Monday, April 12, 2010

LETTER: Market-based water rate increase wrong

April 11, 2010

Open Letter Re: Water Rates
Mayor Kenny Evans And Town Council Members

Dear Mr. Mayor and Council,

Determining water rates based on neighboring communities is not how a utility determines rates. While I would agree it is important to be aware of others’ rates, this information should only be used to insure our utility is competitive and following prudent practices. Municipal utilities should always have lower rates than their private counterparts, in part because they are tax exempt and the only shareholders are the residents of the community.

Rates should only be based on the rate case prepared by the utility and approved by the governing body. This rate would contain current and projected data regarding income and expense. Further, this document should be available to the public, prior to any hearings regarding proposed rate increase.

Using any other method would appear to be setting rates based on the market. I think you would agree public monopolies should avoid any appearance of this. Another problem with this approach is that an unwarranted surplus will exist and those funds may be swept into the town’s general fund. The results would be the meter becomes the tax collector.

I would be happy to discuss this further or assist in any manner. I have over 30 years experience at a large municipal utility, with more than 10 years as a manager. I may be contacted at 468-9667.

Leon H. Keddington

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