(The Center Square) − A utility that has faced criticism over steep customer bills wants to extend its formula-based rate plan it says is essential to financing repairs across dozens of troubled water and wastewater systems across Louisiana.
But opponents say Magnolia Water Utility Operating Company has not met its burden to justify an extension and has left ratepayers with little transparency and time to respond to its request for approval from state regulators.
The debate is playing out before the Louisiana Public Service Commission, where a group of Magnolia customers have asked an administrative law judge to weigh in. They argue that Magnolia’s “rates could be based on expenses that weren’t prudently incurred, and customers simply cannot afford to keep paying them.”
In some cases, Magnolia customers pay up to 132% higher than the average Louisianan, according to the group.
At a hearing on Monday, they urged regulators to reject the extension unless Magnolia provides more documentation and demonstrates it has explored alternatives for capital improvements that would limit costs.
They said because Magnolia operates as a monopoly utility, customers are entitled to added protections, including detailed financial disclosures, internal audit materials and a clear explanation of how revenue needs are calculated.
At a previous hearing, Joy Guillot, an administrative judge with the Public Service Commission, declined to compel Magnolia Water to turn over additional expense and budgeting documents beyond what she had already ordered.
According to the customers, Magnolia has not met its burden to justify its revenue requirement. They claim the Public Service Commission’s prior approval authorized a three-year plan only, with no language allowing an extension, meaning Magnolia must file a new plan with full audits and financials. The customers also criticized what they described as a last-minute filing, saying it prejudiced ratepayers and limited their ability to participate.
Magnolia’s president and founder, Josiah Knox, testified in support of the extension, describing a utility that has built its business model around acquiring and rehabilitating “failing” systems.
At one system, he said, Magnolia faced bacteria buildup and excessive chlorination that triggered health violations and forced a well shutdown. At another, he described bypassed disinfection and “disaster” conditions that required millions of dollar in repairs. Overall, he said Magnolia’s total capital investment is about $422 million.
Knox said Magnolia serves roughly 28,000 to 29,000 water customers and about 61,000 wastewater customers and has invested heavily to bring systems into compliance, citing poor baseline conditions such as untreated drinking water, over-chlorination, inadequate backup power and overflowing lift stations.
Magnolia also argued that frequent oversight exists through state and federal regulators. Company witnesses said the Louisiana Department of Health and the Department of Environmental Quality conduct regular site activity, require third-party engineering involvement and can issue sanctions for noncompliance.
The customers questioned whether the compliance framework substitutes for transparent ratemaking, and pressed the company on reliability during recent severe weather.
A ruling on the company’s extension request is expected in the coming weeks. A recommendation will be issued for the Public Service Commission, which has final authority over the outcome.
