Residents skeptical that new company can solve sewer problems

An executive with a sewer company seeking state regulators’ blessing to buy bankrupt Density Utilities of Louisiana says his company will invest $8 million into Density’s ailing infrastructure and will not seek a rate increase for at least two years.

But residents who have battled with sewer overflows, noisy lift stations and poor waste treatment under Density are skeptical the prospective new owner will deliver on its promises.

Officials in Ascension and Assumption parishes are closely watching the proposed sale , which the Louisiana Public Service Commission must approve.

Assumption Parish Police Jury President Martin “Marty” Triche said he and other officials want to meet with the PSC to learn more about potential purchaser Utilities Inc., its finances and the proposed sale.

Triche said parish officials want Commissioner Lambert Boissiere III to know what they and their residents have gone through with Density, which did not have enough funding to pay for the major upgrades needed in the parish, and are anxiously waiting for Utilities’ financial disclosures to the PSC.

“We want him to understand all that has been going on, and we want to make sure whoever the buyer is, it is adequately funded to be able to take over these systems,” said Triche, whose parish has grappled with some of the worst-performing Density plants.

Based in Macon, Georgia., with offices in Hammond, Density operates 49 sewer systems in Ascension, Assumption, Livingston, Tangipahoa and four other parishes and has about 2,350 customers in Louisiana.

Don Sudduth, president of Utilities Inc. of Louisiana, a subsidiary of Utilities Inc. of Northbrook, Illinois, said his company, if allowed to purchase Density, would add more staff on the ground and look to consolidate some systems.

“We’re committed to serving these customers and fixing the problems, and we’re going to own and operate them (the sewer systems) in compliance for the foreseeable future,” Sudduth promised.

He said the company wants to buy and hold Density’s systems because the acquisition is part of a broader expansion strategy with other systems in the state. In St. Tammany Parish, Utilities Inc. and its sister company, Louisiana Water Service Inc., already provide water or sewer service to 9,100 customers, according to regulatory filings.

Density had run afoul of state health and environmental regulators over its aged infrastructure.

The Louisiana Department of Environmental Quality was moving to put Density, which has been under a cleanup compliance order, into receivership early last year when the company filed for Chapter 11 voluntary bankruptcy in a Macon, Georgia, federal court in March 2013, blocking DEQ’s efforts.

U.S. Bankruptcy Judge James P. Smith granted Density’s motion to sell to Utilities Inc. during a July 23 hearing after no other companies bid on the systems. He also agreed to clear debts and claims not otherwise provided for in the bankruptcy case.

Smith filed a formal order Monday for the sale, which calls for Utilities Inc. to pay $1.2 million, in addition to the $500,000 the company says it spent conducting due diligence for the sale.

Neil Hertenstein, manager of Density Utilities, said the next step is to seek PSC approval.

Colby Cook, PSC spokesman, said the case is going before an administrative law judge who will hold a public hearing to review the application. Then the commission will hold a hearing and vote.

An initial status conference before the judge has been set for 11 a.m. Aug. 18 in the Galvez building, 11th floor conference room, 602 N. Fifth St., Baton Rouge.

Debbie Howard, who manages two apartment complexes along Roddy Road in Ascension Parish, said Utilities Inc. would be the fourth company to take over the complexes’ sewer system, promising a lot and doing little. Howard claims that for more than a decade, she has battled with sewer overflows, foul smells and other problems, including during Density’s management.

Howard, manager for Central Property Management, has formally intervened in the PSC case and opposes the sale. She has submitted newspaper accounts to the regulators about sewer problems Utilities Inc. subsidiaries have had in South Carolina, North Carolina and other states.

“I’m just so tired of the situation. I’m just so tired. I wish someone would care about the people here,” she said.

In one example Howard cited, the Southern Environmental Law Center warned Utilities subsidiary Carolina Water Service Inc. in November that it would sue under the U.S. Clean Water Act if Carolina Water did not improve treated sewer discharges into the Lower Saluda River outside Columbia, South Carolina.

The environmental group made the threat on behalf of the Congaree Riverkeeper, alleging the sewer discharges were polluting the scenic river and that the company needed to connect to a regional municipal system in the area.

Blan Holman, senior attorney for the law center based in Virginia, said Friday that Carolina Water and the group are in settlement negotiations. No suit was filed.

One of the largest privately owned water and wastewater providers in the nation, Utilities Inc. operates more than 550 sewer and water systems through dozens of subsidiaries in 15 states and reports annual revenues of $26 million.

Utilities is owned by Canadian private utility Corix Utilities, whose primary owner is British Columbia Investment Management Corporation. The Canadian institutional fund manager has a global portfolio of more than $114 billion.

Sudduth said that unlike Density, which needed a bond issue and wanted another rate increase to finance upgrades in early 2013 but could not get PSC consent, Utilities has cash to spend.

“We are going to invest our cash into the system and make improvements over time,” Sudduth said. “We do not anticipate a rate increase any time in the near future.”

Based on the company’s initial assessment of Density’s systems, Sudduth said, it may be the “end of 2016 before we’re seeking any rate increase for Density customers.”

Utilities Inc. has had some challenges — in St. Tammany, two systems were cited for a exceeding permit limits on treated sewer effluent and sewer overflows — but Sudduth said they have to be viewed in the context of its hundreds of other systems, the company’s great management team and its 45 years in the business.

“We have a long, very good history,” he said.

Follow David J. Mitchell on Twitter, @NewsieDave.