17414_Authority_April_2024

60 The Authority | APRIL 2024 1000 North Front Street, Suite 401, Wormleysburg, PA 17043 717-737-7655 . 717-737-8431(f) . info@municipalauthorities.org m u n i c i p a l a u t h o r i t i e s . o r g PMAA testimony. See page 24 for Government Relations report. Senate Democratic Policy Committee Public Hearing on Reining in Water Rates: The Unintended Consequences of Act 12 of 2016 January 22, 2024 Testimony of: Anthony Bellitto, Executive Director, North Penn Water Authority Good afternoon, Chairwoman Muth, Senators Comitta, Kane, Kearney, and Schwank as well as other members of the Senate Democratic Policy Committee. Thank you for your invitation to provide testimony on Reining in Water Rates: The Unintended Consequences of Act 12 of 2016. My name is Tony Bellitto, and I am the Executive Director of the North Penn Water Authority (NPWA), a position I have held since 1998. I have worked in a variety of technical and management capacities in the water field for the past 38 years. NPWA provides water to more than 35,000 customers in Bucks and Montgomery Counties. Today, I am testifying on behalf of the Pennsylvania Municipal Authorities Association (PMAA) … … In 2016, the Pennsylvania General Assembly passed Act 12 which added Section 1329 to Title 66 (Public Utilities). Section 1329 established a system called “fair market value” for the acquisition of municipal water and wastewater systems by investor-owned utilities. Act 12 contained no provisions that provided for any limitations on municipal acquisitions. As a result, “fair market value” allows for both negotiating parties to increase the purchase price as high as possible. To date, almost all approved acquisitions far exceeded the net original cost of the system. As these acquisitions continue under Section 1329, the most prevalent impact to Pennsylvania ratepayers is increased rates. It is important to note that Section 1327, the previously and still used acquisition section of the law, includes a provision for acquisitions above depreciated cost. Key features in Section 1327 are protections from rate increases to existing customers, burden of proof of distress on the investor- owned utility, and statutory amortization of purchase price in excess of depreciated cost. Under Section 1329, for-profit utilities can presumably keep these high purchase prices in their rate base forever. As a result, there has been a shift from acquisitions of distressed systems to those systems that are well funded and have excellent system integrity. To sum this up, before Act 12 of 2016, for-profit utilities could only purchase distressed municipal systems at depreciated book value. Now for-profit utilities can target well run, financially sounds systems at inflated prices. These inflated prices are passed directly on to their customers as higher rates (see attached Rate Comparisons). Rates will only continue to rise, impacting generations to come, with no quantifiable benefit. As such, any tightening or further restrictions to Act 12 in order to protect ratepayers is a step in the right direction. To underscore our support for these initiatives, PMAA adopted the following resolutions as part of its 2024 advocacy platform: