Delaware County judge upholds $276 million sale of the regional sewer system

The sale of the sewer system, which serves 165,000 customers in 42 towns in Delaware and Chester Counties, would be the largest privatization of a public water or wastewater system in Pennsylvania.

Aqua America workers rebuilt a water main in Upper Darby.Read moreJose F. Moreno / File Photograph

by Christian Hetrick

Published Dec. 30, 2020, 5:00 a.m. ET

A Delaware County judge on Monday upheld the pending $276.5 million sale of the county’s public sewer system to private operator Aqua Pennsylvania, rejecting the county’s attempt to block the sale by taking over the independent wastewater authority.

Common Pleas Court Judge Barry C. Dozor ruled that the county can’t interfere with the “fully binding and enforceable” agreement between Aqua and the Delaware County Regional Water Quality Control Authority, or DELCORA. The county’s Democratic-led council moved in May to take over DELCORA in order to halt the sale, which the authority arranged last year before Republicans were voted out of office in 2019.

“Contracts, binding agreements, and various legally public actions are not to be extinguished or interfered with merely because of a reorganization of county council or partisan differences,” Dozor wrote in an eight-page order.

The sale of the sprawling sewer system, which serves 165,000 customers in 42 towns in Delaware and Chester Counties, would be the largest privatization of a public water or wastewater system in Pennsylvania. It must still be approved by the state Public Utility Commission (PUC).

The county will decide whether to appeal in the next several weeks, county solicitor William F. Martin said in a statement. The county will continue to argue against the sale before the PUC, he added.

The pending sale sparked a political brawl between local Democrats and Republicans. Democrats called the no-bid agreement “an overtly political and backhanded deal” meant to preserve Republican jobs at the 136-employee authority and benefit Aqua Pennsylvania, a GOP donor. Aqua has promised it would keep on the current payroll.

When Democrats moved to take over the authority to block the sale, DELCORA alleged that the county’s effort was a “money grab” of the sale’s proceeds.

In his order, Dozor said that although the county has general authority to terminate DELCORA, it can’t refuse to comply with the contractual agreement that the utility reached with Aqua. The judge barred the county from taking over the authority before the sale closes.

Dozor also ruled that DELCORA’s creation of a trust to hold proceeds from the sale was legal. The trust, a crucial part of the deal made by the outgoing Republicans, would use the proceeds to reduce the impact of expected rate increases on consumers.

A DELCORA spokesperson called the judge’s order “a complete victory” for the authority and its ratepayers.

“The court rejected every attempt by the county to attack the validity and legality” of the sale and trust, the spokesperson said in a statement. “It is now time for the county to accept these decisions and stop wasting taxpayers’ money on frivolous lawsuits and legal fees.”

The county vowed to fight on, at least before the PUC. Martin, the solicitor, said the county would argue that Aqua is trying to buy “a valuable public asset [DELCORA] at a dramatic discount to fair-market value.”

“There is nothing in the judge’s order which justifies DELCORA’s decision to sell its assets without having tested the market to maximize benefits for its ratepayers and the county’s residents,” Martin said.

DELCORA has said its decision to sell the system was not political, but an effort to rein in rising costs. The authority’s leadership said it moved to sell after the Philadelphia Water Department notified the authority it planned to drastically hike the amount it charges for treating some of the authority’s sewage at city treatment plants. DELCORA said its customers would pay less over the next decade under Aqua’s private ownership, instead of the higher costs of staying on Philadelphia’s system, or the full burden of almost $1.2 billion in required federal clean water improvements.

Aqua Pennsylvania, a subsidiary of Bryn Mawr-based Essential Utilities, will work to bring the deal to a close and address “the forthcoming wave of mandated environmental improvements and capital costs” driven by federal regulations, company spokesperson Daniel Lockwood said.

“We are eager to continue making progress toward the completion of the transaction that will ensure continued reliable wastewater service at affordable rates for tens of thousands of Delaware and Chester County wastewater customers,” Lockwood said.