Aqua North Carolina, the states biggest private water and sewer company, has notified state officials it plans to seek its third rate increase in five years.
The company already charges about twice as much as Raleigh, Durham, Cary and many other municipal water agencies but says it needs to boost rates again to pay for pipes, pumps, meters and other systemwide improvements.
If Aquas last rate case here is any indication, protesting customers will cram public hearings, stage rallies and complain about corporate greed and Aqua will walk away with a rate increase.
Its a very localized, very emotional issue for many, said UNC School of Government professor Jeffrey Hughes, who specializes in water utilities. Water is seen as an essential service.
The company wont reveal how much itll try to raise rates until next month, when it files to recoup about $25 million to $30 million in infrastructure upgrades. Two years ago, Aqua asked the N.C. Utilities Commission for a 19.2 percent raise, and the Utilities Commission awarded a 5.3 percent increase.
You ask for what you think you deserve, said Tom Roberts, Aquas Cary-based president and chief operating officer. The scope of what we do is just different than Raleigh or Greensboro or a place like that. And we have shareholders that we do answer to.
Aqua feeds off rapid growth thats populating new suburbs beyond the reach of legacy municipal water systems, where the only other option for a modern home would be an old-fashioned septic system.
The Philadelphia company has more than 88,000 water and sewer customers in North Carolina, including more than 400 neighborhoods in Wake County, and about 1 million nationwide in nine states.
Aqua is a darling on Wall Street, where it is admired as an unstoppable profit machine. It recently expanded into the business of supplying water for fracking operations in the Marcellus Shale gas drilling region in Pennsylvania.
As of May, Aqua had $8.6 million in rate cases pending in Texas, Virginia and Ohio, according to a recent analysis from Standard & Poors. This year it has won rate cases in Illinois, Ohio and Virginia worth $2.3 million a year.
In February, Aqua CEO Nicholas DeBenedictis told analysts and investors that it took the company 125 years to break the $100 million mark for net income, which it achieved in 2009. The company expects to pass the $200 million mark this year, doubling its profit in just three years.
At the same time, Aqua appears destined for the billion-dollar club in terms of annual sales. The companys revenue, driven by rate increases and acquisitions, has surged from $633.3 million in 2009 to $757.7 million last year and is expected to reach $830.2 million in 2014.
We think of Aqua as one of the best-run water utilities in the U.S., said Theodore Brooks, an analyst at Barclays Capital. They manage their costs very well and have a history of delivering good service.
Here, the N.C. Public Staff will spend months auditing the companys rate filing. Two years ago, the Public Staff, the states consumer protection agency in utility rate cases, disqualified Aquas request as padded with unjustified expenses, but the company prevailed before the Utilities Commission.
Aquas lawyer here is Jo Anne Sanford, the former chairwoman of the Utilities Commission.
Hughes, the UNC professor, said Aquas rates are above average because the company is spread out over a larger geographical area and it has to deliver to Wall Street. Aquas North Carolina service area includes about 800 different systems and covers 53 counties, more than half the state, Roberts said. The biggest system has about 10,000 customers. But some have only a few dozen customers and one has just three customers, he said.
Aqua provides both water and sewer service, but the majority of customers 73,000 are water accounts. A typical Aqua household pays $42.27 for 5,000 gallons of water. The same amount of water costs $25.63 in Raleigh, $21.94 in Durham, $26.80 in Apex, $21.07 in Cary and $14 in Charlotte, according to a UNC database of statewide water utility rates.
The database also shows that most of those municipalities charge a much higher rate to customers who live outside the city limits, in some cases making Aqua look like a bargain. For example, Raleighs fees range between $49.10 and $99.29. Durham charges $43.89, Apex $53.60 and Cary $63.21.