WEST WHITELAND – January 23, 2024 – State Senator Katie Muth (D-Chester/Montgomery/Berks), chair of the Pennsylvania Senate Democratic Policy Committee, joined Senator Carolyn Comitta (D-Chester), Senator John Kane (D-Chester/Delaware), Senator Tim Kearney (D-Delaware), and Senator Judy Schwank (D-Berks) yesterday in Chester County to co-host a public hearing focused on water privatization and the unintended consequences of Act 12 of 2016.
The hearing, held at the West Whiteland Township Building in Exton, focused on privatization and consolidation of water and sewer utilities and how the provisions included in Act 12 of 2016 have led to significant rate increases across the Commonwealth.
“Yesterday’s hearing really highlighted the need for the public to remain engaged and to have their voices heard as water and wastewater rates continue to soar across the Commonwealth in large part to the provisions enacted by Act 12 of 2016,” Muth said. “As legislators, we cannot allow our constituents to continue to be exploited by large corporations. I look forward to working with my colleagues on legislation that protects consumers and ensures fair rates for all public utilities.”
Act 12 of 2016 added Section 1329 of the Public Utility Code and changed the method and timing for calculating the value of what is included in utility rates for specific acquisitions of municipal water and wastewater systems by regulated public utilities. This law allowed sellers and purchasers, should they both agree, to use an alternative valuation method and assess public water/sewer assets at “Fair Market Value” which allows the dollar value of water systems to include not just pipes and plants but market factors such as their worth to the community, allowing them to be sold at much higher prices. The result has been a significant increase in rates for customers of both the acquired and acquiring systems.
“Water and wastewater services are a basic necessity for all people and rates need to be fair and sustainable for all communities. I thank Senator Muth, my Senate colleagues, the PUC, the Office of Consumer Advocate, and all those who participated in the hearing,” Senator Comitta said. “Residents, families, and those on fixed incomes, like seniors, are already facing rising consumer costs. The consensus is that Act 12 is driving water rates higher. I look forward to working with my colleagues to find solutions to help ensure access to quality, affordable water, and wastewater services as a matter of public health and well-being.”
In March 2022, a study was published in the Water Policy journal that surveyed the United States’ 500 largest water systems and found that private ownership was the most significant variable in driving up utility bills — even more than aging infrastructure, water supply and local regulations.
“Yesterday’s hearing exposed the consequences of Act 12 of 2016, dispelling the notion that it would aid distressed systems. Instead, it appears to provide short-term financial benefits to municipalities and long-term gains for the corporate shareholders, all on the backs of taxpayers,” Senator Kearney said. “It’s crucial for taxpayers and stakeholders to maintain pressure on our legislature. I proudly stand with my Democratic colleagues in the challenging but necessary battle to repeal Act 12, ensuring fair and affordable water rates for our constituents.”
According to written testimony submitted by Pennsylvania Consumer Advocate Patrick Cicero, since Act 12 of 2016, there have been 21 approved acquisitions that have been or will soon close. According to estimates, because of these acquisitions and directly due to the fair market value provision in Act 12, consumers are or will be required to pay at least $85 million more each year for water and wastewater service than they would have without this law.
“Yesterday’s policy hearing shed crucial light on the negative impacts of Act 12, highlighting the dire need for change,” said Senator Kane. “It’s disheartening to hear residents share their horror stories of a system that prioritizes profits over people. I’ve listened to the voices of those affected, and it’s clear that this process is broken. That’s why I’ve introduced Senate Bill 866, to completely repeal Act 12. I’m committed to finding a solution that doesn’t burden ratepayers with inflated costs to enrich shareholders. It’s time to put the needs of our residents first, and I will continue to do all I can to make that happen.”
Senator Kane’s Senate Bill 866, which is currently in the Senate Consumer Protection and Professional Licensure Committee, would repeal the provisions of Act 12 of 2016. Senators Comitta, Kane and Kearney are also working on legislation that would make several reforms to Act 12 of 2016. The cosponsor memo indicates that the reforms would include notification and public hearing requirements, a needs assessment, clarification of language regarding public benefit, post-sale monitoring of the contract, and provisions regarding conflicts of interest.
“We’ve had eight years to reflect on the consequences of Act 12 of 2016, and it’s clear that many consumers who experienced privatization are not in a good place. Communities in my district and all over the Commonwealth have seen their water and wastewater bills increase at a rate that is truly shocking,” Senator Schwank added. “There’s no question that the legislature must take action to protect consumers who are being taken advantage of.”
Participants in the hearing included Bill Ferguson and Peter Mrozinski, Keep Water Affordable; David McMahon, Neighbors Opposing Privatization Efforts; Kofe Osei, Towamencin Township Supervisor; Stephen DeFrank, Chairman, PA Public Utility Commission; Patrick Cicero, Pennsylvania’s Consumer Advocate; Amy Sturges, Deputy Executive Director of Advocacy, Pennsylvania Municipal League; and Anthony Bellitto, Executive Director, North Penn Water Authority.
In addition to the participants in yesterday’s hearing, East Whiteland Township, Pennsylvania American Water and Aqua Pennsylvania all submitted written testimony to the Committee which is also available online.
Senator Muth also reminded residents that the PUC has scheduled a series of 12 in-person and telephonic hearings to gather public input on the requests by Pennsylvania American Water Company (PAWC) to increase rates for water and wastewater services. PAWC serves 681,707 water and 97,585 wastewater customers in 37 counties and is the largest regulated water and wastewater service provider in Pennsylvania. The in-person hearings are scheduled across the Commonwealth beginning the last week in January.
All submitted testimony from the policy hearing and the full video is available at SenatorMuth.com/Policy
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Testimony
Panel 1: Affected Residents
- Bill Ferguson – Co-Founder, Keep Water Affordable
- Peter Mrozinski – Co-Founder, Keep Water Affordable
- David McMahon – Neighbors Opposing Privatization Efforts (NOPE)
- Kofe Osei – Towamencin Township Supervisor, Neighbors Opposing Privatization Efforts
Panel 2: Policy Solutions
- Anthony Bellitto – Executive Director, North Penn Water Authority | Pennsylvania Municipal Authorities Association
- Noël Brandon, Board Chairperson, Chester Water Authority
- Amy Sturges – Pennsylvania Municipal League
- Chairman Stephen DeFrank – Pennsylvania Public Utility Commission
- Patrick Cicero – Office of Consumer Advocate
Additional Testimony