Chicago Tribune  [Printer-friendly version]
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

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

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