Water utility alert! Due to the recent change to Wis. Stats. §66.0601(2m)(b), you can transfer the public fire protection (PFP) municipal charges to end-use retail customers without having to reduce your municipal levy limit.
In 1988, the legislature enacted WI Stat. §196.03(3)(b) that allowed municipalities owning a water utility to directly charge retail customers for costs from providing PFP. As a result, many of the state’s municipal water utilities moved PFP from a charge to the municipality (which was often recovered through property taxes) to a direct rate applied to retail water customers.
Legislation in 2013, Wis. Stats. §66.0601(2m)(b), brought the transfer of PFP costs to direct retail users to a near standstill with the requirement that revenue recovery for certain “covered services”, including PFP, had to be offset dollar for dollar in the municipality’s levy limit. As applied by state agencies, this law effectively ended municipalities’ discretion to directly charge PFP costs because they did not have the margin in the levy limit to provide for the change.
With 2017 WI Act 59, the utilities’ costs of providing PFP service is no longer defined as a “covered service” under Wis. Stats. §66.0601(2m)(b)1. Thus, municipalities can again shift PFP costs to direct charges without being required to reduce their levy limit.
This is an opportune time for a municipal water utility to consider whether direct charges would be beneficial for its overall water utility revenue requirement and municipal budget. The PSC does not require a full rate case to make this change, but it does require a hearing. (Directly charging PFP would not impact the private fire protection charges, which is a different service.)
There are different direct-charge PFP rates, but most utilities have elected to allocate these costs based on meter size. Thus, using equivalent meters is the direct charge method of choice. Other even more equitable methods include using property value or square foot of improvements. However, these often require introducing additional billing information into the utility’s charging software and thus are not always practical.
R&M welcomes your inquiries and interest on this topic. Municipalities and their water utilities may wish to reevaluate their current practice. Contact an expert today for more information.
About the Author
Edward F. Maxwell
Edward joined Ruekert & Mielke, Inc. (R/M) in 2017 as a financial analyst. Before joining R/M, he worked in private-sector finance, analyzing capital investments, forecasting expenses and revenue, and crafting department budgets. At R/M, he creates financial solutions for all clients, from municipalities to corporate businesses.