Phila. Council to vote on proposed water-rate board

Mayor Nutter (left) and Water Commissioner Howard Neukrug examine a main at 21st and Bainbridge Streets. ELISE WRABETZ / Staff
Mayor Nutter (left) and Water Commissioner Howard Neukrug examine a main at 21st and Bainbridge Streets. ELISE WRABETZ / Staff
Posted: June 17, 2013

Philadelphia voters in November overwhelmingly approved a measure aimed at fixing what City Council President Darrell L. Clarke regarded as a serious flaw: The city water commissioner could approve his own rate-increase requests.

"We wanted a more balanced approach," said Clarke, "as opposed to the current process, which said, 'This is what I want, this is what I need. OK, I'm going to give it to myself.' "

On Thursday, Council is set to vote on a bill that would establish a five-member commission formally known as the Philadelphia Water, Sewer and Storm Water Rate Board. The panel would have the authority to review and approve the department's rate requests, taking the decision out of the commissioner's hands.

But anybody expecting the new board to rise up and roll back rates is likely to be disappointed. Robert W. Ballenger, a Community Legal Services lawyer who acts as the city's public advocate, said the new system "would result in less meaningful oversight and more arbitrary rate-making" than the one it would replace.

Ballenger testified last week at a hearing of Council's Committee on Law and Government that the financial standards included in the bill would tie the board's hands. They would require it to set rates high enough to cover operating expenses and debt service and to build up a reserve of 120 days of outlays.

The reserve requirements are so high, Ballenger said, the new law would require a "substantial" increase the first time the Water Department's rates come under review, expected to be in 2015.

The bill, which Clarke's staff drafted in close consultation with the Water Department, makes no provision for an independent staff or consultants to advise the board's unpaid members.

The members would be mayoral appointees confirmed by Council, filling staggered five-year terms.

All would need a minimum of five years' professional experience in administration, finance, utilities, engineering, or water-resources management. One must be experienced as a "consumer advocate in utility rate cases." One must be an industrial or commercial ratepayer with knowledge of stormwater rates.

One of the appointments, Clarke said, could be the water commissioner himself.

The new process would give the board 90 days to rule on a rate-increase request. Under the current system, an administrative law judge was appointed to make a recommendation after holding adversarial hearings across the city.

The last rate request, which resulted in a negotiated settlement last year, took 11 months to complete.

"Ninety days is certainly an unreasonable time frame to conduct this important work," Ballenger testified.

Howard Neukrug, the city's water commissioner, called the proposed rate-making system "thorough, transparent, fair, and effective."

He praised the abbreviated rate-making system as a cost-saving measure that would add predictability to the process. The current process costs about $2 million to conduct.

Neukrug also supported the "basic financial protections" in the bill, which are designed to assure bond markets that water rates will be high enough for the department to repay its debts.

"It's always a concern when you take a process that seems to be working and you change it," he said. "Given that, I think we have a new process that has sufficient boundaries."

Clarke said in an interview last week the bill achieves his primary aim - to establish a check on the water commissioner's power.

He said the shortened rate-review process should not be a problem.

"Ninety days is the time it takes us to do the budget for the entire City of Philadelphia," he said.

And though the bill does not provide for support staff to advise the new board, he said, "we will make sure there is the appropriate resources." The board can always rely on the Water Department for data, he said.

Ballenger's concerns appeared to get little support. As he testified Tuesday, Council members chatted among themselves until Councilman William K. Greenlee asked the public advocate to wrap up his testimony. Council had no questions for any witness. The hearing lasted 12 minutes.

Mark McDonald, Mayor Nutter's spokesman, said that if the bill is approved, the mayor intended to sign it.

Contact Andrew Maykuth at 215-854-2947,, or follow @Maykuth on Twitter.

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