Pennsylvania American Water Co. (PAWC) owns and operates 26 wastewater systems in 15 counties across the Keystone State, and hopes to add two in Butler County.

Water company officials have one confidentiality agreement with the Butler Area Sewer Authority (BASA) and another with Adams Township supervisors and Mars Borough Council related to the Breakneck Creek Regional Authority (BCRA) in Adams Township.

Breakneck Creek authority’s board of five directors was asked to sign the confidentiality agreement, but its members did not sign it.

The agreements allow the water company to determine the value of the sewer system so a decision can be made on whether to offer to buy the plant.

The municipality and PAWC each pay for an appraisal upon a potential sale of a sewer system.

The prospective sale of BASA to PAWC has created controversy, with many customers worried that bills could double in 10 years.

Others are concerned that Center Township and East Butler, where a number of residents and businesses are BASA customers, are not involved in the decision to sell because they are not represented on the BASA board of directors.

Laura Martin, senior director of government and external affairs at PAWC, could not comment on any potential rate increase should her company buy the BASA system due to the standing confidentiality agreement.

She said rates are increased at some sewer plants because they have been artificially low for many years, which prevents those in charge from completing maintenance or upgrade projects.

“Some rates are historically underfunded and need to come up to the level where investments can be made,” Martin said.

She said PAWC must apply for a rate increase to the state Public Utilities Commission, which then sets a sewer system’s rates.

That nine-month process includes exhaustive review and analysis by the PUC, as well as public hearings where customers can voice their opinions on a potential increase.

Many times, a PAWC purchase of a municipal sewer authority is a relief to the municipality, which is often struggling with the inability to invest in their sewer system or meet the ever-increasing environmental regulations of the state Department of Environmental Protection.

An example of PAWC providing a solution to a municipality is the company’s purchase of the McKeesport wastewater facility in December 2017 for $159 million.

Michael Cherepko, McKeesport mayor, said the city had taken on $100 million in debt due to state-mandated upgrade requirements.

Once PAWC bought the sewer system and the authority was dissolved, McKeesport received $50 million in revenue from the sale, Cherepko said.

“When would be the next (unfunded upgrade mandate) if the authority had kept the sewer system?” Cherepko asked hypothetically.

BASA had $43.1 million in debt at the end of fiscal year 2021.

BASA board members voted in June to increase rates to fund capital projects like the work required by DEP to correct a continual overflow of sewage at the Brewster Road pump station.

In that increase, residential bills rose from $114 per quarter to $129.

The deal between McKeesport and PAWC included a one-year moratorium on raising the cost of sewer service for customers.

Cherepko said rates were increased by PAWC a few years after the sale, but he could not recall the exact amount.

He said the authority had planned a rate increase that was not much less than the increase issued by PAWC.

“If there are extremely low rates, you may see a significant increase to catch up to everyone else,” Cherepko said. “In five years, we’ve seen no major increases.”

He said city officials have been thrilled with PAWC as owners of the sewer system over the past five years.

“From the day we met PAWC officials until today, their company from the top down are truly authentic, straightforward people,” Cherepko said. “Everything they said they would do, they have kept their word on. They’ve even exceeded expectations in many ways.”

Looking back, the mayor said the sale was a great move for McKeesport.

“I couldn’t be any happier,” Cherepko said. “When you do a transaction of that magnitude, everyone is nervous, but it couldn’t have gone better.”

PAWC also bought the Scranton Sewer Authority’s wastewater system in December 2016 for $195 million, and more recently, the York Wastewater Treatment Plant in March 2021 for $235 million.

Those municipalities did not return calls from the Butler Eagle for comment on those deals or PAWC’s service since the purchases.

Asked how PAWC can afford repeated multi-million dollar purchases of sewer systems, Martin said the company’s finance department gave the following reply:

“Acquisitions will be initially funded by a mixture of short term debt and internally generated funds, and alter will be converted to long-term financing consisting of equity and long-term debt.”

Martin added that PAWC, unlike municipal sewer systems, offers a discount program to eligible low-income customers.

“Through this program, low-income residential customers receive a 30% discount off their total monthly wastewater charges, which saves the average residential customer $20.38 every month,” she said.

Regarding charges, Martin said PAWC normally bases its charges on customer water use instead of charging a flat fee.

Most homes and businesses in Butler and much of the surrounding area are connected to PAWC, which would make it easy for the company to charge based on customer water use if the purchase of BASA goes through.

Martin said in cases where a municipality uses another company for public water service, meter data from those companies would be shared with PAWC for charging purposes.

Regarding the status of the potential sale of BASA to PAWC, the BASA board of directors voted in June to extend the confidentiality agreement to July 31.

Duane McKee, BASA executive director, said in June that a decision on the sale could be made at that time.