The House Consumer Affairs Committee this week held a hearing on issues related to the condition of Pennsylvania’s energy, water, wastewater and telephone infrastructure

Witnesses presenting testimony on drinking water infrastructure issues raised concerns about the ability of small water and wastewater systems to pay for rehabilitating aging infrastructure to meet current standards.

John Hollenbach, Vice President and Manager of United Water Pennsylvania, said small water and wastewater systems have an increasingly difficult time finding the revenue needed to comply with water quality standards. He suggested the Public Utility Commission be given the statutory authority to impose Collection System Improvement Charges, like water systems now have, to recover those costs and give investor-owed systems greater access to tax-exempt financing.

Terrance Fitzpatrick, General Counsel to the Electric Power Generation Association, said consideration should be given to the impact on electric generation infrastructure when environmental standards are set because Pennsylvania’s competitive market for electricity means investors are not assured of recovering their investments like under a regulated electricity market.

Fitzpatrick noted water utilities have successfully used the Collection System Improvement Charges to improve infrastructure and recommended the Public Utility Commission adopt a uniform policy that would allow other utilities to do the same. He pointed to the need for more investment in power transmission lines as an example.

J. Michael Love, President and CEO of the Energy Association of Pennsylvania, said focusing on the needs of aging infrastructure was long overdue and also recommended the adopting of a System Improvement Charge to upgrade the electric transmission system.

Michael Welsh, from the PA AFL-CIO Utility Caucus, said System Improvement Charges may work as an incentive to eliminate preventive maintenance programs and instead focus utilities on capital project improvements and urged caution in their adoption.

Sonny Popowsky, the Consumer Advocate for Pennsylvania, said for the most part Pennsylvania’s natural gas, electric and public water infrastructure is sound and it was important to ensure that utilities meet their infrastructure improvement obligations in the most cost-effective way possible. He said System Improvement Charges only raise utility rates to recover one type of cost and do not offer the opportunity to look over the entire rate structure to see where rates could be lowered.

Wendell Holland, chairman of the Public Utility Commission said the existing System Improvement Charges for water companies adopted 10 years ago have worked to fund upgrades to aging infrastructure at a rate that would not have been possible otherwise.

He noted the PUC does not have the statutory authority to adopt System Improvement Charges for other utilties, and said, “I strongly encourage the legislature to consider enacting a distribution system improvement charge that would allow wastewater, electric and natural gas utilities to make infrastructure improvements that would go a long way toward ensuring the safety and reliability of the systems that transverse the state.”

The Committee is chaired by Rep. Preston (D-Allegheny) and Rep. Godshall (R-Montgomery).

9/14/2007