DV Journal

Delaware Valley residents are feeling the financial pinch. They’re not only paying higher prices for gasoline and food. Now their utility bills are also skyrocketing.

Cheltenham resident Elizabeth Tsingelis opened her combination water and sewer bill from Aqua PA last month to find it went from $43 to $184.

“My sister (who lives around the corner) had a $90 water bill and it went up to $315,” she said. “We were three people here in the summer. Her family is five people. And we don’t understand where it’s coming from.”

Wholesale utility prices (the price at which energy suppliers pay for water, gas, and electricity) have risen due to an increase in global demand as major economies have simultaneously climbed out of the pandemic-induced recession. The price increases have risen steeply since October 2021. Natural gas prices have hit a record high as the world emerges from a lockdown.

Utility companies are now passing that cost on to consumers.

“Power generators that had been shut down could not ramp up in time to meet renewed demand,” says Jonathan Stern of the Oxford Institute for Energy Studies. Electricity demand is set to increase further as a result of rising household incomes and growing demand for digitally connected devices and air conditioning.

After falling by about 1 percent in 2020 due to the COVID-19 pandemic’s impact, global electricity demand is growing by close to 4 percent in 2022 – driven by the global economic recovery– according to the latest edition of the International Energy Agency’s semi-annual Electricity Market Report. Most of the increase in demand is expected to come from the Asia Pacific region, primarily China and India.

The Pennsylvania Public Utility Commission (PUC) has approved what it called substantially lower than requested increases in rates for water and wastewater services provided by Aqua PA Inc. (Aqua Water) and Aqua Pennsylvania Wastewater Inc. (Aqua Wastewater), headquartered in Bryn Mawr.

The commission voted 3-0 on May 12 to approve an increase in annual revenue of approximately $50.51 million (9.88 percent) for Aqua’s water service and an increase in annual revenue of approximately $18.74 million (50.55 percent) for wastewater service – approximately 30 percent lower than what the company originally requested.

The PUC announced utility rates rose last June 1 from 6 percent to 45 percent for those consumers who don’t shop for suppliers in the online marketplace.

Aqua serves parts of Berks, Bucks, Montgomery, Delaware, and Chester Counties. Aqua Wastewater provides wastewater service to approximately 40,284 customers in portions of more than 40 municipalities throughout 15 Pennsylvania counties. The two companies serve nearly 1.5 million people throughout the state.

“Our May 2022 rate increase request was made to cover the three-year period of major capital investment and operating expenses since our last request in 2018,” said Chris Franklin, Essential chairman and CEO. “The overwhelming majority was related to our capital investment of $1.1 billion (through the future test year of 2023) to improve water quality and customer service, including a new financial reporting system, SAP, to replace the company’s 25-year-old software, and reliability for about 490,000 water and wastewater customers throughout Pennsylvania. We also opened a new state-of-the-art environmental laboratory in 2021 to help us continue our long history of providing safe drinking water to our customers and returning clean wastewater to the environment.”

Franklin added, “Inflation was generally estimated in our operation and maintenance costs, but not at today’s current rates. However, Aqua is not currently passing on those additional costs to customers.”

Most Aqua residential customers using 4,000 gallons a month currently pay an average of $69.35 for water and $55.51 for wastewater. Most receive only water service.

The precise impact on Aqua customers was filed in a required tariff report filed by Aqua in July which spelled out new charges for various rate zones across Pennsylvania.  The PUC’s policy is to gradually unify charges across its system so that the costs are shared equitably among all customers. Under that policy, customers in low-rate towns acquired by Aqua will eventually see their rates rise to match the majority of customers.

“For electric and gas in the Delaware Valley, PECO negotiates for lower energy prices. It does not generate electricity, it’s a distributor,” says Greg Smore, senior manager of communications.

“New and higher gas costs influence electric rates for the year. Prices are adjusted quarterly to current market trends – the rising costs of everything else – increased electric supply costs, and geopolitical issues (like the war in Ukraine). It costs power plants more now to produce electricity,” he said.

Natural gas is the plant fuel supply source that is trending higher now. It is the main cost for power plants to produce more electricity. Costs are then passed along to what PECO pays for supply, and passed along at the lowest price possible. But natural gas was lower for consumers in September, falling to 0.81790 cents per centum cubic feet (CCF). However, electricity increased by $6.10 per customer for the average usage of 700 kWh. These past summer months energy increased in usage due to higher air conditioning use.

PECO consistently encourages customers to use company energy efficiency programs and 12-month budget billing assistance programs. Despite rising than normal consumer pricing, there was no increase in customer complaints, which remained steady. Smore indicated, “We’re not seeing a significant increase in customers not being able to pay their bill, but we are encouraging customers to take advantage of financial assistance and bill relief programs.”

An advocacy group known as Keep Water Affordable, led by co-founder Bill Ferguson, is fighting the trend of utilities buying municipal water and sewer systems. Ferguson said Aqua Water and PA American Water, which he called “Big Water,” have a primary mission to acquire distressed municipal water systems at a “fair market value” and turn a profit.

“State regulation offices have stacked their efforts against local citizens,” he told the DVJournal. “This isn’t a fair system to ratepayers. Real users are seeing large rate increases as a result,” he noted. In the recent past, he attended public meetings involving Bucks County, Tredyffrin Township, and Chester Water Authority (CWA) to express objections to those municipal water systems being bought by “Big Water.”

His advocacy group’s efforts helped stop the Bucks County and Chester Water Authority municipal water systems not being sold to “Big Water.” Tredyffrin Township’s municipal sewer system was, however, purchased by Aqua PA. Area residents are mounting a major effort to try and stop municipal water buyouts through a state Supreme Court case, he said.

Please follow DVJournal on social media: Twitter@DVJournal or Facebook.com/DelawareValleyJournal

As the complex legal and political battle over the future of the Chester Water Authority rages on, most CWA customers are focused on one simple question:

What about my rates?

Aqua America has made a $410 million bid for the water authority’s assets. They are pledging to keep the 200,000 current CWA customers’ rates flat for a decade. Make the deal, Essential Utilities Chairman and CEO Chris Franklin told Delaware Valley Journal, and “there will be no movement in what the customer pays.”

Not so fast, says the CWA’s attorney Frank Catania.

“Aqua can’t promise not to raise rates because Aqua doesn’t set the rates. The PUC [Public Utility Commission] does.”

And this is where the debate over the impact to ratepayers of the city of Chester’s attempt to sell the CWA gets complicated. The story also highlights the fact that, in the end, there is no certainty about future rates under the Aqua deal.

It all comes down to another simple question: Who can ratepayers trust?

Catania says it’s not Aqua. “If Chester sells to Aqua, it’s not a matter of ‘if’ there will be higher rates, but ‘when,” Catania told DVJournal.

“To my knowledge, we’re the only bidder who has said what rates will look like for the next decade – no other utility in the entire country has done that,” Franklin responds. “Has Chester Water made a similar pledge?”

But “no new rate hikes” is a much easier promise to make than it is to keep. Particularly in the case of Aqua and the CWA.

Aqua has been on a buying spree across Pennsylvania, snatching up sewer and water systems under a 2016 law known as Act 12. This law lets investor-owned utilities charge ratepayers for the appraised fair-market value of the assets. Aqua currently provides water service to nearly 450,000 customers in 32 Pennsylvania counties and wastewater service in 15 more.

As Aqua raises rates to cover its costs, the rates of its previous customers come into play under a policy known as “single tariff pricing.” Its premise is that similar customers should pay similar prices for similar services — a situation that absolutely wouldn’t exist for other Aqua’s customers in the CWA service territory.

“Our rates are one-third to one-half those of Aqua,” Catania says. “The PUC isn’t going to let one set of Aqua customers pay rates half as high as others in the same territory.” The CWA is scheduled to raise rates in 2022 for the first time in 11 years.

It’s an issue at the heart of a complaint filed on September 13 by the Office of Consumer Advocate regarding Aqua’s current request for a rate increase.

“Aqua has base rate cases for both water and wastewater pending before the [PUC] right now, and the OCA filed a complaint and is an active party in those cases,” Interim Acting Consumer Advocate Christine Hoover told DVJournal.

“The goal is to move customers towards the cost of service, Hoover said. “If there are relatively lower rate customers, but their cost of service is much higher, then the goal is to move them towards that cost service in each case.”

And part of that cost is determined by what the company, in the case of Aqua, pays for the water system. “The revenue requirement is driven by the purchase price, the rate-making rate base in a fair market value acquisition,” Hoover said.

This means higher rates under Aqua, the CWA and its allies argue. “Aqua can say ‘we’re not going to raise your rates for ten years,’ but what that really means is we’re going to take 10 years to get you up to single tariff pricing,” said Catania. “And if the PUC says, ‘no, that’s not OK, you’ve got to do it in three years because it’s unfair to other customers,’ then Aqua can say, ‘well, we didn’t want to raise your rates yet, but there’s no choice and it’s not our fault.’ And everyone is stuck paying higher rates.”

Aqua says they have the answer:  “The city of Chester will take part of the $410 million [purchase price] and put it in a rate stabilization fund,” Franklin said. “There will be no movement in what the customer pays.”

Hoover said she is unaware of any similar workaround as part of a transaction approved by the PUC and declined to speculate about the viability of such an approach. But if rates are half those of similar Aqua customers and CWA is currently collecting $42 million in revenue, filling that gap would in theory be $420 million over the next decade — more than the entire offer Aqua has made.

There’s no reason to believe the PUC would immediately double anyone’s rates — indeed, it would violate their strategy of avoiding rate shock — but gradually raising rates over a decade would still mean tens of millions of dollars from the stabilization fund, and rising with every rate increase.

Meanwhile, current Aqua customers are looking at rate hike requests ranging from 20.49 percent in Bensalem to an 86 percent increase in Sun Valley. It’s part of Aqua’s systemwide 17.86 percent increase currently before the PUC.

Aqua points to its high level of customer service —  more than 300,000 water quality tests per year — and the fact that it’s a local company that’s been part of the community for more than a century.

“We’ve been around as community partners for 135 years,” Franklin said. “We can make necessary investments to make Chester Water a very strong, viable water system.” And, Franklin said, the company is pledging to keep all the Authority’s employees, with commensurate pay and benefits.

Good news for the workers, but it also adds to the costs.

Asked to provide an example of a similar rate stabilization fund that successfully met a “no rate hikes” pledge, an Aqua spokesperson said via email: “A similar rate stabilization fund was formed by DELCORA (the Delaware County Regional Water Quality Control Authority) as part of its asset purchase agreement with Aqua in 2019.”

How well that fund will work has yet to be tested.

“They’ve never been able to hold to a rate agreement in place,” Catania said. “Never. Not even once. They make these promises and then the PUC lets them get away with not honoring them.”

Catania says the fundamental problem is that the focus of this deal between Aqua, the city of Chester, and the Department of Community and Economic Development is the city’s ongoing fiscal crisis. Chester is desperate for cash and the DCED is desperate to keep the city from falling off a pension-fund financing cliff.

“The DCED is trying to help out the government of the city of Chester,” Catania said. ‘We’re trying to help out the ratepayers. They’re our priority.”