Today the Public Utilities Commission (PUC) adopted an order that alters how the commission implements Act 12 of 2016, a controversial law that has opened the floodgates on water and sewer privatization in Pennsylvania.

Act 12 encourages predatory pricing of municipal systems, which has led to excessive rate hikes, since the law allows water corporations to recover the cost of inflated acquisition prices through rate increases. Act 12 has incentivized the sale of healthy municipal utilities – none of the 22 sales under Act 12 has involved a distressed utility. 

The new order establishes a reasonableness review ratio to evaluate purchase prices of water and sewer systems that are marked above their book value. The PUC is adopting an initial ratio of 1.68, effectively indicating that the commission believes it is reasonable to buy a system marked up by 68 percent over the book value. The commission will use this ratio as a guide — not a binding cap on inflated purchase prices. 

A coalition of community and advocacy groups had asked the PUC in March to mandate a reasonableness ratio of 1.0 in order to prevent the most excessive rate hikes. Many organizations point to a repeal of Act 12 as the most effective way to stop runaway price gouging. The PUC neither adopted or even addressed that recommendation in today’s motion to adopt the order. 

“We’re glad the PUC is starting to recognize the harms of Act 12 by adopting this order, but they are hamstrung by how the law is written and it is incumbent on the General Assembly to repeal Act 12,” said Kofi Osei, founder of Towamencin Neighbors Opposing Privatization Efforts (NOPE).

“We have seen an outpouring of public opposition against predatory water system pricing across our state,” said Ginny Marcille-Kerslake, Eastern Pennsylvania Organizer with Food & Water Watch. “While the PUC’s decision is an apparent admission of the harm of Act 12, the order lacks the teeth necessary to truly address it. An outright repeal of Act 12 is the only way to provide real relief to the Pennsylvanians suffering from the rate gouging from the big water corporations.” 

“It will be difficult to recover at the community level from the damage that has been done by the PUC and private water,” said Amanda Johnsen,a resident of Exeter Township, Pa, and founder of Exeter Twp – Water Issues Facebook Group. “While this is a step in the right direction, a full repeal of Act 12 and an action plan to make whole the communities that have been hit the hardest by predatory pricing is the only way to right this ship.” 

“I am very disappointed with the PUC for failing to tell the public if the original proposal was modified before the vote today, and for brushing aside almost all the comments made,” said Bill Ferguson,  the cofounder of Keep Water Affordable. “This process does not give me confidence that the PUC is serving the ratepayer – who is the primary reason for their existence. It has the appearance of the PUC making window dressing changes to head off more significant changes by the legislature — real changes that might impede the Big Water companies they supposedly regulate.”