SCRANTON — Not out of ratepayers’ pockets.
That was the message from nine customers and two state legislators Tuesday at a state Public Utility Commission hearing into a proposed rate increase by Pennsylvania American Water Co.
Kingston resident Brian Shiner was the only Luzerne County resident who spoke out against the water company’s request, which would result in an average 11.7 percent bill increase for Northeast Pennsylvania customers as a means of raising money to fund improvements to the system statewide.
Shiner took aim at what he sees as excessive executive compensation at the utility company’s parent, New Jersey-based American Water, saying documents show that President and CEO Jeff Sterba is paid nearly $3.8 million, while several other officials are paid more than $1 million.
“I think they should divert some of that to the pipes,” Shiner said.
The company has 140,000 customers in Lackawanna and Luzerne counties, officials have said.
The commission scheduled the hearings a month after it voted 5-0 June 13 to investigate the company’s request, which proposes an annual increase in revenues of $58.8 million, or 10.1 percent. Each of the company’s water divisions has a different rate increase.
Effect in Luzerne County
For Luzerne County customers, who are part of the company’s Main Division, the typical residential customer using 47,520 gallons annually would see the bill would increase from $630.12 to $703.56 annually — a $73.44 increase — if the commission approves the request as presented.
In 2011, the state approved a rate increase for the water company of 6.3 percent, which resulted in $36 million in additional annual revenue.
In its rate increase filing, Pennsylvania American Water said it has invested about $731 million in capital improvements since the 2011 rate increase, including upgrades to treatment plants and pumping stations, as well as the replacement of about 300 miles of aging pipe.
Shiner took exception to the need for another rate increase just two years later, on top of voters’ approval in 2008 of a $400 million bond issue for water and sewer upgrades.
Seth Mendelsohn, corporate counsel for the water company, said he understood the bond money could not be used by investor-owned utilities, such as Pennsylvania American Water, but only by municipal utilities.
Shiner and Mendelsohn then disagreed over whether the water company had, in fact, received bond proceeds in other parts of the state.
Either way, the consensus among speakers was that elderly and other cash-strapped customers shouldn’t have to bear the cost of improvements — rather, that the firm should reinvest its own profits in upgrade work.
Two legislators spoke, state Rep. Kevin Haggerty, D-Dunmore, and Marty Flynn, D-Scranton.
Flynn said he did not question the need for improvements to an aging system, but objected to the money being raised “off the broken backs” of customers.
“This corporation has substantial room to invest its own capital,” Flynn said. “The PUC must stand up for taxpayers.”