Press Release

PUC Approves PAWC Request to Increase Surcharge for Infrastructure Improvements.

Published on 7/11/2007

Filed under: Water and Wastewater

HARRISBURG –The Pennsylvania Public Utility Commission (PUC) today approved a Pennsylvania-American Water Co. (PAWC) request to increase its distribution system improvement charge (DSIC) cap by 2.5 percent.

“The DSIC mechanism is one of the most important regulatory tools of the past decade,” said Chairman Wendell F. Holland in a motion. “Allowing the higher DSIC rate today is consistent with the legislative intent to economically accelerate infrastructure remediation.”

The Commission voted unanimously to allow the company to increase the surcharge cap from 5 to 7.5 percent.  Commissioner Terrence Fitzpatrick issued a statement. Commissioner Kim Pizzingrilli also issued a statement.

When the cap is reached, the maximum increase for an average residential customer would be about $1, increasing the surcharge from $1.75 to $2.75 a month. In May 2007, the Commission’s Office of Administrative Law Judge issued a recommendation denying the company’s petition.

Implemented in 1997, DSIC is an automatic adjustment charge that enables companies to recover certain infrastructure improvement costs between base rate cases through a quarterly surcharge on customers’ bills.  The DSIC resets to zero when a company files a base rate case or if the utility is over-earning. The company also must notify customers of any change in the DSIC. An annual reconciliation audit is conducted by the PUC to ensure that no over-collections or under-collections have occurred.

The DSIC allows water companies to use a surcharge to fund more upgrades of aging infrastructure that would not otherwise be feasible at a reasonable rate for customers. Pennsylvania was the first state in the nation to use the DSIC.  Because of the DSIC, Pennsylvania water customers experience improved water quality, greater rate stability, improved fire protection and increased water pressure.  Customers also experience fewer main breaks and service interruptions.

In 10 years, the DSIC has had substantial impact on accelerating infrastructure remediation in Pennsylvania.  Prior to the DSIC, PAWC projected that it would take about 225 years to upgrade its entire system. With DSIC, the projected timeframes for upgrades of the entire distribution systems is about 170 years. Now with an increased DSIC cap, the projected time for upgrades is 117 years, more closely matching the expected service life of the system.

The Pennsylvania Public Utility Commission balances the needs of consumers and utilities to ensure safe and reliable utility service at reasonable rates; protect the public interest; educate consumers to make independent and informed utility choices; further economic development; and foster new technologies and competitive markets in an environmentally sound manner. For recent news releases, or more information about the PUC, visit our Internet homepage www.puc.state.pa.us.

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Docket No. P-00062241

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