Bruce Murphy
Back in the News

8 Problems With Privatizing Water Utilities

Media has now jumped on the issue, adding more info on why proposed bill is a mistake.

By - Feb 2nd, 2016 12:22 pm
Sign-up for the Urban Milwaukee daily email
Lake Michigan water is treated at the Milwaukee Water Works’ Linnwood treatment plant. Courtesy of Milwaukee Water Works

Lake Michigan water is treated at the Milwaukee Water Works’ Linnwood treatment plant. Courtesy of Milwaukee Water Works

The bill that would allow private companies from out of state to purchase public water utilities in Wisconsin had gotten no media coverage until Urban Milwaukee wrote about it last Thursday, but the Wisconsin State Journal followed up with a story later that day and on Friday, two Democratic representatives announced they were introducing a competing bill that would prohibit the privatization of any water utility. Then on Saturday the Milwaukee Journal Sentinel published a long front-page story about the issue.

So when all that coverage is combined, what do we know about the bill?

1. No municipality requested the legislation.

Rep. Tyler August, R-Lake Geneva, the proposal’s lead author, told the State Journal August he wasn’t aware of any municipalities that are interested in selling their water utility. Curt Witynski, Assistant Director of the League of Wisconsin Municipalities, told me no municipalities had requested the bill.

“As a member of the Assembly Committee on Energy Utilities, I did not hear testimony from any municipal leader asking for expanding the ability of corporations to take over their water utilities,” Rep Amanda Stuck (D-Appleton) noted in a press release. “Instead what we heard was a desire to keep control of these vital utilities local.”

2. The bill was pushed by Aqua America, so it can buy water utilities.

As I reported, Aqua hired former Republican legislator and Assembly Majority Leader Steven Foti as a lobbyist, and he worked to get the bill passed by the assembly. August told the Journal Sentinel he introduced the bill after meeting with representatives of Aqua America and Foti.

3. The bill is supported by the state Public Service Commission.

Witynski told me the PSC, which regulates utilities, is “quietly friendly towards the change.”

Aqua America told the Journal Sentinel it met with the Public Service Commission to promote the idea and PSC officials helpfully identified possible customers, “communities that they would consider maybe on their troubled list,” said Jim Bilotti, corporate development director for Aqua America’s operations in Illinois. PSC spokesman Elise Nelson told the newspaper that 161 of the state’s 582 water utilities had an operating loss in 2014, but later backed off: “in an email, Nelson emphasized a one-year loss isn’t an accurate picture of financial health. She did not respond to a request to provide the names of utilities that had losses in 2014.”

That echoes my interview with Rep. Josh Zepnick (D-Milwaukee), a supporter of the bill, who said the PSC was aware of municipalities who needed help, but he couldn’t provide the name of even one such municipality. So why is the PSC rushing to help a private company buy water utilities when no municipality has requested this?

4. No one has proven a need for privately-run water utilities.

August told the State Journal the bill would help any municipality that wanted to unload failing systems that required costly maintenance and repairs. “But opponents noted that the state provides loans and grants to municipalities that need to make repairs, and they scoffed at the idea that private owners would simply absorb costs instead of passing them on to ratepayers,” the State Journal noted.

“If a private utility is going to buy a municipal system, they aren’t doing it to break even, which is what these systems do,” David Lawrence, executive director of the Wisconsin Rural Water Association, told the newspaper. “They are going to do it to make money.”

And Aqua America has done very well in that regard, with net income of $233.2 million on operating revenue of $779.9 million in 2014, as the JS reported.

5. The bill gives citizens less voice in local water utility decisions.

The current law says there must be a referendum approving any sale of a water utility to a private company. The proposed law would make them optional, giving citizens 60 days to get the signatures of 10 percent of the voters in the municipality to force a referendum. But the original bill requested by Aqua gave citizens only 30 days to get signatures of 25 percent of the voters. Clearly the goal of the company is to make referendums as difficult as possible.

“I don’t know why we would want to go out of our way to make it easier for private, for-profit companies to come in and own our water utilities,” Amber Meyer Smith, a lobbyist for Clean Wisconsin, told the State Journal. “I would think we would want the highest and best level of accountability with something as important as water quality.”

6. Private companies like Aqua have a poor track record.

As we reported, there has been 170 instances since 2005 where Aqua North Carolina did not comply with state or federal laws regarding contamination levels, and customers there have complained about poor water quality, dry wells, high rates and subpar service.

In Chalmers County, Texas, the system run by Aqua has had repeated failures and warnings to consumers to boil the water. In Pennsylvania, after Aqua took over a dozen local water utilities, the rates rose from $153 to $707, an increase of 397 percent. In Florida, compared to other local water utilities, Aqua charged twice as much, had serious water quality problems, violated drinking water quality regulations 76 times and wastewater regulations 39 times. Customers complained the company’s water “was smelly, discolored, contaminated and undrinkable.”

7. Municipalities end up paying heavily to buy back their water utility.

Because private companies negotiate long-term contracts, it can be costly for cities to buy back their utility. As we reported, Fort Wayne, Indiana, got its failing water and system back from Aqua only after a lengthy, expensive legal battle, and after agreeing to pay Aqua $67 million to buy out the contract. The city of Indianapolis paid a termination fee of $29 million in order to end its unsatisfactory contract with Veolia.

From 2007 to 2014, a total of 28 U.S. cities and 62 in Europe and Canada moved to “re-municipalize” their water systems. The number of such actions has steadily grown since 2003.

8. This is a solution in search of a problem.

No municipality requested this change and should they face a problem paying for system improvements, they can apply for state loans and grants. This bill is simply an aid to Aqua America, whose corporate expansion plan is based on convincing more states to relax their laws regulating the private purchase of public water utilities. As Jodie Tabak, spokeswoman for Mayor Tom Barrett, told the Journal Sentinel, “It’s not clear to the city what problem this bill sets out to solve.”

14 thoughts on “Back in the News: 8 Problems With Privatizing Water Utilities”

  1. AG says:

    At this point I am neither for nor against the idea of private companies being able to propose taking over water utilities. I assume they would be regulated like the electric utility companies are.

    Bruce, I really want to make up my mind here, but all the information you provide is anecdotal and does not give the reader context. How do the number of violations compare to the average municipal run system? How many violations of all their systems are there compared to all municipal systems? How do the rate hikes compare? What time frame did the rate hikes take place? If there were large rate hikes, was there a reason? Perhaps some sort of major capital project that couldn’t be avoided? If there’s a rise in “re-municipalizing” water utilities wouldn’t that just be because there’s more private run systems and you’d naturally see that go up as municipalities switch back and forth?

    I am getting the impression there is a lot of information not being presented here. In addition, just because a municipality hasn’t come forth and said they are seeking privatization does not mean it couldn’t be a possible positive action. Same with the PSC… just because they are cooperating doesn’t mean they’re in bed with anyone.

    Again, I’m not advocating for these companies… I’m just seeing some major spin going on here.

  2. Bruce Murphy says:

    AG, I’m always suspicious when legislation is proposed to fix a problem no one has brought forward to the legislature. And I’m focusing on what I think are most important points. But I’ve also linked readers to all stories reporting on this, which includes my original story with links to all the research I cited.

  3. Bb says:

    They are planning to commit genocide using water resources much like flint. Flint is a issue across the mid west with old laterals and outdated infrastructure.

  4. Graz says:

    Corporations are desperate to gain possession of resources and water is at the top of the list. Water privatizers were run out of Bulgaria, and recently in India, I believe. Around the world, they leave communities with no potable water. It’s diverted from farm and people.. or, infrastructure for drinking water is not maintained , rates are beyond what the poor in the community can afford, it’s contaminated, etc.. It’s despicable.
    Regulations won’t matter, if the “trade” deals go through. Corporations owning water, resources, could sue governments for lost profits due to regulations. They sue to overturn local bans on fracking, and win. It will only get easier.
    Another recent example of privatization effect- the tailings dam in Brazil. Like the banks, paying a fine/slap on the wrist is just the cheapest way of doing business.
    https://sourceable.net/samarco-warned-well-before-brazil-dam-disaster/#

    In MI, Detroit Water became a regional water authority, whatever that means, formed by the governor appointed emergency “manager” who then terminated contracts to Flint to force their governor appointed emergency “manager” to renegotiate for exorbitant fees (Flint had notified them of their intention to switch to different system, in a year). No local elected officials had any say whatsoever. *The regional authority made the former water director their CEO with pay based on performance.

  5. CindyV says:

    “A solution looking for a problem.” That seems to be the way the GOP in Madison works nowadays.

  6. David Ciepluch says:

    Business loves to turn everything into a commodity including the air we breathe and water we drink that are requirements for life. All for their profit.

    Water is owned by the citizens of Wisconsin per the 1787 Northwest Ordinance, Wisconsin’s Constitution and Public Trust Doctrine and held in trust by the Department of Natural Resources for the citizens of Wisconsin. There is a long history of case law backing this up. The US Constitution 10th Amendment grants states power to protect the health safety and welfare of citizens. Municipal controlled water treatment plants and distribution systems supply healthy routinely tested water, that is also responsive to elected officials and the citizens. All taxpaying water drinking citizens have paid for these water systems with generations of tax support.

    A private company asked for this through their lobbyist. Citizens did not ask for private ownership.

  7. blurondo says:

    “So why is the PSC rushing to help a private company buy water utilities when no municipality has requested this?” Follow the money. The commissioners of the PSC are no different than any other politician in state government. They do the bidding of corporations that promise financial gain, maybe not immediately, but as soon as they exit their public duties. Adding an entire new industry to their control broadens the opportunity for those gains.

  8. podman says:

    David; I agree, the GOP legislation removing local zoning authority for streams,lakes,wetlands, high capacity well approvals with out state oversight,dredging of waterways,lake beds,wetlands,control of waterways/dams and now control of municipal water. The GOP is attacking the Public Trust Doctrine, “death by a thousand cuts.”

  9. Vincent Hanna says:

    AG it’s noteworthy that your skepticism skews pro-privatization. Who benefits if water utilities are privatized? How is it good if citizens have less voice in water utility decisions, especially considering what happened in Flint? You come across like someone who always assumes private companies only want the best for everyone and care only about the public good.

  10. Alene says:

    I think number five sums it up. 5. The bill gives citizens less voice in local water utility decisions.

    Since Republicans took over Wisconsin state government they have been systematically stripping communities, towns and cities of their rights to have a democratic government. Privatizing previously public utilities is one more way of stripping away the citizen’s rights.

    The current legislature in Madison doesn’t need someone to ask for legislation. They are intent on changing the way democracy is run in this state and country and they will quash anything or anybody to get what they want. Once under theocratic rule, we will be right back where our English ancestors were with everything in our lives being ruled by the church.

  11. David Ciepluch says:

    The role of business if provide goods and services for profit with a willing customer.

    The role of government is protect the health, safety and welfare of citizens. There is not profit motivation. Water is natural resource that is vital to life and health. Only government can assume the role and for Wisconsin, the Department of Natural Resources is the legal trust holder and protector of water on behalf of citizens.

    And of course Walker, the GOP, and ALEC laws do everything possible to undermine the role of government and power of the citizen, and want to bestow that power to corporations. ALEC laws are written by corporate attorneys, for their benefit, and not the benefit of citizens.

  12. daniel golden says:

    The perfect storm for corruption: a disgraced former legislator (lobbiest Steve Foti-2003 caucus scandal) doling out money do a morally bankrupt legislature and governor. The goal:to privatize yet another essential government service. The end result: a few will make hundreds of millions, paid for by multiplying the cost of the water delivered while reducing health and safety for the customers. Privatization of essential services, contrary to Republican dogma, almost always results in higher costs with poorer service. I would not want government to make my shoes, but only a historical ignorant fool would want greed driven corporations controlling the price and quality of drinking water.

  13. David Ciepluch says:

    Corporations already sell water in plastic containers made from oil at a cost of about $4 for a few gallons of water. This is higher than the cost of gasoline. So we do know what would happen with privatized water with cost and lack of any testing criteria or accountability for health and safety.

    After a company would suck all the wealth from a water treatment and distribution system, they would go bankrupt, and leave a huge decaying mess that would need complete reconstruction from neglected repairs and service. Generations have contributed to public water systems that serve us safe drinking water at reasonable prices and not profit involved. We should never allow a private entity to come in and skim off all the best cream that took generations of payments to build up.

  14. FLORA RATLIFFE says:

    I SAY ” DO NOT PRIVATIZING ANY WATER SUPPLY IN WISCONSIN” , THE SCHEMES AND GAMES BEING PLAYED FOR PROFIT SEEKING , MONEY HUNGRY PRIVATE COMPANIES .WILL LEAVE OUR WATER WAYS IN WORST CONDITIONS THAN PRIOR TO THEIR COMING .WE HAVE TO PRESERVE WHAT WE HAVE , WE DON’T WANT HAPPENING IN FLINT , OUR WORLD IS RUNNING OUT OF NATURAL RESOURCES !!!!!!!!!

Leave a Reply

Your email address will not be published. Required fields are marked *