Norwich utilities commission to get 'ratemaking 101' lesson
Norwich — The city utilities commission will hear a presentation at its February meeting on how utility rates are calculated and the potential impact of increasing from 10 percent to 12 percent the portion of revenues turned over annually to the city.
Norwich Public Utilities General Manager John Bilda said it would be “very challenging” to include the City Council’s request from last June to increase the charter-mandated revenue share in the 2018-19 utility budget and rates. The rate structure for the coming year’s budget is “85 percent complete,” Bilda said.
Mike Morganti, a utility rate specialist from Management Applications Consulting Inc. of Reading, Penn., will give a presentation, described by Bilda as "ratemaking 101," to the board at its Feb. 27 meeting.
The presentation will cover the various components, calculations and considerations that go into developing rates for any utility, NPU spokesman Chris Riley said.
Changing the contribution to the city at this point would require NPU officials to “go several steps backwards in a process that has been underway for almost three months,” Riley said.
Bilda told the utilities commission Tuesday that rates are calculated based on a cost-of-services study. He said “there’s no way” to add the requested 2 percent without collecting it from ratepayers. If the revenue projection to the city is increased to 12 percent in the 2018-19 fiscal year, the city would not receive the money until the 2019-20 fiscal year, because payments to the city are based on audited revenues from the previous year.
The city charter requires the utility to pay "not less than 10 percent" of gross revenues from electric, water and natural gas revenues to the city each year.
Later in the week, Bilda said the presentation in February would include an alternative proposal to boost revenues to the city “that might make better sense.”
The utilities commission is expected to receive a draft 2018-19 utility budget in March, with proposed rates for all four divisions: electric, water, natural gas and sewer. The 10 percent payment does not apply to sewer revenues. The utilities commission and the sewer authority would have to schedule a public hearing on the budget and proposed rates, likely in April, and would vote on the budget in May.
NPU officials have expressed strong objections to the City Council’s request to add 2 percent to the annual revenue contribution to the city. Mayor Peter Nystrom repeated the request in his Jan. 2 State of the City address. NPU officials argued NPU’s contribution of 10 percent of gross revenues already exceeds contributions by all 90 publicly owned utilities in New England.
On Tuesday, Bilda said the total, $8.5 million this year, also far exceeds the amount NPU would pay to the city in property taxes if the utility paid taxes on its physical assets.
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