Archive for Friday, August 3, 2012

Suburban Water Company agrees to lower rates, stop purchases of personal items for employees

August 3, 2012

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To read more about the agreement requiring Suburban Water Company to reduce its rates and change some company practices, download the document below. More documents from Suburban Water's rate case with the Kansas Corporation Commission are available at the KCC's online docket for the case.

An agreement reached with the state last month will require a southern Leavenworth County water utility to lower its rates and change some of its business practices, including the purchase of personal items for employees.

After requesting a rate increase totaling nearly $300,000 per year last fall, the Basehor-based Suburban Water Company will instead lower its rates by $13,500 starting this month— a decrease of about 70 cents per month for the average customer. The decrease is part of an agreement reached by Suburban Water, the Kansas Corporation Commission and the Citizens’ Utility Ratepayer Board, which is an advocacy group for Kansas utility customers.

Suburban Water officials had requested a rate bump because they said the cost of providing water to its 1,500 customers had grown too large, largely because of increased rates charged by the Kansas City, Kan., Board of Public Utilities, which supplies Suburban with some of its water.

It’s true those costs had risen, said attorney Niki Christopher of CURB, but included in those costs were a number of expenses that shouldn’t have been there.

“It’s not inappropriate, and it’s not illegal, but it’s not standard practice for a public utility,” Christopher said.

Those expenses included the purchase of personal items for employees, cable television and satellite radio services for employees, and cell phone service for people not employed at the company.

The company’s agreement, which was approved by the KCC on July 11, calls for those practices, along with others, to end, with penalties possible if Suburban Water doesn’t comply.

Mike Breuer, president of Suburban Water, said in a written response to the Sentinel that the company had already stopped allowing employees to use company money for personal expenses, and it would comply with the rest of the agreement as well.

“Suburban Water customers can be assured that Suburban Water is following the rules and procedures that were agreed to,” Breuer said.

Suburban Water, which provides water to customers in and near Basehor, Bonner Springs and Tonganoxie, is owned solely by Ray Breuer, Mike’s father, who founded the company in the mid-1980s. It has six employees, and it’s a rarity, Christopher said: It is one of only three privately owned water utilities in Kansas.

Allowing for extra perks for employees and family members might not be unusual for a small family business, Christopher said. But a utility has higher standards when it comes to accounting, she said, because higher costs translate to higher rates for customers.

“It’s a family, and it’s a business,” Christopher said. “And the problem is they weren’t separating the business expenses and the family as well as they should.”

Breuer said the company agreed that some of the procedures identified in the agreement sprang from the fact that it was a private, family business, and that the company recognized the need to follow the same procedures a public utility would.

Another concern, Christopher said, was that the company did not have a formal bidding process for choosing repair and maintenance contractors and purchasing equipment and materials. Some Suburban customers had raised concerns about the company’s awarding of contracts, she said, because several of its vendors are also owned by members of the Breuer family. But Christopher said that was not a problem in itself.

“That’s not necessarily inappropriate, if they’re the lowest bidder,” Christopher said.

The company reported that it had collected bids from potential vendors before awarding contracts, Christopher said, but it had not kept a record of those bids.

The July agreement requires Suburban Water to install a formal competitive bidding process with improved record-keeping. Breuer said the company was developing a process now, and it should be in place within a few weeks.

The agreement also requires the company to begin looking for new supplies of groundwater near its system, so it will be less reliant on water from the BPU. That would ensure that its customers have access to water long into the future, Christopher said.

Mike Breuer said the company believed it had handled customers’ money responsibly in the past, but it also believes the agreement reached in July will be in its customers’ best interest.

Overall, Christopher said she was confident that Suburban Water would take the agreement seriously and improve its operations.

“It was a very favorable settlement for the customers,” Christopher said.

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