On August 24, 2021, Morgantown City Council approved three ordinances related to MUB rate increases. These approved ordinances include:
- Water Rate Ordinance providing a 13% rate increase for the fiscal year ending June 30, 2022, in all areas served by MUB, except for the area previously served by the River Road Public Service District
- Sewer Rate Ordinance, providing a 12% rate increase for the fiscal year ending June 30, 2022, in all areas served by MUB, except for the area served by the Cheat Lake Wastewater Treatment Plant and areas previously served by the Canyon Public Service District and the Scott’s Run Public Service District
- Stormwater Rate Ordinance, providing a 18% rate increase for the fiscal year ending June 30, 2022, in all areas served by MUB.
A component of each of these ordinances is a 3% inflationary rate increase for the fiscal years ending June 30, 2024, June 30, 2025, and June 30, 2026. The purpose of this action is to provide smaller rate adjustments across time rather than the “rate shock” that occurs when rates are adjusted at five-plus year intervals.
The presentation given by MUB General Manager Mike McNulty to the Morgantown City Council Committee of the Whole is available here (includes both the address and slides). The slides include a number of graphs showing how these rate changes impact minimum rates, the impact on the average MUB customer (based on 6,400 gallons used in two months) a graph depicting how our rates compare to other state utilities both currently and should the rate change occur, and other information. Slide change prompts are included in the address.
For additional insight into these rate adjustments, the following questions and answers are provided.
Why the increases now?
The proposed rates are the result of MUB putting off rate adjustments due to COVID-19. We initially planned to present these ordinances in the spring of 2020; however, at that time, MUB’s board decided that rate adjustments at the onset of the pandemic would be inappropriate. Thus, they were delayed until now. It should be noted that we are making every effort to avoid similar increases in the future by including in these ordinances annual 3% adjustments (beginning in 2024) through 2026.
What is driving these rate increases?
There are a number of reasons for the rate adjustments. The most obvious is to meet expenses. Understanding that we haven’t adjusted water and sewer rates since 2016 and stormwater rates since 2012, the financial need is very real.
It should be noted that while we have experienced limited growth in water and sewer customers, we have also seen a decrease in consumption by residential customers and West Virginia University. In slide nine of the presentation given by Mike McNulty to the Council of the Whole (available here) you can see the declining water and sewer use over the past three years, which naturally corresponds with a decrease in revenue.
Meanwhile, MUB has experienced the normal increase in wages, benefits, utilities, chemicals, materials, etc. These costs are very real and must be met.
What’s more, in order to maintain our current strong bond rating, our bond rating agency expects MUB to seek a rate increase when our overall projected coverage falls below 125%. Our most current projections- as reported to our bondholders in our 2020 continuing disclosure operating data is 122%. Given that lower ratings lead to higher interest rates, maintaining a strong bond rating is critical to maintaining affordable service.
Why doesn’t MUB just cut expenses?
We have cut costs and continue- as always- to look for ways to reduce expenditures. We have done everything from the refinancing of bonds to delaying certain projects such as tank painting and even switching health insurance providers.
Won’t the Mountaintop Bottling Company (MBC) being proposed at the Morgantown Industrial Park offset the Mylan Closure?
No. Since the water and sewer line extensions will be paid for by the developer (meaning that we get a new customer at the developer’s expense), West Virginia Public Service Commission rules require that we contribute to the cost of the project. That contribution comes in the form of refunds to the developer.
For every new customer that connects to the extension within the first 10 years after completion of the extension we must pay back to the developer the “net revenue” we receive from each new customer for a period of 5 years. In other words, when MBC connects to the completed extension, the only money we receive is our cost to treat water and sewage. So, for the first 5 years after it connects, we yield no profit.
If another business connects, for example, in year two after completion of the project, we again earn no profit for the next 5 years after it takes service. This process continues for 10 years.
If Mountaintop meets the goals it anticipates, we will pay back to the developer over $3 million during the first 5 years. Presuming Mountaintop connects in late 2022, we will not start earning a profit until late 2027. As the result, Mountaintop cannot be factored into our budget until 2028.
Didn’t MUB dramatically increase rates recently?
No. We haven’t adjusted water and sewer rates since 2016, five years ago. We haven’t adjusted stormwater rates since 2012. Even then, those adjustments were made primarily to fund both the Star City Wastewater Treatment Plant upgrades and construction of the new Cobun Creek reservoir.
How can MUB expect poor people to keep up with these increases? / I live on a fixed income and cannot afford these rates.
The impact of our rates on the economically disadvantaged is always at the top of our minds. As you can see on slides six and seven of the presentation given by Mike McNulty to the Council of the Whole (available here) we work hard to keep our rates low. We are currently one of the most affordable systems in the state.
Even with the rate changes we remain one of the most affordable systems in our state. The water rates in Charleston, Bluefield, Weston, Princeton and Huntington are more than our water and sewer combined. A primary reason for this difference is that they are a private water company and we are a public system. Whereas they must concern themselves with profit and share holder value, we do not. No one- and I repeat this- no one at MUB benefits from rate changes. Rather, the fees received from our rates are invested back into our community.
During the onset of the COVID-19 pandemic and the moment state code permitted, we not only ceased service terminations but restored service to those whose service had been previously terminated, at no cost to our customers and without consideration to amounts owed. Then when required to return to normal operations, we setup payment systems to help ensure the water remained on for all customers. In doing this we also waived reconnect fees.
In fact, when Governor Jim Justice allotted funding to help pay utility bills during the pandemic, we sent out 1,700 letters followed by telephone calls to customers with past due amounts. From this, we secured more than $83,000 from CARES Act funding for our customers.
While state code forbids us from discriminating according to ability to pay, and our bonds forbid the giving away of services, we offer as much assistance to our customers as possible. Among these are the ability to pay in advance. This allows customers to pay toward future bills while funds are available. Also, if a customer gets behind on a water bill, we offer payment programs to help get them get caught up. These may seem like small gestures but to those facing economic hardships, these are very real benefits
Can’t MUB apply federal COVID relief funds to offset the need for the rate increase or at least partially offset the increases?
No. These funds are not intended to subsidize MUB’s budget. However, we do intend to propose both City/MUB and County/MUB mutually beneficial projects that would be eligible for American Rescue Plan dollars. If granted, these capital requests will allow us to move forward with improvements in our infrastructure more quickly than we would otherwise be able to do so without increasing our debt service.
Do the rate increases include funding for the Flegal Dam and Reservoir and/or the Star City Wastewater Plant projects?
No. The current rates include the $150-Million-Dollars in construction costs associated with the Star City Wastewater Treatment Plant and Flegal Dam and Reservoir. We'll add that these projects alone – which are the largest of any public utility in the history of our state - put Morgantown years ahead of others in West Virginia.