FERGUSON TOWNSHIP — The state has tasked Pennsylvania’s largest for-profit water utility with improving service for customers of a struggling rural system while also negotiating a sale to a nearby municipal authority.
The Pennsylvania Public Utility Commission unanimously backed an emergency request from the state’s consumer advocate to appoint an interim operator — also called a receiver — of the privately owned Rock Spring Water Company. It hopes Pennsylvania American Water Company can provide some relief to customers who’ve endured more than a decade of service issues.
An order issued Friday makes the temporary management change official.
The PUC also directed Pennsylvania American to help Rock Spring navigate the regulatory process and negotiate a sale to the State College Borough Water Authority as a permanent solution. The utility commission also tightened deadlines to support a speedy transition, giving parties 90 days to reach an agreement. If they can’t, a formal process to determine whether to force a sale is pending.
“Customers of Rock Spring have experienced unreasonable service for far too long,” PUC Chair Stephen DeFrank said during the March 13 meeting. “We believe that this is a pathway forward and established a timeline forward. I will say to all parties involved: Please negotiate in earnest.”
A June Spotlight PA investigation found that Rock Spring, regulators, and elected officials have failed the 1,000 customers relying on the system in Ferguson Township. Efforts to find new ownership went nowhere. Meanwhile, years of neglect have led to deteriorating infrastructure, low water pressure, regular outages, and sometimes lengthy boil water advisories.
Founded in 1947 to primarily serve farms later subdivided for neighborhoods, Rock Spring has racked up dozens of regulatory violations, including for failing to protect the system’s water source, shutting off service without proper notice, and letting a leak go unfixed for months. It has also failed to pay tens of thousands of dollars in civil penalties as part of a yearslong legal battle with the Department of Environmental Protection over water loss.
Issues with Rock Spring went to the Bureau of Investigation and Enforcement, a division within the PUC, in late May. The unit then launched a review of the company.
Rock Spring owner J. Roy Campbell told a judge in October that he’d rather sell his family’s 78-year-old business and avoid a lengthy process by state regulators to force a sale. In December, he signed a letter of intent to sell to the State College authority for $65,000.
A sale, however, never materialized.
Lawyers for Rock Spring — who resigned as counsel earlier this month, citing “irreconcilable differences” — accused the family of refusing to cooperate in efforts to sell. After the attorneys’ unsuccessful attempt at a municipal takeover in a Centre County court, Pennsylvania’s Office of Consumer Advocate stepped in and urged a judge to grant emergency relief to prevent “irreparable” injury to Rock Spring’s customers by letting another entity manage the business.
Administrative Law Judge John Coogan and the five-member PUC agreed, ordering Campbell to hand over operations or risk prosecution.
The company plans to be in the service area daily to make assessments and find opportunities for improvement, said Thomas Chiomento, Pennsylvania American’s vice president of business development and government and external affairs.
Rock Spring hemorrhaged an annual average of 63% in water from 2010 to 2023, according to a Spotlight PA review of reports filed with the PUC. Industry standards consider levels greater than 20% to be excessive. A 2022 engineering report estimated the system needs $13.5 million in upgrades, including installing a new water main and replacing asbestos cement pipes.
Per the most recent directive, Pennsylvania American must make a list of recommended improvements to the water system. The company can borrow money in Rock Spring’s name and should create an account for any costs incurred. If Rock Spring can’t pay for something necessary for water service, Pennsylvania American can directly cover the funding or file for bankruptcy on behalf of the small utility.
State College Borough Water Authority Executive Director Brian Heiser told Spotlight PA that the municipal entity plans to present a sales agreement soon.
The water authority, which has discussed acquiring Rock Spring for years, plans to apply for a grant to help offset the cost of repairs. Ferguson Township previously committed to helping the municipal entity seek outside dollars.
In an email to Spotlight PA, a Rock Spring representative who didn’t provide their name or title said the company “has been negotiating a sale” with the water authority. They also said Spotlight PA’s previous reporting on the company had inaccuracies but wouldn’t provide specifics.
DeFrank said the PUC action will ensure customers “receive safe and reliable service in the interim.” Whether resolved through these negotiations or a forced acquisition, he hopes Rock Spring will be under new management by the end of the year.
“It’s the customer who’s been impacted here by our mistakes, by Rock Spring’s mistakes,” DeFrank told Spotlight PA. “And you know, that’s really who I have first in mind here. Give these poor people a pathway to finality, to a resolution here, and that’s what I think we have.”
Previously, the PUC erroneously told customers it doesn’t regulate the company. The mistake happened twice, DeFrank said. One staff member thought Rock Spring was a municipal authority. Another turned away a customer who misnamed the company, calling it “Rock Springs” in a complaint.
“I can’t turn back the clock and undo those things,” he said. “Again, we just have to work better, and that’s what we’re focused on.”
