PA American Water acquires Audubon Water Co. for $8 million

LOWER PROVIDENCE — Pennsylvania American Water Co. has purchased yet another local water system.

American Water Co., the largest regulated water and wastewater utility company in the United States and of which Pennsylvania American Water is a part, announced the $8 million transaction on Sept. 22.

Audubon Water Co. is a private, investor-owned system serving approximately 2,900 customers in Lower Providence Township, Montgomery County, and is located directly between Pennsylvania American Water’s existing Royersford and Norristown water systems, according to the press release.

The transaction is structured so that an affiliate of Pennsylvania American Water will merge with Audubon, with shareholders of Audubon Water receiving shares of AWK common stock in exchange for all of the issued and outstanding shares of Audubon, and subsequently, Audubon will merge into Pennsylvania American Water.

However the agreement is not completed because it must still be approved by the Pennsylvania Public Utility Commission, and that is unlikely to occur before 2024.

Pennsylvania American Water will adopt Audubon’s current rates at closing. According to Audubon’s website, the rate for residents set in April 2022, the latest posted, was $8.6197 per 1,000 gallons of water — a 7.3% increase from April 2021. No 2023 rate was listed.

Kara Rahn, Pennsylvania American’s senior manager for government and external affairs in eastern Pennsylvania, noted “there is no rate freeze.  As stated, Pennsylvania American Water will adopt the sellers’ rates and will hold those rates until the Public Utility Commission reviews and approves otherwise.”

As for when Pennsylvania American might seek another rate hike from the PUC, Rhan wrote, “I do not have a timeline for when rates may change. Pennsylvania American Water continuously evaluates the investments we make in our water and wastewater systems to replace aging infrastructure, comply with water quality and environmental regulations and meet customers’ water and wastewater service needs.”

“After extensively reviewing our investment needs, we file rate cases periodically to seek recovery of these investments so we can continue providing safe and reliable service. As a publicly traded company, due to SEC regulations, we are not permitted to state or speculate on the timing of any future rate filings,” Rahn wrote in response to a MediaNews Group query.

According to its website, Audubon Water Co. gets its water from wells in Audubon and the Valley Forge Corporate Center. It is already interconnected with Pennsylvania American should well levels run low, which occurred this year.

On May 24, the company implemented “mandatory water conservation measures for all customers served by the Audubon water system.” The measures were implemented, according to the announcement on the website, because “the system is experiencing a short-term supply shortage (total available water supply is not enough to meet maximum system demand) due to the well levels and the increased water use by Audubon’s customers.”

The company overview also noted that “construction of new facilities is planned and implemented based on the overall recommendation of the company’s consulting engineers.” However, presuming the PUC approves the sale to Pennsylvania American Water, that decision will soon be made in Mechanicsburg, where Pennsylvania American is based.

“Pennsylvania American Water will, over time, interconnect Audubon’s system with Pennsylvania American Water’s Royersford and Norristown systems, eliminating the system’s reliance upon groundwater supply and the need for PFAS-related treatment upgrades,” the company press release stated. “This improvement will provide a cleaner and more reliable water source for Audubon’s customers as well as sufficient supply to support additional area growth. Within the first five years of ownership, the company plans to invest more than $20 million into the system to upgrade aging water infrastructure.”

“Through this transaction, our growing customer base will benefit from the financial investment needed to deliver necessary infrastructure improvements to secure long-term access to safe drinking water,” Martha Russell, president of Audubon, said in the press release issued by Pennsylvania American.

There is currently no announcement or information about the acquisition on Audubon’s website.

“We look forward to becoming the water service provider for these customers in Lower Providence Township, and we appreciate that the leadership at Audubon Water Co. is entrusting us with this privilege,” Pennsylvania American Water President Justin Ladner said in the press release. “The interconnections, system upgrades and source of supply improvements we will accomplish through this acquisition will greatly benefit area customers, while further promoting regionalization and consolidation of our Montgomery County systems.”

Pennsylvania American’s acquisition of this water company is the latest chapter in an ongoing trend of smaller private and public water and sewer companies being snapped up by the utilities giant and its chief competitor, Aqua PA, a subset of the Essential Utilities Co., ever since Pennsylvania adopted Act 12 in 2017.

Act 12 allows municipalities that own water and wastewater systems to sell their systems to regulated public utilities at a fair market valuation, leading to a virtual run on deals to sell those locally owned companies.

In 2018, Exeter Township, Berks County, supervisors voted to sell the sewer system there to Pennsylvania American for $96 million. That same year, Limerick Township completed the sale of its sewer system to Aqua PA for $75 million.

In May 2021, the sale of Royersford Borough’s sewer system to Pennsylvania American for $13 million was finalized. That system serves nearly 1,600 customers in Royersford and a portion of Upper Providence Township,

In 2022, the sale of Upper Pottsgrove Township’s sewer system was completed at a price of $13.75 million

This August, East Coventry Township agreed to sell its sewer system to Pennsylvania American for $7 million.

One month earlier, for the first time in recent memory, a three-judge Commonwealth Court panel found the Public Utility Commission erred in allowing Bryn Mawr-based Aqua Pennsylvania to buy East Whiteland’s sewer system without showing how the sale would benefit the public.