Delays in Approvals for Some Water Rate Changes, Governmental Systems Not Charging Enough

The Louisiana Public Service Commission (PSC) does not always approve requests for water rate changes in a timely manner, while a significant number of the state’s governmental water systems spend more than they collect in revenue, the Legislative Auditor said in a report released today.

Because there is no comprehensive inventory of how much each water system charges, performance auditors compiled and evaluated water rates around the state, focusing on whether the PSC approved rates for private water systems in the timeframe set by law and whether rates charged by governmental systems are high enough to cover their expenses.

The audit was conducted because the American Society of Civil Engineers recently rated Louisiana’s drinking water infrastructure as a D+, meaning it is poor and crumbling, while the U.S. Environmental Protection Agency estimates the state will need to spend $5.3 billion on water infrastructure over the next 20 years.

Louisiana has 850 water systems that bill customers for water services, including private for-profit systems, private nonprofit systems, and governmental systems owned and/or operated by cities, towns and parishes. The PSC is required by the Louisiana Constitution to regulate the rates of private for-profit systems and, until 2016, was also responsible for approving the rates of private nonprofit systems. The rates for governmental systems are approved by their local councils, mayors, or management boards.

Overall, auditors found that the PSC did not approve water rates for six (19percent) of 31 rate reviews between 2013 and 2015 within the required 12-month period. In addition, auditors found 14 water systems for which the PSC did not approve initial rates or did not receive their required annual reports to ensure rates were not increased without approval.

Auditors also found that 87 (41 percent) of the 212 governmental water systems they reviewed had expenses that exceeded revenues in fiscal year 2015, which may indicate their rates are not high enough. Furthermore, 44 (51 percent) of the 87 had expenses that exceeded revenues in fiscal years 2013 and 2014. The report discusses how other factors, including aging infrastructure, poor collection practices, and water loss, also may contribute to these systems having expenses that exceed revenues. In addition, concern over customers’ ability to pay can make it difficult for these systems to raise their rates.

The report also includes an appendix organized by parish that lists how much each water system charges its customers, as well as the average age of its infrastructure and when it last increased its rates.