Pennsylvania American Needs More Time to Negotiate a Deal With Troubled Rural Water System

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 — Pennsylvania American Water is asking state regulators for more time to negotiate a sales agreement with a long-troubled system in rural Centre County.

The requested 90-day extension follows the state Public Utility Commission’s June order for Pennsylvania American to acquire Rock Spring Water Company, which has struggled with crumbling infrastructure, unreliable service, and repeated regulatory violations for more than a decade.

It also comes more than two years after a Spotlight PA investigation found customers served by Rock Spring were failed by the private utility, state regulators, and elected officials.

Pennsylvania American has served as the system’s emergency operator since March 2025, after the state Office of Consumer Advocate requested the takeover to prevent “irreparable” injury to Rock Spring’s 1,000 customers.

The PUC gave the companies three months to negotiate the sale terms.

Gary Lobaugh, director of government and external affairs for Pennsylvania American, told Spotlight PA that Rock Spring “has indicated its willingness to negotiate.”

In a filing, Pennsylvania American’s lawyer said the parties are in “active negotiations” on a purchase price and an asset purchase agreement. Rock Spring did not object to the extension request, according to the document. If approved, the companies would have until December to reach an agreement.

Rock Spring and its attorney did not respond to a request for comment.

If the parties can’t reach a deal, Pennsylvania American could seek ownership through eminent domain. Any sale would also require approval from the utility commission.

Before Pennsylvania American’s emergency takeover, Rock Spring had racked up dozens of regulatory violations — including failing to protect the system’s water source, shutting off service without proper notice, and leaving a leak unfixed for six months. It also owed tens of thousands of dollars in civil penalties as part of a yearslong legal battle with the state Department of Environmental Protection over excessive water loss.

Despite interest from a local municipal authority, Rock Spring’s management resisted state directives to fix the system and find a new owner. The same authority tried to seek ownership through the most recent regulatory proceeding but failed due to jurisdictional issues.

Customers interviewed for Spotlight PA’s June 2024 investigation showed how the company’s service — and its failures — have divided those who rely on the system. Some were torn between wanting better management and worrying about what new ownership might mean for their bills. Others stayed loyal to owner J. Roy Campbell, whose family founded the company in 1947.

Administrative Law Judge John Coogan, who oversaw the regulatory proceeding to decide whether a forced acquisition was warranted, acknowledged fears of steep rate increases in his recommendation to the utility commission. But 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.

Since taking over as receiver, Pennsylvania American has worked to bring the rural system into regulatory compliance and make repairs to address water loss. The company also assumed control of Rock Spring’s bank accounts, which started with a $21,073 balance. The most recent report, submitted in August, shows an ending balance of $23,665.

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 utility commission, Pennsylvania American notes that this amount doesn’t include “significant deferred receivership expenses.”

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