Rumors started flying last week that the Aqua / DELCORA deal wouldn’t be approved by the Pennsylvania Utility Commission when it comes up for their blessing in March 2021. I thought the local papers would provide some details by now, but I guess this isn’t a big enough story in Delaware County.
Someone slipped me the 29 page ‘Recommended Decision’ dated January 11, 2021, that details the history of this proposed merger along with the decision of the Commission who figures all this stuff out in preparation for the PUC to make the final call.
It’s written like a legal document and my strength is not in interpreting legal documents, but I’m going to do my best to explain to you what it says in the most basic terms.
This document is called the Commission Final Order and starts off reminding us that Aqua filed the paperwork to purchase DELCORA and concludes that the Commission denies the application because Aqua failed in 3 areas:
- Aqua failed to establish a record upon which the Commission can make a determination that the proposed acquisition promotes the service, accommodation, convenience and safety of the public in some substantial way
- the outstanding issues surrounding DELCORA’s legal ability to transfer assets subject to the Asset Purchase Agreement (APA) significantly prevent a reliable determination of the appropriate ratemaking rate base
- Aqua failed to include its rate stabilization plan as an attachment to the Application
There seems to be two issues the Commission has with this proposed transaction. The first has to do with the justification of the purchase price. Apparently, it assumes all the municipalities DELCORA serves will go along with the deal, but there are a few who filed their own court cases in protest to the Aqua application. Since those court cases haven’t been settled, the Commission feels it prevents a reliable determination for the appropriate ratemaking rate base. In other words, what was proposed to be the assets the rates would be based on are still up in the air at this point because a judge has yet to rule on the status of those municipalities and whether they should be part of the purchase price or not.
The other sticky point has to do with the trust fund that the proceeds of the sale will go into for the purpose of raising rates only 3% for about 10 years. Although the Delaware County judge ruled the trust was legal, the Commission is saying that it doesn’t quite work out in accordance to how rates are supposed to be determined. And then there was some issue with the rate plan not even being attached to the application in the first place.
And then there’s the issue of Delaware County’s petition against DELCORA alleging that the County has the exclusive right, power and authority to terminate DELCORA. That hasn’t been determined in court yet, either.
My hope is that some reporter who understands how to interpret this legalize will write an article and talk to the people involved so we can get a better understanding of what’s really going on between Aqua and DELCORA. From my lens, it seems Aqua has a lot of work to do in the next couple months to satisfy the Commission. And, they’re going to need a few court decisions to be finalized before they complete that work.
All I know is what I read and the final passage from the Commission is…
Between the ongoing litigation and lack of a rate stabilization plan attachment, there are simply too many outstanding issues that need to be resolved in order for the Commission to be able to analyze this Application and make an informed recommendation as to whether it is in the public interest. Accordingly, we recommend the Application be denied.
This is only a recommendation. I don’t know how much weight it has when the PUC make the final decision but if I were to guess, this recommendation will be highly considered.
It ain’t over til it’s over.