The Medford Water Commission has reduced an extra charge it applies to five outside cities that buy its water. But the cut has not placated the municipalities, which are disputing the commission's control over the valley's water supply.

The Medford Water Commission has reduced an extra charge it applies to five outside cities that buy its water. But the cut has not placated the municipalities, which are disputing the commission's control over the valley's water supply.

Water Commission members voted in October to reduce its rate of return from 7.5 percent to 5 percent for the coming fiscal year. Rate of return is based on the utility's assets and provides the commission with a return on the investment it has made in the system as well as funds for future improvements and debt service.

A coalition of the cities of Central Point, Eagle Point, Jacksonville, Phoenix and Talent still thinks the rate may be too high and has called for a detailed study of how overall rates are calculated.

The group, called the Cities Water Coalition, is challenging the water commission's claim to have sole rights to water piped to the Rogue Valley from Big Butte Springs in the Cascade Mountains.

Rate of return income from the five cities totaled $371,000 in the 2009-10 fiscal year. The rate is added to other costs to determine new rates charged to the cities and others outside city limits served by the commission. The commission is now considering new rates that would begin in March.

Central Point Mayor Hank Williams says times and financial circumstances have changed substantially since the rate plan was set.

"Given the historically low interest rates since the rate of return was last established in 1998, we feel this (revised rate) may still be higher than the customer cities should be required to pay," Williams wrote in a Nov. 1 letter from the coalition.

Larry Rains, Water Commission manager, acknowledged that the other cities were unhappy with the cost, but said it is ultimately up to the commission to set the price.

"We had started visiting other cities on these (proposed) rate increases. The first couple of cities I went to questioned rate of return," said Rains, who took the issue to the commission. "I said, 'Here's the facts and figures.' The board ... decides what's a fair rate of return."

Commissioners determined the rate should be 2.5 percent above the Federal Reserve discount rate, but that a minimum of 5 percent should be charged. The discount rate was 0.18 percent in July, the date used for calculation.

"I'm sure none of us ever envisioned that interest rates would get as low as this," said Laura Hodnett, commission public information coordinator.

Talent Public Works Director Joe Strahl said he found rates of return between 4 percent and 5 percent charged by two other districts that serve outside customers. The Portland Water Bureau charges long-term customers 4 percent and shorter-term customers 5 percent. Lake Oswego charges 4.5 percent.

Hodnett said it's hard to make a comparison.

"There's not a lot of sellers to other entities," she said. "Most simply sell to their own customers."

South Fork Water Board, which serves West Linn and Oregon City, charges a 9 percent rate to outside customers in the Clackamas County area, Hodnett said.

The Cities Water Coalition also has raised concerns over overall rates, water rights and charges for system improvements, including a proposed second water treatment plant.

In addition to charges for water purchased from the commission, customers outside Medford pay for their own city's cost for delivering the water within the city limits.

Tony Boom is a freelance writer living in Ashland. Reach him at tboom8929@charter.net.