A reader's "barb" went out to Water Department Supervisor Mike Kennison, in The Monroe Times April 5 issue, regarding a simplified water rate increase discussed at a Board of Public Works meeting March 31.
"Disappointed Taxpayer" claimed Kennison was "obviously leading everyone astray."
"Disappointed" also barbed Monroe City Council members on the board for not doing their research and "just assuming that the information they are receiving (from Kennison) is correct."
Disappointed taxpayer(s) should be disappointed no more; Mr. Kennison is not leading everyone astray.
Disappointed wrote: "He (Kennison) states in the April 1 edition of The Monroe Times that rate of return is the operating income for construction. According to the Wisconsin Public Service Commission (PSC), rate of return is return on investments."
The Times did not quote Mr. Kennison; although, The Times could have better explained: the rate of return is that portion of the operating income used for construction projects. But the more correct term I, as a reporter, should have defined is the "Authorized Return on Rate Base."
Unfortunately, that term needs extended explanation.
Utilities such as the municipal water department and the wastewater treatment plant are not run on tax money. Both operate much as businesses do, with income minus expenses equaling profit. Unlike businesses, they are regulated by the Public Service Commission as to how much profit they may make.
Rate Base - The rate base refers to how much money utilities have invested in facilities and equipment to ensure service to the utility's customers. Authorized Rate of Return - The amount of profit that utilities are allowed to make is known as the rate of return.
Profit allows utilities to raise the capital necessary for future investments in providing good service. Profits are put back into the businesses to provide safe and reliable service in the future, i.e., new construction projects or facilities.
The Public Service Commission does not guarantee a utility a profit. It simply gives a utility an opportunity to make a profit. If, due to inflation or some other cause, the utility fails to achieve its authorized level of profitability - called the authorized rate of return - the utility can go back to the state commission to request a new rate, but it may not recover what it failed to earn in a time past.
Disappointed also wrote: "A simplified rate increase is not required before the utility can apply for a full rate increase. If this was the situation, then the utility would have filed for a simplified rate increase in 2003 before it actually filed for a full rate increase in 2004. "
Technically, Disappointed is correct. The PSC does not require utilities to file a simplified rate increase before they file a full-rate increase.
But 1995 Wisconsin Act 363 created state statute 196.193, allowing the PSC to grant a rate increase without a public hearing, provided that the increase does not exceed either the authorized rate of return or 6 percent of the prior year's operation and maintenance expense, (and a half dozen other conditions).
The PSC requests that a partial rate increase be initiated first, so consumers are not "sticker shocked" from a full-rate increase being slapped on all at once. A request for the full-rate increase follows and requires a PSC public hearing.
So, Mr. Kennison is correct, and the Council knows it. What's more, this reporter knows it.
Communication is hard - speaking it, hearing it, writing it and reading it. News reporters have to write for the average citizen, most of whom wouldn't have known what an authorized return on base rate meant. Most don't care. Most have fallen asleep during the recent lesson above. We try to keep it simple.
But readers can rest assured that reporters at this paper, and particularly this reporter, are not trying to lead anyone astray. And if anyone is leading anybody astray, we want to be the first to tell you about it.
- Tere Dunlap is a reporter for The Monroe Times. She can be reached at tdunlap@themonroetimes.com
"Disappointed Taxpayer" claimed Kennison was "obviously leading everyone astray."
"Disappointed" also barbed Monroe City Council members on the board for not doing their research and "just assuming that the information they are receiving (from Kennison) is correct."
Disappointed taxpayer(s) should be disappointed no more; Mr. Kennison is not leading everyone astray.
Disappointed wrote: "He (Kennison) states in the April 1 edition of The Monroe Times that rate of return is the operating income for construction. According to the Wisconsin Public Service Commission (PSC), rate of return is return on investments."
The Times did not quote Mr. Kennison; although, The Times could have better explained: the rate of return is that portion of the operating income used for construction projects. But the more correct term I, as a reporter, should have defined is the "Authorized Return on Rate Base."
Unfortunately, that term needs extended explanation.
Utilities such as the municipal water department and the wastewater treatment plant are not run on tax money. Both operate much as businesses do, with income minus expenses equaling profit. Unlike businesses, they are regulated by the Public Service Commission as to how much profit they may make.
Rate Base - The rate base refers to how much money utilities have invested in facilities and equipment to ensure service to the utility's customers. Authorized Rate of Return - The amount of profit that utilities are allowed to make is known as the rate of return.
Profit allows utilities to raise the capital necessary for future investments in providing good service. Profits are put back into the businesses to provide safe and reliable service in the future, i.e., new construction projects or facilities.
The Public Service Commission does not guarantee a utility a profit. It simply gives a utility an opportunity to make a profit. If, due to inflation or some other cause, the utility fails to achieve its authorized level of profitability - called the authorized rate of return - the utility can go back to the state commission to request a new rate, but it may not recover what it failed to earn in a time past.
Disappointed also wrote: "A simplified rate increase is not required before the utility can apply for a full rate increase. If this was the situation, then the utility would have filed for a simplified rate increase in 2003 before it actually filed for a full rate increase in 2004. "
Technically, Disappointed is correct. The PSC does not require utilities to file a simplified rate increase before they file a full-rate increase.
But 1995 Wisconsin Act 363 created state statute 196.193, allowing the PSC to grant a rate increase without a public hearing, provided that the increase does not exceed either the authorized rate of return or 6 percent of the prior year's operation and maintenance expense, (and a half dozen other conditions).
The PSC requests that a partial rate increase be initiated first, so consumers are not "sticker shocked" from a full-rate increase being slapped on all at once. A request for the full-rate increase follows and requires a PSC public hearing.
So, Mr. Kennison is correct, and the Council knows it. What's more, this reporter knows it.
Communication is hard - speaking it, hearing it, writing it and reading it. News reporters have to write for the average citizen, most of whom wouldn't have known what an authorized return on base rate meant. Most don't care. Most have fallen asleep during the recent lesson above. We try to keep it simple.
But readers can rest assured that reporters at this paper, and particularly this reporter, are not trying to lead anyone astray. And if anyone is leading anybody astray, we want to be the first to tell you about it.
- Tere Dunlap is a reporter for The Monroe Times. She can be reached at tdunlap@themonroetimes.com
