At its Wednesday meeting, Bloomington’s city council approved a water rate increase for city of Bloomington utilities (CBU) customers.
The water rate increase will come in two phases, in 2022 and 2024. Residential customers will pay a total of 22 percent more over the course of four years.
Other customers like Indiana University, will see higher increases, around double what residential customers will see.
The 22-percent increase brings the residential customer rate to $4.54 for every 1,000 gallons.
After adding in increases for site charge and fire charge (from $5.89 to $6.58 and from $1.96 to $2.17) after the two phases of increase, an “average” 3,500-gallon residential customer would see a monthly increase of around $3.74 in water fees—from $20.91 to $24.64. That works out to about $45 more per year.
The water rate increase was not controversial for city councilmembers. It passed on a 9-0 vote.
As a separate ordinance, the city council approved the issuance of $17.2 million in revenue bonds, to support the capital improvement plan connected to the rate increase.
Customers will see higher bills starting in early 2022, if the water rate increase gets approval from the state.
All utilities rate increases have to be reviewed and approved by the state’s regulatory body, which is the Indiana Utility Regulatory Commission (IURC).
CBU’s largest customer, which is Indiana University, will intervene with the IURC and try to lower the rate increase that applies to IU, which is about double the rate increase for residential customers.
IU is a separate class of customer for CBU. After the two phases of rate increases are implemented, IU will pay 39.7 percent more than it does now. IU also pays for water as an irrigation customer, and all irrigation customers would see a 43.9 percent increase over the two phases.
A cost of service study, done by a city of Bloomington utilities (CBU) consultant, concluded that residential customers have been subsidizing other classes of customers, like IU.
IU assistant vice president for utilities Keith Thompson told the city council at Wednesday’s meeting about its intention to intervene with the IURC.
IU would likely hire technical experts to evaluate the revenue requirements of CBU’s capital improvement plan, and the allocation factors used in the cost of service study on which the rate increases were based, Thompson said.
On Wednesday, Thompson told the city council, “IU strongly objects to the large rate increase on the assumption that Indiana University is not currently paying our fair share of CBU water infrastructure costs.”
Thompson continued, “We have reviewed the consultant’s reports. And we don’t feel the analysis that was performed there and the proposed rate and rate structure takes into account IU’s substantial $15 million plus of water infrastructure improvements on our campus.”
Thompson added, “We just don’t feel like our infrastructure is being credited back to the service to Indiana University. And we think that warrants further investigation.”
The objection from IU on Wednesday was not a surprise. At a utilities service board meeting earlier this year, Thompson said about the rate increase: “This is a rate shock to Indiana University.”
CBU director Vic Kelson said on Wednesday that he expects to file the rate case with the IURC before April 15. After the filing, Kelson said, the IURC will hold public hearings. The IURC has 300 days to rule on the CBU rate increase that was approved by the city council on Wednesday night, Kelson said.
Kelson was asked by city councilmembers to respond to IU’s objections—based on the university’s water infrastructure improvements, which the university says aren’t being accounted for.
Kelson told the council that that industry standard methodologies were used for the cost of service study, and the allocation factors have been published. Kelson said, “It’s possible that another contractor would come up with a different set of allocation factors—that certainly could occur.”
About the university’s own investments, Kelson said, “We sell water to the meter. We don’t sell water to the buildings at any of our customers’ facilities.” Kelson compared the university’s situation to a residential customer’s: “It’s just like the service line from the meter to your house—that’s yours, that’s not ours.”
Kelson continued: “We’ve sold that water to your meter, not to your house.” Tying back to the university, Kelson said, “And that goes for large infrastructure and large facilities, just like it does for small ones.”
Kelson’s response resonated with councilmember Matt Flaherty, who said, “I live in a condo building. If we had to improve some sort of infrastructure beyond the meter in our units, we wouldn’t get credit for that, either. So, of course, IU is on a much bigger scale. But I think that the same reasoning applies.”
Part of the case for a water rate increase is a capital improvement plan that calls for a more aggressive water main replacement program.
The idea is to go from replacing about 2 miles worth of pipe per year to 3 miles a year—to reach an eventual goal of having a program that replaces all the city’s water mains every 100 years. At the current pace, it would take 200 years to replace all the city’s water mains, which is longer than the expected life of a pipe, according to CBU director Vic Kelson.
The city’s water system has about 420 miles worth of pipe.
The accelerated water main replacement program would mean increasing expenditures for water main replacement from the current level of $1.7 million a year to $3 million a year by 2025.
Through the first couple months of 2021, the city of Bloomington is on a record-setting pace for water main breaks.
|Customer Class||Current Commodity Charge (per 1,000 gal)||Phase 1 Commodity Cost of Service (per 1,000 gal)||Phase 2 Commodity Cost of Service (per 1,000 gal)||Overall Increase|
|Residential and Multi-Family||$3.73||$4.09 (+9.7%)||$4.54 (+11.0%)||21.70%|
|Commercial, Governmental, Interdepartmental||$3.16||$3.79 (+19.9%)||$4.20 (+10.8%)||32.90%|
|Industrial||$2.92||$3.50 (+19.9%)||$4.20 (+20.0%)||43.80%|
|Wholesale||$2.39||$2.81 (+17.6%)||$3.18 (+13.2%)||33.10%|
|Indiana University||$2.37||$2.78 (+17.3%)||$3.31 (+19.1%)||39.70%|
|Irrigation||$3.42||$4.10 (+19.9%)||$4.92 (+20.0%)||43.90%|
CBU has set up a web page about the water rate increase. It includes links to the following documents: