Troubled rural water utility could be forced to sell until Pennsylvania Utilities Commission launches investigation | Pennsylvania News

This story was produced by State College Regional Office of Spotlight PAan independent, nonpartisan newsroom dedicated to investigative and nonprofit journalism for Pennsylvania. Sign up for our north-central Pennsylvania newsletter, Talk of the Town, at Spotlightpa.org/newsletters/talkofthetown.

HARRISBURG, Pa. – State regulators are investigating a troubled water utility in Centre County to determine whether the owner should be forced to sell.

The investigation into Rock Spring Water Company was launched by the Bureau of Investigation and Enforcement, a division of Pennsylvania’s Public Utility Commission. In a recently filed document, the Bureau cited Rock Springs’ history of regulatory violations and an ongoing legal battle with the Department of Environmental Protection over excessive water loss.

The agency also found that the company continues to fail to correct problems and pay tens of thousands of dollars in civil penalties.

An investigation to determine whether the commission should order another utility to take over Rock Spring “is in the public interest,” Assistant Attorney General Carrie Wright wrote in the office’s petition.

Such actions are reserved for situations where a small water or wastewater utility violates legal or regulatory requirements and cannot provide safe and reliable service. It is a lengthy process with no guaranteed outcome.

Rock Spring’s owners did not respond to a request for comment for this article.

A Spotlight PA investigation released in early June found that Rock Spring Water Company, state regulators and elected officials have failed the roughly 1,000 customers who rely on the 20-mile system, which has been losing water for more than a decade — an average of 63 percent. Levels above 20 percent are considered excessive by industry standards.

The commission and the Pennsylvania State Office of Consumer Advocate reached a settlement with Rock Spring when the company last raised its rates in 2013. The agreement required the owners to address the water loss and seek a sale, but neither happened.

The company has been owned by the same family since it was founded in 1947.

The neighboring State College Borough Water Authority has discussed buying Rock Spring, but a sale has never materialized. Meanwhile, years of neglect have resulted in crumbling infrastructure, low pressure, outages and sometimes lengthy boil water advisories.

When asked about the search for new owners, a Rock Spring representative – who declined to give his name or job title – wrote in an email to Spotlight PA in July that fixing the leaks was “more important right now.”

In its filings, the agency identified five potential buyers: privately held Aqua Pennsylvania, Pennsylvania American Water Company and Veolia Water, as well as the municipally owned State College Authority and the Huntingdon Area Water and Sewage Authority.

The Office’s application has been referred to the Commission’s Administrative Tribunal for further review. A judge will be appointed to decide the case and set a trial schedule. It is similar to a court process, with evidence, hearings, expert testimony and legal opinions.

The judge will then recommend a decision that will be considered by the Utilities Commission – along with a full review of the case – before a final action is voted on at a future public meeting, Nils Hagen-Frederiksen, a spokesman for the agency, told Spotlight PA in an email.

A 2022 engineering report commissioned by the municipality of Ferguson estimates that the current water system needs $13.5 million in repairs. The municipality does not have jurisdiction over Rock Spring, but local officials have tried to find ways to solve the problem on behalf of residents.

The report – compiled by Altoona-based Gwin Dobson & Foreman Engineers and obtained by Spotlight PA – identified the State College authority as the “only logical entity capable” of acquiring Rock Spring. The assessment also identified grant and loan programs that would help finance improvements and avoid undue financial pressure on customers.

The water authority has taken over local systems in the past, but cannot force Rock Spring to sell.

It is the office’s job to investigate and argue that the sale of a small water or wastewater utility is in the public interest. The utility – in this case Rock Spring – must demonstrate that it can operate safely and efficiently at a reasonable price. The commission decides whether to order a takeover.

A utility also has the opportunity to explore alternatives – such as organizing under new management or merging with another provider – before the commission orders a sale. Sometimes the commission appoints another utility provider as receiver to ensure safe and reliable service.

If the Commission decides that an acquisition is necessary, the final selling price will be agreed between the seller and the acquiring utility and must be approved by the regulator.

In recent years, the North Heidelberg Sewer Company in Berks County, the Delaware Sewer Company in Pike County, the Winola Water Company in Wyoming County and the Venango Water Company in Venango County have faced such lawsuits.

The 2022 engineering report prepared for Ferguson Township, based on the State College authority as the likely buyer, estimated that the Rock Spring system could sell for $100,000 to $150,000.

Without prompt repairs and funding, Rock Spring’s “chronic operational problems will only get worse,” engineers predicted.

Charles Williams, who lives in Bloomsburg and inherited 12 shares of the company’s stock, has tried to participate in Rock Spring’s operations over the years, but he told Spotlight PA that the Campbell family was reluctant to share information or involve him in business decisions.

Williams said he learned about the company’s activities primarily through Spotlight PA’s reporting.

In early August, Spotlight PA sent letters to the company’s remaining 11 shareholders — including President J. Roy Campbell, Treasurer Bonnie Campbell and several other family members — asking about their roles in the company. Three letters were returned as undeliverable, but no one else responded.

Although a sale would likely mean Williams would get “little or nothing” for his shares, he said what matters most is a reliable and safe water supply for the community.

“I think it has been poorly managed for so long and I would rather not have my name associated with the company,” he told Spotlight PA.

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