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With New York American Water rate hike near, lawmakers try new paths to relief

New York American Water rates are set to

New York American Water rates are set to jump 26% next month. The company's building in Merrick is shown on July 3, 2018. Credit: Danielle Silverman

With New York American Water rates set to jump 26% next month, the state Senate on Tuesday passed a bill that would create a new public water authority in Nassau and stave off a rate increase while one lawmaker requests an investigation into higher-tier conservation rates that he says don’t work.

After previous attempts to push through rate relief and municipalization of the water company's Nassau territory stalled in the Assembly, state senators from Long Island passed a bill that combines measures proposed by Gov. Andrew M. Cuomo that sought to exempt New York American Water from the special tax that weighs heavily in ratepayer bills. The measure as enacted would spread the payment to ratepayers of other utilities, notably National Grid, across Long Island.

The bill also would create a new Nassau County Water Authority to serve as the vehicle for a public takeover of New York American Water. Language from a bill Cuomo and the Department of Public Service had sought to approve as part of the state budget was inserted into an existing bill by Sen. Jim Gaughran (D-Northport), who said lawmakers were now in talks to strike a compromise in the Assembly, where the bill had stalled.

Passage in the senate is "a very good sign and we are in talks with the Assembly and the governor's office to make this a reality," Gaughran said.

Co-sponsor Sen. Todd Kaminsky added, "We are in intense negotiations in advance of May 1 to find a pathway for relief" for American Water's 124,000 Nassau customers. "We're all about making sure we do something before May 1."

Meanwhile, Sen. John Brooks (D-Seaford), said passage of the bill would accompany a separate request to the Public Service Commission to forestall the May 1 rate increase "indefinitely," and to investigate the conservation pricing program that hits users with higher costs when they reach a higher usage threshold. The program is primarily aimed at reducing water usage, particularly in the high-use summer, when watering lawns and gardens, and filling pools, is widespread.

"Customers are unfairly charged extra money under the guise of ‘conservation,' with New York American Water demanding exponentially high profit margins for each narrow tier of water usage," he wrote.

Worse, the vast majority of customers didn’t realize they had reached the higher-tier water usage threshold until their bill came.

Lee Mueller, a spokeswoman for New York American Water, in an email called conservation pricing "an effective tool in driving behavior change by customers" that focused on "long-term changes in customer behavior to support sustainability of water supplies."

In 2018, ratepayers howled in protest when the company's rates soared, and the Public Service Commission, which greenlighted conservation rates, found the company hadn’t given customers enough advance warning about the change. It has since vastly increased awareness and instituted programs to help customers reduce usage.

Mueller said the company saw a 4% reduction in peak-season water demand, measured by production in 2020 over 2017.

Mueller said conservation rates were "not intended" to increase water company revenue, but to reduce customer consumption. About 2,300 customers now have smart water meters that lets them gauge usage, she said.

PSC spokesman James Denn said New York American Water provided the regulator with data "showing that high-use water customers have in fact reduced consumption as a result of higher water conservation rates and the company’s outreach and education efforts promoting conservation."

He and the company concurred that a mechanism called revenue decoupling prevents the NYAW from increasing its profits when less water is used, while revenue amounts above those approved in its rate-case plan must be returned to customers.

Denn signaled the May 1 rate increase likely would not be delayed "without resolving the property tax problem."

The increase "can’t be delayed past May 1 without resolving the property tax problem," he said, referring to the franchise tax exemption the Cuomo administration had worked but failed to enact as part of the budget. "Although the legislature didn’t adopt our plan in the budget, we stand ready to work with all stakeholders to reach a resolution prior to May that protects Nassau residents and ratepayers," Denn said.

Last month, the Suffolk County Water Authority announced a rate- and service-charge increase that would hike average bills around 3.77%. The Suffolk authority, which has proposed managing all or part of NYAW's Nassau territory, said it would raise the threshold for incurring its conservation rate for residential customers to 89,760 gallons, from a current 78,540, after high bill complaints increased last summer. Typical residential customers who reach the new threshold will pay slightly more for that water: $3.057 per thousand gallons, from a current $2.925 per thousand gallons. Suffolk's new rates take effect June 1.

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