FERGUSON TOWNSHIP — As state utility regulators resume efforts to force the sale of a distressed private water company in rural Centre County, a nearby municipal-run authority remains determined to buy it.
The State College Borough Water Authority has attempted to purchase Rock Spring Water Company multiple times over the years, including as recently as this summer.
The Pennsylvania Public Utility Commission, however, says it can’t order Rock Spring to sell to the State College authority because it falls outside the agency’s reach as a municipal entity. Unless Rock Spring voluntarily agrees to sell, the commission’s seldom-used and lengthy regulatory process — known as a Section 529 investigation — will likely end with another investor-owned utility acquiring the long-troubled system.
What that means for the roughly 1,000 people who rely on the system — now under temporary management — remains unclear. But the State College water authority argues it’s the best option for a permanent takeover, citing its close proximity and efforts to provide safe, reliable, and affordable service.
For years, customers in Ferguson Township have resigned themselves to working around unreliable service, including low pressure, lengthy boil water notices, and sudden outages.
A four-month Spotlight PA investigation published in June 2024 revealed how company owner J. Roy Campbell resisted state directives to fix the system. He also racked up dozens of regulatory violations and tens of thousands of dollars in civil fines throughout a yearslong legal battle with the Department of Environmental Protection over excessive water loss.
The PUC’s investigative arm was made aware of the matter in late May 2024 and launched a review of Rock Spring. To offer some relief, regulators ordered Pennsylvania American Water, one of the state’s largest investor-owned utilities, to take over as a receiver in March.
Meanwhile, state officials urged Rock Spring to negotiate a sale to State College while under temporary management.
Although Campbell signed a letter of intent to sell to State College last year, the company’s lawyer rejected a $65,000 offer that would have brought the system under municipal control.
Now, the commission’s case is moving forward, with evidentiary hearings — where formal testimony and evidence are presented — set for Oct. 20 and 21 in Harrisburg.
The public is welcome to attend, but only parties to the case are permitted to testify.
Anyone interested in becoming a party must file a formal complaint with the PUC or petition to intervene at docket number P-2024-3051313 online or by mail with the PUC’s Secretary’s Bureau. They also should reference the docket number and include specific information, as well as supporting documentation, a PUC spokesperson told Spotlight PA in an email.
Ferguson Township is also working with the state Office of Consumer Advocate to formally request a public input hearing, Township Manager Centrice Martin told Spotlight PA.
Such a hearing would allow customer comments to potentially become testimony on the record, she said in an email.
The township has no regulatory authority over Rock Spring, but is participating in the case because the water company operates within its municipality. The township has offered to help the State College water authority apply for grants to fund repairs should it become the new owner.
The State College water authority remains interested in acquiring Rock Spring, Executive Director Brian Heiser told Spotlight PA in an email. He declined to say whether the water authority is willing to offer Rock Spring more than $65,000 to buy the system or share its legal strategy in the ongoing state-level process to force a sale.
Heiser said the authority’s proximity — 8 miles from the center of Rock Spring’s system — positions it to connect customers to a reliable water source that already serves nearby communities. Pennsylvania American has operations 13 miles away.
“The connection to our existing system will provide close personal response to issues that may arise, redundant supplies, and create the ability to provide reliable fire protection,” he said. “All at, what we believe would be a more affordable rate for the customers. The authority works very hard to meet the needs of the communities it serves with quality, reliability, and affordability. The ability that we have to do that in the manner that we do is a huge aspect of what sets us apart.”
In an emailed statement, a Pennsylvania American representative told Spotlight PA the company is “dedicated to delivering safe and reliable service to Rock Spring customers.”
“As the emergency receiver, we have concentrated on stabilizing the system while working toward a long-term solution,” said Gary Lobaugh, Pennsylvania American’s director of government and external affairs. “We believe the focus should be on protecting customers, promoting sustainable investments, and ensuring fair cost recovery.”
Pennsylvania American — which said the water authority was the “most logical choice for a temporary takeover” earlier this year — estimated at least $400,000 in costs before being appointed as an emergency receiver. If Rock Spring is ultimately sold to the State College water authority, customers of the investor-owned utility “could unfairly be stuck” with that bill, a lawyer for the company wrote in a February legal filing.
Customers interviewed as part of the June 2024 investigation told Spotlight PA they were conflicted over whether it was worth paying more for reliable water. Ultimately, it comes down to how much rates would go up, they said.
If the water authority takes over Rock Spring, customers would pay its current rates, and there might be a temporary extra charge for a set period of time, Heiser said. For Pennsylvania American or another investor-owned utility, the PUC approves rates, and the cost of system improvements would likely be spread out across the entire customer base.
The State College water authority has said it would apply for grants to help pay for improvements, and anything not covered by those dollars would be built into its existing capital improvement plan, Heiser said.
But the State College authority has limited say in the regulatory process.
Section 529 doesn’t let the PUC directly order a regulated private utility to sell to a municipal authority, David Hixson, an agency spokesperson, told Spotlight PA in an email.
“However, the commission may oversee the voluntary transfer of a regulated utility to a municipal authority,” he added. “This is what the commission attempted to facilitate between Rock Spring and State College Borough Water Authority.”
The water authority thinks that interpretation is too narrow, Heiser said. He added that the municipal entity is “exploring potential alternatives to offer the PUC.”
James Cawley, an attorney and former PUC commissioner, said the odds of the water authority winning control through the Section 529 process are slim.
The law governing forced sales says “the commission shall issue an order for the acquisition of the small water or sewer utility by a capable public utility.” It doesn’t say anything about a municipal entity, he told Spotlight PA.
“What’s puzzling to me is why the authority and this little company can’t come to an agreement,” Cawley said.
Neither Campbell nor Rodney Beard, a lawyer for Rock Spring, responded to an interview request or emailed questions. A company shareholder previously told Spotlight PA that some board members thought the water authority’s $65,000 sales offer undervalued the business.
Before being appointed emergency receiver, Pennsylvania American proposed a collaborative approach between the PUC and the Court of Common Pleas of Centre County, which can provide oversight to municipal authorities, to pave the way for a takeover by the State College water authority.
A judge turned down that idea, citing uncertainties that likely make the PUC unwilling to pursue this option further, Cawley said. The legislature might need to step in and clarify the law, but for now, the PUC is working within the limits of existing law, he added.
“If they’re unhappy, they have a way of stepping in. That’s what 529 is all about — appointing a receiver, having the receiver start fixing things. That’s what’s happened here,” Cawley said.
“The commission finally got tired of waiting for a deal between the authority and the owners of Rock Spring. It has taken the offensive, and to its credit, it is being affirmative here rather than passively waiting for the parties. The parties have had more than adequate opportunity to make a deal, but the commission is tired of waiting because the people up there deserve better service.”