Indianapolis purchased its water utility from the Indianapolis Water Company in 2002 and immediately privatized the operation of the system. Veolia received the 20-year, $1.5 billion deal to manage the city’s water system. This had been Veolia’s largest water contract in the United States.
Since then, workers, consumers and government officials alike have all had problems:
- Employees claimed the company cut their benefits by more than $50 million.
- Residents accused the company of using unfair billing practices and overcharging them.
- More than one million people were put on a boil alert in 2005 after a company employee entered a wrong code into a computer. This meant that before water could be safely used, it needed to be boiled. As a result, schools and businesses shut down and hotels and restaurants were forced to serve only bottled water.
- A city councilmember criticized the company for cutting back on staffing, water testing, treatment chemicals and maintenance, and other members questioned whether the company had a financial incentive to fudge quality tests.
The company apparently lowballed its bid to win the deal, but after several years of multimillion-dollar losses, the company finagled major concessions from the city. A controversial contract amendment signed in 2007 shifted millions of dollars in liabilities from the company to the city while increasing city’s annual payment to the company by $1.9 million. In total, the amendment cost the city more than $144 million. State regulators refused to allow the city to recoup some of these additional expenses in a rate increase.
By 2010, with infrastructure needs mounting, the city opted to wash its hands of the water utility altogether and decided to sell it, along with the sewer system, to the nonprofit Citizens Energy Group. As part of the transfer, the city agreed to pay Veolia $29 million to terminate its contract early. Citizens Energy believed it could realize savings not possible within the constraints of the contract.
Veolia’s Indianapolis contract ended In August 2011.
- Veolia Environnement: A Profile of the World’s Largest Water Service Corporation (report)
- A Closer Look at Veolia Environnement’s Bad Track Record in the U.S. (press release)
- A Closer Look: Veolia Environnement (fact sheet)