Bucks County may sell its massive water system, and that could cost ratepayers across the region

Bucks County officials are evaluating an offer of about $600 million from Aqua Pennsylvania to buy the county’s sprawling water and wastewater utility, a potentially huge privatization that could fill the county’s treasury, but impact water and sewer rates for customers far beyond Bucks County.

Officials of the Bucks County Water and Sewer Authority (BCWSA) said Wednesday that they are methodically evaluating potential options for the public system, which serves about 100,000 households in Bucks, Montgomery, and Chester Counties. John F. Cordisco, the chairman of the BCWSA board, mentioned Aqua’s offer for the system, but added that an appraisal commissioned by BCWSA values it at $1.4 billion.

An Aqua spokeswoman declined to comment on any discussions underway with Bucks County. “Aqua is always interested in being a solution to municipalities and their customers, but we do not comment on specific opportunities,” the company said in a statement.

If BCWSA were sold, it would be among the nation’s largest utility privatizations, and the largest undertaken in Pennsylvania since the state in 2016 passed new rules encouraging private ownership of public water and sewer systems.

That law has triggered a virtual land rush by private investors for public systems that has raised fears among consumer advocates who say that ratepayers bear the costs of the pricey sales with higher rates.

Aqua’s offer for the BCWSA was first reported by the Bucks County Courier Times.

Members of the authority’s two unions confronted the BCWSA Wednesday at a hastily scheduled board meeting where they feared the utility would be sold. The labor leaders said they had been frustrated for months on getting information about a potential sale.

“It’s very concerning because there are residents out there that are going to look at a potential rate hike,” said Tom Tosti, a director of the AFSCME local that represents the authority’s supervisors. “There’s workers here that could lose their pensions. And everything’s hush-hush. Nobody is talking.”

» READ MORE: In Philly suburbs, sewer systems are for sale, and citizens push back, fearing rate hikes

Cordisco said the board has a fiduciary responsibility to evaluate any offers before deciding to take further action. “We’re not there. So all you basically heard is rumors.”

“When we have enough information to have a discussion, you will be brought into that conversation,” he said.

Cordisco said there was “not even a remote possibility” the board would sell the system if the pensions of BCWSA’s 114 employees were impacted. “We cherish the people that have been working here,” said the Newtown lawyer, who is chairman of the Bucks County Democratic Party and also a member of SEPTA’s board.

BCWSA provides water service, wastewater service or both to 31 towns, according to its system map. Some of the towns it supplies are wholesale customers, so BCWSA does not bill retail customers in those towns. Its system costs are paid entirely by its customers. Wastewater accounted for nearly 80% of its $89.4 million in revenue in 2020.

The authority had $232.5 million in debt at the end of 2020, according to its annual report. Any net proceeds of a sale after long-term debt is paid off would accrue to Bucks County, whose three-member board of commissioners is controlled by two Democrats.

Aqua Pennsylvania, which is a subsidiary of Essential Utilities Inc. of Bryn Mawr, may not be the only potential buyer in the market for the Bucks system. Pennsylvania American Water, the state’s largest investor-owned water utility and chief rival to Aqua in many bidding wars for public utilities, was also said to have expressed an interest.

A third party, Bernhard Capital Partners of Baton Rouge, La., extended an offer to lease and operate BCWSA for 30 years for an upfront $190 million payment, a capital investment of $685 million, and a pledge to limit rate increases up to 2% per year over the lease, according to a proposal supplied by Dan Gerrity, managing director of Bernhard’s Infrastructure Fund.

Founded in 1962, BCWSA is in some ways a rival to the large private water providers. It has aggressively moved beyond the borders of Bucks County, acquiring systems in West Vincent and Buckingham Townships in Chester County.

In 2015, it acquired the sewer system in Springfield Township, Montgomery County, for $16.5 million, prompting Aqua, a losing bidder in the Springfield sale, to sue, alleging that BCWSA was illegally using its nonprofit status to expand beyond its core territory.

BCWSA also acquired the sewer system in Upper Dublin Township, Montgomery County, in 1999. As word spread last week that the Bucks County system could be sold, it sparked worries that Upper Dublin could face soaring sewer rates like customers in Limerick Township, which sold its system to Aqua in 2017.

“We were very careful to protect for rate increases when we sold our sewer authority to Bucks County way back when,” said Ira S. Tackel, president of the Upper Dublin Board of Commissioners. “That all goes for naught if they sell to Aqua. If we look at Limerick and other municipalities, the rates that we’re paying now could easily double and that would be ludicrous.”

A BCWSA residential customer currently pays $43.80 a month for 4,000 gallons of water, and $47.20 for sewer service. Aqua, by contrast, charges $69.35 a month for the same amount of water, 58% more than BCWSA, and $55.51 for sewer service, or 18% more than the Bucks County system.

Aqua filed a rate increase request in August with the Pennsylvania Public Utility Commission that would increase current monthly water bills by 17% and sewer bills by 33% across its system. That matter is pending before the PUC.

According to BCWSA board meeting minutes, representatives of Aqua Pennsylvania have attended several of the board’s meetings over the last year.

Cordisco, the chairman of BCWSA, said Wednesday that Aqua extended its offer to BCWSA more than a year ago, and he had instructed officials from Aqua and Pennsylvania American not to reach out directly to BCWSA board members or the company’s staff while the authority evaluated its prospects.

“We have professionals that will evaluate the information,” Cordisco said. “And that once they complete that process, then we’re in a position to make a determination on what makes sense and what doesn’t make sense. But we’re not at that point.”

Benjamin Jones, BCWSA’s chief executive, said the company had hired engineering firm Gannett Fleming to appraise the value of the system.

The sales of water and sewer systems in Pennsylvania are driven by a 2016 state law that encourages the consolidation of smaller public systems under private ownership. The law, called Act 12, allows investor-owned utilities to pay an appraised fair-market value for an acquired system, rather than its lower depreciated cost or “book value,” and then to recoup the costs through higher rates.

Since the new law went into effect, Aqua has closed on acquisitions in East Norriton, New Garden Township, Cheltenham, East Bradford, Limerick, and Lower Makefield, and has deals pending with East Whiteland, Willistown, Shenandoah, and Beaver Falls.

Aqua has also signed a deal to pay $276 million for Delaware County’s sewer system, Delcora, a multi-town system comparable to the BCWSA. That deal was engineered in late 2019 in the final months before Republicans lost control of Delaware County. A new Democratic majority of county council has moved to undo the decision, which is pending before the PUC.

Interest in Pennsylvania utilities appears to be attracting big money from outside the state. The top bidder for the sewer system in Towamencin Township is NextEra Water, a subsidiary of the Florida company that owns Florida Power and Light but owns no Pennsylvania utilities.

NextEra offered $115 million for the Towamencin system, outbidding four other companies, including Pennsylvania America’s $92 million offer, and Aqua’s $54 million bid.