After requesting a rate increase for homeowners, the owners of water and sewer infrastructure for a Helena Valley subdivision say they will appeal the Montana Public Service Commission's decision to order a rate reduction instead.
Last week, the PSC denied the request of North Star Water & Sewer to increase rates on more than 270 homeowners in the North Star Subdivision. The body instead ruled that based on the valuation of the infrastructure, a point which the company disputes, homeowners should see a rate decrease from $70 to about $56 per month.
Because the homeowners are considered “captive” consumers, meaning they must get their water and sewer service from North Star, the PSC regulates the company as a small utility and authorizes rates.
Last year the company sent a request to the PSC and notified homeowners that it believed rates should be set as high as $500 per month based on the cost of infrastructure, operations and the need to build a reserve fund for emergencies. The company later cut that request down to about $270 – a sum that North Star Water & Sewer partner Doug Peterson said was reflective of actual costs and values and wanted the PSC to recognize, but that actual rates would be set only at $95 per month.
The PSC’s decision follows a two-day hearing in January where Peterson testified that the company had lost business records and become delinquent on taxes after one of its original partners who controlled finances had essentially disappeared following personal issues.
Unable to document the costs of infrastructure, North Star relied on the engineering firm that built the infrastructure to testify on its value. That testimony put the valuation at about $5 million. Based on that figure, the company said it has drastically undercharged homeowners for a decade.
The $5 million figure was challenged by the Montana Consumer Council, a state agency that advocates on behalf of utility customers before the PSC, and Derek Oestreicher, a North Star homeowner and attorney who intervened in the case. The council valued the infrastructure at only $1.2 million based on a North Star financial report. Restrictive covenants also say that the water and sewer infrastructure could be purchased by the homeowners association at the price of $1.2 million.
Based on that valuation, the council and Oestreicher argued the rate should actually be reduced.
In its decision to lower rates, the PSC said it agreed the $1.2 million valuation to be the more accurate of the two and that the company had recouped some of its costs through lot sales.
In response to the decision, Oestreicher said North Star could not substantiate its request and that the PSC determined the investments of 272 homeowners in the North Star Subdivision were more important.
“Our neighborhood is thankful for the work of the Montana Consumer Council, the Public Service Commission staff, and the commissioners in reaching a fair and just decision,” he said. “We are hopeful that the new $55.93 rate is effective immediately, so we don't have to continue overpaying for water and sewer utilities.”
Peterson said in response to the decision that the company would appeal. One significant reason for requesting an increased rate was the need to establish a reserve fund for emergencies.
“Of course we’re extremely disappointed with the whole thing and we are going to file an appeal in district court,” he said. “We desperately need enough income to have a reserve for emergency situations in case there’s a big huge catastrophic thing that goes haywire.”
Reporter Tom Kuglin can be reached at 447-4076 @IR_TomKuglin
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