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State's largest water authority finishes $195M purchase

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Kathy Pape is the president of Pennsylvania American Water. The company recently announced completing its $195 million acquisition of the Scranton Sewer Authority.
Kathy Pape is the president of Pennsylvania American Water. The company recently announced completing its $195 million acquisition of the Scranton Sewer Authority. - (Photo / )

Pennsylvania American Water finished its $195 million purchase of the Scranton Sewer Authority this week, marking the completion of one of the largest acquisitions in its parent company's history.

Pennsylvania American Water, a subsidiary of American Water, is the state's largest water utility. It announced its intention to buy the Scranton authority in March and received approval from the Pennsylvania Utility Commission to do so in October.

The newly acquired system provides wastewater service to about 31,000 customers around the Scranton area in Lackawanna County. Those residents will initially keep their existing rates under American Water, with the PUC reviewing any future rate changes, the company said in a news release Thursday.

American Water has also offered all of the Scranton authority's roughly 80 employees positions under the new ownership and plans to bring 100 new jobs to Scranton by 2020.

As part of the purchase, American Water is inheriting some costly environmental issues at the Scranton authority. The EPA has mandated significant upgrades throughout Scranton's systems, a process expected to cost about $140 million.

PUC Vice Chairman Andrew Place expressed concerns in October that the price tag of American Water's purchase, including the cost of these upgrades, could drive up rates in the long run for American Water's existing customers. He cast the lone dissenting vote in the PUC's 4-1 decision to approve the deal.

American Water will also likely have to contend with a lawsuit filed against the Scranton Sewer Authority last month, according to the Associated Press. 

Six Scranton-area homeowners allege the Scranton authority offered to pay them only $100 for the right to perform repairs or maintenance on decades-old sewer lines under their properties. The homeowners say they had no idea the lines even existed until the authority informed them in August, the AP reports.

The suit, filed in Lackawanna County Common Pleas Court, seeks class action status on behalf of about 600 home and business owners, according to the AP.

Calls to Pennsylvania American Water and an attorney representing the homeowners were not immediately returned Friday morning.

Acquisition to save thousands per household

American Water previously projected that the Scranton Sewer Authority purchase would save customers more than $350 million over the next 30 years, or about $7,600 per household.

"This acquisition marks a significant milestone for our company and our employees, based on the size and scope of this wastewater operation and the environmental challenges facing the system," Pennsylvania American Water President Kathy Pape said in Thursday's release.

"We bring both the technical expertise and financial resources to meet these challenges and provide a long-term wastewater solution, while establishing a plan to maintain reasonable rates for the customers."

Pennsylvania American Water has also acquired municipal wastewater systems in York, Cumberland and Allegheny counties over the past year. Currently based in the Hershey area, it announced last month that it intends to build a new headquarters in Cumberland County.

Its parent company, American Water, services about 2.3 million people and is the largest publicly traded water wastewater and utility company in the country.

This story has been updated to include information about the lawsuit filed last month against the Scranton Sewer Authority.

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Jennifer Wentz

Jennifer Wentz

Jennifer Wentz covers Cumberland County, York County, financial services and taxation. Have a tip or question for her? Email her at jenniferw@cpbj.com. Follow her on Twitter, @jenni_wentz.

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