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In Middletown, your water and sewer bill could be going up by 11.5 percent very soon

By Dan Miller


Posted 3/8/18

Water and sewer bills in Middletown could be going up 11.5 percent “in the very near future” due to a rate increase Suez seeks to impose, borough council told residents in a post on the …

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In Middletown, your water and sewer bill could be going up by 11.5 percent very soon


An 11.5 percent increase in water and sewer bills in Middletown that has been proposed by Suez will not go into effect with the March 26 billing cycle as the company had told the Press & Journal earlier, a Suez spokeswoman now says.

Instead, the increase could go into effect any time “in the spring,” Suez spokeswoman Ghilianie Soto told the Press & Journal on Tuesday.

“There is no exact date,” Soto said. She would not elaborate on the reason for Suez dropping the March 26 date for implementing the increase.

Soto told the Press & Journal earlier that the increase will go into effect, unless “a negotiated settlement” is reached between borough council and Middletown Water Joint Venture LLC to avoid imposing the 11.5 percent increase on borough water and sewer customers. The settlement has been discussed between the joint venture and the borough, Soto added.

Middletown Water Joint Venture LLC is the entity that was created after September 2014 when council and the borough’s former water authority agreed to a 50-year lease of the borough’s water and sewer systems to Suez.

French-owned Suez, a private company, then was known here as United Water. United Water has since been rebranded to carry the Suez name.

Borough council first announced Suez seeking to impose an 11.5 percent increase in a post on the borough’s Facebook page on Thursday, March 8. The post at the time said the increase could go into effect “in the very near future.”

The council Facebook post went on to say, “We have been in discussions with our advisors regarding the validity and appropriateness of this proposed rate increase and we are very concerned about the potential impact this will have on our residents. We will provide you with additional information in the coming days.”

Council President Damon Suglia had no further information regarding chances of council reaching a settlement with Suez to lesson the proposed rate hike or avoid it completely.

Council is holding a special meeting tonight to address matters unrelated to the Suez increase. However, nothing regarding Suez is listed on the agenda.

If the 11.5 percent surcharge goes into effect as planned, customers will pay an additional 20 cents per day, Soto said. Customers would continue paying this surcharge for three years, Soto said.

Suez under terms of the 50-year lease cannot raise water and sewer rates before January 2019.

However, Suez under lease provisions can impose a surcharge when revenues from water sales fall below specified targets. This accounts for the 11.5 percent increase, Soto said, adding that Suez is “required” under the lease agreement to impose the surcharge.

“Currently, less water is being used than was projected by the borough and their advisors, and revenues are below the threshold targets set forth in the contract,” Soto said, referring to the lease agreement. “To maintain the integrity and viability of the contract, and ultimately the safety and reliability of the system, revenue shortfalls must be addressed.”

The prohibition against water and sewer rate increases before January 2019 does not apply to Suez imposing a surcharge to cover the water sales shortfall, Soto said.

The clause in council’s statement regarding the “validity and appropriateness” of the increase sought by Suez indicates council has some ability to block imposition of the surcharge.

But according to the Suez statement from Soto, “Suez has been informed that the shortfall surcharge is purely contractual, and thus not subject to borough council approval.”

The Press & Journal had reached out to borough Manager Ken Klinepeter and to all seven councilors for comment, specifically  regarding any plans council has to block the increase.

The only borough official to comment was Councilor Robert Reid, the town’s former long-time mayor.

“That’s a heckuva increase,” Reid said. “We’re going to try and fight it.”

The lease by the Suez joint venture of Middletown’s water and sewer systems went into effect Jan. 1, 2015. In return for leasing the systems, the borough received a $43 million lump payment from investors backing Suez, enabling the borough to become debt-free overnight.

As Soto noted in her statement, the lease agreement also mandates the joint venture make annual payments to Middletown that over the 50-year term equal an additional $45 million.

Besides the surcharge related to a water sales shortfall, the lease also allows Suez before 2019 to add a surcharge to recoup the cost of past capital expenditures to Middletown’s water and sewer system, such as replacing water and sewer lines.

Suez under terms of the lease could start imposing surcharges in 2017, but the company has not been able to successfully do so yet.

Suez sought to impose a 2.1 percent surcharge on Middletown water and sewer bills starting in January 2017, but borough council blocked the increase.

Instead, council reached an agreement with Suez whereby the borough covered the increase by allowing Suez to withhold portions of the annual payments Soto referred to in her statement.

In March 2016, Kevin Chandler, vice president of Suez’s North Division, told the Press & Journal that starting in January 2019 the water and sewer rate would go up each year by an amount equal to the rate of inflation, for all the remaining years of the 50-year lease.

Suez each year of the lease would also impose a capital cost recovery surcharge of up to 2 percent, to cover the cost of improvements made by Suez to the water and sewer systems, Chandler said.

Chandler at the time did not refer to any additional surcharge Suez could seek to levy each year to recover revenue from water sales falling below the identified target.

Some contend that Middletown water and sewer rates are already too high, even before any increases in surcharges or rates by Suez.

In February 2018, the new owners of Harborton Place mobile home park — Kodiak Property Management — in a letter addressing complaints from park residents about high water and sewer bills contended that the water and sewer bills in Middletown are “some of the most expensive…of any city or borough in the United States — over three times the national average.”

Suez at the time responded by saying it had not raised water and sewer rates but had inherited the rates the borough already had in place in January 2015.

Council and the authority raised the sewer rate by 58 percent on average in 2014, three months before approving the lease deal with United Water. Water bills went up by a smaller amount.