Conflict Of Interest In the world of law firms this is an important issue because they often serve many clients, and conflicts do arise. Most firms have well established protocols to avoid and resolve conflict issues. When there is doubt, you get a different law firm. To illustrate, if you are on trial for a crime you did not commit, you do not want the prosecutor acting as your defense attorney – he would be conflicted and you would most likely wind up in jail. New Garden Conflict Investigation After New Garden’s sewer sale was complete, it came to light that the Solicitor’s law firm had a conflict. The law firm also did work for Aqua, the buyer. This was critically important because the Solicitor was one of the major architects of the sales agreement. Could he have been cutting too sweet of a deal for Aqua to benefit his firm at the expense of his New Garden client? That is the heart of conflict of interest issues. When this came to light, New Garden agreed to hire a different law firm not associated with Aqua to investigate. That law firm did its investigation and reported its findings at the November, 21, 2022 special meeting. The Conflict Report The meeting presentations were recorded on video and posted on Facebook. Unfortunately, after a couple of years Facebook removed the video. However, we have a mp4 recording of the video. Here is our transcript of the report: Neil Morris (the conflict attorney) “OK so moving to the conflict issue. So we looked at this and the Lamb McErlane firm Vince Pompo was the solicitor for New Garden, and he did not represent, to our knowledge, Aqua in any matters. But there was concern that other attorneys in his firm had represented Aqua. So, the question was raised was there a conflict. And we looked into this, and of course there was a conflict. But in looking into it further, we learned that the solicitor did in fact disclose the conflict to the Board of Supervisors at that time. And at that time the Board of Supervisors waived the conflict, and Lamb McErlane continued.” Voice from audience: “What was the date?” Neil Morris: “That was, I believe, sometime in 2016 to 2019 at that point. Our conclusion was that there was not adequate disclosure. That we believe that they shouldn’t have continued representation. However, again looking with hindsight here what happened was that we concluded that there wasn't adequate disclosure. Lamb McErlane disagrees very strongly with that. They believe that there was disclosure. There was disclosure here. We believe that a something, something should have happened. There should have been change of counsel at that time.” Neil Morris continued speaking about the resulting deal. It sounds to us like he was trying to sugar coat the situation by claiming that the resulting deal was okay. Summary #1 – There clearly was a potential conflict. The Solicitor’s law firm did work for Aqua. #2 – The conflict attorney stated: “to our knowledge” the Solicitor did not do work for Aqua. This phrasing brings up the issue of whether they directly asked the question. If they did, we would expect a statement more like: “the law firm stated that ...” Not having knowledge could be the direct result of not asking the question. #3 – There was some form of disclosure and agreement by New Garden. #4 – Yet, the conflict attorney concluded that there was not adequate disclosure and the Solicitor should not have been in his role for the sale. But, there was no explanation as to why. #5 – Timing is important here. The conflict attorney gave an uncertain three year window as to when the disclosure took place. However, even the earliest date was well into the sale process. Proper protocol would have been to resolve potential conflict issues as soon as potential buyers were identified. In August-2014 potential buyers had visited and a request for proposals was being prepared. By December-2014 three proposals had been received. Presumably, Aqua’s was one of them. Pennsylvania American and DELCORA were probably the other two. All three should have been considered for potential conflict of interest at that time. #6 - The Solicitor’s law firm "very strongly" disputed the finding of a conflict. But, there is no further explanation of why. #7 - The Solicitor in question was a key principal at the meeting, but remained silent on the issue. Subsequent Follow Up We want to see the final report submitted by the conflict attorney. Therefore, we filed a right-to-know request to obtain it. That request was denied on the grounds of it was a “non-criminal investigation”. Apparently that is some loophole in the Right To Know law. This denial was upheld on appeal. That denial makes no sense to us and smells to high heaven of cover up. New Garden contracted with an outside firm to study an issue. That firm did its work and filed a report. Normally, such a report should be public information. New Garden has elected to not reveal the content of the report. In fact, New Garden spent over $11,400 in legal fees to justify not releasing the report. Let that sink in. What does that suggest? Later one of New Garden’s Board of Supervisors was asked about implementing one of the conflict attorney’s recommendations. The answer was there was no need to. When asked why, the Board member said because the Solicitor’s law firm said it was not necessary. We think it is hard to find a more obvious case of the fox guarding the hen house. What do you think? Conclusions There was some sort of conflict of interest in the deal. That is not an accusation one law firm is going to make lightly about another law firm. If something was done wrong, New Garden should “fess up” to it and show people what happened how it will be prevented in the future. How did that effect the deal? We will probably never know. It seems to us that New Garden is intent on making sure we never do.

Let the governor and our representatives in Harrisburg know you oppose the sale of Chester Water Authority and support the repeal of Act 12. Large private utility companies continue to spend millions lobbying in Harrisburg. The fruits of their efforts are seen in Act 12. We cannot fight them with money, but politicians need our votes more than they need their money. Residents can help by writing or calling Governor Shapiro asking him to publicly take a position in support of CWA and the repeal of Act 12, and contacting our representatives in Harrisburg to thank them for their support. Sample letters can be found below. Contact Governor Shapiro Phone: 717-787-2500 Mailing Address: 508 Main Capital Building Harrisburg, PA 17120 On-line: https://www.governor.pa.gov/contact/ Chester Water Authority Sample Letters to Governor Shapiro Contact Governor Shapiro asking him to take a public stand against the sale of CWA because of the unfair burden it places on his constituents. Feel free to use all or part of these sample letters, or draft your own. As a Chester Water Authority customer, I strongly oppose the sale of our public water utility to cover the city of Chester’s decades of financial mismanagement. The ratepayers (the majority who do not live in the city of Chester), should not be responsible for their debt. Please take a stand against the sale of CWA. The financial problems of the city of Chester are due to decades of financial mismanagement. The Commonwealth of Pennsylvania needs to take action to resolve these issues. The rate payers of Chester Water Authority, the majority who do not live in the city of Chester, should not be burdened with this debt. Please take a stand against the sale of CWA. The Chester Water Authority is a well-managed and award-winning public utility. Its proposed sale to Aqua PA is driven only by the financial problems of the city of Chester. CWA ratepayers, the majority who do not live in the city of Chester, should not be burdened with the debt caused by decades of financial mismanagement. Chester’s problems need to be handled by the Commonwealth. Please take a stand against the sale of CWA. Act 12 Sample letters to Governor Shapiro Contact Governor Shapiro asking him to publicly support the repeal of Act 12. Feel free to use all or part of these sample letters, or draft your own. I am writing to ask you to publicly support the repeal of Act 12, the so-called “Fair Market Value” legislation passed in 2016. The unfair burden Act 12 places on utility ratepayers has become abundantly clear with recent rate increases approved by the PA PUC. This has become a bi-partisan concern among ratepayers across the state. At a recent public meeting, the PA Senate Democratic Policy Committee took a unanimous stand supporting the repeal of Act 12, the so-called “Fair Market Value” legislation passed into law in 2016. As governor, I ask that you listen to your elected leaders, colleagues and constituents and add your support to the effort to repeal Act 12. As a resident of New Garden Township I have been shocked by my skyrocketing sewer bills after the sale of our municipal sewer system to Aqua PA. These outrageous sewer rates are driven by Act 12. Please show your support for the citizens of PA by adding your support to the effort to repeal Act 12. Contact Your State Senator and Representative In New Garden Township Contact Senator Kane and Representative Sappey Phone: 610-447-5845 Mailing Address: 504 Avenue of the States Chester, PA 19013 On-line: https://pasenatorkane.com/ Phone: 484-200-8264 Mailing Address: Willowdale Town Center 698 Unionville Rd Kennett Square, PA 19348-1704 On-line: https://www.pahouse.com/Sappey / Chester Water Authority Sample Letters to Senator Kane and Rep. Sappey Contact S enator Kane and Rep. Sappey thanking them for their public stand against the sale of CWA because of the unfair burden it places on their constituents. Feel free to use all or part of these sample letters, or draft your own. I am writing to thank you for your continued support in the efforts to prevent the sale of the Chester Water Authority. CWA is a well-managed, award-winning public utility. Its ratepayers should not be burdened with the financial problems of the city of Chester caused by decades of mismanagement. Your stand in support of your constituents is recognized and appreciated. Thank you for your efforts to prevent the sale of the Chester Water Authority. The financial problems of the city of Chester are due to decades of financial mismanagement. The Commonwealth of Pennsylvania needs to take action to resolve these issues. The rate payers of Chester Water Authority, the majority who do not live in the city of Chester, should not be burdened with this debt. Your stand in support of your constituents is recognized and appreciated. Act 12 Sample Letters to Senator Kane and Rep. Sappey Contact Senator Kane and Rep. Sappey thanking them for their public stand supporting the repeal of Act 12 because of the unfair burden it places on their constituents. Feel free to use all or part of these sample letters, or draft your own. I am writing to thank you for your continued support for the repeal of Act 12. As a resident of New Garden Township I have been shocked by my skyrocketing sewer bills after the sale of our municipal sewer system to Aqua PA. These outrageous sewer rates are driven by Act 12. I am writing to thank you for your efforts to repeal of Act 12, the so-called “Fair Market Value” legislation passed in 2016. The unfair burden placed on utility ratepayers has become abundantly clear with recent rate increases approved by the PA PUC. This has become a bi-partisan concern among ratepayers across the state. Chester Water Authority Sample Letters to Chester County Senators and Representatives Contact your representatives in Harrisburg to encourage them to support Chester Water Authority Find your Senator and Representative: https://www.legis.state.pa.us/cfdocs/legis/home/findyourlegislator/county_list.cfm?CNTYLIST=CHESTER I am writing to ask you to help prevent the sale of the Chester Water Authority. CWA is a well-managed, award-winning public utility. Its ratepayers should not be burdened with the financial problems of the city of Chester caused by decades of mismanagement. You must support your constituents on this issue. The financial problems of the city of Chester are due to decades of financial mismanagement. The Commonwealth of Pennsylvania needs to take action to resolve these issues. The rate payers of Chester Water Authority, the majority who do not live in the city of Chester, should not be burdened with this debt. You must support your constituents on this issue. Repeal Act 12 Sample Letters to Chester County Senators and Representatives I am writing to ask you to support the repeal of Act 12, the so-called “Fair Market Value” legislation passed in 2016. The unfair burden placed on utility ratepayers has become abundantly clear with recent rate increases approved by the PA PUC. This has become a bi-partisan concern among ratepayers across the state. Private, for-profit utility companies are using Act 12 to purchase healthy public utilities at inflated prices and passing the cost on to the ratepayers. Rates routinely rise 70% to 100% with no benefit to the ratepayer. Please work with your colleagues to repeal Act 12.

Filings After The Initial Decision Once the Initial Decision has issued, the complaint participants have the opportunity to make additional filings before the PUC Commissioners issue their Opinion and Order. The most common filing is "exceptions", which generally claims sort sort of error in the ruling. When exceptions are filed the other parties can file "reply exceptions", to rebut what the other has filed. Other filings can also be made. For my complaints, we filed exceptions, a petition to re-open discovery and a motion to strike part of Aqua's reply exceptions. Aqua did not file any exceptions. No surprise since the Initial Decision was everything they wanted. Aqua did file replies to all of our filings. The sections that follow summarize all of the filings. The Filing Of "Exceptions" An "Exception" is an appeal to the Public Utility Commission (PUC) that the “Initial Decision” made an error in some aspect of the law. It asks them to fix it. I had the good fortune to know a top notch utility lawyer who had actually served 16 years as a PUC Commissioner. I asked if he would advise me on my options at this point. He agreed and looked at the appropriate case filings. He was appalled at what the PUC had done. Without being asked he proceeded to prepare an “Exceptions” filing, a “Motion” and a “Petition”. Key points in the “Exceptions” filing were: The integrity of the ratemaking process is at stake. The PUC relies heavily truthfulness and completeness of public utility filings. In fact, PUC filings are subject to the penalties for perjury and falsification to authorities under Pennsylvania law (18 Pa.C.S. §§ 4902 for perjury & 4904 for falsification). Charging for a major expense that is not being incurred is not just and reasonable under 66 Pa.C.S. § 1309(a). Pennsylvania law provides the ability for post rate case relief via 66 Pa.C.S. § 1312(a). I carried my burden of proof and Aqua failed to rebut it. In fact, Aqua had a higher standard of rebuttal under 66 Pa.C.S. § 315(b). The “Initial Decision” should have considered the merits of the case. The case should be remanded to the ALJ for further discovery. Aqua has the right to reply to the “Exceptions” and reply they did. The short summary is that Aqua refuted everything. No surprise. Here is a link to the “Exceptions”: LINK Here is Aqua’s reply to the “Exceptions”: LINK Petition To Reopen Discovery My new found legal help (see second paragraph above) filed a petition to reopen discovery for the case. That would have presented the opportunity to require Aqua to produce hard evidence about when it ceased trucking. Reopening was a long shot, but Public Utility Commission (PUC) regulations do allow it. Actually, I was not aware that I ever had the opportunity to require Aqua to document anything. I found nothing in PUC procedures about it. It certainly would have been appropriate for this case. Naturally Aqua replied to both filings refuting everything I claimed. Ultimately, the PUC denied this petition. Here is a link to the petition: LINK And here is a link to Aqua’s reply: LINK Motion To Strike Part Of Aqua's Exception Reply My new found legal help (see above) filed a motion to strike part of Aqua’s “Exception Replies”. This focused on Aqua’s defenses invoking the prima facie reasonableness of Commission-approved rates, the rule against retroactive ratemaking, and the prohibition against single-issue ratemaking. Based on the various laws cited these defenses are irrelevant to the case. Of course, Aqua replied refuting everything. The PUC ultimately denied the motion. Here is a link to the motion: LINK And here is a link to Aqua’s reply: LINK

The following are links to unpublished pages As of 11-June-2026 there are no hidden pages. #1

Aqua's 2022 Rate Increase The charts that follow give some idea of the magnitude of the "rate shock" New Garden ratepayers suffered when they received their first bills after Aqua's rate increase went into effect. The Actual Rates The 2016 column represents the rates in effect when the sale was announced. It also should have been the basis for the rate cap that was part of the original sales contract. There is an extensive story behind the rate cap told here (LINK ) 2021 is the first year Aqua owned the system That rate is the result of the three step rate increase instituted by New Garden near the end of 2018. 2022 was Aqua's first increase for New Garden. We think the "rate shock" is fairly obvious. And, the 146% increase is totally shocking. New Garden's claim that a nearly 80% increase was needed to repair the system sure looks attractive opposite the actual 146% increase. And, as detailed here (LINK ), that 80% claim was likely grossly overstated. Another View Of The Increase This chart shows the impact for all customers, depending on their consumption. The hardest hit is the ratepayer using a modest 5,000 gallons/quarter. The smallest increase was for residents using zero water. Obviously, that is a small number. It represents people on vacation, spending the winter in Florida or a person in some sort of distress situation. It should be pretty clear that the "rate shock" was pretty broadly distributed across most customers. Reality Versus Promises The green bars on the above chart show the rate cap as agreed in the original sales contract. The red bars are what rates have actually done. And, it is very likely there is another significant increase coming with Aqua's next general rate case. The blue bars show an estimate of that increase. This is just one more view of the stark difference of what was promised versus what actually happened. Why Such Large Increases? The primary driver for the rate increase is Aqua's profit. Like all or most municipal systems New Garden operated on a non profit basis. Transitioning from New Garden's non profit status to Aqua's for profit business model requires a LARGE rate increase. That is covered in some detail here (LINK ). There also seems to be a secondary reason for the large increases. There is significant evidence that Pennsylvania is the most expensive state for water and sewer service, at least where Essential Utilities (Aqua) and American Water do business. That is covered here (LINK ). The bottom line is that as a result of any privatization of a municipal system, somebody is going to be hit with large increases.

Keep Water Affordable provides information on the growing trend to privatization of water and wastewater systems, and its negative impact on the ratepayer and the local economy. It deals specifically with current events in Pennsylvania, but it has broad applicability. Discussions of Big Water tactics and key legislative issues, such as Fair Market Value legislation, are included, as well as advice to ratepayers on how to organize and oppose privatization efforts in their communities. STOP BIG WATER Pennsylvania water and wastewater ratepayers are seeing skyrocketing costs when their local water or sewer utility is sold to a large for-profit, investor-owned utility. i.e - Big Water . These sales are driven by MONEY . Profits for the purchasing utility and a large sum of money for local politicians. T he ratepayer is left to pay the bill. WE ARE HERE TO HELP Scroll Down To Learn More BIG WATER Large, for-profit, investor-owned water and sewer utilities = Big Water. They are gobbling up non-profit municipal systems to grow their profits. These sales are driven by purely by MONEY. The ratepayer usually has no say in the deal, but is stuck with large rate increases to pay for Big Water's increased costs and profits. This Must Be Stopped THE DECK IS STACKED AGAINST US Opposing water and wastewater privatization is difficult. Big Water always enters with the upper hand. To avoid an unwanted takeover and the skyrocketing costs that go with it, ratepayers need to get involved and act fast. YOU CAN PREVAIL Follow These Links To Get Started The Basics Big Water Playbook More Useful Links Economics Our New Garden Township Story Local Government (Future) PA Politics Links to other sites About Us The Big Water Companies What's New PUC Rate Setting Full Site Directory Site Overview (Future LINK) So, What Should You Do? If your system is sold, somebody is going to pay substantially increased costs via their water or sewer rates. Our data show that an OBJECTIVE evaluation of the costs and ben efits of a municipal utility sale will show that the costs will outweigh any benefits. This should be the main focus of any opposition. Do not accept what the buyer and seller ar e telling you at face value. Question Everything There Is Strength In Numbers Organize Organize Organize K W A - Keep Water Affordable K W A is an informal confederation of three neighbors in the southeastern Pennsylvania Township of New Garden. We formed in late 2021 when we learned about a sewer rate increase coming our way. Aqua Pennsylvania and New Garden Township had agreed on the sale of our sewer system during April 2016. Due to legal issues, the sale was not executed until the end of 2020. In August-2021 Aqua filed for a rate increase. They proposed to increase our rates by 37%. This was a bit of “rate shock” for us, based on what we had been told prior to the sale. We began digging into the sale and rate filing documents. What emerged is not a pretty picture of how Big Water operates in Pennsylvania. When the rate increases were finalized, everyone using more than 1,000 gallons/quarter (i.e., just about everyone) had their rates more than double versus what they were paying at the time the sale was agreed to. If the proposed 37% increase was shocking, guess how we felt when these bills were received. We are now dedicated to helping ratepayers in other municipalities avoid a similar fate. Customers of municipal water and sewer systems need to understand what their future costs will be if Big Water buys their system. We believe that they would turn a sale down flat in the blink of an eye if they knew the true story. Our mission is to educate people about our story and the stories of ratepayers in other municipalities who have been victimized by Big Water. This website is dedicated to that.

The New Garden Wastewater Trucking Saga New Garden operated two bio-treatment lagoons for its wastewater system. The treated water was disposed of by irrigation on surrounding land dedicated for that purpose. During 2015 the land around the South End lagoon lost capacity to absorb the needed amount of wastewater. There was about a 35% reduction in capacity. But, the inflow did not slow down and something had to be done with the excess wastewater. Therefore, New Garden began to truck wastewater from the South End plant to the East End plant. Trucking Is Expensive By February-2016 100,000 – 150,000 gallons per day were being hauled. This was costing $3,000 - $5,000 per day. New Garden has confirmed that this was costing $100,000/month. This is partially validated by operating costs going up by over $1.3 million in 2016. This went on until the sewer sale was complete at the end of 2020. So, over a five year period, New Garden spent somewhere between $5 - 6 million trucking wastewater. There Was A Cheaper Alternative There is a major untold story here questioning why New Garden wasted so much money trucking waste. It turns out there was an unused pipeline that could be used to pump the wastewater instead of truck it - and, pumping is a heck of a lot cheaper than trucking. New Garden knew about this pipeline but did nothing about it. Prior to 2005 the Hartefeld subdivision pumped wastewater about two miles to the South End plant for treatment. Then in 2005 Hartefeld switched and began pumping to the East End plant. The pipeline to the South End plant was abandon in place. This is documented in a 2015 Report on the South End Waste Treatment Plant (LINK ). So the basic facilities were already in place to pump from the South End plant to Hartefeld and then on to the East End plant. In spite of knowing about this pipeline, New Garden did nothing about it. Aqua, once they owned the system, immediately started to activate this pipeline. It took 8 – 10 months and cost less than $700,000. Spending $700,000 to save $1.2 million/yr is a high return investment – it is a no brainer. Why Didn't New Garden Activate The Pipeline? Clearly, New Garden could have saved a lot of money. One possibility is that New Garden did not want to spend capital money on a system they were about to sell. In April of 2016 Aqua was going to be picked as the buyer. However, the deal with Aqua could have included funding for the pipeline when the sale was executed. At the start of 2016 the New Garden sewer system had $4.4 million in cash reserves, so funding the project would not have been a problem. Another possibility is that the trucking provided a lot of justification for selling the system. Selling the system would off load the issue onto the buyer. The final outcome was that the sewer sale dragged on for another five years. If New Garden had activated that pipeline, it would have saved $4 – 5 million. Instead New Garden trucked for five years until the system was sold. When Aqua took over, they got busy and fixed the problem.

Does Big Water Cost Less? For the ratepayer the flat out answer is NO ! Yet when a municipality wants to sell a water or sewer system to Big Water, lower costs are usually a selling point. How can this be? The claims usually revolve around both operating costs and capital costs. There is a grain of truth in each. But, in making these claims there is an elephant in the room that both the seller and buyer seem to prefer to ignore. Read on for more detail. Capital Investment The standard story is that municipal capital costs are 25% - 35% higher. This means that a construction project that Big Water could execute for $10 million might cost a municipality over $13 million. This grain of truth is based on federal law requiring local governments to pay prevailing wage rates for work they contract. In effect, this means paying union shop wages. Non-union contractors may pay lower wage rates and be used by Big Water. Since labor is usually a big part of construction costs, it is possible that municipal improvements costs could be higher. Although we have seen this claim several times, we have never seen it substantiated. But, lets assume capital costs really are 30% higher for a municipality. The real issue that matters to ratepayers is how that capital investment will impact their rates. We have never seen that issue addressed. Here is an illustration that explains why. Assume that Big Water could install a capital project for $10 million, or a municipality could do it for $13 million - the 30% higher cost. The following chart shows the ratepayer impact: Most municipalities would fund major improvements by issuing a bond. Rates would most likely have to be raised to cover the “mortgage payments” for the bond. This is a very equitable way for users of the system to pay for the improvements. Those who benefit pay the extra cost. When the bond is paid off, the extra cost goes away. The Big Water company will pay for the improvements via their normal capital management system. This typically would be a mix of borrowing, depreciation and reinvested earnings. When the improvements are complete, Big Water will move to increase rates. Over 70% of what they collect from ratepayers depends on their investment. So they quickly move to fully recover their costs plus earn a substantial profit. The short answer is that although Big Water’s capital cost may be 30% less, Big Water will charge ratepayers about a third more. We Can't Afford The Repairs On a related subject, when a municipality wants to sell a water or sewer system a common claim is that needed repairs would be so expensive that we cannot afford them. But, whatever capital investment Big Water puts into a system, it will cost ratepayers more than if the system was not sold. More detail on this issue here . If you are hearing this story line, we suggest you challenge it vigorously. Operating Cost Here, the grain of truth is that Big Water has economies of scale that enable them to operate at lower cost. For small municipal systems this is probably true. For large systems, the savings probably diminish considerably. The problem is that lower operating cost does not offset Big Water’s other costs. The following charts illustrate why. Only about 25% of the ratepayer’s dollar goes to Big Water’s operating cost. Reducing that by 20% would only reduce the ratepayer’s bill by 5%. Profit and depreciation comprise over 60% of Big Water’s costs – both of which are paid for by ratepayers. And, these are costs not incurred by a municipal system. Therefore, they are a big part of the rate increase when a municipal system is sold to Big Water. So, the talking point before the sale is operating savings. The ~5% savings is touted but the 60% increase is not mentioned. Aqua’s acquisition of New Garden’s sewer system illustrates how this works. New Garden is a small system with less than 2,500 customers. In their PUC filings, Aqua noted that they had several nearby systems that could share costs. Indeed, Aqua’s rate filing data indicates that they have reduced operating cost by almost 40%. That is a substantial savings. Yet, they raised our residential rates by almost 80%. The following chart illustrates what happened: Clearly, there are operating savings. Equally clear is how profit and depreciation totally overwhelm those savings. The increase we saw in 2022 was just the first step. When Aqua files its next rate case, much of that "$1 Million Paid By Other Customers" will be shifted to New Garden customers. This is part of the PUC's policy to mitigate "Rate Shock", but move systems to their full cost of service. This is not an isolated case. Every Big Water acquisition we have looked at shows this same pattern. Conclusions There are significant differences in the financial structures of Big Water and municipal water and sewer utilities. The two noted above usually favor Big Water. And, when Big Water wants to buy a system, those advantages are touted. But the money Big Water will be collecting from ratepayers for profit and depreciation are the elephant in the room that both buyer and seller want to ignore. If your water or sewer system is up for sale, you need to understand these issues and: Question Question Question Your Local Officials.

The Curious 2018 New Garden Sewer Rate Increase New Garden Township raised its sewer rates 30% beginning in 2019. This came in the middle of the process to sell the system to Aqua Pennsylvania. The circumstances surrounding the increase call into question the need and justification for the increase. Read on to find out why. Background New Garden Township signed a contract to sell its sewer system to Aqua Pennsylvania in August‑2016. That contract included a rate cap provision that limited rate increases for a period of ten years. Because of litigation, the deal did not close until December‑2020, over four years later. In the middle of the sale period New Garden moved to increase sewer rates by 30%. The circumstances surrounding this increase are unusual: Key Events The following are excerpts from New Garden Board of Supervisors Meeting Minutes during their 2019 budget planning: New Garden used to have links to the meeting minutes for the above meetings. However, New Garden has since removed all meeting minutes prior to 2021. We still have copies of the relevant sections and they can be found in this file: What Happened #1 Indeed, what happened? The status of the litigation on the approval of the sale is important. Eleven days before the October 22, 2018 budget meeting the Pennsylvania Commonwealth Court handed down its decision for the appeal. That decision overturned the PUC's sale approval, but for relatively minor issues – things that could be easily fixed. This was a bright light at the end of the tunnel. Some stuff had to be done, but the sale could proceed. Aqua delayed the process by appealing to the PA Supreme Court – which was denied. It was only two more years before the sale was actually executed. What Happened #2 The “official” story was that increase was necessary to cover increased costs. However, we do not think the following financial records support that position. In 2018 expenses exceeded income by a little over $200,000. However, the sewer operation still had a cash reserve over $3 million at year end. Another couple of years of negative cash flow was not going to seriously deplete that cash reserve. And, it was not to fund capital costs – as the table shows, capital expenses were negligible. Consider the much greater negative cash flow of the two previous years shown in the following table. Nobody was claiming a rate increase was needed then. The 2016 deficit was largely driven by a $1.0 million cost for sewer sale expenses. Likewise, sewer sale expenses were almost $350,000 in 2017. Evidently, depleting cash reserves was not a problem when big money was being spent on selling the system. So, Why Raise Rates? That is a question we would really like to know the truth about. But, truth is hard to come by. Increased cost does not appear to be a valid reason for raising rates. In situations like these, the principle of “follow the money” can be most revealing. The following is our SPECULATION about what happened: #1 - The contractual rate cap was based on rates in effect at the time sale was executed. Starting that cap at a 30% higher base would be worth an extra $5.7 million to Aqua over the 10 year period. #2 - The 30% rate increase was only worth about $680,000 to New Garden Township. It is pretty obvious who benefited the most. #3 - Why would New Garden burden its ratepayers with $5.7 million extra cost for a relatively small benefit? That is a question for which we do not have an answer and probably never will. #4 - Should Aqua have had a say in the rate increase? Definitely not – that was a New Garden issue. Did they? We would really like to know, but never will. Conclusions Was the New Garden sewer system in financial need of a rate increase? The notes from the budget meetings started out with a flat statement that no increase was needed. And, the financial reports support that position. The second budget meeting waffled a bit. Then at the third budget meeting, WHAM, there is a full fledged ordinance for a 30% rate increase. That seems like a strange sequence to us. Following the money brings into question whether the buyer had a role in requesting or demanding a rate increase. It would explain a lot. But, this is a conjecture that will never see the light of day. Epilogue A year after the rate increase, and before the sale closed, the rate cap was removed from the sales contract. That story is told here (LINK ). As a result we have seen rate increases over 100%. Here is a picture of what we were originally promised versus actual: (LINK ). No surprise, sewer customers in New Garden Township have not been very happy.

The Discovery Of The Trucking Complaint Introduction As a result of Aqua’s rate increase effective May-2022 most New Garden customers saw their sewer bills go up dramatically. Since our billing is quarterly, that increase was not seen until September-2022. When those bills were received, customers were shocked and outraged. A lot of heat was put on the New Garden Township Board of Supervisors to explain what happened. They finally agreed to hold a special Board meeting on 11/21/2022 to address the issue. This is off the topic of my complaints, but here is the story of that meeting: LINK . Aqua made three different presentations during that meeting. One was Mr. Todd Duerr, Aqua’s Operations Manager. Part of his presentation was about activating an unused pipeline to replace trucking. The short story was that trucking was eliminated before year end 2021. That revelation led to my trucking complaint. The meeting was video recorded by a member of the audience. Here is the excerpt of Mr. Duerr talking about the pipeline: LINK My transcript of Mr. Duerr’s remarks about activating that pipeline follows. Transcript of what Mr. Duerr said about the pipeline: “If you look at the far right of the picture [slide showing a map] with the red squiggly line on there when this system was built there was a thought that this water could be used to irrigate other areas of the Township. Now it never came to fruition but somebody put in a 10,000, 11,000-foot pipeline, which is represented there [pointing to the map]. So we found out about this. The engineers and operations team got with some of the Township folks and they …they plotted this line out. We really did not know where it was. They had to go out and find it. Then we didn’t know if it was going to hold water. It has to hold water under pressure. So, they spent the better part of eight months while we were pumping and hauling to find the line, fix … fix damaged portions of the line – it hadn’t been used ever - and make it … make it water-tight. And when they did that, that pumping and hauling that was costing a million dollars a year stopped immediately. Because they were able to stand up pump stations connect that pump up to the pipeline there and pump the water to the East End and Kennett Square Borough. So that eliminated that ongoing cost right away. That … that was done within the first year of operation. ” The Full Meeting Video This meeting was held in an elementary school cafeteria to hold the crowd that showed up. Three different recordings of the meeting were made: #1 - A local journalist made an audio recording of the entire meeting. #2 - I made an audio recording of the entire meeting – and have preserved it. #3 - A Food And Water Watch employee sat in the front row and used an I Phone to make a video record of the meeting in three segments. The video recordings were posted on Facebook for almost three years. Then, without warning, Facebook took them down. However, I did make MP4 backup copies of those videos. From those copies I was able to post the clip of Mr. Duerr’s presentation. Unfortunately, those files total over 11 gigabytes. That makes it difficult to provide general access to those videos.

The Saga Of New Garden’s Rate Cap (Have We Got A Deal For You) But ... Now You See It AND ... Now You Don't Background In August of 2016 New Garden Township signed a sales contract with Aqua Pennsylvania (Aqua) to sell its sewer system for $29.5 million. A key provision was that Aqua contractually promised a ten year cap on sewer rate increases. From the date the sale closed there would be a two year rate freeze. Then for the next eight years rate increases would not exceed 4%/year. That was positioned as a very good deal for rate payers. Here is a picture of how that would impact the ratepayer: Rates would increase for the average customer from $56/month to $74/month over that period. This is a side issue, but what happens in year eleven? Check that out here: (LINK ). The Approval Process Aqua is a regulated utility. The Pennsylvania Public Utility Commission (PUC) has to approve any deal before a sale can be executed. That is a long involved legal process run by an Administrative Law Judge (ALJ). Besides Aqua and New Garden Township, the Office of Consumer Advocate (OCA, part of the Attorney General’s office) and the Bureau of Investigation & Enforcement (I&E, a part of the PUC) were major players. The rate cap was a major issue in the PUC approval process. Both the OCA and I&E opposed the rate cap. They claimed that the rate cap was a “Rate Stabilization Plan". That is a technical term within the PUC. It requires special documentation to approve it. Aqua said no, the rate cap was a contractual issue with New Garden ratepayers and did not provide the needed documentation. Who Pays The Difference The difference between what Aqua would collect from ratepayers with and without the rate cap is considerable. We are speculating here, but it is likely Aqua was not expecting to forego that difference. Aqua probably expected to be able to use Act 11 (LINK ) to make up the difference from other ratepayers. Both the OCA and I&E were adamantly against that idea. In the end, the OCA got a stipulation in the PUC approval where Aqua was welcome to charge New Garden customers less than its normal rates, but at shareholders expense, not out of the pocket of other ratepayers. The First PUC Approval At the end of the PUC approval process, the ALJ recommended against the approval of the acquisition. That is a story by itself told here (Future Link). But, the full Commission overruled the ALJ and approved the acquisition on June 29, 2017 – a little less than a year after the deal was signed. Essentially, the commissioners agreed the rate cap was private contractual side deal between Aqua and ratepayers. However - and, this is important - they did include the provision that the cost of the rate cap would be borne by shareholders, not other ratepayers. It is a bit of convoluted legal language, but here is the PUC's statement on the issue (pages 73 - 74 of the PUC's Opinion & Order - LINK ): "12. That the Commission retains the authority to allocate revenues, if appropriate, to the New Garden Township customers that are in excess of the restrictions outlined in the Asset Purchase Agreement. Aqua Pennsylvania Wastewater, Inc., and its shareholders should bear all risk of a shortfall between revenues it is permitted to recover under its Asset Purchase Agreement with New Garden Township and New Garden Township Sewer Authority and the costs that Aqua Pennsylvania Wastewater, Inc., will incur with respect to the acquired system. To the extent that Aqua Pennsylvania Wastewater, Inc., is unwilling or unable to charge costs in excess of the limitations provided in the Asset Purchase Agreement, the excess costs should be borne by its shareholders and not spread to other ratepayers." Litigation Of The PUC’s Approval At that point the OCA sued the PUC to overturn the decision. This acquisition was the first under Pennsylvania's new "Fair Market Value" law (Act 12) - explained here (LINK ). As a first "test case" it was not surprising that it would be tested in court. That lawsuit had absolutely nothing to do with the rate cap. The issue the OCA focused on was not adequately informing ratepayers about the impact of the acquisition. On October 11, 2018 the OCA won its case. The approval was remanded to the PUC for re‑consideration. Aqua appealed the decision to the PA Supreme court but was turned down on April 23, 2019. The basis for the court overturning the PUC’s approval was narrow and technical. Aqua had to make an estimate of the cost impact of the acquisition on all ratepayers and then notify those ratepayers. Those were relatively easy things to do. The PUC should have been able to move forward quickly with the second approval. But, that is not what happened. Public Meeting On The Rate Cap There was a quiet period and then on September 23, 2019 New Garden Township held a public meeting of HUGE importance to sewer ratepayers. The meeting was not well publicized. The "official" announcements about the meeting follow. About a month before the September meeting, the Board of Supervisors meeting minutes from August 19, 2019 had the following statement: Note that they were going to “explain” potential changes. There was no indication of what those changes might be or how significant they were. There had been two previous changes that were minor and technical in nature. There was another Board of Supervisors meeting on September 16, 2019, just three days before the big public meeting. The meeting minutes had the following statement: They were going to provide an “update”. No big deal, just an update. The 9/23/2019 Public Meeting - Introduction This meeting turned out to be a big deal. It was a full Board of Supervisors meeting. All five supervisors were present. All four sewer authority board members were present. Five Aqua officials also participated. Not many New Garden residents attended. One who did estimated that maybe 20 others were in the audience. New Garden’s solicitor (Mr. Vince Pompo) more or less ran the meeting. The proposal to drop the rate cap was introduced as follows (Pompo is speaking - pages 13 -14): "As discussed before, certain legislation provides for the distribution of costs related to acquisition of water and wastewater systems over the entire existing water and sewer customer base throughout Pennsylvania of the purchaser, in addition to the customers at the acquired system, when in the public interest. The logic is that by spreading costs equitably as determined by the PUC, user rates can be kept reasonable. As part of the potential settlement, New Garden and Aqua will be asked to amend the Asset Purchase Agreement to remove the provisions regarding the rate freeze and the compound annual growth rate." Without naming it, the first part talks about Act 11 (LINK ) and how costs can be distributed across a very large user base so that “user rates can be kept reasonable”. This seems to suggest, but does not overtly state, that a rate cap is really not needed because costs will be distributed over the whole system. We think that was a deceptive introduction to dropping the rate cap. But, dropping the rate cap was the very next statement. There were a number of questions from residents that clearly indicated they understood that New Garden costs would be shared across a wide customer base. The answers to those questions were always evasive. The 9/23/2019 Public Meeting - Omissions We think there were a couple of important omissions at this point: #1 - When the PUC first approved of the sale in 2017, they ordered Aqua to set up New Garden as an independent rate zone. If you are going to lump all users into one big group, separate zones would not be needed. This should have been a red flag that New Garden being subsidized by other Aqua customers could be very limited. #2 - The ethical thing to do would have been to estimate New Garden rate increases based on a stand alone basis. Indeed, disclosing ratepayer impact was the reason the PA Commonwealth Court overturned the original approval. One resident actually complained that no one would even make an estimate on rates. Everything was generalities. One of Aqua's participants was a financial leader qualified to answer the rate questions. He remained silent on the issue. The 9/23/ 2019 Public Meeting - End Result At the end of the meeting the New Garden officials voted to drop the rate cap. It is pretty clear to us that was the planned outcome from the very start. Our rate cap was gone! So what happened to New Garden ratepayers when Aqua filed to increase rates in August, 2021? The following chart shows the result: Aqua’s rate increase of May, 2022 increased our rate 146% over the contract commitment. Needless to say there was a lot of “rate shock” when the bills with the rate increases arrived. As a side note, there is a small increase in 2021. That is the story of a different rate increase that probably was not needed. That story is told here (LINK ) The full transcript of the September 23, 2019 meeting is available here: Why Was the Rate Cap Removed This is a question that is not easy to get a straight answer on. The question was asked at the September 23, 2019 meeting (page 46). Here is the back on forth on the issue: STAN LUKOFF: "Yes, sir. Stan Lukoff, Reynolds Road. I'm a present New Garden sewer customer. So, I may have missed something, but why are we removing the provision around the compound annual growth rate and the rate freeze in the Asset Purchase Agreement Is that because the New Garden sewer rates are superceding that?" MR. POMPO: "The basic answer to the question is because there were other parties in the matter, arms of the PUC and the Office of Consumer Advocate that objected to those provisions in the agreement. That's the simple answer." STAN LUKOFF: "Certainly not in the customers benefit to do that." MR. POMPO: "Well, one can argue that both sides, because we thought that that was in favor of the customer, but others, including the Consumer Advocate, for good reason I'm not going to go into, did not follow that same logic." Paraphrasing the reason given: others, including the Consumer Advocate made us do it. But, I am not going to tell you why . We have been filing right to know requests and appeals to validate this claim. So far we have been stonewalled on this. New Garden either claimed the records no longer exist or are part of "settlement discussions", which are a protected category. A few documents have been produced but they bear zero relevance to the requests. There was a second public meeting on this issue held November 21, 2022 (LINK ). This was long after the sale had been executed. The purpose of the meeting to address citizen unrest about what happened to our sewer system. At that meeting Mr Pompo stated clearly multiple times that the OCA would not approve the deal unless the rate cap was removed. It is unlikely that the OCA demanded that the rate cap be removed for the following reasons: #1 - The issue had been thoroughly processed in the first PUC approval of the acquisition. Although the OCA was not happy about the rate cap, they did succeed in having clear language that Aqua shareholders would bear the cost of the revenue shortfall, not other ratepayers – which was their primary concern. #2 - When the OCA appealed the PUC approval through the court system, the rate cap was not part of the appeal. That makes it very unlikely that it would later become a non negotiable issue. #3 - The OCA does not have veto authority over PUC decisions. They can vigorously state their position, but the PUC commissioners are the deciding authority. #4 - Since the New Garden case, Pennsylvania American Water acquisitions have included rate freeze/rate cap provisions. Whether or not the OCA approved them or not, it was not an issue that stopped the approval process. We had direct communication with the OCA principals in the New Garden approval case. They told us that dropping the rate cap was an issue between Aqua and New Garden. Conclusions So why was the rate cap dropped? #1 - It is pretty clear that it was NOT the OCA demanding it. #2 - Our speculation is that Aqua was not willing to forgo over $2.5 million/yr of revenue the rate cap would take away. There would have been essentially zero profit during the first ten years of the deal. But, did Aqua have an escape clause in the contract? We can not find it. Could New Garden have sued Aqua to enforce the contract? Possibly. Why didn’t they? We do not know. It might have been the irresistible lure of the $29.5 million of “free” money. But, we must note that New Garden did receive compensation for the dropping of the rate cap: $10.00. That is ten whole dollars. Not ten thousand or ten million. Ten dollars. Aqua will be collecting over $20 million additional revenue over their first ten years of ownership and New Garden sold that to them for the paltry sum of ten dollars! One thing is clear: the rate cap disappeared. And, WE ARE PAYING FOR IT.

Was The New Garden Sewer Sale Process Legitimate? During 2022 New Garden Township officials were asked repeatedly about sewer sale issues. This became a very high profile issue when the first bills were received with jaw dropping rate increases. As a result New Garden announced that it was hiring a law firm unaffiliated with the sale process to review key aspects of the sale such as the dropping of the rate cap. New Garden announced that the result of this review would be made public at the November 21, 2022 public meeting. What New Garden Claimed It Did Here is the chart deck that the New Garden Board of Supervisors used at the meeting: Chart 13 has four bullet points of what New Garden did to support ratepayers. Point #2 was: "Hired independent counsel to investigate the transactions pertaining to the sewer sale (Offit Kurman)." The Attorney's Report AKA: The BI G Switcheroo Here is our paraphrase of the start of that report: We were asked to review the purchase agreement, as amended, to determine whether Aqua could legally raise New Garden rates. ??? !!! WHAT !!! ??? That bears no resemblance at all to what we were told was being done. It does not take a lawyer to answer that question. Of course Aqua could raise rates. That protection has been stripped out of the contract. Aqua could do whatever the PUC would let them do. And, that is basically what the lawyer said. It was our observation that the lawyer was almost apologetic or embarrassed for having to answer such a obvious question. We suspect he knew something was going on and he was just a pawn being sacrificed in a chess match. Conclusion Why the Big Switcheroo? This is another mystery that we are unlikely to get answers to. But, we think New Garden is likely to tout this as another action they took to be responsive to resident’s concerns. They also succeeded in bringing nothing to light about any issue with the sale process.