Fighting Water Privatization in Pennsylvania And Beyond

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Clean Water

by Mia DiFelice

In July 2022, the Bucks County Water and Sewer Authority shocked residents when it rushed an unannounced vote on a deal with Aqua PA. The deal would have allowed Aqua PA, the local arm of $12-billion corporation Essential Utilities, to exclusively negotiate a purchase of the County’s sewer system. 

The vote came after months of backroom dealing, following Aqua’s unsolicited offer during the height of the pandemic. Residents worried how Aqua would raise rates, as the company’s average rates are double the region’s. 

If passed, the sale would have been the largest of its kind in the U.S., with $1.1 billion on the line. And it would have handed a public resource to a corporation with a driving priority: profit.

Water and sanitation should be managed in the public interest. That’s how we’ll secure the human right to clean, affordable and accessible water for all. But private corporations don’t see water as a right. They see it as a commodity they can profit from. 

And nowhere is it easier for corporations to swoop in and gobble public water systems than in Pennsylvania.

Pennsylvania Law Lets Water Corporations Get Away With Too Much

Across the country, about 1 in 10 people get their drinking water from private companies. But in New Jersey and Pennsylvania, it’s 1 in 3. Water corporations have descended on Pennsylvania in recent years, thanks to legislation that greases the wheels on these deals. 

In 2016, Pennsylvania’s Act 12 allowed corporations to buy public utilities for more than their regular book value. Corporate proposals aren’t limited by the value of the system’s infrastructure. Now, they can approach municipalities with hugely inflated offers. And they do this because they can recover the acquisition’s full cost, plus 10-11% profit, by raising rates. 

After Act 12 passed, New Garden Township, PA, became the first municipality to agree to sell its sewer system. The result — rates jumped 30% when the acquisition was first announced, then an additional 37% after it was completed. 

Corporations Are Exploiting Federal Disinvestment 

With privatization deals, corporations exploit federal disinvestment in water infrastructure. Since 1977, federal funding for municipal water systems plummeted 77%. Disinvestment is one of the driving factors for water crises across the country. Many localities, especially in low-wealth and redlined communities, struggle to fund needed improvements when their residents can’t afford higher bills. 

We see the consequences now in Jackson, Mississippi. Following the recent water crisis that came to a head after decades of environmental racism, the corporate water lobby is now preying on Jackson to promote privatization and rationalize their unaffordable water bills in the media. 

However, privatization deals don’t usually fund infrastructure improvements. The sale becomes a backdoor to use water rate money for other purposes. That includes pet projects, paying off debt or avoiding property tax hikes. This practice isn’t just nontransparent — it’s fiscally irresponsible. It trades the permanent sale of a major asset for a one-time flood of cash.

And when privatization deals go through, ratepayers are hit hardest. Private water utilities typically charge 59% higher rates than public utilities. They’re also less likely to place protections against moratoriums on water shutoffs and less likely to have conservation programs (i.e., help their customers save money). 

In this way, privatization exacerbates our nation’s water affordability crisis. In the U.S., one in three households struggle to afford their water bills. Each year, an estimated 15 million people experience a water shutoff over unaffordable water bills. 

Water is a Right — Not a Profit Center

Running a water system comes with huge costs. The infrastructure and maintenance is expensive. Water systems are one of the most capital-intensive utilities. Because of this, water systems are natural monopolies. They face no competition. 

Privatization makes these monopolies dangerous, as private corporations are accountable first and foremost to their stockholders — and the pursuit of profit. They have less incentives to consider the wide-ranging effects of their rate hikes and infrastructure decisions. 

On the other hand, with local control, public institutions can check water system monopolies. Residents can vote in or out the public officials who oversee the utility. They can pressure their elected officials. They can share their concerns at public meetings. 

Ultimately, water service is not a tradable good that can be sold on a market. Rather, it is a public service that is essential for life. Privatization threatens our right to water with price hikes, service shut offs and decisions that put profits before people. 

A Victory Against Privatization in Pennsylvania

When news of the Bucks County deal first broke, residents went to work. Local group Neighborhoods Opposing Privatization Efforts organized to make their dissent clear. They mobilized for opposition from municipal leaders and pressured the Bucks County Commissioners to oppose the deal. Finally, in September 2022, the chair of the BCWSA confirmed that the deal was off — the sale wouldn’t go through.

As our Eastern PA organizer Ginny Marcille-Kerslake put it:

“This was a backroom corporate deal from the start, and it only stopped because local residents started to ask questions, voice their concerns, and hold their elected commissioners who have the power to change the BCWSA’s charter accountable. Getting the board to see the light and slam the brakes on this terrible deal is a huge win for clean water, public input, and democracy itself.”

The efforts of the residents of Bucks County show the power of people in the face of corporate takeovers. And it shows the value of public systems in which those most affected by changes have a voice in them. As the fight against privatization heats up in Pennsylvania and beyond, we’ll be standing with communities every chance we get. 

Right now, the Pennsylvania State Assembly is considering a bill that would make privatization even easier. You can help us stop the bill and defend against water privatization in PA.

Pennsylvanians: tell your representative to reject this water privatization bill!

Futures Trading: Another Threat To Our Right To Water

Categories

Clean Water

by Mia DiFelice

In late 2020, the Chicago Mercantile Exchange (CME) launched the first water futures market, called the Nasdaq Veles California Water Index Futures. This market allows financial speculators to literally gamble on the price of water. But how does that actually work? And what are the consequences?

Water Futures Open Water Rights To Gambling 

First, let’s start with water rights. Generally, states west of the Mississippi allocate water resources through a water rights system based on the doctrine of “first in time, first in right.” Because of the history of the West, those with the most senior water rights are usually those who use it for agricultural purposes. 

These rights are appropriative. Those who hold them have the legal right to divert water from its natural flow; for example, via crop irrigation. In California, as in other western states, rights holders can sell or lease the rights to use the water to others. 

The index that Nasdaq Veles created is a single number that estimates the prevailing price of water in California. This number changes as water prices change. It’s based on an algorithm and a supposedly representative list of transactions — both of which Nasdaq Veles keeps confidential.  

CME’s new market allows investors to bet on changes in the index. Investors do this by entering a futures contract. The buyer and seller of the contract bet on how the index price will change by a predetermined date in the future. The financial speculators who sell futures contracts hope the price goes down, so they get paid at that date. Those who buy futures contracts hope the price goes up, so they get paid at that date. 

When the contract period ends, neither the buyer nor seller will get any water or rights to water. Instead, the “winner” gets cash. They “win” the difference between the index price at the start of the contract and the price at the end. So if no actual water is changing hands, what harm can it do? Turns out, a lot.

Water Futures Are Bad News For Real-Life Water Access

Proponents of the market say that rather than a casino, the futures contracts will function more like insurance. Farmers who participate in the market can insulate themselves from volatile changes in water prices by securing another source of income.

But the water futures market has inherent risks. It opens up the doors for further commodification and privatization of water. It can reframe water not as it is — a basic human right and resource that should remain in the public trust — but rather as greedy speculators would like it to be — something to bet on, like oil or gold. And, in doing so, it opens up water to excessive speculation and market manipulation, with consequences on the price of actual water.

First, investors, especially if they have huge contracts and stand to make or lose a lot of money, may try to profit from the futures market by manipulating the underlying market for real-life water. A single investor is allowed to buy water futures contracts equal to 31% of the average annual water rights transactions. Market manipulation is rampant in other futures markets that are based on price indices. 

California is particularly vulnerable to market manipulation because it lacks price transparency for water rights transactions. This is even more concerning considering that the CME can keep the data and algorithm of its index secret, calling it “confidential business information.” The public has no way of knowing if the index is accurate.

Excessive speculation is the second way that the water futures market could lead to real world price hikes. The presence of many large speculators on the futures market could send price signals that the price of water will increase. So rights holders of real-life water may hoard their water in response. This would cause prices for water to rise. 

“You can’t put a value on water as you do with other commodities. Water belongs to everyone and is a public good. It is closely tied to all of our lives and livelihoods, and is an essential component to public health.

Pedro Arrojo-Agudo, Special Rapporteur on the human rights to safe drinking water and sanitation.

If prices rise, small farmers will be among the hardest hit because agricultural users are the largest sellers of water rights. High prices would make irrigation unaffordable for many small farmers. They’ll close up shop and sell their land, usually to big agribusinesses. That means more farmland consolidation and more profits and power to big corporations.

We Need The Future Of Water Act To Protect Our Water

Financial speculators should not be allowed to gamble on and profit off of drought in California. As droughts, wildfires and climate chaos threaten our water supplies, we need to protect this invaluable resource as a public trust, managed in the public interest.

Water futures will incentivize the rich to protect their interests in water. Meanwhile, everyone else will face increasingly scarce and unaffordable water. 

Fortunately, in March 2022, Sen. Elizabeth Warren and Rep. Ro Khanna introduced legislation to ban water futures trading. The Future of Water Act will ensure water is not a financial toy for speculators to play with, hurting families and small farmers in the process. Passing this legislation is an essential step to secure our human right to water.

Tell Congress to cosponsor the Future of Water Act!

5. SUPPORTING THE WATER ACT

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Clean Water

Supporting the WATER Act

We fight every day to make sure water remains a right and not a luxury.

People power is how we protect our access to safe public water for all.

2. STOPPING THE PRIVATIZATION OF A PUBLIC RIGHT

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Clean Water

Stopping the privatization of a public right

Water is a human right — corporations have no business managing public utilities.

Public ownership ensures our water systems are safe and affordable for everyone.

1. OUR RIGHT TO CLEAN, AFFORDABLE WATER

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Clean Water

Our right to clean, affordable water

Water is a human right and it should never be withheld from anyone.

Corporations have no business profiting off of what belongs to the people.

Privatized Water Costs More Than Public Water

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Clean Water

We’ve known for years that when communities sell their water systems to private companies, water bills tend to go up. But by how much?

Food & Water Watch did a survey of 500 municipal water systems – the largest survey of its kind – and found that public utilities charge an average of $315.56 per year for a typical household. Private water utilities averaged $500.96 – an increase of 59%.

That’s an extra $185 each year for the same amount of water.

In some areas, private water companies’ track record is even worse:

  • In Illinois, private water cost $286 more.
  • In New Jersey, private water cost $230 more.
  • In New York, private water cost $260 more.
  • In Pennsylvania, private water cost a whopping $323 more.

What do residents get for their extra money? Generally nothing good. As we’ve worked with communities affected by privatized water systems, we see the same trends everywhere: service gets worse, maintenance costs increase, and jobs vanish. Private water companies are motivated by their own profits, not by the public good, and they make decisions about their services accordingly. And unlike publicly operated systems, these companies aren’t accountable to residents, leaving people with little recourse to fix the situation.

Keeping our water in public hands usually means water service that’s more equitable, more affordable, and more reliable. Get the facts about public water, and take action to help fund critical repairs to our nation’s water infrastructure.

Will you join us in supporting the WATER Act?