At Aqua, municipal fair market value legislation helps us help you

 

You may think that here at Aqua, our day-to-day operations revolve almost entirely around the intersection of science and engineering. We’re a water company, after all! 

What may surprise you, though, is that even though those fields are paramount to our mission to provide and protect Earth’s most essential resource, plenty of our work is intertwined with the worlds of finance and public policy.

Think about it: When Aqua acquires a water system from a municipality, we go through extensive legal processes in order to ensure the handoff goes smoothly. And one of the many factors that can improve those processes for all involved parties is the presence of municipal fair market value (MFMV) legislation. 

We spoke to Aqua Ohio President Ed Kolodziej to learn more about MFMV legislation and how it benefits both communities and customers. 

Ed Kolodziej (second from left) and colleagues at the opening of a new facility in Ohio

What’s the benefit to my town? 

In January 2019, Ohio Governor John Kasich signed legislation allowing companies like Aqua to pay fair market value for the purchase of water and wastewater systems. Before these changes, system values were determined by their depreciated original cost, which generally did not reflect a reasonable market value for those assets.

Think of it this way: If the value of a home was established under the old Ohio formula, you would only consider the original purchase price of the home and the cost of improvements you did, minus their depreciation over time. Under the new fair market value system, the value of a home also considers things like the recent selling prices of similar homes nearby, curb appeal, replacement cost, and desirablility of the neighborhood. All of these items can have a significant impact on the true value of the home.

When we apply this logic to the sale of water systems, it’s clear why local municipalities benefit from fair market value legislation. When Aqua purchases the system, themunicipality receives a reasonable market value in return, which can then go toward numerous other local projects, from schools to parks to fire departments. 

“By partnering with a regulated utility through a purchase agreement, an Ohio community can shed the burdens of utility operation and maintenance, immediately improve their financial position, and potentially create a new source of revenue for their general fund,” Kolodziej explained. “The regulated utility brings operational efficiencies and economies of scale along with sorely needed investment dollars to the table and therefore earns a return on their investments.”

What’s the benefit to customers like me? 

If you’ve been following our Aquastructure series since its inception, you know one thing for sure: better water infrastructure leads to better water quality. 

“Around our state, water and wastewater infrastructure is in disrepair, reliability is suffering, compliance with health and environmental regulations is at risk and government-owned utilities across the state are behind the eight ball,” said Kolodziej. 

“The American Society of Civil Engineers (ASCE) says Ohio communities need to spend $26.78 billion on water and wastewater systems in the next 20 years. There are no easy answers, and most have no idea where the resources will come from.”

Kolodziej is right: The answers aren’t always easy. But that’s where Aqua can help. By working with municipal officials to acquire the municipal water and wastewater systems, we’re able to ease the burden of these necessary improvements for communities like yours. 

The acquisition process allows us to carefully assess the state of aging water and wastewater systems and then implement crucial upgrades, many of which are long overdue. Replacing water mains, service lines, main line valves, and fire hydrants are often among the first order of business. 

Because water infrastructure, water quality, and public health are inherently linked, these upgrades lead to delivering better drinking water, therefore leading to healthier communities as a whole. That’s something everyone can get behind. 

Anything else? 

Ohio is our sixth Aqua state to enact this type of fair market value legislation, joining states like Illinois and Pennsylvania in giving municipalities even more reason to ease the burden of water and wastewater operations. 

“I encourage elected leaders across the state, especially those with budget or environmental compliance challenges, to explore the new opportunities created by the new Municipal Fair Market Value rules,” Kolodziej added. “More and more communities are benefiting by unleashing the power of regulated utility investment.” 

 

To learn even more about how Aqua can help improve local finances in a community like yours, visit WaterByAqua.com.

 

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Bringing a fresh filtration system to North Carolina

At Aqua, we’re always proud of our projects that help to improve water quality for our customers, but this week, we have a special reason to highlight these positive changes: It’s Infrastructure Week!

As we all know by now, water infrastructure greatly impacts both the quality of your water and the quality of your life. By investing in new infrastructure in our service areas, we’re making strides to change our communities for the better. That’s why our team has been hard at work implementing a new filtration system in Upchurch Place, a community in Raleigh, North Carolina.

What’s the deal with filtration?

Filtration systems, when necessary, are a crucial part of water infrastructure—after all, they help to remove unwanted naturally occurring minerals. Aqua has provided water to Upchurch Place since 2002, and we’ve built quite a relationship with our North Carolina community.

We spoke to Aqua North Carolina’s Michael Melton, engineering manager, and Amanda Berger, environmental compliance director, to learn more about the recently completed project. Melton noted that the goal of the new filtration system is the removal of iron and manganese. While both elements are naturally present in tap water, keeping their levels below the secondary standard is important.

Changes in Upchurch Place

After hearing reports of discolored water from customers in the Upchurch area, we identified the problem and got to work on implementing a solution.

“Since installing the new filters, the treated water has iron and manganese levels well below the secondary drinking water standard,” Melton said. “In addition, we’re proud to announce that Aqua is the first privately owned water provider in North Carolina to utilize a non-discharge backwash system.” (Aqua developed the first recycle water system in 2010.)

What’s a non-discharge backwash system? Long story short: It allows us to eliminate water loss in the filtration process, therefore upholding our mission to provide and protect Earth’s most essential resource. The best part is that our customers will only see a .70 cent increase in their annual water bill for this major improvement—and it’s well worth it.

Aqua’s commitment to excellence

Providing our Upchurch customers with a new and improved filtration system was no small feat.

“On average, a filter project like the one in Upchurch can take up to nine months to engineer and construct,” Melton said. “At Aqua, we also make it a priority to work with local financial and environmental regulators to improve every aspect of our service and reliability.”

“This project is a good example of how Aqua is working with its stakeholders to achieve the goal of improving our customer’s water quality,” Berger added.

Although these projects take a good amount of time, money, and resources, they’re necessary in order to improve the state of our country's infrastructure. As water providers, it’s our goal to supply our customers with safe and reliable water—and it doesn’t hurt that we’re helping to restore our nation’s infrastructure in the process.

Stay tuned for our next Aquastructure blog to see what we’re up to next, and in the meantime, we’re wishing our customers and professional peers a very happy (and productive) Infrastructure Week!

 

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How does water infrastructure affect public health?

There’s no question that water is Earth’s most essential resource—as a society, we use it for tasks both mundane and extraordinary every day.

At Aqua, we understand and value the importance of monitoring and repairing the systems responsible for bringing us that water. When infrastructure is outdated or damaged, it can cause problems that extend far beyond individual home plumbing systems.

We caught up with Vice President and Chief Environmental Officer Chris Crockett to better understand why Aqua’s determination to rebuild and repair our nation’s water infrastructure isn’t just important—it’s essential in order to maintain public health.

How your water travels to you matters—a lot.

It might seem like water simply rushes out of the tap, but its journey from the well or water treatment plant to your area is longer than you’d think. It’s possible that water has traveled many miles to reach your home, or maybe it was waiting to be released from a storage tank. This time spent traveling or sitting is called water age, and it can cause some less-than-ideal changes to the water.

“The longer the water sits in the pipes or tanks, the more things can happen to change its quality,” Crockett explains. “For example, the chlorine in the water will slowly degrade, and if it’s there too long, the chlorine can actually disappear.”

Though chlorine makes many people think of pool water (yuck), you’ll remember from our water purification blog that the proper amount needs to be present to keep your water safe for drinking. If pipes are outdated or rusty, the quality and safeness of the water can suffer. Without the presence of chlorine, bacteria and viruses can breed in the water supply, and that’s where things can go wrong.

Out with the old—especially pipes.

Pipes make up most of our water infrastructure systems, which makes their physical integrity of the utmost importance.

“Old, corroding pipes can grow a biofilm of bacteria that lives in the rust and can reduce the chlorine levels in the water as it sits in the pipe,” says Crockett. Not only do these biofilms eat away at pipes, but they also can give the water a slight unpleasant odor or taste.

Pipe problems don’t stop there. Crockett adds that “leaking pipes not only let water leak out, but under very specific conditions of low pressure could let water outside the pipe leak in, introducing contamination and dirt.”

According to a report from the American Water Works Association (AWWA), most of America’s drinking water distribution system is more than 50 years old. Although this infrastructure was built to last, Aqua is determined to stay ahead of deterioration to protect our customers’ water supplies.

Where does public health come in?

Water traveling through compromised (or just plain out-of-date) infrastructure can be contaminated through intrusion, corrosion, biofilms, sediment, water age, or any combination of these factors.

According to the AWWA report, a 2006 national estimate attributed nearly 50 percent of the risk of contracting a waterborne illness to distribution systems. As the AWWA puts it, there are three main concerns when it comes to understanding and tracking how water infrastructure can impact public health:

Chart via AWWA (Figure 3)

Using these three pillars, it’s easy to understand that poor infrastructure conditions can make water susceptible to more contaminants, which can affect public health through consumption and use of compromised water.

Although that’s a mouthful (and can sound concerning), allow us to give you peace of mind: Aqua is one step ahead of the game.

How, exactly?

Upgrading water infrastructure is no small task, but we know the benefits are worth it. By now, you understand the impact that outdated systems can have on your everyday life, but rest assured that Aqua takes plenty of action to keep your water safe and reliable.

According to Crockett, in addition to using sophisticated computer programs to monitor the state of the system, replacing old pipes, and flushing newer pipes with chemicals to keep them from corroding, Aqua also has plenty of boots on the ground.

“We conduct extensive flushing exercises,” he explains. “We go out in areas that may need help moving the water, and we flush it via hydrants to get out the rust and bring in fresh water.”

If you keep an eye out, you might even see members of our team in your area flushing hydrants. It’s one simple step that we can take to continue our mission to protect and provide Earth’s most essential resource.

Stay tuned for another year of exploration and education throughout our Aquastructure blog series. See you next month!

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Aqua America’s role in our nation’s infrastructure renewal

When it comes to water and wastewater infrastructure, the reality is that the United States has more than one million miles of underground pipe, much of which is nearly a century old and in dire need of replacement.

According to the American Water Works Association, it will cost an estimated $1 trillion to maintain and expand drinking water service to meet demands over the next 20 years. There is no question that upgrading water and wastewater infrastructure is a major challenge facing our country, and Aqua is proud to be leading the charge when it comes to offering a viable solution. In 2017 alone, Aqua invested $478 million in water and wastewater infrastructure.

Most importantly, our investment has had a direct impact on the communities we serve across our eight-state footprint, including:

  • University Park, Illinois, where we were able to significantly improve water quality with a 14-mile pipeline project
  • Lakes of Mission Grove, Texas, which lacked its own wastewater plant
  • Southeastern Pennsylvania, where main breaks were reduced by 70 percent following significant infrastructure investments

Expertise and persistence delivers for Illinois residents and businesses 

Residents and businesses of University Park, Illinois were served by a water source that contained high levels of iron, calcium and magnesium, creating taste and hardness issues. Many relied on water softeners and filters to reduce hardness. The well source was simply not good, leaving Aqua Illinois with a complicated problem.

Aqua Illinois conducted a feasibility study to explore a set of potential solutions including running a pipeline from a better water source to University Park. Extending the pipeline would be complex, both physically and financially, requiring Aqua Illinois to navigate jurisdiction issues, obtain easements and design around waterways and farm fields. The 14 miles of new pipeline runs from Aqua Illinois’ award-winning Kankakee plant to its customers in University Park.

Both residents and businesses benefit from this expansive project. University Park customers have seen a 90 percent reduction in iron and a 70 percent reduction in hardness. The pipeline project also increased water capacity, which is attracting new economic development to the area.

New Texas wastewater plant increases capacity five-fold

When Aqua Texas acquired the Lakes of Mission Grove system, the community’s population was so low that the volume of wastewater produced couldn’t sustain its own treatment plant. This required Aqua Texas to haul wastewater to a treatment plant each day.

When the community’s population started to rapidly grow, Aqua was able to plan for a new wastewater treatment plant that could serve current residents and new families to come. Aqua Texas began the bidding process for the engineering of what would become a $1.2 million plant to serve the residents. 

The project dramatically increased capacity to 135,000 gallons of wastewater per day and an ability to serve an additional 500 homes. The efficient new plant provides significant operational savings and increased environmental benefits.

Renewed infrastructure benefits customers and the environment

Aqua Pennsylvania owns and is responsible for 5,800 miles of pipe—varying in size, type and age—in 32 counties. Much of this water infrastructure is approaching the end of its useful life cycle, making it susceptible to main breaks, service interruptions, water discoloration and customer dissatisfaction.

In 2017 alone, Aqua Pennsylvania completed nearly 200 projects, replacing 135 miles of main with an investment of $141 million. Over the life of the main replacement program, Aqua Pennsylvania has replaced more than 1,700 miles of pipe with an investment of $1.4 billion.

When the program started, the pipes were on a 900-year replacement cycle. Today, that number has been significantly reduced to a 90-year replacement cycle. The benefits of the main replacement program have been most dramatic in its southeastern division, which is the largest with 4,600 miles of main that serve one million people. Main breaks there have been reduced by 70 percent to an all-time low of eight breaks per 100 miles of pipe, per year, and customer complaints have fallen by 59 percent.

Looking back on these achievements from 2017 excites us to reflect similarly on 2018 as we close out the year. Stay tuned to the Aqua blog in 2019 to explore our continued efforts to make infrastructure improvements across the nation.

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What does it take to acquire and upgrade a water system?

 

Let’s be frank: Operating and maintaining water systems is not an easy task, especially when they need tons of infrastructural improvements.  

Earlier in our Aquastructure blog series, we shed a bit of light on the state of our nation’s water infrastructure and pointed out that most of the pipelines we depend on each and every day were built at the start of the 20thcentury. In the present day, all of that infrastructure is near the end of its life, which means that upkeep and updates are a pressing need. 

Considering those challenges, how does a company like Aqua continue to provide efficient and affordable service? It all comes down to the water systems Aqua acquires, along with regular updates to existing infrastructure.

Craig Blanchette, president of Aqua Illinois, checked in to give us some insight into Aqua’s acquisition and upgrade processes. 


Blanchette (third from right in sunglasses) with fellow Aqua Illinois employees during a local volunteer project.

More water, less problems

Since 1995, Aqua has acquired more than 300 water systems, most of which are from municipalities (which own 85 percent of the nation’s water systems). However, sometimes those systems come from other sources, such as smaller regulated utilities, homeowners associations, water and sewer districts, and developer-owned systems. 

As the number of water systems in Aqua’s network grows, the efficiency and affordability of its services grow, too. The theory at play here is “economies of scale,” which is the economic principle that the more goods or services can be produced at a larger scale, the higher the savings in costs.

“By adding customers, Aqua is able to spread these fixed costs over a larger customer base, alleviating much of the burden from our new and existing customers,” Blanchette explains. 

What happens if Aqua wants to acquire a new system?

When Aqua is preparing to acquire a new system, typically Aqua and the other party—whether it’s a municipality or some other organization—begin by sitting down and talking shop (think inspections and negotiations). This can take anywhere from a couple of months to a couple of years. The goal is to create a partnership which benefits the community.

After that, an asset purchase agreement is created, which outlines all the details of the transaction, such as pricing and inclusion of assets. The APA must then be approved by the state public utility commission, which takes about six months to a year. During the PUC approval process, an administrative law judge takes on the case, and expert witnesses, like engineers, accountants and financial advisors, must evaluate and vouch for the legitimacy and benefits of the proposed acquisition. 

Once the agreement is reviewed, modified and approved by the administrative law judge it is then forwarded to the PUC for its final approval. Once this is complete, Aqua can sit down with the seller and officially take ownership.  

And then it’s smooth sailing?

With the right due diligence, yes! A lot of these existing water systems must be assessed to ensure everything is up to speed. In most cases, many of the system’s assets are underground and cannot be easily inspected.

“In these cases, we rely heavily on the maintenance records of the municipality in determining where future replacements are needed,” Blanchette notes. 

The most common upgrade is water main replacements, which are predominantly located underground and are often left out of a municipality’s investment plan. Blanchette adds that water service lines, main line valves and fire hydrants are also among the areas of a water system that may need more attention. 

“These assets are incredibly important because they are the backbone of any community,” Blanchette says. “Reliability of a water system is important in providing Earth’s most essential resource.” 

Whenever Aqua acquires a new system, they prepare a new capital investment plan to help determine where and when adjustments and updates are needed in each system’s infrastructure. Aqua then reevaluates that plan to determine future improvement needs. From that point forward, investment in the existing infrastructure is constant. 

It seems to be a team effort.

Very much so! Aqua works closely with the communities it serves and regularly meets with community members to coordinate all these infrastructure improvement projects. 

For example, if Aqua wants to do a water main or sewer replacement, they’ll first run it by the local road authority to plan resources accordingly. 

 

“If a road authority is planning to resurface a roadway where Aqua is also looking to replace a water or sewer main, it saves our customers the cost of restoring the roadway,” Blanchette explains.  

Now that is what we call synergy. 

What does this look like in your neighborhood?

Once an acquisition is complete and upgrades are underway, how does this affect the new communities Aqua serves?

View two town success stories in Manteno, IL, and Media, PA, to see how Aqua works with community leaders to ensure water quality and service to customers. 

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