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Great Lakes Article:

Untapped Market
by Tim Holt
Published by Tom Paine
01/26/04

Water has been called the oil of the 21st century. The World Bank predicts that by 2025, two-thirds of the world's population will not have enough drinking water. With scarcity making water an increasingly valuable commodity, private companies are tempted to corner water supplies and delivery.

"We think there'll be world wars fought about water in the future," predicts the aptly named Peter Spillett of RWE/Thames Water, one of the three largest water companies in the world.

Even in the United States, long a bastion of publicly owned water systems, water is increasingly viewed as something to be bought and sold. Private companies have started taking over municipal and suburban water systems, which gives them monopoly control over water rates. Water "privatization," and, most notably, the dramatic entry of the three largest water companies in the world to the U.S. market, threatens local control over this precious resource.

With 85 percent of U.S. consumers still receiving their water from public systems, the Big Three water companies, all based in Europe, see this as a tremendous opportunity for growth. RWE/Thames of Germany and Vivendi and Suez of France have made an aggressive entry into this country with the purchase of American Water Works, U.S. Filter and United Water, respectively. They are now the three leading U.S. water companies.

Although the Big Three's holdings are spread out across the United States, much of their future growth will likely occur in the arid Southwest, where water scarcity, fueled by suburban growth, can be expected to drive up water rates. Paris-based Vivendi has already purchased 45,000 acres in California's Imperial Valley, giving it highly coveted rights to Colorado River water, and an amount equal to 8 percent of the water used in San Diego County.

The push for privatization has spawned charges from customers and public officials alike of inflated rates and poorly maintained equipment as profits are siphoned into corporate coffers.

The differences between private and public water companies are dramatically illustrated in the Los Angeles suburb of Thousand Oaks. Two private companies and one city-run operation coexist, each in a separate district that provides water to 20,000 homes.

"We are a snapshot of the future," says Thousand Oaks Assistant City Manager Scott Mitnick. He notes that the private companies charge rates substantially higher than those of the city operation, with one-an RWE/Thames subsidiary-charging rates that are a whopping 33 percent higher than the city's. RWE/Thames customers who have complaints, he notes, end up talking to operators in Illinois.

A similar pattern prevails in the Monterey Bay area, whose water system was recently acquired by RWE/Thames. The system, run by private companies since the late 19th century, is leaky and antiquated. As in Thousand Oaks, customers with problems talk to operators in Illinois. Alarmed over the prospect of increased rates and anonymous service, citizen efforts have sprung up all over the country--from Lawrence, Mass., to Stockton, Calif.--to thwart corporate takeovers of municipal water systems.

A court case brought by a citizens' coalition in Stockton resulted in the termination, last fall, of the most lucrative water transfer agreement in the country. It was a 20-year, $600 million contract between the city and a joint private operation consisting of RWE/Thames and American partner OMI of Denver.

In the coastal town of Montara, Calif., the state's Public Utilities Commission ordered the transfer of a private water company back to public ownership after the privately owned system had experienced numerous breakdowns and several changes of ownership coupled with rate increases. RWE/Thames was the last private operator of the system.

"Every time it changed hands, rates went up," notes Scott Boyd, president of the now publicly owned Montara Water and Sanitary District. Faced with mounting water bills, Montara's citizens expressed their clear preference for the return to a public operation, with 80 percent voting for the bonds needed to purchase the water system. The new public system has begun funneling money into the repair of what Boyd calls a "uniquely decrepit" system.

There is an inherent contradiction in the notion of reaping profits from the delivery of a life-giving resource. The huge size of the companies now moving into the U.S. market only exacerbates the disconnect between water provider and water consumer. Governments or public water districts are typically involved in the delivery of water because we literally can't live without water. Letting it fall under the control of companies based in Germany or France may be a boon to their shareholders, but not to those who depend on their water.

Tim Holt is contributor to Writers on the Range, a service of High Country News. He is an environmental writer who lives in the Mount Shasta region of California.

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