NY American Water takeover, rate- relief package stalled in Assembly 

Legislation in the state budget that would provide a path to a public takeover of New York American Water, and rate relief to its customers, has stalled in the Assembly, but proponents are hoping a last-minute offer could break the logjam.

One of the major sticking points of the rate-relief package, first floated in a state analysis released Monday, was that ratepayers of other utilities on Long Island, chiefly National Grid gas, would take on more of the tax burden if American Water is given an exemption from a special franchise property tax, state officials and lawmakers said Wednesday.

The tax makes up a large portion of American Water ratepayer bills, and the company has sought an exemption for years.

"There is resistance to rushing a non-budget item as part of the budget and a lack of consensus on the specifics of the legislation," said Assemb. Fred Thiele (I-Sag Harbor).

Stumbling blocks include the need for a "full discussion of who will bear the cost of a public takeover of this private water company," Thiele said. In addition, the tax-relief measure "needs to be properly vetted and should not be stuck in the budget," he said.

Gov. Andrew M. Cuomo's administration has offered an 11th hour resolution that would limit the tax burden to National Grid customers in Nassau County only, said Rory Lancman, special counsel for ratepayer protection for the state Department of Public Service. That might push the amount those ratepayers pay, on average, to $40 to $50 a year, from the study's prior $25 annually, said Tom Congdon, executive deputy of the department.

"If there's a concern by Suffolk [Assembly] members," Congdon said, "we can address that concern" given the urgency of getting rates under control amid a looming rate hike for New York American Water customers. He said it was imperative both measures — rate relief and the public takeover — are approved together as part of the budget, an "opportunity" Lancman called "once-in-a-generation."

Assemb. Charles Lavine (D-Glen Cove) noted that while he, too, supports rate relief for the water customers, "it should not be rushed into a budget. Nothing prohibits this from being a free-standing bill."

Several state senators have coalesced around legislative efforts to provide relief for customers of American Water, which is scheduled to hike rates by an average of 26% May 1. The company, criticized for high rates, and previously the subject of several state investigations after rate-case irregularities, has reached an agreement to be bought by Canadian Liberty Utilities for $607 million, a transaction that requires state Public Service Commission approval. Previous efforts at providing rate relief and public takeover mechanisms have been advanced by State Sens. Todd Kaminsky (D-Long Beach), John Brooks (D-Seaford) and James Gaughran (D-Northport). Those already-introduced bills would continue through the normal legislative process.

Congdon noted that public forums and meetings have taken place since January around the rate relief and included Assembly members who helped Lancman develop the options detailed in the report, "which had tremendous public input."

New York American Water opposes a public takeover but said it would be willing to discuss possible spinoffs of the Sea Cliff and East Massapequa districts if the state approves its sale to Liberty and exempts the company from the special franchise tax.

American Water spokeswoman Lee Muller, in a statement, said "Municipalization is not in the best interest of our customers or the residents of Nassau County."

She pointed to conclusions in the state study calling a public takeover a "lengthy and costly endeavor," saying American Water was "pleased that it [the DPS study] acknowledges the dramatic tax burden that contributes to 31% to 55% of our customers’ water bills. This is an extraordinary situation and legislation that removes the special franchise tax from our customers’ bills would help address this inequity for our customers."

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.