This story was produced by the State College regional bureau of Spotlight PA, an independent, nonpartisan newsroom dedicated to investigative and public-service journalism for Pennsylvania. Sign up for Talk of the Town, a weekly newsletter of local stories that dig deep, events and more from north-central PA, at spotlightpa.org/newsletters/talkofthetown.
FERGUSON TOWNSHIP — Local leaders want to help the State College Borough Water Authority take over a troubled company in rural Centre County and avoid a private acquisition that could see big rate increases.
The privately owned Rock Spring Water Company is currently being investigated by the state, which could force a sale. The scrutiny follows more than a decade of the water company providing shaky service and accruing regulatory violations. But last month, company President J. Roy Campbell told a judge he’d rather settle the case and sell “before the year’s out.”
Several possible buyers have emerged, but the Ferguson Township Board of Supervisors wants the State College authority to prevail. It’s agreed to sponsor efforts to apply for grants to fund millions of dollars in repairs if the authority successfully acquires the system. On Tuesday, the five-member board unanimously approved a memorandum of understanding outlining the township’s commitment.
“This is the first step, and I’m excited that we’re going to work with the borough water authority … to help those residents get some improvements out there,” Ferguson Township Supervisor Omari Patterson said before the unanimous vote.
Nothing in the memorandum requires the township to offer any financial backing for an acquisition or repairs, and it hinges on the State College authority successfully buying Rock Spring.
The water authority unanimously approved its own agreement on Thursday. Per the memorandum, it’s responsible for all negotiations with Rock Spring and developing a phased plan for repairs if the water authority acquires the company.
Jeffrey Kern, who chairs the water authority, said the document would let the two public entities discuss Rock Spring “with some legitimacy” rather than speculation.
A June Spotlight PA investigation found that Rock Spring, state regulators and elected officials failed the roughly 1,000 customers who rely on the 20-mile water system in Ferguson Township. Years of neglect led to crumbling infrastructure, low water pressure, sudden outages and sometimes lengthy boil water advisories.
Issues with the company were referred to the Bureau of Investigation and Enforcement, a division within the Public Utility Commission, on May 23. The unit then launched a review of the company, citing its history of regulatory violations and failure to pay tens of thousands of dollars in civil penalties as part of an ongoing legal battle with the Department of Environmental Protection over excessive water loss.
An investigation to determine whether the commission should order another utility to acquire Rock Spring “is in the public interest,” Carrie Wright, deputy chief prosecutor, wrote in the bureau’s petition.
Such action is reserved for situations where a small water or wastewater utility violates statutory or regulatory standards and cannot provide safe and reliable service. The lengthy process has no guaranteed outcome.
An acquisition takes time and requires approval from the Public Utility Commission. A settlement could speed things up, but the State College authority isn’t the only potential buyer.
In its initial filing, the bureau identified four other possibilities: the privately owned Aqua Pennsylvania, Pennsylvania American Water Company and Veolia Water; and the municipal-run Huntingdon Area Water and Sewage Authority.
The Huntingdon authority has not expressed any interest in taking over the system. Meanwhile, Veolia Water asked a judge to be dismissed from the case.
Aqua noted in filings that its closest pipes are 50 miles from the Rock Spring system and argued that other providers are better situated to take on service, but it didn’t ask to be excused from sale discussions.
Pennsylvania American — the state’s largest private water and wastewater provider — owns systems “in relatively close proximity” to Rock Spring. In filings, the company said it’s happy to help the utility commission evaluate a sale and assess potential buyers.
For the State College water authority, these proceedings are the latest in a series of discussions about buying Rock Spring.
The company’s owners previously approached the water authority about a sale in 2008, but rescinded the offer two months later, per public records. Last year, the water authority tried to start negotiations to buy the system, but talks went nowhere.
Rock Spring’s water system, estimated to be at least 50 years old, needs $13.5 million in repairs, according to a 2022 engineering report commissioned by Ferguson Township. The municipality does not oversee the company, but local officials have tried to find ways to resolve issues on behalf of residents over the years.
The report — compiled by Altoona-based firm Gwin, Dobson & Foreman Engineers and obtained by Spotlight PA — identified the State College Borough Water Authority as “the only logical entity capable” of taking over Rock Spring.
The water authority has acquired local systems in the past, but has concerns about the cost of taking over Rock Spring. It wants to seek grants and loans to fund repairs to avoid placing an undue financial burden on customers.
The average residential Rock Spring customer pays $19.35 monthly, based on water usage of 3,379 gallons. For comparison, the State College Borough Water Authority charges $29.27 each month for similar use, per the engineering report. A board of directors sets rates for the water authority. Meanwhile, state regulators must approve increases requested by private companies.
If another private company bought Rock Spring, customers could face steep hikes, ranging from $50 to $100 monthly rates, engineers said. The firm noted in its report that the family business previously met with a larger utility company to discuss a sale, but Rock Spring opted not to sell.
“Obviously, the more grant funds that can be obtained, the more RSWC water rates can be reduced,” the 2022 engineering report noted.
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