Customers boil over water rate accord

Staff WriterSeptember 15, 2011 

State regulators this week closed one of the most contentious water rate cases in years by clipping a rate request by Aqua North Carolina, the state's biggest private water utility, which serves more than 400 subdivisions in Wake County.

But it wasn't enough to appease Aqua's customers, who routinely organize campaigns to try to block the Cary company's recurring rate increase requests. Aqua is one of the costliest waterworks in the state, charging more than $100 for typical monthly household usage - about twice as much as customers pay for water services in Raleigh, Charlotte and other municipal water/sewer agencies.

The 5.3 percent rate increase the N.C. Utilities Commission approved Monday is a fraction of the 19 percent Aqua had originally asked for in January. Still, customers are seething over the rate dispute and its outcome.

"They shouldn't have gotten anything," said Juli Williams of Mallard Crossing in northeast Raleigh. "I'm so angry right now I could spit nails."

'Rate case machines'

Aqua is known for its aggressive policy of spending on system upgrades and coming in for rate increase requests year after year. A Wall Street analyst in a recent report described the nation's private utility industry as a system of "rate case machines."

For this year's rate case, Aqua hired Jo Anne Sanford, a Raleigh attorney who previously chaired the N.C. Utilities Commission.

The Public Staff, the state's consumer protection agency in utility rate cases, fought Aqua's bid for a rate increase. The consumer agency conducted a months-long audit of Aqua's books and argued to the utilities commission that the increase should be limited to a paltry 1.2 percent.

The utilities commission decision, issued Monday, split the difference between Aqua's position and the Public Staff's. Aqua had scaled back its 19 percent request to about 10 percent last month after customers inundated the utilities commission with letters accusing Aqua's executives of greed.

In its review, the Public Staff found that Aqua's rate request included $325,641 to recover compensation paid to executives at Aqua's Pennsylvania-based parent, Aqua America. The Public Staff wanted to disallow at least half the request, noting that executive compensation for Aqua's top brass had "increased dramatically" in recent years.

For example, the pay package of Aqua CEO Nicholas DeBenedictis swelled nearly 69 percent between 2007 and 2010, to $3.5 million.

The utilities commission disagreed with the Public Staff's analysis and ended up approving 75 percent of the executive compensation portion Aqua wanted. Throughout its 35-page ruling the commission did not explain the rationale for its decision. Commissioners were not immediately available for comment.

"It gives me pause when they come in every two or three years and the rates go up 10, 15 percent," Ken Rudder, director of the Public Staff's Water Division, said of Aqua's rate cases. "There has to be some point where you wonder how high can they go."

Enough for now

Tom Roberts, Aqua North Carolina's president, said the company is still reviewing the commission ruling to determine its financial implications. He said the company will be able to continue North Carolina operations with the extra $2.3 million a year from the 5.3 percent rate increase for the near future.

He noted that among the costs the company wasn't able to recover was gasoline expenses for its technicians and repairmen. The rate increase covers gas costs of $2.77 a gallon, based on the average over the past three years, but that's about a $1 a gallon less than the company is now paying at the pump.

A key reason Aqua charges higher rates, he said, is because it operates more than 1,300 individual water/sewer systems, typically serving outlying suburbs and rural areas that are not connected to municipal water systems. Some of the water systems have fewer than 100 customers.

"We have geography that works against us," he said.

The approved rate increase went into effect Monday. It's spread over five Aqua subsidiaries, which have different rates.

In Wake County, for example, the Aqua Water residential rate will increase 8.2 percent, and the Aqua Sewer residential rate will go up 2.6 percent.

Aqua also has customers in the Wilmington, Charlotte and Fayetteville areas. It provides water and sewer service to 88,000 customers in parts of 48 counties in North Carolina.

The company employs 168 in this state, including about 50 in Cary.

Williams said it's just a matter of time before residents hold rallies and letter-writing campaigns to fight another rate increase.

"Every time they ask for an increase, they get it," she said. "We'd be better off going to the gym at the YMCA to take our showers to save money."

john.murawski@newsobserver.com or 919-829-8932

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