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Chester Water Authority Scores Win in Federal Bankruptcy Court

The Chester Water Authority (CWA) and Chester County chalked up a win in its ongoing legal battle with the Receiver for the City of Chester.

The bankruptcy court judge handling the bankruptcy case filed by Receiver Michael Doweary on behalf of the City of Chester ruled on Nov. 23 the CWA is not part of another case bought by the receiver pending in Commonwealth Court.

In the ruling by Judge Ashely M. Chan, the receiver agreed the word “authority” in the Commonwealth Court amended recovery plan does not include the CWA.

Chan stayed the CWA’s case that was to be heard by the state Supreme Court on Nov. 30. But motions to permit the high court to hear the case were filed and will be heard mid-December.

“We believe the state Supreme Court should be the one to decide it,” said CWA lawyer Frank Catania. CWA is fighting for survival against the state-appointed Receiver’s attempts to sell it to Aqua PA. And even if he succeeded, Catania said, “it is an undecided — and vigorously disputed — as to what money, if any, the city would get from a sale of CWA.”

The city of Chester has a long history of financial turmoil stretching back 27 years. During that time, it has been under the financial authority of four receivership regimes authorized by the Pennsylvania Municipalities Financial Recovery Act of 1987.

“Since 2017, the City of Chester has attempted to monetize the assets of the CWA, an authority that services more than 200,000 ratepayers, the vast majority of whom reside outside the boundaries of the City, including more than 34,000 ratepayers residing in Chester County where critical infrastructure is also located,” Delaware County argued in a legal filing. CWA supporters believe the Receiver had his eye on the authority and his requests to the courts reveal his intentions.

The receiver had “asked the court for permission to take over and run any authority that the City of Chester created. That’s all it said. It didn’t say, ‘not us [CWA],'” said Catania “So clearly we were concerned. If the judge gave a broad interpretation of the language, that would include us, and the Receiver has no business trying to run a water company, right?”

Opposition to Chester’s attempts to sell the CWA to Aqua PA is bipartisan in the Delaware Valley. In addition to Democratic opponents on the county council, two GOP state reps previously filed an amicus brief last month to oppose the sale.

“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.”

And the state Supreme Court is where CWA supporters want this case heard, while the Receiver has tried to get the Commonwealth Courts to make the decision.

“Doweary would rather have the issue heard before a single judge in a different case where the Chester Water Authority is not a party. That’s what he was trying to do. Then the next step in his plot—a hostile takeover– was on the day before Veteran’s Day. That’s when the city filed for bankruptcy, with no prior warning.”

“The Receiver has a nasty habit of trying to pull holiday surprises,” Catania added. “So we’re always on a heightened state of readiness around the holidays.”

“He failed, but he’ll try again,” said Catania.

The receiver did not respond to a request for comment on Tuesday.

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New ACCESS Community Center to Open in Chester

A ribbon-cutting ceremony was recently held for ACCESS, a new community center established by the Surgent Family for Society in Chester.

The center’s mission is to provide a safe and respectful environment to gather for learning, recreation, and celebration.

ACCESS’s vision promotes quality of life and meeting the needs of our community by offering programs and activities which support and enrich the lives of children, young adults, seniors, and families in the Chester Community. It offers educational, social, and recreational experiences for all residents regardless of ethnicity, economic status, or gender with a focus on human dignity and empowering the community. It will also create and encourage partnerships with other community and non-profit organizations.

“Sister Cathy and I are so grateful to the Surgent Family for including us in the creation of ACCESS. The many supporters of ACCESS have been working tirelessly to put together wonderful programs and offerings in this beautiful building which will further enrich our community. We look forward to many years with our Chester neighbors,” said Sister Maggie Gannon.

Funding for the new center was also provided by individual donors as well as Widener University and The Burman Family Foundation. Corporate support included PECO, Bohemian Management Corp, P2 Management Company, New Spring Capital, TriState Bank, Capital Solutions, Tague Lumber, and Meridian Bank.

Gannon said the center will open its doors in early November because the contractor needs to complete some work. Along with classes and programs, the center will have a food bank, washers and dryers and showers.

The new ACCESS center is located at 701 Booth Street.

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POWELSON: Sale of CWA Good for Consumers, City of Chester

America is facing serious and growing water infrastructure challenges, meaning communities across the country are having important conversations about how to ensure safe, reliable water. One of those conversations is happening right now in Chester where the city, which owns the Chester Water Authority (CWA), is looking to get out of the water business and put it in the hands of other local experts.

As both a CWA customer and president of the National Association of Water Companies (NAWC), which represents America’s water companies, I am invested in this ongoing conversation about the future of Chester’s water system and am concerned about misinformation concerning the potential sale.

A wide sampling of that misinformation was part of a recent editorial written by local activists.

Chester is looking to sell its system for good reasons. First, Chester faces significant financial challenges and is only the second Pennsylvania town to be placed into receivership. The sale of CWA is a solution that will bring in much-needed revenues while also placing the system in the hands of professionals.

By selling to a professional water company, Chester will gain the operational expertise that is the hallmark of the private water industry, which currently serves over 4.4 million Pennsylvanians. Despite activist attempts to paint a rosy picture about CWA, the reality is the system has been plagued by operational inefficiencies for decades. A water company will be able to address those inefficiencies, offer a strategic investment plan that removes local politics from decisions about infrastructure, and ensures residents have safe and reliable water for generations to come.

Instead of providing a factual assessment of CWA’s situation, the editorial’s writers resort to the very thing they accuse water companies of doing–scaremongering. For many years, activists on the fringes have tried to demonize particular industries by putting “big” before it. Big Oil. Big Pharma. Big Ag.

But this is a new, absurd one. Big Water?

I assume they are referring to the water companies that:

  • Serve 73 million Americans, partnering with local communities to ensure the highest level of water quality and reliability at affordable rates. These very companies have been proven in study after study to provide the highest quality water–higher than that provided by government-run systems. In fact, EPA data show systems run by Pennsylvania water companies are 34.7 percent less likely to have Safe Drinking Water Act violations compared to government-run systems.
  • Invest billions of dollars annually into community water systems so that when you turn on your tap, you know your water is safe to give to your family.
  • Provide affordability programs to assist those who may struggle to pay their water bills, unlike the government-run systems.
  • That employs tens of thousands of local residents who live in the communities they serve every day–people who are a part of the fabric of the community’s life and you see at the gym or the grocery store or on the sidelines at youth sporting events.

Putting aside the writers’ obvious red herring, it is incredible how many basic facts about water system operations their editorial got wrong.

For example, their claims about how water companies generate profit are laughably inaccurate and expose just how little they actually know about water utilities. They claim water companies want inflated prices for water systems because higher purchase prices result in bigger profits.

That isn’t at all how it works.

The price a water company pays for a system has absolutely nothing to do with how much of a return it can earn. A water company can only earn a return on the dollars they invest in necessary infrastructure repairs and upgrades on systems it already owns.

The writers are right about one thing – water companies are “regulated utilities.” Unlike government-run systems, water companies have strict oversight from independent state regulators. In Pennsylvania, that’s the Public Utility Commission (PUC).

I had the pleasure of serving as PUC chair and know how these protections benefit customers. The PUC provides rate regulation–meaning those expert regulators systematically review company expenditures and assess system needs as part of a transparent, months-long rate-setting process. That’s right: decision-making on customer rates rests in the hands of expert independent regulators, not water companies or local politicians who want to be re-elected.

City leaders and residents should not be misguided by those who are only interested in blocking proven water company solutions, not fostering a productive discussion about what is best for Chester’s residents. The expertise, strategic investment, and singular focus on water system operations that comes from working with a water company will ensure that current CWA customers like my neighbors and my family have safe drinking water and reliable service.

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Is Aqua’s ‘No Rate Hike’ Pledge a Hollow Promise?

As the complex legal and political battle over the future of the Chester Water Authority rages on, most CWA customers are focused on one simple question:

What about my rates?

Aqua America has made a $410 million bid for the water authority’s assets. They are pledging to keep the 200,000 current CWA customers’ rates flat for a decade. Make the deal, Essential Utilities Chairman and CEO Chris Franklin told Delaware Valley Journal, and “there will be no movement in what the customer pays.”

Not so fast, says the CWA’s attorney Frank Catania.

“Aqua can’t promise not to raise rates because Aqua doesn’t set the rates. The PUC [Public Utility Commission] does.”

And this is where the debate over the impact to ratepayers of the city of Chester’s attempt to sell the CWA gets complicated. The story also highlights the fact that, in the end, there is no certainty about future rates under the Aqua deal.

It all comes down to another simple question: Who can ratepayers trust?

Catania says it’s not Aqua. “If Chester sells to Aqua, it’s not a matter of ‘if’ there will be higher rates, but ‘when,” Catania told DVJournal.

“To my knowledge, we’re the only bidder who has said what rates will look like for the next decade – no other utility in the entire country has done that,” Franklin responds. “Has Chester Water made a similar pledge?”

But “no new rate hikes” is a much easier promise to make than it is to keep. Particularly in the case of Aqua and the CWA.

Aqua has been on a buying spree across Pennsylvania, snatching up sewer and water systems under a 2016 law known as Act 12. This law lets investor-owned utilities charge ratepayers for the appraised fair-market value of the assets. Aqua currently provides water service to nearly 450,000 customers in 32 Pennsylvania counties and wastewater service in 15 more.

As Aqua raises rates to cover its costs, the rates of its previous customers come into play under a policy known as “single tariff pricing.” Its premise is that similar customers should pay similar prices for similar services — a situation that absolutely wouldn’t exist for other Aqua’s customers in the CWA service territory.

“Our rates are one-third to one-half those of Aqua,” Catania says. “The PUC isn’t going to let one set of Aqua customers pay rates half as high as others in the same territory.” The CWA is scheduled to raise rates in 2022 for the first time in 11 years.

It’s an issue at the heart of a complaint filed on September 13 by the Office of Consumer Advocate regarding Aqua’s current request for a rate increase.

“Aqua has base rate cases for both water and wastewater pending before the [PUC] right now, and the OCA filed a complaint and is an active party in those cases,” Interim Acting Consumer Advocate Christine Hoover told DVJournal.

“The goal is to move customers towards the cost of service, Hoover said. “If there are relatively lower rate customers, but their cost of service is much higher, then the goal is to move them towards that cost service in each case.”

And part of that cost is determined by what the company, in the case of Aqua, pays for the water system. “The revenue requirement is driven by the purchase price, the rate-making rate base in a fair market value acquisition,” Hoover said.

This means higher rates under Aqua, the CWA and its allies argue. “Aqua can say ‘we’re not going to raise your rates for ten years,’ but what that really means is we’re going to take 10 years to get you up to single tariff pricing,” said Catania. “And if the PUC says, ‘no, that’s not OK, you’ve got to do it in three years because it’s unfair to other customers,’ then Aqua can say, ‘well, we didn’t want to raise your rates yet, but there’s no choice and it’s not our fault.’ And everyone is stuck paying higher rates.”

Aqua says they have the answer:  “The city of Chester will take part of the $410 million [purchase price] and put it in a rate stabilization fund,” Franklin said. “There will be no movement in what the customer pays.”

Hoover said she is unaware of any similar workaround as part of a transaction approved by the PUC and declined to speculate about the viability of such an approach. But if rates are half those of similar Aqua customers and CWA is currently collecting $42 million in revenue, filling that gap would in theory be $420 million over the next decade — more than the entire offer Aqua has made.

There’s no reason to believe the PUC would immediately double anyone’s rates — indeed, it would violate their strategy of avoiding rate shock — but gradually raising rates over a decade would still mean tens of millions of dollars from the stabilization fund, and rising with every rate increase.

Meanwhile, current Aqua customers are looking at rate hike requests ranging from 20.49 percent in Bensalem to an 86 percent increase in Sun Valley. It’s part of Aqua’s systemwide 17.86 percent increase currently before the PUC.

Aqua points to its high level of customer service —  more than 300,000 water quality tests per year — and the fact that it’s a local company that’s been part of the community for more than a century.

“We’ve been around as community partners for 135 years,” Franklin said. “We can make necessary investments to make Chester Water a very strong, viable water system.” And, Franklin said, the company is pledging to keep all the Authority’s employees, with commensurate pay and benefits.

Good news for the workers, but it also adds to the costs.

Asked to provide an example of a similar rate stabilization fund that successfully met a “no rate hikes” pledge, an Aqua spokesperson said via email: “A similar rate stabilization fund was formed by DELCORA (the Delaware County Regional Water Quality Control Authority) as part of its asset purchase agreement with Aqua in 2019.”

How well that fund will work has yet to be tested.

“They’ve never been able to hold to a rate agreement in place,” Catania said. “Never. Not even once. They make these promises and then the PUC lets them get away with not honoring them.”

Catania says the fundamental problem is that the focus of this deal between Aqua, the city of Chester, and the Department of Community and Economic Development is the city’s ongoing fiscal crisis. Chester is desperate for cash and the DCED is desperate to keep the city from falling off a pension-fund financing cliff.

“The DCED is trying to help out the government of the city of Chester,” Catania said. ‘We’re trying to help out the ratepayers. They’re our priority.”