Chicago Tribune, May 28, 2006


Towns push to make service public again

[Rachel's introduction: Multi-national corporations are busy privatizing public water utilities across the U.S. They now control 15% of our water. With concerns over price gouging and poor service, communities in Illinois and elsewhere are starting to fight back.]

By E.A. Torriero

For many towns across the country, it once seemed like a good idea to have municipal water utilities in the hands of private companies.

Now, bristling against skyrocketing rates, spotty service and foreign ownership, a number of towns across Illinois and the U.S. are waging fierce battles to regain control of their drinking water. A host of them are fighting a German conglomerate that has snapped up more than 1,800 American water utilities.

The battle is intensifying in Illinois, where the German company RWE and subsidiary Illinois American Water own the water supplies for more than 1 million people in 125 areas of the state.

Responding to complaints, American Water held meetings last week in Homer Glen, Orland Park and Bolingbrook hoping to mollify angry customers. Instead, they tapped into a deep vein of frustration.

"Everything we hear is double-talk," said Debbie Litoborski of Homer Glen, who is fighting the company over an $800 water bill. "Should we call Germany to get the answers we need?"

In most of the country, including Chicago and many suburbs, water service remains a public utility. About 15 percent of America's water business, however, is in private ownership. Those ranks have tripled in the last decade as cash-strapped cities seek ways to upgrade aging water systems by turning to private firms.

Nevertheless, a showdown is brewing in Illinois as a half-dozen communities are plotting to take over water systems. If they succeed, Illinois American could lose as many as one-third of its customers.

Grass-roots groups are forming statewide to exchange battle plans, hold rallies and plot strategies. Busloads of angry suburban residents descended on Springfield this spring, demanding legislative help. In April, Urbana's Mayor Laurel Prussing flew 4,327 miles to chastise RWE executives and shareholders in Essen, Germany.

"I fired a diplomatic shot across the bow," she said. "I was there to show the flag and to let them know that Americans are offended by foreign intervention and corporate bullying. After all, it's our water, not theirs."

Nationally, government and community takeover attempts against the subsidiaries of Germany's RWE have lasted years and cost taxpayers and consumers millions of dollars for legal challenges, referendums and public relations campaigns.

In most instances, American Water--RWE's U.S. arm and the largest private water company in the country--has won. In the last 15 years, it has sold only three operations because of hostile challenges.

Bought by RWE for $7.5 billion in 2001, American Water has 1,800 operations in 29 states and three Canadian provinces, serving 18 million and generating $2.2 billion in revenues.

To the company, the threats are government piracy to thwart free enterprise. The backlash has split towns, torn apart councils and spawned court fights that landed in state supreme courts.

"The communities lose and the company loses," said Joe Conner, a Tennessee attorney who has litigated the company's battles against several communities.

In Monterey, Calif., last year, the company went on a blitzkrieg advertising rush to defeat soundly a ballot issue calling for a public water utility purchase. In Chattanooga, Tenn., the company spent more than $5 million before fending off a city takeover in 2000. In Lexington, Ky., a bitter battle is now headed toward a November referendum.

In Illinois, in a blow to the company, state legislators passed a bill this session that would make it easier for communities to seize local water operations. The legislation is awaiting the governor's signature.

The Illinois challenges come at an especially delicate juncture for the company. Although American Water officials say none of the firm's individual units is for sale, RWE is pursuing a public stock offering for the whole of American Water.

If communities succeed in taking over even a few of its subsidiaries, the value of the public offering could be seriously eroded, company officials say.

In Illinois, the company defends its record despite two pending cases before the Illinois Commerce Commission and an aggregate complaint from the state attorney general over allegations of bad service and rate gouging in three Chicago suburbs.

In the last decade, water wars in Illinois have taken psychological and economic tolls. Seven years into its battle, Peoria decided last year against a water takeover after an appraiser put the price tag at a hefty $220 million. A few miles away, in Pekin, a takeover attempt was squashed when the Illinois Commerce Commission ruled in 2004 that Pekin was not capable of running the utility better.

Now, a half-dozen Illinois communities--Pekin, Champaign, Urbana, Homer Glen, Orland Park and Bolingbrook--are bent on forcing Illinois American to the bargaining table.

Consumers became riled in Champaign-Urbana last summer, when failed pumps led to impure water on five occasions. Then, firefighters arrived at a blaze in Champaign to find two of three hydrant covers stuck shut. Illinois American describes them as isolated incidents, but a backlash had begun.

On May Day, activists in Urbana staged a mock birthday party complete with cake and balloons for Donald Correll, American Water's chief executive. They sent Correll "greeting cards" demanding the company sell local operations at a reasonable price.

The company has been firing back with letters to consumers in Champaign-Urbana and telephone polls asking whether city officials' attentions should be elsewhere. They gathered central Illinois business leaders recently to warn that local officials were embarking on a costly fight.

"I'm sort of perplexed why we would want to go through this," said John Stewart, who runs an advertising business in Urbana and lives in Champaign. "It seems likely it would be a laborious process that could split the community, and nothing in the end would get accomplished."

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E.A. Torriero