CHICAGO, May 2, 2024
/PRNewswire/ -- An Illinois
utility watchdog group has joined forces with a community that has
had highly publicized problems with lead in its drinking water to
file testimony arguing that Aqua Illinois' proposed $19.2 million rate hike should be slashed by at
least 40 percent.
The testimony was filed May 1 by
the Citizens Utility Board (CUB), the Village of University Park and Viscofan
USA, which has a manufacturing
facility in Danville and is Aqua's
largest industrial customer in the Vermillion water division. The
testimony uncovered at least $7.6
million in overcharges proposed by Aqua, or about 40 percent
of the company's rate-hike request.
"Our testimony shows that Aqua Illinois' rate-hike request is
unjust and unreasonable," CUB Executive Director Sarah Moskowitz said. "For years, we've received
a steady stream of complaints from Aqua customers unhappy with poor
water quality and exorbitant rates, and our latest testimony
reveals that the company is pushing for an excessive profit rate
for its shareholders. We urge state regulators to reject Aqua's
rate hike."
The testimony, from Chris Walters
and James Leyko, of Brubaker &
Associates, Inc., a Missouri-based
consulting firm that specializes in utility regulation, recommended
these reductions:
- Return on Equity and Common Equity Ratio. Aqua is asking
for an excessive increase in its "Return on Equity" (ROE)—or profit
rate for shareholders—from 9.6 percent to 10.8 percent. Instead,
CUB argues for a more reasonable 9.45 percent ROE. CUB also argues
that the utility's proposed "common equity ratio"—how much of the
utility's financing comes from issuing stocks—is too high.
Combined, those two adjustments would reduce the proposed rate hike
by $7.1 million. ROE is the
most important component of a utility's "rate of return," which is
the rate at which the utility recovers the cost of financing
physical assets, such as meters and pipes.
- Executive Bonuses. CUB argues that customers shouldn't
cover bonuses the company gives to executives for reaching
financial goals that only benefit shareholders. That recommendation
cut Aqua's proposed increase by another $323,000.
- Rate-case Expense. Under Illinois law, utilities are allowed to recover
expenses for outside lawyers and expert witnesses in rate cases. In
the Aqua case, CUB's testimony argues that the utility inflated
those expenses, reducing the rate hike by another $159,000. (Note: In Springfield, CUB is working for the Utility
Affordability Act, which would prohibit utilities from charging
customers for such expenses.)
In total, the testimony calls for about $7.6 million in reductions of Aqua's proposed
rate hike. CUB hopes to adopt testimony filed by other parties,
including the Illinois Attorney
General's Office, to argue for cutting the rate hike even more.
On Jan. 17, Aqua, which serves
about 273,000 customers in central and northern Illinois, filed a $19.2
million rate-hike request with the Illinois Commerce
Commission (ICC) (Docket 24-0044). Aqua estimated that it
would increase the average residential wastewater and water bill
(4,000 gallons) by $29.91 per
month.
The rate-hike request was the latest bad news for Aqua
customers. There have been several examples of serious service
concerns—including a water outage in Lake
County in 2023 and unacceptable levels of lead in drinking
water in University Park in 2019.
While Aqua says the problem in University
Park has been fixed, years later some customers were still
drinking bottled water because they didn't trust the company.
At the same time, Aqua's aggressive strategy of buying up
municipal systems, along with winning legislative approval to add a
"Qualifying Infrastructure Plant" surcharge to bills, has
needlessly increased costs for customers. Under state law, the
company can buy depreciated water and wastewater systems across the
state and charge their customers to cover 100 percent of the
acquisition costs. CUB Water Tracker, a special online
center that monitors the problem, has found that Aqua customers
have so far covered $121 million in
acquisition costs. CUB has been advocating for legislative reforms
to bring relief to private water customers across Illinois.
Meanwhile, Aqua's parent company, Essential Utilities, has
prospered. The company raked in $498.2
million in profits in 2023, up about 7 percent from the year
before. In announcing its 2023 results, Aqua's parent bragged about
its "proven acquisition track record" and capturing higher rates or
infrastructure charges in Illinois
and seven other states.
The Citizens Utility Board (CUB) is celebrating its
40th anniversary as Illinois'
leading nonprofit utility watchdog group. Created by the Illinois
Legislature, CUB opened its doors in 1984 to represent the
interests of residential and small-business utility customers.
Since then, CUB has saved consumers more than $20 billion by helping to block rate hikes and
secure refunds. For more information, call CUB's Consumer Hotline
at 1-800-669-5556 or visit CitizensUtilityBoard.org.
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SOURCE Citizens Utility Board