York Water enters wastewater businessSeveral factors led utility into sector for first time
The York Water Co. has expanded from its core water-delivery services by acquiring a small wastewater treatment operation for the first time in its nearly 200-year history, and it expects there might be more of the same in the firm's future.
The York-based, publicly held water utility has averaged about one acquisition per year during the past two decades, though this is an especially busy year. Four have either closed or are in the process of closing, President and CEO Jeffrey Hines said.
Three are small water-system acquisitions around York Water's service territories in York and Adams counties, Hines said.
The fourth is the recently completed $305,000 purchase of the wastewater facilities of Asbury Pointe Water & Sewer Co. in East Manchester
Township, the company said. The acquisition includes about 240 wastewater customers, it said.
It has contracted the operations but will look at some point at developing its own in-house capacity, Hines said.
York Water previously acquired the water services of the developer-built system, and a lot of factors came together for the company to acquire the wastewater assets, Hines said.
First, the core competencies for operating a water system and a wastewater system are similar, he said: Each includes maintaining a network of pipes with a treatment plant on one end and a customer on the other.
"We do that very well. We manage infrastructure. That's what we do," he said.
Particularly for smaller systems, staying in environmental compliance and retaining a certified operator without problems can be a difficult task, he said. York Water has staff and financial resources available.
Also, many systems require expensive updates that can't be absorbed without steep rate hikes, Hines said.
After passage of the federal Clean Water Act 40 years ago, grants were available to communities for treatment plants, he said.
Many were not maintained properly as time passed and must either be rebuilt or significantly updated, Hines said. Today, the grants that used to be available have diminished.
The trend for privately held water and wastewater companies in Pennsylvania is to have both types of assets, and the same is true for municipal systems, said Penny McCoy, executive director of the Centre County-based Pennsylvania Rural Water Association, a nonprofit representing the state's water and wastewater industry with training, technical assistance and legislative representation.
Hines said it's hard to say how quickly and how much the company could grow in the coming years, though potential remains in its territory to roughly double its water-customer base.
And that's not including wastewater systems, he said.
Deals come about normally because the owner or operator of a system runs into some kind of problem and seeks alternatives, he said.
"We don't go anywhere where we're certainly not wanted," Hines said.
A recently enacted law appears to be advantageous for managing rate hikes among water and wastewater customers, said Jeffrey Hines, president and CEO of The York Water Co.
Part of Act 11 of 2012 provides a way for companies with water and wastewater assets to, for example, spread the costs of upgrading wastewater treatment among wastewater and water customers, Pennsylvania Public Utility Commission spokeswoman Jennifer Kocher said.
The need for expensive upgrades required by environmental rules helped lead to the change, Kocher said.
Gov. Tom Corbett in February signed into law Act 11, which provides a regulatory framework to support “accelerated infrastructure replacement,” according to the commission.
Although it might not at first seem fair to water customers, the advantage would eventually come back around to benefit them when infrastructure serving their areas has to be replaced, Hines said.
“It averages out over time,” he said.