IRUA and Newton reach a settlement agreement after water rates dispute

Iowa Regional Utilities Association and the City of Newton have agreed to drop their lawsuits against each other and reach a settlement, finally putting to rest a nearly year-long litigation over water rate increases lobbed against the utility company back in March 2024. Council approved the settlement last week.

The agreement states neither IRUA nor the city admits to any wrongdoing. As part of the deal, the water utility is to pay Newton more than $285,000 over four months, and the city is to modify its water purchase contract with IRUA. The new contract was approved in a unanimous vote from council at its June 16 meeting.

In addition to repealing the old rates and establishing new rates that are already approved for fiscal years 2025, 2026 and 2027, the city’s 20-year contract with IRUA also creates new monthly volumes and stipulates all future rate changes be adjusted based on percentage changes in Newton residential water rates.

According to the settlement agreement, both the city and IRUA agree to never file a lawsuit or file or submit a claim regarding this particular water rate issue, unless there is a breach in the agreement. Within 15 days of executing the agreement, the parties are to file dismissals with prejudice of their pending lawsuits.

Other terms of the agreement prohibit either party from publishing or posting any statement that is “disparaging to the reputation or goodwill of the other party” in any kind of public forum or on a social media platform. Breaching this part of the agreement allows the non-breaching party to file injunctive relief.

WHAT LED TO THE LAWSUITS?

Initially, IRUA was charged as low $1.09 per 1,000 gallons for zero to 31 million gallons a month to as high as $1.23 per 1,000 gallons for anything above 93 million gallons. Newton officials say they conducted a rate study and determined an increase to IRUA’s rates were necessary.

The rates last year changed to $9.73 per 1,000 gallons for a minimum of 0 to 31 million gallons a month; $9.73 per 1,000 for the next 14 million gallons, $9.79 for the next 48 million gallons; $3.27 per 1,000 for a minimum of 93 million gallons a month; and $3.34 per 1,000 for anything over 93 million gallons.

Council’s controversial decision to waive the second and third readings of the rate changes — and adopting them on the spot — caused unrest with rural water customers. IRUA stated to Newton News at the time it had only heard about the rate changes after the newspaper reached out to the utility company for comment.

Since these past rates for the lower volumes increased by nearly 800 percent, IRUA was incentivized to purchase the higher volumes at a discounted rate.

Ronald Dunsbergen, the president of the IRUA Board of Directors, argued in a past statement to Newton News that the utility company only purchased a minimum of 93 million gallons once every three months over the past three years, meaning it would likely have to pay the lower monthly minimum volume.

Legal action was taken by IRUA, which sued the city for breach of contract and defamation. The drama only compounded when the mayor alleged IRUA owes hundreds of thousands of dollars in back payments to the city for refusing to commit to the new water rates set by council.

However, IRUA CEO Matt Mahler disputed the mayor’s statement at that time, but he confirmed the company did file a lawsuit with the city.

Following the council’s approval of the settlement agreement, it is assumed that all of these past issues are now moot and put to rest.

WHAT ARE THE NEW WATER RATES?

IRUA’s new water rates, effective May 1, 2025 to June 30, 2026, have been set at $2.59 per 1,000 gallons for a monthly minimum of 75 million gallons to a monthly maximum of 100 million gallons. The rate will increase to $2.76 per 1,000 gallons effective July 1, 2026 through June 30, 2027.

All rate increases after June 30, 2027 shall be, in percentage terms, equal to or less than those applied to residential customers for the term of the contract. Any usage exceeding the allotted monthly maximum will be charged at twice the prevailing rate at that time.

Mahler previously told Newton News that IRUA is evaluating financial models considering the city’s proposed rates and is working to mitigate the effect the rates will have on the bills of IRUA’s customers. The earliest any rate decision would be implemented for an IRUA customer would be Jan. 1, 2026.

IRUA will communicate any rate decisions directly to customers before any new rates go into effect.