State Would Ditch Regulatory Oversight for Certain Wastewater Infrastructure Upgrades

Tom Johnson | March 10, 2020 | Energy & Environment, Water
BPU presents proposal as way of accelerating replacement and repairs, but Rate Counsel director says it’s ‘a solution in search of a problem’
Credit: Montgomery County Planning Commission from Flickr
An aeration tank at a wastewater treatment facility

The state is proposing to allow utilities to recover the costs of upgrading their wastewater infrastructure more rapidly and without traditional regulatory oversight, a system put in place almost a decade ago for regulated water companies.

The new rule proposal by the New Jersey Board of Public Utilities aims to accelerate investment in replacing and repairing aging wastewater infrastructure, a long-neglected problem projected to cost tens of billions of dollars, according to some estimates.

The proposal, however, would apply only to the 11 regulated wastewater utilities in New Jersey, but not the more numerous public municipal and county authorities that handle wastewater for their residents and businesses.

Given its small scope, Division of Rate Counsel director Stefanie Brand argued in written comments to the agency that the proposal, dubbed the Wastewater Systems Improvement Charge (WSIC), would have little overall impact on infrastructure in New Jersey.

“We see WSIC as a solution in search of a problem and we see little or no benefit to ratepayers from the enactment of such a rule,’’ Brand advised the agency.

A tilt in favor of investor-owned utilities?

“It is one of the ways the playing field is being tilted in favor of the investor-owned utilities,’’ agreed Peggy Gallos, executive director of the Association of Environmental Authorities, a trade group representing the public authorities. “This creates ways of bypassing the regulatory process.’’

BPU president Joseph Fiordaliso defended the proposal, arguing infrastructure drives the economy in New Jersey. “It is extremely important that we, as a state, get ahead of that,’’ he said.

The board has been aggressive in pushing utilities in the state to upgrade and modernize infrastructure, particularly electric and gas utilities.

Thomas Churchelow, president of the New Jersey Utilities Association, called the agency’s action an important step, saying the benefits of the WSIC are clear, allowing utilities to invest in their systems in an efficient and cost-effective manner.

“Accelerated investment in sewer infrastructure is important on a number of levels, but particularly for the health and safety of the state’s residents and economic development,’’ he said.

Bills could rise by $20 to $25 a year

According to agency staff, the proposed rule would likely increase customers’ bills by between $20 and $25 a year. Overall, the proposal would have a positive economic impact by leading to fewer unplanned repairs, reduced outages and fewer road openings, according to the draft rule.

The proposal is modeled after a similar system put in place for investor-owned utilities about a decade ago. But Brand noted the rule, adopted in 2012, led only four water utilities to ever utilize the mechanism for a variety of reasons.

“We expect the use of a WSIC will be similar and that such a rule would only benefit New Jersey American and SUEZ Water NJ,’’ Brand argued.

The rule proposal comes at a time when more local governments are interested in selling their wastewater, and, in some cases, water systems to the private sector, a trend driven by increasing costs to upgrade and fix aging infrastructure.

By adopting the proposed rule, Rate Counsel argued the accelerated capital spending would increase the burden on ratepayers to where it “is reaching the point at which affordability is becoming a significant issue.’’