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PSC orders $1.1M rate-reduction for Mountain Water; consumers save 5.9 percent

By Martin Kidston/MISSOULA CURRENT

The Montana Public Service Commission approved a $1.1 million rate reduction for Mountain Water customers on Tuesday, though it has yet to decide if proprietary information regarding the company’s beneficial interest rates should be made public.

In a hearing that lasted under four minutes, the PSC voted 4-1 to implement the rate reduction for Mountain Water, reflecting what staff called the “secret interest rate” on the company’s $235 million credit facility.

“That interest rate would be imputed into the overall cost of capital of Mountain Water,” said Gary Duncan, a rate analyst with the PSC.

The commission convened Tuesday’s proceedings to investigate whether water rates resulting from the sale of Mountain Water to Algonquin Power and Utilities Co. were “just and reasonable.”

When Algonquin and its subsidiary, Liberty Utilities, acquired Mountain Water in an unauthorized transaction in December, it received a beneficial interest rate that has yet to be disclosed.

The city of Missoula and the Montana Consumer Council believe the savings netted through the beneficial interest rate should be returned to ratepayers, not kept as corporate profits.

The $1.1 million rate reduction set Monday by the PSC amounts to an estimated 5.9 percent savings to local consumers. Mountain Water declined comment pending the PSC’s written order explaining its decision.

“Essentially, the loan they took out to finance this acquisition was a low-interest-rate loan and the benefit of that loan, they passed on to the consumers,” said PSC spokesman Eric Sell. “It’s a reduced revenue requirement, which means its $1.1 million less (consumers) have to pay.”

The commission’s decision follows an earlier work session held in Missoula in early May, during which it upheld its protective order safeguarding certain financial information – including interest rates – related to Liberty’s acquisition of Mountain Water.

The city of Missoula and the Montana Consumer Council believe the information should be made public. The PSC will decide in the coming weeks whether to release the figures.

“There is still some material in this docket that is proprietary, said PSC attorney Laura Farkas. “Both today’s determination and the resolution next week with the issue on whether information should be removed from protection will both be included in the final order.”

While the PSC considers releasing the information, it’s also considering settlement options with Liberty and Mountain water over December’s unauthorized sale. The PSC considers the sale as an affront to its jurisdiction and promised “swift and severe” penalties back in January.

Action there is likely expected in the coming weeks.

“We still have the pending complain we haven’t pulled the trigger on in District Court,” Sell said. “That’s still alive and a real possibility. That’s still very much an issue.”

The Montana Supreme Court is also expected to issue a ruling in the coming months regarding the city of Missoula’s right to acquire Mountain Water through eminent domain.

Commissioner Kirk Bushman cast the only dissenting vote on Monday.