Pa. Task Force Pushes Asset Management, Full-Cost Pricing

In testimony on Feb. 4 before the House Consumer Affairs Committee, Pennsylvania American Water President Kathy L. Pape said the state has reached a "turning point" in the challenge of fixing and replacing its aging water and wastewater infrastructure. Pape outlined a list of potential solutions, including proposed legislation to create a surcharge to help fund wastewater system improvements.

"Pipe will continue to corrode, erode, and break, thus affecting water quality and reliability," said Pape, who also serves as chair of the Pennsylvania Chapter of the National Association of Water Companies. "We have arrived not at a crisis, but at a turning point. We can react, or we can proactively adopt strategies to address the operational and financial issues we face."

Appointed by Gov. Rendell last year to serve on the Sustainable Water Infrastructure Task Force, Pape said the task force found that the state's water and wastewater systems need $36.5 billion for capital repairs and upgrades over the next 20 years. The task force also reported that Pennsylvania needs $77.1 billion for operations, management, and debt service over the next 20 years.

Pape advocated a number of recommendations from the task force that need legislative action to help address the state's infrastructure challenges:

  • Require asset management to ensure that all utilities maintain an inventory of assets, track their assets' conditions, and prepare long-term plans for rehabilitating or replacing major assets.
  • Move Pennsylvania toward full-cost pricing to ensure that system owners are charging customers the total cost of providing water service.
  • Ensure that fees collected for water/wastewater service are appropriately re-invested.
  • Adopt the Collection System Improvement Charge (CSIC). This proposed surcharge on customers' bills would enable wastewater utilities to recover fixed costs of revenue-neutral system improvement projects between base rate cases.

The CSIC legislation would be modeled after the Distribution System Improvement Charge for water utilities, which the Pennsylvania legislature passed in 1996. "The enactment of CSIC will provide an incentive to speed up the reconstruction of wastewater infrastructure by reducing the lag in recovering the costs of system improvements through small, gradual increases," said Pape. "Thus, you can avoid rate shock for customers."

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