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Borough’s dispute with Suez over water usage now turns to meter readings

By Dan Miller

Posted 4/10/19

The 11.5 percent surcharge imposed on Middletown water and sewer customers is invalid because it is based on inaccurate meter readings, the borough says.

The borough is also fighting Middletown …

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Borough’s dispute with Suez over water usage now turns to meter readings


The 11.5 percent surcharge imposed on Middletown water and sewer customers is invalid because it is based on inaccurate meter readings, the borough says.

The borough is also fighting Middletown Water Joint Venture LLC, which includes Suez, the private company providing water and sewer service in the borough, over whether the joint venture can impose more charges to recoup the cost of replacing water mains.

The fight over both issues is continuing through arbitration, despite the March 27 dismissal by a federal judge of a lawsuit the borough filed against the joint venture in 2018, the borough posted on its website April 5.

The post was the borough’s first public comment since Chief Judge Christopher C. Conner handed down his decision dismissing the federal lawsuit.

An arbitration hearing on both issues — the alleged faulty meters and the joint venture passing on to borough water and sewer customers “millions of dollars in costs” for replacing water mains — was held in November 2018, the borough said in the statement.

The arbitration panel was to hold more hearings on Tuesday, April 8, the borough said. A decision on the arbitration is expected “within a couple of months,” the borough said in the April 5 statement.

The joint venture and Suez imposed the 11.5 percent surcharge in April 2018 to recoup what Suez said is revenue lost from a water sales shortfall that the joint venture says occurred in the Middletown system from Jan. 1, 2015, through 2017.

Suez told the Press & Journal last year that the surcharge is increasing the average water and sewer bill by 20 cents per day, or by roughly $72 a year.

The borough says it has presented evidence that the meters used by Suez to serve major customers “have failed performance tests on multiple occasions without timely repairs, and that Suez has not actively monitored the accuracy of its meters.”

According to the borough, Suez said it was entitled to use “estimated billing techniques that did not comply with the borough’s ordinance” to determine the shortfall amount upon which the 11.5 percent surcharge is based.

The borough called this “in sharp contrast” to Suez insisting on charging a residential customer in Enhaut, Pennsylvania, $992.36 in back charges, supposedly because her meter was under recording for a period of months. This is based upon a report made public by abc27 news, the borough said.

In response, Suez in a statement issued through spokeswoman Ghilianie Soto said “there is no merit to any of the borough’s positions” that are the subject of the arbitration proceedings.

Regarding the joint venture recouping from borough ratepayers the cost of replacing water mains, the statement from Soto referred to provisions included in the contract between the joint venture and the borough following the borough’s September 2014 decision to lease its water and sewer systems to the joint venture for 50 years. The lease became effective on Jan. 1, 2015.

That contract calls for the joint venture to make infrastructure improvements to the borough’s water and sewer systems in each year of the 50-year lease.

The contract allows the joint venture to impose a “capital cost recovery charge” to recoup the cost of improvements that are completed by the joint venture in the previous year.

“The borough was sued by (the joint venture) in an arbitration to force the borough to comply with the terms of the agreement and to invest in the infrastructure which was called for under the agreement anyway,” according to the joint venture statement. “We want to partner with the borough through the terms of our agreement to allow us to do what we were ultimately hired to do, which is fixing the infrastructure of Middletown.”

While the lease calls for the joint venture to make annual system improvements, the only time that has been done was in 2015, when Suez replaced 2,500 feet of water line on Ann Street and Oak Hill Drive.

Suez has undertaken no major infrastructure improvements during any years since — 2016, 2017 and 2018 — because borough council in each of those years has rejected the plan for capital improvements that has been submitted by Suez.

It appears unlikely any capital improvements will be done in 2019 either, as council March 19 rejected the joint venture’s proposed capital expenditure plan for the years 2019-2023. The borough noted that rejection in its April 5 statement.

The borough to date has spent $792,261.80 in legal fees on the dispute with Suez, based on Right to Know requests filed by the Press & Journal concerning bills paid to Dilworth Paxson LLP, the law firm council in March 2018 hired as “special counsel” to represent the borough in the federal lawsuit against the joint venture and Suez.

The borough has spent another $58,140.95 to date in legal fees to Gibson & Perkins, a law firm council hired on May 1 to pursue claims against other parties that were involved in approving the water and sewer lease in 2014.

Hiring Gibson & Perkins led to a separate lawsuit that the borough filed in June 2018 in Dauphin County Court against its former solicitor, McNees Wallace & Nurick; and  former financial advisers Susquehanna Group Advisors.

The borough alleges in the lawsuit that McNees and Susquehanna provided bad advice that council relied on in approving the lease.

McNees and Susquehanna Group both dispute those claims, in responses filed on behalf of the two defendants by their respective lawyers.

The lawsuit is pending in county court.

The joint venture in its statement responding to the borough’s April 5 press release called on the borough to stop trying to get out of its obligations under the lease.

“The borough signed an agreement Sept. 30, 2014 under which it was paid $43 million up front, and under this agreement the borough would receive $45 million in additional payments from (the joint venture),” the statement said. “Having received 10s of millions of dollars in payments, the borough is now seeking to walk away from this agreement. The borough filed a lawsuit to try and change the clear terms of this agreement. The court completely rejected the borough’s arguments and dismissed the borough’s case.”