A Maryland judge ruled Friday that the state’s largest water utility has an “unreasonable” pricing structure that illegally discriminates against larger households, a decision that is likely to result in higher water bills for most customers.
Chief Public Utility Law Judge Terry J. Romine ruled in favor of a Bethesda resident who said the Washington Suburban Sanitary Commission’s (WSSC) highly unusual pricing system resulted in larger households paying more per gallon. WSSC provides water and sewer services to about 1.8 million people in Montgomery and Prince George’s counties.
At issue is a 16-tier pricing structure that some utility experts say is unique in the United States. Like many water utilities, WSSC says it encourages conservation by charging more per gallon based on consumption. As more water is consumed, customers bump into higher-priced tiers. However, other utilities charge the higher prices only for the number of gallons that reach into each more expensive tier. WSSC charges the highest rate for the entire quarterly bill, back to the first drop.
In addition to leaving higher-use customers paying more per gallon, the system also can cause a small increase in water usage to result in a much larger increase in a bill.
Romine found that WSSC provided no evidence that its pricing structure actually led people to conserve and that it was “unduly discriminatory” against large households and businesses.
WSSC’s decision to retain the unfair pricing system “was primarily based on its own administrative ease and concern as to its relationship with the majority of its residential customers if it adopted a rate structure that might significantly increase these customers’ bills,” the judge wrote in a 34-page opinion.
Romine noted that, while she would “certainly encourage” WSSC to find a nondiscriminatory rate structure, she had no authority to require the utility to do so. Still, the utility said it already has begun to reexamine its pricing structure in light of this case and other complaints.
WSSC has said changing to one flat rate would result in higher water bills for about 85 percent of its residential customers. WSSC serves about 430,000 households in Montgomery and Prince George’s.
WSSC spokesman Jim Neustadt said he couldn’t comment directly on the ruling until utility officials had reviewed it. However, he said, a group of staffers from WSSC and both counties recently began studying possible changes to the rate structure. The panel plans to solicit public input this spring, after it has narrowed down the “many options” under consideration, he said.
Neustadt said any change wouldn’t be implemented until at least July 2018, after the utility’s information-technology department could update its badly outdated billing system.
“Changing a rate structure is not simple and a very sensitive process,” Neustadt said. “There are always winners and losers.”
The legal case began in July 2015, when Richard Boltuck, a retired economist, filed a complaint with the Maryland Public Service Commission. Boltuck argued that having to pay more per gallon discriminated against households with three or more people because they can be charged nearly twice as much per 1,000 gallons as customers who live alone. A home with seven residents, he said, can end up paying $1,314 more over a year for water than if those seven people each lived alone.
Hardest hit, Boltuck said, include families with multiple children, young adults sharing homes to defray living expenses, multigenerational families caring for aging or sick parents, and some immigrants or ethnic groups for whom large households are the cultural norm.
The judge’s “proposed order” becomes a final order of the Maryland Public Service Commission unless either side files an appeal to the commission. The commission doesn’t regulate WSSC’s rates — those are approved by county councils in Montgomery and Prince George’s as part of the utility’s annual budget — but it hears appeals about utility rates in the state.
Generally, the commission’s final decisions may be appealed to a state circuit court, but it was unclear late Friday whether that would be a possible route in this case.
Any changes in WSSC’s rates would come as the water utility, like others across the United States, struggles to maintain a reliable revenue stream, even as its rates have jumped over the past decade. Volume-based revenue has dropped along with water consumption due to federally mandated low-flow toilets, faucets and shower heads. At the same time, WSSC and other utilities are facing higher costs to upgrade and replace decaying pipes, valves and other aging infrastructure that has been neglected for years.
WSSC’s attorneys argued that the pricing structure, in place since 1978, isn’t discriminatory because a single person with a lawn irrigation system and a swimming pool could use more water than a larger household.
Moving all customers to one flat rate, the utility wrote in court filings, “will result in significant bill increases for most WSSC residential customers and, for that reason, will be unpopular and arguably untenable.”
Boltuck, who lives in a two-person household, said he and his wife are likely to pay higher water rates under any change because their larger-household neighbors are now subsidizing their lower rates.
“I always had a different reason for doing this,” Boltuck said Friday, “because it’s an irrational and unjust rate system and there are a lot of victims of it.”
D.C. Water charges residents one rate for the first 3,000 gallons per month and then a higher rate for water used over that amount.
Fairfax Water charges one flat rate, regardless of the amount of water used. However, customers pay a higher “peak use” rate from June to November if they exceed their average winter usage by a certain amount. The peak rate applies only to the additional water used.