Wisconsin Public Service Commission Issues Regulatory Update on Westboro Sanitary District Water Rate Increase

Strategic Insights -

The Wisconsin Public Service Commission (PSC) has analyzed the Westboro Sanitary District Water System's application for a water rate increase. The commission received the application on March 26, 2025. The proposed 2025 test year revenue requirement exhibit will serve as the basis for the cost-of-service study. Commission staff recommends a revenue requirement based on a 6.80 percent return on net investment rate base plus a cash adder of $11,400 for debt service, for a total estimated operating income of $24,482.

Key Takeaways:

  • The Westboro Sanitary District Water System applied for a water rate increase to recover construction costs from the addition of water main and the installation of water meters, and also due to an increase in operating and maintenance expenses.
  • The applicant requested a return on net investment rate base of 6.20 percent, which is lower than the commission's calculated benchmark rate of return of 6.80 percent.
  • Commission staff recommends a cash adder of $11,400 to ensure the applicant maintains an acceptable debt service ratio while also allowing the applicant to reduce its debt ratio.
  • The commission staff estimates the applicant's capital employed in providing public utility service associated with the net investment rate base to be 19.46 percent municipal equity and 80.54 percent long-term debt.
  • Commission staff cautions the applicant that an 80.54 percent debt ratio is too high to support the applicant's financial integrity over the long term and recommends the applicant reduce its debt ratio to reasonable levels as soon as practical.
  • The commission staff discovered several issues during its review of the rate application, including improper reporting of charges from the tariff, and proposed adjustments to the revenue requirement.
  • The applicant agreed with the proposed adjustments and will make the necessary adjusting entries in an amended 2024 PSC Annual Report.

Statistics:

  • The commission recommends a revenue requirement of $24,482, which includes a 6.80 percent return on net investment rate base and a cash adder of $11,400 for debt service.
  • The applicant's capital employed in providing public utility service associated with the net investment rate base is estimated to be 19.46 percent municipal equity and 80.54 percent long-term debt.
  • The commission's benchmark rate of return is 6.80 percent, which is higher than the applicant's requested return of 6.20 percent.
  • The cash adder of $11,400 is recommended to ensure the applicant maintains an acceptable debt service ratio.
  • The commission staff estimates the applicant's current debt ratio to be 80.54 percent, which is too high and recommends reducing it to reasonable levels as soon as practical.

Sources:

  • Westboro Sanitary District Water System, Application for Water Rate Increase, submitted to the Wisconsin Public Service Commission on March 26, 2025.
  • Wisconsin Public Service Commission, Proposed 2025 Test Year Revenue Requirement Exhibit, dated March 26, 2025.
  • Wisconsin Public Service Commission, Staff's Analysis and Recommendation, dated March 26, 2025.