The settlement, which was reached among the company and the PUC's Office of Trial Staff, the Office of Consumer Advocate, Office of Small Business Advocate and other parties, calls for an overall increase of $36 million per year, or an 8.9 percent increase. This includes a portion of a surcharge that customers have already been paying related to the Distribution System Improvement Charge (DSIC). When factoring in the higher level of DSIC that customers are currently paying, the effective overall increase of the settlement is 6.5 percent. This is the first increase the company has received in base rates since 2004.
"Delivering quality water service requires continued investment to replace aging infrastructure and make the necessary system upgrades to meet drinking water standards," said Kathy Pape, president, Pennsylvania American Water. "It has been four years since we have had a change in our base rates, and we have invested nearly a half billion dollars in that time frame. With the Commission's decision today, we will be able to recover costs related to those investments."
The need for a rate change was driven primarily by the $490 million the company has invested in its treatment and distribution facilities from January 2004 through the end of 2007 to assure the delivery of high-quality water service.
Examples of projects completed across the state during that time frame include:
-- replacing more than 260 miles of pipeline
-- building new storage facilities to ensure reliability of service
-- constructing improvements to our treatment plants
-- installing pump stations to improve water pressure
-- replacing two treatment plants with one facility
-- enhancing municipal fire service by installing new or replacement
-- installing new or replacement customer meters
-- implementing or upgrading the company's monitoring control systems,
which enables plant operations and distribution facilities to be
monitored from a centralized location.
For the average residential customer who uses 4,500 gallons per month, the settlement will result in an increase of $2.70 per month in current rates. The new rates will become effective on November 30, 2007. "Even with this rate adjustment, at less than a penny a gallon, water will remain a good value for our customers," said Pape.
As part of the settlement, the company is enhancing its customer assistance program, called the H2O-Help to Others program, by increasing the company match from $100,000 to $150,000.
For more than 15 years, Pennsylvania American Water has been assisting low-income customers who qualify for its H2O program, which comprises three main components:
-- Grants of up to $500 per year: In 2006, the company provided a combined
$197,000 in assistance grants to 526 individuals and families.
-- Discount on the monthly service fee: By December 2006, more than 4,800
customers were enrolled in this program. Currently, the discount is 50
percent of the monthly service fee. As part of the settlement, the
company will be increasing the discount to 65 percent.
-- Water-saving devices and education.