Pennsylvania American Water deal cuts rate hike about 50%

Pennsylvania American Water Co., which serves thousands of Northampton County customers, has won a rate increase in a settlement with state utility regulators that cuts the proposed increase by more than 50%.

The state Public Utility Commission voted 4-0 Thursday on a $70.5 million, two-year revenue increase, which will be offset by credits of $10.5 million each in 2021 and 2022.

The monthly water bill for a typical residential customer will increase from $57.85 to $62.80 over the two years, according to a company news release. Wastewater customer bills will go from $60.42 to $78.41 per month. The rates are retroactive to Jan. 28, the company said.

When Pennsylvania American announced its proposed $138.6 million increase last spring, it said typical residential water customers would see a 20.5% jump, from $57.85 to $69.73, by the time Part 2 of the two-phase increase took effect.

PUC spokesperson Nils Hagen-Frederiksen said the combined water and wastewater rates will increase by a net $40 million in 2021, and then increase by another $20 million in 2022, when factoring the $10.5 million credits. In 2023, the credit ends, and the full $70.5 million increase will go into effect, he said.

The credit stems from the 2018 federal Tax Cuts and Jobs Act. In 2018, the PUC required

“Please be assured that there will be follow-up with these utilities to determine when and how their suggestions can be implemented.”

major utilities to set aside any extra profits they received because of a lower federal tax burden and to address how to return that money to consumers during their next rate cases, Hagen-Frederiksen said.

David W. Sweet, the PUC’s vice chairperson, complained about the rate case’s timing, noting it was filed in April during the early stages of the coronavirus pandemic. He also said the utility failed to provide sufficient measures to help poor customers and users who have been affected economically by the virus outbreak.

The PUC requires electric and natural gas utilities to operate customer assistance programs, but not water and wastewater utilities, Hagen-Frederiksen said. Pennsylvania American proposed enhancements to its customer financial assistance programs since the pandemic’s start as part of its rate hike request, and was among the first to set a moratorium on service terminations.

Sweet said Pennsylvania American and Pittsburgh Water and

Sewer Authority, which received a rate hike last year, agreed to consider enacting formal customer assistance policies.

“Please be assured,” Sweet said, “that there will be follow-up with these utilities to determine when and how their suggestions can be implemented.”

The PUC said Thursday’s settlement includes enhancements to the company’s current assistance programs, as well as several COVID-19-related relief measures. The company said the rate increase was driven by $1.64 billion outlay to replace and upgrade aging pipes and other equipment in its system.

“We are pleased the Commission has approved this settlement, which reflects carefully negotiated terms that balance the customer’s interest with the much-needed ongoing investments made by the company,” Pennsylvania American Water President Mike Doran said.

The commission in 2017 approved a nearly $62 million raise for Pennsylvania American that took effect in early 2018, after the publicly owned company, which is a subsidiary of Camden, New Jersey’s American Water, sought a nearly $108 million annual rate increase.

Pennsylvania American, based in Mechanicsburg, Cumberland County, sells water to 13,500 customers from Palmer Township to Upper Mount Bethel Township in Northampton County, along with Hamilton and Ross townships in southern Monroe County. It has 666,000 customers in 408 communities statewide and 18 wastewater systems, including in Monroe County.

— David W. Sweet, the PUC’s vice chairperson