City’s handling of water rates called unacceptable

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This article was published 25/10/2023 (819 days ago), so information in it may no longer be current.

Manitoba’s Public Utilities Board came down hard against the City of Brandon’s handling of water rate increases, approving the city’s request but criticizing its lack of process and handling of deficits in a report issued on Oct. 20.

Earlier this year, the city asked for permission to raise rates for the first time in seven years to help pay for deficits incurred in previous fiscal years, increasing service costs and future infrastructure improvements.

The city initially hoped the first round of increases would go into effect on July 1 of this year, but some corrections needed for its application meant that a decision was not rendered until last week.

During a public hearing held by the board in the foyer of Brandon City Hall in September, city staff made a case for the increases to be approved while residents present argued against them, some criticizing the city for waiting so long between rate increases and necessitating larger ones to make up for lost ground.

In a media release sent out Monday, the city provided an updated timeline for the increases to come into effect.

The first increase, if approved by council, will go into effect retroactively as of Oct. 1. The next increase is scheduled for Jan. 1, 2024, followed by two more increases on Jan. 1, 2025 and Jan. 1, 2026.

Before the increases, customers paid $1.83 per cubic metre of water used (including a debt surcharge), $1.63 per cubic metre of wastewater and a monthly service charge of $4.66.

Under the first increase, which adds two deficit rate riders to the water rate, customers will now pay $2.37 per cubic metre of water, 1.79 per cubic metre of wastewater and a monthly service charge of $4.80.

As of Jan. 1, 2024, the combined water rate per cubic metre will go up to $2.76, the wastewater rate to $2.14 per cubic metre and the service charge to $5.11.

At the beginning of 2025, the combined water rate will go up again to $2.972 per cubic metre, the wastewater rate to $2.40 per cubic metre and the service charge to $5.42.

When the final increase kicks in on Jan. 1, 2026, the combined water rate will end up at $3.28 per cubic metre, wastewater at $2.71 per cubic metre and the monthly service charge to $5.74. This means that water rates will effectively increase by 79.2 per cent by the end of the rate hikes and wastewater rates by 66.3 per cent.

The board’s report states that the seven years between rate applications from the city is unacceptable.

“Regular rate reviews, submitted every three years as per the board’s guidelines, protect the financial position of the utility and may reduce the need for significant rate increases in one year. In this case, the additional cost of a rate rider is required to recover 11 years of operating deficits and replenish the utility’s working capital,” the report says.

“Had the city been diligent in making rate applications to the board every three years, the operating deficits incurred by the utility may have been mitigated or avoided entirely.”

Also noted was that Brandon had not complied with an order from the board issued in 2016 that required the city review its water and wastewater rates and file a report and application with the board no later than June 30, 2018.

The report warns that items issued by the board with the words “it is therefore ordered that …” are directives, not recommendations, and that penalties can be issued for non-compliance.

The city has been ordered to review its rates and submit a new rate application by April 1, 2026.

Also a subject for criticism from the board was the number of deficits and the deficit amount incurred by the city as well as the seven-year duration of a rate rider intended to recover a deficit incurred over five years.

The PUB noted that the city’s application did not contain included forecasted cost increases to the southwest lift station project by $10 million and to the water treatment facility improvements by $12.165 million and the board orders that Brandon return with a revised rate application once those extra costs have been approved by the Municipal Board.

Though the rate increases were approved as requested, the board recommended that the city “consult with customers, stakeholders, non-profit organizations and other relevant persons/groups/organizations about creating targeted programs to alleviate the financial hardship faced by the utility’s customers.”

On Tuesday, city manager Ron Bowles told the Sun by phone that he was very happy to receive the PUB’s decision, though he said ideally he would have liked more time to warn residents before the rate hikes go into effect.

Monthly customers’ bill for October will be sent out in mid-November and will incorporate the first of the rate hikes. Bowles said the city will be conducting a campaign to notify ratepayers about the changes.

With regards to the extra costs for the lift station and water treatment projects, Bowles said the city is working on an application for a rate rider for the latter.

Work on rate changes relating to the lift stations are a little more complex, Bowles said, as the city is currently working on plans to reduce the cost of the project to taxpayers by reducing the scope of it and looking for grants from other levels of government.

The project, he said, should be coming forward at a city council meeting before the end of the year.

On the fiscal management critiques levied by the board, Bowles said the city agrees with the findings and is putting measures in place to improve things going forward.

“Our current management and finance teams are effectively managing a seven-year-old problem,” he said. “They’ve now put in great, robust and accountable systems in place on a go-forward basis … We’ve had a traditional approach to keeping fees low. And as you know, the PUB has said that wasn’t an appropriate strategy and we want you to change and we agree with that.”

By performing annual reviews of its utility rates going forward and making more frequent rate applications, Bowles said ratepayers will be provided with more certainty as to what their rates will be and prevent the accumulation of accounting deficits.

“We’ve already initiated our 2025 review,” Bowles said. “And we’ll be adding that rate review in the budget that council will be talking about early in the new year.”

In response to the board’s recommendation that the city create programming to help alleviate the financial burden of the rate increases on local users, Bowles said that will likely take the form of conversations and education.

“Our utility system are based on user pay,” Bowles said. “And so the program and where users can help the environment and help their pocketbook is using less water. And if you use less water, your water bill is directly linked to your sewer bill.”

He recommended that local ratepayers consider measures like implementing rainwater gardens, watering lawns less, using low-flow showerheads and toilets.

The city manager also noted that the board’s criticism was related to the financial aspects of the utility and not the quality of its services.

Mayor Jeff Fawcett said the criticism in the report wasn’t a surprise after city staff did its own homework on the situation.

“It does sound like there was some sort of mistakes made,” Fawcett said. “Things should have been acted on faster, then you throw the COVID stuff in on top of that, where it was a conscious delay. That just added additional years. There’s nothing we can go back in time and change, so we’re moving on with what we’ve got.”

Fawcett said he wondered why the board didn’t approach the city sooner if it knew one of its orders was not being followed, though he acknowledged the city’s staff should have brought it up as well.

The staffers who should have known about it, he said, are no longer with the city. Council was not aware of the issue previously and now that it is, he said they are addressing it.

Fawcett said he was much more confident that the utility’s finances would be better-managed going forward. He said council is communicating with administration about the utility more frequently and administration is keeping in more frequent contact with the board.

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