Maryland American Water is requesting a rate increase that would be about 20 percent for a typical household customer in its Bel Air service area.
The company said it is seeking to raise its annual revenue by about $813,000 from the higher rates.
The request, which was filed Friday, is subject to review and approval by the Maryland Public Service Commission.
For a typical residential customer using about 11,600 gallons of water quarterly, the requested increase would add about $22.76 to the quarterly bill or $91.04 a year, the company said. The quarterly bill would rise from $113.55 to $136.31.
The company said its residential customers will be paying on average $1.49 a day if the increase is approved, which its president called "a remarkable value."
Bel Air Town Commissioner Robert Preston said he and his fellow town commissioners have not discussed the rate increases yet, but he expects it could come up in a future work session.
"It's usually not something that the town has a whole lot of sway over one way or the other," said Preston, who has been a town commissioner for about 13 years. "We work with [Maryland American] on different issues, but when it comes to rates and the Public Service Commission, normally it's the entity that has the control over the rates."
He noted Maryland American has control over the infrastructure that serves its water customers in Bel Air and the surrounding areas.
"We can voice our opinions, but it really does come down to the PSC looking at the numbers and whether it's justified or not," Preston said. "It certainly hasn't gotten any cheaper to produce water."
According to its PSC filing, Maryland American charges 78 cents per 100 gallons of water consumed, with a base user charge of $8.02 per quarter. The company is requesting to increase those rates to 93.18 cents and $9.74, respectively.
The company states in its filing that it was granted a 10.75 rate of return based on the year that ended in December 2008, when its most recent rates were set effective Sept. 10, 2009.
"As a result of increases in investment, labor, purchased water and waste disposal and other costs, the Company will not be able to obtain a reasonable return on its investment," the company's application for permanent rate increase states. "The projected deterioration in earnings and inadequate rate of return will result in irreparable loss to the Company unless arrested by an increase in rates which will produce a reasonable return and allow the Company to continue to provide dependable and safe service to its customers."
There are 4,971 homes and businesses and about 20,000 people living within the water utility's service area, making it the largest provider of drinking water in Harford County that's not owned by the county or one of its municipal governments.
Samantha Villegas, a Maryland American spokesperson, said in an email the company has not filed a rate request in more than five years and explained the additional revenue "is needed to recover investments made during that time."
Villegas said Maryland American has 2,646 residential and 476 commercial customers within the Town of Bel Air and 1,418 residential and 121 commercial customers outside the town limits, mostly to the west along the Route 1 corridor.
The rate increase request comes just weeks after Maryland American, Bel Air and Harford County entered into an agreement to increase Maryland American's supplemental water supply it purchases from Harford County. Company officials were quick to say the two are not related.
The agreement with the county and town ended a building moratorium in Bel Air imposed by state environmental and health officials over concerns about the reliability of Winters Run, Maryland American's principal supply source, during periods of sustained drought.
The county agreed to sell Maryland American up to 40,000 gallons a day in addition to the 500,000 gallons the county had previously agreed to provide as standby capacity. The two sides also pledged to jointly work on a more permanent solution to potential supply sources.
One possibility actively being investigated, according to the agreement, is construction of a storage reservoir on county-owned land just across Winters Run from Maryland American's treatment plant, about a mile west of the Bel Air town limits.
Maryland American last month received approval of a tariff amendment from the Public Service Commission that permits it to charge a "new development capacity fee" to any developers who receive access to the additional purchased water, hence, Maryland American's existing customers' rates aren't affected, the company noted Friday.
"This [rate] request is not looking to recover any costs associated with the recent short-term supply solution, or any work being done to explore long-term supply," Villegas emphasized. "It's a request to recover investments already made."
"One of the primary reasons for the request is the capital investments of approximately $3.6 million that the company has made since its last rate case in 2009," Maryland American President William R. Walsh said in a statement released Friday regarding the rate increase. "The system improvements include $1.9 million for replacing aging water infrastructure, and approximately $450,000 for the rehabilitation and repainting of the 250,000-gallon water storage tank located on Main Street, which was completed earlier this year."
"We've made prudent capital investments to upgrade water treatment equipment, pumps, meters, valves and other facilities, which enhances water quality, service reliability and fire protection for the community," he continued. "In addition, the company is requesting recovery of its investment of approximately $500,000 in new information systems that are designed to improve productivity, operational efficiency and customer service.
"We work hard to keep operating expenses and rates down, but we have to balance that objective with the increasing costs associated with the need to comply with tighter state and federal requirements," Walsh said. "Our production costs for purchased water, waste disposal and facility maintenance have increased over the past five years."
The PSC filing requests that the new rates become effective Jan. 20, 2015; however, the company said it expects the state regulatory authority to suspend the request for up to six months while it studies the filing.
Maryland American Water is a subsidiary of American Water, a New Jersey-based public stock corporation providing water, wastewater and related services to an estimated 14 million people in more than 30 states and parts of Canada.