This is far less than what the company requested — it had sought a 82.7 percent increase. But it will represent an increased bill of $48.60 per quarter for the average customer, according to the DEP.
The state would not approve the larger increase, according to a news release, in part because the commission had concerns about the management of the company.
Milford Water Co. serves 8,800 customers. It had requested a $3.8 million - or 82.7 percent - increase in its water revenues, the state reported, to cover the expenses of constructing a new water treatment plant. After a "prudency review" of Water Company expenses, the state disallowed $1.3 million in cost recovery, allowing only $2.4 million to be recovered through the increased rates.
The DPU's decision follows a 10-month investigation that included a public hearing in Milford and five days of evidentiary hearings in Boston.
“The Commission carefully reviews any rate increase before it is passed onto the customer, in this case the Milford Water Company needed to make upgrades to its system in order to keep providing clean water to customers,” said DPU Chair, Ann Berwick, in a statement. “We kept that increase to a minimum and further reduced the rate increase due to concerns we have about the management of the company.”
According to the DPU, investigators found a number of shortcomings in the Water Company's management and therefore reduced the private utility company's allowed "return on equity" to 9.2 percent, the lowest that the DPU has granted for a water utility in more than 30 years. The company had sought a return on investment of 11.5 percent.
David Condrey, the general manager of the Water Company, could not be reached Friday afternoon for comment. The water treatment plant started operations in June. It is located on Dilla Street, behind the administrative building for the utility.
The rate increase could take effect immediately, once the utility company submits a "compliance filing" with the state DPU, a spokeswoman said. The utility, if it chooses to, could appeal the ruling to the state Judicial Supreme Court.
In the ruling, according to the news release, one commissioner dissented on one point, saying that in addition to the reduction of the return on investment, some construction costs for the new water treatment plant that the company paid to RH White Construction and WhiteWater, affiliated companies, should not be passed on to customers.
The Milford Water Company awarded the construction contract to R.H. White, one of its affiliates, stating in a release that it had submitted the lowest bid.
In his dissent, Commissioner David Cash said the Water Company had not demonstrated it treated the two affiliates with an arms-length relationship.
"While we are convinced that the ultimate costs are reasonable, MWC's failure to abide by the affiliate transactions standard, in this case, is not harmless," he wrote. "MWC's failure to follow meaningful [Request For Proposal] processes when engaging the services of the R.H. White Companies further degrades the company's credibility and damages the already strained relationship with the town and MWC's ratepayers. The town and the company's ratepayers are left to question whether MWC has their best interests in mind, or whether the company is motivated to increase the profits of R.H. White Companies at ratepayer expense."
The order, signed by all three commissioners, emphasizes that the Water Company has significant work ahead to improve its relationship with the residents and community it serves, the release stated.
"These improvements include maintaining high-quality, safe drinking water, better communication with the community, and a more open procurement process."