People are asking a very important question: Who benefits when Pennsylvania’s water companies bring operational expertise to a municipality that is struggling to run its water or wastewater system, or a town that decides it no longer wants to be in the business of managing a complex part of our vital infrastructure?
As a former Pennsylvania Public Utility Commissioner, I see that important context is often missing from these discussions.
The policy solutions passed by the state General Assembly — with overwhelming, bipartisan support — help Pennsylvania municipalities obtain much-needed expertise for the management of their communities’ vital water and wastewater infrastructures.
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On top of gaining operational expertise and getting out of the complex and liability-heavy business of running these systems, the benefits are clearly visible in the form of a safer and more reliable service that includes long-term infrastructure investment planning and robust customer affordability programs.
Years of neglect and underinvestment in infrastructure, along with increasing environmental and safety regulations, cause local governments to decide it is in the community’s best interest to have private-sector expertise run their systems.
Far too often, municipally-set rates don’t recover the cost of service because of a natural reticence of community leaders to raise rates. And those costs don’t go away — they are simply hidden in your tax bill.
Pennsylvania’s policy solution, called Act 12, ensures municipalities that choose to sell their water and wastewater systems receive a fair sale price for the system instead of the depreciated value they would otherwise receive.
Opponents greatly misrepresent what Act 12 does as well as the beneficial experiences of communities that choose to sell their systems.
Context is important.
For example, without Act 12, the western Pennsylvania city of McKeesport would have been forced to sell its wastewater facility at an unfairly low price. Instead, because of Act 12, the city was able to sell for a fair price, and used the money to pay off debt, fund pensions, and avoid municipal bankruptcy.
New Garden Township opted to sell because its wastewater system needed to expand and was desperately in need of repair. The township solicitor said “rates [would be] as high as you’re seeing them today, if not higher” if the system were still public and the improvements were funded via rate increases. The system’s buyer, Aqua Pennsylvania, has invested heavily in the system, fixing the infrastructure and addressing an emergency issue to keep sewage from flowing into township streams.
The Exeter Township manager said its sewer system was “becoming an increasing burden on the township as federal and state regulations were becoming too difficult for the township to manage.” Instead, the township sold the system, which paid off the library and sewer debt, stabilized the tax base, and improved the township’s credit rating.
Instead of offering viable solutions, a vocal minority is focused on blocking communities from receiving the expertise and resources needed to ensure safe and reliable service.
A similar story holds true in East Norriton, where the township’s 5,000 customers were faced with as much as $20 million in needed investment in the system. Instead, the township chose to sell the sewer system to achieve the results needed and financially benefit its residents.
Same for Limerick, where the township manager said “sewer rate increases will be less to our residents than they would have had to pay if the township kept the sewer system.” Capital projects funded by the proceeds included a township building, a police headquarters, a public works department garage, and road improvements.
“To pay for all that would have required us to double the township’s taxes or more,” said township Supervisor Elaine DeWan.
Pennsylvania’s water and wastewater companies have a successful and extensive record after serving the Commonwealth for over 200 years. These water companies serve over three million Pennsylvanians, partnering with local communities to ensure the highest level of water quality at affordable rates.
Numerous studies have consistently shown that these companies provide water of superior quality compared to government-run systems. Data from the Environmental Protection Agency (EPA) demonstrates that systems operated by Pennsylvania water companies are 34.7 percent less likely to have Safe Drinking Water Act violations compared to their government-run counterparts. Water company employees — the tens of thousands of hardworking men and women, both union and non-union, who live in the Pennsylvania communities they serve — are also 21.5 percent less likely to suffer an accident on the job.
Pennsylvania’s rate-regulated water companies are committed to operating in full transparency under regulatory scrutiny of the PUC, which uses a team of experts to analyze company expenses and sets rates based upon those allowable expenses.
Pennsylvania’s private water companies invested $800 million last year in improvement, prioritizing the safety and reliability of the water supply. For Pennsylvania’s two largest water companies, their investments exceed their returns, illustrating their commitment to infrastructure improvement and putting to rest the tired argument around shareholder profits.
What we need are constructive discussions about what is truly in the best interest of Pennsylvania residents. Instead of offering viable solutions, a vocal minority is focused on blocking communities from receiving the expertise and resources needed to ensure safe and reliable service. This is all done in the name of advancing an ideologically-driven agenda that ignores 200+ years of operational expertise.
Norman Kennard is a former Pennsylvania Public Utility Commissioner (PUC) and former advisor to the chairman of the PUC. He currently is a member of the utility law practice at Eckert Seamans.