It was a mere 4 days ago when I wrote ‘County Council Case against Delcora could be the first of more to come.’ That more-to-come part was plastered on the front page of the Delaware County Daily Times today – Water bomb: Delaware County council moves to dissolve DELCORA.

A Review

 

Delcora, the wastewater management company for Delaware County located on the Chester City waterfront, agreed to offer itself for sale last year and determined Aqua Pennsylvania to be the perfect buyer. The proceeds from the sale would sit in a trust fund to soften the blow from the unavoidable rate increases customers would see because of system upgrades Delcora is required to make and because Aqua’s rates are higher than Delcora’s. 

Last week, county council filed papers to destroy that trust fund. However, they made no move to try to stop the Delcora Aqua merger. That’s why I figured they still had something up their sleeve if they were serious about ending the deal.

The 2nd step to kill the deal

The best way to describe county council’s 2nd step to try to stop the Delcora Aqua deal is to understand how similar their technique is to what black fathers have been using on their sons for generations. Basically, it’s a statement that goes something like this – “I brought you into this world and I will take you outta of this world!”

The paper describes it a little differently…

…the county, which authorized DELCORA’s creation in 1971 under the Municipality Authorities Act of 1945, also has the power to terminate DELCORA under that same act.

The county simply told Delcora ‘You’re done.’

The proposed ordinance would direct DELCORA to wind up operations; transfer its assets, funds and liabilities to the county and execute and deliver a “certificate of termination” to the county by June 18.

Here’s where it gets interesting. Just like during Part 1 when they made the move to squash the trust fund but didn’t make any move to squash the deal between Delcora and Aqua, they are doing the same thing again by not making any move to directly challenge the Delcora Aqua agreement of sale. Even the Daily Times recognizes that…

The proposed asset purchase agreement and merger is still pending approval by the Pennsylvania Public Utility Commission.

But, it now becomes like a reality game. Let’s call it ‘Race to the PUC.’  

If Delcora and Aqua can get the Public Utility Commission to approve their sale before June 18th, the merger is golden. Unless there’s some new expedited approval process that’s never been seen or heard of before to appear out of thin air in the next 4-weeks, it looks like the county is going to have their way. They’ve asked for a seat at the table just in case something strange happens.

In response, the Aqua people want to remind everyone they came onboard to protect ratepayers from future rate increases…

If Delaware County Council is successful in its current action, the ratepayers will pay the price with skyrocketing rates to cover the cost of future capital costs of $1.2 billion in new and ongoing capital costs over the next 20 years, as well as costs associated with regulations under the U.S. Environmental Protection Agency Long-Term Control Plan.

And Aqua is firm the deal with Delcora is ironclad…

Aqua likewise stated that it has an enforceable contract “that council cannot break” and that it intends to proceed with the sale.

Aqua anticipates the sale with Delcora will still go through, but if it doesn’t, they wonder…

…if the county would take sale proceeds out of a trust intended for customers and use them for another purpose

Even the Daily Times wonders how practical that logic is when they remind us…

…the county council ordinance would appear to simply dissolve DELCORA before the transaction is approved by PUC, leaving no sale to take place and therefore no trust to be funded.

County’s council’s response to all this rate increase talk is rather pedestrian. They figure if Delcora has to spend money to fix stuff, it’s the rate payers that’s stuck with the bill no matter who owns the company. Of course, in politician talk it comes out like this by the head of county council…

…if you spend $100 million fixing it up, that $100 million is then paid by the ratepayers,” he said. “There is no free lunch for anybody … The only argument in my mind for selling it is if Aqua could more efficiently do these things and therefor the ultimate cost to the ratepayers would be less.”

Aqua likes to leverage their huge size as a benefit to lowering costs when it comes to big projects like Delcora is facing, but…

Brian Zidek of county council said when he probed that issue last year, he found Aqua’s cost of capital – meaning the rate of interest that it would repay on loans – would be substantially higher than the county’s.

I guess it comes down to whether big companies or county governments get the best deals for buying a lot of pipe. 

How Chester City and the Chester Water Company (CWA) deal compares (or not)

Chester City is trying to use the same black father argument to sell CWA. They want everyone to remember that CWA was born in Chester and because of that Chester City should be able to do what it wants with CWA. The big difference is Chester City has served as more of a step-father to CWA and is showing up now that they see their child (CWA) has some value. 

Delaware County has consistently been Big Poppa to Delcora and closely involved in the success of their operation. Chester City has had little to do with the day-to-day operation of CWA. In fact, only 22% of CWA customers are in Chester. Sure, Chester assigns 3 board members to CWA but they sort of serve as aunts and uncles, no where near a father figure. With a total of 9 board members, Chester board members don’t even have a majority vote. 

Conclusion

The water utility drama around here only gets more interesting as the world turns. I’ll try to keep you posted on new developments as they pop up.