SPIRIT LAKE - Idaho Public Utilities Commission staff is recommending that a controversial Spirit Lake East water rate hike plan, which would nearly double the monthly base rate, be 50 cents more than what's proposed.

Commissioners who will decide on the Spirit Lake East Water Company increase proposal will hold a public hearing on Sept. 4 at 7 p.m. at Spirit Lake City Hall, 6042 W. Maine St.

Spirit Lake East is proposing to increase its monthly water charge from $12.50 to $24.75 for the first 9,000 gallons of use. The plan affects 290 property owners in Spirit Lake East, a subdivision in northern Kootenai County, and Treeport, a private area in Bonner County.

Leslie Abrams, manager of Spirit Lake East, said the reasons behind the hike proposal include paying for system upgrades completed five years ago, inflation and to establish an emergency fund in case of equipment failures.

Ron Anello, a concerned Spirit Lake East homeowner, said the large rate increase proposal was stunning.

"It raises red flags," he said earlier, adding that small increases would be easier to swallow.

Abrams said the company isn't eligible for grants and emergency funds like many homeowners' associations and water districts because it is privately owned.

The company's 2011 income statement indicates $72,870 annual revenue versus expenses of $114,830. In light of that shortfall, it seeks an annual revenue requirement of $150,414. Commission staff proposes $143,525, which would set the base monthly rate at $25.25.

"Even though staff's recommended revenue requirement is lower than the company's, staff's proposed increase is larger than that requested by Spirit Lake East because a review of the company's application determined that with its proposed increase, it would still collect $32,600 less than the needed revenue requirement," an IPUC press release states.

Commission staff proposes a 12 percent return on equity and an 11.42 percent overall rate or return.

The company proposes no change to its charge of 12 cents for every 100 gallons above 9,000 gallons per month, but to encourage water conservation, IPUC staff proposes to set the charge at 22.4 cents for every 100 gallons of use above 6,000 gallons per month.

Commission staff opposes the company's proposal to shift from quarterly billing to monthly for up to eight months out of the year because it does not allow customers who practice conservation to reduce their monthly bill.

Spirit Lake claims the billing change has been requested by customers and will allow customers and the company to more quickly find and repair leaks. Customers will also be able to better track their consumption and take conservation measures if they choose.

Abrams said the meters in the system are currently only read quarterly because some meters can be difficult, if not impossible, to reach during the winters in the snow belt. She believes the company has lost income as a result.

There has not been a large increase for Spirit Lake East customers in 30 years, according to the company's application. The IPUC approved a 50-cent per month increase in 2007.

Abrams said that, even if the increase proposal is approved, the rate would still be a good deal compared to most area water districts.

She said, in hindsight, she wishes the company would have requested smaller rate hikes sooner but she said it was trying to improve the morale of homeowners frustrated by decisions made by previous shareholders and the developer. She said the company was reluctant to raise rates out the gate.

The current shareholders acquired the company in 2009.

According to the company's application, it has completed nearly $300,000 in upgrades and repairs to increase water pressure provide backup power generation and improve leaks to the main line. Many of those upgrades were made to comply with a 2007 state Department of Environmental Quality consent order.

Abrams said the system was only designed to provide domestic water use, not for irrigation. Hence, that could be the root of water pressure problems some residents have complained about.

There will be no presentation at the hearing from the IPUC commissioners or staff members. The only purpose is to take public testimony.

The commissioners, which operate independently of commission staff, are free to accept, reject or modify the company and IPUC staff proposals.

For those who do not want to provide oral testimony at the hearing, the IPUC is also accepting written comments through Sept. 6.

Comments are accepted via email at www.puc.idaho.gov and clicking on "Case Comment or Question Form," under the "Consumers" heading. Fill in the case number (SPL-W-13-01) and enter your comments. Comments can also be mailed to P.O. Box 83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.

To review the company's application, commission staff comments and customer comments already received, go to www.puc.idaho.gov, click on "Water," then on "Open Cases" and scroll down to the case number.