In a letter from T. Kevin Blume of The Blume Law Firm, LLC, the firm says, “The 90.4 percent increase in water rates is unreasonable, and is not consistent with the water supply contracts. The original water rates specified in the contracts only permitted increases in the water rates ‘at the same percent as rates may be increased to the city.’ What documentation do you have to establish that the rates to the city of Portsmouth have increased by 90.4 percent since the last rate increase?”
The letter goes on to say, “Scioto Water, Inc. demands that you produce such documentation within 14 days of the date of this correspondence. In the Saturday edition of the Portsmouth Daily Times, was an article indicating that City Council was considering a 15 percent rate increase to the residents of the city of Portsmouth.”
According to Blume’s letter, the 90.4 percent increase in water rates will cause Scioto Water, Inc. to incur more than $300,000 in additional expense to acquire water from the city for 2010.
Blume said that Scioto Water, Inc. is currently paying $1.67 per 1,000 gallons, but under the increase, that price would be $3.18 per 1,000 gallons.
Blume said two things would occur with such an increase. One would be the necessity of passing on that rate to its customers, and the other would be large layoffs.
The letter further states that several meters used for customers Scioto Water, Inc. distributes to have malfunctioned.
For example, Blume said the meter for the Hygean Run account has not changed since August of 2008, leading Scioto Water, Inc. to underpay the account by $492.66. However, a similar problem with the meter on the U.S. 52 Pond Run account, has caused Scioto Water, Inc. to overpay by $26,648.90, and one on the Moores Lane account causing Scioto Water, Inc. to overpay by $461.09.
“Scioto Water, Inc. requests that the city of Portsmouth comply with the terms of the water purchase contracts and make necessary repairs to the three water meters that are not functioning,” Blume’s letter says. “Scioto Water, Inc. further contends that Scioto Water, Inc. is due a net credit of $26,617.33 for the overpayments made upon the account.”
“They had a meter that had malfunctioned,” Portsmouth City Wastewater Director/Assistant Director Jeffory Peck said “They mentioned that meter in this (letter) from Blume. It seems that meter is actually their responsibility, not our responsibility.”
Peck furnished the Portsmouth Daily Times with copies of the city’s ordinance that allowed the city to enter into contracts with Scioto Water, a copy of the contract, the old rate sheet, and the new rate sheet.
With the seller being the city and the purchaser being Scioto Water, Peck outlined several points of the contract.
Item A.3 states that the Seller agrees … “3. (Metering Equipment) To furnish, Install, operate, and maintain at Its own expense at point of delivery, the necessary metering, equipment, including a meter house or pit, and required devices of standard type for properly measuring the quantity of water delivered to the purchaser and to calibrate such metering equipment whenever requested by the purchaser but not more frequently than once every twelve (12) months.”
Item B.c states that the purchaser agrees … “c. (Metering Equipment) Purchaser to furnish and install at its own expense at point of delivery the necessary metering, equipment, including a meter, house or pit.”
Item B.b states that the purchaser agrees … “b. These rates are subject to change at the same percent as rates may be increase to the City as, determined by the City Manager during the life of this contract.”
On the surface it appears the city is responsible for the meter from the city to Scioto Water, and Scioto Water is responsible for the meters from their facility to their customers.
It also appears to show what the Blume letter alleges, and that is, that the city can increase their rates as long as those rates are increased for all customers.
Peck said he believes the problem boils down to one issue.
“Honestly, I think it’s a reaction simply to their going to have to pay a higher rate,” Peck said. “I understand their reaction. It’s one of those things that is happening all over the United States that things are having to raise in order to pay for the goods and services that we receive. They are getting discounts after discounts, and they are unhappy because they are not getting those discounts.”
Peck said the city had allowed Scioto Water, Inc. to put in a master meter, and that the city then sells water to Scioto Water, who, according to Peck, sells it at more than $8 per 1,000 gallons.
“So they are making a very big profit off of a service that we are actually the provider for,” Peck said. “And again, that’s business. However, we have the right to make that profit ourselves. There are two things that could happen there. We could just provide them the water and just go on with it. But we could also annex the main to the city at that point, simply because the county does not have that service. It could actually be annexed simply without the consent of the people that are there simply because we are the ones who are providing those services.”
Blume’s letter goes on to say, “Under Federal Law 7 U.S.C. 1926 (b), as long as Scioto Water, Inc. owes an indebtedness to the United States, the law prohibits impairment to its customers and the area serviced by Scioto Water, Inc. by another political subdivision such as the city of Portsmouth. Scioto Water, Inc. considers the city of Portsmouth’s actions in causing a 90.4 percent increase in water rates to be a violation of the water purchase contracts, and a violation of the requirements of 7 U.S.C. 1926 (b).”
The letter requests the city of Portsmouth postpone any rate increase until the parties have had an opportunity to sit down and negotiate a reasonable increase in water rates.
“He’s (Peck) getting those figures together for you,” Murray said. “Then, of course, we will be happy to sit and talk with them.”
FRANK LEWIS can be reached at (740) 353-3101, ext. 232 or email@example.com