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Fact Check C1:
Letter to Editor by Darwin Throne
cherry picks irrelevant data

              Rating:  Flaming Fabrication
  Flaming Fabrication

Darwin Throne wrote in a letter to editor
published November 25, 2016 in the Mountain Democrat:

EID "rates have more than doubled in the last seven years yet EID management wants board approval to continue gouging its ratepayers".

Additionally, the writer advocates that the public convince the board to "deny the 9 percent rate hikes for 2017-2018".

Taking the second statement first, it's just factually wrong, off by more than a factor of two. Referring to "hikes" in the plural in two years means 9% in 2017 and 9% in 2018. However, the Proposition 218 authorization for maximum possible rate increases is for 5% in 2017 and 4% in 2018. 

This first statement is the main problem. It cherry picks data for past high rate increases instituted in 2009, when EID had a financial emergency caused primarily by 13 years of prior rate restraint. Rates in 2009 were 5% above those of 1996, 13 years earlier. Between 1996 and 2009 costs continued to rise at the rate of inflation for water and wastewater services, about 3% per year. The natiional average is 3.3% September, 2016 relative to one year earlier.

A secondary factor was past history of having covered shortages in operating revenues by subsidizing rates from FCC (Facility Capacity Charge) revenues. By 2009 FCC revenues were nearly nonexistent and the full effect of excessively restrained rates forced EID into violation of its bond covenants to maintain a minimum debt service coverage ratio of 1.25:1.  This forced the beginning of a series of high rate increases, maximal in the first year and decreasing in following years.

See Finding F2 for more on the problems caused by past excessive rate restraint.

By 2015 rate-based revenue had allowed one year without a rate increase, which the author of this statement ignored. Year 2016 had a 5% rate increase, the maximum authorized in the most recent Proposition 218 public hearing as part of a five-year sequence. Consecutive annual maximum increases were authorized to be 5%, 5%, 4%, 3%, and 3%. The EID board adopts each year's rates at the end of the preceding year and has authority to adopt increases below the Proposition 218 authorized level.

The graph below, from Finding F2, compares EID actual rates since 1996 with national cost inflation measured by the CPI-U detail index for water, sewer, and trash services.

EID financial circumstances at the end of 2016 are largely opposite to those of 2009, the year Darwin Throne uses to claim rate gouging. In 2009 EID's bond ratings had just been demoted, in 2016 they were promoted. Where EID adopted a very high (for EID) rate increase  for year 2010 and escalated it further in fllowing years, by 2015 it was marginally able to provide a year with no rate increase.

The recent year with no rate increase went unnoticed by Darwin Throne. His attention was fixed on seven years ago, when fiscal circumstances were much different than they are now, as reflected by the recent upgrade of EID's bond ratings. That upgrade signals additional savings in near-future years.

Rate increases versus cost inflation


1. Full text of letter to editor