Bruce Murphy
Murphy’s Law

Will Bill Privatize Water Utilities?

Proposed law opens door to companies like Aqua America running local water utilities.

By - Jan 28th, 2016 10:19 am
No Toxic Water. Photo courtesy of the  Overpass Light Brigade.

No Toxic Water. Photo courtesy of the
Overpass Light Brigade.

This is how the legislative process now works in Wisconsin. A company called Aqua America registers as a lobbyist, hires former Republican legislator and Assembly Majority Leader Steven Foti as a lobbyist, and he works to get a new law passed that will bring business for Aqua. The company has had success nationally selling its services to take over local water utilities.

Rep. Josh Zepnick (D-Milwaukee), the sole Democrat among a raft of Republican sponsors of the bill, says it’s intended to help municipalities that might need to do upgrades of their water system and can’t raise the needed money from local taxpayers. That’s where Aqua America, the nation’s second largest publicly traded water utility company in the nation, can help out. The $5 billion company already serves about three million people in eight states, and the proposed law would make it legal for out-of-state holding companies like Aqua to become the water utility in any municipality that chooses to purchase its services.

So what municipality requested this legal change? Zepnick said he didn’t know of any such request. Nor did Curt Witynski, Assistant Director of the League of Wisconsin Municipalities, who said “the bill is being pushed by a national private company that has acquired municipal water utilities in other states. The lobbyists for the company came to us and sought our support.” The Public Service Commission, he added, “is also quietly friendly towards the change.”

There are 582 local water utilities in the state. Not one of them, apparently, requested this measure. Yet it has already been passed by the Assembly, as AB554, and is likely to be passed today by the Senate, as Senate bill 432.

Zepnick noted that under the current law a private water company located in Wisconsin can already sell its services to a municipality (in fact five of the 582 local water utilities are privately owned), so this simply opens the door to more competition.

But if that’s the goal, why does the law also make it less likely there will be a local referendum on whether to privatize a water utility? Under the current state law, a referendum is mandatory. Under the revised law sought by Aqua, the citizens must request a referendum and have 60 days to get the signatures of 10 percent of the municipality’s voters in the last election for governor to support a referendum.

Actually, the original bill requested by Aqua gave citizens only 30 days to get signatures of 25 percent of the voters, but legislators amended the bill to make it less tough. The amended law is at least better than the law passed in New Jersey in February 2015, where any referendum required the signatures of 25 percent of voters within 45 days.

Privately owned water utilities such as Aqua are proliferating in America. A story by reported that “an estimated 69 percent of public water systems…in the U.S. are privately owned.” That includes Aqua America, whose customers in North Carolina “have complained to the company and to state environmental and utilities officials about poor water quality, dry wells, high rates and subpar customer service.”

“Since 2005, there have been at least 170 instances in which Aqua NC water did not comply with state or federal laws regarding contamination levels, monitoring and public notification of violations in the Raleigh region,” the story reports. Aqua customers have complained that “they don’t want to wash their clothes, their dishes or themselves in brown, dirty water.”

In Chalmers County, Texas, the system run by Aqua has had repeated failures and repeated warnings to consumers to boil the water, as the TV station KHOH reported.

In Pennsylvania, after Aqua took over a dozen local water utilities, the rates rose from $153 to $707, an increase of 397 percent, Food & Water Watch reported.

In Florida after opposition was organized by citizens in counties served by Aqua America, the company pulled out of the state, Food & Water Watch notes. Compared to other water utilities in the state, Aqua charged twice as much, had serious water quality problems, violated drinking water quality regulations 76 times and wastewater regulations 39 times. Many of the company’s customers complained that the company’s water “was smelly, discolored, contaminated and undrinkable,” the watchdog group reports. From 2007 to 2011, the state Public Service Commission received 767 customer complaints about Aqua Utilities.

In Fort Wayne, Indiana, the city took over the operation of the northern water and sewer system from Aqua Indiana in 2008, “after winning a lengthy battle over the city’s right to condemn that went all the way to the state supreme court,” Food & Water Watch reports. It took more than five years, however, to finalize a purchase agreement because the company also sued over the purchase price.The city agreed to pay Aqua $67 million to buy out the contract.

All of which has driven up profits for Aqua America, whose CEO Nicholas DeBenedictis earns an annual compensation package that totals $4.1 million.

Typically, companies like Aqua push for long-term contracts, so it becomes difficult and costly for cities to buy back their water utility. In Hoboken, New Jersey where the Suez company (formerly United Water) has a contract that goes through 2024, NBC New York reports, two water mains broke and thousands of people have been without water and forced to boil their water.

The city of Indianapolis paid a termination fee of $29 million in order to end its unsatisfactory contract with Veolia. And in the four years United Water operated Atlanta’s water system (1999 – 2003), “the corporation halved the workforce, leading to water quality declines; however, rates continued to increase each year. City residents were forced to boil their water after insufficient treatment by United Water led to orange and brown water spewing from residential taps.” The experience of these cities was included in a report on privatized water utilities by Corporate Accountability International.

The report notes that “more and more communities are mobilizing… and an increasing number of local governments are terminating unsatisfactory water privatization contracts in the U.S. and globally. 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.

When asked about this history of privatized water, Zepnick notes that should Aqua take over any water utilities in Wisconsin, its rates would have to be approved by the PSC. That would be the same PSC that is “quietly supporting” the law proposed by Aqua.

As for water quality, Zepnick notes that the Wisconsin Department of Natural Resources can oversee this. That would be the same DNR whose scientific staff was decimated in the last budget passed by the legislature.

Witynski says the League of Municipalities supported the provision to make local referendums harder because “we have consistently opposed legislative efforts in the past that force us to go to referendum on policy issues” (such as laws requiring a referendum to approve an increase in state-imposed local tax levy limits) and “we believe elected local governing bodies are perfectly capable of making an informed decision on whether to sell a water utility.”

Given that the League represents municipal governments, that stance is to be expected. But it’s worth asking: if the lobbyists for Aqua were so easily able to roll the full-time legislators of Wisconsin, how much easier will it be when they are dealing with part-time municipal officials who may lack the time to study up on complicated water policy issues?

As Kara Kaufman of Corporate Accountability International notes, “we are seeing the private sector using this tactic across the country, pushing through legislation like the bill proposed in Wisconsin that would remove or roll back the democratic processes, that make it more difficult for the people to decide the fate of their own water systems.”

It’s worth noting that the Milwaukee Metropolitan Sewerage District has used a private company Veolia, but the company operates on a for-hire basis under the control of a governmental body. And the situation in Flint, Michigan proves that a publicly-run utility can also sacrifice quality. But what evidence is there that Wisconsin’s water utilities need to privatized? What municipality has called for this bill?

Sadly, there has been no media reporting of the proposed law. The only opposition has risen in the last week among liberal activists in Milwaukee, who held a rally on Tuesday night at Bradford Beach. Democratic state Sen. Chris Larson joined environmental groups like Milwaukee Riverkeeper, Sierra Club and Wisconsin League of Conservation Voters to demand the State Senate reject a bill “that threatens drinking water for millions of Wisconsinites and opens the door to corporate control of Wisconsin’s water utilities.”

Ironically, Milwaukee is probably the least likely of any municipality to privatize its water system. The idea was floated by former city Comptroller Wally Morics about a decade ago, and went nowhere. “I do not recall anyone (on the Common Council) supporting the idea,” Ald. Bob Bauman says.

But if the proposed state law passes, representatives of Aqua will some day be visiting council members and promising to save taxpayers money. By now its sale people have a well-honed sales pitch that’s succeeded in countless cities in America.

10 thoughts on “Murphy’s Law: Will Bill Privatize Water Utilities?”

  1. Any monopoly service owned by a profit-making corporation is a thorn in the side of the public. We need to look at ways of busting up vertical monopolies – like public ownership or an open cooperative of the last mile for broadband and electrical interconnections with multiple providers of broadband services and power production. The little guy with a solar array should have the opportunity to sell his power, as long as it complies with technical standards, on an open market.

  2. Water, not being a utility that can be easily converted to an open market model, should remain a democratically controlled public utility either municipally controlled or set up as a consumer cooperative.

  3. Robert R says:

    I’d argue that setting up a contract like MMSD has with Veolia is the key to whether it’s ultimately a good deal or bad one for taxpayers and users. I’d argue the MMSD/Veolia deal has worked out well.

    You negotiate a good tough deal with incentives and penalties and the ability to terminate the deal and it’s probably overall good for a community. You believe everything you hear and sign off on the first contract put in front of you, and you’ll probably regret it. And, making sure that anyone that puts in a proposal for a contract has a good track record, is something you should require if seeking bids.

  4. Milwaukee Native says:

    Privatization of public services is a way for massive corporations to bilk taxpayers while raking in huge profits. It often eliminates the potential of any oversight and accountability through the securing of dubious decades-long leases.

    Wise citizens know when to be afraid. Water is the basic substance of life. Making it easy for ruthless corporations and their lobbyists to con and buy legislators is the goal of this bill. It’s another takeover effort maneuvered in the dark of night. Wisconsin citizens can barely keep up with, much less counter, callous state legislators’ schemes to dismantle good government–and everything that makes the state livable and viable.

    Thanks UM, for using the great photo of the great Overpass Light Brigade. They’re a small citizens action group that has inspired similar low-tech actions around the world, including in response to terrorism attacks in Paris. I believe they emerged to shed light on issues after Walker and company started operating state government in the dark. So at least Milwaukee and WIsconsin is exporting a little bit of enlightenment!

  5. Steve says:

    The bill will also allow municipal consolidation – which is probably a better idea. Most water utilities in Wisconsin are very small and need to be absorbed into regional water utilities. If this is done by a private company or another public entity, it is likely to save money. We often hear about regional cooperation – well this is a way to tackle water regionally.

  6. David Ciepluch says:

    I prefer the method we have in place today, controlled by public officials that we elect, and operated by public employees. Water prices are very reasonable in our area and our water is protected by a multitude of tests. I would not trust a private entity with such a precious item that our very lives depend on.

    No. to any private profit supply of water or allowing them to take it and sell as a commodity.

    Water in Wisconsin is owned by the public. This was established in the 1787 Northwest Ordinance, and further enshrined in Wisconsin’s Constitution and State Statute under the Public Trust Doctrine. Wisconsin Department of Natural Resources is assigned the responsibility and role of water protection held in trust as guardian of water for all citizens. There is a great deal of case law supporting this fact.

    We do know that Walker and the GOP have been doing everything possible to undermine environmental laws and the Department of Natural Resources in Wisconsin. Walker and the GOP cannot be trusted and have zero credibility in letting lobbyists and corporations write the laws for Wisconsin. Gutting WDNRs budget and firing 100 experienced scientific experts is a very visible example of their recent betrayal. This action is another one.

  7. And then there is Flint.

  8. Peter Goldberg says:

    There is a theory and growing evidence among the plaintiffs attorneys in the Flint class action litigation that the separation from Detroit’s water system and corners cut were not so much as to cut expenses per se but as a thoughtless rush to privatize the water system in Flint.

  9. Virginia Small says:

    Even with whatever costs they reportedly attempted to cut in Flint, people have been forced to continue paying high monthly bills (I heard an average of $130) for water they cannot even use.

    It’s not that governments always do the right thing (witness Flint) but you can vote out officials or at least show up at rooms where decisions are being made. Privatization often removes ongoing oversight (e.g. Chicago parking meter fiasco) or renders it toothless, as many Aqua captive “customers” are finding.

  10. Tom D says:

    Robert R (post 3): there is a big difference between the MMSD/Veolia deal and what is being proposed here.

    Veolia doesn’t own the sewer system; it operates it for a predetermined price for a 10-year period. At the end of the contract in 2018, MMSD is under no further obligation to Veolia.

    What is being proposed here is a SALE of water systems. The sale doesn’t expire after 10 years; it is forever. There is potentially unlimited cost to citizens; the new owners are free to charge WHATEVER they wish in the future (subject only to review by an “open for business” PSC).

    Look at what has happened with recent toll road privatization in Indiana and Illinois. Since the first privatization (Indiana’s I-80 in 2006) tolls on those privatized roads have more than doubled. Do you want your water bill to double every 10 years?

    Actually, I think that water bills might increase even more than highway tolls because water systems have no competition. If highway tolls are too high, you can always take nearby un-tolled highways. If your water system charges too much, your only option is bottled water.

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