NEW JERSEY—An independent state consumer agency is leading a legal battle over Suez North America’s proposed plan to add a long-term increase to all its water customers’ bills to replace customer lead lines.
Suez, a privately owned utility, contends customers will not remove lead service lines without the discounted replacement program but provides few details about possible ratepayer costs in its application for a pilot customer lead replacement effort.
Its initial filing with the state Board of Public Utilities (BPU) in March did not indicate a possible surcharge and it was unclear how many customer pipes need to be replaced.
According to Stefanie Brand, director of the New Jersey Division of Rate Counsel—which as an an independent agency in the Treasury Department advocates for ratepayers before state public utility boards—all issues in the case relate to how Suez will get paid for replacing customer lead lines.
Brand said Suez’s proposal goes against “very well established law that they cannot charge us [ratepayers] for property they don’t own.”
She added that the practice “has never been done before in New Jersey” and would set “a terrible precedent.”
Brand said Suez’s proposal to recover its costs for lead-line replacement by boosting their base water rate would allow Suez to “profit” from its replacement of customer-owned pipes.
Brand said Suez must come up with alternate financing options because “the idea of turning back 100 years of law [for Suez] is just not legal.”
The “bigger issue,” she said, is that “if you allow them to do this, it’s going to happen everywhere.”
Suez proposed a pilot program to replace customers’ lead service lines about two months after it revealed mid-January that 15 of 108 homes tested over the past six months in 2018 showed elevated lead levels—readings above the federal standard of 15 parts per billion.
The utility was required to make the lead testing results public because more than 10 percent of samples exceeded federal lead standards.
The U.S. Environmental Protection Agency has said there is no safe level of lead in drinking water because lead is a toxic metal that affects cognitive abilities even at low exposure levels.
Lead, a natural element, accumulates with exposure to poison the body. Although children are at greater risk of effects of lead poisoning, exposure via drinking contaminated water can sicken adults.
Suez North America, founded as the Hackensack Water Company in 1869 and later named United Water, is headquartered in Paramus and serves approximately 200,000 residential and business customers in 57 municipalities throughout Bergen and Hudson counties.
In January Suez announced that it was expanding in New Jersey, acquiring four utility operations in December and adding nearly 9,000 residents to the more than 1.5 million the company says it already serves across the state.
It said it was expanding in part “because municipalities, homeowners associations and other small independent operators are finding it increasingly difficult to maintain their aging facilities and meet today’s health, safety and environmental regulations.”
David Stanton, president of Utility Operations, said “The company has the expertise, the experience and the capital to transform troubled operations. Our investment plan ensures that our neighbors, now our new customers, will receive safe, reliable services.”
According to Suez, the water leaving its Haworth treatment plant contains no trace of lead. That said, it notes lead service lines and connections to water mains—called goosenecks—might be composed of lead that can leach into the system due to corrosion from pipes.
By way of context, Newark has planned a multi-year lead service line replacement program with the goal of removing all the lead service lines in the city water system. Construction for the first phase of this program commenced in March. The program will remove 15,000 lead service lines and replace them with copper pipes.
Typically, the cost of replacing a lead service line ranges from $5,000 to $10,000. Under Newark’s plan, lead service lines will be replaced at no cost to the homeowner.
Further afield, and of greater magnitude, the Flint, Michigan water crisis began in 2014 after the drinking water source for the city was changed to a less costly source. Due to insufficient water treatment, lead leached from water pipes into the drinking water, exposing more than 100,000 residents to elevated lead levels.
Local solution sought
Thankfully, the local situation is hardly as grave, but paying for line replacements is an issue.
On Sept. 16, Suez spokeswoman Debra Vial told Northern Valley Press that this year the utility has avoided “partials”—where it replaced a main and the utility’s service line—but not the customer’s lead line.
Vial told another media outlet that Suez crews have done 112 “partial” replacements of 1,498 line replacements so far. Partial replacements often result in higher lead level readings on the customer’s side due to disturbing the pipe and a change in water chemistry, say water quality experts.
In all cases where customers’ lines contain lead, Vial said, Suez offered to set the customer up with a plumber to replace their lead service line.
She said few customers agree to remove their lines on their own, citing cost.
She added, “Suez intends to remove all of the goosenecks and lead service lines it owns. We have to find a way in New Jersey to help residents remove lead from their own properties. Our proposal helps customers.”
According to Vial, Suez was prepared to pay for “most” of the cost of the replacement and provide customers with an interest-free $1,000 loan to accomplish the work.
“This will be a significant investment for us but we believe it is the right thing to do. Our customers deserve to be helped and government needs to provide a way to do that. We believe that our proposal is the best way to help people and the best way ensure that all of the lead is out,” Vial said.
Although Suez recently dropped its plan to charge that specific amount for replacing a lead line, its proposal continues to request “deferred accounting” for all customer replacement costs, citing the “extraordinary circumstances” presented by its discovery of elevated lead levels in drinking water last year.
Northern Valley Press is still waiting for Suez’s answers to questions about increases in ratepayers’ bills or possible surcharges to pay for the program.
From the water main near the center of a street, the utility owns the main, any connections, and the service line to the curb.
From the curb into the home or business, the property owner owns the line.
Under pressure from customers and lawmakers, Suez launched expedited lead service line replacement on March 21, promising to replace 2,400 lead service lines—a quarter of existing lines—this year. Within weeks, the utility submitted a proposal to also replace customer lead pipes.
Replacements initially focused on Teaneck, Rutherford, Hackensack, Ridgefield Park, Bogota, North Bergen, Union City and West New York.
Other towns with “smaller pockets” of lead lines to get priority included Old Tappan, River Vale, Alpine, Little Ferry, Wallington, Lodi, and Upper Saddle River.
Suez said in June that it had replaced its service lines in 35 towns in Bergen and Hudson counties since announcing an expedited replacement effort.
In late May, the BPU transferred Suez’s proposal to the state Office of Administrative Law, where it was assigned to Judge Jacob Gertsman for an expedited decision.
According to its petition to replace customer lines, Suez said it would notify customers 45 days in advance of an option to replace their lead line when Suez crews were also working to remove utility-owned lead lines in the area.
The utility noted customer lead line replacement costs likely range $3,000 to $8,000, but provided no specifics or estimates on Suez’s total program costs.
Its filing predicted customers likely would not replace their lead service lines without discounted rates.
At press time, an OAL administrative hearing on Suez’s proposal to charge all ratepayers’ bills—part of its petition to replace customer-owned lead service lines for $1,000—had yet to be scheduled.
Within weeks of Suez’s proposal, however, the Division of Rate Counsel took exception to Suez’s proposal on several counts:
• The utility’s proposed surcharge on all ratepayers;
• The utility’s request for “deferred accounting” of customer replacement costs; and
• The utility’s claim that its request for an expedited BPU decision on the pilot customer replacement program was required due to extraordinary circumstances.
Division on consumers’ side
The New Jersey Division of Rate Counsel represents the interests of consumers of electric, natural gas, water/sewer, telecommunications, cable television service, and insurance (residential, small business, commercial and industrial customers).
A division fact sheet notes Rate Counsel is a party to every proceeding before the BPU in which utilities seek to alter their rates or services.
In each case, Rate Counsel investigates the company’s request and creates the evidentiary record upon which the BPU and its staff will analyze and decide the case.
Brand added that the division also works to negotiate with utilities on matters affecting ratepayers prior to engaging in litigation, saving taxpayer dollars.
Suez requests countered
The Division of Rate Counsel opposed Suez’s requests for changing the program’s financing noting deferred accounting would be the same as granting Suez approval to charge whatever costs it wants for replacing customer pipes.
Moreover, it said Suez found elevated lead levels in drinking water previously, which were reported in a Bergen County daily newspaper, and that recent lead level violations did not at the time constitute extraordinary circumstances.
Brand said that the case is currently in discovery, with agency attorneys requesting pertinent information from Suez.
One key difference in Suez’s proposal is that Suez is a privately owned utility, whereas cities such as Newark and Trenton are served by public water utilities, Brand said.
Brand said no private utility has ever been approved to add an undefined increase to its entire customer base as Suez proposes.
Brand said the agency continues to negotiate in hopes of settling the case out of court. She said the parties would meet within weeks to discuss where the process stands.
Referring to laws that prevent Suez from increasing rates due to replacing customer pipes, Brand said “We need not deviate from these principles.”
She added, “It’s really not fair to all the ratepayers. Our recommendation is to find alternate ways of funding this after finding out the scope of this problem.”
Suez previously said it would replace customer lead lines only when it was replacing Suez-owned pipes on that street. The proposed customer replacements would be offered only where Suez is conducting replacement work.
According to Brand, granting approval to Suez’s for increasing its base customer rates to replace non-Suez service lines would set “a very bad precedent” and could allow the utility to seek additional rate increases for services or costs it’s not allowed to charge for.
According to published reports, Suez nearly exceeded federal lead level standards for drinking water in 2012 and 2015, coming close to the threshold of 15 parts per billion.
After 2015, reports noted, Suez changed its water acidity and corrosion treatment chemicals.
By late 2018, 15 of 108 homes sampled (14%) had elevated lead levels, which required notification of all customers due to more than 10% of samples exceeding federal standards.
State law requires the utility to test for lead at more than 100 homes every six months.
Suez recently announced its January–June customer lead test results fall below the safe drinking water standard of 15 parts per billion.
Mark McKoy, Suez vice president and general manager, said in a recent statement, “I want to assure our customers our work will continue. In fact this week alone, 20 crews are removing lead lines in 19 municipalities.”
He added, “We understand our customers are concerned and we are committed to delivering the safest water possible. We, too, live here. We raise our children here.”
Previously Suez noted homes or buildings built before 1986 were more likely to have lead pipes, fixtures or solder.
According to the utility, customers who are concerned can determine if their service lines or interior plumbing contains lead. Run a cold water tap for 15–30 seconds to flush a line before using, test water inside the home for lead, and have children tested for lead exposure.
For more information about lead testing, visit Suez online or consult your health department.
Northwest Bergen Regional Health Commission offers its member towns a lead test for drinking water for $65. Call (201) 445-7217 ext. 0 or visit info@nwbrhc.net.