PWSA defends rate increase at PUC hearing

For the last five months, more than 5,000 pages of testimony and exhibits have been flowing into the Pennsylvania Public Utility Commission (PUC) regarding the Pittsburgh Water and Sewer Authority’s (PWSA) plan to raise its rates by 70% over the next three years.

None of that testimony is from the City of Pittsburgh, which was granted the right to intervene in the case by the PUC but has not officially taken a stand for or against the increase.

Pittsburgh Public Schools, on the other hand, has come out against the stormwater charges that authority levees on water-impervious areas.

In an unusual exchange, the school district’s arguments were challenged by an attorney for the city who questioned why the school district, which would see its costs rise by $320,160 under the proposed rate increase, could not raise taxes or cut costs to cover the fee.

In written testimony to the PUC, Pittsburgh Public Schools Chief Operations Officer Michael McNamara said the increase in the stormwater fee “would have a large impact on the district’s budget.”

Whitney Snyder, a Harrisburg-based attorney who represented the city in a telephone hearing on Oct. 4, seized on whether the increase would have a large impact since the overall school district budget, as reported on its website, is $675 million.

She also pointed out that the district is funded, in part, by local taxes, and questioned McNamara’s testimony that the sources of school district funds “can’t be quickly or easily increased to cover higher expenses.”

Whitney then asked whether it was true that the school district could cover the cost of higher water rates by raising taxes, to which McNamara said there are rules about how the district can raise taxes.

“But you don’t know of any rules that apply here that prevent the school district from raising taxes to cover stormwater costs,” she replied.

Later, Snyder also questioned Eric Callocchia, a partner with Texas-based NewGen Strategies & Solutions, who consulted with the school district about the impact of the rate increase.

In his testimony, Callocchia said, “The school district is concerned that the stormwater fees it is now obligated to pay are large, growing, have a huge impact on the school district’s operations and budget, and ultimately adversely impact the district’s ability to achieve its vision and mission.”

Snyder pointed out that the increase was a small percentage of the school district budget.

“The huge impact was not just a financial one,” Callocchia testified, explaining the impact would be on how the district could spend that money, whether it be on supplies or the number of teachers hired.

A spokesperson for the mayor’s office did not respond to requests for comment on the line of questioning.

Office of Consumer Advocate

Thousands of pages of testimony were submitted in the case, with organizations providing statements in opposition to the increases and the PWSA responding to those objections.

The Pennsylvania Office of Consumer Advocate (OCA) objected both to the amount of the increase and the authority’s proposal to raise rates over a three-year period.

In testimony to the PUC, one of OCA’s consultants, Jerome Mierzwa, managing director of economic and management consulting firm PCMG and Associates, said, “PWSA failed to propose even the basic performance metrics for an MYRP (Multi-Year Rate Plan) that one would expect, including a process, timeline and adequate processes for reconciliation of PWSA’s actual expenses, actual revenues, actual capital costs and measures of system reliability and quality of service.”

As one example, Mierzwa pointed to the authority’s capital budget that is included in the proposed increases. 

Looking back he testified, “PWSA has fallen short of spending its projected capital improvements budget every year from FY 2019-FY 2022. As a recent example, for 2022, PWSA projected a spend of $158,934,290 but it only spent $111,140,185, meaning that PWSA over projected the budget by almost $48 million (30%).”

Mierzwa went on to point out that capital spending makes up 55% of the costs that the authority says it will need over the next three years.

“The practical reality of these facts is that while PWSA has significantly underspent its capital budget since it became a public utility in 2018, over half of the revenue PWSA now requests is built upon the assumption that PWSA will now not only meet its spending projections, but that it will actually double its spending.”

Edward Barca, PWSA’s director of finance, countered in his own testimony that the budget is designed to pay back the debt on capital spending. 

He added that if the authority accomplishes fewer projects, it doesn’t eliminate the need for the work, it just means the projects will be done later and the money still needs to be there.

Employee pay and CEO bonus

The Office of Consumer Advocate also submitted testimony from Dante Mugrace, a consultant for PCMG and Associates, who pointed out that rate increases assume that all of the positions at the authority are filled, though there is generally a 12.61% vacancy rate. 

Barca disputed those numbers, saying there are more employees now than Mugrace counted.

Mugrace also opposed the bonuses for PWSA Chief Executive Will Pickering, who received a $44,550 bonus in 2023, according to the PWSA’s filing, and is expecting a proposed bonus of $47,223 for fiscal year 2024.

Before becoming a consultant, Mugrace was the bureau chief of rates in the water division for the New Jersey Board of Public Utilities.

Mugrace said the problem with the proposed bonus for Pickering is that there are no metrics attached. 

“PWSA did not provide any performance goals or metrics related to the receipt of money attributable to the Chief Executive Officer,” he testified.

Barca rebutted that the PWSA’s board annually sets the goals it wants the CEO to achieve. “This incentivizes the Chief Executive Officer to continue to improve all aspects of the PWSA.”

PWSA Senior Manager of Public Affairs Rebecca Zito did not provide Pickering’s salary by deadline, but according to the website govsalaries.com, Pickering’s total compensation for 2022 was $249,309. 

A lower rate proposal

After going through the PWSA’s proposed 2024 budget department-by-department, Mugrace said that his calculations showed that the authority’s proposed 2024 increase of $22.5%, or nearly $47 million, was too high. Instead, he said, the authority could get by on a $30.6 million increase or 14.7%.

The PWSA, which disputed the consultant’s premises, did not have a specific response to the lowered rate increase.

Impact on low-income residents

Pittsburgh United, which describes itself as a coalition of community, labor, faith and environmental organizations, has also objected to the rate increases.

In testimony from Harry Geller, an attorney with the Pennsylvania Utility Law Project, the organization pointed out that the authority has already raised rates by 97% for a typical household since 2016 and the proposed increase will bring that to 142% since 2016.

Further, Geller said that while the PWSA’s program to help low-income residents is estimated to serve 20,000 customers, the authority only has 4,751 customers enrolled as of June 2023. 

To be eligible, a family has to be below 150% of the federal poverty line, which is $56,250 for a family of four.