The Milford Water Co. is seeking an 83 percent rate increase to pay for its new $20 million water treatment plant, which the state ordered the private utility to build after a two-week drinking water ban three years ago.
Town officials vow to fight the rate increase — the second in two years — and the state attorney general’s office says it is stepping into the fray.
The proposed increase will be discussed at Town Hall on Dec. 12, when state Department of Public Utilities officials will take part in a 7 p.m. public hearing on Milford Water’s request.
“They had talked about a 50 percent increase, which we thought was excessive, and then they came back with this,’’ said Gerald M. Moody, Milford’s town counsel. “This is on top of a 33 percent increase granted two years ago.
“I am sure this is being driven by the $20 million water treatment facility they are under administrative order . . . to build,’’ Moody said, referring to the state Department of Environmental Protection’s directive, “but there is nothing we have seen that justifies the 82 percent increase. We will be opposing it vigorously.”
But from where David Condrey sits in the manager’s office at Milford Water, given his view of new buildings going up, retention lagoons, earthmovers, and scores of workers in hardhats, the rate increase seems reasonable.
“I feel good we are actually taking the steps to make sure we have better quality water going forward,” Condrey said. “I know we are in hard economic times now, but the plant is not a Taj Majal. It is a practical, state-of-the-art facility.”
The new treatment plant is being built as part of a settlement with the state’s environmental agency, which stepped in after the discovery of E. coli bacteria in water samples led to a 13-day boil-water order for the utility’s customers in August 2009.
Condrey said the company had no choice but to increase its rate request after the overall expense of the new facility went from an estimated $16 million to $20 million. According to the company’s filing with the Department of Public Utilities, the new rates would add $3.8 million to its coffers annually to cover the 10-year construction loan.
While it is not unusual for a utility in the midst of a major capital project to seek a large increase in its rates, DPU spokeswoman Krista Selmi said, that does not mean the request is always granted.
For example, she said, the Dover Water Co. sought a 66 percent increase in 2007 for a new well and treatment facility, and was granted a 62 percent increase from the state oversight agency, while the Assabet Water Co. applied for a 208 percent increase for upgrades to its water treatment plant in 2008, and the DPU approved only a 64 percent increase.
Meanwhile, the Milford water case also is being reviewed by Attorney General Martha Coakley’s office, which earlier this year was granted authority by the Legislature to intervene on behalf of customers in rate increase cases involving the 17 private utilities running public water supplies in Massachusetts.
The attorney general’s office already had been involved in how the state reviews rate increases for gas and electric companies, but a contentious dispute between the towns of Hingham and Hull and the Aquarion Water Co. prompted the change on Beacon Hill.
Jillian Fennimore, Coakley’s deputy press secretary, said the AG’s office is intervening in Milford “to ensure ratepayers are protected. We are currently reviewing company documents to determine whether any of the claimed costs are unwarranted.”
The contractor building the new treatment plant, the R.H. White Construction Co., expects to have the project completed by April, a month ahead of the deadline hammered out with the Department of Environmental Protection, Condrey said.
Condrey started at the private utility — which was founded in 1881 — around the time of the contaminated water episode in 2009, he said, and he remembers it as a “perfect storm” of bad circumstances.
A wet spring and summer followed by a sudden spike in temperatures that August led to more customers suddenly drawing more water from the system, Condrey said, and the utility had to take more water from Echo Lake to meet the demand. At the same time, the temperature change had prompted an inversion of warmer top water and cooler bottom water in the lake, stirring up sediment and bacteria, he said. And Milford Water had reduced the amount of chlorine being used to treat the water to reduce the production of a group of potentially hazardous chemical compounds — trihalomethanes, or THMs — that are generated when chlorine mixes with organic material.
The result was that water carrying E. coli bacteria was coming out of customers’ taps.
While some people pointed to the utility’s aging infrastructure, including a hole in the top of its Congress Street water tank, for the problem, testing on the bacteria eventually traced the contaminants to Echo Lake, Condrey said. In addition to spurring the consent order to build the new treatment plant, the 13-day shutdown led to thousands of dollars in fines against the company, and a criminal case that is still pending against a former manager accused of tampering with water samples.
The utility has continued to struggle with total THM levels, and spent much of the last year trying to remedy the situation, eventually adding layers of activated charcoal to the treatment system’s filters to capture more organic material from the water being drawn both from Echo Lake and the Charles River.
The new water treatment facility will replace the company’s slow-sand filtering system, which has been in place since the 19th century, and provide customers with water that is five times cleaner, Condrey said.
The new facility will treat the same 5 million gallons of water a day as the current works, but will make its output far cleaner through the use of a modern diffused air filtration system and a separate granular-activated carbon filter. The new system also will be more efficient, recycling and reusing hundreds of thousands of gallons of water per day now discharged as waste, Condrey said.
But the new facility comes with a hefty price tag that Milford Water initially had thought the state would help finance.
Rules changed last year on what projects could be funded through the State Revolving Fund, leaving Milford Water without financing even as the company was nearing the agreement’s deadline for putting the project out to bid.
“It was very troubling at the time,” Condrey said of the loss of state funding. “Under the order, financing or not, the deadline is the deadline.”
The company eventually secured a construction loan from People’s United Bank.
If approved, the new rate would raise the average water bill for Milford homeowners from $77.31 per quarter to $141.79, according to the company.
Condrey said the rate increase would amount to about $20 a month for most households, but could be lessened through water conservation efforts.
“It is something we can control — we can control our consumption,’’ Condrey said. “We encourage people to conserve water, and offer up tips all the time.”
Milford Water’s filing for the requested rate increase can be examined at the company’s Dilla Street offices, where it is in a white, three-ring binder on the front counter, and on the company’s website, www.milfordwater.com.