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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowState regulators yesterday granted Indianapolis Water a 12.3-percent emergency rate increase – less than the 17.5 percent sought last February to relieve the utility drowning in variable-rate bond debt.
The Indiana Utility Regulatory Commission rate order was critical of the utility’s management, however, and required better disclosure of financial records as a condition of the increase.
Customers will pay the price – about $3 more a month – for a dubious bond-refinancing strategy that the utility pursued in 2005. The utility, through the Indianapolis Bond Bank, converted fixed-rate debt to variable-rate debt as part of a plan to free up $45 million in cash.
Placing 60 percent of its debt in variable-rate bonds backfired when financial markets collapsed and bond swaps intended to mitigate the risk of interest-rate variations failed.
The bond bank warned recently that, without emergency rate relief, the water utility’s credit ratings would tumble, raising future borrowing costs.
Industrial customers had argued the utility isn’t justified to make more than a 7.7-percent increase, questioning its expense projections.
The average residential water bill will now be $28 a month.
But the utility also plans to file a general rate request to pay for system upgrades and expansion, which would boost water bills further starting in mid-2010.
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