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Assembly passes bill to stop water-rate hikes, but state officials call it 'illegal'

Merrick-based New York American Water instituted a rate

Merrick-based New York American Water instituted a rate increase of 26% to 30% on May 1, according to a recent notice by the company. Credit: Newsday/Steve Pfost

The state Assembly on Tuesday passed legislation that would establish a new water authority in Nassau and cap rate increases by New York American Water, but the bill differs considerably from a Senate version and state officials called it "unconstitutional."

The Assembly bill would create a North and South Shore Water Authority, while prohibiting a private water company operating in Nassau from increasing rates in excess of 2%.

Merrick-based New York American Water instituted a rate increase of 26% to 30% on May 1, after failed legislative attempts to nix the hike through an exemption from a tax that makes up upward of 50% of ratepayer bills. The cap would be retroactive, thus precluding the company from recouping more than a year of forestalled rate hikes and surcharges provided for under its Public Service Commission rate case.

Assemb. Michael Montesano (R-Glen Head), a co-sponsor of the Assembly bill, called it "a huge win for Long Islanders" that stops private water companies from "monopoliz[ing] the water utility market." He called on the Senate to pass similar legislation. Assemb. Charles Lavine (D-Glen Cove) on Wednesday sent a note to fellow Assembly members calling it "advisable" to schedule a meeting to "begin a conversation relative to the possibility of reconciling the disparate bills addressing the New York American Water crisis . . ."

But two Department of Public Service officials, who have been closely following the bills and negotiating with the Legislature to pass another backed by Gov. Andrew M. Cuomo, assailed the Assembly bill as "unconstitutional and illegal on its face."

One of the officials noted that since New York American Water previously agreed to delay already approved rate hikes and surcharges, at the request of the state, the expenses it sought to recoup had already been incurred and can’t be avoided. The Department of Public Service had been attempting to pass the tax-exemption and Nassau County Water Authority bill as part of the state budget, but the Assembly blocked the measure.

In a statement, Department of Public Service chief executive John B. Howard said, "We continue to be willing to work with all stakeholders and hear their serious ideas for relieving NY American Water customers from the enormous burden caused by the imposition of local property taxes, and for setting a path forward to true ‘public water.’ "

On Monday, the state Senate passed legislation that more closely mirrored legislation that had been part of Cuomo’s budget, including creating the new water authority, which would take up to two years to establish. It also calls for a three-year phase in for the tax exemption, which would have provided immediate rate relief for the company’s 124,000 Nassau customers.

But the Senate's passage wasn’t viewed as cause to celebrate.

"Unfortunately, as we stand here today I don’t have the greatest expectation this will be a joint bill and end up being the law of the land and that’s unfortunate," state Sen. Todd Kaminsky (D-Long Beach) said Monday. "We still stand here willing to work with any governmental body to help put off these increases."

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