Commonwealth Court rules in favor of Delaware County, and against Aqua and DELCORA, in $276.5M sale dispute

Aqua Pennsylvania, an often-irresistible force in acquiring public suburban water utilities across the state, has met an immovable object — the state’s Commonwealth Court — in its quest to purchase the Delaware County Regional Water Quality Control Authority, or DELCORA.

In reversing a December 2020 Common Pleas Court ruling, the three-judge Commonwealth Court panel ruled largely in favor of the Delaware County government, saying that the county has “statutory authority” over DELCORA, and that therefore its 2020 attempt to terminate DELCORA via ordinance was indeed legitimate.

In the opinion attached to the decision, dated March 3, Judge Patricia McCullough wrote that Delaware County has the “authority to enact the Ordinance, and the Ordinance complies with the requisites necessary for the County to demand the termination of DELCORA and the conveyance of DELCORA’s assets and obligations to the County.”

But while they ruled against DELCORA in its unilateral attempt to sell itself to Aqua for $276.5 million, the judges also said that Delaware County would be bound by the terms and conditions of the asset purchase agreement (APA) with Aqua, meaning the intended effect of the ordinance will not come to pass.

“This is because the County, irrespective of whether it can live up to the contractual promises made in the APA, will have no choice but to abide by and fully perform its obligations or else be potentially subjected to a breach of contract suit by Aqua,” McCullough wrote.

The case now returns to the lower court for an order consistent with the written opinion of the Commonwealth Court judges.

However, the real fight will continue before the Pennsylvania Public Utility Commission, which will have the final say on the pending deal. If completed, it would result in the largest privatization of a public water system in the state.

That spells good news for the county. A panel of administrative law judges has already recommended to the PUC that it toss out the deal, citing Aqua’s inability to show how the public benefits, the legality of the agreement, and the omission of a rate-stabilization plan. There have already been public hearings on the matter. The panel’s recommendation, while not a be-all and end-all, carries a lot of weight.

In a statement to WHYY News, Delaware County Solicitor Bill Martin said he was pleased to see the Commonwealth Court allow the “dissolution” of DELCORA via the 2020 ordinance.

Martin indicated that the county will await a decision from Delaware County Court Judge Barry Dozor for further clarification, as well as work with DELCORA’s board to figure out the next steps.

DELCORA serves roughly 165,000 people in 42 municipalities in Delaware County and parts of Chester County. The authority has been under Republican control since its inception in 1973. When the deal with Aqua was announced in 2019, county Democrats criticized it as politically motivated, corrupt, and a relic of the GOP machine still active within a county turning blue.

Martin echoed some of that sentiment in his statement to WHYY. “At the same time, the County will continue its participation in the pending PUC hearings, regarding the proposed sale of DELCORA’s assets to Aqua. We will continue to argue that the proposed deal was a no-bid, sweetheart arrangement, which only benefits Aqua and DELCORA’s management, and not its ratepayers, nor County residents as a whole,” Martin wrote.

He categorized the last two years of “groundless” litigation with DELCORA and Aqua as a tragedy for ratepayers.

Jay Devine, a spokesperson for DELCORA, passed along this message from the authority’s board: “We are reviewing the Court’s decision and its impact on the potential resolution of the issues between the parties.”

In a statement to WHYY News, Christopher Franklin, chairman, and CEO of Essential Utilities, Aqua’s parent company, underscored the Commonwealth Court opinion that Delaware County is still “bound” by the purchase agreement.

His interpretation appeared to make Aqua’s acquisition of DELCORA a foregone conclusion, even though the PUC has yet to weigh in.

“With the court’s finding that our asset purchase agreement to acquire DELCORA remains in place and enforceable, we look forward to implementing the agreement with the county. Aqua is eager to welcome DELCORA employees to the Aqua team and stands ready to provide outstanding service to DELCORA customers for years to come,” Franklin said.

Ironically, the Commonwealth Court judges used a previous ruling involving Aqua and the Chester Water Authority as the grounds for their reversal in the DELCORA case.

McCullough cited the court’s September 2021 decision, in which judges ruled that the city of Chester is the sole owner of the water authority, thus clearing the way for the city to enter into a $410 million deal with Aqua — much to the dismay of many ratepayers in Delaware and Chester counties.

All eyes are still on Chester’s state-appointed receiver to see whether he will sign off on that deal.

Aqua currently provides water and wastewater services to more than 1.4 million people across Pennsylvania.