The Illinois American Water Co. (subsidiary of much larger American Water Works Co. – AWK) is seeing new scrutiny from the Illinois Commerce Commission on its proposal for 30% increases in water rates for many Chicago-area utilities that it operates. The rate case has made its way to the ICC where Illinois Attorney General Lisa Madigan has argued that the company’s request is both “unreasonable” and “excessive.” The full story is reported in TheTelegraph.com. There is one gem in this story worth a little more time here though…
One of the cost items the company is trying to justify is the cost of a study it commissioned in 2007 to compare its own water and sewer rates with those of surrounding municipalities. The ICC had commented in the 2007 rate case that American’s rates were two to three times higher than those other cities’ and the company followed up with a study. It seems that after paying $37,000 for the study, the company concluded that no comparison of water rates or sewer rates was possible due to accounting differences.
There are several reasons why comparing rates with other utilities will give you dubious information. Not all utilities are supported 100% from user charge rates, some use tax dollars making rate comparisons tricky; some utilities do not recover their full costs of service (not good, but it happens); all utilities have different cost structures and different dynamics in their customer bases. “Accounting differences” is not one of the reasons.
More likely, the real reason is that comparing a privately owned utility like Illinois American with any equally situated utility under public ownership will ALWAYS result in the private company being the one with the higher rates. Since we’ve made this point before here, we can just direct you to the links to find out why private companies have a hard time comparing. Here are two good ones:
Keep in mind that American Water Works Co. is also attempting to increase its rates by similarly large amounts in many of its other jurisdictions simultaneously. Rate increases are in the works in Illinois, Indiana, Missouri, Kentucky, and Arizona just to name the ones we’ve been able to follow. Most of our blog posts on these issues is under our Privatization Tag if you want to see everything we have on this topic.