Aqua Pennsylvania, the Bryn Mawr company that has been gobbling up public utilities in the Philadelphia suburbs, received state approval Thursday to buy the Lower Makefield Township sewer system in Bucks County for $53 million.
The Pennsylvania Public Utility Commission unanimously approved Aqua’s acquisition of the Lower Makefield system, which has 11,151 residential and commercial connections in Lower Makefield, Falls and Middletown Townships, and Yardley Borough. The Lower Makefield system includes 113 miles of collection mains and 14 pump stations, but no treatment plants: It conveys its wastewater to the Morrisville Municipal Authority, which treats it under a contract.
Lower Makefield becomes the latest Pennsylvania municipality to close on a sale of its water or wastewater system, incentivized by a 2016 state law that allows private utilities such as Aqua to offer higher “fair market value” prices for the facilities.
Will rates rise?
Critics fear that the higher prices paid for the systems will boost rates for all customers of the private systems, pointing to Aqua’s filing in August requesting a 17% rate increase for water customers and a 33% increase for sewer customers. Aqua is a subsidiary of Essential Utilities Inc.
The Lower Makefield Township supervisors, by a 3-1 vote, chose Aqua over rival Pennsylvania American Water at a contentious 2020 meeting where opponents expressed fear that the sale would bring burdensome rate increases. Aqua promised to freeze rates for two years, but estimated they will increase in steps from about $71 to $96 a month by 2028.
“This is a horrible decision, a wretched decision, and I am profoundly disappointed that the township would make this decision,” John Lewis, the dissenting supervisor, said at the time according to the Bucks County Courier Times.
Township officials, in a letter to residents, said it chose to sell its system because Aqua is better able to comply with environmental regulations and to take on the “massive risk associated with running a wastewater system.” The proceeds from the sale will allow the township to pay down debt, improve its financial outlook, and fund future projects without raising taxes.
The township rejected a lower bid from the Bucks County Water and Sewer Authority, which would not agree to take on the expected increase in sewage treatment costs from the Morrisville Authority, which plans to build a new treatment plant.
The PUC approved the sale without discussion. The terms were largely set in a settlement between Aqua, the PUC’s staff, and consumer advocates. But there remained a disagreement over the valuation of the deal, which will determine how much money Aqua can recover from customers in future rate increase requests.
Aqua said that the average of two appraisals — one conducted for the township, and by an appraiser hired by Aqua — came in higher than the $53 million purchase price, and that the company should be entitled to recover the full purchase price in future rate increases. But an administrative law judge agreed with the Office of Consumer Advocate’s arguments that the appraisals were too high and should be discounted, setting the value at $51.2 million. The PUC mostly agreed with Aqua’s arguments, and set the recoverable value at the purchase price, $53 million.
Aqua’s growing network
The addition of Lower Makefield’s 11,151 customers will boost Aqua Pennsylvania’s existing base of 45,000 wastewater customers by nearly 25%. Aqua’s water division — its traditional business line — has about 445,000 customers in Pennsylvania, or 10 times as many as wastewater customers.
Since the 2016 fair-market value law went into effect, Aqua has agreed to buy eight systems in the Philadelphia suburbs for a total of $295 million: New Garden Township, Limerick, East Bradford, Cheltenham, East Norriton, Lower Makefield, Willistown and East Whiteland.
In July, Shenandoah Borough in Schuylkill County agreed to sell its sewer system for $12 million to Aqua. And in October, Aqua agreed to buy the sewer system of the city of Beaver Falls for $41.25 million, its first system in Beaver County in Western Pennsylvania.
Aqua also has a deal to buy the massive DELCORA wastewater system in Delaware and Chester Counties for $277 million and has offered to buy the Chester Water Authority for $410 million, but both of those deals are tied up in litigation.