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 infrastructureand 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 andregularly 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. 

Thanks for tuning in, water and sewer connoisseurs! We’ll see you next month! 

 

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