Good morning. I want to thank you all for attending this conference today. I've been very pleased by the response to our invitation, but not really surprised. The affordability of clean water in New Jersey and throughout the country has become - slowly and for the first time - a public policy issue that we all must face. And I am especially glad that our office - the Division of the Ratepayer Advocate - has been able to sponsor the first conference on this topic.
As I am sure you know, the Division of the Ratepayer Advocate was created in 1994 by Governor Christine Todd Whitman to represent and protect the interests of utility customers in the State of New Jersey, including industrial, small business and residential consumers, in an effort to protect the economic interests of all New Jersey ratepayers
In a recent consumer attitude survey, the question was asked, "what do customers want most from their local water utility?"1 The issues most important to customers were clean, safe,quality water at a reasonable price. Customer satisfaction in the water industry is based primarily on two factors: one, whether water tastes, and smells and looks good; and, two, if it is reasonably priced. These results shouldn't surprise any of you. Nor should the fact that there is an intrinsic tension between the two responses.
In recent years, a number of developments have driven water rates up sharply. One major factor is the cost of implementing major environmental initiatives. For example, the amendments to the Safe Drinking Water Act of 1986 increased the number of contaminants that are regulated from 26 to 83, and mandated the construction of tremendously expensive new water treatment plants aimed at ensuring clean water for New Jersey.
It will be interesting to see the ultimate impact on rates of the new Safe Drinking Water Act Amendments of 1996, which, in part, creates risk-based criteria for the EPA to determine whether to regulate a contaminant. The new Amendments also create a Drinking Water State Revolving Fund, which is intended to assist communities in installing and upgrading safe drinking water treatment facilities.
Another factor driving up rates are the costs of replacing aging water supply infrastructures and of meeting a growing demand for residential and industrial water use.
Indeed, water rates are rising faster than the rate of inflation. It has been estimated that anywhere from one in four to one in six water customers are currently paying more than two percent of their household income for water service. 2
Alongside rising costs consumers are nevertheless demanding that water, which historically has been taken for granted as being "clean", should be certified, on a regular basis, that it is in fact "clean" and complies with all federal and state laws. The Safe Drinking Water Act Amendments of 1996 responds to some of these concerns, requiring the EPA to create a national occurrence database covering regulated and unregulated contaminants, and to issue regulations requiring all community water systems to provide customers with essential information about the level of contaminants in the water they drink.
With this trend, low-income customers are now less able to afford water services. Affordability is emerging as an issue for the water ratepayer in much the same way as affordable rates became a social policy issue in the energy sector beginning in the 1 980s. These steadily climbing water rates particularly place a special burden upon lower-income households, which are concurrently experiencing spiraling energy costs without corresponding increases in household income.
The issue of water affordability clearly has serious implications for water utilities, as well, in terms of increased arrearages, late payments, disconnection notices, and actual service terminations. In other words, affordability issues affect the bottom line, and last, but emphatically not least, the approach utilities take to disconnection policies has public health implications, since potable water is a health-related essential service.
As if affordability weren't a tough enough issue, the water industry is fighting to maintain the safety and quality of our water supply. According to a report of the American Academy of Microbiology, burgeoning populations, aging sewer systems, environmental pollution and the growing resistance of microorganisms to water-treatment chemicals are among the problems cited by the Academy in its report, "a global decline in microbiological safety of water: a call for action."
I believe that utilities, legislators, regulators and consumer advocates can work together in developing new and innovative options to deal with the issue of affordability. We must each familiarize ourselves with the expanding range of options available for consideration by utilities and regulators in dealing with this issue.
As a matter of fact, it may help to take a look at some of the measures the electric and natural gas utilities have implemented to support affordability for low-income customers and determine whether some of those programs can be adopted by water utilities. I hope our panelist can discuss some of these measures today.
In summation, the quality and affordability of water is a growing concern. As water rates rise and household incomes remain stagnant, water bills will take up an increasingly higher percentage of income. The water industry is currently facing a challenge which it must overcome with the help of state regulators, state consumer advocates, municipal leaders, utility management and information from their own customers. Customer satisfaction will be achieved when water is truly clean and rates are affordable.
Thank you for this opportunity to speak, and I look forward to hearing your comments. The issues I have raised are not new to utility ratepayers or consumer advocates or regulators. They are new to the water utility industry. This is a wake up call and we look forward to working together to resolve these issues.
AGENDA
| 9:00 - 9:30 a.m. | - Registration and Continental Breakfast |
| Welcome: Blossom A. PERETZ, Esq., Ratepayer Advocate | |
| 9:30 - 10:15 a.m. | Panel One: The Impact Upon New Jersey of the Passage of the Federal Safe Drinking Water Act |
| Moderators: | Blossom A. PERETZ, Esq and Andrew Dembia, Esq. Managing Attorney Water and Waste Water, Division of The Ratepayer Advocate |
| Panelists: |
|
| 10:15 - 11:00 a.m. | Panel Two: The Utilities Discuss Enrironmental Projects, Rate Increases and Conservation Programs to Reduce Rates |
| Moderator: | Richard B. McGlynn, Esq., Vice Pres. & General Counsel, United Water New Jersey, Inc. |
| Panelists: |
|
| 11:00 - 11:45 a.m. | Panel Three: Consumers Talk About Affordability of Water |
| Moderators: | Scott Rubin, Esq., Public Utility Consumer Consultant and Andrew Dembia, Esq., Managing Attorney Water and Wastewater, Division of The Ratepayer Advocate |
| Panelists: |
|
| 11:45 - 12:30 p.m. | Questions and Comments from the Audience |
| 12:30 p.m. | Adjourn |
Introduction
The Division of The Ratepayer Advocate is a party to every case in which any New Jersey regulated utility seeks to alter its rates or services including water, sewer, gas, electric, telephone and cable TV. In each case, the Ratepayer Advocate throughly investigates the impact on all classes of New Jersey ratepayers of each aspect of the Company's request.
That investigation is based on detailed information that the utility provides regarding its purported need for the change in service or rate increase. Ratepayer Advocate attorneys along with consulting economists, engineers, and accountants analyze the information provided and develop independent conclusions regarding the reasonableness of the utility's requests and the impact on the economic health of the State as well as residential and commercial customers .
To protect ratepayers interests, the Ratepayer Advocate prepares and files testimony that support its conclusions. As a party to evidentiary hearings, the Ratepayer Advocate crossexamines the utility's witnesses and submits evidence to support the Division's position. The Ratepayer Advocate also participates in the development of State regulatory policy.
Through the early exchange of relevant information and discussion in a relatively non-adversarial atmosphere, the parties in the following proceedings were able to reach equitable resolutions without the need for complex adversarial evidentiary hearings and the preparation of extensive legal briefs, all of which are expensive. By settling these matters, on terms which were beneficial to ratepayers, without protracted judicial proceedings which are structured and adversarial, the Ratepayer Advocate saved ratepayers many thousands in litigation costs.
UNITED WATER-NJ - BASE RATE CASE
United Water-NJ. Inc., which serves residents in Bergen and parts of Hudson Counties, sought a 10% increase in revenues. As a result of negotiations between the Division of the Ratepayer Advocate (Ratepayer Advocate), Staff of the Board of Public Utilities and the Company, the revenue increase amounted to 4.5%, almost one half less than the Company originally requested.
On June 4, 1996, the Board of Public Utilities approved the Administrative Law Judge's Initial Decision which adopted the settlement agreed to by the Ratepayer Advocate. The settlement provides the Company with a $5 million rate increase as opposed to it's originally filed for request of $10.6 million. The Ratepayer Advocate had proposed a reduction of ~ of the Company's original request. As a result of the settlement, an average residential ratepayer using about 22,000 gallons of water per quarter will pay approximately $82.44 per quarter, an increase of about $2.09 more than they were paying under their former rate which was approximately $80.35.
As part of the settlement, United Water - NJ was given approval to purchase surplus water from the Jersey City water supply located in the Parsippany/Troy Hills reservoir. As a result of United Water - NJ's ability to buy this treated water from Jersey City, it was able to delay a capital improvement project at its Haworth water filtration plant beyond the year 2010 and delay another project to pump water from the Dundee Dam to the year 2020. The Jersey City water supply is intended to service the needs of the customers in the southern part of United Water - NJ's service territory: Secaucus, West New York, Guttenberg and Weehawken. By piping this water to the southern part of its service territory, United Water - NJ will pump less water through its Haworth filtration plant and will not need to pump water up from the Dundee Dam, as well, until some time in the future when the need appears, thereby resulting in savings to ratepayers.
LOGAN WELLS WATER COMPANY-BASE RATE CASE
Logan Wells Water Company, serves parts of Gloucester County requested a 27.98% increase in its water rates . As a result of the negotiations among the Ratepayer Advocate, Staff of the Board of Public Utilities and Logan Wells, the revenue increase was reduced to one half of the Company's original request 13.99%. The resulting settlement agreement among the parties was approved on June 19, 1996 by the Board. To offset the impact of the 13.99% rate increase, the Ratepayer Advocate worked with the company to expand its consumer education and conservation program as a means of enabling customers to reduce water use and gain more control over their water bill.
ELIZABETHTOWN WATER CO. - BASE RATE CASE
Elizabethtown Water Company, which serves residents in Somerset, Mercer and Union Counties, sought a 32% increase in revenues. As a result of negotiations between the Division of the Ratepayer Advocate (Ratepayer Advocate), Staff of the Board of Public Utilities, the Company and over ten municipal intervenors, the revenue increase amounted to 21%, one third less than what the Company requested.
On June 20, 1996, Board of Public Utilities approved the Administrative Law Judge's Initial Decision adopting the settlement agreed to by the Ratepayer Advocate. The settlement provides the Company with a $21.8 million rate increase as opposed to it's originally filed for request of $31.6 million. The Ratepayer Advocate was successful in reducing almost $10 million or approximately 1/3 of the Company's original request. As a result of the settlement, an average residential ratepayer using about 21,000 gallons of water per quarter will pay approximately $75.96 per quarter an increase of about $14.22 more than they were paying under their former rate which on an average was approximately $61.74.
The primary issue in the case was the cost to ratepayers of the Company's new $100 million Canal Road water treatment plant. Elizabethtown Water built the Canal Road Plant to make up for reductions in water treatment capacity resulting from stricter federal and state water quality standards. To offset the impact of this rate increase, the Ratepayer Advocate worked with the Company in expanding its' consumer education and conservation programs which would enable customer's to reduce the amount of water they use thereby lowering their water bills.
Moreover, the Company is currently investigating the implementation of a computerized calling program to enable economically distressed customers to assess their financial needs and establish payment assistance programs where warranted. Telephone notification of late payments or shut-off notices will also be provided under this new system, where feasible.
PENNES GROVE WATER COMPANY-BASE RATE CASE
Pennes Grove Water Company - Residents of Pennes Grove, Carneys Point and Oldmans in Salem County and parts of Logan Township, in Gloucester County, will see a 28% increase in their water rates, as opposed to the 37% increase originally requested by Pennes Grove Water Company, as proposed by the New Jersey Division of the Ratepayer Advocate. The settlement agreement among Pennes Grove, the Ratepayer Advocate and the Board of Public Utilities was approved by the Board of Public Utilities on June 19, 1996.
The Judge's Initial Decision adopted a settlement actively supported by the Ratepayer Advocate which will provide the Company with a $315,000 rate increase as opposed to it's originally filed request for $415,753. As a result of the settlement, an average residential ratepayer using about 20,000 gallons of water per quarter will pay approximately $57 per quarter, an increase of about $12 more than they were paying under their former rate, which was approximately $45. An essential part of the settlement was that the proposed rates will go into effect on September 1, 1996, foregoing an increase during the summer when water usage is extremely high for customers of the Company.
The Company previously filed for rate increase four years ago. This case was driven by capital additions to the Company's plant, which were required to provide proper, safe and adequate service pursuant to current State and Federal Regulations regarding water quality and service
GORDON'S CORNER WATER COMPANY-BASE RATE CASE
Customers of Gordon's Corner Water Company, consisting of residents of Manalapan and Marlboro Townships, Monmouth County, will see a 8.69% increase in their water rates, as opposed to the 22.39% increase originally filed by Gordon's Corner Water Company. The settlement agreement among Gordon's Corner, the Ratepayer Advocate, the Board of Public Utilities, the Townships of Marlboro and Manalapan, and the Marlboro Fire Commissioners District 1, was approved by the Board of Public Utilities on September 25, 1996.
The Administrative Law Judge's Initial Decision adopted a settlement actively supported by the Ratepayer Advocate which will provide the Company with a $515,000 rate increase as opposed to the originally request of $1,330,003. As a result of the settlement, an average residential ratepayer using about 20,000 gallons of water per quarter will pay approximately $83 per quarter, an increase of about $6.50 more than they were paying under their former rate, which was approximately $76. An essential part of the settlement was that the Company will provide both speakers and printed information to the local schools and community organizations in an effort to educate the public on the issue of water conservation and wise water use.
This case was driven by the Company's extraordinary need to purchase water from other water purveyors in the area to accomplish current New Jersey DEP regulations regarding water quality and service.
Footnotes
1 Consumer Attitude Survey on Water Quality Issues, American Water Works Association Foundation, 1993. Back
2 Rubin Scott J. Are Water Rates Becoming Unaffordable, American Water Works Association, February 1994, p 79. Back
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