Beyond the question of the water company's priorities, WV American Water's request for a 28% rate increase highlights even more fundamental problems with the business model of private water in West Virginia. WV American Water has been operating in an area with declining population and declining sales - and because water rates are set per gallon of water sold, declining sales have meant that the utility tends to collect less revenue than its rates were actually designed to collect. Additionally, WV American Water typically experiences a delay between when it makes an investment and when it gets to start recovering that money in rates. Those two factors have not been good for the company.
WV American Water typically earns profits of 4-5% — much lower than the overall 8-9% profit rate earned by its parent company, New Jersey-based American Water Works. American Water Works is a very profitable company (and its shareholders have seen their dividends increase every year since 2008 ), but WV American Water has argued that the low profit rate in West Virginia makes investing in West Virginia’s infrastructure unattractive. As stated by former WV American Water president Wayne Morgan in a 2010 rate case, “Why would American Water – or any company for that matter – invest in West Virginia when it can earn much more in Pennsylvania or New Jersey?”
Now WV American Water is seeking a profit rate of 10.75%, more than double what it has earned in recent years.
Meanwhile, in deciding a rate case, the Public Service Commission is legally obligated to "balance" the interests of utility customers with the interests of the utility itself - including its interest in earning a profit.
This is not a system that is likely to result in the best outcome for WV ratepayers - and it hasn't. Nor is it a system likely to result in the least expensive solution to financing our growing infrastructure needs.
We need a public water system, where the money that we currently send out of state in shareholder dividends can stay here and be invested in fixing our infrastructure.
While we're pushing for a public water system, we can't let the company off the hook for its flawed priorities. We need your voice at next week's public hearing at the Public Service Commission - even as we work over the long term to create a public water system that is transparent, accountable and fair.