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Water and Wastewater in PA
The Basics

Water is a necessary and valuable natural resource. Everyone has a right to clean water at a cost they can afford.  The Pennsylvania constitution was even amended in 1971 to assure this right is available  to all its residents.

Historically, water and wastewater needs have been met locally, either with individual wells and septic systems, or through publicly owned utilities, which operate local distribution systems. These not-for-profit public utilities still dominate water and wastewater management in Pennsylvania. However, in what has become a common business model, large, for profit, investor-owned utility companies have arisen to profit from the consolidation of these smaller public utilities. The need to provide profit to shareholders is the major difference between public and private utilities, and any claimed savings by private utilities due to “economy of scale” arguments are overwhelmed by the added expense of profits.

Due to large, widespread infrastructure requirements, utilities present a unique business problem. This is especially true for water and wastewater utilities which require miles of underground pipes and large pumps to move their product. Ownership of this infrastructure naturally leads to a monopoly position. Recognizing this, states have created Public Utility Commissions to regulate private utilities. In Pennsylvania, the PUC must approve any utility sale and changes in rate tariffs. The PUC, however, consistently supports Big Water requests, allowing higher profits than other states and ignoring recommendations from their own review system. (Future link)

PA has become a target of investor-owned utilities due to the passage of privatization friendly legislation over the past 10 years. The major players are Aqua PA a (a subsidiary of Essential Utilities) and Pennsylvania American Water (a subsidiary of American Water). These companies initially targeted small municipal utilities but have changed tactics and are now also targeting large regional public utilities.  

Water and wastewater utilities are limited in their growth opportunities. Adding new customers to their existing infrastructure requires development in the areas covered. Although they try to have a say in promoting development, they are limited by municipal decision makers. Consequently, both companies have publicly stated that their growth strategy will rely on acquisition.

The combination of enabling legislation, regulatory complacency, and an aggressive growth strategy by Big Water companies has led to a feeding frenzy in Pennsylvania. In the last seven years they have spent $ 900 million to acquire public utilities, with another $ 1.1 billion worth of acquisition deals proposed or in progress. The result of these sales consistently means much higher rates and little to no improvement in service. 

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