Have you ever wondered what’s behind an Aqua rate increase? If the “when?” and “why?” are lost on you, you’re not alone. Believe it or not, there is a rhyme and reason behind Aqua’s rate cases, and there are checks in place to make sure that each case is fair and warranted. Did you know that in most states, you cannot file for a rate increase until after you invest money into your water system? For Aqua that means first we must invest the capital for improvements in infrastructure, new tanks or plant upgrades.
Only after these improvements are made can Aqua request to raise rates to recover our investment. Aqua cannot request a rate increase to finance a future project according to the regulations of most states. When putting the case together, Aqua must determine a “test year.” This is a one-year financial snapshot of the system in which Aqua is filing the case. Each state has a regulating body — the Public Utility Commission (PUC) — that ensures the increase is both fair and warranted.
Once it decides to file a rate increase, Aqua must compile the proper paperwork and notify our state PUC that it plans to request a rate increase. Aqua must provide the necessary documentation supporting the investments made in the test year that provide just cause for the increase.
Improvements often include:
• Water main replacements
• Loops to improve water pressure
• New hydrant installation to support the local fire department
• Added tanks for increased capacity
• Upgraded tanks to improve water quality.
Most state commissions require water utilities to notify their customers once they file a rate request. These notices can take the form of a bill stuffer, an ad, a postcard or a letter. These notices must contain instructions on how to intervene. Customers or other third parties who wish to formally block a rate increase for any particular reason are known as “interveners.” Interveners must file with the commission for this status.
After the request is filed, Aqua compiles all of the official paperwork, supporting documents and supporting numbers for the PUC. Once all necessary documents are filed, the PUC then has several months to rule on the case. During the assessment process, the PUC conducts public hearings, which allow customers, elected officials, stakeholders and interveners to voice their concerns. Information gathered in public hearings is taken into account by the PUC as they look to make a decision on the rate request.
Once the PUC has analyzed Aqua’s request, it rules on whether to grant the proposed rate increase. The PUC can grant or deny the new proposed rates. Additionally, the PUC can grant Aqua a rate increase, but at a different level than what was proposed. In some cases, it will grant increases for some but not all of the items requested. It is important for the company to demonstrate that all of our expenses and infrastructure improvements are just and reasonable.
Once the request is approved, Aqua usually is required to notify our customers of their new rates and when they will take effect. These notices are usually in the form of a paid newspaper advertisement, bill stuffers or customer letters.
Aqua’s goal is to recover investments made to improve infrastructure while still striving to keep rates manageable for customers. Our proactive capital investment plan ensures that pipes and equipment are properly maintained to guarantee quality water and uninterrupted service.
As infrastructure ages, it becomes less reliable. When main breaks occur or equipment breaks down, the cost to repair them is greater than the cost of a proactive replacement. Additionally, customers may not have service during the time it takes to fix the emergency.
“While no customer wants to hear that their rates are increasing, we strive to help them understand that, without our improvements, it would not be possible for them to continue to receive quality water,” said Regulatory Affairs Manager Kim Joyce. “Our capital improvement model and rates schedule aim to improve each system over time so that each rate request is spaced out appropriately so as not to overwhelm customers whenever possible. Furthermore, each of our requests is carefully scrutinized by the Public Utility Commission to ensure that what we are asking for is warranted.” Even as rates continue to change in Aqua’s 10 states, Aqua is proud of the fact that (in most of our systems) the company is still able to deliver quality water to our customers for approximately a penny per gallon.
For Additional Information:
Pennsylvania Public Utility Commission
Aqua America States