Pennsylvania American Water grows by acquiring another public plant in Montgomery County

A subsidiary of American Water has agreed to buy Upper Pottsgrove’s wastewater management system for $13.75 million, a deal officials said would lessen burdens on the debt-ridden town, which has struggled to maintain its aging infrastructure, and add to the portfolio of Pennsylvania’s largest private water company.

The Upper Pottsgrove Township Board of Commissioners approved the sale with Pennsylvania American Water on April 20, adding to the utility giant’s municipal wastewater treatment system acquisitions that range from McKean County in northwestern Pennsylvania to Philadelphia’s collar counties. Pennsylvania American Water also will be responsible for three public sewer extension projects in town.

Mirroring similar sales in other towns, the agreement is expected to allow Upper Pottsgrove to pay outstanding debt, replenish its pension fund, and fix other deteriorating infrastructure.

Pennsylvania American Water has tentatively scheduled to take ownership of Upper Pottsgrove’s wastewater management system early next year, pending approval from the Pennsylvania Public Utility Commission, said Maggie Sheely, a spokesperson for the company.

The utility commission would oversee water rates and rate changes.

Upper Pottsgrove had been searching for a utilities company to buy its wastewater system assets since early 2019 and submitted a bid request to Aqua America and Pennsylvania American Water on Feb. 5.

Under state laws, notably Act 12, a private water company can assess the value of a wastewater system, the cost of repairs and estimated future revenue, and offer the appraisal figure to a town — in this case, $13.75 million to Upper Pottsgrove.

The utility company can then charge customers based on the new, fair-market value of the wastewater management system instead of its lower depreciated value. Utility commission oversight is intended to prevent possible rate spikes after acquisition, but private water systems can also offset increases by spreading costs across all its customers in Pennsylvania.

Consumer advocates have opposed the law, saying that public water systems often charge less and that privatized water utilities can become predatory and raise prices substantially.

Private utility companies have rejected such characterizations and said acquisitions help pull towns out of dire financial situations.

Without the sale, Pennsylvania American Water said, Upper Pottsgrove’s residents would have seen a “significantly higher” tax increase if the town were solely responsible for fixing its wastewater management system, which serves about 1,600 people.

The sale offsets other financial burdens, officials said, meaning residents will have about a 9% decrease in wastewater fees. To date, residents in Upper Pottsgrove, which the census has pegged at having a population of about 5,700, have annually paid about $860 in sewage fees, ranking among the costliest in the area.

In 2019, Pennsylvania American Water, a subsidiary of Camden-based American Water Works Co. Inc., acquired a string of public water and wastewater utilities that included facilities in Sadsbury and Valley Townships, Chester County, and Royersford, Montgomery County.

Staff writer Andrew Maykuth contributed to this article.