An Insider's View of the Water Business
Nicholas DeBenedictis draws on credentials from both sides of the fence when he says business can do a better job than government at the essential service of providing clean drinking water. Although he's served for 14 years as chief executive of Aqua America, the largest U.S.-based publicly traded water company, in the 1980s he held two of Pennsylvania's top state government posts: head of the Office of Economic Development and, later, secretary of environmental resources. As a trained engineer and former president of the Greater Philadelphia Chamber of Commerce, he's keenly aware of the work that needs to be done on the nation's water infrastructure and the importance of finding a reasonable way to pay for it.
Recently, DeBenedictis has been an outspoken opponent of private-equity firms' involvement in water systems. Some observers point out that DeBenedictis has good business reason to worry: The wealthy buyout firms are bidding up the price of systems that Aqua America, which has been on an aggressive acquisition spree, might like to take over. But the issues he raises about the need for long-term commitment are sure to resonate with the regulators who will scrutinize private equity's forays into the water business.
U.S. News recently talked with DeBenedictis about the challenges ahead.
You say we have to come to grips with water infrastructure problems throughout the United States.
When I was environmental secretary, I realized that water and wastewater problems were occurring not because people didn't have trained engineers, but because governments didn't want to put the money up to maintain the resources, because it's all hidden. They're all under the ground. The water and sewer plant is out of everybody's sight. So you worry about potholes, police cars, and things of that sort—which I would, too, if I were mayor—and hope that the pipes will last for the next mayor...because it's so expensive.
How have you tackled the problem in the states where you operate?
We have programs now that allow us to replace pipe on an ongoing basis and get a surcharge on the rates in between [formal applications to the state regulators for rate increases]. It never goes up more than 4 or 5 percent over a two-year period, so it's about the rate of inflation. But at least you're not depreciating an investment before you can earn on it. And that's helped a great deal, and that's why we're one of the leaders in this area. And I have to say it's because I understood the process coming from government. You could fix the best plant in the world, but if the pipes are bad that you're sending the water through, where are you?
There's been no rate backlash, because the average household spends between 50 cents and a dollar a day on their water. Think of what they're paying for cable, telephone, and electric. Water utilities are the least expensive of all utilities, yet, somebody's willing to buy a pint of [bottled] water and spend a dollar.
And yet a lot of municipalities have been reluctant to make that investment.
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