Illinois American Water tells council they need more money

[December 20, 2011]  Monday evening Illinois American Water representative Dave Schonauer, company vice president Barry Suits and director of engineering Jeff Kaiser were present to speak to the Lincoln City Council regarding an increase in water rates that may come about in early fall next year. 

Schonauer began by saying the company representatives were on hand as the result of a conversation he'd had in the last couple months with Mayor Keith Snyder regarding the proposed rate increases. He introduced Suits and Kaiser and then turned the podium over to Suits. 

Suits began by telling the council that in simplest terms, a gallon of water delivered into a home in Lincoln costs about 1 cent per gallon. He said the average household consumption in Lincoln is approximately 4,500 gallons per month. 

He explained the costs as being the cost of service, not the actual water. The water is obtained naturally by the water company, but the costs they incur are for infrastructure, chemical treatment, operating overhead and fire protection. 

Suits reminded the council the water company is local, with nine local employees living in the community. He explained the community involvement of the company, citing participation in the Lincoln Art & Balloon Festival, the chamber of commerce Leadership Acadamy, United Way and more. 

He said the company provides approximately $6,000 per year to those who are unable to pay their bills, through a program administered by the Salvation Army called the H2O program. 

The water company is regulated by the Illinois Commerce Commission, and there is a drawn-out and complicated process to get a rate increase. Generally it takes a year to go through this process, in which Illinois Water is scrutinized by the ICC in great detail. Suits said the process will include literally thousands of pages of documentation to the ICC, including financial information and all other records of the company. 

Illinois American filed for a rate increase in October and has hopes of having it approved and set in place by September 2012. 

Suits said there are a few factors driving the need for the increase, among them the reduction in water usage by consumers. 

Two increases ago, Suits said the average household was using 6,000 gallons of water per month. With the development of water-saving, low-flow toilets and other more efficient appliances, the average usage has dropped.   

However, the fixed costs of the company have not decreased. In order for the company to continue maintaining their equipment, make payroll and honor other financial obligations such as taxes, the cost of the water that is being consumed has to be raised to compensate for the water that is not being consumed. 

Suits touched briefly on capital expenses, saying that right now, the company has invested dollars into the Lincoln facilities that it hasn't been able to recoup because it cannot raise rates at will -- the decision has to come from the ICC -- and that automatically puts the company behind in making back those dollars invested. 

When Kaiser took the floor, he spoke about the investments that have been made in Lincoln. The company has installed and replaced water mains; replaced meters, fire hydrants and valves; rebuilt the north treatment plant; is rebuilding portions of the south treatment plant; and is working to upgrade electric power lines by putting them underground. 

Kaiser said that since 2002, the company has invested dollars in the community that would come to about $2,300 per customer. However, the cumulative increase in the bills comes to only about $13 per customer per month, which equates to a 15-year payoff on the dollars invested thus far. 

He went on to say the company wants to always be ahead of what is needed.

"If a business comes to Lincoln and says, ‘I want to put 200 jobs or 500 jobs here,' you can't look at the water system and say, ‘They are the reason we can't let that business in town,'" Kaiser said. "We want to be ready to serve the town with quality of water and reliability of water." 

When the floor was opened for discussion, Alderwoman Marty Neitzel was the first to speak, saying that the council does understand what the company has to do, but the real problem is for the aldermen who have to explain this to their constituents, especially their older citizens who are living on Social Security that doesn't increase accordingly. 

She also asked, if reduced usage causes the raises, whether increased usage would cause rates to go down. She was told no, at least not immediately, as once again it would have to go through the one-year process with the ICC. It was also noted the company takes almost a year getting the paperwork ready for the ICC, so the actual changes in rates come along about every two years. 

Alderwoman Joni Tibbs expanded on Neitzel's comments, saying the problems weren't just centered on seniors, but also involve families.

She commented, "Everything we have touched this year has gone up," and she said that what it will come down to is choices on what to use water for and what to let go. 

Kaiser said he understood this, as he, too, is an Illinois American customer and is going to see these increases in his bills. But, he also noted that for several years the company held their charges at a flat rate. 

Snyder also asked about the company call centers, saying he'd heard from a citizen who called Illinois American and ended up talking to a call center in Florida.

It was explained the company has two call centers that handle all the calls for the entire company. One is in Alton and the other in Florida. Suits said the two are placed far apart so if an event occurred that caused a power outage in one area, it would not likely cause the same outage in the other area, thus assuring that anyone who tried to call in would be able to get in contact with someone. 

It was also noted Illinois American does not farm out the call services to foreign countries.   

Snyder also commented on the increase, saying one-third of the increase is due to the decrease in consumption. He said he got the increases for infrastructure, but this was not so easy. 

The comparison came back, if you park your car in the garage and don't drive it, you still have to make payments on it. But Snyder responded that while the car is parked in the garage, the bank doesn't ask him to pay more for it. 

It was also mentioned that the increases were driven by the fire protection area and the needs of the local department, but this was not discussed in great detail. 

Kaiser explained that the company, as a utility, was not allowed to hold funds.

"We can't build a rainy-day fund. The ICC does not allow us to accumulate funds," he said.

Therefore, the company is paying for increased costs after the fact most of the time, whether they are for improvements or increases in overhead. 

He also commented that the highest percentage of their costs is in chemicals and electricity, which fluctuate. He said chemicals go up, and most of the time so does electricity. However, he also added that right now the company is enjoying a decrease in electric costs. 

As the discussions drew to a close, the representatives from Illinois American said they would be happy to participate in a public meeting to help explain the rate increases to Lincoln citizens. 

Before they left, Snyder also commented on the local availability of the company, expressing his appreciation for Schonauer, who is very involved in the community, and for the fact the company has a local phone number, which he said is something some of the other service providers don't offer. 

[By NILA SMITH]