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Selling Out Consumers: How Water Prices Increased After 10 of the Largest Water System Sales

Selling Out Consumers: How Water Prices Increased After 10 of the Largest Water System Sales

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For-profit water companies usually hike household water prices after buying municipal water and sewer systems. Many companies employ an aggressive rate increase strategy to recoup their investment and boost profits, usually aiming for a new hike every other year. Over time, this can add hundreds of dollars to a consumer’s annual water bill.
For-profit water companies usually hike household water prices after buying municipal water and sewer systems. Many companies employ an aggressive rate increase strategy to recoup their investment and boost profits, usually aiming for a new hike every other year. Over time, this can add hundreds of dollars to a consumer’s annual water bill.

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Published by: Food and Water Watch on Jun 03, 2011
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07/10/2013

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Selling Out Consumers:
How Water Prices Increased After 10 of theLargest Water System Sales
WATER 
IncreasinglyExpensive WaterService: A Surveyof 10 Large Sales
Food & Water Watch ex-amined how water priceschanged under private own-ership following the 10 larg-est known sales of municipalwater or sewer systems to for-
prot companies in the last
two decades. Most of thesetransactions occurred in thelate 1990s and early 2000s.
2
 By 2011, after an average of 11 years of private control,water bills in these commu-nities had nearly tripled onaverage. A typical householdwas paying an extra $434a year (or $344 in constant January 2011 dollars) onaverage for water or sewerservice. Under private own-ership, water rates grew at anaverage of about three times
the rate of ination, averag
-ing an increase of 18 percentevery other year (see table).
3
F
or-prot water companies usually hike household water prices after buying
municipal water and sewer systems. Many companies employ an aggressive
rate increase strategy to recoup their investment and boost prots, usually aiming
for a new hike every other year.
1
Over time, this can add hundreds of dollars to aconsumer’s annual water bill.
$0.00 $200.00 $400.00 $600.00 $800.00 $1000.00 $1200.00
Bensalem, Pa.Bolingbrook, Ill.Bristol, Pa.Coatesville, Pa.(water and sewer)Fairbanks, Alaska(water and sewer)Florissant, Mo.Media, Pa.Webster Groves,Mo.West Chester, Pa.West Covina, Cali.
 A Comparison of Household Water Bills Before and After Privatization:
The typical annual residential water and/or sewer bill in constant January 2011 dollars
$137.08$350.25$165.44$631.55$742.23$272.42$335.69$334.91$305.31$599.82$578.05$959.85$661.43$1,132.64$1,198.52$792.22$683.85$617.96$343.67$343.66
Beore Privatization (adjusted or infation) Ater Privatization (as o January 2011)
 
Increase in the Annual Water Bill of a Typical Household after Privatizationfor the Ten Largest Sales and Concessions Surveyed (Including wastewater charges,where applicable), as of January 2011
 A
Municipality System Water Year Annual Bills
B
Percent Increase
(population
Company of Sale
 served by system)Bensalem, Pa.
4
Water Aqua America 1999 54,000 $104.76
5
$137.08 $578.05
6
452% 36%(pop. 60,000)Bolingbrook, Ill.
7
Water American Water 2002 84,000 $286.44
8
$350.25 $959.85
9
235% 31%(pop. 24,600)Bristol, Pa.
10
Water Aqua America 1997 54,000 $119.52
11
$165.44 $661.43
12
453% 28%(pop. 30,000)Coatesville, Pa.
13
Water American Water 2001 54,000 $505.30
14
$631.55 $1,132.64
15
124% 18%(pop. 25,000) andsewerFairbanks, Alaska
16
Water Corix 1997 54,000 $543.30
17
$742.23 $1,198.52
18
121% 13%(pop. 34,000) andsewerFlorissant, Mo.
19
Water American Water 2002 90,000 $219.07
20
$272.42 $343.67
21
57% 11%(pop. 38,000)Media, Pa.
22
Water Aqua America 1995 68,000 $232.00
23
$335.69 $792.22
24
241% 17%(pop. 40,000)Webster Groves, Mo.
25
Water American Water 2002 90,000 $270.39
26
$334.91 $343.66
27
27% 6%(pop; 23,000)West Chester, Pa.
28
Water Aqua America 1998 56,400 $224.04
29
$305.31 $683.85
30
205% 19%(pop. 23,500)West Covina, Cali.
31
Water Southwest Water Co. 2000 180,000 $462.48
32
$599.82 $617.96
33
34% 5%(Zone 1)(pop. 20,500)
 Average 195% 18%
Typicalannualhouseholdusage
(gallons)
C
 After-SaleBill
(January2011)
TotalPercentIncrease
Notination-adjusted
BiennialGrowth Rate
(averageincreaseevery twoyears)
Pre-Sale Bill
Not Jan.ination- 2011adjusted dollars
Notes:
 A
The survey contains the 10 largest (in terms o population served) out o the known sales o entire publicly owned water and sewer systemsto or-proft utilities rom 1991 to 2010, as compiled in Food & Water Watch’s November 2010 report “Trends in Water Privatization: ThePost-Recession Economy and the Fight or Public Water.”
B
Household bills were calculated based on the listed household usage and the rates charged to general service metered residential custom-ers immediately prior to privatization and as o January 2011. Coatesville, Pa., and Fairbanks, Alaska, sold both their water and sewerutilities, so the household bills include both water and sewer charges. For the other eight locations, only the water bill is reported.
C
Within each community, the same annual water usage was used to calculate the pre-sale water bill and the ater-sale bill. By keeping usageconstant, changes in annual bills within communities reect dierences in prices — not dierences in consumption. Typical householdusage was assumed to be 54,000 gallons a year when not otherwise specifed in source documentation.
 
 Aqua Pennsylvania:The Most Severe Hikes
Of these communities, Bensalem Township and BristolBorough, Pa., have experienced the biggest total rate hike.In these two southeastern Pennsylvanian communities,
typical household bills have jumped more than vefold
since privatization. Notably, Aqua America (then knownas Philadelphia Suburban Water Co.) bought both watersystems in the late 1990s.After buying a water system, Aqua Pennsylvania, the Penn-sylvanian arm of Aqua America, seeks to increase the ratesof its new customers over time up to the level it charges inits main service division. At the same time, it also hikes therates of its main division, so the new purchases need evensteeper increases to be equalized.
34
By 2011, the companyhad brought the residential rates in Bristol into line andhad nearly done the same in Bensalem.
35
 In Bensalem, before privatization, a household paid $105(or $137 in January 2011 dollars) for 54,000 gallons of water a year.
36
By January 2011, it paid $578 for the sameamount of water.
37
Similarly, in Bristol, the annual waterbill of a typical household jumped from $120 (or $166 inconstant January 2011 dollars) in 1996 to $661 in 2011for the same amount of water.
38
In these two Bucks County communities, households haveseen their water bills grow far faster than their income.Since privatization, typical household bills have grownat an average annual rate of 13 percent in Bristol and 17percent in Bensalem.
39
The county’s median household
income, on the other hand, has barely kept pace with ina
-tion, growing by an average of 3 percent a year from 1995to 2009.
40
 With Aqua America controlling their water systems, house-holds have to spend more and more of their income onwater service. In another southeastern Pennsylvanian com-munity, customers of American Water have fared no better.

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