How high is too high? [Editorial]

The Aegis

It comes as no surprise, or perhaps we should say, it shouldn’t come as a surprise, that the water company serving Bel Air and some surrounding areas is seeking a rate increase.

For those who haven’t been following along the past five years, Maryland American Water, a public utility owned by stockholders, not a government owned and operated water system, has been constructing a water storage reservoir just outside the Bel Air town limits.

The reservoir, a $15.4 million undertaking, became necessary because the state government determined the Maryland American water supply, which comes from Winters Run, was unreliable, especially in dry periods, and might not be adequate if future development were to occur within the company’s service area.

The reservoir, which is being built on land Maryland American acquired from Harford County, was deemed the quickest and best solution to what frankly is a problem that has gone back decades, at least to the 1960s when Bel Air began to grow outward through annexations.

For a time, Maryland American tried to forestall the inevitable by purchasing water from Harford County’s system, but that has ceased to be a viable option because the county system now has its own supply issues.

So the reservoir became the solution and as it was going through the approval process, the water company officials were upfront that once the project was completed, they would be seeking a rate increase to recover its cost.

The rate increase request was filed with the Public Service Commission on June 28. Essentially, the company is asking for what amounts to nearly a 40 percent increase, although a typical residential customer’s monthly bill would rise approximately 37 percent. The company says the increase, if approved in full, would generate approximately $1.84 million in additional annual revenue, with 95 percent going to pay for the reservoir.

If the increase from a percentage standpoint seems high, we believe it is very high. The company spin says it amounts to 51 cents per day for a residential customer, currently paying $42 monthly, which means the annual bill for this customer would go from $504 to $690. Of course, that’s a lot cheaper than such essentials as phone, Internet and pay TV, but it’s still a pretty big increase at one sitting.

Ultimately, the PSC will decide how much of an increase Maryland American Water will receive. Four years ago, when the company asked for a 20 percent increase, some customers pushed back, as did the PSC, and the increase ended up a little less than half what the company asked for.

We’re not going to debate the merits of the rate increase at this time, other than to say Maryland American long knew it had a problem with the reliability of its Bel Air supply and it chose basically a bunch of stopgap measures, until its back was against the wall in 2013-14 with a state-imposed moratorium on building that got the politicians involved.

As a private company, unique among most – though not all – of the public water systems in Harford County, Maryland American should be entitled to recover its costs of system construction and maintenance and operations, while making a reasonable profit for its shareholders.

Just how much is reasonable? Well, when do higher rates become too high? That’s an issue to be hashed out and negotiated among Maryland American, the PSC and, most importantly, the company’s Bel Air customers.

avought@theaegis.com

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