As part of the company's latest request to increase water and sewer rates, Missouri American Water is proposing new ways to calculate rates.
The company is asking the Missouri Public Service Commission to adopt a "revenue stabilization mechanism," which would allow Missouri American Water to increase or decrease customer rates between rate cases.
Speaking to customers at a PSC hearing last week in Jefferson City, Missouri American President Cheryl Norton said this would allow the company to recover no more and no less revenue than authorized.
"When we filed our case, we looked at what other states were doing and the things we thought made sense both for our business and our customers," Norton said. "With the RSM, once the commission decides how much money is required for us to do business, looking at all our expenses and investments, they pick a dollar amount and say this is what you need to run your business. Some years, we make more than that, and other years we bring in less revenue than that.
"What we think is fair is that we would be able to make exactly what the commission says we need to run our business."
Norton said the company would credit customers if more revenue came in or put a surcharge on customers' bills if less revenue came in.
Missouri American Water officials added more accurate rates would allow for more consistent capital improvement costs, which would ensure better water quality.
Officials with the Office of Public Counsel, which represents the interests of utility customers and the public in proceedings before the PSC, said the RSM model would allow for more to occur outside the context of a normal rate case.
Many opponents of RSM are nonprofit groups such as the Consumers Council of Missouri and the American Association of Retired Persons, who said it would lessen the incentive for water consumers to reduce their personal water use while at the same time charging those who use less water more than they should pay.
"To me, guaranteed revenue for a business sounds a little socialistic," said Richard Allen, a Wardsville resident who testified at last week's public hearing. "Companies take some risks when they're in business, and that's the way it works. I think having a guaranteed amount will not encourage them to manage their costs."
Also speaking at last week's hearing was Vicki Schildmeyer, of Jefferson City, who volunteers at Common Ground Community Center. She told PSC commissioners the local nonprofit organization is seeing more people come in needing help paying their utility bills.
"People get behind and can't live in a house, so they end up homeless, and their problems are exacerbated when things like increases in utility rates occur," Schildmeyer said. "It's not helping the community when companies like Missouri American want an increase in their return on investment."
Also discussed during Wednesday's hearing was another part of the rate proposal asking for a "future test year," which according to PSC officials, would allow Missouri American Water to set rates based on forecasted costs instead of costs they've already incurred.
Officials with the Office of Public Counsel said the PSC usually bases rates on historic information. Some other states use forecasted costs, but Missouri doesn't.
"We started filing this case in January 2017, and our expenses are built on 2016 numbers," Norton said. "By the time we get rates in May or first of June this year, we've already had increases that are not included in this case. We're just trying to capture those increases so we don't have to go back every two years to the PSC."
PSC commissioners will hold formal hearings on Missouri American Water's proposal from Feb. 26-March 9 at the commission offices in the Governor's Office Building on Madison Street. The hearings are open to the public, but only witnesses who have been subpoenaed will give testimony.
The PSC's ruling on the proposal should come this spring or early summer.