(Last updated: June 23, 2022)

What is the fight about?

Essential Utilities, Inc. (formerly “Aqua America”), a for-profit corporation, has been attempting a hostile takeover of the Chester Water Authority (CWA), an award-winning, non-profit municipal water authority. Essential Utilities, through its wholly-owned subsidiary, Aqua Pennsylvania, Inc. (Aqua), has been trying to force a deal ever since 2017, and made Governor Tom Wolf’s office aware of its intentions prior to its first uninvited offer to purchase the CWA in May 2017. Aqua wants to own the CWA because it is well run and well maintained, and provides water to approximately 200,000 residents in Delaware County and Chester County, Pennsylvania. The CWA does not profit from its ratepayers, does not charge more than the cost of service, and has no incentive to charge more than needed to provide services. This makes sense—clean drinking water is a basic human need. Not one of the 200,000 residents in the CWA’s service area can live without it. 

Yet, the threat of losing access to water is very real for many people. For CWA ratepayers in the City of Chester who live below the poverty line, the fact that the CWA exists as a non-profit is the very reason why they can continue to afford their water and avoid the cascading devastation of a water shut off: inability to cook, bathe, clean, or flush toilets, conditions that can quickly result in losing one’s health, one’s home, one’s parental rights, and even one’s freedom under sanitation laws. Unfortunately, these horrific consequences, which disproportionately impact communities of color as detailed in a 2019 report by the NAACP Legal Defense and Educational Fund, are inevitable if Aqua succeeds in acquiring the CWA. The national, non-profit advocacy group, Food & Water Watch, has found that the “most immediate effect” of Aqua’s takeover would be significantly higher rates by which the “water bill burden in Chester would go from about 1.2 percent of median household income to 3.3 percent of median household income, a level generally deemed unaffordable by the Environmental Protection Agency and the United Nations.”

Most water systems in the United States are not privately owned—there are strong public policy reasons for not allowing a for-profit company to enjoy a monopoly over something no one can refuse to buy. But in those places where Aqua has been allowed to operate, the profits to its remote corporate shareholders, institutional investors, and executives have been staggering. For example, in 2020 alone, Essential/Aqua reportedly paid its CEO, Chris Franklin, $7.2 million in total annual compensation. The Simply Wall St. article reporting Franklin’s salary explains: “We think that the total shareholder return of 42%, over three years, would leave most Essential Utilities, Inc. shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.” For profiteers of the earth’s limited freshwater resources (comprising less than 1% of all water), a 42% return is just the beginning. Essential/Aqua recently reported a net income increase of 51.5% over the last year alone, with 2020 profits of $284.8 million soaring to $431.6 million in 2021. For the company’s second-largest shareholder, the Canadian Public Pension Investment Board, this is great news, especially insofar as its pensioners live nowhere near the communities carrying the burden of ever-rising water costs. It is no wonder why hedge fund manager Michael Burry (who, as shown in the 2015 film, The Big Short, made his fortune predicting the housing bubble burst of 2008) is now “focusing all of his trading on one commodity: Water.”

One thing, however, stands in the way of limitless corporate profits: the public’s refusal to surrender control over their water. That is why Essential/Aqua’s business growth model is almost entirely dependent on pressuring state and local governments to divest the public of that control. In 2021, more than 99% of the value of the company’s acquisitions (closed and pending) came from buying municipal authorities as reported on pages of 20-24 of its latest Earnings Call.  

Preserving the public’s control over their water is what this fight is about. That means protecting both the affordability of water as well as the public’s continued access to the CWA’s water source, the pristine Octoraro Reservoir. 

Make no mistake: once the public gives up their right to control their water, they will never get it back.

How does this affect me?

If you are a current CWA customer, this affects you.

If Aqua is allowed to take over the CWA, all CWA customers, regardless of where they live, will pay significantly higher water rates. Expert analysis has concluded that the average residential customer in the CWA’s service area would end up paying more than $500 extra per year under Aqua’s rates. In effect, rates would double or triple for CWA customers. This impact would be especially devastating to low income and fixed income residents, many of whom are already below the poverty line. Also, large commercial and industrial customers in the City and elsewhere in the CWA’s service area would end up paying millions of dollars more under Aqua’s rates. And, if the CWA is sold to Aqua, it will be CWA ratepayers who will pay for Aqua’s future acquisitions. Every single CWA ratepayer will be chipping in to provide the funds that Aqua will use when it goes down the road to the next town.

Aqua has claimed that, if it were to buy the CWA, it would keep rates flat for 10 years. This is a hollow promise because, while Aqua routinely requests increases in rates, it does not ultimately set them—the Pennsylvania Public Utility Commission (PUC) does. The PUC does so under a policy known as “single tariff pricing,” which requires similar customers to pay similar prices for similar services, and therefore, prohibits special treatment for certain water customers—the kind of special treatment that Aqua’s purported “rate freeze” would entail. That means if CWA ratepayers become Aqua ratepayers, they will need to pay rates similar to what Aqua charges its ratepayers—rates much higher than what they pay under the CWA. 

Also, nowhere in its 58-page proposed Asset Purchase Agreement is there any mention of any effort to keep water rates stabilized. Aqua clearly does not want the public to know that its promises are hollow—its Asset Purchase Agreement had to be obtained through Right to Know Law requests after being withheld from the public.

Finally, even if Aqua actually had the ability to promise temporary rate stability, what would happen after that period of stability expires? What is to keep Aqua from imposing massive rate increases in the future?

If you are a current Aqua customer, this affects you.

Even if you are not a CWA ratepayer, but instead, a current Aqua customer, this fight affects you as well. Aqua is proposing to spend $420 million to buy the CWA. The money to fund this acquisition would come right out of the pockets of current Aqua customers. As The Guardian has explained: 

“In 2016, Pennsylvania became the first state to pass legislation that allows private companies to buy public utilities for more than they are worth – relying on what’s known as fair market value rather than depreciated value. Companies can recoup the over-priced investments by passing on the cost to all their customers through statewide rate hikes, meaning residents pay while shareholders reap the rewards.” 

It has been widely reported that “current Aqua customers are looking at rate hike requests ranging from 20.49 percent in Bensalem to an 86 percent increase in Sun Valley. It’s part of Aqua’s systemwide 17.86 percent increase currently before the PUC.” What massive rate increases await Aqua’s customers if Aqua spends $420 million to buy the CWA? 

If you are someone who cares about the outdoors or preserving open space, this affects you.

This also impacts you if you are someone who enjoys the outdoors or cares about preserving southeastern Pennsylvania’s ever-shrinking open space from being sold and developed. That is because, if Aqua is successful in taking over the CWA, the two-billion-gallon Octoraro Reservoir and its 2000 acres of surrounding land in Lancaster County—pristine open space currently available for public enjoyment—will, in all likelihood, be closed off to the public forever. Aqua has done this to public open space before. In denying that it would treat the Octoraro Reservoir like Delaware County’s Springton Reservoir (that is, closing it off to the general public and selling off the surrounding land to developers despite the obvious lack of public use that results from land development), Aqua has asked the public to trust its words, not its actions. However, nowhere in its proposed Asset Purchase Agreement does it mention the Octoraro Reservoir even once. 

Currently, the Octoraro Reservoir and its untouched surrounding land is home to wildlife including bald eagles, herons, wild turkeys, and more. The reservoir and the surrounding watershed are widely used for non-polluting public recreation, such as fishing, boating, kayaking, hiking, bird watching, and hunting. It is all free and open to the community for enjoyment and recreation. If you care about protecting the Octoraro Reservoir and its surrounding land, and preserving the public’s access to this open space, this fight affects you.

Will rates increase if the CWA is improperly seized and sold to Aqua?

Yes, to the benefit of Canadian pensioners.

If Aqua is successful in buying the CWA, the increases in rates would amount to a wealth transfer of one billion dollars per generation from CWA customers to Aqua and its shareholders—including its second-largest shareholder, the Canadian Public Pension Investment Board. Think about that: our government officials in the City of Chester and state government (as further discussed below) are trying to sell the CWA in an attempt to solve the City’s pension shortfall, which would result in the CWA’s pension having a shortfall, all to the benefit of Canadian pensioners! 

As previously noted, the average residential customer in the CWA’s service area would end up paying more than $500 extra per year under Aqua’s rates. In effect, rates would double or triple for CWA customers. The Guardian (a daily newspaper based out of London, England) reported that, as to four of Aqua’s largest Pennsylvania acquisitions, “rates increased by an average of 280% – the equivalent of 8% per year – after adjusting for inflation.” As to the CWA specifically, The Guardian reported that “the Aqua deal could cost its customers more than $1bn in higher bills over the next 20 years – and threatens public access to the reservoir and its landholdings, 2,000 acres that protects the watershed and wildlife.” Despite attempting to siphon billions of dollars out of our local communities, Aqua portrays itself as a community partner and publicized this year that it contributed $50,000 to Cradles to Crayons. To be clear: this is nothing compared to the financial pain and environmental injustice that our communities will suffer from Aqua’s rate increases in perpetuity if Aqua is allowed to take over the CWA.

How can Aqua get away with such staggering rate hikes? The Pennsylvania Municipal Authorities Association recently explained how changes in Pennsylvania law several years ago (specifically, through Act 12 of 2016) have allowed companies like Aqua to “bid up the purchase price for any system they are interested in acquiring, to any level they wish, regardless of the appraised value,” often paying “two, three, or even four times over the actual appraised value of a system, thereby cutting any competing non-profit Municipal Authority out of the running.” The purchasing company can then, under the current law, increase customer rates to recover 100% of its investment “plus a reasonable return on the investment” (rules that also apply to any subsequent improvements made to the system). Consequently, the more the water company pays for the system, the higher it can raise customer rates. The ratepayers end up fully funding the purchase so that companies like Aqua can go on to enjoy staggering profits. There is no requirement that the purchasing company ever reduce the increased rates; to the contrary, the company can continue to raise the rates of those same customers in order to, for example, fund purchases of other systems “in the same rate zone” despite the fact that “the customers of the previously acquired system receive no direct benefit from the new acquisition.” Thus, customers not only pay for a water system’s infrastructure in their mortgages (through “tapping” or “capacity” fees) but, under Act 12, customers are required to pay for it all over again to offset the water company’s acquisition expenses—and then, of course, the customers continue to pay, in perpetuity, as the for-profit water company routinely increases rates and continues reaping massive profits.

Does the City of Chester own the CWA?

No. In fact, no one owns the CWA. The CWA is a municipal authority which was incorporated in 1939. As a municipal authority, the CWA does not have stockholders; it is organized and operated for the benefit of its ratepayers. The award-winning authority supplies water in a service area which includes portions of 31 municipalities in Delaware and Chester Counties, Pennsylvania. It was originally incorporated by the City of Chester and now has a nine-member board comprised of three members from the City of Chester, three from the surrounding Delaware County, and three from Chester County. Presently, approximately 21% of CWA ratepayers are residents of the City of Chester, whereas 79% of its ratepayers reside throughout Chester County and other areas of Delaware County.

Is the CWA for sale?

No, the CWA is not for sale. In 2017, Aqua (then called “Aqua America Inc.”) made a written offer to the CWA to purchase its assets. Aqua’s offer was uninvited and the CWA rejected it. Since the City of Chester was the incorporator of the CWA, Aqua and the Pennsylvania Department of Community and Economic Development (DCED) have put enormous pressure on the City (now in a receivership due to financial difficulties) to try to seize and sell the CWA. 

What is the DCED?

The Pennsylvania Department of Community and Economic Development (DCED) is part of the Commonwealth’s Executive Branch, under the control of the Governor’s Office, and works with the City of Chester through the Municipalities Financial Recovery Act (Act 47 of 1987, as amended). The City of Chester entered the Act 47 program in 1995 and the Act 47 Recovery Team has been involved in the City’s day-to-day strategic financial planning for decades.

Why is the state government trying to sell the CWA?

Emails obtained through the CWA’s Right to Know Law Requests show a statewide program being pursued by the DCED and the Governor’s Office to sell water authorities throughout the Commonwealth to for-profit water companies. In the case of the CWA, the DCED issued an emergency action plan for the City of Chester in April of 2020 following a “Declaration of Fiscal Emergency” issued by Governor Wolf. The DCED has been working to force a sale of the CWA as a way to fix the City’s current financial distress. However, these problems are long-term structural problems that will not be fixed by a one-time infusion of cash resulting from the improper seizure and sale of CWA assets.

Can Aqua buy the CWA?

In 2017, the CWA rejected an unsolicited offer made by Aqua America to purchase its assets. The CWA rejected the offer, in part, because its analysis showed that ratepayers would have seen significant rate increases over time by Aqua. More than 30 townships and boroughs, 10 state senators and state representatives, and at least 10 local interested organizations have written letters opposing any sale of the CWA. The Governor, the DCED, and the DCED’s Receiver for the City of Chester, however, are using all of their efforts to force a sale by claiming that the City of Chester owns the CWA because the City incorporated it, despite the City only constituting approximately one-fifth of the CWA’s service area and the CWA having a governing board in which only one-third of its members represent the City. The CWA is fighting these efforts in court.

What has been decided in the courts?

In April 2020, the Delaware County Court of Common Pleas ruled that the City of Chester does not have the right to unilaterally seize and sell the CWA. The Court ordered that any transfer of CWA assets must be conducted “in unison” by the three municipalities represented on the CWA board, which are the City of Chester, Delaware County and Chester County.

In September 2021, the Commonwealth Court reversed the April 2020 Order and stated that the City of Chester has the power to “obtain the assets” of the CWA. The Court, however, stressed the very limited nature of its decision, stating:

We emphasize the very limited nature of the issue before this Court. In this case, we decide only whether a municipality, under section 5622(a), possesses the general authority to obtain the assets of an authority that it created. We do not decide the manner or extent to which a municipality can utilize or exercise such authority.

In re Chester Water Auth. Tr., 263 A.3d 689, 692 n.4 (Pa. Commw. Ct. 2021). Later in the opinion, the Court went on to repeat this important caveat—that it was not deciding the manner or extent to which the City may lawfully exercise the power to obtain the CWA’s assets. Id. at 714 n.11.

The September 2021 decision was not unanimous. Rather, two Commonwealth Court judges dissented, finding, among other things: “The growth and success of the water project has been built on the backs of the Counties’ ratepayers. . . . It is patently unconscionable to permit the City to pay off its own municipal debt by selling the Authority’s assets that were paid for by its ratepayers, the vast majority of whom reside in the Counties and elsewhere.” Id. at 713.

In April 2022, the Pennsylvania Supreme Court agreed to hear the case. The high court will ultimately decide whether the Commonwealth Court’s majority ruling should be affirmed or overruled. 

How can I keep current on what is happening with the CWA?

In addition to this website, information on the CWA and the fight to preserve its existence can be found at www.chesterwater.com (the official CWA website) and www.savecwa.org (a grassroots website for members of the community to take action). Click here to sign up for e-mail updates.

How can I show my support for the CWA?

Members of the public and ratepayers must increase pressure on all of our state lawmakers. Our lawmakers must take back the power for their people—now. Support the bipartisan effort to save the CWA—click here to make your voice heard before it is too late!

Learn More

To learn more about Save Chester Water Authority, please visit the Save CWA website