Rates Could Be Raised to Pay for Repairs

A city that had removed itself from the jurisdiction of the Indiana Utility Regulatory Commission was not limited to the methodologies used by the commission and could raise water rates in order to generate revenue for repairs, according to the Court of Appeals of Indiana. In September 1997 the Common Council of Clinton, Ind., adopted an ordinance to increase the city's water rates for the first time in nearly 10 years. Clinton Township Water Company Inc., a nonprofit water utility, was the city's only wholesale customer. The company was to incur a 166 percent increase in its rates, while the city's residential customers were to incur a 100 percent increase in their rates. The increases resulted in the company paying the same rate as the residential customers. The rate increase was intended to generate revenue for repairs, replacements, and upgrades so that the expenses could be paid as they were incurred instead of creating debt. The company filed this action objecting to the rate increase. The trial court confirmed the city's rate increase. On appeal, the company argued that although the city had removed itself from the jurisdiction of the Indiana Utility Regulatory Commission, the city nevertheless was required to justify the rate increases by using the same ratemaking methods and procedures followed by utilities subject to the commission's jurisdiction. But the appellate court said that when a municipality removes itself from that jurisdiction, the commission's authority is replaced by local control. Thus, the court said that the city was not limited to methods generally accepted by the commission. The city was also not required to incur debt to finance these projects. The trial court decision was affirmed.