As water rates go up, Pittsburgh Water buys beach balls

The replacement of lead service lines is highlighted as part of Pittsburgh Water's Reliability Plan on the authority’s website. Pittsburgh Water website

By Ann Belser for Print

Faced with more than $100 million in annual debt service costs and looking toward a rate increase, the Pittsburgh Water and Sewer Authority spent more than two years studying its brand, then changed its name.

The new name, “Pittsburgh Water” cost the authority $400,000 for consultants, a media strategy, and items such as $500 worth of hard hat stickers, a brand new $350 tablecloth with “Pittsburgh Water” on it, and 300 polka dotted beach balls.

Its legal name remains The Pittsburgh Water and Sewer Authority. While the new name was supposed to align with the website PGH2O.com, the consultants found that more customers than not pronounced it “Pea-Gee-Aitch-Two-Oh” instead of “Pittsburgh Water,” which they noted reduces brand clarity.

The rate increase

On June 4, the authority filed a request with the Pennsylvania Public Utility Commission for a rate increase of $84.4 million over two years starting in 2026. The increase covers all aspects of a customer’s bill except the Allegheny County Sanitary Authority, known as Alcosan, charge which appears on the bill but is collected for the separate authority.

For residential customers, the increase over the two years would be 35%, based on a customer who uses 3,000 gallons a month and lives in a typical home for the stormwater runoff charge. Low-income customers who use the authority's discount program will also see their rates go up, but by 21%.

Larger rate increases are proposed for typical commercial, health and education, and industrial customers with commercial rates rising by a total of 43% over the two years; schools and medical facilities would experience a 43% increase; and industrial facilities would have the largest increase of 67%.

Those increases will bring residential, commercial, health and education, and industrial rates close to parity for the costs for a 1,000 gallons of water. Residential customers would see a 35% increase over two years bringing the cost of water and wastewater conveyance to $34.97 for 1,000 gallons. Industrial customers are facing a 68% increase, the largest percentage increase for the proposed rates, but that will bring their costs per thousand gallons to $34.74. Currently industrial users pay $23.05 per 1,000 gallons of water used while residential customers who are not on the discount plan pay $25.05 per 1,000 gallons.

Edward Barca, the authority’s finance director, said the rates were set to bring the various rate payers into parity so that residential customers aren’t paying a higher rate.

“The intent was not to have one customer class subsidize another,” Mr. Barca said.

In the past, industrial users had signed separate contracts assuring the authority they would use a certain amount and for that garnering a lower rate, but those have all expired, Mr. Barca said. “They are paying more of their share of what they should be.”

Other charges are then added to those, such as the stormwater fee, which the utility wants to increase by 25% for homeowners over the two years and the distribution system improvement charge which would rise from 5% of the water and wastewater fees to 7.5% next year.

The authority has also requested to add a new fee for the debt service charge on its PennVEST loans.

The Alcosan bill will not part of the rate case.

The last time the authority proposed to raise rates was 2023 — at 70% — but settled with the PUC on a 16% increase that was locked in for three years. Under the settlement, this year was the first in which the authority was allowed to file for another increase.

The rate increase request, according to the notice to customers, is scheduled to go into effect on Aug. 5, but the notice also notes that rate increases are usually held up as they go through the utility commission, with the last increase taking seven months to go through.

The notice also points out that “As a publicly owned and operated water utility, every dollar we receive is reinvested back into the water systems you rely on.”

The water authority’s rate filing also shows that it has nearly $1.3 billion in outstanding bonds for which it paid nearly $116 million for interest and refinancing charges last year. It expects to pay more than $111 million in interest next year.

Mr. Barca said the debt service would be that high if the Pennsylvania Utility Commission allows the rate increases, which would allow the authority to borrow more to fund its water reliability program. The water reliability program is a $470 million plan that includes replacing the Highland Reservoir Pump Station, upgrades to the Aspinwall and Bruecken pump station, and water main replacements.

“This is a process,” Mr. Barca said. If the PUC approves the rate increase the projects will be more ambitious than if the commission denies the increase and the authority has to cut back on the construction schedule.

The authority also has lines of credit that will allow it to borrow another $773 million from PennVEST and PNC Bank.

Water authority CEO Will Pickering’s submitted testimony to the utility commission with the request for approval of the rate increase. In his testimony, he addressed the question of whether there was a “major factor driving the need for this rate increase.”

Mr. Pickering answered that as the water authority “is continuing its once-in-a-generation effort to replace its antiquated water, wastewater and stormwater systems. Pittsburgh Water needs sufficient capital to finance these large capital expenditures, and an operating budget sufficient to pay the costs for much needed upgrades and maintenance to these facilities. Additional funds are needed to cover increased costs of these projects and to continue meeting financial and regulatory obligations. As a cash flow entity, the rate increase is also necessary for Pittsburgh Water to maintain or improve its bond rating, which keeps borrowing costs down.”

Rebranding the organization

In late 2023, before the last rate increase took effect, the authority hired ReGroup. The Ann Arbor, Michigan-based brand consultants in turn hired a Troy, Michigan-based market research firm, Emicity, to study the Pittsburgh Water and Sewer Authority brand. The authority paid Regroup $370,907 for the rebranding studies and media efforts, according to records obtained by Print through a Right to Know Act request.

They found that fewer of its customers had a favorable view of it than they had for their gas, electric, or internet providers.

Pittsburgh Water Senior Manager of Public Affairs Rebecca Zito said the survey reflected old views of the authority, which now ranks along with other utilities for customer satisfaction.

The market report was less upbeat.

“The majority of customers viewed PGH2O as a lack-luster utility, often citing expensive (and increased) rates. To a lesser degree, poor quality water and poor customer service were also noted,” the market research report stated.

Less than 40% of the water authority’s customers gave it high marks for service. Just 38% of the respondents said they trusted Pittsburgh Water to make smart decisions about water and sewer service, and 24% said they did not trust the authority with 38% unsure. Just 16% rated its leadership as “very strong” and “capable” while half of the respondents said they have “no idea” about the authority’s leadership, and others were split between “competent” (12%), “passable” (12%), and “very weak” (10%).

The report concluded that “customer ratings of the utility indicate high levels of distrust, concerns over high rates, and extreme worry over the safety of the product it delivers. The majority of customers still do not know what type of organization PGH2O is, and are often unaware of the 2018 structural change and the promised improvements associated with that change.”

The authority had two brands, PWSA and PGH2O. The consultants found that more customers used PWSA and that it, as a brand name, did better with the traits that were more important to the customers.

When asked which name they used, 46% of the sample group of customers said “PWSA.” “PGH2O” sounded out was third at 14% of customers using it, and just 5% said “Pittsburgh Water.” The second most common way to refer to the organization was “The water company” at 27%.

“The survey results showed that there was a lot of confusion about our name and that people called us by many different names,” Ms. Zito said. “And so the name change overall reflects our transition to a more modern and responsive utility. It demonstrates that we are following through on our commitments that we have made to customers.”

Ms. Zito said in 2018 the authority committed to replacing lead service lines and lowering lead levels, fixing infrastructure and improving customer service. And now “we have historically low lead levels for Pittsburgh,” she said. “We’re making investments in our water infrastructure.”

And she said customer service has improved, including updating the website to include more self-service functions.

“We have really transformed as an organization and we’re not the same organization that we were several years ago,” she said.

The consultants, ReGroup, had estimated a thorough rebranding effort would cost $300 million.

In a Dec. 1, 2023, report to the water authority, one slide stated, “There are some considerations that may inform your naming decision.”

The consultants pointed out that the legal name will remain “The Pittsburgh Water and Sewer Authority,” which will be used for legal documents, and “the cost to modify signage, vehicles, and uniforms to a new name is an expensive proposition and could irk customers who think you should spend money on improvements.”

Additionally the consultants said that the authority has “a limited communications budget and to properly launch a new/different name will cost $300M or more.”

In November the water authority rolled out “Pittsburgh Water” as its new brand.

The media campaign, according to the bills from Regroup, cost $197,000. That was accompanied by a $4,800 “website refresh” by Interpersonal Frequency of McLean, Virginia.

Zito said the media campaign was mostly online with ads on Facebook, Instagram, YouTube and Pluto, with some bus ads and on-air spots on 3WS Radio and KISS-FM.

The authority also paid LeWay Enterprises, a screen printing company in Baldwin, $6,640 for Pittsburgh Water/PGH2O branded products: 500 tote bags, 500 lanyards, 500 mop-topper pens, notebooks, 500 5-inch-by-7-inch eco-inspired notebooks with pens and the 300 polka dot beach balls.

Ann Belser is the publisher of Print, the community newspaper serving Pittsburgh's East End. This article was shared through the Pittsburgh Community Newspaper Network.