Water privatization is on the rise in Pa. Here’s what you need to know.

A Pennsylvania commission oversees more than 150 water utilities statewide, most of which are privately owned, and the number of systems acquired by for-profit companies has risen in recent years.

While there are benefits to water privatization, like more financial resources and staffing, there are also downsides. For example, municipal officials lose their power to regulate, and that can limit local authority when communities have issues with their service.

Spotlight PA recently investigated one private system in rural Centre County, finding that the Rock Spring Water Company, state regulators, and elected officials have failed the nearly 500 customers served by the privately owned business.

Years of neglect of the system have led to crumbling infrastructure. A 2022 engineering report commissioned by Ferguson Township — where the company operates but of which the local government has no oversight — estimated that necessary repairs total $13.5 million.

Though frustrated with the current owners, some customers have refrained from filing complaints with the state agency tasked with service oversight. Instead, residents have resigned themselves to working around low pressure, outages, and sometimes lengthy boil water notices. That’s because many fear rates, which haven’t increased in more than a decade, will skyrocket to help fund improvements.

Meanwhile, the State College Borough Water Authority, which has existing local infrastructure that would ease a transition, has explored taking over operations as part of talks with local officials to fix service issues. However, Rock Spring can’t be forced by the water authority or local elected officials to sell the company.

Marley Parish, the rural affairs reporter with Spotlight PA’s State College regional bureau, spoke with a panel of experts about the state’s private water industry, how it’s regulated, and what options exist for customers having issues with their utility provider.

Here are three key takeaways from the panel discussion, which can be viewed in full online:

Pa. regulates private water providers, but customers are also encouraged to speak up

The Pennsylvania Public Utility Commission oversees private water providers statewide, handling rate increase requests and other service issues, while the state Department of Environmental Protection monitors drinking water safety.

More than 150 private water and wastewater providers fall under the commission’s jurisdiction. When customers have a problem — such as billing issues or rate protests — they can file a complaint with the commission, which aims to find a resolution.

But first, customers must try to solve the problem by contacting their utility company individually, Patrick Cicero, the state’s appointed consumer advocate, said. If that doesn’t work, he suggested pursuing the commission’s complaint process, contacting local elected officials, and reaching out to his office, which represents consumer interests.

The PUC’s online database shows seven complaints about Rock Spring since 2008, including five filings from customers primarily over billing disputes. Customers have more frequently turned to a private Facebook group to vent their frustrations.

Because Rock Spring is a private company, Ferguson Township has no oversight over the business. Still, Laura Dininni, a former supervisor and current Rock Spring customer, facilitated conversations on solving the issues and researched funding options for the State College Borough Water Authority to avoid placing undue burden on customers for repairs if it took over.

“I have an idea that folks don’t know how bad our system condition is, and because of that, there’s not a lot of political pressure being put on our elected officials to take action — even though there’s a solution right down the road,” Dininni said, referring to the water authority.

Funding infrastructure repairs and keeping rates reasonable is a balancing act

Though some loans and grant programs exist, customer payments are the main funding source for water and wastewater system operations and infrastructure.

Elizabeth Marx, executive director of the Pennsylvania Utility Law Project, a nonprofit that provides legal aid to people struggling with utility bills, said keeping rates reasonable and funding infrastructure needs is a difficult balance. Hardship grant funds and ongoing rate assistance opportunities can help consumers, but increases need to be reasonable, she said.

“Water is not something that you can price someone out of the market for,” Marx said.

Pennsylvania’s drinking water infrastructure needs $24.3 billion over the next 20 years for “pipe replacement, treatment plant upgrades, storage tanks, and other key assets to ensure the public health, security, and economic well-being of our cities, towns, and communities,” according to estimates from the U.S. Environmental Protection Agency.

Rikardo Hull, chief operating officer at the National Association of Water Companies, said the for-profit members he represents want to gradually invest in their systems, which means going through the Public Utility Commission’s rate increase process. Though research suggests that private companies charge more than municipal water authorities, Hull said those studies don’t account for infrastructure investment.

“It’s a lot less expensive to change the oil on your car than it is to not change the oil in your car and replace your engine,” Hull said.

Cicero said his office isn’t “anti-privatization” and noted that for-profit providers do a good job at providing safe and reliable services.

Proposed changes to a 2016 law meant to help municipalities have stalled in the legislature

Pennsylvania lawmakers thought a 2016 law, now known as Act 12, would help local governments struggling to keep up with the maintenance costs of water and wastewater systems. The law changed how municipal water and wastewater systems are valued when sold to for-profit companies, letting these private operators bake the costs of infrastructure improvements into Public Utility Commission rate increase requests for all customers.

Since Act 12 took effect, the commission has allowed private water companies to buy at least 21 local water and sewer systems, according to state officials. These acquisitions have resulted in rate increases ranging from 44.9% to 116.6%, Stephen DeFrank, the commission’s chair, told lawmakers in testimony last year.

Cicero has urged lawmakers to repeal the law, arguing that Act 12 has caused significant harm to customers. Meanwhile, the private water industry has said the law accomplished its intent by letting municipalities sell distressed systems to owners with the resources to improve service.

In response to criticism of Act 12, lawmakers have proposed some changes, including capping the acquisition amount at 125% of the depreciated original cost, spreading out costs incurred by customers over time instead of all at once, and imposing new public notice requirements.

Four bills that would implement such reforms advanced out of a state House committee in April, but the proposals have yet to see a chamber vote. Lawmakers won’t return to Harrisburg until the fall, so the issue remains stalled.