Aquarion exec fails to douse anger over higher water rates
A presentation by Aquarion Water Co.'s CEO and president on the reasons for the utility's proposed 18.3 percent water rate hike in September did little to dampen residents' anger over the request at a Tuesday public hearing in Fairfield Warde High School.
Bob Eick of Fairfield said the 15-minute presentation by Aquarion's Charles Firlotte at the Public Utilities Regulatory Authority's second public hearing on the rate hike request in Fairfield was "fine in its intent but laughable in its content."
"Everyone here just needs to know why," Eick said of the proposed rate increase, which if approved, would be followed in 2014 by a 1.8 percent increase and in 2015 by a 1.9 percent increase. "How does it work? Every dollar I pay to Aquarion, where does it go? How does it get distributed?"
"We just want to understand exactly how this is going to transpire and where does the money flow," Eick said. "We are dealing with a monopoly. It's not like we can choose another water supplier."
Barbara Rifkin of Fairfield said, "This is, I think, just an outrageous amount to ask us to pay."
The hearing was attended by about 50 people -- far short of the Warde auditorium's capacity. It was the second on the proposed water fee increases conducted in Fairfield within the last several weeks after many complained the first hearing, conducted in Sullivan-Independence Hall, was held in a meeting room too small to accommodate everyone who wanted to speak.
State Sen. John McKinney, R-Fairfield, said elected officials have heard from many more people angered by Aquarion's proposed rate hike than were present at PURA's hearing.
The state board is scheduled to make a decision on Aquarion's proposed rate increase sometime in August or September
During Firlotte's presentation, the Aquarion executive said the region's water company was acquired by Macquarie Utilities Inc. in April 2007, and he described Macquarie as "a significant investor in infrastructure in the United States." He said Aquarion invested $143 million in infrastructure over the last three years -- $103 million of which he said was spent in Fairfield County -- and the utility is now seeking to recover that cost.
Firlotte said some of Aquarion's recent infrastructure improvements were to the Brookside pump station in Fairfield, the Coleytown treatment plant in Westport, a dam and gatehouse in Stamford, a tank refurbishment on Chestnut Street in Darien and an upgrade at the Putnam water treatment plant in Greenwich. He said Aquarion also replaced 25,000 feet of water mains in Fairfield County and made upgrades to other equipment, technology and communications.
Firlotte said water suppliers in 1987 had to monitor for 10 contaminants, while more than 100 are monitored today. He said Aquarion's cumulative rate increase from 2000, including the proposed rate increase, would total 62.2 percent while water rate increases in other areas of the country have been much higher. He said from 2000 to 2012, water rates had increased 161 percent in Portland, Ore., 151 percent in New York, 140 percent in Sioux Falls, S.D. and 233 percent in Atlanta. He said Aquarion's proposed rate increase would amount to 26 cents a day, or nearly $8 a month, and that a gallon of water still would cost "less than a penny."
On the expense side, Firlotte said Aquarion in 2005 reduced staffing by 21 percent through an early-retirement program and sustained that reduction through the use of technology. He said many people mistakenly believe Aquarion has no limit placed on its earnings, but said PURA does impose a limit on how much the company can earn.
But Jim Marpe, a candidate for Westport first selectman this year, said Aquarion asking its customers to pay a rate increase of 23 percent over three years "is simply an unreasonable request." He said the high cost of electricity and gas in Connecticut, combined with the proposed 23 percent increase in water rates, makes the state less attractive to residents and businesses.
Marpe, a former Board of Education chairman in Westport, said many Westport residents are senior citizens with fixed incomes and people still trying to recover from the economic crash of 2008. He said their property tax bills also would rise because the higher water costs for government would likely be passed along to residents.
Marpe said Aquarion already charges a fee for infrastructure improvements to its customers and questioned how the surcharge could "suddenly be so inadequate."
"They have not made the case to justify such a water rate increase," Marpe said.
Bud Morten of Fairfield said Firlotte failed to present any data on Aquarion's finances in his presentation, while adding that Aquarion's current allowed rate of return of 9.95 percent seems "quite high" for a low-risk investment in a bad economy. He said Aquarion is seeking to increase its rate of return to 10.6 percent, while the electric utility, United Illuminating, has a 8.75 percent rate of return.
Morten said Aquarion has seven layers of ownership, which he termed "seven layers of veils" that "must be lifted to understand ultimately what is going on."
"Is it not likely that there are many fees and charges from this multi-layer ownership cake that are costing Connecticut water customers more than they would have to pay if there was simply one operating company?" Morten asked. "Think about the audit fees alone for that many companies."
Morten also questioned how much Aquarion pays to finance its debt, saying bond rating agencies base their ratings on the total amount of debt in an ownership structure. He said Aquarion also hadn't provided financial data related to salaries and pre- and post-retirement benefits for its senior executives and employees. He said administrative and general salaries at Aquarion were up more than 17 percent in 2012 and employee pension and benefits were up nearly 29 percent.
Morten said the Connecticut Water Co. recently announced that federal tax law changes would allow it to lower water rates by $10 million over the next two years and to delay its next proposed rate increase by six months. "Why can't Aquarion do the same thing?" he said. "Why, after nine years of price stability, has it suddenly been necessary to raise rates so aggressively?"
Ron Fernandez of Fairfield asked, "Is this company making money or not? Is a 9 percent yield not adequate?"
First Selectman Michael Tetreau said town officials and residents need "much more" detailed financial information from Aquarion. He said Firlotte's presentation "raised more questions than answers it provided," and that Firlotte made no mention of federal tax law changes that enable other utilities to pass on savings to its customers.
John Betkoski III, PURA's vice chairman, said the federal tax law changes have just taken effect, and that PURA was analyzing and evaluating it to see if it was applicable to Aquarion.
Jay Wolk, a Representative Town Meeting member from District 6, said recent rate increases from United Illuminating, Aquarion and Southern Connecticut Gas are "almost like negating" expanded tax relief for Fairfield senior citizens recently approved by the RTM.
Linda Snelham-Moore of Fairfield questioned how a for-profit company could be allowed to purchase a public utility when the utility has a monopoly. "It just seems like they shouldn't be able to do that because it's a monopoly," she said. "It shouldn't be run the same way as a corporation. It's a monopoly. We can't go to any other place."
David Mackenzie, an RTM member from District 3, asked when residents' questions would be answered, but Betkoski said the purpose ot Tuesday night's hearing was to gather public comments and he didn't want to get into a "back and forth" with Aquarion that night.
Mackenzie replied, "I hope they will be answered specifically because they're good questions. The questions that were asked are the ones that ought to be answered."
In his presentation, Firlotte also cited some of Aquarion's achievements, saying the water company maintained service to 99 percent of its customers during the past four major storms when many had lost electricity. He said Aquarion provided a safe, reliable and clean product and has the fewest complaints received by PURA among all the regulated public services in Connecticut.