MADISON, Wis., Aug. 13, 2002 -- Citing its desire to provide relief on water rate increases and focus on its core electric and natural gas utility operations, Alliant Energy-Wisconsin Power and Light has announced its intention to offer the Wisconsin communities of Ripon and the greater Beloit area the opportunity to purchase the water utilities currently serving those locations.
"With less than 20,000 total water customers, compared to over 435,000 electric and gas customers, Alliant Energy-WP&L cannot reach the economies of scale in our water business as we do in our other utility businesses," said Kim Zuhlke, vice president, engineering, sales and marketing. "Frankly, this impacts the prices our customers pay for water service, and has led our company to conclude there must be a better way to provide these communities with water service."
Unlike a private company, municipal water systems do not pay state and federal taxes, nor provide a return to investors. These key differences are where significant savings can be realized through municipal ownership, according to Zuhlke. Should the water utilities be sold to Ripon and the greater Beloit area, Alliant Energy-WP&L will offer to continue operation on a contractual basis to ensure a seamless transition of ownership without any impact in service.
Ripon and greater Beloit would gain the advantage of the water utility becoming tax exempt. According to Zuhlke, the municipalities would be able to finance the purchase of the water utility through revenue bonds, whereby the capital is lent to the community based on the income that would be generated by water sales. The optional operating contract with Alliant Energy-WP&L would provide further flexibility and should the communities decide, make for an easy transition into operation as their personnel are trained on how to operate and maintain a water utility.
"We fully expect these communities to take several months to evaluate the implications and benefits of municipal water utility ownership," Zuhlke said. "This is a big decision, but after careful consideration, we believe the community leaders will conclude that a purchase is in their city's best interests." Zuhlke adds that with near record low interest rates, there may never be a more opportune time for the municipalities to purchase the water systems.
Zuhlke indicates that if a mutually agreeable sale cannot be worked out with the communities, Alliant Energy-WP&L will explore selling the water utilities to a private company. In either case, the company hopes to complete the sale within twelve months. The sale of the water utilities will be subject to approval by state regulators.
"Our analysis indicates that the greater Beloit water system has a value of $40.7 million and the system in Ripon has a value of $7.8 million," says Zuhlke. "If the communities purchased the respective systems at these values, they would gain control of the systems, have a positive cash flow and would not place any additional burden on taxpayers. This provides strong evidence that such a transaction can make sense for the communities and for our company. We look forward to exploring the issues in greater detail over the coming weeks with the local elected officials and citizens of Ripon and greater Beloit."
Alliant Energy Corporation (NYSE: LNT - News; www.alliantenergy.com ), headquartered in Madison, Wis., is a growing energy-services provider with operations both domestically and internationally. Alliant Energy, through its subsidiaries and partners, provides electric, natural gas, water and steam services to over three million customers worldwide, including over 435,000 in Wisconsin and 20,000 in Illinois. Alliant Energy Resources, Inc., home of the company's non-utility businesses, has operations and investments throughout the United States as well as in Australia, Brazil, China and New Zealand.