Letter to Mr. Sterba

Letter

Last Year, Aqua Told Customers They Would See A $16 Hike, But Ended Up Jacking Up Rates By $139 Per Quarter; Aqua Promised To Use Funds To Update Infrastructure But Failed To Deliver

As American Water Takes Over Aqua's Customer Accounts, Schumer Asks New Owners To Immediately Roll Back Unfair Rate Increases, And To Make Sure Every Dollar Of Previously-Collected Fees Goes To Improving Service

Schumer: American Water Can Undo These Unfair Hikes and Provide Relief For Somers' Water Customers

Today, U.S. Senator Charles E. Schumer stood with Somers Town Supervisor Mary Beth Murphy, Homeowners Association President Toni Petrizzelli, board members and residents as he asked American Water to roll back the unfair and undue rate increases Aqua placed on Westchester County residents in 2009. Schumer, local leaders, and area residents asked American Water, which recently purchased Aqua and took over their customer accounts, to review these rate increases, and do everything possible to reduce the rates going forward. Schumer also asked American to abandon Aqua's practice of consistently asking for overly large rate increases and then not fully delivering on promised service upgrades used to justify their rate increases. Although Aqua has done some improvements, many projects still require more work and details of how the money is being spent cannot be explained.

"To get off on the right foot with the community, American Water should immediately roll back the unfair and excessive rate hikes imposed by Aqua two years ago," said Schumer. "Westchester residents were hammered with overly large hikes during a difficult economy and have been unable to obtain any information on how this money is being spent. American should right this wrong, and use the already collected payments to make the service improvements that Westchester County customers need and deserve."

American Water purchased Aqua America Inc.'s operations in New York in July, adding about 152,000 customers in four New York counties, and taking over Aqua's service rates and projects. Somers residents and those throughout Westchester County are hopeful following this purchase, due to a long history of unfair rate hikes and poor service from Aqua New York. Standing with local officials and homeowners, Schumer noted that this purchase provides American Water with the unique opportunity to right the wrongs of Aqua New York, reverse unfair rate hikes, and deliver on the promise of service upgrades that have gone unfulfilled.

In 2008, Aqua NY filed an application with the New York Public Service Commission for increased rates for water service. At that time, residents were informed rates would increase by $16, from $82.00 per quarter to $98.77 per quarter. However, Somers residents later discovered the rates under the new rate schedule were actually $221.48 per quarter -- a staggering $139 increase.

Since then, Schumer has pushed the PSC to block this outrageous rate hike. Today, Schumer went directly to the new source and implored that American Water reverse the unjustified hikes that were put in place under Aqua NY. Schumer also pushed American Water to make long overdue improvements to the water service and delivery infrastructure in Westchester County, which were promised to Aqua New York ratepayers at the time of this major rate hike in 2009. Potential service upgrades include new wells, improved water pressure systems, revamped filtration, and new pipes.

Schumer continued, "Aqua New York promised to keep rates low and improve service, and they have instead done exactly the opposite. But American Water has a good record of community relations, and I urge it to continue in that tradition by reducing these rates going forward, and by utilizing previous dollars towards the improved service promise that has thus gone unfulfilled."

According to Food and Water Watch, Aqua's national strategy is to grow their rate base, which is the value of its property that regulators use to determine allowable return. Aqua added to its rate base by making basic capital investments. After augmenting the rate base, Aqua sought regular approval to hike customer rates to both recover costs and boost profits. The company proposed 32 rate increases in 2006 and 23 in 2007. Past records indicate that Aqua often asks for excessive rate increases, settles and quickly seeks another hike. Schumer noted that the most recent case, in which rate payers were ensured that costs would increase by only $16 per quarter and instead were raised by $139 is amongst the most outrageous in Aqua America's history.

Schumer and American water have already worked together since the purchase of Aqua to respond to local community needs. Just last week, after Schumer, along with local officials, asked American to abandon Aqua's plan for a water tower opposed by local residents in Wantagh on Long Island. American decided not to move forward with the project.

The text of Schumer's letter to American Water appears below:

Dear Mr. Sterba:

I am writing you today in regards to the recent announcement that your company, American Water, will be purchasing the New York assets of Aqua Water. Specifically, I would like to bring to your attention problems with Aqua Water in the Hudson Valley.

Last year, after many complaints from residents in Somers, New York of an unfair and unjustified rate increases from their water provider, Aqua Water, I asked the PSC to investigate these outrageous rate hikes and examine the disparities between what the residents were promised and what they got. When Aqua NY filed their initial application to PSC, residents were informed rates would increase by $16. When the bills finally came, residents and homeowners were shocked to find out their quarterly rates were increased by $139.00.

As you become the new owner and sole provider of water to residents in Somers I am requesting you roll back these rate hikes and make long overdue improvements to the water service and delivery infrastructure in Westchester County. As a new owner, you have a unique chance to undo these unfair hikes, providing real relief for Somers customers and showing customers across New York State American Water is a fair and responsible corporate citizen. At a time when New Yorkers are struggling to make ends meet it was unconscionable for Aqua NY to pass these rates onto their customers after promising entirely different rates and service in their first application.

As you know, Aqua NY was an extremely profitable company, spending millions to their top executives along with paying shareholder dividends each and every year. According to Food and Water Watch, Aqua's national strategy is to grow their rate base, which is the value of its property that regulators use to determine allowable return. Aqua adds to its rate base by making basic capital investments. After augmenting the rate base, Aqua seeks regular approval to hike customer rates to both recover costs and boost profits. The company proposed 32 rate increases in 2006 and 23 in 2007. Past record indicate that Aqua asks for excessive rate increases, settles for less and quickly seeks another hike -- but in this case hit the jackpot. I am simply asking you to return this jackpot to its rightful owners and invest in the community who made this company so profitable.

I appreciate your help in advance and look forward to hearing from your office.

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