Approval could hinder parish takeover
“The more that they drive their costs up, the more it’s going to cost us to initially get into the (new parish) system or build our system out.” BENNY JOHNSON, utilities committee chairman
GONZALES — Facing regulatory pressure to improve sewage treatment across southeast Louisiana, private sewer companies Mo-Dad Utilities and Ascension Wastewater Treatment Inc. are seeking major rate increases from state regulators.
Ascension Parish council members, who are trying to establish a new public system in the high-growth parish and buy out private sewer systems toward that end, are mulling whether to ask the Louisiana Public Service Commission to block those requests and other rate increase requests from other private sewer providers in the parish.
Mo-Dad Utilities, which has more than 7,000 customers in six parishes, is seeking system-wide rate increases that would more than double monthly residential and commercial bills. The bulk of its customers are in Livingston and Tangipahoa parishes but more than 1,700 are in Ascension Parish.
Ascension Wastewater has 13,962 customers, including some in East Baton Rouge Parish, but is the largest private sewer provider in Ascension. That company is seeking a $15.40 monthly rate increase on residential customers, as well as other rate and fee increases.
In PSC filings, the companies said the costs of state Department of Environmental Quality compliance orders and other needed modernization efforts make the increases necessary to prevent the companies from losing money.
“The Company’s current rate structure has proven insufficient to meet the financial requirements of the systems,” Mo-Dad attorneys wrote in an Oct. 22 rate request. “The Company has consistently operated at a loss, meeting financial needs by infusions of cash from the owners.”
Council members on the parish’s Utilities Committee say the rate increases could raise the sewer systems’ values and hinder parish attempts to buy the companies. With a purchase of the companies, the parish would get their customers, and customers are needed to keep a parish system’s monthly rates down, the council members said.
“The more that they drive their costs up, the more it’s going to cost us to initially get into the (new parish) system or build our system out,” Councilman Benny Johnson, chairman of the Utilities Committee, told other members last week.
Johnson said if the companies become too costly, it will make it harder for the parish to create a regional sewer system.
One of the goals of a new parish sewer system is to clean up the waterways.
Several Mo-Dad and Ascension Wastewater systems ultimately discharge into the impaired Bayou Manchac, which has been the focus of DEQ regulatory efforts. Ascension’s planned system would discharge into the Mississippi River, diverting treated waste from Manchac.
The Utilities Committee proposed a resolution June 30 that says the Public Service Commission should deny the rate requests. The full council, which often follows the committee’s lead, votes July 9.
“We’ve sent the information to the council, and it will be the council’s decision,” Parish President Tommy Martinez said Thursday.
Colby Cook, PSC spokesman, said longtime staff members could not recall another instance when local government asked the PSC to oppose a sewer company rate increase. Ascension Wastewater made its initial rate request in June. PSC staff are still vetting the financial aspects of Mo-Dad’s request.
Public Service Commissioner Eric Skrmetta, who represents East Ascension, said he would consider the parish’s request but noted continuing regulatory changes are driving rate increases. He also said the commission is responsible for ensuring that sewer service continues.
“We certainly want to do what we can to help and accommodate the parish, but we also recognize we have a job to do to protect the public,” Skrmetta said.
Robert Rieger Jr., Ascension Wastewater attorney, said Thursday that it was not appropriate to comment at this time on the parish’s request.
An attorney for Mo-Dad did not comment on the request either.
In 2013, Ascension Wastewater finished a three-year phase-in of rate bumps that state regulators approved in 2010 and 2011 for DEQ-mandated upgrades to dozens of systems, according to PSC filings.
The earlier increases brought residential bills to $34 per month but the company said the rate is not enough to make ends meet. The company estimated it would cost $7 million for upgrades but had to spend $3.6 million more than that, which was financed with the owners’ personal resources. The company says it needs to recoup its costs and make further upgrades to comply with tighter water quality rules soon taking effect.
The Ascension Wastewater rate increases would boost monthly residential bills to $49.40 per month and commercial bills to $54.40 per month.
Mo-Dad and the PSC agreed in May to split Mo-Dad’s proposed increases into two pieces.
Increases of $11.24, $14.24 or $21.24 more per month for residential customers — increases vary with the area, though most would see the $11.24 increase — and similar increases for commercial customers would be used to hire more personnel to run plants, create a rainy day fund for emergencies and allow the company to make a profit.
A second increase of $19.72 to $23.52 per month across the board would finance a loan of up to $16.6 million to meet a pending DEQ compliance order.
Currently, Mo-Dad’s residential customers are paying $15, $22 or $25 per month for service and with the two increases, they would be paying as much as $59.76. Rates for commercial customers would go from $22 per month to as much as $62.20.
While rates tied to the DEQ order are on a slower track, a PSC hearing on the other Mo-Dad increase is scheduled for 9:30 a.m. Aug. 12.
Over the past three years, Ascension Parish government has tried to buy systems from both companies with no success.
A bid to buy Ascension Wastewater in 2011 failed.
In August, Parish President Martinez offered $1.2 million to buy all of Mo-Dad’s systems in the parish. The company turned down the offer in November, citing upgrade negotiations with DEQ. A month earlier, the company had submitted the now pending rate increase request to the PSC.
“A sale of our operations to anyone would significantly disrupt the process we committed to some time ago,” wrote William A. Stegall Sr., Mo-Dad Utilities manager, in a Nov. 21 letter to the parish.
Mo-Dad attorney Bill Kirtland would not discuss actual sales offers Thursday but said price also was a factor in the company’s decision.
Sale documents and other regulatory filings with the PSC show Mo-Dad sold 37 systems in 18 subdivisions to two Livingston Parish sewer districts in April 2013. The $2.14 million sale works out to $1,000 per existing customer and per undeveloped subdivision lot.
Based on an August count of about 1,717 Mo-Dad customers in Ascension Parish, the parish government’s $1.2 million offer did not match Livingston’s on a per-customer basis.
“Ascension’s offer was substantially less than the price paid by Livingston Parish, a sale in which Mo-Dad accepted less than the systems’ estimated value,” Kirtland said in an email Thursday.
Editor’s note: This story was changed on Monday, July 7, 2014, to correct the high end rate Mo-Dad’s residential customers would pay with the proposed rate increase.