The Indiana Utility Regulatory Commission (IURC) reduced the increase in operating revenues initially requested by Citizens Water in its rate case from 14.7 percent to 9 percent. The difference between the amount requested and the amount approved is mainly related to reductions in costs, including executive compensation.
The IURC found that Citizens Water’s level of executive compensation was not appropriate for a municipal utility. Consequently, the IURC significantly limited the amount of recovery in this area. In Citizens Water’s next rate case, the IURC expects the utility to realign compensation so that it is more compatible with actual municipal-based expenses.
The IURC decreased recoverable executive compensation by approximately $900,000 for 16 employees by eliminating the Executive Incentive Plan and cutting their Short Term Incentive Plan increases by 38 percent. The reduction to executive pay increases takes the amount from 47 percent to 9 percent, which is equal to the average increases nonexecutive employees receive. These reductions in executive pay and other operations and maintenance expenses resulted in a total decrease of $1.4 million.
Additionally, the IURC rejected Citizens Water’s claim of reduction in water consumption amounting to $1.6 million due to lack of evidence. Also rejected was an adjustment to nonrecurring charges of $1.2 million because Citizens Water based these charges on an average that included a period when the City of Indianapolis owned the utility. Further, the IURC only allowed current and 2015 infrastructure investments to be recovered, which will save ratepayers an additional $2 million in capital expenditures. These investments are needed as the state’s water systems are aging and in need of improvement.
In addition to the rate case order, the IURC opened an investigation into the management practices, including billing and call center issues, of Citizens Energy Group (gas and water) and CWA Authority, Inc. (wastewater). The primary issues so far are related to the following: 1) customer service quality (e.g., one out of five callers hang up prior to receiving service due to long wait times); 2) billing compliance with approved rules, regulations, and tariffs; and 3) payment application compliance with state and federal laws. A procedural schedule has not yet been set, but is forthcoming.
Citizens responded by saying: “Citizens Energy Group is currently reviewing the water rate order received from the Indiana Utility Regulatory Commission (IURC). The IURC approved a 9 percent increase in revenue for the water utility. This will translate into less than a $3 per month increase in the average residential water bill.
“Like the IURC, we are very concerned about the impact of rate increases on our customers. The reduction in revenue approved by the IURC does create a shortfall in funds for vital infrastructure investments. Years of under investment by past owners has resulted in a water system that experiences 700 main breaks per year, resulting in $3.5 million in repair costs and 3 billion gallons of wasted water. If Indianapolis is going to remain a world class city, it is important Citizens makes investments to upgrade its water system to ensure safety, reliability and water quality.
“As evidenced by three straight J.D. Power Awards (2011-2013) for customer satisfaction, Citizens takes great pride in being an industry leader for customer service. Citizens has been and will continue to be transparent with the IURC on its combined billing and customer service practices. In combining the gas, water and wastewater utilities in 2011 and 2012, Citizens did experience some delays in responding to customers. Since then call wait times at the Citizens’ call center have been significantly reduced.
“The total executive compensation program at Citizens is currently undergoing a review by a leading compensation consultant. The results of that review should be available to the public by mid-year.”
To view the rate case decision under Cause No. 44306 or the new investigation under Cause No. 44462, visit In.gov/iurc. Other cases still pending before the IURC include the Citizens Thermal Energy rate case, under Cause No. 44349, and the CWA Authority, Inc. (wastewater) rate case, under Cause No. 44305.
