Testimony of State Representative Phyllis Mundy

Aqua Pennsylvania, Inc., Base Rate Increase Hearing

February 24, 2010

Good evening.  My name is Sara Karlowicz.  I am here on behalf of State Representative Phyllis Mundy who represents the 120^th Legislative District. Representative Mundy regrets that, because of a family commitment, she cannot be here in person.  I would like to present the following remarks on her behalf.

Thank you all for coming to Kingston Township this evening.  I appreciate the opportunity to offer comments on Aqua Pennsylvania’s most recent request for a base rate increase.

Aqua PA serves approximately 406,000 customers – including customers in Exeter, Jackson, and Kingston Townships in my legislative district.  As you can well imagine, this company’s service and rates are of vital importance to the people I represent.

Aqua PA is requesting a base rate increase of 11.8 percent, or 43.2 million dollars. The company claims that such an increase will enable them to recover its investments to replace and rehabilitate aging distribution system infrastructure.  In addition, the company has proposed two new tariffs that would automatically adjust customer rates to reflect changes in purchased water costs and purchased electricity costs.

Such proposals and claims by Aqua PA have become all too familiar and predictable to me. This is the fourth base rate increase that Aqua PA has requested in the past six years.  In August 2004, the company was approved for a 5.56 percent increase, and then in June of 2006, the company was approved for a 9.2 percent increase.  And then, just two years ago in 2008, the company was approved for another 11.1 percent rate increase.  Aqua PA has received a grand total of 72.7 million dollars in rate hikes over the past 6 years alone.

But apparently these rate increases have not been enough for Aqua PA.  Just last year, the PUC allowed Aqua PA to raise the cap on its Distribution System Improvement Charge, or DSIC, for the same reasons the company uses to make its base rate requests – to better recover infrastructure improvement costs.  As a result, the company is now able to automatically raise the DSIC up to 7.5% between rate cases for the rehabilitation of its plant, but does not have to reflect reductions for depreciation and retirement of existing plant during that time.  This means lower operational costs or increased revenues are not taken into account when raising the DSIC; an increase is simply automatic. 

The newly proposed tariffs to reflect the company’s purchased water and electricity costs are actually very similar to the DSIC in that they are automatically adjusted and do not take into account reduced operating costs or quality improvements that produce other cost savings.  In fact, it is my understanding that Aqua PA has recovered sufficient increases in revenue over the past decade to more than make up for any changes in purchased water costs.  And the company still has yet to provide sufficient information to support its request for an energy cost adjustment tariff.

In these difficult financial times, we simply cannot allow the most basic human necessity – water – to become unaffordable.  My constituents’ incomes continue to be strained by high prices, job losses, and losses in investment income, and they simply cannot keep up with these never-ending water utility increases.

The matters that I have highlighted are of great concern to me as the Representative of the 120th Legislative District.  I certainly realize that utility rate increases are, from time to time, necessary.  But these increases must be just and reasonable.  I do not believe that Aqua PA’s request is just and reasonable.  It also comes at a particularly difficult time for the people I represent.  Therefore, I must oppose this rate increase request and urge the PUC to deny it.  I thank you for your consideration.