Twisted Logic of Privatization: You People Saved Water Last Year -- So Rates Are Going Up!


Yesterday I performed a web search on "water rate hike" and as expected, water rate hikes that range from 1.8% to as high as 35% are being asked. It's a situation found in many US municipalities. And there is anger to follow.

A common rationale is that 'customers used less water last year.' Because operating costs are relatively constant, the argument goes, (same pipe maintenance and health regulations to meet regardless of flow) operators experienced lower net revenues in 2009 and are proposing rate increases to meet the 2010 budget. Several cash strapped US cities have sold off their municipal water systems or at least contracted operations to for-profit companies. (One of the truly odd things about the water market in America is that the biggest players in privatization are European corporations.) Recapping the perverse incentive: conserve water to be "green;" get charged more for what you still use to keep the overseas profit stream flowing.

Sometimes it's a capital improvement which drives the big rate increase. Fixing leaky pipes is another common reason. Or, maybe expanding the system to serve The Sprawl.

Business Lexington documents the outrage at a rate increase to support a water system expansion.

In a resolution before the Urban County Council, Gray lashed out at Kentucky American Water's proposed 37 percent increase in the Lexington water rate. Gray's resolution asks for the Kentucky Attorney General to get involved in fighting the requested rate hike...If approved by the Public Service Commission, the proposed increase would boost the monthly bill for an average residential water customer from $25.46 to $34.90 - an increase of $9.44 per month or 31 cents per day.

This increase would come on top of a boost approved last June. The company had requested a 32.5 percent hike but was approved for an 18 percent increase.


American Water

started out as a mainly German owned company - seems foreign-owned water companies in the USA always pick a nice patriotic sounding name - but RWE AG, owner of American Water, seems to have decided that water is no longer the hot American business opportunity it once thought.

They are now a minority owner.

Was water just one more over-valued investment or were maintenance costs and customer push-back under-appreciated?

Outrage on pennies a day.

How do we square the serious need to repair the nation's water infrastructure with the fact that so many century old water pipes and valves are owned in whole or in part by foreign companies?

With more cities looking at privatizing their water systems to cut back on the public works payroll in times of tight city budgets, and with citizens tea partying their hearts out in opposition to the rate increases, something's got to give.

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