Water and sewage disposal rates will rise for Pennsylvania American Water Co. customers for the fourth time in six years.
The state Public Utility Commission voted 4 to 1 on Thursday to approve an increase substantially lower than what the company sought for upgrades and a fair financial profit.
Commissioner Kimberly M. Barrow criticized even that, pointing out that even before the latest hike, water bills had risen 35% since 2020.
“The utility's financial health is incredibly important,” Barrow said during the commissioner meeting, according to an online recording. “They can't provide reliable service unless they're financially sound. So that's a big part of my job as a regulator. But right now, the scales are not balanced.”
Two PUC administrative law judges who hosted hearings and collected evidence recommended either denying the entire hike or approving a somewhat larger one than the commission approved.
What the company wanted
Pennsylvania American asked for higher water rates to spend up to $1.2 billion upgrading its distribution system by June 30, 2027. Without higher rates, the company won’t make enough profit to attract more money for upgrades, its request said.
The new rates go into effect Aug. 13.
Neither the PUC, nor the utility provided estimates of the size of the rate hike for typical residential customers from the latest hikes. A water company spokesman said Pennsylvania American will provide that later in bills issued after Aug. 13.
Based on estimates in the original water rate hike request filed in November:
- Residential customers would have risen to $95.27 a month from $81.55, or 16.8%.
- Commercial customers would have risen to $445.61 a month from $379.78, or 17.3%.
- Industrial customers would have risen to $9,759.49 a month from $8,639.78, or 13%.
Rates for sewage disposal, which the utility refers to by the more generic term wastewater, would have risen for:
- Residential customers to $119.50 a month from $109.50, or 9.1%.
- Commercial customers to $532.62 a month from $498.78, or 6.8%.
- Industrial customers to $15,213.96 a month from $14,415.29, or 5.5%.
That would have raised $168.7 million more in revenue (14.6%) overall — $152.4 million for water (16.1%), and $16.3 million for sewage disposal (7.8%).
What the company got
The approved requests mean about $74.9 million in new revenues — almost $45.3 million more for water revenues (4.8%) and more than $29.6 million (14.2%) for sewage disposal.
If the rate hike wasn't entirely denied, the administrative law judges said increases of almost $82.7 million — about $51.5 million for water revenues and almost $31.2 million (14.2%) for sewage disposal — were appropriate. That's slightly higher than the PUC approved.
Commissioners square off
During the meeting, Barrow debated the hikes with PUC Chairman Stephen DeFrank and Commissioner Kathryn L. Zerfuss, who both voted in favor. (Commissioners John F. Coleman Jr. and Ralph V. Yanora also voted yes.)
DeFrank said the company deserved higher rates partly because it acquired 14 troubled water or wastewater systems in the last 10 years, a strategy the commission encourages “when doing so is in the public interest.”
He noted the company also agreed to build a public water system for residents in Dimock Twp., Susquehanna County, “who have not had access to safe drinking water for almost 20 years because of the unsafe levels of methane and other contaminants.”
Residents have said natural gas drilling caused the contamination.
“There is no doubt that the efforts the company has undertaken to temporarily run, remediate, and often provide permanent solutions for these troubled water systems provide a real benefit to the public that should be recognized,” he said.
In her written statement, Zerfuss agreed with DeFrank on crediting the company for stepping up to take over troubled situations.
“In summary, my support of this final disposition is not to give a public utility carte blanche to raise rates with abandon,” Zerfuss wrote.
Rather, the hike balances the need to upgrade the water company’s systems “while giving meaningful weight to customer affordability.”
“The outcome is a just, reasonable and balanced regulator result,” she wrote.
Barrow said the company deserves “kudos” for taking over in troubled situations.
“They did the right thing,” she said. “And they did the right thing, they were able to do it, because basically the commission has been pretty darn generous with rate increases since 2020. Pennsylvania American has the highest water rates in the Commonwealth.”
She said the company also did what a regulated public utility should do.
“So, I am not taking away from the work that they have done, and I am thankful for that. But we are not striking the right balance when they've got the highest rates in the state, 35% in increases,” she said.
The PUC says Pennsylvania-American serves about 682,000 water customers and 97,000 sewage disposal customers in 37 counties. The utility, the state's largest, says it serves about 2.5 million water and sewage disposal customers.
