In a scorching eight-page appeal, N.C. Attorney General Roy Cooper saidAqua North Carolina should be prohibited from raising water and sewer rates without public hearings. Cooper filed the appeal, which will be sent to the N.C. Supreme Court, yesterday. [pdf-1]

Earlier this year, the N.C. Utilities Commission approved what is known as a surcharge mechanism that allows the private company to increase rates in 5 percent increments between regular rate requests. As the INDY reported in May, the mechanism is not subject to public hearings and input, unlike other rate requests. The surcharge is subject only to internal review at the utilities commission.

The utility has justified the surcharge by saying the extra money will be used to improve water quality.

Aqua NC owns 800 water and/or sewer systems and serves 90,000 households, making it the largest private water and sewer utility in the state. Aqua customers already pay among the highest utility rates in North Carolina. Customers have complained that water quality, as the INDY has extensively reported, is poor.

At public hearings and in letters to the commission, Aqua customers throughout the state have opposed a rate hike.

Cooper’s office questioned the justification for the surcharge, saying Aqua NC doesn’t need an incentive to provide quality water to its customers. “The commission already has the ability to require Aqua to provide clean, drinkable water.”

Aqua North Carolina responded to the appeal in a statement yesterday. [pdf-2]

The company said the public staff and the utilities commission can still review projects funded by the surcharge. It also said the surcharge would help tame “regulatory and legal expenses,” which are passed on to customers.

The company is a subsidiary of Aqua America, one of the largest private utilities in the U.S. Its stock is publicly traded and the company has shareholders. The surcharge, the appeal said, would benefit the company’s shareholders, but not the public: “The benefit to Aqua and its shareholders is concrete, while the supposed benefit to the public is not concrete or guaranteed.”

There were several other significant flaws in the commission’s rulings, the appeal said. The ruling denied a request that the commission conduct or order a study examining these mechanisms in other states. Nor will the commission order an audit to understand how Aqua prioritizes its improvements and “why prior rate increases and investment decisions have not resulted in acceptable water quality.”

The commission approved the surcharge mechanism on top of a 5.2 percent increase, lower than the 19 percent Aqua NC had originally requested. This was the company’s third rate hike in six years.

In ruling Aqua could assess the surcharge, the utilities commission relied on a law passed by the N.C. Legislature last year. That law is similar to those in eight other states allowing the surcharge. In many cases, lobbyists for Aqua America, the parent company, helped draft the language.

Here is the INDY’s previous coverage of Aqua:
“Water utility surcharge rules won’t protect ratepayers”
“Why Aqua customers are furious about their service”
“Aqua North Carolina found a legal way to raise its rates—at customers’ expense”
“Durham tries to prevent Aqua NC from reselling water to 751 South”

Food & Water Watch also has a synopsis of Aqua America’s strategies.