Aqua softens rate increase to reflect tax savings

Aqua softens rate increase to reflect tax savings

By Christina Dimeo


Water bills went up for Aqua Virginia customers Feb. 15 – but not as far up as previously thought.

Aqua modified its rate increase request to the State Corporation Commission (SCC) to reflect savings realized by the new tax law.

The Tax Cuts and Jobs Act of 2017, which went into effect Jan. 1, reduced Aqua’s federal corporate income tax rate from 35 percent to 21 percent.

Aqua builds its tax expenses into its rate structure, and based its most recent rate increase request on tax law as it existed last August. Now that the tax law has changed, Aqua’s requested rates would have netted the company an estimated $667,832 in extra cash.

Soon after the new tax law took effect, the SCC told all regulated utilities to start paying attention to how much money they were over-collecting. “If the federal corporate tax rate has been reduced, then rates need to be reduced,” said Ken Schrad, SCC spokesperson.

Utilities with current rate cases – like Aqua – had a couple of options. They could continue to charge rates that were suddenly higher than necessary, and then refund the money with interest at the conclusion of their rate case, or they could lower their interim rates. “Either way, that amount was coming back to ratepayers,” Schrad said.

Aqua chose to go ahead and lower its interim rates. “This reduction was Aqua’s initiative to enable our customers to benefit from the federal tax code changes,” said Gretchen Toner, Aqua spokesperson, and John Aulbach, president of Aqua Virginia. “This should be good news for customers.”

The company filed the appropriate paperwork Jan. 24, and on Feb. 6 SCC hearing examiner D. Mathias Roussy, Jr., issued his approval. “By incorporating the effects of the intervening federal tax cut now, rather than after the conclusion of this proceeding, ratepayers will benefit from reduced interim rates, while [Aqua] will mitigate its legal obligation for potential refunds,” Roussy wrote. “Such action is in the public interest.”

Interim rates

Aqua’s rate case is ongoing, which means its requested rates have not been approved. But the SCC allows utilities to begin charging their requested rates while the rate case plays out, as long as they refund with interest any amount they overcharged when the rate case concludes. So while Aqua’s interim rates may not be official, customers are paying them now.

The SCC gave Aqua permission to implement its original, higher interim rates starting Feb. 10, but the new tax law threw a wrench into the timing. Aqua began charging its adjusted interim rates Feb. 15, and never charged the original interim rates.

And just in case there was any confusion, Aqua confirmed that the new interim rates equate to the new permanent rates it seeks to impose. “From a technical and legal standpoint, the rates we originally proposed remain the same,” said Toner and Aulbach. “However, we filed a motion to reduce the interim rates, and those reduced interim rates are now our proposed new rates.”

By the numbers

The tax savings allowed Aqua to eliminate its requested sewer rate increase entirely – an increase that would have yielded an additional $400,000 across the state.

Currently Aqua customers pay a base rate of $31.26 per month for sewage service and $15.05 per thousand gallons of sewage usage. Those rates will now remain in effect.

Aqua originally sought a statewide water revenue increase of $1.49 million, but tax savings have lowered that amount to $821,000.

The company is now charging customers $17.92 per month for water service – up from $17.62 – and $7.54 per thousand gallons of water usage – up from $6.74.

Aqua provides water and sewer service to nearly 5,000 locations in Lake Monticello, Sycamore Square, Nahor Village and Piedmont Village. The company also provides water to 40 locations in Columbia, 31 in Palmyra, and 28 in the Stage Coach neighborhood.

The average monthly water and sewer bill for Aqua customers used to be $118.61. Before the tax savings adjustment, Aqua was seeking to raise that total to $127.38. Now the average customer bill is $121.47.

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