Statement by Assemblywoman Amy Paulin on United Water Rate Increase - "Return on Equity of 9.2% too high for low-risk business"

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UnitedWaterHearing 2014 1304

I am Assemblywoman Amy Paulin, and my Assembly district includes New Rochelle, Pelham, Pelham Manor, Bronxville, Eastchester and Tuckahoe, all of which are among the municipalities served by United Water New Rochelle.

The Joint Proposal signed by the United Water companies, the Public Service Commission staff, and the Municipal Intervenors reflects a tremendous amount of work and thought. However, I don’t believe that the proposal adequately protects the interests of consumers and ask that the Commission deny the requested rate increases described in the Joint Proposal.

I support the portion of the Joint Proposal that recommends that the Commission approve the proposed merger of United Water New Rochelle and United Water Westchester. The larger company, through managerial efficiencies and economies of scale, would provide customers both service improvements and financial savings.

However, I cannot support the portion of the Joint Proposal that proposes increases, under the levelization method described in the Proposal, of 6% or more per year for the next three years. It is unreasonable to expect municipal ratepayers, who are expected to keep property tax increases below 2%, to accept annual increases of 6%. With the rate of inflation hovering around 2% and many wages and salaries increasing at a similar or slower pace, it is equally unreasonable to impose upon residential ratepayers such a large increase in the price of this critical resource.

I recognize that the two companies have agreed to undertake certain cost-saving measures, such as coordination of large scale main replacement with municipal construction work, efforts to file tax certiorari proceedings where appropriate, application for “qualified New York manufacturer” status and efforts to reduce non-revenue water losses. However, those efforts are not enough — and they are all activities in which the companies should already have been engaged. The parties must identify and agree to more specific and concrete cost-saving strategies in order to reduce further the proposed rate increases.

The proposed increase in rates would provide the company a return on equity of 9.2%, which is simply too high for a company in a low-risk business in the current environment of low returns on alternative forms of investment.

Investors should not reap high profits at the expense of ratepayers who do not have any choice in their supplier of water. Thank you for this opportunity to address this important issue and for your consideration.

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