Written by Mary C. Marvin

Dec. 3, 2014: Despite the best efforts of the consortium of nine communities including Bronxville served by United Water, the New York State Public Service Commission (PSC) saw fit to again grant a substantial rate increase covering the three years from November 1, 2014, through October 31, 2017. 

The new rates will not become effective until December 5, 2014, but the payment plan will be compressed to ensure that the water company receives the additional revenues that it would have received had the effective date been November 1, 2014.

Furthermore, the water company was given the option of a non-levelized increase after being awarded the double-digit rate increase, in the first year by 13.9%, the second by 1.6%, and the final year by 2.7%. The levelized increase option (which we understand the utility is leaning toward) has rates increasing by 8.2% in the first year, 7.6% in the second year, and 7% in the final year. By way of background, our water rates have increased by 56% over the last four years.

The PSC justified the increase in essence because of the great capital expenditures needed in the Delaware interconnection project, a system consisting of a new pumping station and transmission main connected to the Delaware Aqueduct, the principal water supply source for United Water New Rochelle and United Water Westchester customers.

United also claimed that the cost to purchase water (since the water supply is owned by New York City), including treatment and chemical expenses, also increased dramatically. These expenses, combined with infrastructure failures that caused the non-revenue water level (leakage) to average over 24% in volume over the last four years, all contributed to United's rate increase request.

We recently saw the effects of this in our own village as a leak of fresh water at the corner of Pondfield Road and Midland Avenue remained unrepaired for seven days.

In addition, the PSC agreed with the water company's recommendation of return on common equity to be 9.2%, along with a capital structure of 47% to be reasonable. We will also be receiving our bills on a monthly rather than a quarterly basis.

The PSC did not discuss in its ruling the possible impact on rates due to the accounting irregularities recently disclosed that led to the termination of the long-term VP and general manager and two other senior employees in the accounting and finance departments.

So what is a municipality's recourse to redress the above set of circumstances with a further review?

The standard of proof for a rehearing by the PSC is virtually impossible to meet. As a municipality, we would have to prove that the PSC exceeded its jurisdiction, made a determination in violation of procedure, committed an error of law, or made an arbitrary and capricious decision. 

Even though the decision is devoid of good judgment, and certainly does not meet the required duty of the PSC, as stated on its website, "to ensure that all New Yorkers have access to reliable and low-cost utility services," we cannot meet the burden of proof under Article 78.  For example, to be "arbitrary and capricious" under Article 78, we would have to prove that the decision was made with no regard for the facts. Due to this high standard, less than 10% of the cases filed under Article 78 result in a favorable ruling for a plaintiff over a municipal agency. After a cost-benefit analysis, we determined that these legal remedies do not make economic sense.

So what are our options out of the orbit of Albany?

Unfortunately, we have no recourse to change water providers, since United Water owns much of the purveyance system, but we are looking to at least spread the cost of the sewer system infrastructure both in the operating budget and the local capital improvement program to a formula based on water consumption, not property taxation.

If you recall, we successfully petitioned both the water company and the PSC to allocate hydrant maintenance costs, which were solely on the backs of the property tax payers (to the tune of $146,254 as of May 31, 2014, in our most recent budget) and spread the cost across all water users, including the 23% of the village properties that are classified as tax exempt.

Under the current system of fee allocation, a property tax payer who is a single resident in a one-bedroom apartment pays more toward our sewer infrastructure costs than the hospital.

Fairness dictates that the costs be spread over all water users by the percentage of their consumption and corresponding use of the sewer infrastructure. The PSC just recently granted approval for this allocation method to the Village of Port Chester, so we are hopeful that the members of our consortium will be treated in a like manner

The equitable sharing of maintenance costs across all water users in the village is particularly critical at this juncture. The village has embarked on a multiple-year sewer televising, cleaning, and relining and replacement program when deemed necessary, which will increase our day-to-day operating costs as well as our annual debt service for a capital expenditure.

In tandem, as we move forward on this front, we ask that you call the village as well as the water company and alert us to any leaks or malfunctions of the system and the response time thereto. Water in Westchester is clearly not only a scarce resource to be preserved, but also a highly expensive commodity.

The one silver lining in this whole ordeal is that nine communities are united in the service of their residents. This bodes well for whatever future challenges await us.