RIPPLE EFFECT

A statewide fight over the biggest-ever water-rate-increase request could spill over into St. Louis County

"It's no different than me going to you and saying, "Hey, here's my electric bill -- why don't you pay it?'" says Stuart Conrad, a Kansas City attorney who is representing industrial customers in St. Joseph opposed to the rate increase. Conrad says his clients are worried they might end up paying for capital improvements in the St. Louis area if the commission approves single-tariff pricing.

In addition to industrial customers in St. Louis County, the proposed rate hike and single-tariff pricing have drawn fire from St. Charles County and other jurisdictions that didn't fight Missouri-American's 1997 rate hike that established a single rate for the company's seven districts. Attorneys for opponents say the size of the proposed hike has gotten everybody's attention. "Now, with this big plant, the price of poker gets different," Curtis says. Curtis and other opponents see the proposed rate hike as a make-or-break issue for single-tariff pricing in Missouri.

The St. Joseph plant is already under construction and scheduled to begin operation this spring. The plant, which gets water from wells, is replacing an aging Missouri River plant in a floodplain that had to be shut down during the 1993 flood. Rather than build a new plant, rate-hike opponents argue, the company should have gone with a cheaper option, such as buying water from Kansas City or diking the old plant to protect it from floods. As part of the rate hike, the PSC will determine whether the new plant is prudent. If the commission decides the company should have gone with a cheaper alternative, American Water Works shareholders could end up paying for the new plant. Otherwise, ratepayers somewhere will pay. If the commission puts all the cost on St. Joseph, rates there will double, Coffman predicts.

Twenty-six of the 45 states that regulate water have adopted some form of single-tariff pricing, according to the National Regulatory Research Institute at Ohio State University. Typically, single-rate tariffs pay for capital improvements in small water districts that otherwise would not be able to afford them without doubling or tripling water bills, says John Wilhelm, a water-utility expert at the institute. States allow single-tariff pricing because it is in the public interest to fix substandard small systems without astronomic rate increases spread among just a few hundred or few thousand customers, he says.

The case in Missouri is different from the norm because the St. Joseph water system, which has about 30,000 customers, isn't considered small. In fact, it's the largest district owned by Missouri-American. "In this case, the small cities like Warrensburg (with about 5,000 customers) and Brunswick (with fewer than 500 customers) would be subsidizing the larger cities," says Coffman. "That seems to be contrary to the biggest public-policy reason that you would have to go to uniform rates."

The biggest wild card in all this is St. Louis County, where 300,000 people get their water from St. Louis County Water. The system is old and has a history of water-main breaks. Just how much it will cost to replace mains hasn't been determined, but everyone expects the company to ask for a rate increase to upgrade the system.

Opponents of the proposed rate hike say they want no part of whatever happens in St. Louis County. "The people in St. Louis should pay for the people in St. Louis," Conrad says. "People in St. Charles should pay for people in St. Charles. Joplin should pay for Joplin. St. Joseph should pay for St. Joseph."

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