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Regulatory Activites – Water/Sewer – Current Issues

Water Companies

Consolidation of Ownership of Small Water Companies 

During the past decade there has been a lot ofconsolidation of ownership of small water companies by large national corporations in Maryland and other states. The newly acquired companies usually operate under the same rate s and tariffs, at least in the beginning, but have more f centralized back-office operations.  The additional size and financial structure of the parent corporation can be Larger companies operating small systems can be better situated to handle operational needs of the water facilities and the regulatory requirements of the PSC. However, the remoteness of the upper management can lead to failure to identify problems arising from the local water systems’ infrastructure deterioration in a timely fashion.   Allegheny County customers of Maryland Water Services experienced this first hand, with increased water losses on the system and the failure to follow through on regulatory filings with the PSC. See Significant Cases 9212. 

In addition to small private water companies, small towns that have water systems may be targeted for acquisition by national water companies. Towns have made infrastructure investments that their citizens have been paying for, and the town has been depreciating these investments over time.   There needs to be adequate recognition of the vintage of the system being purchased, so that the customers of the new company are not asked to make more payments than have been warranted by infrastructure investment when the new ownership takes over. This can include debt service for the acquisition costs to the company. 

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Aging Infrastructure Water Loss Due to Leaks 

Small water companies also present infrastructure repair and replacement problems. Typically these companies have older systems that have been in place for decades and are approaching the end of their useful lives. Absent a comprehensive program of systematic replacements and upgrades, companies will tend to avoid investment in mains except to repair or replace main breaks. At a minimum, this can lead to increased leakage and water loss, which customers pay for. The leakage rates may eventually exceed acceptable industry standards of water loss, and otherwise accountable water loss. The adoption of leakage detection techniques may be the best way to avoid the unnecessary expense of high percentages of water loss due to leaks.

There also can be a problem with the type of pipe installed. Some small water system owners used a cement/asbestos material, known as transite pipe, decades ago instead o f metal pipe since it was cheaper to manufacture.  The pipe can become brittle over time and fissure and fracture, leading to leaks. In some areas where the ground is clay and dirt, water will work to the surface enabling visual detection from the pooling. But in areas with geological formations such as sedimentary rock and shale, the water leaking will sink away into the earth and not be visible at the surface. Acoustic detection methods work well with metal pipes to detect leaks, but it does not work well with pipes made of other material.

Pipe replacement can be costly, particularly when the traditional method is to open a trench remove the old pipe and install new pipe and backfill the trench. A newer method and material that has been used is High Density PolyEthylene pipe (HDPE). The insertion method is easier, because the piping is flexible, and so lateral boring can accomplish installation without the digging of trenches.   

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