Pennsylvania High Court to consider benefits versus higher costs of private ownership of water utilities • Pennsylvania Capital-Star

Pennsylvania’s highest court will consider whether the state should allow private companies to acquire public water and sewer systems, even if a deal is likely to increase costs for consumers.

The case involves for-profit water company Aqua PA’s bid to purchase a Chester County Township-owned sewer system and the price approved by the Pennsylvania Public Utilities Commission (PUC) under a statute which is also subject to legislative review.

The 2016 law aimed to make buying out troubled municipal water and sewer systems more attractive to investor-owned companies like Aqua PA, but critics say it led to skyrocketing water bills and sewer systems for thousands of customers across the state.

“The net impact, the dollar impact, of all of these acquisitions in total is about $100 million a year, which taxpayers are paying more than they otherwise would have,” said Patrick Cicero, an advocate of Pennsylvania Consumers, to the Capital-Star. “There is significant harm, financial harm to consumers.”

The Office of Consumer Advocate (OCA), which is an independent agency created by law that represents consumers in utility matters, challenged the PUC’s approval of Aqua PA’s proposal to purchase the system wastewater treatment plant in East Whiteland Township in 2022.

A three-judge panel of the Commonwealth Court ruled in favor of the consumer advocate, finding that the PUC had erroneously concluded that the benefits of the agreement outweighed the inconveniences caused to the public, namely the possibility of administrative fees. higher sewers.

The PUC, Aqua PA and East Whiteland Township asked the state Supreme Court to review the decision, and on Friday it issued orders granting their requests. The Supreme Court agreed to consider whether the Commonwealth Court abused its discretion in overturning the PUC’s findings that the sale to Aqua PA would benefit the public, if the PUC were to reject such proposals because the PUC’s bills consumers could increase and resolve questions regarding case law.

A PUC spokesperson said the agency would not comment on pending litigation. An Aqua PA spokesperson did not provide comment as of press time.

Governor Tom Wolf signed Act 12 to amend Pennsylvania’s public utilities law in April 2016. The new law allows municipal water and sewer utilities to negotiate with for-profit utilities for fair value market value rather than the real value of the system. The higher purchase prices, in turn, give new owners a basis to seek permission to charge higher rates, which they usually receive, consumer advocates say. testified at a hearing in December before the State House Consumer Protection, Technology and Utilities Committee.

Investor-owned companies, such as Aqua PA and Pennsylvania American Water, purchased 22 municipal utilities under the new valuation method and obtained rate increases ranging from 44% to 166%, according to the PUC.

A package of bills pending in the House would require utility companies to use lower values ​​for newly purchased water and sewer systems when seeking to raise rates, spreading the impact across a longer period and improve the transparency of the process.

According to the July 2023 Commonwealth Court ruling, Aqua PA and East Whiteland reached an agreement to sell the township’s wastewater treatment system for nearly $55 million and sought approval from the PUC. The OCA filed a protest against the request.

In proceedings before an administrative law judge, customers of Aqua PA and the East Whiteland system expressed concerns that their rates would increase as a result of the sale.

Aqua PA testified that as a large utility company, it was well prepared and had sufficient resources to support operation of the East Whiteland system. It also claimed its ownership would offer other benefits such as better customer service, the ability to spread risk across a broader customer base and in-house environmental and regulatory experts. She argued that her ownership of the township’s fresh water system would allow her to coordinate projects to avoid service interruptions.

The OCA provided evidence that the price offered by Aqua PA was inflated by more than 64%. Aqua PA calculated it would need to recoup more than $5 million a year in revenue from the sale, but agreed to freeze rates for East Whiteland wastewater customers for three years. After that, rates could increase between 66.5% and 133%, depending on whether the cost was paid only by East Whiteland customers or by all of Aqua PA’s customer base. OCA also argued that if the system remained a public entity, customers would benefit because the system would not pay taxes and have no shareholders.

The administrative law judge recommended that Aqua PA’s request be denied, but the PUC found that the benefits of the agreement outweighed the inconvenience caused to the public. He granted the purchase request, but at a slightly reduced price of $54.4 million.

In OCA’s appeal of the decision, Judge Renee Cohn Jubelirer, Chief Justice of the Commonwealth Court, wrote that the potential benefits of Aqua PA’s technical, financial and operational assistance to the water treatment system used by the municipality were not substantial enough to compensate for the known damage.