Aqua filed a rate increase request for its water and wastewater customers in Pennsylvania on May 23,2024.  This is less than three years after its last rate request. We can expect rate requests from Aqua at this regular interval.

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New Garden Township residents received a letter from Aqua stating that “If the Company’s entire request is approved, the typical water bill” will decrease. Some found this letter misleading since it states our rates can go down, while Aqua is seeking an overall rate increase. The reason a rate decrease is possible for some customers is because Aqua can spread its costs across its customer base.

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Aqua is a large company that has purchased many local municipal water and wastewater systems in Pennsylvania. It has assigned each of these systems to one of its Rate Zones.  The potential decrease in NGT rates is caused by two factors.

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1. Rate Zone Reassignment

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For this new rate filing, Aqua has reduced the number of wastewater Rate Zones, moving NGT from Rate Zone 11 to Rate Zone 2. Current Zone 2 rates are significantly less than current Zone 11 rates, and the proposal calls for only a small increase in Zone 2 rates.

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The average existing Rate Zone 2 ratepayer, usually defined as 12,000 gal/quarter, will only see a 1% increase. But for the average NGT ratepayer the Zone 2 rate is already 24% lower than the current NGT rate. So, this ratepayer will potentially see a 23% decrease.

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2. Cost Sharing

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Aqua has flexibility in how it assigns costs to each Rate Zone. This flexibility can result in a particular Rate Zone sharing its costs with another Zone.  But even more significantly, Aqua can spread its wastewater costs across its water customers. The current rate request calls for shifting $22 million from wastewater to water ratepayers.

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By shifting money between its customer base, some can see a decrease in rates. But Aqua will still recover all the money.  Aqua touts this cost sharing scheme as an advantage, because residents of a Rate Zone requiring large investment will not pay the full investment cost. However, they neglect to explain this cost sharing works in both directions. A Rate Zone with little need for investment can end up paying the bill for others.

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The 85% increase for NGT we saw in 2022 was mainly due to Aqua’ s investment in buying our sewer system. Aqua will still be allowed to recover their full investment. If the PUC approves the current proposed rate the extra investment cost will be borne by other Aqua customers.

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Important to Know

 

The probability is very high that this proposed rate structure will change. The PUC has been sensitive to this cost shifting strategy. In 2021 Aqua filed a rate case containing a 37% increase for NGT. However, we saw an 85% increase when the new rate went into effect in 2022. This large discrepancy was due in large part to the PUC not allowing Aqua to shift as much cost as it had originally requested. The same can happen now.

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As part of its review process, the PUC will determine how much revenue Aqua will be allowed to collect and how much it will allow Aqua to shift costs between its wastewater ratepayers and from its wastewater to water ratepayers.