FERGUSON TOWNSHIP — In recent legal filings, Rock Spring Water Company, its emergency receiver, and state utility regulators have proposed competing plans for the future of the long-troubled system in rural Centre County.
The filings lay out a number of paths for consideration: Give Rock Spring more time to raise rates and reorganize; allow Pennsylvania American Water — which is acting as temporary manager — to file for bankruptcy to enable a municipal sale; or direct the State College Borough Water Authority to acquire the system.
By Feb. 19, a Pennsylvania utilities judge will decide which, if any, of the proposals is most viable as part of a regulatory process that could result in a forced sale.
Rock Spring’s customers have dealt with shaky service for more than a decade as neglect led to crumbling infrastructure, low water pressure, regular outages, and sometimes lengthy boil water advisories.
Company owner J. Roy Campbell also racked up dozens of regulatory violations and tens of thousands of dollars in fines as part of a yearslong legal battle with the Department of Environmental Protection over excessive water loss.
In May 2024, the Public Utility Commission’s investigative arm launched a review of the company. To offer customers some relief, regulators in March ordered Pennsylvania American Water, one of the state’s largest investor-owned utilities, to temporarily manage operations as an emergency receiver.
Rock Spring hasn’t increased its rates since 2013. Meanwhile, estimates to bring the system into compliance range from $13.5 million to $16 million. Public input and testimony shared throughout this process, known as a Section 529 investigation, show a divide among customers, who wonder what new ownership could mean for their bills.
The deadline for legal briefs in the Section 529 proceeding passed last month. Administrative Law Judge John Coogan will now review the filings and make a recommendation to the PUC.
Rock Spring’s lawyer, Rodney Beard, argued in the company’s legal filing that regulators haven’t met the requirements to justify a sale, saying that regulatory violations alone aren’t enough. He added that the state must consider alternatives — such as raising rates, finding another utility to manage operations, or reorganizing under new management — before mandating a takeover.
Beard also cited positive experiences shared during public hearings and testimony by customers who don’t want Campbell to lose ownership of the company and said recent improvements under Pennsylvania American’s receivership prove that providing safe and reliable service is possible with the right resources.
Under Pennsylvania American’s receivership, Rock Spring “is doing fine,” Beard wrote. All the small company needs “is a more robust management and operations team,” he added.
Beard urged regulators to consider “less intrusive means” than forcing a sale. He proposed that the PUC continue the receivership for a little longer and order Rock Spring to increase its rates, also proposing a 120-day period for discussions about alternative options and how to pay Pennsylvania American for its work and Rock Spring’s counsel.
“The receivership can be wound down in an orderly fashion, and the operations turned over to a more robust management team,” he wrote. “This is not a situation where the operator has walked away from the utility. Rather, this is a situation where the operator needs additional revenue and assistance to keep up with regulatory requirements.”
The PUC’s Bureau of Investigation and Enforcement balked at Rock Spring’s proposal.
Deputy Chief Prosecutor Carrie Wright wrote in a legal filing that improvements happened only after Pennsylvania American took over management of Rock Spring. She warned that Rock Spring is unlikely to maintain compliance on its own.
Pennsylvania American also criticized Rock Spring’s argument, calling the suggestion “truly startling” because the PUC ordered a receivership due to an inability to provide safe and adequate service.
Still, Pennsylvania American agreed with Beard that state investigators haven’t considered alternatives to forcing a sale.
Filing for bankruptcy on behalf of Rock Spring is another option, Pennsylvania American noted. This approach could sidestep the PUC’s position that it can’t order a transfer to a utility outside its regulatory oversight and “provide a path forward for finally resolving the issues that have plagued the system for years,” the investor-owned utility argued in its legal filing.
If regulators decide Pennsylvania American should acquire the system, the utility said it’s ready to formally take over Rock Spring. Attorneys asked regulators for guidance on next steps and at least three months to negotiate a purchase agreement and a “reasonable price.”
The State College water authority has long considered taking over Rock Spring’s system.
In its filing, Pennsylvania American wrote that Rock Spring’s owners haven’t sold to State College because they want the most money possible. The attorneys said Rock Spring’s management believes that Pennsylvania American will pay more than State College, especially if the investor-owned utility is ordered to acquire the system through the PUC process. But if the PUC rejects such a sale, Rock Spring “would have to change its negotiating strategy,” counsel for Pennsylvania American wrote.
Rather than “hold out for more money,” Rock Spring “would have to bargain” with the water authority, they added.
The State College water authority made a $65,000 offer to buy Rock Spring over the summer, but the company rejected the bid in June. Regulators said they couldn’t mandate a sale to a utility outside their jurisdiction. Even so, the municipal authority insists it’s the best choice.
In legal filings, the State College authority’s lawyer, Robert Mix, argued that because the water authority has participated in the Section 529 process, it has submitted itself to the PUC’s jurisdiction, meaning regulators could legally order it to acquire Rock Spring.
He also cited several “practical reasons” in support of a local takeover. Much of Rock Spring’s service area overlaps with Ferguson Township, where the municipal authority already provides water service, he noted. Additionally, the authority’s main office is just eight miles from the center of Rock Spring’s system.
A PUC spokesperson declined to comment on arguments in the case because it’s still ongoing.