Pennsylvania approves private takeover of Royersford sewer system; rates will increase 70%

Pennsylvania regulators on Thursday approved the $13 million sale of the sewer system in Royersford borough, which will cause rates for the 1,600 customers in the Montgomery County town to soar 70% in about two years. It’s the latest sale of a Pennsylvania municipal sewer system to a private operator.

Under terms of the sale agreement to Pennsylvania American Water, Royersford’s rates will be frozen for two years after the deal closes later this month, though the new owners may impose up to a 5% infrastructure surcharge immediately. In two years, Royersford’s rates can increase by up to 70%, according to a settlement approved by a 4-0 vote Thursday by the Pennsylvania Public Utility Commission.

Royersford, which has a population of 4,756 and occupies less than a square mile, is the latest municipality to sell its public utility under a 2016 state law that encourages the consolidation of smaller water and wastewater systems. That law allows investor-owned utilities to charge ratepayers for the appraised fair-market value of an acquired system, rather than its lower depreciated book value, turning asset sales into bonanzas for some towns.

The Inquirer reported Sunday that grassroots movements have emerged among residents opposing wastewater privatization efforts — just down the Schuylkill River from Royersford, Norristown and Conshohocken recently rejected sales after opposition campaigns developed. But in Royersford, opposition was muted.

Town officials told the PUC that residents would be facing rate hikes even without a sale because the aging system needs expensive improvements. In addition, the borough wanted to get out of managing its sewer system, and also wanted to generate revenue, Michael A. Leonard, borough manager, told the PUC in an affidavit.

The sale will indeed boost the finances for the tiny borough. Last year Royersford’s cash reserves totaled $200,000. The borough will net $9.8 million from the sale after debt and expenses are paid, an amount more than three times the borough’s typical annual revenue of $3.1 million, Leonard said.

Pennsylvania American, which already provides water service to the borough, said it expects to provide the borough with better customer service.

“We can provide greater efficiencies and convenience for our customers, including one monthly bill and one customer service contact for both water and wastewater service,” said Laura E. Martin, Pennsylvania American’s spokeswoman.

Pennsylvania American, which is a subsidiary of American Water Works Co. Inc. of Camden, is the state’s largest water company, with 74,754 wastewater customers and 668,658 water customers.

The rate increase for Royersford customers in two years is capped at 70%, but the bills will no doubt increase more in subsequent years as Royersford customers are gradually incorporated into Pennsylvania American’s larger system.

Royersford customers now pay about $30 a month, less than half of Pennsylvania American’s current wastewater customers in eastern Pennsylvania, who pay $67.94. That monthly bill is scheduled to increase to $78.41 next year under a rate increase the PUC approved in February.