Bidder for York City sewer seeks statewide rate hike

Erin Bamer
York Dispatch
The City of York's wastewater treatment plant.
Tuesday, August 25, 2020
John A. Pavoncello photo

Pennsylvania American Water looked to increase rates by more than $130 million over two years across its network, but landed on a settlement with the state's utility regulator of up to $90.5 million instead.

Those rate increases in communities throughout Pennsylvania are developing while the company works to secure a deal with York City officials to acquire the city's wastewater system, and would fund system-wide upgrades, company officials said.

And they come amid accusations from opponents to York City's quest to sell its sewer system that the privatization would ultimately result in significant cost increases for users.

Pennsylvania American Water services 408 communities throughout the state, according to spokesperson Laura Martin. The company is currently seeking a rate increase through the Pennsylvania Public Utility Commission, which would apply to all of its systems, Martin said.

The company initially sought to boost rates throughout its network by 12.9%, or $92.4 million, in 2021 and by 5.8%, or $46.2 million, in 2022, according to a 2019-2020 PUC report.

PUC reached a settlement late last year that would see rates rise to totals of between $70.5 million to $50.5 million in 2021, and $20 million in 2022, Martin said.

That settlement agreement is pending. 

Those increases wouldn't affect users of York City's sewer system for at least three years under the terms of the deal with the city, officials have said. 

The York City Council is expected to vote in February about whether to accept the terms of the deal with the company, which has offered $235 million for the system. If approved, the deal would ensure that rates would not change for York sewer customers for three years. 

Martin said the rate increases now under deliberation would cover more than $1 billion Pennsylvania American invested in updating infrastructure in Pennsylvania water and wastewater systems. 

Martin disputed claims that York City users would eventually see exponential increases in sewer rates should the company finalize the purchase. 

Jeff Hines, former president of The York Water Co., recently said Pennsylvania American would eventually triple rates in order to make the system profitable.

More:Potential buyer makes pitch to York City sewer users

Martin said Hines' calculations were flawed. Rates would eventually increase following the three-year price freeze mandated in the agreement with the city, she said, but the company would not triple them in short order.

Martin did not provide an estimate of how much the increase could be, however. 

For a city like Scranton, which sold its wastewater system to the company in 2016, Pennsylvania American's original proposal would have increased rates from about $40.55 per month to about $44.44 in 2021, and then to about $44.87 in 2022, according to an article from The Scranton Times-Tribune. 

It's unclear what the increases would be under the terms of the company's proposed settlement with the PUC. 

In an op-ed published in this past week in the York Daily Record, Hines predicted company officials would seek a rate increase through the Pennsylvania Public Utility Commission after three years to recover the cost of the $235 million sale. 

Pennsylvania American Water's rate requests must be approved by the PUC before they can take effect. Hines said he expects the PUC to allow the company to increase rates by about $1,000 per year for each York sewer customer. The average sewer customer in York pays about $500 per year, he said, so the increase would bring the average annual rate to about $1,500. He said the increases would likely be implemented over several years. 

The York Dispatch could not reach Hines for additional comment. 

But Martin said Hines' logic does not match with how the company increases customer rates for several reasons. She said Pennsylvania American Water spreads out rate increases to cover expenses across all of the municipalities it serves. So while the $235 million sale will impact users of York City's sewer system, it will also impact all of the company's customers. 

The average York sewer customer now pays $46.85 a month, according to York City Mayor Michael Helfrich's chief of staff, Philip Given. The Pennsylvania Economy League, which supports the sale, projected that Pennsylvania American Water would increase rates by 40% in 2024.

This would raise the average monthly sewer rate to $65.59 in 2024, based on these projections. Martin said she could not confirm these projections were accurate. 

During a public forum in January, Gerald Cross, a senior research fellow for the Pennsylvania Economy League, said rate increases are inevitable with or without the sale. Helfrich has pitched the sale as a way to stabilize the city's finances without significant tax hikes and job cuts. 

"It’s important to understand that this sale is a choice between financial catastrophe and financial freedom," Helfrich said in an op-ed submitted Thursday to The York Dispatch. "It’s a choice between looming, devastating tax and sewer rate hikes and a return to tax and rate stability."

More:OP-ED: Mayor sees clear choice in York City: financial freedom or financial catastrophe