American Water Works Co. has agreed to sell its embattled New York American Water operations for $608 million in cash to Liberty Utilities in a deal that is expected to close late next year, the company said Wednesday.
The company reached the “very difficult decision” after a “careful and comprehensive analysis,” said chief executive Susan Story in a prepared statement. The move is in the “best interest of our customers.”
State lawmakers, watchdog groups and local customers have been strongly advocating for a public takeover of the company’s Long Island operations, which are based in the Nassau communities of Lynbrook, Merrick and Sea Cliff and surrounding areas. The company has about 120,000 customers on the Island, and another 5,000 upstate.
The sale is subject to Public Service Commission approval, among other conditions.
American Water’s statement said Liberty Utilities had water utility operations in New York and that the addition of the New York operations would give it a ”larger presence in New York once the transaction closes.”
New York American Water’s troubles began in 2016 with a rate-hike request through the Department of Public Service, which ultimately found financial irregularities and, following a state probe, instances in which company officials intentionally deceived regulators.
Problems worsened last year, when bills spiked for different service areas tied to a new conservation rate that hit heavy users harder, particularly in the high-use summer months. The company addressed the problem with awareness campaigns and measures to help customers limit usage, but the revenue declines from those measures led to another round of rate hikes in November. And more increases are coming next April.
State Sen. Todd Kaminsky (D-Long Beach) said customers who have "had it up to their eyeballs" with New York American Water "won't be sorry to see them go."
He also said the PSC review of the sale could be an opportunity for customers to get concessions from the new company. "There could be a lot of ways ratepayers could be helped in this process," he said, vowing to follow it closely.
Watchdog group Long Island Clean Air, Water and Soil, which uncovered many of the company's irregularities, said the state should push even harder for a public takeover, now that the value of the company is known. The group has suggested a joining of American Water customers with the Suffolk County Water Authority, among other options.
Co-director Claudia Borecky said, "No matter what, it has to be a public takeover" to remove the profit incentive. Added co-director David Denenberg, "Enough is enough. We demand a public takeover now."
American Water spokesman Ruben Rodriguez threw cold water on the prospect of a public takeover, particularly now that the New York operation was being sold.
"It's not in the interest of our customers," he said of a public takeover, because it would be "much more time-consuming, complex and expensive. It would lead to higher costs and gaps in the system."
Noting that bills are 33% to 59% tied to property taxes, Rodriguez said, "The fastest way to achieve more affordable water service is to lower the unfair property tax burden placed on our customers."
One longtime critic of New York American Water was positive about the move.
"We are extremely happy to see this company go and we look forward to a sitting down with Liberty executives who we expect will work with us on establishing reasonable rates for our community," said George Pombar, a member of the executive committee of the North Shore Concerned Citizens, which has been pushing for a public takeover.
Fellow group member Joe Lopes said that effort would continue.
"This will not deter our group from seeking public water," he said. "We can only hope that this improves our prospects. Replacing a bad private company with another private company does not guarantee improvement."
Liberty Utilities has more than 800,000 customers in 14 states, and American Water said the company was “known for its commitment to customer service, the community and conservation.”
“We are excited to expand our customer base in the great state of New York, and to bring our experience in multiple states as a water utility operator committed to excellence,” said Ian Robertson, chief executive of Algonquin Power & Utilities Corp., which owns Liberty. The company will take on New York American Water employees in the region and no jobs will be lost, he said, adding the company was "committed to partnering with our regulator 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."
But the takeover won't happen without a fight, said Agatha Nadel, of the North Shore Concerned Citizens, from Glen Head.
"This is simply going from one private water nightmare to the next," she said, urging local lawmakers, the PSC and Gov. Andrew M. Cuomo to "fight this and force a public takeover."