(The following is an op-ed submission from Robert F. Powelson, President and CEO of the National Association of Water Companies, disputing the contents of a letter sent to Bucks County officials from the Pennsylvania Municipal Authorities Association.)
An Open Letter to Bucks County Elected Officials:
Important conversations are happening across the country and in our Commonwealth about how to address water infrastructure challenges and needs. The men and women on the front lines for Pennsylvania’s investor-owned water companies are friends, neighbors and even family members who are a part of their local communities and are personally invested in ensuring that the water is safe when we turn on our taps.
The letter you recently received from the PA Municipal Authorities Association about Act 12 of 2016 was written from a script provided to them by an out-of-town, dark-money group. The language is specifically designed to stoke outrage and misinform, containing errors so blatant that it causes anyone who knows the truth to question whether there was a deliberate intent to mislead.
It is incredible how many basic facts about water system operations and the mechanics of Act 12 PMAA got wrong. The misuse of information shows incredible negligence in comprehending state law, parroting statements by D.C.-based lobbyists that do not reflect the realities in Pennsylvania and disregarding the important role independent regulators play when it comes to investor-owned water companies.
You deserve better than that.
For example, the writers’ claims about how water companies generate profit is laughably inaccurate and exposes just how little they actually know about regulated water utilities. They claim water companies want inflated prices for water systems because higher purchase prices result in bigger profits.
That isn’t at all how it works.
The price a water company pays for a system has absolutely nothing to do with how much of a return it can earn. A regulated water utility can only earn a return on the dollars it invests in necessary infrastructure repairs and upgrades on systems it already owns. Unlike the government-run systems PMAA represents, water companies have strict oversight from independent state regulators at the Public Utility Commission (PUC).
This model of rate regulation removes politics from the ratemaking process, putting it in the hands of independent utility experts focused on long-term consumer and infrastructure needs. Unlike municipal authorities, which have an unfettered ability to raise rates for often unstated reasons, Pennsylvania’s regulated water companies must go through a transparent rate-setting process with the ultimate decision-making on rates being in the hands of independent regulators, not the water utility.
Also, it’s not company officials or elected officials making decisions about consumer complaints. Rather, if unhappy, consumers can take their issues to the independent PUC for resolution. The PUC has about 110 employees dedicated to handling consumer complaints – no need for an attorney, just a phone call to the Bureau of Consumer Services. It is not the free-for-all that the authors describe – rather instead of having to exercise their displeasure every two years at the ballot box or to a system operator that the authors themselves admit have little-to-no oversight from public officials, residents have the ability to take their complaints to the PUC at any time.
The authors also criticize Act 12, disregarding how the law has enabled tens of millions of dollars in urgent water infrastructure repairs to protect public health while also providing communities funding to address challenges like municipal debt, unfunded pensions and budget shortfalls.
You deserve to hear the full story, not one-sided mistruths provided by faceless activists who have never heard of Yardley, Perkasie or Tinicum.
Prior to Act 12, antiquated and unfair laws in Pennsylvania meant municipal governments and taxpayers were often unable to get a fair price for their water and sewer assets. A fair comparison would be if state law limited the price you could get for your home because an archaic accounting rule only allowed it to be sold for the original building cost, plus improvements, minus depreciation. And when you subtract depreciation, the actual value of the house (on an accounting basis) may be zero, or even less than zero. Commonsense changes to these antiquated laws – an effort often led by public utility commissioners – means that municipalities and their taxpayers can receive the full market value they deserve for their assets if they willingly decide to sell to a company specializing in water and wastewater operations. This unlocks funding to invest in infrastructure, retire debt, fund pensions and address other pressing local priorities.
A total of 14 states – 10 in the last four years, led by both Democrats and Republicans – have adopted utility valuation reforms, modernizing value-setting procedures to be used when systems are voluntarily sold.
Valuation reforms have provided lifelines to several troubled systems facing EPA enforcement orders, allowing them to regain system compliance and retire utility debt. Without the reforms, these systems would have been valued at next to nothing.
Ignoring the many benefits asset sales bring to communities, the D.C. activists, through PMAA, argue that valuation reforms somehow “artificially inflate” sale prices – despite the fact that those prices are set by independent appraisals (not the sale price) through a strict process defined by statute. The PUC can reject a purchase price that it deems unreasonable or a sale that does not serve the public interest, a fact PMAA conveniently ignores.
The argument as presented by PMAA essentially outlines how they would prefer to see taxpayer assets sold at less than their worth. Valuation reforms enable communities interested in selling their water or wastewater assets to get the best deal by allowing expert appraisers to determine a fair acquisition price using proven valuation methods.
Without these commonsense utility valuation reforms, communities would continue to be stuck without options to address their water challenges – and stuck without funding for other serious challenges like municipal debt, pension liabilities and budget shortfalls.
The U.S. Environmental Protection Agency (EPA) estimates that Pennsylvania needs to spend more than $16 billion over the 20 years just to modernize its drinking water infrastructure. Old and leaky infrastructure results in the loss of 6 million gallons of water each day across the United States. Improved infrastructure results in fewer water main breaks and less wasted water.
Working with a water company also brings higher quality water. Pennsylvania’s investor-owned water companies invest more than $800 million annually to ensure safe drinking water, protect our environment and preserve our most valuable resource. These community partners have a proven record of adhering to the highest standards of water quality. The EPA data doesn’t lie: Systems run by water companies in Pennsylvania are 34.7% less likely to have Safe Drinking Water Act violations compared to government-run systems.
Pennsylvania’s water companies also invest in their customers by establishing customer assistance programs – something municipal authorities do not have – and advocating for permanent federal funding for low-income assistance programs. Water companies also have implemented water conservation programs designed to help consumers save money by reducing water usage. The goal is to ensure customers of all income levels have access to high-quality water.
Local leaders and residents should not be misguided by those who are only interested in advancing a strict anti-private sector narrative, not fostering a productive discussion about what is best for our communities. The expertise, strategic investment and singular focus on water system operations that comes from working with a water company is what will ensure that customers have safe drinking water and reliable water service.
Sincerely,
Robert F. Powelson
President & CEO
National Association of Water Companies
See also:
Bucks County Water & Sewer Authority Exploring Plan to Sell Part of System For $1.1 Billion
Editorial: Why We Decided to Sell Our Sewer System
Despite Vocal Opposition, Towamencin Supervisors Sell Sewer System for $115M in Historic 4-1 Vote
Towamencin Supervisors Vote 4-1 to Advertise Sale of Sewer System for $115M, Final Vote May 25
Letter to the Editor: Vote No on Selling Sewer System
Residents Speak Out After Towamencin Supervisors Signal Intent to Sell Sewer System
Towamencin Supervisor Majority Says They’re in Favor of Selling Sewer System Despite Opposition
North Penn Says Proposed Towamencin Sewer Sale Would Have Minimal Impact on District
To Sell or Not to Sell: Towamencin Board to Decide Sanitary Sewer Fate in May
Towamencin Inches Closer To Possible Sewer Privatization With Feb. 11 Bid Deadline
Editorial: Selling the Sewer System Would Be Bad for Towamencin (and Elsewhere)
