Milwaukee Water Works Pursuing Rate Changes

The Milwaukee Water Works (MWW) is pursuing broad adjustments to its water prices. And the changes will impact far more than just Milwaukee residents and businesses, because the City-owned utility sells water to 15 suburbs.

“This is a very comprehensive process, digging deep into our finances, making sure we are in fact recovering our cost of service from our ratepayers,” said Superintendent Karen Dettmer to members of the Common Council Public Works Committee on Friday.

Water isn’t sold at a flat rate, nor is the price set at will. The state-regulated utility is allowed to provide a rate of return to cover its capital improvement plan after selling water to a variety of retail and wholesale customers. It also transfers revenue, as a payment in lieu of taxes based on its book value, to its owner, the City of Milwaukee. It’s scheduled to transfer $13.46 million to the city’s general fund this year.

Trilogy Consulting was hired to support the evaluation. The firm will help the utility present what is known as a “conventional rate case” to the Public Service Commission.

“As part of this resolution we will be coming back likely in September or October after we have had a conversation with the Public Service Commission,” said Dettmer. The resolution authorizes the utility to pursue the adjustments, but does not approve any increases (or decreases).

Details on actual rates would come in the future. “We don’t really look at it as a range. What we negotiate with the Public Service Commission is a rate of return,” said the superintendent in response to a question from Alderman Russell W. Stamper, II.

The utility sells water directly to Milwaukee, Greenfield, Hales Corners, St. Francis, West Milwaukee and a portion of Franklin water users. It sells water at a wholesale rate to Brown Deer, Butler, Greendale, Menomonee Falls, Mequon, New Berlin, Shorewood, Thiensville, Wauwatosa, West Allis and the Milwaukee County Grounds, which in turn resell it at their own rates. MWW is also partnering with the City of Waukesha on a $286 million project to add the western suburb as a wholesale customer.

“We want to make sure we are going through this in a stepped process so customers don’t see a big increase in any one year,” said Dettmer. She said the rate would be re-evaluated after Waukesha comes online as a customer. The suburban community is expected to pay at least $3.2 million annually for water once the pipeline is completed.

Whatever the new rates end up being, Dettmer doesn’t expect it to be the biggest cost on resident’s water bills. Water charges on the bill, now known as the Municipal Service Bill, amount to approximately 25% of the bill’s total estimated the superintendent. The city uses the bill to charge for other municipal services like street lighting, garbage pickup and snow plowing.

MWW’s residential rate was increased 3% in 2019 from $2.08 to $2.14 per 100 cubic feet (748 gallons). That equates to four gallons of water costing just over one cent. The water rate was last adjusted in 2017, with MWW noting in 2019 that its rate of return (3.04%) was below the state benchmark of 5.7%. The change was expected to yield an additional $2.7 million per year in revenue.

City of Milwaukee non-residential users pay a lower rate per cubic foot as their usage increases, a pricing structure that benefits large users like Molson Coors. Suburban businesses in municipalities that buy water directly (at retail pricing) don’t see the same benefit.

The utility’s 2021 budget is $150.1 million.

The committee unanimously recommended approval. The full council will review the request on July 27th.

CORRECTION: An earlier version of this article identified Franklin as a wholesale customer. A portion of the City of Franklin is serviced by the Milwaukee Water Works on a retail customer basis.