepair without a replacement plan.”

“With all respect to the company, a plan to address these issues should have been developed a long time ago, not now,” White wrote. “Having done so would, at minimum, have better enabled the company to spread out rate increases over a longer period, rather than the drastic increase originally proposed. It would also have allowed the company to make this investment at lower cost considering the significant construction inflation that has impacted capital improvement projects since 2020 and would have avoided subjecting its customers to [health concerns].”

White wrote that HWW’s submissions to the DPU “provide no reasonable explanation for this situation.”

“No explanation for the lack of any capital planning or investment over decades, to distribute the costs of maintaining and upgrading its system, and spreading out the rate increases necessary to do so,” White wrote. “No explanation for how the Company has delivered a crisis to the department’s doorstep, the only solution for which is to increase the rates that it charges its customers just to get to the point of providing the service that the company already should be providing.”

White’s full comments submitted to the DPU can be read here.

Boston attorney and West Stockbridge Town Counsel Timothy Zessin, of KP Law, P.C., submitted his comments on the potential rate increase on behalf of the town. In his comments, Zessin wrote that the town has roughly 100 HWW customers and that “Many of these residents cannot afford and should not be forced to pay 65 percent more simply for the right to have potable water.”

“As well-documented in the comments filed by the town of Stockbridge, it is common knowledge that the company has long put off maintenance of its aging infrastructure while its owners continued to profit handsomely,” Zessin wrote. “Because of its negligence, the company’s customers have for years been forced to pay for brown water that cannot be safely consumed or used for household purposes. The company is now asking these same customers to foot the bill for decades of neglect. It is the position of West Stockbridge that, while these repairs are urgently needed, it is plainly unjust to force customers to bear the entire financial burden over such a short period of time, without holding the company accountable for its actions and without providing a disincentive for the company to shirk their responsibilities in the future.”

Zessin’s full comments submitted to the DPU can be read here.

In his written comments on behalf of the town of Great Barrington, Boston attorney and Town Counsel David Doneski, of KP Law, wrote that the town would provide a formal statement at the June 20 hearing.

However, Great Barrington Selectboard Vice Chair Leigh Davis submitted comments to the DPU and, just like White and Zessin, cited concerns over the proposed rapid and significant cost increases to HWW customers and deferred maintenance of the company’s water system. “I have serious concerns about the proposed settlement, which would result in rapid and significant cost increases for the roughly 850 homes serviced by HWW,” Davis wrote. “Many of these residents cannot afford and should not be forced to pay 65 percent more over a few short years simply for potable water. The company has long deferred maintenance on its aging infrastructure while its owners profited. Due to this negligence, customers have paid for brown water that cannot be safely consumed or used for household purposes. Now, the company is asking these customers to bear the costs of decades of neglect and questionable operating budget priorities. While these repairs are urgently needed, imposing the entire financial burden on customers over a short period without holding the company accountable and disincentivizing future neglect is unjust. I urge the department to find a way to distribute the financial burden of the proposed projects equitably. This could be achieved by scrutinizing the company’s annual reports, in particular, the annual expenditure summary, requiring the company to pursue grants for capital improvements, reducing its 9.5 percent profit margin, lowering borrowing costs, or finding a responsible purchaser. These customers have long suffered from the company’s ongoing neglect. It is only fair that the company is held accountable for its failure to maintain the system.”

Davis’s full comments to the DPU can be read here.

In response to the various comments made, Boston attorneys Jed Nosal and Jesse Reyes of Womble Bond Dickinson filed comments on behalf of HWW. “The company’s rates have not been increased since November 2017,” Nosal and Reyes wrote in their comments. “There is no material dispute that in the nearly seven years since then, the company’s cost of service has increased. At the same time, the company has invested in capital improvements as part of its long-term capital improvement plans. The company is mindful that the cost of upcoming capital projects will be significant in comparison to the size of the Company’s customer base and current rate base. However, no party has disputed that the major capital improvement projects…are necessary.”

Nosal and Reyes dispute that “the need to approve the proposed capital project schedule is not the result of the company’s neglect or a ‘crisis.’”

“Rather, the Manganese Filtration System project has been the subject of solution studies that began in 2020 and pilot testing of the Greensand Plus filtration technology, review, and approval by MassDEP, all of which were required before the Company could implement the proposed solution,” Nosal and Reyes wrote. “The company does conduct long-term asset planning, having developed a 20-year Capital Improvement Plan contained in the company’s 2016 Master Plan, as acknowledged by MassDEP in the Company’s most recent sanitary survey. The settlement agreement would address the company’s current revenue deficiency and establish a schedule for necessary near-term capital improvements in up to five phases and a path for cost recovery implemented annually.”

Nosal and Reyes wrote that if the settlement is not approved by the DPU “…the company would likely have to petition for a base distribution rate increase after every major capital improvement is placed in service.”

“In addition, the company would propose a capital investment cost recovery mechanism for its ongoing ten-year pipe replacement project for more timely recovery of those costs,” Nosal and Reyes wrote. “Approving the settlement agreement would avoid litigation costs of the current rate case and the serial base distribution rate case filings that would otherwise result in increased costs to the company’s customers.”

Nosal and Reyes’ full comments submitted to the DPU can be read here.

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