DV Journal

The Commonwealth Court’s surprising rejection of a PUC-approved utility sale could be a sign the surge in sales of public utilities to corporate giant Aqua is coming to an end. The result may be a new model of fair market value (FMV) acquisitions by large corporations in Pennsylvania for city-owned water systems.

On July 31, the court reversed an order by the Pennsylvania Public Utility Commission (PUC) that approved Aqua Pennsylvania Wastewater’s takeover of East Whiteland Township’s wastewater system assets.

“We bear in mind that, on account of the Commission’s expertise in the utility arena, reviewing courts accord considerable deference to the agency concerning the certification process,” the judges wrote, quoting the Pennsylvania Supreme Court’s 2007 Popowsky v. PUC ruling. The PUC overruled an administrative law judge’s rejection of the Aqua-East Whiteland agreement last summer. The Commonwealth Court noted that the PUC typically has discretion in its rulings but with a caveat. “[S]uch discretion is not absolute, and “where the judgment is manifestly unreasonable or where the law is not applied,” that discretion is abused.” [emphasis in original].

Essential Utilities, the parent company of Aqua, is one of the largest publicly traded water, wastewater, and natural gas providers in the U.S., operating in 10 states and with an estimated 5 million customers. Since Pennsylvania passed Act 12,  the 2016 law that creates a framework for municipalities looking to sell water systems to utilities, the company has been on a Keystone State buying spree. Aqua is currently locked in litigation over its attempt to purchase both the Chester Water Authority and the DELCORA wastewater system, for example.

According to Ryan Connors, managing director and senior analyst at Northcoast Research, the new ruling could profoundly impact this trend.

“This is highly unusual, and immediate next steps remain unclear,” Ryan Connors wrote in an analysis entitled, “Surprise East Whiteland ruling ups approval risks for Butler, Towamencin.”

Connors added, “Legal sources say an appeal [to] the Pennsylvania Supreme Court is an option, although we believe Essential is unlikely to take that path, as it could lead to Act 12 itself effectively being put on trial and potentially struck down.”

Act 12 requires separate appraisals from valuation experts “for the purpose of establishing…fair market value.” There was concern at the time from Pennsylvania’s then-Action Consumer Advocate that appraisals would be overstated. Supporters claimed those higher value estimates would happen because of certain considerations not allowed in pre-Act 12 appraisals.

Act 12 supporters received a major boost from Moody’s Investors Services, which argued the law allows financially-distressed cities a way out of fiscal problems created by bloated pension balance sheets and other debts. However, another part of Act 12 required utilities to keep rates stable “or phase rates in over a period of time” following a base rate case before the PUC. In the Aqua/EWT agreement, customers would have seen rates rise by 132.92 percent.

“There is something perverse about this whole system because the people that pay for the transaction are not included as a decision-maker in the transaction,” said Francis J. Catania, Chester Water Authority attorney, who wants Act 12 repealed. “Both the buyer and seller have a motivation of getting the highest price…You have a buyer who is motivated to get a higher price because they can recover more in higher rates from future charges to ratepayers.

“And the ratepayers aren’t even asked!” he exclaimed.

Catania quoted the Commonwealth Court case, which ruled the PUC had erred and/or abused its discretion in concluding that Aqua had shown that the public benefit of the proposed sale of the wastewater system outweighed the acknowledged harms of Aqua’s proposed acquisition, a finding that the PUC Administrative Law judge had recommended but which the full Commission rejected. “Every time the PUC administrative law judges recommend not approving a transaction, The full Commission overrules them and approves them.

“Fortunately, this time, the Commonwealth Court got involved because the Consumer Advocate filed an appeal. Hopefully, this court decision will require the commission to look more closely at the permanent economic burden on ratepayers imposed by these transactions, which provide more benefits to utility shareholders than utility ratepayers.”

A bill has been introduced in the legislature repealing Act 12, but Connor doesn’t believe the effort to repeal is a serious one.

“Even some of the supporters of [the Act 12 repeal] seem to see it as largely symbolic and not having the votes to pass in the near term,” Connors said. “That doesn’t mean that three years or five years from now, that might not be different, but I think the votes aren’t necessarily there in the near term.”

Connors isn’t ready to say that future Aqua purchases are in jeopardy or that Aqua changes its strategies on future purchases.

“Essential/Aqua and peers like American Water have made municipal acquisitions a core part of their national strategy,” he told DVJournal. “They are used to fighting for their interests through legal channels (such as on rate cases), and they show no sign of being fazed by the opposition they are experiencing.”

A spokesperson for Aqua said, “We are reviewing the decision, and it would be premature to comment at this time.”

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New Hanover residents in Montgomery County have been reporting significant water problems coming from their Aqua PA-owned water system in recent months, including foul smells and drinking water full of sediment.

The problem has grown so acute that earlier this month, Aqua PA and New Hanover hosted a joint town meeting to address the ongoing concerns over the town’s water supply.

A list of resident-submitted questions for the meeting reveals broad unhappiness with the town’s water quality:

• “Why is my next-door neighbor not having brown water if I am?”
• “Why should I be required to install sediment filters in my house if I am buying what should be drinking water?”
• “What is the timeframe for having a better quality of water?”
• “Is it safe to drink? It has a foul taste.”

In many cases, Aqua provided the same stock response to the inquiries: “We routinely test the water, and it continues to meet regulatory requirements.”

Residents at the meeting were far from satisfied with Aqua’s handling of the water system. And they let the company know it. “The water explodes out of the faucet, and it tastes crappy,” one resident told company and township officials, according to a report in the Pottstown Mercury.

“When I first turn on the shower, it smells awful. It has a rotten egg or sewer smell,” another said.

The embarrassing debacle comes as Aqua has faced withering criticism from residents in the Delaware Valley and beyond amid its ongoing efforts to buy local water systems.

Matt Miller, director of water quality and environmental compliance at Aqua PA, told DVJournal the company has been addressing complaints of water quality in the area since December 2021.

“We got a specialized flushing rig in immediately [after hearing the complaints],” Miller said. “It comes in with a truck and is able to do high-velocity flushing in the system. We took a look at a well in the area that’s the primary source for the neighborhood. We did some work to essentially raise the well pump and grout out the well bottom.”

Miller said the company continued to address sporadic reports of sediment in drinking water throughout 2022, with Aqua doing grout repairs to the area well in November of last year. The company had no further complaints until March of this year, he said.

The forum, he said, went well, with Aqua representatives setting up appointments with residents to go address their complaints at their homes.

“We feel like we’re in a good place now,” he said.

The company, whose parent corporation Essential Utilities manages wastewater and natural gas in eight states, has acquired multiple water systems in Pennsylvania in the wake of Act 12. That is the 2016 law which made it easier for private companies to buy municipal water networks.

Grassroots efforts like Neighbors Opposing Privatization Efforts (NOPE) have risen up to push back against efforts by Aqua and other companies to buy those systems, with NOPE and other residents spearheading resistance in locations including Bucks County, Willistown, Delaware County, and elsewhere.

NOPE’s Twitter handle—”@StopAquaPA”—reflects the group’s original aim to counter Aqua’s acquisition efforts in the area.

But the grassroots effort—which has chapters in multiple locations around the Delaware Valley—has expanded to push back against other companies as well. Towamencin’s NOPE chapter led a successful effort last month to change the township’s governance to home rule. The issue that drove the change was a sewer sale to NextEra Energy and Pennsylvania-American Water Company.

Towamencin officials have nevertheless stated their intent to continue ahead with the sale even after the charter ostensibly forbids them from doing so.

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The Towamencin Board of Supervisors will continue with its planned sale of the municipal sewer system even after residents voted to pass a charter that scrapped the sale and gave citizens more control over municipal water ownership.

Residents were successful in last month’s primary election in passing a “home rule charter” that effectively negated the proposed sale of the sewer system. The charter passage resulted from efforts by a local chapter of the group Neighbors Opposing Privatization Efforts (NOPE) to halt the utility sale to the controller Pennsylvania-American Water Company (PAWC).

In a statement after the primary results, the Board of Supervisors said it “acknowledge[d] that the Charter will be the law of the Township as of July 1,” but the relevant issue “is whether a prospective law can upend a contract.”

“[T]he Township legal team does not believe the passage of the Home Rule Charter negates the sewer sale under current Pennsylvania law and the Pennsylvania Constitution,” the board said.

“There is strong legal precedent against overturning pre-existing contracts based on the passage of new laws. As such, we do not intend to seek to terminate the contract.”

Towamencin officials could not be reached for comment on the proposed sale. Town resident Kofi Osei, who helped lead the local NOPE chapter to victory in the primary vote, said a lawsuit might be in the works if the town fails to back down.

“The charter is effective July 1, so if neither party attempts to terminate the contract, we will pursue legal action,” he said.

“We haven’t really started that process yet, so there is quite some time before the sale possibly closes,” he added.

“If this goes to court, I believe it will be a landmark case about the extent home rule charters can restrict local governments.”

May’s successful charter vote came after the Towamencin Board of Supervisors voted to sell the town’s sewer system to NextEra Energy in May 2022, with the proposed sale eventually being shifted to PAWC.

Residents revolted against the proposal, leading to a citizen’s commission and the home rule proposal that effectively revokes the town’s utility sale.

The town had moved to sell the utility under Pennsylvania’s Act 12. Passed in 2016, the rule modified the state’s regulations for the valuation and purchase of municipal water systems, allowing private concerns to buy more of them.

Residents around the Delaware Valley and the state have united against proposed utility sales in recent years, with NOPE chapters springing up in Bucks County and other parts of Montgomery County.

In April, persistent resident protests led the supervisors of Chester County’s Willistown to drop a proposed utility sale to Aqua PA, invoking a kill clause in the contract after several years of debate.

Aqua has also moved to take over utilities such as the Delaware County Regional Water Authority, though a judge earlier this year ordered a stay on that deal due to contract disputes.

State Rep. John Lawrence (R-West Grove) has proposed repealing Act 12, claiming the rule had resulted in significantly higher utility fees for ratepayers around the state.

Osei said he expects any lawsuit brought by residents to ensnare the deal in a web of protracted legal proceedings.

“I personally think it would take years to fall in the Township/PAWC’s favor.”

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The Willistown Board of Supervisors brought an end to deliberations over the sale of the township’s sewer system to Aqua PA at a Friday night meeting. It was the conclusion of a contentious debate over many months to a deal opposed by local residents.

David McMahon, a candidate for municipal council in nearby Norristown who was at the meeting, told DVJournal the supervisors had taken advantage of a kill clause in the Aqua/Willistown contract.

“There’s basically a termination clause in the contract after a certain time period,” McMahon said. “They’ve chosen to go that route. Last night’s meeting was to pass the ordinance to activate that feature of the contract.”

It “remains to be seen” if Aqua will challenge the termination, McMahon said. But “this really should be the end of it,” he added.

After the meeting, McMahon wrote on Facebook that “[Aqua] CEO Chris Franklin and President Mark Lucca left the auditorium empty-handed” following the decision.

“Folks there have been fighting the sale of their sewer system to Aqua Pennsylvania for a couple of years now,” McMahon wrote, adding that “their amazing tenacity paid off tonight.”

Julie Frissora, a Willistown resident who has advocated against the Aqua deal since it became public, told DVJournal the contract was terminated at the earliest possible opportunity.

“On April 14th, all of the provisions in the termination clause materialized,” she said. “That day was the first time the township could exercise their rights under that contract with Aqua to terminate it.”

Township officials could not be reached on Saturday. A spokeswoman for Aqua did not immediately return a request for comment.

Aqua America, owned by Bryn Mawr-based Essential Utilities, has been on a buying spree across the region, purchasing — or attempting to purchase — utilities, including Chester Water Authority and the DELCORA wastewater system. According to a report by the progressive group Food and Water Watch, the four largest Aqua acquisitions resulted in an average rate increase of 280 percent, or 8 percent per year, when adjusted for inflation.

“Water corporations have become increasingly aggressive, and even the best-run water systems like CWA are under attack, which should sound the alarms for communities nationwide,” Mary Grant with Food and Water Watch told The Guardian last year.

Willistown supervisors had earlier posted a schedule of the “special meeting” held at General Wayne Elementary School. The board would consider “a resolution to terminate the asset purchase agreement with Aqua Pennsylvania Wastewater, Inc.”

The resolution in question directed the township manager “to send Notice … that the Agreement is hereby terminated and abandoned without liability or other obligation of either Party.”

The potential sale of the utility to the private water company had twisted and turned its way through Pennsylvania courts and regulatory agencies prior to this week’s termination.

Administrative Law Judge Jeffrey Watson had in April of last year recommended the deal be scuttled due to concerns that Aqua was poised to charge ratepayers higher prices for the system after its acquisition.

In July, Pennsylvania Public Utility Commission regulators approved the sale, directing Aqua to freeze rates for two years following the acquisition.

The state Office of Consumer Advocate appealed that decision in August. An OCA attorney argued that the sale “would not provide any net benefit to safety and reliability because Willistown is not a troubled system.”

Many Willistown residents had fiercely opposed the proposed sale before Friday’s vote to scuttle it.

“You have a chance to decide what you want your legacy to be,” one resident told the board on Friday. “I think [the supervisors] have had the township’s best interests in mind. This does not.”

“I’ve talked to many of the people in our community,” another said. “All of them are against this.”

McMahon told DVJournal that at the meeting, “the only two voices in favor of Aqua were [CEO] Franklin and [President] Luca.”

“One of the residents asked people who opposed the sale to stand up,” McMahon said. “It was virtually the entire auditorium.”

Frissora said the township supervisors argued they had “made a good-faith decision back in 2020” when embarking upon the deal, but “in the intervening time period, they heard what the citizens had to say.

“I don’t know what they individually thought,” she said. “But they did listen to their constituents.”

After a chemical spill into the Delaware River Friday forced Philadelphians to turn off their taps and buy bottled water, Aqua PA assured its suburban customers that their water was safe. However, documents from the Public Utility Commission show Aqua has been buying water from the Philadelphia Water Department’s supply for years.

An Aqua spokesperson confirmed Monday its water system purchased Philadelphia water “periodically” through direct “channels” connecting the systems But, she said, those channels were closed when the spill was discovered.

In its most recent annual report filed with the Public Utilities Commission (PUC), Aqua stated it bought 559 million gallons of water for resale from Philadelphia in 2021. In 2020, Aqua purchased 492,574 million gallons of water from Philadelphia. And in 2019, it purchased 475,491 million gallons.

Dave Hixon, a spokesperson for the PUC, confirmed the filing. He also said Aqua told the PUC it closed those interconnections with the Philadelphia Water Department after the latest spill.

A spokesperson for the Philadelphia Water Department said, “Aqua Pennsylvania purchases water from the Philadelphia Water Department through a wholesale contract and distributes it to their customers outside of the city.”

Aqua has been at the center of multiple controversies over the past few years as it has tried to implement an ambitious program of buying publicly-held sewer and water systems across the region. The company is currently embroiled in legal action over its attempted purchase of the Chester Water Authority. Last year the state’s Consumer Advocate office sued to stop Aqua’s takeover of the wastewater system in Willistown Township.

AQUA PENNSYLVANIA, INC. 2021 WATER A/R

Aqua insisted Friday’s chemical spill wasn’t an issue for its customers and downplayed the millions of gallons of water they buy every month from the Philly system.

“We access water from the Philadelphia Water Department (PWD) periodically as part of a diversified water-source strategy,” said Aqua spokesperson Sarah Courtright. “Aqua PA closed that channel the minute we knew about the spill. And we’ll only resume accessing PWD water when we’re confident there is no danger.

“Diversifying water sources is a best practice because it increases our water-quality integrity and our systems’ resiliency,” Courtright added.

Aqua bought between 20 million and 60 million gallons each month in 2021, according to their filing. With that volume of water so high, questions are being raised about where Aqua got the water it needed to serve customers during the Delaware River shutdown if it didn’t come from Philadelphia Water.

On its website, Auqa said it acted immediately to protect its water supply from the spill on the Delaware River tributary in Bristol and will continue to monitor the situation. It did not mention its “interconnections” to the Philadelphia Water Department.

“The safety of our customers and employees is Aqua’s top priority,” the company said. “Our operations team immediately shut down the intake to our Bristol water system as soon as we learned of the chemical spill, preventing customer exposure to hazardous materials. As a result of their fast action, we are not seeing any of the chemicals from the spill in our drinking water.

“We will reopen our intake only when we are confident that the source water is safe for our customers and meets our stringent quality standards,” the statement added.

In Bucks County, where the accident occurred, the county released a statement Monday that said the county’s emergency management agency “remains on scene and in close contact with state, federal and local partners, as well as the water providers in the affected area.

“There continues to be no known adverse impacts to drinking water in Bucks County,” the agency said, adding that “water suppliers in the area reported this morning that contaminants from this weekend’s spill are not being detected near the intakes for their plants along the river. They say contaminants also have not been detected in the drinking water supply.

“Multiple samples collected Sunday by the U.S. Environmental Protection Agency and U.S. Coast Guard also have shown no contamination near the water intakes. Sampling is expected to continue (Monday).”

The Lower Bucks County Joint Municipal Authority said it had not been affected by the chemical release because its intake valves are upstream from where the accident occurred.

The Chester Water Authority also released a statement saying none of its water comes from the Delaware River. Its sources are the Octoraro Reservoir and the Susquehanna River, and its customers “should feel confident that their drinking water continues to be of high quality and meets or exceeds all federal and state regulations.”

According to Bucks County officials, the leak occurred at the Trinseo Altuglas chemical facility in Bristol Township and spilled between 8,100 and 12,000 gallons of hazardous materials into the Delaware River.

The material spilled is a water-based latex finishing solution and is non-toxic to humans.

Michael Carroll, Philadelphia’s deputy managing director for transportation, infrastructure, and sustainability, told reporters Sunday that one chemical released into the river was butyl acrylate.

“It is a chemical that was identified in the spill in East Palestine,” he said. “So, we understand there are some known health effects, and their established thresholds in terms of the parts per billion that the EPA feels are safe.”

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State Sen. John Kane (D-Chester/Delaware) joined a telephone public hearing Thursday to share his views on the proposed $276.5 million deal for Aqua PA to buy DELCORA. He opposed the plan and, if Thursday’s hearing is any indication, he is far from alone.

“I’m here today to relay a message delivered to me loudly and clearly. The people in the 9th District as a whole do not support the private takeover of public utilities,” he said, noting that goes for Republicans, Democrats, and independents. “All agree public utilities belong in public hands.”

Kane said people believe Aqua will increase their sewer and water bills.

“This would be a slap in the face to the people of Delaware County,” said Kane.

During Thursday’s hearing, person after person urged Administrative Law Judge F. Joseph Brady to say no to the proposed sale of DELCORA (Delaware County Regional Water Control Authority). The proposal, which extends back to the previous GOP-controlled Delaware County Council and had been rejected by the current Democratic majority, has been at the center of political controversy from the beginning.

Citizens and ratepayers had their chance to speak, and they were nearly universally in opposition.

Swarthmore resident Christopher DeBruyn said he has studied the issue in depth.

“I’m protesting as a private citizen,” said DeBruyn. “The sale is “strongly against the long-term interests of DELCORA ratepayers.” But “massive rate increases are coming no matter who owns the system,” he said.

Ross Schmucki, also of Swarthmore, a former councilman who chaired the public works committee, said he had read the trust document. Newspaper articles about it were “misleading,” he said.

He noted that a trust Aqua had offered to set up would be based in Delaware and the $200 million that would be put into the trust would flow to Aqua itself, not to customers to defray rate hikes as promised.

“That $200 million is no substitute for full rate stabilization,” he said. “The trust by its terms says it will be non-responsive to anybody (according to the) memorandum of understanding.”

Cynthia Ziegler of Downingtown said she is already an Aqua customer, and her rates are much higher than promised.

“Whenever Aqua purchases a place, our rates go up,” she said. “I, too, am opposed to their purchase of DELCORA…This is so unfair and obscene. We’ve been paying these rate increases for years.”

“The sale does not promote the public good,” said Peter Mrozinski of Landenberg. The towns of New Garden, Willistown, and East Whiteland sold their public sewer systems to Aqua with the PUC’s approval even though an administrative law judge recommended against it, he said. New Garden saw an 80 percent increase in sewer rates. The PUC members ruled for the sale because they believe the state legislature favored consolidation, Mrozinski said. But DECORA is already a regional authority with 500,000 customers serving 46 municipalities.

“A monopoly is never in the public interest,” he said.

Vijay Kapoor, a representative of the City of Chester Receiver, tried to testify to tell Brady that Chester was not in bankruptcy, but Brady said that he was taking testimony from individual customers, not government entities. He suggested that Kapoor file a motion.

Stephani Perez, a Chester resident, said, “I am protesting. I am against Aqua.”

“It would be a great hardship to the residents of Chester. If the rates continue to go up, we won’t be able to afford water…Many residents will be pushed out of the city if they can’t afford the water.”

Kearni Warren, who ran as a Green Party candidate for Chester city council, was also opposed to the sale.

“Put people over profits,” she said. Aqua is also trying to buy the Chester Water Authority, she added. “I feel their actions are based on greed. A public bidding process wasn’t held.” She said that she had received a “deceptive” mailing from Aqua.

Radnor resident George Badey, a lawyer, also opposed the DELCORA sale.

He noted he is a DELCORA customer but through a municipal system. And any promised rate savings would not necessarily go to the residents but might be used by municipalities for other needs.

“I strongly oppose the sale,” said Badey. “It’s not fair to ratepayers.”

Judge Brady said he expects to give a recommendation to the PUC in late April or early May 2023.

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Two Republican state representatives filed an amicus brief to oppose the city of Chester’s bid to sell Chester Water Authority to Aqua PA.

The case is expected to be heard by the state Supreme Court on Nov. 30.

“Act 73 of 2012 abolished Chester city’s control over the CWA board. It is outrageous to suggest that years later, the city can override the clear intent of the Legislature, take control of CWA and sell it to the highest bidder.  I am grateful that the Supreme Court has agreed to review this matter, and I will continue to fight to prevent any takeover of Chester Water Authority,” said Rep. John Lawrence (R-West Grove).

Lawrence, whose constituents in Chester and Delaware counties are served by CWA filed the brief with House Speaker Bryan Cutler (R-Lancaster).

“The CWA board has steadfastly and responsibly served the hundreds of thousands of customers who rely on this municipally provided service,” Cutler said. “The Commonwealth Court’s ruling undermines the board’s rightful position to continue to recognize the best interest of its customers and sets a dangerous precedent for all water consumers in the Commonwealth. We strongly urge the Pennsylvania Supreme Court to take a closer look at this case.”

Previously, CWA rejected an unsolicited $320 million takeover offer in 2017. Subsequent lawsuits focused on whether the CWA Board or the city of Chester has the ultimate authority to approve a sale of the water authority. A Delaware County court decided in favor of CWA, but on appeal t the Commonwealth Court reversed the lower court’s ruling.

Founded in 1939, Chester Water Authority serves over 200,000 customers in Chester and Delaware counties. In addition to water treatment facilities, the authority owns and operates the Octoraro Reservoir, and water pipelines connecting the reservoir with the Susquehanna River and facilities in the city of Chester.

A spokesperson for Aqua, which made a $410 million bid for the system, declined to comment since the matter is in litigation.

Aqua and other privately owned corporations have been buying area water and sewer systems after a law signed in 2016 permitted them to pay “fair market value” for those public utilities.  However, residents have been organizing to fight back against these acquisitions, fearing higher rates. They have had some success, notably garnering public support to pressure the Bucks County Commissioners to oppose a planned deal for Aqua to buy the Bucks County Water & Sewer Authority for $1.1 billion.

In the brief, the lawmakers noted that the takeover jeopardizes the reservoir, which Cutler’s constituents enjoy.

The representatives argue in their brief that the City of Chester does not have the right to decide on the sale without the consent of Delaware and Chester counties, which are also represented on the CWA board.

Frank Catania, a lawyer for CWA, said the CWA board members terms are up in November. The Chester County commissioners reappointed two board members on Wednesday, Noel Brandon and Leonard Rivera, along with Erik Walschburger, deputy county administrator as a new board member.

On Thursday, the CWA board will hold a special meeting to discuss whether to join the U.S. Water Alliance and its One Water Program. That group promotes sustainable fresh water and holistic water management, according to its website.

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Two judges in separate courts issued rulings this week in cases involving DELCORA (Delaware County Regional Water Quality Control Authority).

The litigation involves an agreement with Aqua PA to buy DELCORA which had been approved by a previous county council but has been publicly rejected by the current Democrat-controlled county council. The new council went to court in May 2020 to block the sale by terminating DELCORA’s existence.

However, DVJournal learned Delaware County officials are talking with Aqua about settling the litigation.

Asked about whether the county was in settlement discussions with Aqua, County Councilwoman Christine Reuther was noncommittal.

“It’s possible we’ve had some conversations and these may continue,” said Reuther. “I will always take Chris Franklin’s call.” Franklin is the CEO of Essential Utilities, Aqua’s parent company.

Common Pleas Judge Barry C. Dozor held Delaware County does have the right to undo DELCORA but must go forward with a $276.5 million sale to Aqua PA or be in breach of contract. The Commonwealth Court ruled the Public Utilities Commission has authority over the matter, something that Dozor also stated in his decision. It also quashed a Delaware County’s petition asking for review.

William F. Martin, county solicitor, said, “The county has not yet decided whether to appeal the Common Pleas decision. In any event, no transfer of DELCORA’s assets can occur until the PUC has approved the transaction. And that approval is no closer to being received than it was in 2020.

“As to the Commonwealth Court order, it merely stated that now is not the proper procedural time to present the many issues the county has posed for review. The county will still have the opportunity to make its arguments before the PUC and if needed, the Commonwealth Court,” said Martin.

Dozor also ruled if it takes over DELCORA, the county would be bound by the terms of the asset purchase agreement and that settlement on the agreement must happen before the county dissolves DELCORA.

In a separate case that is still pending, the Chester City receiver also filed suit to be sure that the city garners its share from the sale or regains control of its infrastructure.

An Aqua spokeswoman said it has not publicly commented on the court’s decision.

Frank Catania, the lawyer for the Chester Water Authority, which is also an Aqua target, praised the Bucks County Board of Commissioners which recently rejected Aqua’s planned $1.1 billion purchase of the Bucks County Water and Sewer Authority. Catania also praised Chester County officials for their support of CWA and its ratepayers.

“The Bucks County commissioners made their decision in two months and made it publicly,” said Catania. “Delaware County is doing something different, having private conversations. I don’t understand what they’re trying to do here. Their stated strategy is to try and stop the purchase from going through. If there is something else going on they should state it publicly.”

Recently, outside counsel representing Delaware County filed a motion with the Supreme Court to stop Chester Water Authority’s “attempt to protect its natural resources,” said Catania. “They raised an issue that’s not even before the court.” Delaware County took this action without public discussion or notice in the minutes that Council had discussed it in executive session, he said.

As part of its bid, Aqua has offered to place the proceeds from the sale into a trust used to offset rate increases for DELCORA customers. However, residents of other Delaware Valley areas where the sewer or water utilities have been sold have seen rate increases. Residents in Cheltenham Township experienced sticker shock this year after Aqua received PUC approval to raise their sewer rates, with an average residential bill up 69 percent. Township officials sold the sewer system to Aqua in 2019.

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Delaware Valley residents are being confronted with Aqua Pennsylvania and Pennsylvania American Water driving a frenzy of acquisitions to take over municipal sewer and drinking water operations.  This is 100 percent money-driven – Big Money, Big Profits, all paid for by the utilities’ customers.

The Pennsylvania legislature and Public Utilities Commission (PUC) have combined to create this acquisition frenzy. In 2012 the legislature allowed Big Water companies to dump much of the cost of their acquisitions on existing customers who have no connection to the acquired systems. Then in 2016, the legislature gifted Big Water the ability to pay highly inflated prices for municipal systems.

Regulated utilities generate profits from a return on their investments.  As illogical as it sounds, Big Water is eager to pay the inflated acquisition prices because the more they pay, the greater their profits.

The PUC has to certify that these acquisitions provide a “public benefit.” They seem to have a simple definition of “public benefit”: Economy of Scale ‑ Good; Big Water ‑ Good;  Municipal system ‑ Bad.  “Economy of Scale” is so important that it can justify a doubling of the customer’s cost. Think about that – “economies” that double your cost is a “public benefit.” Does that make sense to you?  It does to the PUC. The PUC has yet to deny any of these acquisitions.

Buying municipal systems is a major strategic focus for Aqua and American. They have very deep pockets and are pouring hundreds of millions of dollars into the acquisition feed trough. Unfortunately, many municipal politicians are the hogs flocking to the trough to get what they see as “free” money.

Big Water uses a well-practiced sleight of hand to entice these politicians. They make the deal sound so sweet. They start with a huge candy jar full of money emphasizing no tax increase – a hot button for any politician. Then there is scaremongering about the costs of repairing a decrepit system and misleading claims that Big Water can fix it cheaper. Finally, there may be promises about mitigation of future rate increases. Promises that so far have always been broken. The reality is that the customer is on the hook for the entire sale price.

The elephant in the room that Big Water tries to cover up is their profits.  They want you to visualize that their sliver of profit is no big deal.

The following chart destroys that sliver image. It is Aqua PA’s proposal from its August-2021 rate filing. It is not seeking a sliver of profit but wants the hog’s share of the pie! They propose that 43 percent of our water and sewer bills should go to their profits. Municipal systems are non-profit operations. Therefore, when Aqua acquires a system, a 75 percent rate hike is required just to fund its profits.  Higher depreciation and interest costs push rates up even more.

Delaware Valley residents are facing all these issues with Aqua Pennsylvania trying to buy DELCORA’s sewer operations for $276 million and the drinking water operations of the Chester Water Authority (CWA) for $410 million. Both deals involve political agendas.

For DELCORA, there is speculation that the political incumbents are maneuvering to increase the purchase price. There is also an issue of facility improvements that DELCORA claims could cost $1.2 billion. Such numbers are usually grossly over‑stated scare tactics. But one thing is certain: the customer is far better off when non‑profit DELCORA makes the investment. If Aqua closes this deal, the cost to its customers will go up. Depending on the investment, it could be a modest 17 percent, or it could double or even triple. It is certain that Aqua will be the high-cost result for DELCORA’s customers.

The sale of CWA is supported by Gov. Tom Wolf as a bailout for the bankrupt City of Chester. Politically, that stinks. It is trying to hide a large backdoor “tax” on CWA customers – a small segment of Pennsylvania’s population. If the state wants to bail out Chester City, let it appropriate state funds and have all of Pennsylvania pay for it. Of course, that would be politically toxic.

CWA is a large well-run system.  Aqua brings nothing to the table that CWA does not already have. If this deal goes through, the cost to its customers will double just to fund Aqua’s profits. The PUC approving this deal would be definite proof of its failure to have an understanding of what “public benefit” means.

If your municipal system is the target of a Big Water takeover, you need to take action. Assume the sales pitch is all hogwash. Start asking tough questions and do not accept mumbo-jumbo answers. Put pressure on your municipal officials to stop the takeover. Many officials only see the candy jar full of money and they are not on your side. Demand a place at the bargaining table. The ratepayer has been the pawn in this Big Water, Big Money acquisition frenzy for too long.

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Who better than a Californian to speak to the Chester Water Authority about winning a water war?  Disputes over water rights are rife in the southwest. California once fought with Arizona over the rights to the Colorado River water, and Arizona called out its National Guard to stop dam construction.

The CWA, which serves 200,000 people in Delaware and Chester counties, has been trying to fend off a takeover by Aqua PA since 2017. The issue is now pending before the state Supreme Court.

CWA contends that rates for consumers and businesses will rise if Aqua acquires the water company, and also, residents will lose access to Octoraro Reservoir.

Donald Cohen, co-author of “The Privatization of Everything: How the Plunder of Public Goods Transformed America and How We Can Fight Back,” spoke to Save CWA last week. He’s also the founder and executive director of In the Public Interest, a research and policy center.

Cohen talked in broad strokes about why publically owned entities like schools, libraries, or parks are generally good, but people can lose out when for-profit corporations buy those institutions.

“Things can be public,” Cohen said. “There are ways to keep them public. And there are ways to make them public. And most importantly, they need to be public.”

“The problem comes when their interests conflict with a public use,” said Cohen. “That’s the issue.”

In 2008, Chicago was in dire financial straits when it was offered a deal to sell its parking spaces to a private consortium led by Morgan Stanley, a parking company, and a sovereign wealth fund from the Middle East for $1.1 billion cash he said. The private group would control the city’s 36,000 parking meters for 75 years. Chicago took the deal and has lived to regret it when, for example, it needs to close a street for a parade or wants to add bicycle or bus lanes. It must pay the group for what was formerly its property.

“They just didn’t negotiate right,” he said. “They got taken.”

Donald Cohen

Often, local governments are not as sophisticated as the private companies who come in and want to buy something the public owns. And the officials see a PowerPoint with a bunch of “pretty pictures” and sign on the dotted line, ending up with a raw deal for their residents.

“This is an assault on our democracy,” Cohen said. And contracts, once signed, can be hard and expensive to break. “A deal’s a deal. Rigid contracts take away our ability to make decisions.”

Cohen also cited private companies that run prisons as another example.  Governments typically guarantee a certain number of beds that will be filled. So what happens when crime decreases? Is there an incentive to arrest more people?

In Arizona, the private contracts were for 100 percent bed utilization, but now the prison populations are going down because of the legalization of marijuana, he said.  And the state does not have the money for training and rehabilitation “because it’s locked into these contracts.”

“These are publicly-traded companies,” he said. “They spend lots of money in politics. They spend lots of money on lobbying…They have a fiduciary obligation to their investors.”

CWA Board member Joe McGinn said CWA has “bipartisan support working for us in Harrisburg.”

He asked Rep. Leanne Krueger (D-Folsom) and Sen. John Kane (D-Delaware/Chester) to ask the Delaware County council to get involved. And he thanked the two legislators for “fighting on our behalf.”

“None of them that are on the council now actually live in this district,” said McGinn, a former Delaware County sheriff.

“This is not a company that had issues. This was not a company that is in distress. This is not a company that had problems such as lead in the water. This is a company that is very well run. And sure, you can tweak it, whatever you want to do,” he said about CWA,

“Honestly, I’m really proud to be a member of the Chester Water Authority board,” said McGinn. “I’m going to do whatever I can to keep fighting for this. And I hope that the Supreme Court is going to do the right thing and we can keep Chester Water Authority as Chester Water Authority.”

Kane has received a lot of phone calls about CWA. He understands why the City of Chester wants to sell CWA because of being in state receivership and needing to sell the asset to escape that situation.

Having Aqua buy CWA “wasn’t the right thing to do,” said Kane, who introduced a bill to support ratepayers’ rights if an acquisition occurs.

However, another bill, SB 597, “written by big water companies” that would make it easier for Aqua and other companies to acquire community-owned utilities, was tabled this past week, he said. But he believes it will be brought up again.

“I’ve always believed in public utilities,” he said. “Over the last 18 months, I’ve gotten a crash course in what private water looks like, and I’m sorry to report, it’s not good.”

However, several bills to stop the sale of CWA remain stalled in committee, Krueger said.

An audience member suggested demonstrations outside the Supreme Court to sway the justices.

Cohen said people going to city and county council meetings would be more effective.

“People in motion,” he said. “That’s the only way it happens.”

CWA solicitor Frank Catania said that for-profit water companies are lobbying the state legislature hard.

“That’s their business,” Catania said. “That’s what they do. Constituents don’t understand the pressure the legislators are under.”

“Aqua has a list of every water system in the state,” said Cohen. “We should create that list and get ahead. Their strategy is to surround the cities…They’re playing a long game.”

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