Freeholders Declare Early Victory in Water Rate Fight

Burlington County freeholders declared a partial victory this week in their fight against New Jersey American Water’s (NJAW) rate hike, after learning the New Jersey Division of Rate Counsel will counter by seeking an actual rate decrease.

“Burlington County residents , online or through the mail, have been heard,” said Freeholder Director Bruce Garganio. “Rate Counsel, which represents all utility customers in the state, will argue for an actual cut in water rates when hearings begin the end of March.

“Obviously, we are still at the mercy of the Office of Administrative Law and the Board of Public Utilities, which ultimately decides who pays what,” he added. “So I encourage all our residents to add their names to our petition, and help us present a united front of our own."

NJAW filed a petition in July 2011 seeking $95.5 million over its current revenues of $565 million.

Tom Merchel, Moorestown's financial officer, has said if NJAW's rate hike goes through it could cost . The township currently pays $2 million a year per its contract with the utility company. 

The Division of Rate Counsel will instead seek a rate decrease of $45.8 million.

The Rate Counsel’s position is based on the testimony of a panel of six experts, including a financial consultant who testified NJAW’s rate increase is bloated by $6 million for incentive compensation for non-union employees, who are already scheduled to receive annual salary increases in excess of 3 percent; $5 million in overestimated pension costs and supplemental retirement benefits for “top executives”; an unreasonable projection of $1.4 million in attorney and other fees in support of its rate increase; as well as promotional marketing fees, public relations expenses, employee award expenses, lobbying fees and country club fees.

The consultant, Robert J. Henkes, of Henkes Consulting of Rhode Island, a firm that specializes in utility regulation, concluded NJAW was financially positioned to decrease rates by $45.8 million.

“I find the company’s request for rate recovery of approximately $6 million in bonus compensation on top of regular compensation particularly objectionable, because the proposal is being made in the aftermath of the worst economic downturn since the Great Depression, where ratepayers are faced with job losses and plunging home values,” Henkes testified last month.

Richard Barnes, external affairs manager for NJAW, responded, "The overwhelming majority of our rate request is centered on . New Jersey American Water has invested more than $300 million in infrastructure upgrades since our last rate case, including more than $37 million invested to improve water service in Burlington County. If we are granted the rates as requested, the cost of water will remain less than a penny a gallon."

Garganio said Henkes' observation “about the timing of this increase is virtually the same as mine. I don’t understand how any company could gouge customers for a substantial rate increase, when so many ratepayers are struggling to survive financially.”

The director said Henkes also noted that, in contrast to the salary and bonuses for American Water’s non-union employees, many in government have received no increases in salary during the recession. Garganio said this is “certainly reflective of county government. Our management employees are now in their fourth year without a wage increase of any kind.”

He again noted Burlington County freeholders cut taxes $8.6 million over the past four years, while NJAW received four increases since 2004 that add up to a compounded increase of 51 percent. If the latest petition were approved, Garganio said, that compounded rate will top 73 percent.

“This is a company that needs to learn the meaning of the phrase ‘shared sacrifice,’” he said.

- Information provided by the Office of the Burlington County Freeholders