Critics cite water quality law passed by Pa. Legislature Opens a Backdoor to Privatization Spotlight PA

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HARRISBURG — Pennsylvania lawmakers are weighing legislation that would make it easier for private water companies to recruit municipal authorities for acquisitions, purchases that new research shows could lead to higher bills for consumers.

The proposal — sponsored by state Senator Pat Stefano (R., Fayette) and backed by two large, influential private utilities — is being billed by supporters as a way to increase the reliability, quality and safety of Pennsylvania’s water supply.

It would require public water systems with more than 750 customers to develop and provide to the state an asset management plan with a schedule for identifying and replacing infrastructure such as old pipes and meters, as well as the estimated cost of such projects and the expected rate increases needed to pay them.

City officials and environmental groups are lining up against the bill, arguing it is a solution in search of a problem. They said it would create taxpayer-funded market research for private companies looking for their next deal under the guise of consumer protection.

“Lawmakers in Harrisburg are coming up with many, many different types of proposed regulations for our industry,” said Anthony Bellitto Jr., executive director of the North Penn Water Authority, which serves approximately 70,000 people in Montgomery County. “And unfortunately, most of those lawmakers have no idea what they’re talking about.”

The bill was passed by the state Senate on June 27-23 and now awaits further action in the state house.

The lower house’s Environmental Resources and Energy Committee held a hearing this week on the bill, known as the Water Quality Accountability Act, and executives of two private water companies: Essential Utilities of Bryn Mawr, the parent company of Aqua America and New American Water Works. Company, based in Jersey, gave a supporting testimony.

Combined, the two companies already serve at least 1.1 million homes and businesses statewide and look forward to expansion — Aqua America, for example, is in talks to buy Bucks County’s sewage system for more than $1 billion.

During the hearing, Aqua America President Marc Lucca argued that asset management plans, as required by the bill, encourage water suppliers to be proactive in inspecting, repairing and replacing infrastructure such as fire hydrants and lead pipes.

“People drink our water. They drink our product,” says Lucca. “And if a provider can’t meet the most basic requirements, would you feel safe consuming their water or giving it to your family, your children or grandchildren?”

Public water authorities are already required to comply with the federal safe drinking water law, among dozens of other state and federal laws, and release annual reports on water quality levels. For example, the 2022 North Penn Water Authority report was free of violations.

In addition to making asset management plans mandatory, the legislation would also oblige water boards to develop a cybersecurity plan and an inspection plan for, among other things, valves that connect to hospitals or that prevent the backflow of wastewater.

The state’s Department of Environmental Protection would be responsible for reviewing and enforcing the plans, and would set the timeline for authorities to comply with the plan.

These layers of oversight, authorities argued, could lead systems to misallocate dollars. For example, the bill mentions replacing water meters as a priority. While that sounds good on paper, Bellitto said a broken meter isn’t a big concern because it won’t affect a customer’s service or artificially inflate the bill.

“Let’s determine the best way to use our limited resources,” Bellitto said. “It’s probably much better for us to replace a water pipe that broke three times in the last winter than to put that money into replacing meters.”

New Jersey passed its own version of the law in 2017. Since then, local water services have had to deploy staff and dollars where they are not needed, leaving some more urgent tasks untouched, said Peggy Gallos, executive director of the state’s Association of Environmental Authorities, a trade group.

Pennsylvania’s new budget allocated $320 million in federal stimulus money to water and sewage systems, and the systems also have access to billions more in aid approved in the federal infrastructure bill of 2021. That puts them in a stronger financial position.

But this sudden windfall comes after decades of underinvestment in water. The proposal’s additional requirements, Bellitto said, will continue to force authorities to choose between their own plans or those mandated by state law.

Governor Tom Wolf, a Democrat, opposes the legislation in its current form, his spokesman said in an email, because it would impose “significant new obligations on municipal water systems without clearly demonstrating that the costs of those obligations are justified.” by the expected public health and safety benefits.”

ELIZABETH ROBERTSON / Philadelphia Inquirer
It’s probably much better for us to replace a water main that went down three times in the past winter than to put that money into replacing meters,” said Anthony Bellitto Jr., executive director of the North Penn Water Authority. , which serves approximately 70,000 people in Montgomery County.

A road to privatization – and higher bills?

In public remarks, water authorities have acknowledged a motive beyond safety for the legislation – paving the way for more takeovers.

Speaking to investors in February 2021, Walter Lynch, director of American Water Works, was asked about “emerging legislation that would also help” mergers and acquisitions. Lynch immediately cited the Water Quality Accountability Act as an example.

Forcing water authorities to inventory their systems could be a “wake-up call for many municipalities to say, ‘Maybe we should talk to American Water about selling the system,'” Lynch said.

Lucca expressed concerns about privatization at this week’s House hearing, saying it “may be a consequence” of the bill.

The utility sector is already a powerful political force in the General Assembly. Companies spend hundreds of thousands of dollars each year on lobbying and political donations, and a number of former lawmakers and staffers either work directly for or are contracted to the industry.

One of the most notable is Mike Turzai (R., Allegheny), former Speaker of the State House, who is counsel for Peoples Gas, a subsidiary of Essential Utilities. As a speaker, Turzai threw his support behind an ultimately failed attempt by the peoples to partner with the Pittsburgh Water and Sewer Authority.

Allegheny Strategy Partners, a lobbying firm in which former Senate President Pro Tempore Joe Scarnati (R., Jefferson) is a partner, is lobbying for Aqua America, according to State Department data.

This influence, experts say, can be seen in two laws passed by the legislature in the past decade. One, introduced in 2012, allows private utilities to levy fees on water bills outside of regular rate increases to pay for infrastructure projects.

Another law, enacted in 2016, allows the sale of water infrastructure at market price rather than book value. This allows companies to drive up their purchase price of water systems, giving local officials a big, one-time windfall, said Cornell University professor Mildred Warner.

The proposed water quality bill, Warner said, amounts to intimidating local governments with new requirements before private companies invade and offer a large check.

At first, local officials may not see much of a multimillion-dollar offer to get rid of troublesome assets.

But water services tend to be a monopoly, Warner added, so it’s hard to find an accurate sale price. And the cost of maintaining the water system, whether it’s repairing a leaking water pipe or replacing lead pipes, doesn’t disappear after the sale.

Instead, rate hikes to solve these problems will be decided by a private profit-seeking company, rather than a public board of directors accountable to taxpayers.

“What’s not to like about it?” Warner said, “What’s not fun is that if you’re the resident of the community, you’ve just lost control of your water.”

In March, Warner published a study with Food and Water Watch — an environmental group that opposes water privatization — examining the 500 largest water systems in the U.S.

The survey found that private system customers paid an average of $144 more per year for water than public system customers, and that in communities with private water systems, low-income households spent 1.55% more of their income on their water bills.

The pro-industrial policies already enacted in Pennsylvania and New Jersey, the study added, cost taxpayers an additional $89 on average per year.

It’s unclear whether the bill will pass in the State House, as influential environmental groups have spoken out strongly against it.

“We are looking much more closely across the board at bills related to privatization and corporate regulation because they create loopholes for companies to ignore environmental quality,” said Katie Blume, political and legislative director for the Conservation Voters of PA. , an environmental lawyer. group.

At least one conservative legislator is also skeptical. During the public hearing this week, State Representative Daryl Metcalfe (R., Butler), who chairs the environment committee, said he expected “additional work” on the bill, given the testimony the committee heard.

“Normally I’m against the government regulating more than they already are, and I’m for rolling back rules and not imposing new ones,” Metcalfe said. “So what are we fixing?”

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