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Pittsburgh Water & Sewer files lawsuit against former management firm

| Wednesday, Oct. 12, 2016, 11:15 a.m.

Pittsburgh Water and Sewer Authority filed an arbitration lawsuit Wednesday against the company that ran the utility's operations for more than three years, claiming it created problems such as faulty automated water meters and a change in corrosive chemicals that led to a state violation.

PWSA is seeking damages not anticipated to exceed the $12.5 million the authority already paid or still owes Boston-based Veolia Water North America-Northeast, which had a management contract with PWSA from July 12, 2012, to Dec. 31, 2015, the suit states.

“They represented to us they had this world-class expertise at running water authorities,” said Alex Thomson, chairman of PWSA's board of directors. “We just don't believe they managed the authority as required in their contract.”

In a statement, the company said the authority's action was “inflammatory” and “nothing more than an effort to redirect blame for their failures and not fulfill their contractual obligations to Veolia.”

Thomson said PWSA would seek to recover as much as possible of what it paid Veolia, and would use that money back to offset authority rate increases.

The lawsuit was filed with the American Arbitration Association, a New York-based nonprofit for resolving corporate disputes outside of court, PWSA spokesman Will Pickering said. Veolia's contract with PWSA required that disputes go through arbitration, Thomson said.

“PWSA asserts that Veolia grossly mismanaged PWSA's operations, abused its positions of special trust and confidence, and misled and deceived PWSA as part of its efforts to maximize profits for itself to the unfair detriment of PWSA and its customers,” PWSA officials said in a release announcing the arbitration suit.

Among the issues alleged in the announcement — but not included in the formal filing with the Arbitration Association — PWSA said Veolia was responsible for the botched rollout of automated water meters, inaccurate water bills and a 14-month change in chemicals for corrosion and lead control that violated PWSA's operating permit from the state.

“Veolia met its obligations and fulfilled the requirements of our contract in a fully transparent manner,” the company stated. “We stand behind the work performed on behalf of PWSA and strongly urge PWSA to stop trying to blame others for their failures and fulfill their obligations under the contract with Veolia.”

Water samples in 2013 showed lead levels had climbed to 14.7 parts per billion, just below a federal Environmental Protection Agency warning threshold.

Seventeen of 100 homes tested this spring, after Veolia's contract expired, had lead levels exceeding the 15 parts per billion limit. PWSA was receiving more lead test requests than usual from customers in the wake of the Flint, Mich., water crisis.

“Veolia's not responsible for the lead issue PWSA has — these lead issues are the result of the fact we have 75- to 100-year-old infrastructure,” Thomson said. “But we do believe they didn't aggressively work on these issues when they were running the authority for three and a half years.”

Last year, PWSA customers filed a class-action lawsuit in the Allegheny County Court over water meter upgrades that resulted in inaccurate bills, increased administrative fees and improper shutoffs.

That lawsuit was put on hold in June pending settlement negotiations.

The state Department of Environmental Protection cited PWSA in December because, under Veolia's management in 2014, the authority switched the chemicals it used in the water treatment process to reduce corrosion of pipes and the possible release of lead. The DEP's operating permit barred PWSA from making such changes without notifying the state, and PWSA changed back to its previous chemical early this year.

“It is clear Veolia cared more about their bottom line than providing residents with the high-quality water and customer service they deserve,” Pittsburgh Mayor Bill Peduto said in a statement.

A binding arbitration hearing, with an arbitrator jointly selected by both parties or chosen by the arbitration association, will be held within four months of Wednesday's filing.

Matthew Santoni is a Tribune-Review staff writer. Reach him at 412-391-0927 or msantoni@tribweb.com.

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