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Water companies pan public water proposal, but offer a path for two districts

New York American Water in Merrick, July 3,

New York American Water in Merrick, July 3, 2018. Credit: Danielle Silverman

Top officials for New York American Water and Liberty Utilities, in a letter to the state, panned the idea of a public water utility to run the Nassau-based system but set down conditions for discussion of potential sale of assets in Sea Cliff and Massapequa.

The letter to the state last week comes as the Department of Public Service completes a review of proposals to take all or part of the Nassau-based water company public. Sea Cliff Village and the Massapequa Water District have already conducted feasibility studies and proposed taking on some 5,000 customers of the 125,000 Nassau customers of New York American Water. That review is set to be released April 1.

The state Public Service Commission is considering Liberty's proposed $607 million purchase of New York American Water, the Merrick-based water company serving some 126,000 customers from Lynbrook to Sea Cliff. The state's review has held up that purchase, which the companies had hoped to complete last year.

In its letter to state regulators, the top officials of the two companies wrote that Liberty would be "amenable to negotiating in good faith with appropriate persons the Village of Sea Cliff and the Massapequa Water District regarding the purchase of certain assets from NYAW used to serve those portions of NYAW’s service territory."

Those talks, the executives said, "would only occur after PSC approval of the acquisition, closing of the acquisition by Liberty and American Water and removal of the Special Franchise Tax applicable to Nassau County water providers." That tax, the companies have long argued, represents a large chunk of customer water costs from the investor-owned utilities. Public utilities are exempt from it. New York American Water has around 5,800 customers in East Massapequa and another 4,500 in Sea Cliff.

Critics panned the idea.

"They're willing to free 10,000 ratepayers as long as they continue to have a monopoly to overcharge and underserve 115,000 ratepayers," said Dave Denenberg, co-director of watchdog group Long Island Clean Air, Water, Soil, adding he'd oppose such a move.

Joe Lopes, a member of North Shore Concerned Citizens, a ratepayer group which has been strongly advocating for public water for the Sea Cliff service area, said while the group has always primarily advocated for its own public water, "We would not advocate for this and would not favor it."

Public Service Commission spokesman Jame Denn said the companies' proposal will "be considered within the context of the ongoing municipalization study that is focused on how best to reduce water utility rates and provide safe, reliable drinking water for customers for the long-term."

Liberty and New York American Water otherwise gave a collective thumbs-down to the notion of public water, which state officials, watchdog groups and consumers have been loudly clamoring for. Already, Sea Cliff Village and the Massapequa Water District have found it was feasible to break off parts of the American Water territory to municipalize them. The Town of Hempstead also found such a move feasible for the 115,000 customers in its borders, but Supervisor Don Clavin said the debt load would hurt the town's finances. He wants to the state to step in.

In their letter, Liberty executive Peter Eichler and New York American Water President Lynda DiMenna argued the "best and only" way for customers to see "significant decreases" in their water bills is for the PSC to approve the acquisition and give the companies relief from state franchise tax.

After reviewing several proposals for municipalization, the companies found "none" would save customers "any money for years, if ever …"

"Municipalization takes many years and may require costly condemnation litigation, which would likely result in an increase in taxes for Nassau County residents," the executives wrote. The three studies of the feasibility, and a separate proposal by the Suffolk County Water Authority, in fact found customers would save money through municipalization.

The two officials pointed to Nassau County Executive Laura Curran's recent concerns about "unintended consequences" of a public takeover, and said such a move "represents the riskiest approach to all parties involved."

Denenberg called the companies' analysis of a municipal water system "simply not true. The studies show municipalization will immediately save ratepayers millions of dollars."

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