Why McKeesport makes sense for American Water
American Water’s $156 million acquisition of the sewer system in McKeesport, Pennsylvania marks the second time the company has come in with a successful big-ticket bid for a wastewater utility in the state in the last twelve months.
The deal comes after American offered $195 million to buy the assets of the Scranton Sewer Authority last December, and stands to take advantage of new legislation which came into effect in June of this year (Act 12 of 2016).
In the past, the Pennsylvania Public Utility Commission had been reluctant to allow investor-owned water utilities to recover through rates any premium paid to the book value of acquired assets.
Under Act 12, however, if a municipality and an investor-owned utility agree on a fair value as part of a voluntary arm’s length transaction, the buyer will be allowed to earn a return on the entire rate base of the acquired system.