PUC drastically reduces rate changes for Pennsylvania American Water and launches investigation into service quality issues

HARRISBURG, Pa. (EYT) – The Pennsylvania Public Utility Commission today voted to dramatically reduce the overall revenue increase sought by Pennsylvania American Water Company (PAWC) by more than 50% of the amount PAWC originally requested, as well as by expanding key customer assistance programs. This was the conclusion of a lengthy investigation and a series of extensive public hearings across the state.

The Commission today approved, by a vote of 4-1, a motion by Chairman Stephen M. DeFrank to roll back rate changes for water and wastewater services and take other steps to protect consumers and improve affordable programs. The motion also initiates a PUC investigation into quality of service issues raised during public hearings.

The revised tariff changes provide a revenue increase of approximately $99.3 million per year, compared to PAWC’s original request of nearly $202.4 million. This represents a 9.99% increase over PAWC’s proposed 20% increase.

“Today, I believe the Commission has struck a balance by approving a significantly smaller increase than requested while expanding customer benefits and access to the Company’s various consumer assistance programs,” said Chairman DeFrank. “In addition, today’s action allows the Commission to appropriately address the cumulative quality of service issues raised in this proceeding.”

In a statement of support, Commissioner Kathryn L. Zerfuss noted the strong public participation in this rate action that will improve service quality for many PAWC customers: “I want to thank all customers who testified in person or by phone at a public hearing. Their testimony was important in creating a complete record and was carefully considered in this matter today. The number of concerns raised by customers in Northeast Pennsylvania has prompted an internal investigation into service quality. I look forward to seeing the final report with key findings and any staff recommendations for future action.”

Vice Chair Kimberly Barrow also noted the active participation of ratepayers and legislative advocates in this process, stating that she hopes to see this type of public participation more often as it feeds into the minutes. The Vice Chair expressed concern about the number and nature of complaints from customers in the north of the state and advocated for an investigation into the quality of service. Vice Chair Barrow voted against the across-the-board fee increase and requested that “PAWC seriously consider the balance between (Section 1329) acquisitions and fee case filings and customer fees and affordability.” The Vice Chair also acknowledged the frequency of PAWC’s fee cases, even though the company currently utilizes an arsenal of fee recovery tools such as the Distribution System Improvement Charge.

“Today’s motion underscores the Commission’s commitment to listening to consumers’ concerns about utility services,” the PUC said in a statement.

Today’s motion initiates an investigation by the PUC’s Office of Legal Affairs, in cooperation with the Bureau of Technical Utility Services (TUS), into the numerous water quality concerns raised by consumers who testified at PUC public hearings as part of this rate proceeding, particularly consumers in the Scranton area and other communities in PAWC’s northeast service area.

The investigation will analyze the root cause of complaints of dirty, discolored, or foul-smelling water and make recommendations for future actions by the PAWC to address these problems. In addition, the results of the TUS investigation into water quality issues may be forwarded to the Pennsylvania Department of Environmental Protection and/or the PUC’s independent Bureau of Investigation and Enforcement if such actions are necessary.

PUC also rejected a proposal by PAWC to introduce a “surcharge” that would further increase the company’s earnings – and that was intended to reward PAWC’s management performance. In rejecting this additional financial reward for the company, the motion notes that such measures are intended for situations where exceptional performance is achieved – but the considerable public opinion on service quality issues makes it inappropriate to award a surcharge in this case.

“Today’s motion calls on PAWC to make an additional $1 million shareholder contribution to the utility’s Customer Hardship Fund – doubling the size of that fund, which currently receives contributions of $750,000 per year.”

This donation would not be passed on to PAWC customers as an additional fee.

In addition, PAWC will expand income eligibility guidelines and make other improvements to the Hardship Fund grant program so that more consumers can benefit from this program.

The utility will also increase rebates and expand income eligibility guidelines for the H2O bill rebate program to address affordability concerns and help more income-eligible customers.

In addition, the Commission rejected several proposals in the PAWC tariff procedure that were opposed by consumer advocates and other affected parties because they considered that they were not in the public interest. These include:

• Denying PAWC’s requests for fee reimbursement with respect to Butler Area Sewer Authority, Farmington Township (water and sewer), Audubon Water Company, and Sadsbury Township Municipal Authority.
• Rejecting a “winter averaging” billing proposal for wastewater services that may disproportionately negatively impact low-income customers while higher-income customers would likely benefit from the proposal.
• Rejecting PAWC’s proposed revenue decoupling mechanism, noting, among other things, that the proposed mechanism would hinder customers’ water conservation efforts and could result in customers who take steps to reduce their water use being required to share a portion of bill savings with PAWC.
• Rejected a proposed environmental compliance capital levy that would have allowed PAWC to adjust rates between PUC rate cases based on the costs associated with complying with new or updated environmental regulations for several reasons, finding that the only way to assess the impact of such a levy along with other expenditures is to review those costs in the context of a rate case.

According to the Commission, PAWC is directed to submit revised rates for water and wastewater services reflecting the changes approved by the Commission today, with the rates to be effective for services provided on or after August 7, 2024. Once submitted to the Commission, the updated rate applications will include the exact water and wastewater rates and the overall projected impact on customers’ monthly bills in each of the company’s rate zones.

PAWC serves 681,707 water and 97,585 wastewater customers in 37 counties and is the largest regulated water and wastewater service provider in Pennsylvania.