New Jersey American Water rates will increase 5 percent, adding nearly $2.50 to an average monthly water bill of $50.
The rate hike approved by the state Board of Public Utilities on Tuesday was one-third of the company’s initial request in July, which sought to add more than $7.50 to the average bill for use of 6,500 gallons per month.
The approved rate was negotiated by the state Division of Rate Counsel, the utility and other parties, BPU spokesman Greg Reinert said.
The increase will raise about $30 million for the company and goes into effect immediately, he said.
The Voorhees-based, investor-owned utility said it wanted the increase to fund some of the $300 million in infrastructure projects to maintain nearly 9,000 of miles aging underground water and sewer pipes, to rehabilitate water storage tanks, to build new water-treatment plants and to install three solar projects that produce two megawatts of electricity.
But the rate request drew the ire of state legislators, who opposed the company’s fifth rate increase in eight years. These included a 7 percent hike in 2010, 15 percent in 2008, 12 percent in 2007 and 8 percent in 2004.
Also, the utility’s initial proposal included nearly $6 million in management incentive bonuses and fees for lobbying, promotions and marketing.
The New Jersey Senate passed a resolution in March asking the Division of Rate Counsel, which represents the public in rate cases, to stop negotiations and pursue a $46 million rate decrease.
At the time, Stephanie Brand, the director of the Division of Rate Counsel, said she would not cut off negotiations, having to consider litigation risks if the case went before judicial proceedings, as well as issues involving proper funding for safe operations and transportation of water. Brand said she would not agree to such executive bonuses, which had been proposed by other utilities.
Water utilities historically get less than they ask for in rate cases. New Jersey American Water asked for a 13 percent increase in 2010 before a 7 percent increase was granted.
New Jersey American Water, a subsidiary of American Water, has about 180,000 users in Atlantic and Cape May counties, representing 61,000 accounts.
The company serves Egg Harbor Township, Galloway Township, Absecon, Northfield, Pleasantville, Linwood, Somers Point, Ocean City, Upper Township and part of Middle Township.
The utility also manages Avalon’s water system, although the borough recently awarded a contract with Middlesex Water Co. that will start in July.
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