RALEIGH Aqua North Carolina, the state’s biggest private water utility and frequent target of customer ire, is pushing to switch to a new method of raising customer rates without public hearings.

If approved, it would be a first in North Carolina, based on a new law passed without opposition this summer by the state legislature. Now before the N.C. Utilities Commission, the question of public hearings involves a number of current and former regulators with ties to the water utility industry.

The law allows private waterworks to adjust rates several times a year through a streamlined review to pay for water and sewer upgrades. It governs all private water utilities in North Carolina, potentially affecting more than 170,000 customers statewide.

Aqua, which provides water and sewer service to more than 400 subdivisions in Wake County, already charges about twice as much as Raleigh, Durham, Cary and other municipal water agencies. The company is in the process of seeking a 19percent rate hike, its third increase in North Carolina in the past five years.

Aqua says frequent but smaller rate increases will cause less rate shock to customers than waiting several years between rate increases. But critics accuse Aqua of devising a scheme to raise rates out of public view to muzzle the emotional public opposition that its rate increases regularly attract.

“It’s brilliant what they did,” said Stan Coleman, an Aqua customer in Charlotte and a frequent Aqua critic. “The real thing they’ve accomplished is to hide the increases from their customers.”

The new law doesn’t mention public hearings, leaving the final decision up to the N.C. Utilities Commission. The commission can scrap the new rate-adjustment mechanism if it’s not in the public interest.

Aqua has enlisted an influential ally for its cause: The Public Staff, the state’s consumer protection agency in utility matters. Last week the Public Staff dropped its push for public hearings as part of an agreement with the company that would limit Aqua’s rate adjustments to twice a year.

The smaller increases would still be subject to an audit by the Public Staff and final approval by the Utilities Commission.

“It is an accelerated, faster proceeding, but we feel the Public Staff audits provide adequate public protection,” Public Staff attorney William Grantmyre said.

The Utilities Commission, as part of Aqua’s pending rate case, is holding statewide hearings in various locations in the coming weeks. The commission will accept public statements about Aqua’s proposal to bypass public hearings in future rate increases. The hearing in Raleigh is set for Thursday and in Charlotte on Dec. 17.

It’ll show up on the bill

Aqua’s top executive in North Carolina, Tom Roberts, said two rate adjustments a year are necessary to recover the company’s ongoing investment in replacing aging pipes, valves, pumps and motors.

“A gradual impact is certainly better for the customers,” Roberts said. “The regulatory controls and oversight still exist.

“I don’t want anyone to feel that something is being hidden from them,” he said of Aqua’s customers. “They’ll see it on their bill, after the fact.”

In public filings, Aqua warned the Utilities Commission that requiring public hearings for periodic rate adjustments would conflict with the state’s new law, which creates a mechanism for accelerated cost recovery in-between hearings for rate increases.

Aqua said that requiring public hearings would result in “a mini-version of a litigated general rate case, with the costs, delays and regulatory lag that are involved therein.”

Other utilities affected

The case before the Utilities Commission also involves Utilities Inc., a private water utility with customers in North Carolina through Carolina Trace in Lee County; CWS Systems in Wake, Durham, Franklin and Nash counties; Bradfield Farms in Mecklenburg and Cabarrus counties, and other subsidiaries throughout the state.

The participation of Utilities Inc. has sidelined Public Staff Director Christopher Ayers, who has recused himself from the case to avoid a potential conflict of interest. Before joining the state’s public protection agency in July, Ayers was in private law practice in Raleigh and represented Utilities Inc.

The utility company’s previous attorney was Edward Finley Jr., now the chairman of the Utilities Commission. Finley and Ayers practiced law together and Ayers inherited Finley’s water utility client portfolio when Finley joined the Utilities Commission in 2007.

The current lawyer for Utilities Inc., as well as for Aqua, is Jo Anne Sanford, who chaired the Utilities Commission until 2006.

Aqua and the law

Aqua, a publicly traded company based in Pennsylvania, is admired by Wall Street as a rate-case machine that delivers reliable rate increases to shareholders.

In North Carolina, Aqua has 91,938 water and sewer customers, including 27,231 in Wake County. Aqua’s 160-employee North Carolina division, based in Cary, typically provides water and sewer service to outlying areas and isolated subdivisions, including one service area with just three customers, Roberts said.

The new law would not eliminate rate reviews with public hearings altogether, but they would become less common. After a water utility’s incremental rate increases reached 5 percent, the company would have to come in for a rate review, a proceeding conducted with public hearings, to raise rates further. After the rate case, the utility would be given another cycle to raise rates incrementally up to 5 percent.

That means that a substantial portion of rate increases by private water utilities could be handled through the new procedure. The mechanism would let water utilities pay for system upgrades, but not for pipe extensions, new facilities or operating costs, such as fuel and insurance.

“The 5 percent is a customer protection that is written into the statute,” Grantmyre, the Public Staff attorney, said.

Aqua said in filings that similar laws are in effect in Pennsylvania, Ohio, Ilinois, Indiana and New Jersey.

Aqua customers are organizing to keep North Carolina off that list.

“As a customer, you need to know what’s going on and not have your rates raised without a say in the matter,” said Tony DeLuca, an Aqua customer in the Robins Wood neighborhood in Orange County.