New Jersey Bill May Place 'Unworkable' Pressures On Sewer Utilities

In what is ostensibly a consumer-protection effort, the New Jersey legislature may crack down on charges from regional sewer authorities. But critics say the plan will endanger efforts to repair the state's dilapidated wastewater infrastructure.

New Jersey has urgent infrastructure challenges. The state has reported $8 billion in drinking water infrastructure needs and $32.5 billion in wastewater infrastructure needs over the next two decades, according to the American Society of Civil Engineers.

A new bill under consideration in the state legislature could make matters worse, critics say. The proposed plan—contained in Senate bill S-72 and its assembly companion A-3782—requires "state oversight of budgets of regional sewerage authorities" and places limits on sewer charges.

Opponents say the proposal would present "unworkable" problems to utilities and set back efforts to improve sewer infrastructure. Daniel Van Abs, a water policy professor at Rutgers University, slammed the proposed cap in a recent opinion piece published by NJ Spotlight.

"The 2 percent cap is a trap that will drive utilities to reduce their expenditures even when costs really should rise to address critical needs for capital expenditures. Utilities could be forced to 'run to failure' instead of operating for sustainable success. And yet, these utilities are subject to state and federal requirements that can result in large fines for such failures. The proposed bill does not address these concerns. Regional sewerage authorities will be fined if they do and slammed if they don’t. The same issues would apply to other water utilities if similar caps are proposed," Van Abs argued.

He framed the cap as a problematic proposal. "This provision is simply unworkable regarding individual customers, and is problematic regarding municipal (local-unit) shares. Many sewer utilities charge large customers by flow, and some have flow-based charges for residential and commercial customers. What if a major customer increases their flows by 25 percent from one year to the next? It appears that its charge would be limited to a 2 percent increase. Even if the bill focused on the per-gallon rate, utility expenses can shift significantly from year to year, such as for energy costs or new bonding," he wrote.

The legislation does not differentiate between types of regional sewer authorities, according to the commentator. "Some regional sewerage authorities operate a sewage treatment plant to which a large pipeline delivers flows from their service areas. Others own local collection systems but not a treatment plant, while some own both. Each is subject to different budgeting pressures; collection systems have low energy costs while treatment plants are major energy users with many moving parts," the piece said.

He added that the infrastructure conditions vary by utility, so providers face varying cost pressures. This legislation would "set back efforts to restore and upgrade the integrity of our utilities," he said.

Van Abs was senior director for planning and science with the New Jersey Highlands Council from 2007 to 2012. He has since retired from state government.

For more on policy and politics, visit Water Online's Regulations & Legislation Solution Center.