Indecisive Utility Pays the Price

Abstract

Industrial Utilities Service (IUS), a privately owned water and wastewater utility, obtained all its water from ground sources. The local subsidence district required utilities to convert 80 percent of their water supply from groundwater to surface water to control subsidence. IUS proposed to build a surface water treatment plant within 10 years to be financed by adding a surcharge to its rates over the 10‐year period. The district approved the plan with the condition that the plant be built in five years. To meet these conditions, IUS proposed to finance half the cost through surcharges to customers and the rest conventionally. IUS filed a surcharge application with the state conservation commission but, in a puzzling turn of events, then asked the commission to deny the request. The reason was that IUS believed the increased rates would lead IUS to insolvency because customers would drill their own wells or obtain water elsewhere. The commission denied the requested surcharge and the recovery of expenses. The trial court affirmed the commission. IUS argued on appeal that the order denying recovery of rate case expenses here was arbitrary, capricious, and an abuse of discretion. The court said the commission made a policy decision based on the unexpected anomaly that occurred at the hearing. “The commission may reasonably expect a utility applying for a surcharge to present evidence in favor of that request,” the court said. Accordingly, the court said the commission was justified in finding that expenses incurred in seeking a surcharge the utility did not want were unreasonable, unnecessary, and not in the public interest. The trial court decision denying the expenses was affirmed.