Pennsylvania American customers will see higher water and sewer bills starting in January

Water bills for Pennsylvania American customers are set to increase about 14.5% in January, and wastewater rates will go up a staggering 39.1% under a settlement approved Thursday that continues a trend of water-rate increases that outpace inflation.

The Pennsylvania Public Utility Commission, by a 5-0 vote, approved a $138 million rate boost for Pennsylvania American, the state’s largest water utility. That’s about 20% less than the $173.2 million in additional annual revenue that the company sought when it filed its request in April.

» READ MORE: In Philly suburbs, sewer systems are for sale, and citizens push back, fearing rate hikes

Water bills for a residential customer using an average 3,212 gallons a month will increase by $8.76 per month, from $60.48 to $69.24, a 14.5% increase. A wastewater bill for a typical residential customer will increase by $30.00, from $76.65 to $106.65 per month, or 39.1%. The increases go into effect Jan. 28, 2023.

Pennsylvania American serves 760,000 customers in about 400 communities across the state, including clusters of water customers in Bucks, Montgomery, and Chester Counties anchored around such towns as Norristown, Coatesville, and Yardley. The Pennsylvania company, a subsidiary of American Water Works. Co. Inc. of Camden, is based in Mechanicsburg.

The burden will fall more heavily upon wastewater customers under the settlement negotiated between Pennsylvania American, consumer advocates, and the PUC’s staff.

In its initial request, Pennsylvania American had sought to shift $73 million in costs for operating its sewer system to its far bigger base of water customers, though 90% of water customers do not get sewer service from the company. Under a 2012 law, utilities are allowed to shift some costs of wastewater systems to water customers to avoid the “rate shock” that sewer customers are experiencing as more municipal systems are getting acquired and upgraded by private owners.

But the PUC’s staff, the Office of Consumer Advocate, and other customer advocates complained that the $73 million cross-subsidy was too large and not in the public interest. Under the settlement, they agreed to allow Pennsylvania American to shift only $27 million in sewer costs to water customers.

The result of the settlement is that water customers will face a smaller rate increase than was originally advertised, and sewer customers will get hit with a much bigger increase. A Pennsylvania American sewer customer using 3,212 gallons per month will now pay about $1,300 a year just for wastewater service.

An array of small and large customers had objected to the rate increase. Cleveland-Cliffs Inc., which operates a steel mill in Coatesville, filed a protest, as did Victory Brewing Co., which operates a brewery in Parkesburg. Victory had complained that the initial rate increase would increase its annual water and sewer bill by about 60%, or about $446,000. The two companies signed onto the settlement after Pennsylvania American agreed to reduce a proposed industrial surcharge in its Coatesville rate zone.

Pennsylvania American last received a rate increase in January 2021, which went into effect in two steps, the most recent of which boosted monthly water bills about 8.6% and sewer bills by 30% Jan. 1, 2022.

The increases are the latest price hikes facing customers of private water companies, which are upgrading aging infrastructure, but also spending top dollar to acquire public water and wastewater systems under a 2016 state law that encourages the consolidation of public water systems.

In May, the PUC approved an increase for Pennsylvania America’s rival, Aqua Pennsylvania, that boosted a residential water bill for a customer in Aqua’s main rate zone by 12% from $69.35 to $77.51, an $8.16 increase. Rates for Aqua sewer customers went up 59%, from $55.51 to $88.18. Aqua’s rates are quoted for customers using 4,000 gallons of water, which is greater than the 3,212 gallons that Pennsylvania American uses as a metric.

Pennsylvania American said it needed the higher rates because it will spend $1.1 billion this year and next to improve service reliability, water quality and fire protection across its system. That includes replacing 90 to 100 miles of aging pipeline in its 11,613-mile network of water and sewer lines.

The investor-owned utilities say they need to recover the costs of upgrade aging water and wastewater systems, including recent acquisitions hat were neglected under public ownership. But the big rate hikes have sparked an increasing number of protests, including by residents of towns where privatization is proposed. The Bucks County Commission in September halted talks with Aqua Pennsylvania to sell the county’s wastewater system for $1.1 billion after an uproar of protests.

Pennsylvania American in April closed the $235 million acquisition of a public wastewater system in York County, the largest privatization so far under Act 12, the 2016 law that encourages the consolidation of public water and wastewater systems.

In October, Pennsylvania American agreed to buy the Butler Area Sewer Authority in Western Pennsylvania for $231.5 million. It is also bidding to buy the Breakneck Creek Regional Authority and Municipal Water Authority of Adams Township, also in Butler County.