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Chester County Press

Editorial: Tracking down ‘stability’ in the New Garden-Aqua deal

09/17/2019 11:41AM ● By Richard Gaw

On Sept. 23, the New Garden Board of Supervisors and the New Garden Township Sewer Authority will hold a special joint meeting at 7 p.m. at the Township Building to update residents on the status of the pending sale of New Garden Sewer System to Aqua Pennsylvania Wastewater, Inc. The meeting will  consider proposed changes to the pending asset purchase agreement. 

From the time the township, the Sewer Authority and Aqua entered into an agreement to sell/purchase the sewage system for the sum of $29.5 million in August 2016 -- which was approved by the Pennsylvania Public Utility Commission (PUC) on June 29, 2017 -- finalizing the deal has been a one step up, two steps back matrix of delays, appeals, requests for reconsideration, adoptions and revisions. Along the way, these negotiations have been joined by the Bureau of Investigation and Enforcement, the Commonwealth Court and the Pennsylvania Supreme Court.

Currently, settlement discussions between the township, its sewer authority and Aqua are ongoing, and while the sale price remains the same, new wrinkles in the original agreement have begun to appear. In an update of the negotiations about the sale now posted on the township’s website, New Garden and Aqua will amend the agreement to remove the provisions regarding the compound annual growth rate and rate freeze, so that the potential settlement, if approved, would:

Allow Aqua to acquire the New Garden sewer assets and begin to provide sewer service in areas supplied by New Garden.

Allow Aqua to add $29.5 million to its rate base. A utility’s rate base is the value of property used by the utility to provide service to its customers and is one of several components used to establish a utility’s customer rates.

Remove the provisions regarding the compound annual growth rate and rate freeze from the Asset Purchase Agreement.

Implement New Garden’s existing sewer rate ordinance, which provides for rate increases in 2019, 2020 and 2021, after which time rates would remain in effect until Aqua’s next base rate case is approved and implemented.

Propose a rate zone for New Garden customers, in Aqua’s first base rate case following closing, that would increase rates to an amount equal to Aqua’s Zone 1 wastewater rates, unless the increase would be more than twice the system average increase for all Aqua’s wastewater divisions. In that case, the increase would be capped at twice the system average increase.

The amounts stated above could change and will depend on how the PUC chooses to apportion any increase among the types of service, rate zones, and classes of customers.

Aqua will adopt the current sewer ordinance of New Garden Township which includes an implementation of rate increases in 2018, 2019 and 2020.  These rates will then be held at that level until Aqua files its next base rate case which is anticipated to be filed in 2021, with rates effective in 2022.

As stated on the township’s website, the sale of the township’s sewage system was entered into with the belief that the sale would provide stability in sewer rates in the future by having the service provided by an organization with significant resources to meet ever-increasing regulatory demands and infrastructure needs as the sewage system ages.  

As the stew in this long-simmering and multi-layered deal thickens, the more we question whether or not the intended beneficiaries of this sale – New Garden residents who are tied to public water – will see their wastewater rates remain stable, or whether Aqua will increase them, and if so, to what percentages, in an effort to recoup their $29.5 million investment. 

On Sept. 23, we feel it only right for those whose wastewater rates may rise as a result of this sale to politely ask these negotiators to define what “Stability” means.