The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

Water privatization leads to ... big rate increases

Nov 17, 2003

When a company called California-American Water Company (Cal-Am) took over the water system in Sacramento, California, it sent out notices to all homes that read, "Welcome to our Family." Cal-Am is the largest private water-services company in the nation, with over 16 million customers in 27 states and three Canadian provinces. And it promised that it would use its considerable resources to improve service – and not raise rates.

But, no surprise, a few months later, Cal-Am closed the local business offices, laid off dozens of workers... and applied for a 62% rate increase.

Up until recently, water supply and service historically have been owned and operated by government agencies. Of course, as with everything else, local governments – too busy handing tax money over to big corporations – did little maintenance of these systems. Over the decades water systems around the county have become increasingly inadequate and run-down.

A few major corporations, claiming they were ready to make those investments, demanded that water utilities be opened up for private ownership. In 1997, Congress passed a law that relaxed water-privatization rules. Companies like Cal-Am jumped to take advantage of it.

Cal-Am, in fact, is the product of three different mergers in less than three years' time, and is now a subsidiary of a much larger multinational, called Cal-Am/RWE Thames. Each one of those mergers was financed by debt – for which debt the people of Sacramento today find their water being held hostage.

Cal-Am now claims that it needs the rate increase to cover increased electricity prices and to upgrade the water system. In fact, this increase will just go to pay for the mergers and the future profits of the new company.

Three years ago, Fortune magazine dubbed the privatization of water and water services the "new oil," the investment opportunity of the next century. Since water, like oil, is an increasingly precious commodity, this magazine of the bosses thinks it should be turned over to those who will make a profit from it.

What's next – the air we breathe?