This story was produced by the State College regional bureau of Spotlight PA, an independent, nonpartisan newsroom dedicated to investigative and public-service journalism for Pennsylvania. Sign up for Talk of the Town, a newsletter of local stories that dig deep, events and more from north-central PA, at spotlightpa.org/newsletters/talkofthetown.
FERGUSON TOWNSHIP — What began as a state-backed emergency rescue of a struggling water system will end in a private takeover by one of Pennsylvania’s largest for-profit utilities.
The state Public Utility Commission on Thursday approved a judge’s February recommendation for Pennsylvania American Water to permanently buy Rock Spring Water Company — a change that’s expected to improve service for roughly 1,000 customers in rural Centre County and one that could increase their bills.
It comes two years after a Spotlight PA investigation found customers served by Rock Spring were failed by the private utility, state regulators and elected officials. The decision also marks the end of a seldom-used and lengthy regulatory process — launched in September 2024 — to determine whether a forced acquisition was warranted.
Commission Chair Stephen DeFrank called the move “an important step to provide long-term system reliability and service to customers that have not had that in a number of years.”
Pennsylvania American has temporarily managed Rock Spring since March 2025, after the state Office of Consumer Advocate requested an emergency takeover of the company to prevent “irreparable” injury.
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Gary Lobaugh, Pennsylvania American’s director of government and external affairs, said the company appreciates the PUC’s decision to “establish a clear, long-term path forward for Rock Spring customers, recognizing both the poor condition of the system and the company’s expertise in restoring safe, reliable water service.”
“We support the Commission’s decision and are dedicated to working collaboratively with the system’s owner to reach a fair and reasonable agreement on the acquisition terms,” he told Spotlight PA in an email. “Our focus remains on finding a way forward that best serves our customers’ interests and promotes long-term system stability.”
Prior to the emergency takeover, Rock Spring had racked up dozens of regulatory violations — including for failing to protect the system’s water source, shutting off service without proper notice and letting a leak go unfixed for six months. It also owed tens of thousands of dollars in civil penalties as part of a yearslong legal battle with the Pennsylvania Department of Environmental Protection over excessive water loss.
For more than a decade, Rock Spring’s management resisted state directives to fix the system and find a new owner, despite interest from a local municipal authority. Meanwhile, years of neglect led to crumbling infrastructure, low water pressure, regular outages and sometimes lengthy boil water advisories.
Rock Spring and its lawyer did not respond to requests for comment.
Customers interviewed for Spotlight PA’s June 2024 investigation and public input collected during the state regulatory process illustrated how Rock Spring’s service — and its failures — have divided those who rely on the system. While some were torn between wanting better management and worrying about what new ownership might mean for their bills, others remained loyal to owner J. Roy Campbell, whose family founded Rock Spring in 1947.
John Hajduk, a Rock Spring customer since 2016, said he’s happy to see movement toward a sale — while acknowledging the potential impact on his water bill — and questioned why it took so long for regulators to take action against a company with a history of shaky service.
“To me, it’s unspeakable what they have been doing for the last 10, 20 years, and the fact that it’s gone on this long without legal intervention, particularly for something like water,” he told Spotlight PA during an interview in March. “Gas, electric, telephone, those certainly are important, but to me, when I look at water, everybody needs water.”
Administrative Law Judge John Coogan, who oversaw the state regulatory proceeding, acknowledged fears of steep rate increases in his recommendation to the utility commission.
However, he cited testimony that an acquisition wouldn’t unreasonably impact rates. For Pennsylvania American, the PUC approves rates. So the cost of updating Rock Spring’s systems would likely be spread out across the company’s entire customer base.
Now, Pennsylvania American and Rock Spring have three months to negotiate an asset purchase agreement. At the end of that timeline, Pennsylvania American could ask for an extension or for the PUC to approve the sale. If the parties can’t reach a deal, the investor-owned utility could seek ownership through eminent domain.
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Additionally, the order approved by the PUC requires that “all reasonable and necessary” costs related to Pennsylvania American’s receivership be paid for by the sale proceeds. If an acquisition doesn’t cover expenses, Pennsylvania American can ask the PUC for permission to include those costs in a future base rate increase. Any revenue from the sale should also go toward paying the outstanding DEP fines, and if those funds aren’t enough, Rock Spring “shall remain liable” for the leftover balance.
Since taking over as receiver, Pennsylvania American has worked to bring the rural system into regulatory compliance and make repairs to address water loss. It also plans to conduct a leak detection survey this month, per the most recent status report submitted to the utility commission.
The company also assumed control of Rock Spring’s bank accounts, which started with a $21,073 balance. The most recent report, submitted in late May, shows an ending balance of $22,262. Customer payments totaled $122,124, while operating expenses were $134,188.
The investor-owned utility wired $13,251 last year to cover “unplanned expenses,” including a well pump replacement, generator emergency services and paving repairs. In documents sent to the PUC, Pennsylvania American notes that this amount doesn’t include “significant deferred receivership expenses.”
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