The math didn't add up: When a 17% water rate hike for Liberty Utilities is really 27%

For the thousands of Liberty Utilities' Nassau water customers facing sticker shock by skyrocketing water bills this summer, a retired Baldwin financial analyst with a $400 monthly water bill found answers, if not relief: Residential customers are paying a higher share of a hike than expected.

When the state Public Service Commission first announced the increase last August, it said the "levelized" increase for customers in Liberty's westernmost Nassau service area 1 would be 17%.

But the PSC figure and subsequent explanations by Liberty didn’t compute for Baldwin resident Steven Faske, who started crunching the numbers on his bill last fall. Right away he found the expected publicized 17% increase was actually 23% for all classes of usage. 

"It seemed very high," he said. 

Since that time, Faske, an admittedly high summer-water user, has found his bill has increased to $399 for just one month’s use, and his cumulative increase in under eight months has jumped 43%.

"The bottom line is I had no idea this increase was going into effect," he said Thursday.

In fact, according to figures confirmed by the PSC and published in the voluminous record of Liberty's rate case, the first-year impact on residential customers in service area 1 was actually 27%. That's because the rate increases include a new 4% charge that allowed Liberty to recoup revenue during a shorter rate "year" of just seven months because of delays in approving the case.

Compounding the impact on bills this summer, the Sept. 1 increase was followed in short order by another at 15% on April 1 for residential customers in that area, bringing the cumulative increase for the two-year period to 42%. Faske said his calculation of the second-year increase shows it was 16.2%, bringing the total increase to 43.%

Customers in Liberty's other Nassau service areas of Merrick and Sea Cliff saw more moderate first-year bill hikes of 9% and 12%, respectively.

Claudia Borecky, co-director of Long Island Clean Air, Water and Soil, an activist group which has argued for public water systems, said one reason service area 1 rates are higher is because it has "older, failing infrastructure and is charging its customers more to pay for the repairs," among other factors.

In its release, which the PSC noted it had reduced from Liberty's higher request, the agency's chairman Rory Christian said adoption of the plan "ensures critical investments that are good for the rates customers will pay, and good for their assurance of safe and adequate service." 

Faske initially called Liberty last fall to complain about what he was certain was an overcharge. A customer service rep told him the bill was correct, but that he could take his complaint to the PSC, he said. In November, he did just that.

He wasn’t alone in his sticker shock. Customers in Oceanside have been complaining for months, and some even started a Facebook forum dedicated to the higher water costs.

In March, the PSC responded to Faske’s complaint, saying he was "charged correctly" and he was due no credit. The agency said his "confusion" stemmed from the "difference between a base-rate increase, and how that base increase affects the overall charges on the customer’s bill." He was referred to Liberty’s website.

When Newsday this week reached out to the PSC with Faske’s claims about the rates, the agency in an email cited Liberty’s "inclining block rate structure, which may cause large water users to experience increases greater than others."

Faske countered the argument "doesn't hold water" because the higher cost is "already included in the across-the-board rate increase."

The agency also pointed to "rate compression," in which the PSC allowed Liberty to recoup more of its increase in a shorter period of time because of delays in the final settlement of Liberty’s rate request.

"Liberty Water charged approximately 4% more on customer bills to recover the approved revenue level for rate year one," the agency said.

But that didn’t specifically address the discrepancy between the expected 17% increase and the 23% Faske found in his year-over-year rate comparisons.

PSC spokesman James Denn wrote that money collected from ratepayers is calculated using "cost-of-service study results, which may cause some classes to contribute more than others." Translation: residential customers were paying more, while certain other rate classes, such as those who pay for water from public and private hydrants, including fire departments, were seeing a decline.

Faske did year-over-year comparisons adjusted for equal amounts of water usage over two years. He compared his bill for May 17 through June 16 to what it would have been prior to Sept. 1, 2024, before any increase. "Rather than $399.59," the actual bill, "it would have been $279.01," he said. The difference was an increase of 43%, he calculated.

Presented with that calculation, the PSC provided deeper insight into the rate allocation.

While the total amount of "levelized" revenue Liberty was permitted by the PSC to collect in the first year was $13.7 million, or 17%, the company’s "cost-of-service study results" allowed Liberty to draw more from its residential customer base — in fact, the 23% that Faske had calculated. The 4% compressed rate charge brought it to 27%. Other service classes in the territory, including public and private hydrants and "private fire protection" customers saw "revenue decreases," Denn noted, amounting to lower charges for their water. 

"So they seem to be robbing Peter to pay Paul," Faske said.

Liberty New York Water  president Deborah Franco, in a statement, explained, "Liberty advocated for reduced hydrant fees and the PSC agreed to that request with a 30% reduction in fees, bringing [service-area 1] hydrant fees to $186.25 per quarter. This reduction benefits customers since fire department budgets are included in resident’s taxes." 

A chart of rate hikes for residential customers in area 1 was among the information posted on the DPS website from the rate case, showing a monthly $18.12 hike for customers using 8,000 gallons a month in the first year, another $12.93 in the second year, and $8.32 in the third. The $18.12 reflects a 27% hike in the first year, but percentages weren't provided in the information.

The chart corresponds to figures in a Liberty news release dated Aug. 15, but spokeswoman Pamela Bellings said the release wasn’t posted to the company website at the time because the company set up a webpage with "more information than was in the release." She said the release was sent to those asking for it.

Through all his encounters with Liberty and the DPS, Faske said the 27% increase and the 43% he's now paying were never mentioned. 

"They sort of buried this and haven't come clean about what the real increase was, unless you took your calculator out," he said. The figures are included in the mountain of documents produced as part of Liberty's rate case. 

Nevertheless, he said, he has since given up on a complaint about his bills with the PSC, but said he believes Liberty needs to do more. 

"There needs to be better communication from Liberty to its customers about pending rate increases," he said. "They need to be able to let the customer know before they see it in their bill." 

Franco, of Liberty, said the company has been transparent. 

"Liberty cares greatly about our customers and works to communicate important topics like rate changes," she said in the prepared statement. "Since approval from [the PSC] in August 2024, we shared information about annual rate increases via special bill messages, our website, a news release, and public notices." 

The PSC rate documents have given further details about what's to come next year: another 9% bill hike for residential customers in the service area on April 1. 

By the time it's all over, the average residential customer in service area 1 who uses 8,000 gallons of water per month will see their bill go from $66.48 before the rate hike of last September to $105.85 next year. The cumulative hike: 59.2%. For customers like Faske who use considerably more than 8,000 during the summer, bills will be even higher.