[Dryerase] The Alarm!--H2O: Locals struggle against private water interests

[The Alarm!Newswire]

Felton joins the fight against privatized water

Residents, activists and decision-makers battle German conglomerate 
RWE-AG over acquisition of Felton’s water rights

By Fhar Miess
The Alarm! Newspaper Collective

What does our own town of Felton have in common with Chattanooga, 
Tennessee, Lexington, Kentucky and Peoria, Illinois?  All these cities, 
among many others, have engaged in struggles to reclaim their municipal 
water systems from private corporations and conglomerates.  Felton is 
the latest to join the fight.  Santa Cruz County Supervisor Jeff 
Almquist, whose district encompasses Felton and much of the rest of San 
Lorenzo Valley, recently discovered that a German multi-utility named 
Rheinisch-Westfälisches Elektrizitätswerk Aktiengesellschaft (say that 
ten times fast), or RWE-AG, has laid plans to purchase 
California-American Water Company (Cal-Am), which owns water rights and 
facilities that serve the Felton community.  Unfortunately, notice of 
the acquisition and Public Utilities Commission (PUC) hearings to 
approve it went to the Santa Cruz County district attorney and county 
clerk, rather than the county counsel.  According to Almquist, this 
mixup resulted in a delay that excluded Santa Cruz County from 
participation in the review of PUC proceedings.

Almquist and his staff have been vocal in their opposition to this 
corporate merger, as well as rate hikes proposed by Cal-Am of 57% over 
the next three years, despite earlier company promises that rate hikes 
would be on hold until 2005 after the company acquired Citizens 
Utilities Company in 1999.

It was first owned by a small, local company before being acquired by 
Citizens Utilities, based in Connecticut.  Citizens bought a number of 
municipal water systems through the 90s and diversified into 
telecommunications with the deregulation of that industry.  They 
subsequently sold their water utilities operations and management 
across the US to the various regional subsidiaries of American Water 
Works Company.  In Felton, that meant the California-American Water Co. 
  Throughout that time, Ginger recalls the same few people staffing the 
local office.  While they were never particularly responsive to service 
requests, she claims that the various mergers have only served to add 
consecutive layers of bureaucracy to insulate them from their customers.

RWE-AG
RWE, founded in Germany at the end of the 19th century, is a 
multi-utility conglomerate of 848 wholly-owned companies.  It is 
Germany’s second largest publicly-held corporation and the world’s 
third largest for-profit water provider, behind French companies Suez 
and Vivendi.  After its acquisition of American Water Works through its 
Thames subsidiaries, RWE will be the largest investor-owned water 
utility company in the United States.

For most of its history, RWE focussed on electricity production and 
delivery.  It grew substantially during Hitler’s reign and even more so 
in the post-WWII period with the help of Allied powers and the Marshall 
Plan.  It surpassed its peak war-time production levels within only a 
few years, despite the widespread destruction of its infrastructure 
near the end of the war.

More recently, the company has focussed on acquisition of smaller 
utilities companies in electricity, waste management and water, using 
their existing customer base to expand profits from the sale of other 
services to those same customers.  They have drawn upon the leverage 
given to large corporations by economic liberalization to expand this 
model globally.

The company has come under fire from environmental groups for its 
practices of illegal dumping and storage of nuclear waste in Europe.

Thames Water, Britain’s largest water utility, was recently acquired by 
RWE.  US water systems will be organized under the control of this new 
RWE subsidiary pending regulatory approval.  According to the 
Environment Agency of England and Wales, Thames Water was Britain’s 
worst offender of anti-pollution regulations two years running (in 1999 
and 2000).

RWE also recently acquired Azurix, the former water services division 
of Enron, in addition to hiring a number of mid-level power traders and 
structurers from the scandal-stricken energy giant.

The poor safety record of RWE’s US coal-mining operations has likewise 
opened the corporation up to public criticism.

American Water Works
While many local communities, Felton included, have fought 
privatization of their most basic resource on the basis of wanting 
protection from the interests of a foreign conglomerate, American Water 
Works (AWW) is not much better.  Executives at AWW have been thoroughly 
behind the acquisition by RWE/Thames.  There is nothing hostile about 
this takeover.  While J. James Barr, CEO of AWW, will be retiring after 
the acquisition is completed, Marilyn Ware, Chairperson of the 
company’s Board of Directors will be taking a high-level consulting 
position in RWE-AG.  The economic model that led AWW to be the leading 
private water service provider in the US through mergers and 
acquisitions is perfectly in line with the profit-driven and 
expansionist model of RWE.

AWW was bought by John H. Ware, Jr. in 1947 and has largely been in the 
control of the Ware family since then.  Four of the company’s directors 
are members of the Ware family (according to Securities and Exchange 
Commission files, the occupation of one of those Ware family members is 
“homemaker,” revealing some fairly serious nepotism).  All-American 
family though they may be, they are by no means protectionist.

Marilyn Ware is Chairperson of the Executive Committee of the 
Eisenhower Fellowships, an organization committed to promoting 
“international understanding and productivity through the exchange of 
information, ideas and perspectives among emerging leaders throughout 
the world.”  The Chairman of this organization is Henry Kissinger.  The 
two men listed as “Honorary Chairmen” are former presidents George Bush 
and Gerald Ford.  Donald Rumsfeld is identified as “Chairman Emeritus” 
of the Eisenhower Fellowships.

Last month, President Bush appointed Marilyn Ware to the National 
Infrastructure Advisory Committee, charged with safeguarding the 
security of US banking and finance, transportation, energy, information 
technology and manufacturing infrastructures.

Ms. Ware’s ties to the Bush family go deeper than this, though.  She 
and other members of the Ware family have given over $100,000 to Bush 
election campaigns in addition to organizational support.  The Bessemer 
Group, which manages investments for rich folks with at least $10 
million to spare, invests millions of shares in American Water Works 
Company, giving it a 6.2% stake in the company in 2001.  The Bessemer 
Group also manages the not-insignificant investment finances of George 
Bush, Sr.  If the RWE acquisition survives regulatory scrutiny (as it 
likely will), the massive proceeds of the sale will not go primarily to 
faceless and feared German bureaucrats and investors, but to an 
all-American plutocrat whose mug we are all too familiar with.

In our own back yard
RWE executives, however, seem to have underestimated the anti-German 
sentiment that still lurks in American society.  Communities across the 
country, already irked by rate hikes and poor service from American 
Water Works, are drawing the line at having their water rights owned 
and controlled by what they perceive as a foreign power hostile to us 
just decades ago and becoming increasingly antagonistic to our present 
federal administration on the question of Iraq.  Through referenda, 
bond measures and eminent domain proceedings, communities as far flung 
as Chattanooga, Tennessee and as nearby as Montara, California (just 
north of Half Moon Bay) are kicking American Water Works and RWE out, 
often urged on by a fear of German economic invasion, shrouded in the 
language of “security.”

Of course, not all of the critiques of for-profit water service fall 
into the protectionist, nationalist (or regionalist) categories so 
often and so easily derided by “liberal” economists.  For instance, 
some of County Supervisor Jeff Almquist’s constituents have expressed 
frustration that he remained silent on continuing problems with the 
operation and management of Felton’s water system until a foreign 
conglomerate came into the picture.  Residents of Felton and local 
activists are now calling for the seizure of the utility’s facilities 
in the area so that it can be merged with the neighboring San Lorenzo 
Valley Water District, a local, publicly-controlled utility.  Aside 
from RWE’s poor environmental record in Europe, residents note the 
years of poor service under both Citizens Utility and 
California-American Water Company, which is only likely to get worse as 
management is taken over by RWE’s subsidiaries.

Felton residents also point to exploitive rate hikes, which could be 
avoided by capitalizing and managing the water system locally.  Adding 
insult to injury, according to residents, RWE is in negotiations with 
Arrowhead Water Company, now owned by Perrier Corporation of France, to 
export water from Felton.  Arrowhead was caught stealing water from the 
area in 1989 and was fined $100,000 in what was at the time the largest 
land-use fine ever collected in the State of California.

As municipal water systems have changed hands and for-profit providers 
have been unable to consistently deliver customer service or clean 
water, many communities became antsy but were often unable to develop 
the political will to reclaim their water systems in the face of 
mammoth public relations campaigns (American Water Works subsidiaries 
spent $6 million in the Peoria and Chattanooga fights alone, much of it 
going to the PR firm of Burson-Marsteller).  But as French and German 
firms attempt to take over, the combination of a nationalism mirroring 
the unilateralism of the Bush administration and a still-burgeoning 
anti-globalization movement has begun to mount resistance to the 
expansion of privatization.

A global struggle
But all too often, the struggle in US communities against 
investor-owned water utilities remains isolated from the struggle of 
communities around the world facing similar threats.  Water giants such 
as Suez, Vivendi, Perrier and RWE (that many of the largest companies 
are French is no accident—France was the first to privatize water on a 
large scale under Napoleon III), in combination with US firms such as 
Bechtel and Monsanto, are systematically divvying up the entirety of 
the planet’s fresh water resources.  Much of this splitting of the 
spoils has been facilitated and encouraged by governments and 
international bodies such as the United Nations, which recently 
declared fresh water to be a “need” rather than a “right”, thereby 
sanctioning its commodification.

The Water Investment Act of 2002, passed earlier this year by the US 
Congress, makes federal funding for municipal water projects contingent 
on the local government “considering” selling its water systems to 
for-profit corporations.  Most local jurisdictions lack the capital 
resources to fund improvements for water treatment and distribution 
facilities.  These facilities are increasingly taxed by development 
pressures, more stringent quality standards and dwindling fresh water 
resources.  The 2002 Water Investment Act puts considerable pressure on 
local communities in the US to privatize their water systems to fund 
these projects.

The International Monetary Fund has several times made funding for debt 
relief contingent on a country’s privatization of its water supply in a 
similar way.  In Bolivia, this stipulation led to massive revolt in the 
streets after San Francisco-based Bechtel Corporation raised water 
rates to levels that would impoverish many Bolivians.  Street-level 
resistance eventually obliged power brokers to cancel the selling of 
the nation’s water.

At the turn of the century, Fortune Magazine declared that water “will 
be to the 21st century what oil was to the 20th.”  In some cases, the 
comparison is directly evident.  The Village Voice reports noises 
coming out of the Bush Administration of converting the existing 
oil-pipeline infrastructure in Canada’s Northern Provinces to pump 
water to the American Midwest.  Under the North American Free Trade 
Agreement (NAFTA), Canada would have little recourse to prevent this 
expropriation, as attemts to do so would likely be considered “barriers 
to trade”.

As more of the world’s water is taken out of the public commons to be 
drilled, piped, bottled and delivered as corporate property, the 
environment will become degraded (as RWE/Thames has shown us in 
Britain), conservation will be deprioritized (when companies’ revenues 
are tied to the amount of water sold, why conserve?), rates will be 
raised to pay shareholders’ dividends and control over one of our most 
vital natural resources will be taken farther and farther from the 
source and from us.  As decision-makers at all levels of government 
compete to deprive themselves and each other of recourse to thwart the 
profiteering of corporate entities, it falls upon the rest of us to 
develop viable alternatives and effective movements that will ensure 
that power flows from all of us and water flows to all of us.
 
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