PENNSYLVANIA'S #1 WEEKLY NEWSPAPER • locally owned since 1854

Arbitration provides little relief for Middletown water, sewer customers

By Dan Miller

danmiller@pressandjournal.com

717-944-4628
Posted 7/25/19

With an arbitration panel upholding the surcharge, the Borough of Middletown has lost another battle in its legal war against Suez regarding Suez’s 50-year lease of the borough’s water and sewer system.

This item is available in full to subscribers.

Please log in to continue

Log in

Arbitration provides little relief for Middletown water, sewer customers

Posted

The Borough of Middletown has lost another battle in its legal war against Suez regarding Suez’s 50-year lease of the borough’s water and sewer system.

An arbitration panel on July 10 handed down a final award upholding the 11.5 percent surcharge Suez has been adding to monthly water and sewer bills since April 2018, when Suez imposed the fee to recoup money from a water sales shortfall that occurred from Jan. 1, 2015 through January 2017.

The panel also upheld Suez being able to impose a separate surcharge on water and sewer bills each year, to recoup the cost of annual replacement of water and sewer lines, according to a press release about the arbitrator’s ruling that the borough posted on its website on July 24.

The borough in the release said it will continue exercising a watchdog role going forward to ensure that future surcharges imposed by Suez are not excessive.

But otherwise, it appears that the borough has exhausted its legal efforts to gain relief for residents from the water and sewer increases imposed by Suez.

The ruling by the arbitration panel cannot be appealed by the borough, as the lease agreement between the borough and Suez calls for binding arbitration, Borough Manager Ken Klinepeter told the Press & Journal.

"Now that the arbitration is over, we look forward to collaborating with the Borough of Middletown in this next phase of our partnership," Suez spokeswoman Ghilianie Soto said in an e-mailed statement to the Press & Journal. "While there were no investments made into the system during the arbitration, Suez has already begun the process of prioritizing and planning for critical upgrades to the system this year. Our plan is to follow the obligations stipulated in the (lease) for the implementation" of the annual capital projects."

In March 2019, a federal judge dismissed a lawsuit that the borough had filed against Middletown Water Joint Venture LLC, which includes Suez, regarding changes the borough sought to make in the 50-year lease agreement between the borough and Suez.

That agreement, which went into effect on Jan. 1, 2015, was the result of borough council and the former borough authority approving entering into the 50-year lease with Suez - then known as United Water - in September 2014.

The federal lawsuit and the attempt to gain relief through arbitration now gone, the borough in the press release said that its only remaining recourse through the courts is the lawsuit that the borough filed in Dauphin County Court in June 2018 against the borough’s former solicitor, McNees Wallace & Nurick, and its former financial advisors Susquehanna Group Advisors.

In the lawsuit, which is pending, the borough alleges malpractice regarding the advice from both entities that the borough says council and the former authority relied upon in deciding to approve entering in the lease with Suez.

To date, the only tangible relief that the borough appears to have obtained through its legal battles with Suez is a $150,000 reduction in the amount of the 3-year shortfall.

Suez initially based the 11.5 percent surcharge on a 3-year water sales shortfall that according to Suez totalled $1,922,754.

The arbitration panel agreed to reduce the shortfall amount by $150,000, based upon what the borough contended were faulty meter readings involving one major customer that Suez relied upon in calculating the 3-year shortfall.