CHICAGO, May 23, 2024
/PRNewswire/ -- Testimony filed by the Citizens Utility Board (CUB)
has uncovered about $50 million in
overcharges buried in Illinois American Water's proposed rate hike,
criticizing the company for seeking an excessive profit rate and
charging customers millions for executive bonuses, CUB said
Thursday.
The consumer group said the company's rate-hike request
highlights the need for Springfield to pass consumer protections for
private water customers across Illinois.
In testimony filed with the Illinois Commerce Commission (ICC)
Wednesday, CUB argued that Illinois American's $152.4 million rate-hike request should be cut by
at least 32 percent, or $48.78
million. CUB hopes to add at least $7
million to those reductions by adopting other testimony
filed by the staff of the ICC and the Illinois Attorney General's Office.
"Our testimony reveals what Illinois American Water customers
have known for years–that the company's rates are unjust and
unreasonable," CUB Executive Director Sarah
Moskowitz said. "Consumers just want clean and affordable
water–they shouldn't have to cover bonuses for Illinois American
executives and exorbitant profit rates for corporate
shareholders."
In January, Illinois American Water, the largest
investor-owned water and wastewater utility in Illinois, serving about 1.3 million customers,
filed a $152.4 million (39.5 percent)
rate-hike request with the ICC. The company has already won
$120 million in rate hikes in less
than a decade–an $85 million increase
in 2022 and a $35 million hike in
2016.
Illinois American says the latest rate hike would increase
average residential monthly water service bills by about
$24 per month, while the average
wastewater bill would increase by about $3 to $5 per month.
Actual rates would depend on a customer's service
area.
In this case, CUB partnered with Illinois Industrial Water
Consumers, which represents large commercial customers, and the
Village of Bolingbrook, which has
suffered under high Illinois American bills. The testimony, from
Christopher Walters and James Leyko, of Brubaker & Associates, Inc.,
a Missouri-based consulting firm
that specializes in utility regulation, recommended $48.78 million in reductions:
- Return on Equity and Common Equity Ratio. Illinois
American is pushing to increase its Return on Equity (ROE), or
profit-rate for shareholders, from an already excessive 9.78
percent to 10.75 percent. Plus, it wants a "common equity
ratio"—how much of the utility's financing comes from issuing
stocks–ranging from 52 percent to 54 percent. CUB recommends a more
reasonable ROE of 9.35 percent and capping the "common equity
ratio" at 50 percent. These adjustments cut the rate hike by
$27.28 million.
- Executive Bonuses. CUB argued that customers
shouldn't cover bonuses the company gives to executives for
reaching financial goals that only benefit shareholders. That
recommendation cut Illinois American's proposed increase by another
$5.8 million.
- Two-step Rate Hike. Illinois American proposed
dividing its rate hike into two steps, with the bulk of the
increase hitting customers initially in early 2025, and a second
wave adding to the increase in early 2026. Utilities do not
typically structure their requests in this manner, in fact no
witness from Brubaker, the Attorney General's Office or ICC staff
had ever seen this allowed in Illinois. CUB argued for fully rejecting the
second step, because aside from it being a completely unprecedented
request, it was calculated in a way that is unfair to customers and
is designed to further enrich the company. That represented a
$15.7 million reduction.
The ICC will rule on the rate case, Docket #24-0097, late this
year, and new rates would take effect in early 2025. Customers can
sign a petition against the rate hike at
CUBActionCenter.com, and file a public comment against the
increase directly with the ICC.
Illinois American's rate-hike request is the latest burden faced
by its customers, who for years have contacted CUB to complain
about excessive water bills that are fueled by two factors:
- Illinois American won state legislative approval to add a
"Qualifying Infrastructure Plant" surcharge to bills that has
needlessly increased costs for customers.
- State law allows Illinois American and Aqua Illinois–the
state's two biggest private water utilities–to buy up depreciated
water and wastewater systems across the state and charge their
customers to cover 100 percent of the acquisition
costs. CUB Water Tracker, our special online center
monitoring the problem, found that these for-profit companies have
purchased 56 systems since 2013, when state legislators passed a
law that allows these water utilities to pass acquisition
costs—$402 million and
counting—onto their customers.
While customers suffer under these pro-utility policies,
American Water, Illinois American's parent company, has prospered,
raking in $1.8 billion in profits
over the last two years—including $820
million in 2022 and a 15 percent increase to $944 million in 2023.
"We hope that Illinois American's exorbitant rate-hike request
shines a light on how private water customers have suffered in
recent years," Moskowitz said. "There is a profound need for reform
to rein in Illinois' biggest
private water company and protect its customers."
In the 2024 legislative session in Springfield, CUB pushed for passage of House
Bill 5157 (the "Water Affordability and Accountability Act"), which
would, among other things, remove the QIP surcharge; require
shareholders to cover most of the price tag when they buy a local
water/wastewater system; and require local approval through a
referendum before Illinois American or Aqua could buy up municipal
systems.
The Citizens Utility Board (CUB) is celebrating its 40th
anniversary as Illinois' leading
nonprofit utility watchdog group. Created by the Illinois
Legislature, CUB opened its doors in 1984 to represent the
interests of residential and small-business utility customers.
Since then, CUB has saved consumers more than $20 billion by helping to block rate hikes and
secure refunds. In 2024, CUB is celebrating its 40th anniversary of
consumer advocacy work. For more information, call CUB's Consumer
Hotline at 1-800-669-5556 or visit CUB's award-winning website,
www.CitizensUtilityBoard.org.
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SOURCE Citizens Utility Board