On September 1st of this year, water rates will rise once again. It will be the third consecutive year of rate hikes. And on September 1st of next year, 2024, the rates will rise again, making it four straight years of rate hikes. Community Legal Services, which the Philadelphia Rate Board appointed to represent the public, has rejected the public’s demand that the Water Department find savings and money from elsewhere and supports four years of rate increases. Once again, proving the wisdom of Upton Sinclair, who wrote, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
The 19% rate increase is far more than inflation. It is far more than what workers can expect in salary increases. The double-digit rate increase burdens the working poor, those who make too much to qualify for low-income plans and not enough to keep up with all the rising costs.
How does it happen? How can the Water Department get a rate increase after a rate increase? And why doesn’t the Public Advocate appointed by the Water Rate Board, who has voted to raise the rates in four consecutive years, fight for ratepayers?
In January of this year, the Philadelphia Water Department filed for a rate increase that sought increases over two years of $162.131 million. After months of hearings, the Water Rate Board, which consists of the former Philadelphia Water Commissioner, the former chief legal counsel of Philadelphia Gas Works, two developers, and one consumer representative, granted the Water Department a total rate increase of 132.28 million dollars. 11 million less than what the Water Department requested.
In essence, the entire hearing was nothing other than window dressing. The Rate Board gave the Water Department 81% of what it asked. And, of course, the Water Department knowing that the Rate Board would cut some of the requested rate increase, asked for more than it needed.
During the hearings, which were only covered by Philadelphia Hall Monitor, it became clear that Philadelphia City Council opposed the rate increase. 14 of the 17 members signed a letter asking the Water Department to seek funding from the America Recovery Plan Act (ARPA) and the State of Pennsylvania instead of raising rates. The Water Department said the Mayor, who wanted to offer tax cuts to businesses, informed it there would be no ARPA money coming. Because the Water Commissioner serves at the pleasure of the Mayor, the Water Department didn’t ask City Council for any funds. Nor did the Water Department ask City Council’s help getting funds from the State.
The Water Department hired six consultants and two law firms to ram the rate increase through. During cross-examination, the Water Department admitted it failed to hire a single consultant to find cost savings and innovations that would make rate increases unnecessary. Community Legal Services consultants also revealed that they didn’t examine any cost savings strategies.
Perhaps the most challenging part of the rate increase to understand is the second year. Philadelphia will have a new Mayor, one who will understand how much of a burden a 19% rate hike will be. Instead of allowing a new Mayor to chart a new future, the Water Rate Board decided that it did not have the power to limit the size of the rate increase, so the Water Department would have to find cost savings. Despite writing, “Certainly, the Board agrees that PWD should take every reasonable step to reduce expenses (including the costs of borrowing) as much as possible, and to aggressively seek alternative funding from sources other than its customers,” the Rate Board granted the Water Department the 19% rate hike. Thus, the Water Department has no economic incentive to cut costs and improve operations.
After four years of rate increases totaling over 30%, there will be no changes in the operations of the Water Department. It will continue to waste millions of dollars refurbishing its offices, hiring consultants to help it raise rates, not lower costs, and turning its back on its ratepayers. The only hope water ratepayers have, is that the new Mayor will understand that rising utility bills, along with higher housing and food costs, make it much harder for working Philadelphians to make ends meet.
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