With the pending sale of New York American Water to Liberty Utilities, service for 120,000 Nassau County customers will shift from a U.S. company focused on water infrastructure to one whose Canadian parent owns a diverse collection of energy, water and natural gas operations in North America.
Liberty Utilities is owned by Ontario-based Algonquin Power & Utilities Corp., an $11 billion utilities conglomerate that owns everything from wind and solar energy projects to old-world utilities serving more than 800,000 gas, power and water customers in the United States and Canada.
Its Liberty Power company has interests in 35 wind, solar, hydroelectric and thermal energy projects, while Liberty Utilities has more than 750,000 customers in 14 states and one Canadian province, providing water, natural gas and electricity.
Its U.S. water service and treatment subsidiaries are in Arizona, Arkansas, California, Missouri and Texas, while natural gas operations are in upstate New York, Massachusetts, New Hampshire, Illinois, Iowa, Georgia and Missouri. It owns electric utilities in Arkansas, California, Kansas, Missouri, New Hampshire and Oklahoma.
The $608 million cash acquisition of New York American Water is expected to be finalized in the second half of 2020.
In its statement touting the purchase, Liberty showed a recognition of the issues that have dogged New York American Water since its 2012 acquisition of Aqua brought it into high-tax Nassau County districts such as Sea Cliff, Merrick and Lynbrook.
Liberty said that customer rates in its new New York Region “are not expected to be affected” by the acquisition. Algonquin chief executive Ian Robertson said the company would partner with the Public Service Commission "and other state officials to support the affordability of water services, including reducing the burden of local taxes on New York American Water's customers."
Robertson, in an interview, said he was "incredibly empathetic" to customers' heightened concerns about water affordability on Long Island. "There's been an unfortunate confluence of events that have certainly raised everybody's strain levels to the max" about water costs there and the influence of property taxes on those costs, he said. "It's a huge part of peoples' bills," and the company wants to "see if we can be part of solving that for everybody."
He stressed that the cost premium tied to the $608 million purchase price is one that is "one hundred percent to the account of our shareholders," not customers (a term he prefers to ratepayers), he said. "This acquisition will not cause rate increases."
Cost savings could come from items such as advanced meters that obviate the need for meter readers, he said.
Robertson took issue with the stance that a public takeover of the utility, or utilities in general, is the best answer. "I think it's probably somewhat of a misinformed perspective if people say public ownership is the cheapest way for a utility to be funded going forward." But he added there's a process to do so, including condemnation, and "every municipality needs to find their own way and whether public or private [ownership] is the right thing for them. Anyone who believes the answer is black or white probably isn't familiar with the issues behind it."
It's unclear whether the change in ownership will affect customer satisfaction, according to research firm J.D. Power, which studies the trends and ranks utilities. New York American Water has had "strong declines" in its recent water utility studies, including posting the biggest decline in its 2019 study because of "issues with rates and billing on Long Island," said Andrew Heath, director of the utilities practice. Liberty brands, meanwhile, "perform below the national average," J.D. Power found.
Generally, he said, "There is no consistent finding showing either an uplift or decline for customer satisfaction for the acquired or acquiring company after the deal closes."
The PS C must approve the sale, and there are indications there will be strong pushback from consumer groups and ratepayers who view the transfer as another opportunity for a for-profit company to cash in on the provision of a basic commodity.
David Denenberg, the former state legislator who codirects the watchdog group Long Island Clean Air, Water and Soil, estimated that New York American Water may see a tripling of its investment in the Nassau water infrastructure in the seven years of ownership. He noted that the company’s Merrick district, which has 44,000 customers, cost $71 million in 2012. That’s around a third of the operating base, suggesting the total is worth around $200 million now and Liberty has agreed to pay $608 million.
“They made the company as valuable as possible on the backs of ratepayers,” said Denenberg, adding that another private company takeover is a “recipe for failure.”
“It’s going to be more insane,” said Denenberg. “We might be a small fish as far as their attention to us, but we’ll be a big profit center. There’s no way this conglomerate is purchasing this small little entity or would even be interested in it unless there was an opportunity to make a lot of profit.”
Added Agatha Nadel of the North Shore Concerned Citizens group, which wants a public takeover of the water system, "This sale is not going to go through like business as usual without a fight."