FORT WAYNE — Fort Wayne water customers’ rates won’t increase as much as initially proposed under a settlement agreed to this week by City Utilities and other parties.
The agreement calls for raising rates 33.86 percent over the next three years, compared with nearly 40 percent under the plan approved by the City Council in February. Rates would increase 19.62 percent the first year, 5.87 percent the second year and 5.7 percent the third year, although the second and third increases could change based on a study to be done by the utility.
Kumar Menon, director of City Utilities, said he will inform the council on the rate case in the next few weeks and again in October after a final decision is made by the Indiana Utilities Regulatory Commission. The commission must vote to accept the proposed settlement and the new rates.
The agreement comes after months of negotiations with New Haven, General Motors Co. and the Office of Utility Consumer Counselor, which is the state’s consumer advocate group. All four parties signed off on the agreement.
“We are pleased that we have been able to reach this near term agreement with two of our major water customers and with OUCC, which represents the interests of all our customers,” Menon said in a statement.
Gregory Guerrettaz, New Haven’s financial consultant, said in written testimony that the agreement benefited everyone and would avoid lengthy and costly litigation.
“On the whole, I believe that the result of the Settlement 19 Agreement is fair and reasonable and should be approved in its entirety,” he said.
In particular, he wrote that the settlement includes a cost-of-services study to determine whether Fort Wayne’s water rates cover or exceed the cost of providing service to GM and New Haven. On top of that, rates in New Haven could be increased only if Fort Wayne was losing more than $250,000 in any year providing service to the smaller community. Guerrettaz said that quarter-million-dollar threshold was critical for New Haven’s support.
City Councilman Russ Jehl, R-2nd, said the settlement agreement was a step in the right direction for the utility.
“Anything that helps consumers these days is good news,” he said.
Jehl voted against the original rate increase, primarily because of the large jump in the first year of the plan. He said he understood the utility’s need for money for maintenance but such a spike was not in the best interest of his constituents.
The results of the cost-of-service study could “marginally” alter the rates in the settlement in years two or three, according to Menon. He said the study will begin by the end of the year, although it was unclear what the reduced rates would mean to the utility’s plans to increase its water pipe-replacement efforts.
The rate hike was largely sold as necessary to help repair aging water pipes that have been breaking at an increasing amount. Utility officials said replacing old, brittle pipes is more cost-effective than emergency repairs.
The first rate hike is expected to take effect on Jan. 1.