Can you imagine having your water billed by Chevron or Exxon? All right, maybe that’s a bit of a stretch. But we often talk about water becoming the new oil in this century and, right now, there are a few big companies jockeying for position to take over public resources like water. Would you tolerate a monopoly takeover of your tap water?
It’s actually been happening for a while now, only it’s not always making headlines. Financial institutions like J.P. Morgan and the Carlyle Group are trying to buy up water companies and the already large water corporations like Aqua America, Inc., and American Water are collaborating to expand their stronghold in key markets. All of these private entities are positioning themselves to heartily profit from the commodification of water.
Back in September 2010, J.P. Morgan purchased SouthWest Water, a large national water company. Just before the holidays, the Carlyle Group announced it plans to purchase the Park Water Company, which owns water systems in California and Missoula, Montana.
While most of us were doing our last-minute shopping for seasonal bargains, the nation’s two largest publicly traded water corporations were shopping for good deals, too. Aqua America, Inc., started making arrangements to purchase water operations in Texas from American Water Works Company, Inc., while also selling their Missouri operations to American Water — a convenient swap, for sure. Since the deal needs regulator approval, the transaction has not yet occurred.
What does all this purchasing and positioning mean? In poker, these transactions would be an awfully big “tells.” Here we have major investment firms realizing the profit potential from getting into the water business as available water resources dwindle and as cities become more desperate to give up control of their systems in exchange for much-needed cash. Simultaneously, the two largest U.S.-based water companies are working together to kill competition in two key markets: high-growth Texas and increasingly privatization-active Missouri.
While scrambling to stay financially afloat at a time when most states and cities are experiencing record budget shortfalls, many city councils have considered selling their municipal water systems to private entities like Aqua America or American Water. But communities seeking to sell their water systems there shouldn’t expect to get a good deal since the goal of these private water companies is to establish large monopolies, thus eliminating competition and consumer choice along with it.
Aqua America, for example, focuses their resources on expanding in markets with fast-growing populations and corporate-friendly regulators. It targets smaller systems, often ones that are in disrepair, and makes several acquisitions each year. (In 2010, it took over 23 systems.) Some of these systems are known as “tuck-ins,” or smaller systems that it can incorporate into larger systems nearby.
After taking over systems, large investor owned water utilities aggressively pursue rate increases. The typical household sees their water bill increase by an average of about 10 percent each year following privatization. That’s not surprising. The companies’ priority is their own bottom line and not consumer satisfaction or even public health.
Many private utilities sell bulk water (a whole-sale amount of water) to nearby municipal water systems that don’t have a sufficient water supply. By increasing rates, private companies can effectively force these communities to sell their water systems. This was a factor in American Water’s expansion in Missouri. Since these acquisitions are done piecemeal, it’s easy to miss the big picture, but, since 1991, at least 144 local governments have privatized their water systems.
It doesn’t have to be all doom and gloom, though. Back in 2008, when Goldman Sachs tried to acquire the water system in the Reno-Sparks area, the directors of the Truckee Meadows Water Authority saw the writing on the wall and voted it down. But these transactions tend to happen quickly and behind closed doors. It takes communities who pay close attention to their city council meetings to stop the corporate takeover of public water systems and fend off what could become tap water monopolies. One thing is quite evident: there are suddenly more foxes around the hen house, and they are becoming quite sly.