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State, New York American Water reach rate relief agreement worth millions

Jack P. McCloy of Baldwin addresses New York

Jack P. McCloy of Baldwin addresses New York American Water executives during a meeting in East Rockaway on Aug. 9. Credit: Danielle Silverman

New York State has brokered an agreement with embattled New York American Water over a torrent of high bill complaints that provides for millions of dollars in short-term rate relief and the appointment of an independent monitor, the governor and the company said Saturday.

In the agreement that Gov. Andrew M. Cuomo disclosed in an interview with Newsday, the company will suspend a recently implemented “conservation rate” that levies the highest charges on customers who use the most water. The move eliminates a fourth tier of water cost and provides for bill credits for that rate retroactive to April, state officials said. The fourth tier will be suspended through 2018. 

Cuomo called the measures an “interim” step, noting that any findings from a new company-funded independent monitor could provide further action and relief. The state put the total ratepayer value of the agreements at $11 million.

And the governor didn't rule out exploration of a public water authority or even revoking the company's charter to operate in the state.

“These utility companies all have the same issue,” Cuomo said. “Big corporations think there are two sets of rules: one set of rules for them, and one set of rules for everyone else. No, it doesn’t work that way. The law is the law, the rules are the rules and if you violate the rules, you have to pay.”

In a statement confirming the state agreement, American Water deputy chief operating officer William Varley said the company was “fully committed to addressing the concerns of our customers and this agreement will help provide prompt rate relief.”

Customers with high-bill complaints outstanding need not pay disputed amounts until they’re resolved, officials said, and the company won’t impose late fees or threaten shut-off until they are cleared.

In addition, Sea Cliff customers will see at least $1 million in credits from the sale of a parcel of land in the village in a transaction that will be paid by company shareholder funds, not ratepayers. And the independent monitor, expected to be appointed soon and costing up to $500,000 of shareholder funds, will review both past rate hike miscalculations and future company operations, including outreach by the company over any new charges, officials said.

The state settlement also will accelerate other rate-relief measures for the company’s 120,000 Nassau County customers by moving up the return of proceeds from last year’s federal tax reform and an $8 million garbage-district judgment the company recently won in a manner that would bar shareholders from sharing in the judgment.

Crediting Cuomo for “leadership,” Varley said the company continues to address “every high bill complaint” and will “collaborate” with customers on a “conservation study and rebate program.”

The measures come amid increased calls by customers for public water entities to take over the privately owned New York American Water, which is the subject of investigations or reviews by the state attorney general and comptroller, the Nassau County district attorney's office and the Nassau comptroller, among others.

The state Public Service Commission, which is also investigating, released a report in June that found company employees sought to intentionally deceive state regulators during rate-hike proceedings in 2016, resulting in $292,000 in overcharges to 4,500 Sea Cliff customers. The PSC ordered the company to credit the Sea Cliff customers $68 each after the overcharging due to a property tax miscalculation. Questions about the company's tax miscalculations were first raised by watchdog group, Long Island Clean Air, Water and Soil. 

Spiking summer bills have sparked outrage from communities across Nassau, including Merrick, East Rockaway and Lynbrook, with some bills increasing into the hundreds, even thousands of dollars.

Earlier this month, the company blamed the conservation rate for more than 1,200 high bill complaints on the South Shore, but the state found that the company did not adequately inform customers about that rate before it was enacted. 

In the interview, Cuomo did not rule out a possible public takeover of the company or the revocation of its state operating charter.

The PSC is “also looking at ownership options,” Cuomo said. “A public utility is a real option if you have a public entity that will do it,” he added.

Asked whether the state would consider revoking New York American Water’s state charter in light of the PSC’s recent revocation of Spectrum Charter cable’s operating license, Cuomo said he was “open to that” but it’s “going to depend on what the PSC finds” in its investigation and the independent monitor’s probe.

Customers at a fiery public meeting in East Rockaway earlier this month aimed nearly as much wrath at state Department of Pubilc Service officials as they did the company, saying the state should have uncovered tax miscalculations before approving the increase. Some called for them to be fired.

Agatha Nadel, a member of the executive committee of North Shore Concerned Citizens, which is seeking a public takeover of the Sea Cliff district, said ratepayers will welcome any rate relief but added, “This is not going to deter us from getting rid of American Water. We want them out of here. I think they’ve met their match with New Yorkers.”

State Sen. Todd Kaminsky (D-Long Beach), whose office has fielded hundreds of complaints about spiking water bills, called the agreement “a serious reckoning” for the company and applauded Cuomo’s involvement. “The company messed up and it’s going to have to pay,” he said.

As part of the new settlement, the state is also supporting an offer by New York American Water to sell a parcel of company-owned land to the Village of Sea Cliff in a transaction whose proceeds would be used to reduce bills in the North Shore district by at least $1 million, according to senior state officials. Company shareholders would provide $1 million to the village for the purchase, and all proceeds from the sale, including any premium in the appraised purchase price, would go toward rate relief in Sea Cliff.

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