Upcoming Rate Case

February 2009

Department of Waterworks•Owns and manages Indianapolis

Water.

•Bi-partisan seven member Board of Directors oversees department policy, finances, contract and captial projects.

•Department has eight employees.

•System is operated by Veolia Water Indianapolis.

Waterworks System• Indianapolis Water serves nearly 1 million people

in 7 counties.

• 83% of customers and 89% of revenues are from Marion County.

• 77% of treated water comes from surface sources.

• 68 groundwater wells supplement surface water sources.

• Average daily production of finished water is 140 MGD.

• Peak day record is 228 MGD on June 13, 2007.

• Total rated capacity of the system is 220 MGD.

Morse Reservoir

White River North

Treatment Plant

Flow of Funds• Customers pay water bills

• DOW pays for the operation of the Waterworks

• Payments are made on debt service borrowed to finance major capital improvements

• Remaining $ are spent on capital projects

• End of Year cash balance is carried over to the next fiscal year & reflects no profit for the DOW

TOTAL REVENUE

O&M, PILOTS, G&A-

DEBT SERVICE-

CASH CAPITAL-

= END OF YEARBALANCE

-

Upcoming Rate Case will have two parts:

•Emergency

•Non-emergency or general

Emergency Rate Case: Variable rate debt

•Waterworks took a direct hit from the financial market crisis.

• Interest expense on variable rate debt increased dramatically.– Interest rates rose from about 3 percent

to 9 percent.– Financial impact to Waterworks is more

than $20 million more in interest payments for 2008 than in 2007.

Combined Variable Rate Debt

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2006

2007

2008

2009

Emergency Rate Case:

•Without immediate additional revenue, Waterworks’ financial situation will continue to decline.

•Waterworks and the City of Indianapolis could face a downgraded credit rating.

•Lower credit rating would make it more expensive to borrow money for future projects.

•Higher interest rates = higher water rates

Revenue Collected by Month - Unaudited Data

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

January February March April May June July August September October November December

2006 2007 2008

Emergency Rate Case: • Waterworks intends to petition the Indiana

Utility Regulatory Commission for about a 20 percent across-the-board emergency rate increase to stabilize the financial situation.

• For the average household using 7,000 gallons, this translates to about $5 per month.

• The average water bill is $25 per month.

• An emergency rate increase may be approved by late Spring 2009.

General Rate Case:•Waterworks also intends to petition the

IURC for a general rate increase at the same time as the emergency petition.

•The general rate increase will fund important capital projects, improvements to the water system, increased operational costs and other general needs.

•A general rate increase could be approved sometime in the first half of 2010.

Questions?