The Milford Water Co. is seeking an 83 percent rate increase to pay for its new $20 million water treatment plant, which the state ordered the private utility to build after a two-week drinking water ban three years ago.
Town officials vow to fight the rate increase — the second in two years — and the state attorney general’s office says it is stepping into the fray.
The proposed increase will be discussed at Town Hall on Dec. 12, when state Department of Public Utilities officials will take part in a 7 p.m. public hearing on Milford Water’s request.
“They had talked about a 50 percent increase, which we thought was excessive, and then they came back with this,’’ said Gerald M. Moody, Milford’s town counsel. “This is on top of a 33 percent increase granted two years ago.
“I am sure this is being driven by the $20 million water treatment facility they are under administrative order . . . to build,’’ Moody said, referring to the state Department of Environmental Protection’s directive, “but there is nothing we have seen that justifies the 82 percent increase. We will be opposing it vigorously.”
But from where David Condrey sits in the manager’s office at Milford Water, given his view of new buildings going up, retention lagoons, earthmovers, and scores of workers in hardhats, the rate increase seems reasonable.
“I feel good we are actually taking the steps to make sure we have better quality water going forward,” Condrey said. “I know we are in hard economic times now, but the plant is not a Taj Majal. It is a practical, state-of-the-art facility.”
The new treatment plant is being built as part of a settlement with the state’s environmental agency, which stepped in after the discovery of E. coli bacteria in water samples led to a 13-day boil-water order for the utility’s customers in August 2009.
Condrey said the company had no choice but to increase its rate request after the overall expense of the new facility went from an estimated $16 million to $20 million. According to the company’s filing with the Department of Public Utilities, the new rates would add $3.8 million to its coffers annually to cover the 10-year construction loan.
While it is not unusual for a utility in the midst of a major capital project to seek a large increase in its rates, DPU spokeswoman Krista Selmi said, that does not mean the request is always granted.
For example, she said, the Dover Water Co. sought a 66 percent increase in 2007 for a new well and treatment facility, and was granted a 62 percent increase from the state oversight agency, while the Assabet Water Co. applied for a 208 percent increase for upgrades to its water treatment plant in 2008, and the DPU approved only a 64 percent increase.
Meanwhile, the Milford water case also is being reviewed by Attorney General Martha Coakley’s office, which earlier this year was granted authority by the Legislature to intervene on behalf of customers in rate increase cases involving the 17 private utilities running public water supplies in Massachusetts.
The attorney general’s office already had been involved in how the state reviews rate increases for gas and electric companies, but a contentious dispute between the towns of Hingham and Hull and the Aquarion Water Co. prompted the change on Beacon Hill.
Jillian Fennimore, Coakley’s deputy press secretary, said the AG’s office is intervening in Milford “to ensure ratepayers are protected. We are currently reviewing company documents to determine whether any of the claimed costs are unwarranted.”
The contractor building the new treatment plant, the R.H. White Construction Co., expects to have the project completed by April, a month ahead of the deadline hammered out with the Department of Environmental Protection, Condrey said.
Condrey started at the private utility — which was founded in 1881 — around the time of the contaminated water episode in 2009, he said, and he remembers it as a “perfect storm” of bad circumstances.
A wet spring and summer followed by a sudden spike in temperatures that August led to more customers suddenly drawing more water from the system, Condrey said, and the utility had to take more water from Echo Lake to meet the demand. At the same time, the temperature change had prompted an inversion of warmer top water and cooler bottom water in the lake, stirring up sediment and bacteria, he said. And Milford Water had reduced the amount of chlorine being used to treat the water to reduce the production of a group of potentially hazardous chemical compounds — trihalomethanes, or THMs — that are generated when chlorine mixes with organic material. Continued...