Norwich - While some members of the Board of Public Utilities Commissioners agreed Tuesday with criticism that a 36.7 percent water rate increase was too steep to institute all at once, the board approved an 18 percent increase starting July 1 and another 16 percent rate hike Jan. 1.

Opponents representing some of the city's largest water and sewer customers made final pleas at the start of Tuesday's meeting. Attorney Glenn Carberry said the water increase was unreasonable and unjustified.

Commission member Alan Remondi agreed and questioned both Norwich Public Utilities management and the commission about why the water division has been allowed to carry deficits each year, covering them with borrowed money from the much larger electric division.

New 20-year, 2 percent state loans to cover $8 million in capital projects - replacing 40-year-old water pumps, 100-year-old water lines and improving filtering systems - are included in the water rate hikes. The loans require the $9 million water budget to operate with a surplus.

NPU must pay off $400,000 borrowed from the electric division and erase this year's projected $261,000 operating deficit.

By phasing in the rate increases, the water division will take longer to erase the deficit and build the surplus. Steve Sinko, division manager of business services, estimated the water division will end up with a $680,000 deficit in 2012-13.

The total rate increase for the 2012-13 fiscal year now will be 27 percent, Sinko said. The full 36.7 percent increase will take effect July 1, 2013, when the cash flow would start to improve, he said.

Remondi pointed out that repaying the electric division loan and erasing the current operating deficit amounted to "one-time expenses" that shouldn't be built into annual rates.

But Sinko said that was not the case, and the rates would cover both the necessary water system upgrades and increased operating expenses over the years.

The commission then changed hats and acting as the Sewer Authority, voted to delay action on an equally controversial 11.5 percent sewer rate increase to explore alternatives. The sewer increase mostly would cover operating expenses, technology upgrades and maintenance in the $7.5 million sewer budget.

But in the face of skyrocketing new estimates for the sewage treatment plant upgrade, now at $120 million, Remondi proposed NPU divert rate money dedicated to that project - now insufficient - to cover sewer operations instead.

The sewer authority will hold a special meeting May 29 to discuss the alternatives.

C.BESSETTE@THEDAY.COM