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Food & Water Watch: Private Water Investment Costly for Customers, Industry Analysis Reveals

FOR IMMEDIATE RELEASE
June 19, 2008
11:34 AM

CONTACT: Food & Water Watch
Kate Fried, Food & Water Watch
(202) 683-2500

 
Private Water Investment Costly for Customers, Industry Analysis Reveals
 
WASHINGTON, DC - June 19 - A future favorable to investor owned water utilities will result in higher rates, fewer consumer protections, a limited or non-existent federal safety net for low income communities and large infrastructure investments built to maximize profit, not the interest of the public, according to a Food & Water Watch analysis of investor briefs.

“Corporations have a financial incentive to oppose conservation, protection of drinking water sources and other policies and programs that would save money and help offset the economic burden on communities across the nation,” said Food & Water Watch Executive Director Wenonah Hauter. “Wasted water drives up a company’s revenue, which flows from people’s water bills.”

In fact, the investor research firm believes that if “faulty underground infrastructure were to interrupt a major city’s water supply for an extended period,” the public would be less resistant to rate hikes that benefit corporations. The analysis also reveals U.S. states where regulators are especially friendly to private ownership or management of water: Pennsylvania, Delaware, and Connecticut, with a nod to California’s recent about face on strong consumer protections and shift toward encouraging privatization of water service.

Although public utilities provide water to about 86 percent of people on community water systems, a private sector push is on to change this. The report, Costly Returns: How Corporations Could Profit From Inflating the Already High Cost of Repairing the Nation’s Crumbling Water and Sewer Infrastructure, analyzed investor briefs by Boenning & Scattergood and reveals that, thanks to some fancy finance and accounting, private utilities tie higher earnings to increased costs.

“Absent a needed increase in federal assistance, consumers and communities across the nation will see their bills continue to climb as utilities make necessary repairs and upgrades. Yet, corporate advocates are deceitfully using the costs of those upgrades to push elected officials into privatizing their water and sewer systems,” concluded Hauter.

“[T]he investment case for [investor owned utilities] is predicated on two key growth drivers, rate base expansion and ongoing industry consolidation, and federal funding for water system improvements is an incremental negative for both,” said one Boenning and Scattergood brief. “In terms of rate base, theoretically, every dollar that the federal government injects into local water systems is a dollar that will not go into someone’s rate base. . .”

According to the report, our nation’s aging drinking water and sewer infrastructure spans almost 1.5 million miles of piping, including about 640,000 miles of sewer lines. And, U.S. cities endure 250,000 to 300,000 water main breaks, lose one-fifth of their water through leaks and suffer 1.2 trillion gallons of wastewater spills each year. Americans will spend up to $1 trillion by 2019 to upgrade and repair our 1.5 million miles of piping and the treatment plants to avoid a public health crisis.

In Costly Returns, Food & Water Watch makes the case that privatization of water utilities would result in unnecessarily expensive and water-wasting projects. Often, the touted efficiencies of the private sector amount to little more than downsizing the workforce and cutting employee benefits – two actions that surely work against timely and effective completion of improvement projects on aging systems.

Food & Water Watch advocates the establishment of a federal trust fund to support our water infrastructure. Federal funding would reduce financing costs, allow small municipal systems to fend off privatization and ease the financial burden on families across the nation.

“Instead of solving our water crisis, privatization pads the pockets of corporate water barons,” said Hauter. “Indeed, when Congress passes a federal trust fund, it should be available only to the publicly owned and operated utilities that serve most of the nation’s population.”

Food & Water Watch is a nonprofit consumer rights organization that challenges the corporate control and abuse of our food and water resources. Visit www.foodandwaterwatch.org.

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