Water rates continue to rise in Alle-Kiski Valley
By Tom Yerace
Published: Sunday, December 2, 2012, 12:01 a.m.
Updated: Friday, December 28, 2012
When Alle-Kiski Valley residents view the charges on their water bills, most probably don't see an investment.
But area water suppliers say that is exactly what they are: an investment in the systems that keep the water flowing.
“We increased our rates because we are doing a $2 million improvement project to our system,” said Tarentum Borough Manager Bill Rossey.
He said the borough, which owns its own water company, is using the rate increase, effective in January, to do renovations at the filter plant and to build two new water tanks on the hillside above the west end of town.
“They're going up 10 percent,” Rossey said. “It will go up to $18.14, which is still less than a penny a gallon.”
Tarentum is not alone when it comes to raising water rates.
Of the 19 Alle-Kiski Valley water companies or authorities contacted for this story, at least 13 have had some type of rate increase within the past five years and eight of those have occurred since 2010. At least three are raising rates for 2013 and there could be more because many 2013 municipal budgets still are being compiled.
Only one municipal water company, Cheswick's, has actually lowered rates in that time. Cheswick's water plant has been offline because of needed renovations. In the meantime, the borough has been buying water from its neighbors and was able to drop the rate from $8.05 to $7 for a monthly minimum of 2,000 gallons, when it switched suppliers from Springdale to the Municipal Authority of Harmar Township, which is charging less.
“Rates have gone up faster than the consumer price index,” said Matt McCaffree, director of state regulatory relations for the National Association of Water Companies.
“In the last 30 years, in real terms it has gone up about 30 percent, looking at the average.”
A rising trend
A recent USA Today study of residential water rates in the past 12 years for large and small water agencies nationwide found that monthly costs doubled or more in 29 areas such as Atlanta, Seattle and San Diego.
Stephen Altobelli, spokesman for the Denver-based Water Research Foundation, said, “There is a trend that rates are going up, and there are a number of factors for that. One of which is the age of many systems' infrastructure. The drinking water industry is very capital intensive. So modernizing and getting that equipment up to date is very capital intensive.”
The Westmoreland County Municipal Authority, which services most of the Kiski Valley, is a case in point.
Tom Ceraso, the authority's assistant manager, said that system's 125,000 customers will experience a 25 percent increase that takes effect in February.
He said increases have been more prevalent with private water companies but thinks more public water companies and authorities will be boosting rates because “on the public side, our rates have been slower to increase historically than they should have to replace the infrastructure.”
Replacing infrastructure is not a cheap proposition, especially with a huge system like Westmoreland's which, Ceraso said, includes 2,500 miles of pipeline, three treatment plants, 80,000 valves and 9,000 fire hydrants.
“If you don't start investing in that infrastructure, it is going to catch up to you,” Ceraso said. ”We adopt a yearly budget but, when we look at our yearly budget, we forecast our maintenance budget out three to five years.”
As for the rate hike, Ceraso said, “Eleven percent is for operations and 14 percent for a capital plan that is going to cost $141 million over five years. That plan will probably go into effect in the spring of next year.”
Costs of aging, expansion
“It's not just a situation where there is price-gouging and municipalities and companies are trying to get more revenue out of their customers,” McCaffree said.
“Some of the water assets are more than 100 years old,” he said. “There was a line that broke in Baltimore recently that was over 100 years old. When new infrastructure is put in, the rates are going to reflect that new infrastructure.
“Obviously, the systems that have been in place for over 100 years, we are going to see this more frequently than, say, a subdivision in the Midwest,” he said.
That likely would include many of the water systems throughout the northeastern United States, including the Alle-Kiski Valley.
Don Amadee, manager of the Buffalo Township Municipal Authority, which also supplies Freeport and South Buffalo, said the authority raised rates the past two years but before that, it had been 20 years since rates increased.
Amadee said the treatment plant, which was privately owned before the authority bought it in 1987, was built in 1919 and was badly in need of renovation. The Buffalo authority addressed that by borrowing $7.2 million from the Rural Utilities Service to revamp the 93-year-old plant
“Primarily, we were using those (increases) in funding the replacement of our water treatment plant,” Amadee said.
Passing onto the rate payers the cost of system upgrades or expanding service areas with new waterlines and pump stations is the norm for most authorities.
In Parks Township, the municipal authority has two tiers of customers: those who have been part of the system and pay $14.50 a month for 2,000 gallons used and about 260 new customers in the boundary area between Parks and Bethel Townships. They are serviced by recently installed lines and pay $51 for the same usage.
“But $36 of that is mortgage payment,” said Pete Massetto, the Parks authority manager. “We have a $2 million loan to pay off.”
One authority that goes against the norm is the Kittanning Suburban Joint Water Authority.
“We do expansion most of the time when it is not feasible at all,” said authority manager Richard Lauer. “In the last few years, we have gone from averaging 25 new customers in a year to averaging one customer per year.”
Lauer said that is because the expansion is into rural areas where residents are few and far between but the need for potable water is critical.
“In some cases, their water has been very poor because of mine drainage,” Lauer said.
“One of our projects is Glade Run Road in South Buffalo Township,” he said. “It is an $800,000 project, and we are going to serve less than 25 homes. But they are homes that are in dire need for water and have been for quite some time. It's basically been the quantity of water more so than the quality of water. They just don't have it.”
The authority will not finance the cost of that entire project as the authority is getting a federal grant for $500,000 to help pay for it.
But when those projects are done, Lauer said the new customers pay the same rates as the old ones.
“It's a challenge from a business standpoint,” he said. “The board choose to operate that way.”
Last year, the authority approved a $4 rate increase, about 12 percent, but Lauer said there was no complaining from customers.
“We hadn't increased rates in over 20 years, and it was way overdue economically,” he said. “This increase, along with paying of some of our long term debt, should give us some breathing room for the next few years.”
Maintaining infrastructure is only part of the challenge in operating a water system, according to Amadee. He said water authorities and companies have to deal with the same rising costs of other businesses.
“Electricity, health care and employee costs have gone up significantly,” Amadee said. “If you don't change rates within 20 years, with inflation, the costs creep up on you.”
There also are costs that stem from the state's Department of Environmental Resources (DEP) and, in Allegheny County, the county health department, as Joe McCollum, operations administrator for the Harmar Township authority, pointed out.
“With the regulations being put in place, they are making it hard on the small authorities and they have to pass costs on to the customers,” McCollum said.
For example, he said when the drinking water standards changed to mandate finished water that is 99.99 percent free of bacteria, it carried a cost.
He said that standard required using more chlorine, which has to be closely monitored 24 hours a day. To do that, McCollum said the authority had to purchase a chlorine monitor and operating software that cost his authority $2,500 and then another $500 a year for additional manpower and chemical expenses.
Howard Theis, manager of the Plum Municipal Authority, said, “Before we were not required to test for copper and lead, not that it was not needed but it was not required but now we do. We have to send out samples to the lab for the proper analysis and the cost for that is something we didn't have before.”
In addition, he said the authority has to publish the findings in a consumer confidence report that is distributed to customers. He said that costs about $2,000 annually.
At the same time, many authorities continue to search for ways to cut costs and are turning to technology for help.
“We're taking advantage of some newer technology,” Theis said. “We were able to install some radio read devices through out the system and are able to read the entire borough in two days, which allowed us to start billing monthly.”
Before that happened, he said the borough had an employee who traveled the community reading meters and writing the readings down manually in a log book and it took a solid month to do the whole borough. The new meters now allow for remote reading with an electronic device or a computer which makes the process much faster.
“That has freed up all but two or three days of his time to do other things in the system,” Theis said. “If we had not done that, the system was getting bigger and it would have lead to hiring another employee.”
Paying the bills
There is really only one way for authorities to cover costs and that is through selling enough of the product produced.
Ironically, efforts by water companies to promote water conservation to help consumers reduce their bills - through encouraging the purchase of items such as water-saving toilets and showerheads — creates a conundrum. The authorities are then in the position of selling less water and generating less revenue.
“A lot of times, water companies will have a decreasing use due to conservation, but at the same time, the rates go up,” Altobelli said. “It doesn't make sense but utilities need money to cover their costs. It's counter-intuitive, really.”
McCaffree said, “As use declines, the rates still have to reflect the costs of delivering a service.”
Energy is a major part of that cost, he said, along with labor and chemicals.
“If you had to set aside money for the raw service itself, it would be less than one percent of (a water) bill,” McCaffree said. “It takes a lot of energy to treat that water, it takes a lot energy to distribute that water.”
He said water utilities are not the same as oil, natural gas and electricity, where finding new reserves or sources can have an impact on consumer costs.
“It's not like we've found a new source of water and that is going to drive the cost of the water down,” he said.
“I think the rising cost environment is a reality,” McCaffree said. “I don't really want to downplay how important it is communicating this new reality to the customers.”
He noted that the periodic rate increases allow for system improvements, which is good for the communities and avoids consumer “rate shock“ from big increases that result when a system is not updated and needs a major overhaul. He said water authorities and companies need to have a plan in place and communicate what it is to their customers.
“If customers understand why it is happening, then it is going to be a smoother path forward,” McCaffree said.
Tom Yerace is a staff writer for Trib Total Media. He can be reached at 724-226-4675 or firstname.lastname@example.org.
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