The federal Government Accountability Office will investigate Merrick-based New York American Water and its parent company, Sen. Chuck Schumer said Sunday night, specifically how the privately owned utility uses federal funds.
The company has been under intense scrutiny since June when the New York State Department of Public Service reported that employees looked to intentionally deceive regulators during 2016 rate hearings.
Soaring rate hikes for thousands of Long Islanders, approved by the state Public Service Commission, led to customer outrage and calls for a public takeover of the utility. Multiple local and state agencies also have launched investigations and complaint reviews.
In August, Schumer (D-N.Y.), had called for a federal probe into infrastructure funding.
“I said it before and I will say it again: the steady drip-drip-drip of dubious charges, rate hikes and bad billing demanded the federal government … do a deep dive into New York American Water,” Schumer said in a news release. “I am glad the GAO has heeded the call because there was precedent for this request and substantial reasons to warrant a formal investigation.”
Alfredo Gomez, a spokesman for the GAO, confirmed the agency was investigating. He said the agency expects to start work on the probe in coming months.
“We have received and accepted a request from Senate Minority Leader Charles E. Schumer asking that the Government Accountability Office review the American Water’s possible use of Environmental Protection Agency (EPA) Drinking Water State Revolving Funds (DWSRF) and whether it is consistent with the intent of the law that established the DWSRF fund,” Gomez said.
New York American Water, in a statement, said it “cooperates with governmental and regulatory inquiries.”
Responding to the GAO probe, the company clarified that “all” of New York American Water’s debt is “internally sourced,” meaning it has “no federal or state loans, and the company is not pursuing any such government loans.”
However, the company noted that a “handful” of American Water subsidiaries “in other states have borrowed state revolving funds to construct critical infrastructure benefiting our customers.”
The company noted that private water providers “do have access to state revolving funds, as both the providers and their customers pay federal taxes and their customers should and do benefit from projects financed by such loans. Oftentimes these loans lower overall project costs. These savings go directly to customers.”
The company on Aug. 18 signed an agreement with the state to end a state Department of Public Service high-bill investigation of its more than 120,000 Nassau customers.
William Varley, deputy chief operating officer of American Water, in late August said the company was working toward “implementing the agreed upon rate relief, increasing our communications with customers and restoring their confidence.”
New York American Water also will work with the PSC, which is within the Department of Public Service, and an appointed independent monitor to review controls and processes, Varley has said.
New York American Water, through the federal fund, could apply for up to $20 million in debt to cover costs such as water main replacements and upgrades to distribution systems, according to the release.
Schumer called into question American Water’s eligibility to receive federal funds given the business practices of its Long Island-based subsidiary, including misleading testimony to the state Public Service Commission, the release said.
“New York American Water’s tactics to deploy a rate hike, make a mess of billing and capitalize on a newfound ‘conservation fee’ were aggressive money-raising tactics while the company simultaneously was accessing federal funds and that raises serious concerns the federal government will now look further at on behalf of consumers and Long Islanders,” Schumer said.
In a statement Monday,State Sen. John Brooks (D-Seaford) said he was pleased the GAO is investigating.
"Long Island taxpayers are suffering," Brooks said, "and the debacle with American Water rate increases has added to these problems."
With Mark Harrington