This story was updated with new details on 7/19 and 7/20.
If you follow the drama surrounding Pittsburgh’s water issues, you heard the announcement made by Peoples Natural Gas to tackle the city’s water woes by partnering with the Pittsburgh Water and Sewer Authority (PWSA) and local government.
The privately-owned, North Shore-based natural gas utility made a lot of promises. Peoples CEO Morgan O’Brien touted the company’s willingness to replace the city’s lead lines over the next five years. They would build a $350 million water treatment plant in O’Hara Township powered by solar and hydroelectricity.
They would also update PWSA’s billing, work management and mapping systems. They would work with community groups to create jobs for vulnerable populations in the region, including making sure that one out of three hires goes to African American candidates. All of this while PWSA and the City of Pittsburgh continue to oversee the utility’s operations as part of a public/private partnership.
Peoples had made an earlier pitch to fix PWSA back in February — a move that caused some controversy because of the involvement of Kevin Acklin, the mayor’s former chief of staff who, not long before, joined Peoples as the company’s vice president and chief legal officer.
The ambitious plan unveiled this month — if it can be accomplished — looks ideal considering the recent problems facing PWSA, which has accumulated nearly $1 billion in debt and continues to struggle with a number of issues, chief among them Pittsburgh’s lead water crisis.
But at a City Council meeting on July 18, more than 30 spoke out opposing the plan and none supported it, including City Councilman President Bruce Kraus, reported the Pittsburgh Business Times. Detractors referenced fracking issues by private companies and the problems caused by the PWSA-Veolia partnership.
As PWSA looks at increasing rates to tackle its various challenges, O’Brien says his solution helps take the financial burden of lead pipe replacement off local water consumers. Peoples has already made a commitment to the Public Utility Commission to accelerate the replacement of their underground gas pipes over the next 20 years, the first five of which are focused around the City of Pittsburgh.
During that process, Peoples could replace both gas and water pipes at the same time, rather than having each of them do it separately: “The end result of that is the cost to both the gas line replacement and the water line replacement is cut in half, because you’re only digging up the street once, and you’re restoring it only once,” O’Brien says. “That’s a key part of the partnership.”
He also says his plan would prevent PWSA and the City from having to let a private company come in and run it.
“This is sort of a middle ground between stand-alone versus privatization,” says O’Brien. “We’re proposing a partnership, which means that we’re going to take all of the things that the public own today and they will continue to own them.”
He adds that PWSA employees “who are working hard at trying to fix this old system,” would become part of the partnership as well, and instead of fixing the old water processing plants, they would join the team operating the new state-of-the-art clean water plant.
When asked why Peoples would foot the bill for such an ambitious undertaking, he responded:
“My job at the end of the day is to create value for the people who invest in us,” he says. “I was born and raised here. I’ve lived here my whole life. I’ve seen bad times and the exciting thing going on today. For me, the best sustaining value I can provide to my investors is the most vibrant, robust region that we exist in.”
But while Peoples seems ready to move forward with the deal, local representatives are approaching the situation with either trepidation or skepticism. The proposal was also criticized by local representative Deb Gross and recently elected state House Democratic nominee, Sara Innamorato. And a spokesperson re-emphasized Mayor Bill Peduto’s commitment to keeping the water system public.
In their coverage of the controversy, WESA described Peduto as “set on PWSA remaining a public asset. And yet, they said, he feels “the city is obligated to do what’s best for the ratepayer, and that competition could bring out some creative solutions.”
“At the end of the day, I don’t know, and I don’t think there’s anybody out there who can say with pure certainty, this is the best idea,” WESA quoted Peduto. “Not until you’ve had the opportunity to look at all ideas.”
We got a similar response from the Mayor’s office about the need for more information and analysis:
“What the mayor and PWSA have consistently made clear is that any sort of partnership like this would have to undergo a public process and certainly with a lot more detail provided than what has been shared with us to date,” says PWSA Communications Manager, Will Pickering.
He adds that they’re viewing this as an “unsolicited proposal.”
There have been other offers to help PWSA. The Pennsylvania-American Water Company, which provides drinking water within Pittsburgh to customers in South Hills neighborhoods like Brookline, Carrick and Overbrook, would consider stepping in if City officials decided to sell the PWSA system.
“Our hope is that as City leaders determine how to proceed, they implement an open and transparent process that’s inclusive of all the options and consider what is most cost-efficient for the customers,” says Gary Lobaugh, an external affairs manager with the Pennsylvania-American Water Company. “We believe a regional approach to water and wastewater infrastructure makes the most sense because it strengthens system resiliency, streamlines some costs and unifies operating standards.”
Pickering stresses that PWSA has committed to following through with its own initiatives that would make up for decades of neglect in the city’s water system. He cites PWSA’s $44 million investment in its lead line replacement program and its plans to improve water treatment by adding orthophosphate, a chemical that would reduce corrosion from lead pipes.
PWSA recently submitted a major rate request proposal to the Public Utility Commission, and in September, will turn in a compliance plan for outlining the investments they plan to make to renew the city’s aging infrastructure.
They’re also focused on stormwater management projects — such as the ongoing City-Wide Green First Plan — that would prevent major rainfall from causing combined sewer overflow into local rivers and flooding.
As for PWSA’s nearly $1 billion in debt?
“While we do have sizable debt, Wall Street and rating agencies have expressed that they do not have concerns about our ability to pay down that debt and they’re willing to issue new debt for us to complete those projects,” says Pickering. “It is a scary figure but the financial experts have not been turned off from lending to us at a very competitive rate.”