BUCKSPORT — At the Town Council meeting Jan. 12, Town Manager Susan Lessard said Bucksport’s water bills will be a bit bigger than they were last year.
That’s because the town’s water utility provider, Maine Water Co., received approval from the Maine Public Utilities Commission (MPUC) to increase the surcharge that pays for improvements to the town’s water infrastructure.
“This is a legal infrastructure improvement charge, and it allows them to use funds to improve lines, et cetera,” Lessard said. “But it doesn’t go the same way a water rate increase does.”
A water rate is the price customers pay for water supplied by a utility company. When a utility company wants to raise the general water rate, it must undertake a lengthy legal process with the MPUC.
The process involves lawyers, hearings and testimony, said Harry Lanphear, the commission’s administrative director.
But in 2013, the MPUC added Chapter 675 to its list of rules regulating water utilities. The chapter allows water utility companies to set a water infrastructure surcharge without going through the lengthy process of a general rate change.
The surcharge still must be approved by the MPUC, but the process is much more streamlined than a rate change proceeding.
“The water infrastructure charges are generally more straightforward,” Lanphear said, adding that the public can provide input on a company’s surcharge request.
The surcharge is a useful tool for water utility companies, Lanphear said, which are responsible for maintaining aging pipes throughout Maine.
“It’s mainly due to infrastructure being so old,” he said. “This process is used very frequently by other water companies across the state.”
Rick Knowlton is the president of the Maine Water Co., a private water utility that provides public water service to the town of Bucksport. The company owns and maintains a water infrastructure system in Bucksport, which includes the water treatment facility drawing water from Silver Lake and approximately 10 miles of buried water mains. The infrastructure delivers water service to 650 homes and businesses in town.
“Most of the water systems in Maine date back to the turn of the 20th century,” Knowlton said. “Sometimes the mains break and the repair is very expensive. It’s inconvenient for customers who lose service because of the break.”
Replacing old pipes can reduce the risk of breakage. The thing is, replacement projects are expensive too. Chapter 675 allows utility companies such as Maine Water to raise the revenue necessary to pay for such projects without going through the process of raising the general water rate.
“This mechanism allows, within certain limits, a way for a utility to make those improvements and replacements that are most critical, without the regular routine of a full rate proceeding, which tends to involve lawyers and time and money,” Knowlton said.
Chapter 675 limits how often and how much a utility company can add to the base rate through a surcharge for infrastructure projects. The subsidiary of Maine Water in Bucksport is classified as a medium-sized water utility because it makes between $250,000 and $750,000 in total annual revenue. According to the chapter, that means the company cannot surcharge more than 15 percent of the company’s base water rate.
Still, 15 percent can be a large sum, especially if the bill is already five or six figures long.
“Nine percent of an $80 bill is completely different from nine percent of a $25,000 bill,” said Lessard after the Town Council meeting.
The town manager said Bucksport pays a fire protection charge so that the town’s water system is large enough to supply firefighters with enough water flow and pressure to fight fires.
“If you have a fire on your street, you want to make sure the water system is large enough to accommodate the hydrant running and the water still going down the line,” she said.
According to a chart provided by Maine Water, the town’s annual base rate for hydrant rental since 2014 has been $189,373.
Every year since then, a water infrastructure surcharge has been approved by the MPUC for addition to the base rate, increasing the total bill. In 2014, the surcharge was 2.45 percent of the hydrant rental base rate, which brought the total bill to $194,019.
Since then, the surcharge has increased every year. The amount by which the surcharge increases changes based on the cost of infrastructure projects the utility company completed the previous year, Knowlton said. In 2015, the surcharge increased by $1,764, but in 2016 the surcharge increased by $7,173. Effective Jan. 1 this year, the surcharge is increasing by 1.91 percent, or $3,623.
Over time, the surcharges accumulate. With the approved increase for this year, the town of Bucksport will pay a 9.09 percent surcharge on its hydrant base rate, which makes for a total bill of $206,579.
Maine Water customers across the town will face a similar increase, albeit with much smaller charges. For a typical residential water bill, the total surcharge equates to 8 or 9 cents per day, Knowlton said.
“We’re a customer just like anybody’s a customer,” Lessard said. “We just pay the big bill.”
The reason the surcharge increases every year is to recover the cost of replacing infrastructure year after year.
“Since we began, we have invested $1 million replacing portions of the water systems,” Knowlton said. “That investment of a million dollars causes the charge to incrementally go up. Each year we invest another few hundred thousand dollars to do work that the rates otherwise don’t support.”
The infrastructure work helps improve Bucksport’s water service, reduce interruptions, improve water quality and improve firefighting capacity, Knowlton said.
“It’s less expensive for customers to do it this way than to pay for lawyers and the more expensive general rate process,” he said about the surcharge system.
Knowlton said Bucksport is due to hit the surcharge limit of 15 percent in three years, at which time Maine Water will begin the lengthy process of a base rate change.
Until then, if Bucksport readers see an increased surcharge on their water bill and spot construction crews working on their water mains, they can rest assured that the two events are related.
“For people who get these bills in the mail, this is what it means,” Lessard said during the meeting. Later, she added, “Maine Water has done a great job. They’ve done a lot of line replacements and they’re continuing to do that.”