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Residents Weigh In on DELCORA Sale

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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DelVal Residents See Higher Utility Bills

Delaware Valley residents are feeling the financial pinch. They’re not only paying higher prices for gasoline and food. Now their utility bills are also skyrocketing.

Cheltenham resident Elizabeth Tsingelis opened her combination water and sewer bill from Aqua PA last month to find it went from $43 to $184.

“My sister (who lives around the corner) had a $90 water bill and it went up to $315,” she said. “We were three people here in the summer. Her family is five people. And we don’t understand where it’s coming from.”

Wholesale utility prices (the price at which energy suppliers pay for water, gas, and electricity) have risen due to an increase in global demand as major economies have simultaneously climbed out of the pandemic-induced recession. The price increases have risen steeply since October 2021. Natural gas prices have hit a record high as the world emerges from a lockdown.

Utility companies are now passing that cost on to consumers.

“Power generators that had been shut down could not ramp up in time to meet renewed demand,” says Jonathan Stern of the Oxford Institute for Energy Studies. Electricity demand is set to increase further as a result of rising household incomes and growing demand for digitally connected devices and air conditioning.

After falling by about 1 percent in 2020 due to the COVID-19 pandemic’s impact, global electricity demand is growing by close to 4 percent in 2022 – driven by the global economic recovery– according to the latest edition of the International Energy Agency’s semi-annual Electricity Market Report. Most of the increase in demand is expected to come from the Asia Pacific region, primarily China and India.

The Pennsylvania Public Utility Commission (PUC) has approved what it called substantially lower than requested increases in rates for water and wastewater services provided by Aqua PA Inc. (Aqua Water) and Aqua Pennsylvania Wastewater Inc. (Aqua Wastewater), headquartered in Bryn Mawr.

The commission voted 3-0 on May 12 to approve an increase in annual revenue of approximately $50.51 million (9.88 percent) for Aqua’s water service and an increase in annual revenue of approximately $18.74 million (50.55 percent) for wastewater service – approximately 30 percent lower than what the company originally requested.

The PUC announced utility rates rose last June 1 from 6 percent to 45 percent for those consumers who don’t shop for suppliers in the online marketplace.

Aqua serves parts of Berks, Bucks, Montgomery, Delaware, and Chester Counties. Aqua Wastewater provides wastewater service to approximately 40,284 customers in portions of more than 40 municipalities throughout 15 Pennsylvania counties. The two companies serve nearly 1.5 million people throughout the state.

“Our May 2022 rate increase request was made to cover the three-year period of major capital investment and operating expenses since our last request in 2018,” said Chris Franklin, Essential chairman and CEO. “The overwhelming majority was related to our capital investment of $1.1 billion (through the future test year of 2023) to improve water quality and customer service, including a new financial reporting system, SAP, to replace the company’s 25-year-old software, and reliability for about 490,000 water and wastewater customers throughout Pennsylvania. We also opened a new state-of-the-art environmental laboratory in 2021 to help us continue our long history of providing safe drinking water to our customers and returning clean wastewater to the environment.”

Franklin added, “Inflation was generally estimated in our operation and maintenance costs, but not at today’s current rates. However, Aqua is not currently passing on those additional costs to customers.”

Most Aqua residential customers using 4,000 gallons a month currently pay an average of $69.35 for water and $55.51 for wastewater. Most receive only water service.

The precise impact on Aqua customers was filed in a required tariff report filed by Aqua in July which spelled out new charges for various rate zones across Pennsylvania.  The PUC’s policy is to gradually unify charges across its system so that the costs are shared equitably among all customers. Under that policy, customers in low-rate towns acquired by Aqua will eventually see their rates rise to match the majority of customers.

“For electric and gas in the Delaware Valley, PECO negotiates for lower energy prices. It does not generate electricity, it’s a distributor,” says Greg Smore, senior manager of communications.

“New and higher gas costs influence electric rates for the year. Prices are adjusted quarterly to current market trends – the rising costs of everything else – increased electric supply costs, and geopolitical issues (like the war in Ukraine). It costs power plants more now to produce electricity,” he said.

Natural gas is the plant fuel supply source that is trending higher now. It is the main cost for power plants to produce more electricity. Costs are then passed along to what PECO pays for supply, and passed along at the lowest price possible. But natural gas was lower for consumers in September, falling to 0.81790 cents per centum cubic feet (CCF). However, electricity increased by $6.10 per customer for the average usage of 700 kWh. These past summer months energy increased in usage due to higher air conditioning use.

PECO consistently encourages customers to use company energy efficiency programs and 12-month budget billing assistance programs. Despite rising than normal consumer pricing, there was no increase in customer complaints, which remained steady. Smore indicated, “We’re not seeing a significant increase in customers not being able to pay their bill, but we are encouraging customers to take advantage of financial assistance and bill relief programs.”

An advocacy group known as Keep Water Affordable, led by co-founder Bill Ferguson, is fighting the trend of utilities buying municipal water and sewer systems. Ferguson said Aqua Water and PA American Water, which he called “Big Water,” have a primary mission to acquire distressed municipal water systems at a “fair market value” and turn a profit.

“State regulation offices have stacked their efforts against local citizens,” he told the DVJournal. “This isn’t a fair system to ratepayers. Real users are seeing large rate increases as a result,” he noted. In the recent past, he attended public meetings involving Bucks County, Tredyffrin Township, and Chester Water Authority (CWA) to express objections to those municipal water systems being bought by “Big Water.”

His advocacy group’s efforts helped stop the Bucks County and Chester Water Authority municipal water systems not being sold to “Big Water.” Tredyffrin Township’s municipal sewer system was, however, purchased by Aqua PA. Area residents are mounting a major effort to try and stop municipal water buyouts through a state Supreme Court case, he said.

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New Suit Filed in Maze of DELCORA Litigation

The sale of DELCORA remains snared in litigation. The latest salvo was by Chester City receiver Michael Doweary to make sure the city receives its share of compensation if the pending $276.5 million DELCORA sale to Aqua PA goes through.

The suit argues that a previous contract signed in 1973 says Chester must agree to a sale and the city should also be paid a portion of the proceeds. DELCORA (Delaware County Regional Water Quality Control Authority) is also required under that 48-years-old agreement to return the city’s sewer system to the city. A later agreement said DELCORA must pay the city 10 percent of any sale, the complaint said.

DELCORA serves 46 municipalities in Chester and Delaware Counties.

Doweary asks the court to impose a declaration of judgment and an injunction.

Doweary tried to intervene in the sale before, but the Public Utilities Commission (PUC) refused, telling Chester it was too late. The DELCORA sale to Aqua had been approved by Delaware County’s former Republican-controlled council. The Democrats now in control are fighting the deal and passed an ordinance to permit the county to take over the utility.

Vijay Kapoor, Doweary’s chief of staff, said the new complaint is to make sure that Chester is protected if a sale goes through or DELCORA stops operations.

“There are assets that used to belong to the city,” he said. “These would revert back to the city or the city would receive adequate compensation.” The suit will “preserve Chester’s rights.”

A spokeswoman for Aqua PA said, “Although the action was filed/dated Aug. 17, Aqua only recently received a copy and has not had the chance to thoroughly review it in order to make substantive comment. Aqua is not a named party in the action. We are aware of similar relief the receiver sought before the PUC but the PUC determined he was not permitted to participate in that process. We previously asked the receiver several times for a list of the supposed assets potentially subject to the old agreement, and the supposed valuation of those assets. To date, we have not received a response.”

Kapoor said the PUC ruled they were too late to file but did not rule on the merits of their claims.

“It’s like watching a medieval castle siege,” said Frank Catania, a lawyer for the Chester Water Authority. “If they just starve them out they will eventually yield and sell to Aqua. Harrisburg has a $4 billion surplus. Delaware County has $100 million. It’s disappointing that nobody can use some of that money to help the City of Chester.”

CWA is also a litigant because Doweary may sell that entity to Aqua for $410 million, which would help with the city’s pension obligations. However, that case is pending before the state Supreme Court.

CWA serves 49,000 customers in 33 towns in Delaware and Chester counties.

Samantha Newell, with Rudolph Clarke, the law firm representing DELCORA, did not reply to a request for comment Thursday. The politically-connected law firm has Democratic state Reps. Mike Zabel and Benjamin Sanchez and Democratic state Sen. Maria Collett and Steven Santarsiero as “of counsel” lawyers.

The Common Pleas court has scheduled a hearing on September 7th to hear arguments regarding the Order the Court will issue, in response to the Commonwealth Court’s decision on this matter.

Delaware County Solicitor William Martin could not be reached for comment.

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If Aqua’s DELCORA Deal Goes Down, Who Wins?

In the wake of a Commonwealth Court ruling on the controversial DELCORA deal, an attorney for the private utility company Aqua sent a letter to the Public Utility Commission (PUC) urging it to “commence expeditiously” toward approving the sale. It is the most recent shot in a legal and political battle going back to 2019.

And yet after mountains of legal filings, multiple political attacks, and partisan name-calling, a key question remains unanswered: Who wins?

If Aqua convinces the PUC to approve its $276.5 million offer to buy DELCORA and the for-profit company takes over service for the 165,000 wastewater customers, is that good news or bad for ratepayers?

Delaware County has convinced the court that it has the authority to dissolve DELCORA and absorb its assets. If it takes over the operation entirely, is that a step forward for customers, or back?

Does the county even want to run the wastewater system? Or would it rather reform DELCORA and leave a quasi-independent agency in charge? Or does the council have another plan: Get Aqua to bump up the price, pocket the extra cash, and dump DELCORA’S customers onto the company’s ledger?

How did the seemingly simple sale of a water treatment system become so fraught with drama? Partisan politics — and lots of money.

Given the dominance of Democrats in Delaware County politics — there are currently no GOP members on the county council — it is easy to forget Republicans held the majority for decades. In 2019, when Brian Zidek became the first Democrat to chair the Delaware County Council in 150 years, one of his first comments was, “We want to make sure we don’t screw this up.”

One of the first items on the Democrats’ “this” list was the previous GOP-controlled council’s decision to make the DELCORA deal with Aqua on their way out the door. The new Democrat-controlled council went to court in May 2020 to block the sale by terminating DELCORA’s existence.

“From the beginning, I’ve said this deal stunk and the fix was in,” Zidek said at the time. “It was nothing more than a giveaway to a political contributor and the hardworking taxpayers of Delaware County deserve better. With the action we took today, we are advancing our goal of transparency and putting people over politics.”

Nearly two years later, the Commonwealth Court ruled that the council does have the power to terminate DELCORA. However, as Aqua pointed out in its letter to the PUC, the court also said the deal is still in play. Whether or not the goal was to protect GOP patronage jobs, the county is bound by the asset purchase agreement (APA) with Aqua.

In his letter, Aqua’s attorney, John F. Povilaitis with Buchanan Ingersoll & Rooney, highlighted a key part of Judge Patricia McCullough’s decision:

“[I]t is important to note that the County, in its demand that DELCORA terminate its operations and transfer its assets to the County, effectively places the County in a situation where it would receive a ‘contractual assignment’ from DELCORA as a matter of statutory law. Consequently, the County would, without question or condition, be bound by the terms and conditions of the [purchase agreement], just as if it were DELCORA itself in the sense that it would essentially become a ‘party’ to the contract.”

“Aqua respectfully requests that the Commission rule on the pending Petition as expeditiously as possible,” Povilaitis added.

As is often the case in politics, that depends on your definition of the word “expeditiously.” The PUC has to rule on the sale, and an administrative law judge panel has already recommended its rejection.

So, now what?

“The bottom line is that the county must comply with the existing asset purchase agreement between DELCORA and Aqua or face a lawsuit for specific performance and or breach of contract that we believe could reach hundreds of millions of dollars,” Aqua said in a statement to DVJournal.

Some county government observers say the current Democratic majority would be more than happy to avoid a lawsuit and collect a big check. They speculate the current fight is about leverage to force Aqua to sweeten the pot. With DELCORA dissolved, that cash would come straight to the county.

Delaware County Democrats say that is crazy because no matter how hard the story has been to follow, if local ratepayers suddenly see a spike in their sewer bills, they are going to blame the current council.

“The county had been consistent in its position that the transaction is unfair to ratepayers and taxpayers because there was nobody at the table looking out for their interests,” said Delaware County Solicitor Bill Martin.

As for restructuring the existing DELCORA board, attorney Frank Catania, who has often battled Aqua, has concerns.

“A person experienced in Public Utility Commission matters once told me that when dealing with the PUC, ‘If you don’t have a seat at the table, you will be on the menu.’ I hope that the new DELCORA Board will take strong action to protect the DELCORA ratepayers in the PUC proceeding and the remand to Delaware County Court,” Catania said.

And what about rate hikes? Aqua is touting a rate stabilization trust fund in its DELOCORA proposal similar to the one it says is in its bid to take over the Chester Water Authority. The idea is to set aside part of the purchase price to keep rates stable for the next few years.

And, like the Chester Water proposal, Aqua’s trust fund appears nowhere in the actual sales agreement. In other words, it is a pledge, but not a contract.

“The Trust is not part of the purchase agreement and it is up to DELCORA (and possibly the county, if they choose to dissolve DELCORA) to decide what will happen with the net proceeds from the sale,” according to Aqua’s statement. “DELCORA’s plan, as was explained to us, was to offset future rate increases by taking the $200 million in proceeds from the sale and give it back to customers through the use of a trust over the next 10 years.”

Martin describes the Aqua arrangement this way:

“The concept of the trust is that Aqua is paying the authority, but then the authority is setting aside part of the purchase to offset future rate hikes. It’s like someone saying, ‘I want to buy your car,’ then the buyer requires you to hold half the sale proceeds to pay for future repairs for the next 10 years. The net result is that they get the money, not you.”

Margo Woodacre says she has two words for promises from Aqua about protecting ratepayers: “Hog. Wash.”

Margo Woodacre is a co-founder of KWA – Keep Water Affordable, a group of New Garden residents who have seen their sewer bills soar since Aqua purchased the municipal system. She says Aqua came in with a promise of a two-year rate freeze and a cap on rate increases for ten years. It was a promise Aqua hasn’t kept, she told DVJournal.

“Aqua is a lot of talk,” Woodacre said. “They’ve got the money, they’ve got the connections, but I wouldn’t believe anything they say.”

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.”