Water is a valuable public asset which should be available to all, not sold to the highest bidder to exploit for profits.
The Two Largest Of The Big Water Companies
American Water Works Co. Inc - AWK (stock market symbol) - Website: LINK
This is the largest of the Big Water companies. It has almost 3.6 million customer connections. That is over three times the second place Essential Utilities. Its 2025 revenue was $5.1 billion. The vast majority of American's business is water and sewer services.
Essential Utilities Inc - WTRG (stock market symbol) - Website: LINK
Essential is the second largest. It has 1.1 million customer connections for water and sewer service - about one third of American's size. Its 2025 revenue was $2.5 billion, but only $1.3 billion of that was water and sewer revenue. The balance was natural gas service. So, in terms of size Essential is a distant second behind American. In most states Essential is better known under its legacy name of Aqua.
Others
There are other investor owned water companies, but they are considerably smaller than American and Essential. Also, the focus of Keep Water Affordable (KWA) is mostly Pennsylvania. And, in Pennsylvania, the only two of significance are American and Aqua. Therefore, KWA has essentially ignored any of the others.
The Proposed Merger
American and Essential announced a proposed merger 10/27/2025. In effect, it will be American acquiring Essential. Both companies have approved the deal and now they are working through a maze of regulatory approvals. They forecast closing the deal in early 2027.
The sections that follow provide a perspective of the geography served by the two companies and an analysis of their water and sewer businesses in Pennsylvania.
American Encompasses A Wide Swath Of America
In addition to the eight states noted in the above chart, the "Other" slice includes six more states: Hawaii, Tennessee, Georgia, Maryland, Iowa and Virginia. Plus, there are another ten states in which American provides services to military installations. The total is almost half the states. American investor presentations generally include an excellent map of their operations. For their June-2026 report it is page four: LINK
Clearly, American serves many customers in the USA.
Essential Utilities Has A Long Pennsylvania History
Essential Utilities traces its history back 140 years to the outskirts of Philadelphia. About 75 years ago it became Philadelphia Suburban Water Company and in 2004 became Aqua America. In 2020 it acquired People's Natural Gas and re-branded itself as Essential Utilities. It probably is no surprise that Pennsylvania accounts for almost half of Essential's water and sewer business. In most states the water and sewer businesses carry the Aqua name - Aqua Pennsylvania, Aqua Ohio, etc.
What follows is a profile of the Pennsylvania water and sewer businesses of the two companies. The data is taken from the annual reports each company is required to file with the Public Utility Commission.
Big Water's Water Business In Pennsylvania
The water side of the business is dominate for both companies. For Aqua, it is almost 90% of their business and for American it is over 80%. If you read the investor presentation materials of the two companies, you would think it is a vibrant growing business. That is certainly true for revenue and profits. However, in two key aspects it is very much a stagnate business.
Slow Customer Growth
Over the last 14 years they have only increased their customer count by 9%. That is less than 0.75% per year compound growth. There have been some minor acquisitions, but, clearly, acquisitions have not been a major strategy for water operations. Another source of new customers is likely developers building new homes and businesses that tie into existing systems. The following chart shows their customer growth:
Water Volume Sold
The volume of water billed to their customers has actually gone down. Over 14 years the water volume is down about 9% or 7.6 billion gallons/year. This is likely due newer appliances that use less water and cost conscious customers. The following chart shows this result.
Revenue
Since they are selling less water, you might expect declining revenues. No, quite the opposite. Over the last 14 years American's revenue has increased by 75% and Aqua's by 60%. In the last 5 - 7 years the rate of revenue growth has increased significantly. This is clearly shown by the following chart:
Operating Cost
With revenue increasing so steadily, one might wonder how much of that is driven by the costs to operate the system. The answer is almost none. The two companies have done an excellent job of controlling operating costs. For American over the 14 years costs have only gone up by 20%. In fact, during the first seven years costs actually went down. Aqua actually has done even better. Over the 14 years Aqua's operating cost only went up by 13%. For the two companies combined increased operating cost only accounted for about 9% of the revenue increase. All shown by the following chart:
Investment
So, with operating costs under good control and volume being sold is actually declining, what is driving the revenue and rate increases? In a single word: INVESTMENT - which is what the utility companies call Rate Base. Here is how the investment for these two companies has increased over 14 years:
Investment has grown very steadily over the fourteen years for a combined increase of $6.3 Billion. That is BILLION, with a capital B. That is an increase of 143%. Rate base drives 3/4 of Big Water’s costs - essentially all the costs except operating cost:
Interest cost = a direct percentage of rate base.
Depreciation = another direct percentage of rate base.
Net earnings = also a direct percentage of rate base.
Income taxes = yes, another direct percentage of rate base.
Clearly, increased investment is the driver for Big Water’s revenue growth. So, why is investment increasing so rapidly for a no growth business? In two words: Infrastructure Renewal:
Aqua’s 2024 rate filing indicated continued investment of about $300 million/yr.
American plans to invest $3.5 billion over the next five years.
As a result of Big Water’s continuing infrastructure renewal, their customers can expect to see ever higher costs.
Profits
While revenue has been growing at 3 – 4% per year, as the chart below shows, profits are growing at about 7% per year. Specifically over the full 14 years:
American – earnings have increased by $135 million/yr. About 36% of their revenue increase has gone to earnings.
Aqua – earnings have increased by $143 million/yr. A whopping 64% of their revenue increase has gone to earnings.
Big Water's Sewer Business In Pennsylvania
Big Water's sewer business is very different from their water business. Although much smaller than water, it has been growing rapidly by acquisition of municipal systems. Acquisition grows customer count, revenue, profit and investment in big chunks. However, there was very little growth until Act 12 (LINK) passed in 2016. Then Big Water went on an acquisition binge of non-profit municipal sewer systems. American made 13 acquisitions and Aqua made 9. With the one significant exception noted below, all were made under the provisions of Act 12.
Customer Growth
The following chart shows several key features about how their customer base grew via acquisition:
#1 - Their combined customer count soared from about 32,000 in 2010 to 177,000 in 2024 – an increase of 145,000 or over 450%.
#2 - It clearly shows a no growth business until Act 12 was passed in 2016. Even then, it took a year or two for the initial deals to be executed.
#3 - There is one exception to the Act 12 acquisitions. That is American's acquisition of Scranton in 2016. It was NOT Act 12, but did add 31,000 customers to American's roles.
Revenue
As the chart below shows, revenue has grown even faster than the customer base - probably not a surprise.
The impact of Act 12 is also clearly visible in this chart beginning about 2018. Over the 14 year period total revenue has gone from about $16 million/yr to $245 million/yr. That is over a 1400% increase.
The large majority driven by acquisition
Profits
As the chart below shows, profits have grown even faster than revenue. Again, most of the growth has come after the passage of Act 12 in 2016.
The combined companies profits have grown from $3 million in 2010 to $110 million in 2024. That is over a 3400% increase.
Investment
The chart below shows how the two Big Water companies have increased their sewer investments by $1.9 billion over the 14 year period. Most of it, over $1.6 billion came after the passage of Act 12.
However, the composition of that investment increase is very different than their water business. For the sewer business, 2/3 of the investment has been for acquisition of municipal systems. The balance, slightly over $600 million, has been for infrastructure.
Like the water business, growth in earnings is driven by the growth in investment.
Conclusions
Big Water's Growth
Clearly, both companies are aggressively growing both their water and sewer businesses. That is what for-profit businesses strive to do. But, in this case there is a cost - a substantial cost - associated with that growth. Existing customers are seeing regular rate increases well above normal measures of inflation and newly acquired customers are hit with "rate shock" levels of increases.
Growth Via Acquisitions
As shown above, Big Water's sewer business growth has largely been driven by acquisitions. And, those acquisitions totally revolve around Act 12. The short summary of what is going on with Act 12 acquisitions is told here: (LINK)
Act 12 was promoted by Big Water to legislators as a solution for fixing distressed systems. That was a bait and switch operation. Of 25 Act 12 acquisitions completed so far ZERO have been distressed systems.
What Act 12 really has accomplished is allow Big Water to offer municipalities about twice what their systems were historically worth. That is a temptation too many local politicians cannot resist. They grab the money and leave their citizens to pay the bill - a bill substantially inflated by the doubled investment cost. Typically, the rate increases (and rate shock) come a couple of years later. Then the politicians and Big Water try to lay the blame on the PUC as the one who sets the rates. That is pure dishonesty because those rate increases were predictable in advance.
Two things are needed to level the playing field for Big Water acquisition of municipal water and sewer systems. First is outright repeal of Act 12. Second, it is evident that local politicians are not acting in the best interests of their constituents. Therefore, a rate payer approval/veto of any sale should be required.
Growth Via Infrastructure Renewal
How much infrastructure renewal is really needed? Big Water has done a masterful job of positioning our water and sewer infrastructure as old and falling apart. And, they tout how they are fixing it. They cast themselves as the white knight rescuing infrastructure. And, they profit significantly from it.
Old does not mean falling apart. It is not easy to determine when it is economically justified to replace old facilities. Does a 50 year old pipeline that is functioning perfectly need to be replaced just because of its age??? Big Water has a strong profit motive to renew as much infrastructure as possible - and, has nearly unlimited access to capital to do so.
The PUC should be the counter balance to Big Water’s profit drive. Do they have the capability to assess true renewal needs? We have substantial doubts. If the PUC cannot competently assess renewal needs, the utilities an unequal advantage in the regulatory process.
As a result of Big Water’s continuing infrastructure renewal, their customers can expect to see ever higher costs.