Public-private partnership or ‘privatization scheme?’ New details emerge about Peoples Gas proposal to fix city water infrastructure

The Pittsburgh Water and Sewer Authority's water treatment plant in Aspinwall. (Photo by Ryan Loew/PublicSource)

The Pittsburgh Water and Sewer Authority's water treatment plant in Aspinwall. (Photo by Ryan Loew/PublicSource)

New information has emerged about an aggressive push by Peoples Natural Gas to take control of parts of the Pittsburgh Water and Sewer Authority’s infrastructure, a deal the company hopes it can strike by promising to fix some of PWSA’s problems.

Details of Peoples offer — which to activists and public officials who have heard the company’s pitch in recent meetings looked like an offer to privatize parts of the city’s water system —  indicate that the company is offering to leverage its capital and expertise to solve Pittsburgh’s water woes. Led by Morgan O’Brien, the company’s CEO and president, and Kevin Acklin, a Peoples executive and former chief of staff for Mayor Bill Peduto, Peoples has been pitching its idea to city council members, PWSA officials and local activists. O’Brien has also courted Peduto, as the Post-Gazette reported in February. Acklin wrote in an email Tuesday that he wasn’t present at the meeting with the mayor or the meetings with city council members as his presence would violate city ethics rules. He said those meetings were conducted by O’Brien and other Peoples staff.  

Peoples pitched its proposal verbally to both PWSA and activists and has not provided the details in writing yet, according to Robert Weimar, PWSA’s executive director, Paul Leger, the chair of PWSA’s board, and Aly Shaw, an organizer for the Our Water Campaign with Pittsburgh United, which Peoples also met with. Barry Kukovich, a Peoples spokesperson, confirmed that a plan isn’t set yet and that the meetings were conversations so the company could “listen.”

“I haven’t seen the plan,” Kukovich said on Tuesday. “I know this is fluctuating as people talk. We haven’t given anyone a formal proposal.”

The following details of the plan are based on the accounts of four people who attended meetings where Peoples made its proposal. Kukovich declined to confirm details of the company’s proposal Tuesday evening.

In its pitch, Peoples said it will:

  • Build a new water treatment facility which it will own;
  • Replace all of Pittsburgh’s water lines in as little as five years, a much faster pace than PWSA would be able to do under its current plan. Peoples would own all of the lines it replaces;
  • Freeze water rates for three years and offer better customer service;
  • Lease the city’s water infrastructure for a period of time — though not its stormwater or sewage infrastructure — and replace it over time, owning what it replaces. The city may have the option to buy the infrastructure back in the future but how is unclear. Leger said his understanding was that Peoples would keep track of how much it cost to build the water treatment facility and replace the water lines and the city could buy back the infrastructure for that price. Leger and Shaw both estimated that could be at least $10 billion.

The plan amounts to ownership of the city’s water infrastructure over time, Weimar said on Tuesday.

“They’re establishing, over time, ownership rather than an outright purchase,” he said.

That’s the impression Shaw got, too. “It seemed like a full privatization scheme to us,” she said.

Peoples, however, refutes that notion. Kukovich said he “[didn’t] know about ownership.” And Acklin noted in an email that “the proposal being pitched by Peoples is a true partnership, not privatization.”

“As stakeholders in Pittsburgh, Peoples is constantly seeking ways to help the city with its critical infrastructure issues, including helping to solve its water problems,” Acklin said.

O’Brien also stressed in the meetings he had that his plan was not an effort to privatize PWSA.

Peoples pitched establishing a new entity to oversee all of the infrastructure it builds and replaces, which could be a nonprofit, according to Shaw, and could be governed by a mix of company representatives and the public. Once Peoples replaced PWSA’s water lines and built the water treatment facility, the city could have the option to buy back the infrastructure. The company also proposed paying off PWSA’s debt, which currently amounts to $1 billion.

The meetings Peoples has had with PWSA and the Our Water Campaign have been “substantial,” Leger said, and have run one to two hours. The meetings have occured within the past few weeks.

According to Shaw, Peoples pitched a do-gooder proposal in which the company would help Pittsburgh avoid a lead crisis like Flint’s in Michigan, support union jobs and find an environmentally friendly way to replace water lines. The company also proposed that its water treatment plant would be energy efficient and could generate hydroelectric power for the region, Shaw said. In some meetings O’Brien has had, he’s emphasized that the proposal would be in line with Peduto’s goals to make the city more environmentally friendly. Peoples mentioned hiring Hatch, an engineering and construction consultancy group, to build the water treatment plant, reportedly in O’Hara Township.

Peoples also pitched widening PWSA’s service area to more parts of Allegheny County, according to Shaw.

In an email Tuesday, Timothy McNulty, a spokesperson for Peduto, said the mayor hadn’t received any “proposals or offers” from Peoples or other companies and has been clear that he wants PWSA to remain a public entity.

“Mayor Peduto is on the record saying he wants to keep the water system public and that his current focus in regard to PWSA is reorganizing the governance of the authority, lead line replacements and introducing orthophosphate,” McNulty wrote.

Leger and Weimar both expressed doubts about Peoples pitch. According to them, If PWSA’s infrastructure was going to be leased, there would need to be a formal request for proposals, put out by PWSA or the city, and other companies would also be allowed to bid. On top of that, PWSA or city council, possibly both, would have to pass legislation allowing the infrastructure to be leased. That process could take months, even years, Leger said. Right now, he and Weimar both said PWSA is focused on complying with a state Department of Environmental Protection consent order and Public Utility Commission regulations. Leger added that PWSA is focused on working with city council to sort out who will govern PWSA, a debate that’s been ongoing for months.

“Both the PUC and DEP have indicated to us that they like what they see,” Weimar said. “We don’t see the need for us to have a third party owner.”

He emphasized that though PWSA has had big problems to solve, it’s capable of solving them on its own.

“We’ve got a long way to go, there’s no question about it,” Weimar said. “Be we can do it.”

Shaw, local officials and other activists are holding a press conference in opposition to Peoples’ proposal Wednesday morning at 10 a.m. in front of the company’s North Shore headquarters.

J. Dale Shoemaker is PublicSource's government and data reporter. You can reach him at 412-515-0069 or by email at dale@publicsource.org. You can follow him on Twitter at @JDale_Shoemaker. He can be reached securely at PGP: bit.ly/2ig07qL