EAST CHICAGO — City officials can hike water rates for the first time in more than a decade, increasing annual revenue by about $2.5 million to address much-needed capital improvements, but can’t use ratepayer revenue to subsidize the replacement of privately owned lead service pipelines.
That’s according to a settlement agreement reached last week between East Chicago and the Indiana Office of Utility Consumer Counselor, which advocates on behalf of utility customers in cases before state and federal utility regulatory agencies.
Under the proposed agreement, East Chicago can increase water rates by 55 percent, meaning a monthly water bill for a residential customer using 5,000 gallons would rise from $12.05 to $18.66, according to OUCC. The city will also be able to issue bonds up to $14.9 million for capital improvements.
While OUCC is supportive of the city’s initiative to replace privately owned lead pipes, the commission is concerned the use of ratepayer dollars for private investment would be inconsistent with state statute, Anthony Swinger*, spokesman for OUCC, said Wednesday.
“Typically, money taken in for water utility, or any regulated utility, must be used for the benefit of all customers,” Swinger said.
In exchange for the rate hike, the city agreed to scratch plans to spend about $1.4 million for lead pipe replacement as well as other spending, reducing the total amount borrowed from $16.5 million to $14.9 million. The EPA recently detected elevated lead levels in the drinking water at 18 of 43 homes tested within the lead- and arsenic-contaminated USS Lead Superfund site in East Chicago.
City officials in recent weeks have said they are exploring a 50/50 match program using department money and customer payment to replace aging lead service lines, but they now must pursue other revenue sources. Eligible properties will be targeted based on the city’s 2014 and 2016 water testing results, according to case documents.
East Chicago Utilities Director Greg Crowley was unable to be reached for comment Wednesday to discuss the rate hike and replacement program. Dina Rodriguez, a paralegal within the city’s law department, said in an email City Attorney Carla Morgan will respond to all media inquiries upon her return Jan. 3.
The city sought the subsidy because many customers are considered low income, according to documents. The replacement of lead piping requires attention sooner rather than later “given the probable high lead levels within the drinking water of some of the residents,” Crowley wrote in his testimony filed Dec. 22.
The crumbling water infrastructure is not unique to East Chicago. A report recently issued by the Indiana Finance Authority found Indiana's aging water utilities need $2.3 billion for immediate repairs and $815 million annually in additional maintenance spending.
Swinger said the city's request for a rate hike was "justified," noting needed capital improvements.
Projects include, in part, an $8.4 million expansion in storage capacity, $1.6 million replacement of the city’s metering system, $854,504 demolition of the old plant,
The city estimated to spend $750,000 to replace the utility-owned portion of lead and copper pipes using money from the State Revolving Loan Fund, which provides low-interest loans to communities for wastewater- and drinking water-related infrastructure projects.
It's estimated there are 4,000 lead services lines in East Chicago, according to documents.
The city used $16.6 million in late 2006 and $27.2 million in 2009 from the state’s Revolving Loan Fund to design and build the new water treatment plant, according to documents.
East Chicago pulls its drinking water from Lake Michigan and filters it at two different plants: one built in the 1960s and a second that came online in 2012 but initially was hampered by technological problems. The new plant is expected to be fully operational in 2017 and become the city's only source of drinking water.
In 2014 alone, East Chicago lost just over 31 percent of its water due to leaks associated with aging pipes. An improved metering system will help the city identify problematic leakage in sections of the city.