BELLEFONTE — A private entity is poised to take temporary control of a troubled rural water company after a judge approved an emergency request by Pennsylvania’s consumer advocate.
Pennsylvania American Water Company — one of the state’s largest investor-owned utilities — should take over management of privately owned Rock Spring Water Company, Administrative Law Judge John Coogan ordered Thursday.
The appointment, which requires approval from the state Public Utility Commission to take effect, could offer some relief to the company’s 1,000 customers who’ve endured more than a decade of unreliable service in Centre County as regulators decide on a permanent solution.
Nils Hagen-Frederiksen, a spokesperson for the PUC, told Spotlight PA that regulators “will work to address this matter in a timely fashion.” Next steps include reviewing the judge’s emergency order and briefs from those involved in the case, which are due in a week, he said.
The decision came as a surprise to stakeholders and goes against requests from Rock Spring owner J. Roy Campbell, lawyers for the company, and even Pennsylvania American. All asked the judge to let the nearby State College Borough Water Authority assume interim control.
“It’s out of left field, but at least somebody will be there to answer the phone,” James Bryant, an attorney for Rock Spring, told Spotlight PA.
Rock Spring has racked up dozens of regulatory violations — including for failing to protect the system’s water source, shutting off service without proper notice, and letting a leak go unfixed for six months — and tens of thousands of dollars in unpaid civil penalties as part of a yearslong legal battle with the Department of Environmental Protection over excessive water loss.
A June Spotlight PA investigation found that Rock Spring, state regulators, and elected officials failed those who rely on the system in Ferguson Township. Efforts to find new ownership have gone nowhere, while years of neglect have led to deteriorating infrastructure, low water pressure, regular outages, and sometimes lengthy boil water advisories. The utility commission even erroneously told a customer in 2018 that it doesn’t regulate the company. So after years of inaction, residents resigned to living with shoddy service.
Issues with Rock Spring were referred to the Bureau of Investigation and Enforcement, a division within the PUC, on May 23. The unit then launched a review of the company.
The state regulatory process is lengthy, with no guaranteed outcome. As part of the review, a two-day hearing is scheduled for late April. But customers can’t wait until the spring, the consumer advocate argued in its emergency request for another provider to take over service.
The State College water authority has talked about acquiring Rock Spring’s 20-mile water system — which needs at least $13.5 million in repairs — for years. In December, Campbell signed a letter of intent to sell to the municipal entity for $65,000. The state Office of Consumer Advocate, which urged regulators to provide emergency relief to prevent “irreparable” injury, identified the municipal authority as the most logical choice for an interim operator, called a receiver.
But uncertainty over regulatory authority and a desire for quick relief for customers prompted the decision to appoint Pennsylvania American as the receiver, Coogan wrote in a 26-page order.
Because the PUC primarily regulates private utility companies, the judge had reservations about whether a municipal authority could take over, especially when the State College authority opposed subjecting itself to the commission’s jurisdiction and regulations.
The water authority had instead asked the administrative law judge to recommend it become the receiver, hoping it would make a Centre County judge more comfortable approving a local request to let the municipal entity take over. Rock Spring’s lawyers previously tried this approach, but their request was denied, with the judge saying he could not usurp the PUC’s powers.
While not necessarily opposed to the idea, the Office of Consumer Advocate and investigators for the PUC had concerns over how long it might take for State College to take the helm.
A Pennsylvania American representative told Spotlight PA that the company is reviewing the judge’s decision.
During a recent hearing, David Zambito, an attorney for the company, said Pennsylvania American could handle operations but thinks State College was the best option. Plus, if the receiver isn’t the ultimate buyer, the utilities will have to “unravel” the cost of repairs, he said.
“Somebody has to pay to remediate the Rock Spring system,” Zambito said.
State College water authority officials met with their lawyer to discuss the decision Friday morning, Katie McCaulley, assistant executive director, told Spotlight PA.
“At this time, we are still intent on the long term and continuing the discussions and negotiations of the acquisition of RSWC,” she wrote in an email.
