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Sorting Out Depths Of Mess New York American Water Made On LI Will Take Locals, State—And Now Possibly Feds—A While; New Company-Funded ‘Independent Monitor’ Wouldn’t Have Ability To Block Fed Dollars

Senator Says Eye-Popping Rate Hikes Soaking Consumers With Questionable Billing Practices Are Relevant To The Fed Funds National Company Might Have Received Or Seeks

Schumer: The Steady Drip-Drip-Drip Of Dubious Charges, Rate Hikes & Billing Demand Feds Investigate   

Standing with homeowners soaked by burgeoning water bills and on the heels of an interim agreement between New York American Water and the State of New York, U.S. Senator Charles Schumer is revealing that the company is in line to potentially receive substantial federal funds that are allocated to New York state through the federal government’s Drinking Water State Revolving Fund (DWSRF) used for improving drinking water infrastructure across the state, usually in the form of low interest loans or sometimes grants. Moreover, Schumer is also revealing the firm also already has received federal dollars. The Senator wants the Government Accountability Office (GAO) to investigate the eligibility of New York American Water and parent, American Water Co. to receive federal dollars.

“The steady drip-drip-drip of dubious charges, rate hikes and bad billing demands the federal government step in and take a deep dive into New York American Water,” said U.S. Senator Charles Schumer. “And there is precedent and reason why the feds can and should take a look, too. First, when New York American Water acquired Aqua America, Inc, the New York State Drinking Water State Revolving Fund – which is supported with federal money –supported nearly $68 million of the company’s long term debt. Second, New York American Water has been listed to potentially receive more funds from the New York State Environmental Facilities Corporation (EFC), via the same DWSRF fund, and those dollars flow directly from the feds.”

Schumer, today, said American Water’s effort to seek the use of any federal dollars demands enhanced scrutiny by an independent federal agency, given American Water’s New York rate hike madness that began this past June. New York American Water is currently listed on the State of New York’s ‘Intended Use Plan’ for DWSRF funds and may apply for up $20 million in debt to cover costs of water main replacements, upgraded distribution systems, and a new water treatment facility.

Schumer also pointed out that parent company American Water has disclosed the taking of federal dollars in their own annual report. “…however, we have also issued debt through our regulated subsidiaries, primarily in the form of tax exempt securities or borrowings under state revolving funds, to lower our overall cost of debt,” the company writes.

Therefore, Schumer believes that (GAO), an “independent, nonpartisan agency that works for Congress,” should investigate. The GAO, “often called the ‘congressional watchdog,’ investigates how the federal government spends taxpayer dollars.” Schumer believes they are best suited to examine New York American Water, and might also look at parent-company American Water, too. Schumer said American Water’s eligibility to receive federal funds should be called into question given the business practices of its New York subsidiary, along with misleading testimony it allegedly provided to the New York State Public Service Commission, which green-lighted rate hikes on thousands of Long Island consumers.  Schumer said these reports raise concerns GAO should consider as part of determining the continuation of American Water’s federal fund eligibility.

“New York American Water’s tactics to deploy a rate hike, make a mess of billing and capitalize on a newfound ‘conservation fee’ are aggressive money-raising tactics that raise serious concerns the federal government should look further at on behalf of consumers and Long Islanders,” Schumer said.

Schumer also said Long Islanders want more action to be taken here and that a federal investigation could help locals and state officials piece together how exactly things went so wrong with rate hikes, billing and other consumers concerns. Newsday reported one customer saw an increase in their monthly bill of $281 from $81. One other saw an increase go from more than $1,900 from an original $48. Schumer explained that American Water, as a national, publicly-traded company has also had issues in other states, like Pennsylvania, and that it makes sense for the federal government to investigate these activities given a similar storyline appeared there a year ago.  

According to the Morning Call, in August of 2017, Pocono Mountain residents spoke out against a $108 million dollar rate increase proposal. Pennsylvania-American Water filed in April of that year for the 17 percent rate request. According to the reports, bills for business and industrial customers also rose. This is just one other instance that raises questions.

Schumer says the GAO should look into how the company made their case for the Pennsylvania rate hike, as in if it was anything like how they made the case to the New York PSC. Schumer said an investigation like this, something with a federal lens might shine more light on the firm and the business practices now in question.

As part of these hikes, a state report released on June 29th by the State Department of Public Service revealed deception among company employees, citing that New York American Water’s rates and regulatory team was at fault for requesting a hike in rates with miscalculated property taxes. These rate-hike proceedings were first requested in 2016 for the Sea Cliff water district. NY American Water Corp was aware of the miscalculated tax figures and did not disclose that information to the state Public Service Commission. The Commission ultimately approved the rate increase likely due in-part because of this potential deception, which resulted in customer overcharges. The overcharges have amounted to more than $281,000.

"Thank you to Senator Schumer for advocating for Nassau County’s residents as we work to address recent utility billing concerns,” said Nassau County Executive Laura Curran. “Customers deserve a fair and comprehensible billing system, and as public officials it’s our duty to ensure that our residents are getting a fair shake,” said Nassau County Executive Laura Curran.

“I want to thank Senator Schumer for bringing federal scrutiny to this issue and supporting Nassau County residents as we continue to push for answers and get results, “ Nassau County Comptroller Jack Schnirman said.  “Together, we will keep asking questions and ensure proper oversight is put into place so this can’t happen again.”

“So long as some of our neighbors have to depend on private enterprise for water, it is imperative that government maintain necessary oversight and protection.  Senator Schumer has an outstanding record of fighting for the American middle class, and I am proud to stand with him today to demand an investigation into the conduct of New York American Water,” said Assemblyman Chuck Lavine

“For the past two years we have been repeatedly hearing from NY American Water that the reason our rates were so high was because of property taxes.  The truth is now out that the real reason for the exorbitant cost for water in the Sea Cliff district is greed and gross improprieties by this $18.4 billion corporation. It is now undisputed that NY American Water intentionally withheld material facts in the recent rate proceedings. We applaud Senator Schumer for championing our cause as move forward in our quest for public water,” said Bruce Kennedy, Executive Board Member of North Shore Concerned

“No one in America in 2018 should be denied affordable public water. Water is a basic human right NOT a commodity to be traded on the stock exchange,” said homeowner Agatha Nadel

Complaints against NY American Water Corp. have been mounting since the release of the state report. According to reports, the company has received 632 complaints from customers. These high-bill complaints are from both South Shore customers and customers in the Sea Cliff District. New York American Water has attributed the spike in water bills to the 2017-approved conservation rate. The conservation rate went into effect in April, which has increased the per-gallon charge as customers use more water during the summer months.

According to the company, New York American Water serves about 350,000 customers in dozens of communities throughout the state.  The company was founded in 1886 and is the largest public water utility in the United States, providing drinking water and wastewater services to approximately 15 million people in 16 states, making them a relevant candidate for a GAO investigation.

A copy of Schumer’s letter appears below.

Dear Mr. Dodaro:

I write to request that the GAO examine whether the Environmental Protection Agency (EPA) is using all of its oversight tools to monitor the states implementation of the revolving funds and more specifically conduct a review of American Water’s possible use of EPA Drinking Water State Revolving Funds (DWSRF) and whether it is consistent with the intent of the law that established the DWSRF program. I am concerned that American Water is not complying with the intent of the DWSRF as they employ questionable business practices and rate charges while they prepare to access low-cost DWSRF loans. Specifically, I am concerned that American Water could be using these practices as a backdoor way to implement rate hikes under the guise of water conservation improvements, an action that I believe is contrary to Congress’s intent with DWSRF funding.

When Congress established the DWSRF program in 1996, it did so with the intent of establishing a long term financing vehicle to ensure that communities would continue to have access to safe drinking water. Though states were provided with a great deal of flexibility in distributing these funds, the goal was to ensure that communities would be able to finance needed drinking water infrastructure improvements. Over the past two decades, the program has been a great success. However, I am concerned that American Water and others may have taken advantage of this program in ways contrary to its intent.

American Water is the largest and most geographically diverse, publicly-traded water and wastewater utility company in the United States, as measured by both operating revenues and population served. American Water issues debt through regulated subsidiaries, such as NY American Water, primarily in the form of tax exempt securities or borrowings under state revolving funds, in order to lower the company’s overall cost of debt. The clear intent of the DWSRF is to provide low cost loans for infrastructure projects that will provide consumers with clean drinking water. In turn, DWSRF loans should reduce the capital costs that would otherwise be passed on to customers. But American Water has repeatedly imposed rate-hikes that appear inconsistent as the company also seeks federal funds to lower overall costs.

The provision of water is a public need and the entity that provides this service must be held publicly accountable. Unfortunately, it appears that American Water is using federal assistance to put their shareholders before the residents who simply seek safe, clean drinking water. Should you have any further questions, please do not hesitate to contact my staff. Thank you for your prompt attention to this urgent request.


Charles E. Schumer

US Senator