Consumer Advocate sues to overturn Aqua Pa. takeover of Chesco town’s sewer system

The Pennsylvania Office of Consumer Advocate has sued to block Aqua Pennsylvania’s takeover of a Chester County town’s sewer system, saying the $17.5 million sale will fail to deliver “affirmative public benefits” and would instead harm all Aqua customers with higher rates.

The Office of Consumer Advocate, headed by Patrick M. Cicero, asked the Commonwealth Court on Friday to overturn a Pennsylvania Public Utility Commission (PUC) decision last month that allowed Aqua to buy the wastewater system in Willistown Township, the latest acquisition of a public water and sewer system with the help of a 2016 state law that encourages the consolidation of utility ownership.

The Consumer Advocate’s Office, which reports to Pennsylvania Attorney General Josh Shapiro, says the PUC erred by disregarding an administrative law judge’s recommendation to reject the sale, which the hearing examiner said would cause greater harms than benefits. The PUC voted 3-0 on June 8 to approve the sale to the Aqua, a subsidiary of Essential Utilities Inc., based in Bryn Mawr.

The PUC, in approving the sale, said Aqua had demonstrated its financial, legal and technical fitness to take over the Willistown system, and the sale would advance the commission’s policy consolidating smaller systems by larger entities that were more likely to improve performance.

But the consumer advocate said the case could have implications far beyond Willistown, a relatively small system serving nearly 2,300 customers in the affluent town near Malvern. The practical effect of the PUC’s ruling is that any acquisition by a “fit” buyer in the future will be approved if it can be shown it will promote regionalization of utility systems.

“This ruling, if allowed to stand, would eliminate the statutory requirement to conduct a fact-based weighing of harms and benefits to determine if a specific transaction will affirmatively promote the interest of the public in some substantial way,” wrote Erin L. Gannon, a senior assistant consumer advocate.

Aqua on Tuesday said it believes the Willistown acquisition will further the public interest, including the consolidation and regionalization of wastewater systems.

“We believe the PUC decision also supports the rights of elected municipal leadership across the commonwealth to determine the best water and wastewater solutions for the constituents that elected them,” the company said in an emailed statement.

Robert A. Swift, a Willistown resident and private attorney, filed a separate Commonwealth Court lawsuit on Friday, seeking to block the sale.

The consumer advocate’s legal challenge could also be expanded to include Aqua’s $54.9 million purchase of the East Whiteland sewer system, which is adjacent to Willistown. A different administrative law judge had recommended that the PUC reject the East Whiteland transaction, saying that Aqua had not demonstrated any cost reductions or efficiencies from deal. Despite the recommendation, the PUC voted 3-0 on July 29 to approve the sale.

Aqua and its principal competitor, Pennsylvania American Water, have aggressively moved to expand their systems in recent years under a 2016 Pennsylvania law that encourages municipalities to sell their water and wastewater utilities at sometimes very attractive prices.

Critics say the sales of these utilities are leading to an upward spiral of water and sewer rates. The private companies say they can provide better service to towns whose officials sometimes have little appetite for running a utility.

Aqua is currently engaged in a public campaign to get the Bucks County Water and Sewer Authority to approve its $1.1 billion offer for that sewer system. Aqua’s offer to buy the Chester Water Authority, which serves Chester and Delaware Counties, is hung up by a pending Pennsylvania Supreme Court decision on whether the authority’s assets are controlled by Chester City or by suburban Chester and Delaware Counties.

And Aqua continues to move forward to close its proposed $276 million purchase of the Delaware County Regional Water Quality Control Authority (DELCORA), a deal it struck in late 2019 before political power in Delaware County shifted from Republican to Democratic control.

The Commonwealth Court in March upheld Aqua’s claim that the disputed sales agreement was still enforceable, even though the new Democratic majority voted to dissolve the authority. Christopher H. Franklin, the chief executive of Essential Utilities, told investment analysts on Thursday that he was confident the deal would close soon and the company was including DELCORA revenue in its 2023 financial projections.