John Severance Apr. 7, 2017, 8:41pm


CAPE GIRARDEAU — Close to 250 customers in the Hillcrest Manor subdivision will have to pay utility rate hikes of $25 to $150 per month after a ruling was upheld by the Missouri Western District Court of Appeals.

In 2015, the Missouri Public Service Commission made it possible for Hillcrest Utility Operating Co. to increase its rates since the company's infrastructure was crumbling. To fix the problem, Hillcrest secured $1.2 million in financing to repair its aging equipment.

The last time Hillcrest Manor residents had seen a rate increase was 1989, but the equipment Hillcrest Utility Operating bought from Brandco Investments in 2015 was failing.

On Sept. 15, 2015, Hillcrest Utility Operating filed a letter with the Missouri Public Service Commission, asking for an increase to its operating revenues to cover the cost. The company held a plethora of meetings to settle unresolved differences.

"A consensus was eventually reached between Staff and Hillcrest as to some of the issues, and the two jointly filed a Partial Agreement setting out the resolved issues while simultaneously setting aside the remaining issues for resolution at an evidentiary hearing before the Commission," court documents stated.

Another meeting was held in May 19, 2016, in attempt to settle the two sides’ differences.

The primary obstacle in the appeal was the cost of the debt component. Hillcrest Utility Operating president Josiah Cox said in court documents that he met with more than 50 investors and commercial bankers in an attempt to secure funding for repairs.

Cox said the only financing to be secured was with Fresh Start Ventures at a 14 percent interest rate. Hillcrest Utility Operating told the commission that the interest rate should be used to determine its proposed rate of return.

The Public Service Commission staff, meanwhile, disagreed, suggesting a rate between 8.88 percent and 10.13 percent. During the hearing, the company was granted its 14 percent rate.

At the appeals hearing, the office of public counsel's appeal argued the commission should have followed its staff's recommendation and assigned Hillcrest a lower cost of debt.

In the appeals court's opinion, though, it sided with Hillcrest Utility Operating, saying that "the commission did not presume the 14 percent cost of debt to be appropriate but rather determined it was appropriate based on the evidence presented at the evidentiary hearing."

The appeals court also ruled that Cox’s testimony convinced the commission the company's interest rate was the best it could obtain despite diligent efforts to find "cheaper, more traditional financing."

 So what’s next? No one is really sure if there is any recourse for the residents of Hillcrest Manor.

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Organizations in this Story

Missouri Court of Appeals Western District
1300 Oak Street
Kansas City, MO 64106

Hillcrest Utility Operating Co.
500 Plaza Drive
Arnold, MO 63010

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