City council opposes Virginia American Water rate increase

City council opposes Virginia American Water rate increase

By Missy Schrott |

A Virginia American Water Company proposal to significantly increase water rates in Alexandria was met with vehement opposition from city council on Tuesday night.

VAW filed the rate increase application with the State Corporation Commission on Nov. 2, 2018, according to the company’s public notice of the proposal.

In the application, VAW proposes a 15.84 percent increase in its overall revenues. The rate request is based on a 10.8 percent proposed return on equity, according to the notice.

VAW cited several reasons for the rate increase, according to the city staff report, including increases in capital investment and infrastructure and compliance with federal tax cuts. VAW last increased rates in 2016, and before then in 2010, according to Bill Eger, Alexandria’s energy manager.

The application, however, proposes increasing rates in Alexandria more than in the other jurisdictions VAW serves.

The 15.84 percent increase would result in an average increase of $5.98 million across all of VAW’s jurisdictions, which include Alexandria, Hopewell, Prince William and other Eastern districts. The proposed increase in Alexandria is $7.8 million, which is another $1.8 million, or 30 percent, higher than the average VAW jurisdiction’s increase.

“You may note that those two numbers are different,” Eger said. “One could infer … that while our costs are going up, that the costs borne by other service districts are going down in cases, so it’s important to note that distinction overall.”

Based on the proposed increase, an Alexandria resident who uses 4,500 gallons of water per month and is currently paying $19.91 would pay $32.79 by 2021, according to the staff report. Eger said the average customer in Alexandria uses 4,300 gallons of water per month.

The numbers were met with passionate opposition from several councilors.

“This is not a friendly partner and they never have been,” Councilor Del Pepper said. “When you ask them, ‘So why do you need all these rates increased?’ the answer traditionally has been that we have this old infrastructure and they’re always working on it. Well, I’m not so sure. … I think they see Alexandria as being a wealthy community and [say], ‘Why not stick it to them?’”

Eger said because of higher rates in Alexandria compared to other jurisdictions, among other factors, city staff recommended opposing the proposal.

“City staff presents to council … that city staff intervene in the case as a participant and oppose Virginia American Water’s 15.84 percent increase and the 10.8 percent rate of return on common equity, essentially arguing and providing evidence to support a lower rate of return and lower revenue requirement,” Eger said.

Council unanimously passed staff’s recommendation.

“I’m thankful to staff for bringing this forward and leading a push to oppose this,” Councilor John Chapman said. “They certainly have my support in trying to oppose what Virginia American Water is doing.”

In the application, VAW also proposed buying Alexandria’s hydrants and taking over their maintenance and management.

Yon Lambert, director of the Department of Transportation and Environmental Services, said staff was in the early stages of researching whether selling the hydrants would make sense.

“Virginia American Water has other customers where it maintains their hydrants,” Lambert said. “If we can arrive at a deal that we think makes sense for our customers, and which makes sense in terms of the rates, that’s certainly something I think we would consider.”

Several councilors said they were against selling the hydrants.

“I don’t like handing out public assets to private companies that are not really fully in the interest of serving the public,” Councilor Mo Seifeldein said. “Because they do have shareholders and they need to make money and I think that may impact the residents.”

Chapman said he would be hesitant about selling the hydrants in light of the rate increases.

“I don’t know if it’s something we need to really look to discuss with them in the near term, especially as we don’t really feel that we align with where they are on rates,” Chapman said. “I think, as the presentation shows, they’re basically showing a little bias to us as it relates to the overall rate.”

The proposed rate increases are slated to be implemented on an interim basis beginning May 1. After council’s vote, staff will work to push back on the proposal.

“I hope staff has heard loud and clear that there are not happy people when it comes to selling our fire hydrants, among other things,” Pepper, who made the motion, said.