New Garden sewer sale nearing final approval stages
By Steven Hoffman
On June 29, 2017, the Pennsylvania Public Utility Commission (PUC) approved the application of Aqua Pennsylvania Wastewater, Inc. (Aqua) to purchase New Garden Township's wastewater system for $29.5 million.
For the next two years, negotiations to finalize the purchase hit several legal snags, which reached its peak in Oct. 2018, when the PUC's Office of Consumer Advocate sued the PUC in Commonwealth Court, claiming that the sale of the township sewer system would lead to a severe escalation of rates among Aqua customers not only in New Garden but across Pennsylvania.
Last week, however, the township sent a notice to all wastewater system rate payers in the township that signified that the long journey to finalize the sale is coming to a close. On Feb. 21, the notice stated, Aqua filed the proposed final settlement with the PUC for the completion of the sale, pending final approval from Hon. Administrative Law Judge Steven K. Haas and the PUC.
In addition, there is one more hurdle to leap over before the sale can go through: Parties opposed to the transaction can submit written comments to the PUC before April 8, 2020, which will be reviewed by the PUC before the sale will become final.
Currently, the township bills its sewer customers on a quarterly basis and the township rate structure incorporates a base rate and then two levels of rates for excess usage above the base rate. However, once the sale is completed, New Garden customers will need to adapt to Aqua's billing process, which bills its sewer customers on a monthly basis, and over a period of time would convert the current quarterly billing to monthly. The public notice that was just sent to township customers includes a table that is based on monthly usage and billing.
For the approximately 2,000 households in the township who are tapped into the wastewater system, those who use an average of 3,750 gallons of water per month could see their sewer bill increase by as much as $36. By comparison, customers who use 5,000 gallons or less per quarter now pay $104.55 plus $13.91 for every additional 1,000 gallons used.
This November, the already adopted rates set by the Township Board of Supervisors will increase and customers will pay $112.91 per quarter, as the base rate, plus $15.17 for every additional 1,000 gallons used which will result in a total bill of $219.10 per quarter for a typical customer using 12,000 gallons per quarter.
As stated in the letter, the fees “could change and will depend upon how the PUC chooses to apportion any increase among the types of service, rate zones and classes of customers.”
Simply stated, New Garden customers will not be socked with the entire bill but rather, share the cost increase with other Aqua customers across Pennsylvania.
“The law was changed some years ago so that regulated utilities in Pennsylvania can distribute some of a rate increase that is related to an acquisition across their water and sewer rate base that is already in existence statewide, so that the full burden of paying for an acquisition doesn't only fall on these [new] customers,” said Spence Andress, New Garden's director of planning and projects. “[As a result of the impending sale], an almost identical notice is going to all of the Aqua Pennsylvania sewer rate payers that reflects a possible increase in their sewer bills as a result of the sale to New Garden.”
This rate increase represents a change from the original asset purchase agreement, that included a provision that called for a two-year rate freeze from the date of settlement. After that, the original agreement stated, there would be a compound annual growth rate not exceeding four percent a year,
over a 10-year period.
During negotiations to finalize the sale, that two-year rate freeze provision and the compound annual growth rate provision were removed from the asset purchase agreement. Under current rate guidelines, every regulated utility must file a rate request periodically with the PUC, who ultimately determines rates for all utilities.
In 2018, the township's Board of Supervisors adopted an ordinance that called for new wastewater rates to go into effect in November 2018, November 2019 and this November. Andress said that another rate increase is anticipated to go into effect in late 2021 or early 2022, when Aqua will file for a rate increase with the PUC, who will make the final determination of what the rate increase will be.
“We know the number for the next year for sure, we likely know the number for the next year and half, but we don't know what the number will be as of PUC's future determination,” Andress said.
Given that the sale still has three steps to go through – approvals by Haas and the PUC, and the public input stage – Andress said he is not certain as to when the transference of money from the sale will happen.
While the township waits for the deal to be done, its key stakeholders and elected officials contend that the sale of its outdated wastewater system is being done in the best interests of the system's ratepayers. In his Feb. 18 statement of support for the sale, township solicitor Vince Pompo wrote that the transaction will “produce affirmative public benefits of a substantial nature, particularly that Aqua will be more capable of operating and maintaining the sewer system at a cost-effective rate.”
“Since New Garden constructed, installed and/or acquired the various components of the sewer system, it has aged considerably and both significant upgrades and new capacity will be required,” Pompo wrote. “In particular, constraints at the South End spray irrigation fields have resulted in significant, ongoing operational costs. As a result, sewer rates have already been stressed in order to generate the revenue needed to meet existing debt service requirements in addition to funding all of the normal as well as extraordinary operational costs.”
While the township's supervisors have had preliminary discussions about how to allocate the funds from the sale of the wastewater system, no one is putting the cart before the horse just yet. Early talk is that some of the proceeds from the sale will go toward township infrastructure; paying back the township's general fund for the cost of the new facility for the Southern Chester County Regional Police Department; and creating a rate stabilization fund for New Garden customers in the township who will by then be customers of Aqua.
“It's been an emotional roller coaster ride,” Andress said of the more than two years the approval process has taken. “A lot of the township staff and others associated with the township have had a personal investment in order to assure that the system has been operated and maintained, so they are vested in the community, in that regard.
“There was the up and down in determining whether or not to sell, and then we went on to the mechanics of getting our system sold, and now we're on another roller coaster, where the deal is signed, and the deal has been generally very well supported with no major push-backs, but we are waiting for final PUC approval once again.”