Report Questions Future of American Water

New Report Questions the Future of American Water

As RWE Spins Off American Water, Consumers Demand Accountability

Communities will challenge rate increases by their local American Water subsidiary in California, New Mexico and Ohio in the next week. In fact, as Germany-based utility company RWE prepares to sell American Water on Wall Street, communities around the country are resisting private ownership of water and complaining of poor service and rate increases by the company, according to a new report by Food & Water Watch.

“Water privatization by American Water has failed both to provide quality water services to the public and to meet expectations for corporate profits” said Food & Water Watch Executive Director Wenonah Hauter.

The report, The Future of American Water, profiles the RWE subsidiary American Water, which was purchased for $4.6 billion – a 37 percent markup over the company’s stock value – in 2003. American Water was the largest investor-owned water utility in the country with 18 million customers in 29 U.S. states and $3 billion in debt at the time of the RWE purchase.

In spite of early promises not to pass expansion costs on to the ratepayer, American Water has sought massive rate increases, ranging from 20 to 2000 percent, all over the country. Utilities commissions will hold hearings about the proposed increases in California, Ohio, and New Mexico over the next week.

“Utilities that manage such an essential resource as water should be accountable to the local community, not faraway shareholders or parent companies,” continued Hauter. “Utilities commissions should not reward American Water for poor service and should instead reject outrageous rate increases.”

Earlier this year, RWE announced its intentions to sell the company in an initial public offering now scheduled for 2007. The company recently sold its troubled UK water subsidiary, Thames Water, to an investment bank for nearly $15 billion, approximately $6 billion more than they paid for it six years earlier. In communities across the U.S., mayors, city managers, ratepayers, and local citizens groups have all said that they want to buy their water systems. But RWE refuses to do business with those communities and American Water CEO Don Correll recently announced plans to pursue more long term contracts and purchases of small water utilities after becoming independent from RWE.

“Water should be managed as a public trust in the public interest. But instead, our essential resources are being bought and sold to make a quick buck,” concluded Hauter.