The Way I See It: Erie Water Woes

The amount of money that continues to get washed away due to the ongoing dispute between the Erie Water Works and the Millcreek Township Water Authority is a little like their previous rate issue – it just keeps getting higher.

Litigation between the two entities began back in April 2010 because the Millcreek authority claimed that the Erie Water Works was charging unfairly for bulk water purchases. However, at that time, all three of the Millcreek Township Supervisors urged the Water Authority not to initiate the litigation because the township was negotiating with Erie Water Works in the hope of striking a deal for the Erie utility's lease of the Millcreek water system.

At that time, George Riedesel was the executive director of the Millcreek Water Authority and went on record stating that: "The issue predates the lease talks and needs to be resolved. You can't ignore it by simply executing the lease and ignoring the overcharge that's occurred."

In August of that year, the Water Authority put the Water Works on notice – they would be seeking mediation. And at that same time, the organization started withholding payments from Erie Water Works because of what those in charge perceived to be as unfair rates.

And the lawsuit (along with the withholding) continues today – with no end in sight.

Important to note, however, is that during that time, Riedesel retired his post and David Sterrett became the new executive director – and had the misfortune of walking into the fine mess that Riedesel helped to create.

In a recent open letter to the public, Millcreek Township Supervisor Richard Figaski challenged the current litigation issue.

He estimates (based off the actual budgets) the total operating loss of the Millcreek Water Authority since 2010 and through 2013 was at $1.5 million, a much greater loss than originally estimated. According to the Millcreek Water Authority's 2013 annual operating summary, the group currently serves 7,269 customers. This ends up being a loss of about $50 a year per customer. By the end of 2014, that operating loss is estimated by Millcreek to be a total of $2.3 million, more than twice what was originally anticipated.

As for those payments being withheld? If the Millcreek Water Authority is ultimately successful in this litigation, they will not have to payback these withheld payments. To date, they have withheld just over $1 million. So if successful, the overall loss would drop from $2.3 million to $1.3 million.

Yet, the legal fees are staggering. The Millcreek Water Authority has spent just shy of $1 million on this litigation to date. Erie Water Works has also spent a large sum – currently $800,000.

It is an example of the classic "prisoners dilemma" (an example of why two parties might not cooperate, even if it appears that it is in their best interests to do so). Both groups would be much better off if they struck a compromised deal, but currently each is walking a fine line, especially Millcreek Authority because not only are they paying the litigation, but they're already operating at a loss.

If Millcreek loses the lawsuit, they would be out a couple million dollars, and if Erie loses the case, they would be out close to two million. Obviously both parties are holding firm, because although it may not make sense to fight this battle, looking at the amount to date, whoever wins this litigation will be much better off in the long run.

Not only will Millcreek recoup the litigation expenses to date, but they would also save an significant amount of money in water purchases per year. On the flip side, Erie Water Works would actually increase their revenue by the same amount that Millcreek is looking to save.

Unfortunately, these solutions don't happen without the expense to the ratepayers.

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