CHELSEA – The Chelsea City Council approved at its meeting on Tuesday, Feb. 5, a rate structure and control agreement with the owner of a sewer system that serves the city.

The agreement would be effective immediately for a 10-year term with an option to renew and would:

• Freeze utility rates of customers of the SRUS system through January 2021 (five years since the last rate increase in 2016).
• Limit future adjustments of the SRUS monthly fees and reservation fees to “reasonable parameters.”
• Reduce the reservation fees for certain categories of future commercial customers.
• Eliminate lateral service line extension fees up to 100 feet for all types of commercial business.

The city would review rates annually and ensure that rate adjustments are supported using a return on equity calculation used by the Alabama Public Service Commission to regulate other utilities.

The PSC currently has no jurisdiction over private sewer systems of the size of the SRUS.

Chelsea Mayor Tony Picklesimer said it is possible that as the city grows, and thus more customers enter under SRUS service, rates could remain flat even beyond the agreed-upon five-year freeze.

“It’s very feasible and possible for us to have 10 flat years on sewer rates,” he said.

The agreement was first brought before the Council during its Jan. 22 meeting, when the public was also given an opportunity to offer thoughts and ask questions.

Two changes to the agreement resulted from those discussions: the addition of wording giving the city the right to terminate the agreement in the event the sewer system eventually came under PSC regulation, and the requirement that the company’s reported financial information would be certified by a third party.

City officials had been concerned about current commercial sewer tap and line extension fees hampering the city’s economic growth, and residents have been dissatisfied with the monthly service fees and the rapid rate of increases between 2009 and 2016 implemented by the previous owner of the sewer system.

The City Council approved a resolution on July 10, 2018, authorizing Picklesimer to proceed with potential condemnation of the sewer system and to negotiate the purchase of the system from the new owners.

Richard Rich, chief operating officer of Southwest Water Company, which purchased Shelby Ridge Utility Systems LLC in April 2018, reached out to Picklesimer in an attempt to reach an agreement and avoid legal costs to both parties associated with any condemnation action by the city.

“By entering into the settlement agreement with SRUS, the city of Chelsea will be able to secure our objectives of ensuring the provision of cost-effective utility services for Chelsea’s citizens and making Chelsea more attractive to incoming commercial or industrial customers,” Picklesimer said.