Superior has the state’s only private water utility. It’s making it harder to replace lead pipes.

Standing by casks of beer brewed with Lake Superior water, President Joe Biden touted more than $1 billion last year to ensure clean water and replace lead pipes in Wisconsin during a stop in Superior. The crowd cheered and applauded as he said people would be able to drink water from their faucets without getting sick, highlighting the harms of lead exposure in children.

“That’s why we’re going to eliminate every single lead pipe in America,” Biden said. “I promise you that. We’ve got the money to do it.”

There’s just one problem. Superior can’t access the federal loan forgiveness that helps financially strapped communities upgrade water systems. That’s because Superior is the only community in Wisconsin with a privately owned water utility rather than a public one.

Congress allocated $15 billion to help communities remove lead pipes when it passed the bipartisan infrastructure law in 2021. The federal money bolstered state loan programs that provide financial aid to water systems for ensuring safe drinking water. Nearly half the funds must be provided to disadvantaged communities as grants or forgivable loans, which means a portion of the loan doesn’t have to be paid back.

Superior’s residents are eligible for loan forgiveness because of higher poverty and county unemployment rates, and they make less than the statewide median household income. But state law bars privately owned water systems from receiving loan forgiveness – a regulation that today applies only to Superior.

State Republican lawmakers and city officials want Superior residents to benefit from the federal money, but they’re at odds over how to make that happen.

GOP legislators want to change the law to make the funds available to Superior Water Light & Power Company, which has served the city for 135 years. But residents are frustrated by water rates that are among the highest in the state, and some local leaders want the city to take over the utility.

Bill would allow private utility to access loan forgiveness 

A new state bill introduced by Sen. Romaine Quinn, R-Birchwood, and Rep. Chanz Green, R-Grand View, would eliminate the restriction barring privately-owned water systems from accessing loan forgiveness for removal of lead pipes. 

At his office in the state Capitol, Quinn said he had reservations about making the funds available to private utilities when Superior Water Light & Power first approached him about it. 

“But at the end of the day, Superior residents are also taxpayers, and I think they should have the same opportunity to be afforded some of this relief as other taxpayers who are struggling with the replacement of lead laterals,” Quinn said.

In late February, a few spoke in support of the proposal at a Superior City Council meeting, including Superior resident Shannon Johnson. She said her 1889 home is “full of lead” and urged council members to support legislation to change the law. 

“The city of Superior needs to help their homeowners do this so that the burden is not 100 percent placed on us,” Johnson said. “We need help.”

But city leaders in Superior disputed claims that the proposal would ease financial strain for residents. Late last month, a majority of the council voted down a resolution to back the bill. Superior Mayor Jim Paine said the city could instead borrow money to purchase the utility, voicing frustration over recent rate hikes.

“All of those increased rates that they’ve been raising on us, we can just use that to pay for the bond,” Paine said. “Then when it’s paid off…rates will come down.”

Last fall, the Public Service Commission approved a roughly 11 percent increase in water rates. The average resident among the utility’s 10,000 customers pays nearly $59 per month. For systems serving the most customers, state data shows quarterly bills for Superior ratepayers are the second highest in Wisconsin next to the Waukesha Water Utility. Waukesha residents are paying higher rates because the utility completed a $286 million project in 2023 to bring Lake Michigan water to the city.

Superior City Council member Mark Johnson argued the city may not even be able to buy the water utility. The city plans to conduct a feasibility study, and he noted that voters would have to support the purchase in a referendum. The acquisition could be a long, drawn-out process, he said, and the better option for the city is to support the bill to change state law.

“I don’t know that we will be able to get it done with the same efficiency and at the lowest cost that we can if we change this [law],” Johnson said.

Hundreds of thousands of lead lines remain in Wisconsin

Lead in paint and dust are the primary source of lead exposure in Wisconsin, but water crises like the one in Flint, Michigan, have highlighted the ongoing problem with lead in drinking water. The federal government banned use of lead pipes in 1986, but the Environmental Protection Agency estimates as many as 341,000 lead lines may still remain in Wisconsin. Corrosion of lead pipes over time can increase lead exposure through drinking water, which can harm children’s development and damage the brain and kidneys. There is no safe level of lead.

In most Wisconsin cities, utilities are responsible for removing their lead lines, and residents are on the hook for replacing lead pipes that run to their homes. The DNR’s Lead Service Line Replacement Program provides financial assistance to communities for replacing both public and private lead lines. The state received $83 million in the most recent round of federal funding. 

Based on bids, Superior Water Light & Power Company estimates it would cost residents an average of $10,000 per household to replace around 700 privately-owned lead lines. The utility also owns around 3,700 lead lines. 

Altogether, the utility said it would cost around $44 million to replace both public and private lead lines, according to Joscy Skandel, the utility’s manager of regulatory compliance, policy and rates. If the law were changed, Skandel said, the utility could seek loan forgiveness under the DNR program, potentially saving customers half that amount or more.

The utility is asking city officials to support the bill, and local leaders did join the company last year to lobby lawmakers for a change in the law. But some city leaders have since withdrawn support, saying the bill benefits the utility rather than customers. 

Local officials say a change in the law would effectively make it impossible for the city to buy the utility.

State law allows compensation for the utility’s assets, and any upgrades made with federal funds will increase the utility’s worth. If the GOP bill passes, Superior City Council member Garner Moffat argued, it would only inflate the value of Superior Water Light & Power.

“We can’t allow them to get a hold of these resources and build in a system in which we’re trapped underneath them for another 100 years of poor service and the highest rates in the state,” Moffat said during a February council meeting.

If the bill passes, the company does plan to request loan forgiveness for replacement of both customer-owned and utility-owned lead lines. If federal funds don’t cover all expenses for the utility side, the company would seek to recover costs from customers through another rate increase. 

State estimates lower replacement costs than Superior utility

While costs vary, the DNR said the average cost to replace private lead lines under its program is less than $5,000 per household — roughly half the utility’s estimates. Under the program, the utility would be required to use the lowest bidder for replacement of lead lines. 

Council member Jenny Van Sickle has questioned why a for-profit company should be allowed to compete with communities for federal funding.

“They’re the only company in the world selling Lake Superior water at an extraordinary profit,” Van Sickle said.

As a private company, state utility regulators allow Superior Water Light & Power to receive a nearly 10 percent rate of return on those investments. In 2023, the water utility’s assets were worth at least $62.9 million, and it made around $2 million in profits after expenses. Superior City Council members highlight the company is currently owned by Duluth-based Allete, which is valued at $3.8 billion.

When asked why the utility’s profits couldn’t help offset costs, SWL&P’s president Rob Sandstrom said it invests in the safety and reliability of its system. 

“We have the (commission) that comes in and takes a look at our projects, our expenses and makes sure that those are reasonable and just,” Sandstrom said. 

The utility’s Skandel said it’s been replacing an average of 285 utility-owned lead lines each year, adding that drinking water is treated and safe. Since customers own their lead lines, she said the utility didn’t know how many needed to be replaced until they were required to conduct an inventory under revisions to the federal Lead and Copper rule during President Donald Trump’s first term. 

If the company were eligible for and received loan forgiveness, Skandel said they would work with the commission to set up a program to help customers pay off their lead line replacements. 

“Whatever is not recovered through (federal funds) would be kind of a long-term loan that they would pay back through their utility bill,” Skandel said.

Van Sickle questioned why the utility hasn’t previously sought low-interest loans for replacement of lead lines to save customers money. 

Becky Scott, the DNR’s environmental loan section manager, said the utility has been eligible to apply for general funding under the Safe Drinking Water Loan Program for about a decade. 

“They definitely have not applied to our program,” Scott said.

If the utility became eligible for forgivable loans, Scott said the DNR prioritizes funding for replacing customer-owned lead lines in communities first. Any remaining funds could go toward replacement of utility-owned lead lines.

Uncertainty exists over funding even if the law is changed

Even if the law were changed, some local leaders say there’s no guarantee the private water utility would be awarded funds, since it would be competing with communities statewide for funding. 

And there’s another potential obstacle: getting paid by the federal government. 

The Trump administration has paused some federal spending under the bipartisan infrastructure law. For example, the U.S. Department of Transportation said no new funds will be awarded for now under a program to install electric vehicle chargers nationwide, which has threatened funding for Wisconsin. Federal judges have blocked the freeze on federal grants and loans, including in a case brought by Wisconsin and 21 other states. The Trump administration is appealing the ruling in that case.

While it’s possible federal funding may be halted, the DNR’s Scott said the agency is “fairly confident” additional rounds of federal infrastructure funding will be approved.

Sandstrom with Superior Water Light & Power argued the utility can realize economies of scale through sharing equipment and staff across its three utilities. Company officials questioned whether the city could afford to operate and maintain the utility when local budgets are often stretched for funds. 

Superior’s mayor said every other community in the state runs a water utility, and the city is already planning to remove about 20 lead lines this year with its own resources. Superior City Council member Nick Ledin said the city can also seek out other grants or programs to help residents replace lead lines.

“Our residents are going to be completely, 100 percent taken care of,” Ledin said. “That is our goal here.”

The utility is seeking support to change the law prior to a June 30 deadline for utilities to apply for the next round of funds under the state’s lead line replacement program. If federal funding holds, the state will receive additional funding through 2027.