The City of Lodi delivered a letter to the Public Service Commission of Wisconsin (PSC) Jan. 18 with a list of procedural steps they will take following the letter of reprimand they received for constructing a booster station without approval.
The letter comes as one of the conditions from the PSC for failing to obtain a certificate of authority prior to the construction of the west side booster station in April of 2017. The letter includes measures the city will implement to avoid a recurrence of similar noncompliance issues.
Julie Ostrander, director of administration, sent the letter to Andy Galvin, PSC assistant division administrator. The letter lists the following steps being considered:
- Assess utilities to determine if plant facilities are able to provide utility service in sufficient quality and/or quantity to the existing and future customer demand with the current service area with existing plant facilities.
- Review community planning documents and determine additional plant requirements to provide utility service to potential new development.
- Review PSC 184.03 (3) and (4) to determine if existing [or] future utility needs require commission authorization prior to construction.
- Update and/or amend planning documents and/or utility capital improvement plan(s) to highlight those utility project requiring PSC construction authorization. For projects require PSC authorization, determine required schedule for application for certificate of authority in accordance with PSC 184.04(1).
- Communicate project stakeholders that include 180 days for review pursuant to PSC 184.05(2).
- Update or create plan commission review checklists to include questions such as, “Does utility service for this development include plant expansion requiring PSC construction authorization?”
- Review engineering proposals scope of services to ensure they include application for PSC authorization with a stated estimated schedule for submittal.
- In accordance with PSC 184.04(2), consult with PSC regarding the pending application, communicate early in the process the urgency of the project and need for expedient review.
- City representatives will review and/or participate in all correspondence with the PSC to ensure that project schedules and circumstances needing special consideration or expedited review are clearly communication, verbally and written.
- Make regular and frequent contact with commission staff for updates on review status, adjust anticipated construction start schedule and communicate update schedule to project stakeholders.
Water rate case
The city says it hopes the procedural change will direct PSC staff to include the booster station project costs in the water rate case currently being reviewed, according to the letter.
In response to the request to address the recovery of costs associated with the west side booster station, the PSC sent a letter Jan. 24 with proposed adjustments. According to the letter, the City of Lodi removed around $1.8 million on plant assets from Utility Finance Plant for the west side booster station.
PSC said, since the utility’s original application included the project as a routine addition rather than a major addition, commission staff excluded the project by removing around $855,000 from the net investment rate base. In total, the rate base included around $1.3 million in decreases.
The City of Lodi responded to the proposed revenue requirements Jan. 30, saying “removing these assets from the Utility’s rate base will have a negative effect on requested rate increase, as the depreciation and rate of return for these assets is needed to help pay debt service for revenue bond debt previously issued for this project.”
The city defended its early construction of the booster station, which the PSC said may result in them not being reimbursed for the project’s cost, by saying the project “was necessary to ensure adequate service to the Utility’s customers, and therefore the assets should be included in the Utility’s rate base,” according to the letter.
Lodi utility estimates the rate increase would need to be at least around $50,000 more than what the PSC is proposing. The PSC proposed a net investment rate base of around $3.9 million, with the City of Lodi requesting around $4.7 million.
The city says the additional revenue is vital for their utilities, as they plan to replace old and undersized maubs that contain lead joints and service laterals. According to the letter, funding the main replacement program out of cash “would deplete reserves to a dangerously low level.”
The City of Lodi says it expects each of its three utility systems to pay for its proportional share of project costs. The annual payments for the west side booster station is around $133,000 per year through 2038.
The PSC staff will submit proposals at a public hearing that will be scheduled at a later date.