WSAZ Investigates | High cost of H2O
CHARLESTON, W.Va. (WSAZ) -- Clean and safe water is something everyone needs, but for many West Virginians the prices they pay for that water has skyrocketed over the past decade.
West Virginians pay the most for water service across the nation with an average monthly bill of $72, according to World Population Review. Other states have significantly lower average monthly rates, including California at $65, Texas at $46 and Florida at $6.
Despite that extremely high number from the most recent increase in January 2021, West Virginia American Water is once again looking to increase base rates by another 27 percent starting in February 2022.
The company said the average customer uses 3,100 gallons a month and will see their bills increase by $11. However, many families WSAZ surveyed said they use far more than that. The West Virginia Public Service Commission (PSC) reviews and sets water rates, and uses 4,500 gallons as a standard number. That figure would mean families could actually pay $20 more per month.
West Virginia American Water President Rob Burton said this new increase is to recoup more than $250 million the company has invested in infrastructure improvements over the past three years.
“I think it’s important that folks do understand that as a water utility we have to do our part, which is to maintain the infrastructure, make an investment in the systems and ultimately that does lead to the need to talk about rate increases,” Burton told WSAZ.
Documents filed with the PSC requesting the rate hike said American Water is looking to earn an additional $40.5 million next year from these increased rates. That’s despite the company making more than a $28 million profit in 2020, more than three times as much as the company made a decade ago when rates were around half the new proposed numbers.
“The work into the infrastructure has been more than doubled,” Burton said when asked about raising rates instead of reinvesting the company’s increased profits. “If you look at the infrastructure across the state for water and wastewater, the state consistently gets poor grades for water and wastewater infrastructure. We’re doing our part to make sure our systems are reliable. We’re putting that money into the system to upgrade them so that we don’t have bad grades on our system as well. We do that so our customers have reliable service, clean drinking water and that is very important to us.”
West Virginia American Water is now the water provider for around a third of the state, after buying up a number of smaller and underperforming water districts in recent years. That includes Glasgow, East Bank and Page-Kincaid. West Virginia American Water paid more than $2.7 million to purchase these three utility districts and the 1,300 customers they serve.
The PSC said these acquisitions helped ensure people have safe and reliable water, but it takes a lot of investment to improve these struggling systems. Because of a uniform rate system used by the PSC, West Virginia American Water customers in Charleston and Huntington were paying higher rates to cover the cost of projects in far away and rural areas.
Burton said the terrain of West Virginia makes it a lot more expensive than other states to provide water to customers, and the state has the most complex water system in the country. The Kanawha Valley system alone has more than 100 pressure gradients from having to pump water up and down hills.
“The investment is based on the needs of the system,” Burton said. “We don’t look at it and say, ‘we want to do this kind of increase, how much does that mean we have to put into the system?’ It’s what is the system need and what do we need to do to the infrastructure. That’s what we base our work on.”
“At the end of the day, we do that investment and there is a requirement to have recovery of that investment and rates,” Burton continued. “There’s a portion of that that is recovered through rates, there’s a portion of that that’s not recover through rates. Part of that is paid for by the company without recovery and part of it does get recovery and that’s how utilities are supported through the PSC system.”
“Their investment does continue to increase and it really is a fine line because if they’re not given recovery of that money, they’re not going to invest that money,” PSC Utility Division Director Karen Macon said. “It’s our job to determine what a reasonable return is and recommend that to the commission. The company comes in with what they think is a reasonable return, but ultimately in order to continue to have investment in the state of West Virginia there are customers that still don’t have water service. There are customers that are on small systems that are having difficulties maintaining the quality of the service and then there is new expansion. We are not going to be able to develop in the state if the water company doesn’t have the funds to put an extension out for a new customer.”
Macon said a team of at least five PSC staffers will review the rate increase proposal and determine what reasons given for an increase are acceptable. Some of the filings are more than 1,250 pages long, so the process does take some time to complete. The Commission looks to find a balance between the utility company’s need to get a return on its investment and protecting consumers from paying unfair rates.
“A key part of it is the investment that they put in the ground,” Macon said. “That drives a lot of rates within the state and we see if it is prudent investments. Somethings are allowed and sometimes they are not allowed. It’s definitely a process, it’s a litigated process, unless there is a settlement. But, basically all the parties submit the recommendations, and if it’s litigated each party will go through the commission and each individual issue then issue an order on those individual issues.”
WSAZ found that American Water has not been given its full requested rate amount over the past four increase filings. Those cases were either settled with the Commission or ruled on after a hearing and full proceeding before the Commission.
For example, in 2018, West Virginia American Water requested to raise the rate for 4,500 gallons of water from $64.24 to $78.05 and was given approval for $73.28.
PSC documents show only a few water providers in West Virginia have higher rates than American Water, and some providers, such as Putnam Public Service District (PSD), charge around a third what American Water wants to charge next year.
Burton said the difference in rates is because smaller municipal water providers are able to get funding from grants and governments. He said other providers do not spend as much to improve infrastructure and prevent problems, but the Putnam PSD funds all its projects and operations through customer rates.
Putnam PSD General Manager James Evers said they have completed multiple multi-million dollar projects in recent years in addition to a preventative maintenance program that looks to find problems when it costs hundreds of dollars to fix them instead of thousands.
“We keep it low just because of the rate base,” Evers said. “We want to make sure that they get the bang for their buck. We are a not-for-profit organization, where as American Water is a for profit organization. They have stakeholders to look out for, where Putnam PSD, we have the rate holders to look after.”
Evers said they normally have to increase rates every six to eight years, compacted to yearly surcharge or rate increases requested by American Water. The Putnam PSD has won multiple awards for its water quality, including 2020 Surface Water System of the Year.
“No one wants to pay more, but unfortunately in today’s time the cost of everything is going up,” Evers said. “We try to keep is as low as we can for as long as we can just so the customers don’t have to bear that cost.”
The Putnam PSD charges $36 for 4,500 gallons of water. Other Putnam County residents that live in areas served by West Virginia American Water could pay $93 for the same amount of water if the company’s latest rate increase is approved.
JB King lives in Bancroft, Putnam County, and has West Virginia American Water. His neighbors across the river could soon pay a third of his water rates to the Putnam PSD. He is concerned this latest increase could make him go without something else to cover the increased cost, since Social Security and other retirement benefits are not increasing as much as other expenses.
“People across the river are getting cheaper water than we are,” King said. “That makes no sense. Especially for the people like myself that are on a fixed income.”
King has bought bottled water for drinking since the 2014 water crisis and only uses his utility water for bathing, washing dishes and doing laundry. He considered getting a swimming pool, but did not want to have to pay the high rates to fill it up every year.
“We’re paying for it whether we use it or not,” King said. “I told my wife that when we got this little check from that chemical spill that was in the water, I told my wife then that we are going to pay for that three times over, and we have.”
A West Virginia American Water spokesperson said its rate increases are not connected to the water crisis and only reflect money that has been spent on infrastructure improvements.
Since 2014, the company’s water rates have increased substantially along with its revenue and profits, according to yearly filings with the PSC. At the same time, the company’s expenses have not increased as much.
Reviewing recent rate increase requests, WSAZ found that American Water lists many of the same reasons. Those include an increased level of investment, lower customer water usage, increased rate of return, increased depreciation expense and higher taxes and operating expenses.
On the issue of plant investment, WSAZ found the company is spending more on things like filters, chlorine and payroll. When it comes to preventing leaks between the treatment plant and your meter, WSAZ found the company is losing just as much water as it lost in 2010.
Burton said they would lose even more water if they did not invest to upkeep infrastructure, and have to make improvements across the board with equipment constantly deteriorating.
The PSC is currently reviewing the case and Macon will submit a recommendation to the Commission in the coming weeks. That will then be used to reach a settlement with West Virginia American Water, or the case will head to litigation and include a number of hearings.
The public can submit comments in support or opposition to this new increase online or attend a public hearing. Multiple cities and counties in our region have already filed letters against the increase.
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