PEL provides first set of answers to submitted MABS sale questions
KAYLEE LINDENMUTH / SHENANDOAH SENTINEL - The entrance to the Municipal Authority of the Borough of Shenandoah property in Raven Run on Oct. 1, 2020.
SHENANDOAH – Last week, the Pennsylvania Economy League began seeking questions regarding the potential sale of the Municipal Authority of the Borough of Shenandoah, which they would answer via the Sentinel, and, today, they’ve provided the first set of answers.
Questions can still be submitted via an email address has set up, [email protected], and it is expected that answers will be provided weekly.
The question-and-answer initiative is part of the ongoing effort to engage and inform the public about the potential sale of MABS to Aqua Pennsylvania, a private water company based in the Philadelphia area.
As part of the public engagement effort, two public hearings will held on Oct. 19 and Oct 26 at 7:00pm at the Shenandoah Area Senior Citizens Center on North Market Street. As a result of the coronavirus pandemic, in-person attendance will be limited, though the hearings will be broadcast via Zoom.
The following are the answers to submitted questions, published as they were submitted to the Sentinel.
1. What improvements does Aqua intend to make?
Aqua has estimated that it will need to invest approximately $23 million over the next 10 years to the Shenandoah water treatment plant and distribution system. The bulk of the repairs are expected to be to the distribution system. The repairs to water mains and upgrades to pumps would ensure system reliability and water quality.
This work will help reduce non-revenue water which has been reported at as much as 60%, meaning that 60% of the water that is produced at the water treatment plant never reaches the customer. Customers today are paying for this lost water in their overall rate. Aqua’s estimated capital work also includes tank painting, replacement and upgrade to customer water meters and leak detection work that helps identify areas of highest leakage. The remainder of the estimated capital is for water treatment plant upgrades including replacement of pumps, replacement of SCADA (supervisory control and data acquisition system) –to the extent not yet completed, safety improvements as well as dam repairs which have been defined as hi-hazard.
We expect Aqua may adjust their capital investment plan to reflect system changes they make as a result of their ownership and as a result of finding additional items that are overdue for repair, replacement or upgrade.
2. How much are my rates going to go up?
Current user rates would be frozen until Aqua’s next rate case with the PA Public Utilities Commission (PAPUC), which includes the Shenandoah water system. It is currently expected that Aqua’s next rate case involving the Shenandoah system would be filed in 2024 and likely become effective in or around 2025.
A typical residential customer using an average of 3,000 gallons of water monthly currently pays MABS just below $50 per month while current rates for Aqua are just under $52 per month. The difference in rates increases at higher usage levels.
Note that beginning in 2023, under the negotiated purchase agreement with Aqua, Aqua will be permitted to assess what is known as a Distribution System Improvement Charge of up to 7.5%; however, review and approval by the PA Public Utility Commission is required before any such surcharge may occur, and these charges are typically phased in. Net proceeds of a sale to Aqua could be used, among other purposes, to subsidize rates for customers or taxes for taxpayers.
If MABS were to undertake the same capital improvements to the water system, the projected resulting rate increase necessary to service the debt incurred by MABS would be an approximately 90 percent rate increase over MABS current rates. This rate increase is much higher than the projected Aqua rates in the future primarily because Aqua can spread the cost of capital investment across 450,000 customers; MABS can only spread the cost over a few thousand customers.
3. What is the borough going to do with funds from the sale?
The Shenandoah Borough Council has not determined how it would use sale proceeds and is inviting public input. Borough Council is soliciting public input on the use of funds for road paving and other capital improvements, government services, water rate or tax subsidies, and other priority needs. Two public hearings are being held on the proposed sale on Oct. 19 and Oct. 26 at 7 p.m. at the Shenandoah Community Center, 225 North Market Street. The Oct. 26 public hearing is specifically intended for input on the potential use of funds.
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