Aqua America and the Privatization of US Water Utilities
The landscape of water distribution in the United States is characterized by a vast network of providers. As of 2006, approximately 55,000 separate water systems supplied the nation. While many of these utilities remain under government ownership, a significant shift toward privatization has emerged, driven by both corporate growth strategies and municipal financial pressures.
Private companies often pursue the acquisition of utilities to leverage economy of scale—the cost advantage that arises with increased output or size. Simultaneously, municipalities facing budget constraints often find it beneficial to sell their water supply assets to private entities to secure immediate capital.
Key Facts
- There were 55,000 separate water systems in the US in 2006.
- Aqua America completed 300 acquisitions between 1993 and 2013.
- The company has expanded its footprint across 12 states, moving gradually southward.
- Aqua America transitioned from the Philadelphia Suburban Water Company (PSW) to its current branding.
- The 2018 acquisition of Peoples Natural Gas cost $4.27 billion.
The Growth Strategy of Aqua America
Acquisitions form the core of Aqua America's business model. Between 1993 and 2013, the company aggressively expanded its portfolio by completing 300 acquisitions. This growth has primarily involved purchasing smaller private utilities across 12 states, with a strategic geographic expansion moving toward the south.
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Evolution from Municipal to Private Assets
The company's history includes a mix of municipal and private purchases. In January 1998, while still operating as the Philadelphia Suburban Water Company (PSW), the firm acquired the municipal water utility assets of West Chester, Pennsylvania.
Major Corporate Acquisitions
Beyond small-scale utilities, Aqua America has targeted larger private corporations to scale its operations. Notable acquisitions include:
- AquaSource (2003)
- Heater and Florida Water Services (2004)
- New York Water Service Corporation (2007)
Diversification into Energy
In October 2018, Aqua America signaled a major strategic shift by announcing the purchase of Peoples Natural Gas in Pittsburgh, Pennsylvania. This $4.27 billion transaction served two primary purposes: it established the company's presence in the competitive Pittsburgh water market and marked its first entry into the gas utility sector.
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| Year | Entity Acquired | Type/Significance |
|---|---|---|
| 1998 | West Chester, PA Assets | Municipal Water Utility |
| 2003 | AquaSource | Large Private Company |
| 2004 | Heater and Florida Water Services | Large Private Company |
| 2007 | New York Water Service Corporation | Large Private Company |
| 2018 | Peoples Natural Gas | Gas Utility / Market Entry ($4.27B) |
Frequently Asked Questions
Why are municipalities selling their water assets?
Many municipalities are cash-strapped and see the sale of their water supply assets as a way to generate necessary funds.
What is the primary business model of Aqua America?
The bulk of Aqua America's business model is based on the acquisition of smaller private utilities and municipal assets to achieve profitability through economies of scale.
How many water systems existed in the US in 2006?
There were 55,000 separate water systems supplying water in the United States in 2006.
When did Aqua America enter the gas utility market?
Aqua America entered the gas utility market in October 2018 through the $4.27 billion acquisition of Peoples Natural Gas.
What was Aqua America previously called?
The company was previously known as the Philadelphia Suburban Water Company (PSW).