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Cuomo: State to study municipalization of NYAW

Governor appoints special counsel to oversee the proceeding

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Gov. Andrew Cuomo announced Wednesday that the state Department of Public Service will look into the feasibility of municipalizing New York American Water, the privately owned utility whose service and water bills have long been decried by Nassau County customers.

The study will assess different avenues by which to reduce customer costs — which in some cases are nearly five times more than the price of municipally owned water — including a public takeover. The announcement comes after two independent feasibility studies (both conducted by Walden Environmental Engineering) determined that local ratepayers in NYAW’s Hempstead territory and Sea Cliff district would see a reduction in their water bills through a public acquisition of the company.  

“For far too long, the 120,000 customers of New York American Water on Long Island have been plagued by exorbitantly high rates for water — this simply cannot continue,” Cuomo said in a news release. “New Yorkers deserve access to clean, safe and affordable water, and we are going to pursue every avenue to make that happen.”

Rory Lancman, special counsel for ratepayer protection, will oversee the study, which is set to be completed by April 1. The proceeding will include a series of virtual hearings at which residents and elected officials can offer public comment.

In an interview with the Herald, Lancman said the state’s study will consider whether a municipalization of all or part of NYAW’s system would be feasible and more beneficial for ratepayers. This comes after advocates called on the DPS to reconsider a proposed sale of American Water Works’ New York operation to Liberty Utilities, another private entity, which was announced in November 2019. The department is currently reviewing the details of the $608 million deal.

“Our examination of the feasibility of converting American Water to municipal control is going to factor in the value of the assets that exist and, realistically, be cognizant of the role that ratepayers have played in making American Water a company that [Liberty] is willing to pay hundreds of millions of dollars for,” Lancman said.

After Walden concluded that Hempstead ratepayers would see savings between $70 and $383 a year if the town acquired a portion of NYAW’s Nassau operation, Water Department Commissioner John Reinhardt claimed such savings would be “diminutive” compared to the almost $500 million cost to acquire the system. He also demanded “state involvement” regarding a takeover.

Lancman criticized Hempstead officials for “ignoring” the results of Walden’s study. “If Hempstead or any other locality is going to oppose municipal control despite our analysis and analysis of their own experts,” he said, “they’re going to have to explain to the public why they’re not doing anything to lower rates.”

In a statement, NYAW President Lynda DiMenna said the issue of affordability depends on a special franchise tax — which accounts for a significant portion of customers’ bills, she added — not who manages the system. A public takeover, she said she believes, is not “financially prudent.”

“A public takeover would lead to an increase in the debt service obligations of Long Island residents by hundreds of millions of dollars,” DiMenna said. “The best path forward for our customers is the elimination of that special franchise tax combined with completing the sale to Liberty Utilities.”

Legislation to eliminate those franchise taxes was introduced in the State Senate last year by Sen. Todd Kaminsky, a Democrat from Long Beach, and co-sponsored by Sen. John Brooks, a Democrat from Seaford. (see box)

On the North Shore, Sea Cliff’s elected representatives, including State Sen. Jim Gaughran and Assemblymen Charles Lavine and Michael Montesano, have been vocal supporters of public water. Last July, a bill establishing the public North Shore Water District, authored by Gaughran, passed the State Senate.

A companion bill was presented to the Assembly by Lavine around the same time but did not pass by the end of the year. New bills will be presented to the Senate and Assembly this year, and if they were to pass and then be signed by Gov. Andrew Cuomo, an authority could be established by April.