For Wisconsin water utilities,
public fire protection (PFP) service refers to the extra infrastructure capacity that a water utility must build, maintain, and operate to ensure access to high-volume, sometimes high pressure, water for fighting fires.
This is not the same as the fire protection your local fire department provides, which uses water in the course of responding to calls and extinguishing fires. Water utility PFP service provides the system that enables the fire department to access enough water, with enough pressure, to use its equipment effectively.
Wisconsin law requires the Public Service Commission of Wisconsin (PSC) to strictly separate the cost of delivering standard water purchased by customers for daily use (e.g. for drinking and bathing) from the cost of maintaining this emergency fire readiness. The PSC is required by Wis. Stat. § 196.03 to ensure that the law is followed.
Key Terms.
Each of these terms will be explained in more detail below:
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PFP Service: This is the additional infrastructure capacity the water utility maintains that is required to meet the demands of providing sufficient water to suppress fires within the geographical area the utility serves. PFP Service does not include the cost of any water actually provided to suppress fires.
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PFP Cost: This is the cost to the utility for building, providing, and maintaining the additional infrastructure capacity required to provide the PFP Service. In the PSC ratemaking model, PFP Service is treated as a unique customer class and related costs are allocated directly to the class.
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PFP Recovery: The manner in which the utility obtains the funds necessary to recover the costs it incurs (PFP Cost) to provide the PFP Service. A water utility recovers the PFP Cost through a PFP Charge.
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PFP Charge: This is the mechanism the utility uses to collect enough funds to recover the PFP Cost. A utility may use one of the following three PFP Charge methods:
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Direct Charges: The PFP Charge is billed to customers directly on the customers' water bills in order to recover the PFP Cost.
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Municipal Charge: The PFP Cost is converted to a single PFP Charge that the municipality pays with tax revenue.
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Combined Charge: A mixture of the other two methods. The utility charges a portion of the PFP Cost to the municipality and collects the remainder from customers on their water bills.
Core Elements of PFP Service
PFP service does not include fire trucks, firefighters, or the public buildings that the fire department uses. It also does not include water used to fight fires. Instead, PFP Service refers only to the water utility infrastructure that produces the water necessary for firefighting. This infrastructure falls into four major categories:
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Hydrants: The installation, testing, and upkeep of all public fire hydrants.
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Oversized Mains: Large-diameter water pipes designed to carry massive volumes of water quickly.
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Storage Capacity: Extra water towers and reservoirs used to store water in reserve strictly for emergency fire suppression.
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Pumping Power: High-capacity pumps and backup generators to maintain sufficient water pressure for the duration of a major fire event.
Why does PFP Service Cost “Extra"?
A standard water system only needs to meet the steady, predictable daily demands of customers like families and businesses. Fire protection requires the system to deliver thousands of gallons of water per minute instantly, anywhere in the community, without dropping water pressure so low that bacteria may enter the pipes.
The utility must design and build its entire system to stand ready for these brief, unpredictable emergencies. PFP Service requires building the system larger than otherwise needed for daily customer needs. The PFP Cost is the amount required to cover the additional capital costs of building and maintaining this oversized system.
Because Wisconsin law requires utilities to separate the costs of everyday water service from PFP costs, those PFP costs might look like an “extra" charge on customers' water bills. However, they are just one of several components of regular utility service that are listed individually on customer bills and are added together to result in the entire amount due each month.
How does a Utility Pay for PFP Service (PFP Recovery)?
In Wisconsin, water utilities utilize a PFP Charge to recover the total PFP Cost associated with providing PFP Service. As mentioned above, utilities have three different methods for levying the PFP Charge to cover the PFP Cost (PFP Recovery): direct charges on customer water bills,
a municipal charge (paid for by the municipality through property taxes), or a
combination of both. Each municipality chooses from the following options to require the PFP Recovery method used by the utility:
1. Direct Charges (Utility Bill Surcharge)
The utility places a fixed PFP Charge directly onto the water bills of its customers to collect the full PFP Cost. [1]
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How it is calculated: The PSC has approved eight methods for calculating Direct Charges, but the majority of utilities use the
equivalent meters method. Information on other Direct Charge methods is described in the
2016 PFP Study. Direct Charges are fixed charges based on the physical size of the customer's water meter. Properties with larger meters (like factories or schools) pay a higher fixed rate than a standard residential home pays. [1,
2,
3]
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Tax-Exempt Properties: A major advantage of this method is that
tax-exempt entities—such as churches, public schools, and government buildings—must pay their fair share because they are utility customers just like homeowners and business owners in the community. [1,
2]
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Levy Limits: Direct charges do not count against a municipality's strict state-mandated property tax levy limit, freeing up local tax dollars for other public services like street repairs that can
only be paid for with tax revenue. [1,
2]
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2. Municipal Charge (Property Tax Levy)
The utility levies the PFP Charge on the municipality, and the municipality pays the amount out of its general fund. This means the municipality recovers the money from residents via general property taxes. [1,
2]
How it is calculated: The PFP Charge is the same as the PFP Cost because the utility is collecting the cost from a single payer, the municipality. The municipality generally distributes this financial obligation to property owners via their property tax bill and based on the assessed value of the property, rather than the size of the meter used by those residents, businesses, or other customers who receive service at that location.
“The Catch": While this method makes customers' monthly water bills look smaller and offers tax deductions for homeowners, the PFP Cost collected this way counts directly toward the municipality's levy limit. Furthermore, tax-exempt properties end up contributing nothing to PFP infrastructure under this method. Because of these constraints, many Wisconsin municipalities have transitioned away from this method. [1,
2,
3,
4]
3. Combination Charge
The municipality may elect to pay a designated portion of the total PFP Cost through a partial Municipal Charge using property tax revenue, while the utility collects the remaining balance of the PFP Cost by billing customers directly on their water bills. [1,
2] Some utilities may opt to use a Combination Charge as a way of gradually phasing in the process of moving the PFP Cost off of the tax levy (Municipal Charge) and onto the water bill (Direct Charges). See more about Phased-In-Rates (PIRs) in the “Managing Rate Shock" section below.
Charging Non-Customers
Under Wis. Stat. § 196.03(3)(b)(2), a utility using the Direct Charges method can request permission from the PSC to bill
unmetered landowners. If someone owns a piece of developed or buildable land within the city limits that is protected by the PFP Service provided by the municipal water system—but does not actually use or pay for water service at that property—the utility can still bill that property owner at the standard, baseline ⅝-inch meter rate to fund PFP Service.
This way, vacant lots (where firefighting may be required) pay for that service even if there is no building with plumbing, or even a simple spigot for a hose, located on the lot. Such a customer is called a non-general service customer.
Process for Changing the Method of PFP Recovery
To change its method of recovering the PFP Cost, a water utility must go through a legal process regulated by the PSC. Because this change alters who is billed and how much they pay, a utility cannot switch its PFP Recovery method on its own.
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Conventional Rate Case (Recommended): A utility may request changes to its PFP Recovery as part of a conventional rate case proceeding under a Water Rates (WR) docket. This option is preferred, as it allows Commission staff to determine the total amount of the PFP Cost, review the method for calculating the PFP Charge, and thoroughly review the utility's entire financial structure at once.
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Outside of Conventional Rate Case (PFP Docket): Alternatively, a utility may request changes to PFP Recovery outside a conventional rate case proceeding. Under this alternative process, the Commission opens a PFP docket. A hearing is required whenever PFP Direct Charges are established or changed. A utility choosing to revise its method of PFP Recovery outside a conventional rate case can find additional information at:
Required Docket Exhibit - Resolution
A utility that seeks to change its method of PFP Recovery from a Municipal Charge to either Direct Charges or a Combination Charge must file with the Commission a resolution from the municipality supporting the change. This resolution must be filed as an exhibit in the utility's WR or PFP docket.
Managing "Rate Shock"
Shifting the entire PFP Cost directly onto water bills can cause a sudden, sharp spike in a customer's monthly billing statement. To protect consumers, the PSC sometimes permits PIRs. This allows the utility to transition the PFP Recovery method incrementally over a multi-year period (e.g., shifting 25.00 percent of the cost to water bills in year one, 50.00 percent in year two, etc.) rather than requiring the entire change happen at once. [1,
2]
Public vs. Private Fire Protection
Wisconsin utilities separate fire protection into two categories:
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Public (PFP Service): Covers water capacity for standard street hydrants the fire department uses to protect the general public and all structures.
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Private: Covers dedicated water connections inside specific buildings, such as private fire hydrants on corporate campuses or internal automated building sprinkler systems.