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USA: Private Firms Belly-flop in the H2O Biz

by Jane KellyThe Sacramento Bee
April 7th, 2003

Multinational corporations vie for a share of the American water market, and if they are given the opportunity, affordable drinking water may soon be a thing of the past. From Stockton, to Atlanta, to Cochabamba, Bolivia, privatization has proven a risky business with far-reaching consequences.

As budgets everywhere are slashed, there is increasing pressure to hand over public utilities to private firms. Politicians want a quick fix and are buying into the hype of giant water firms offering the capital to invest in needed upgrades. These corporations claim to be the solution to the growing global water crisis. In truth, the consumer is the one who pays.

The City Council in Stockton approved a $600 million, 20-year contract with OMI-Thames, a multinational partnership that's British-based and German-owned, but citizens are battling to protect their water and to have a say in its management. When they learned that Mayor Gary Podesto was pushing privatization, they gathered 18,000 signatures calling for a public ballot on the privatization issue.

Local water experts were highly critical of the bid, and the former director of Stockton's Municipal Utilities Department (MUD), Morris Allen, charged that city officials ordered him to shred important documents related to the deal. These papers reportedly showed that it would be cheaper for Stockton to continue managing its own water system. Allen says he also was asked to inflate MUD's operating costs to make a bid by OMI-Thames look better.

To pre-empt the forthcoming ballot measure, the mayor fast-tracked City Council approval of the OMI-Thames contract, saying the issue was too complex for voters. The council, 4-3, approved the contract on Feb. 19. But in a special election on March 4, Stockton citizens disagreed, voting to maintain control of their water system. However, because the election came after the council's quick vote the contract, activists have gathered another 12,000 signatures to qualify a referendum that would allow voters to overturn the City Council's vote.

In Atlanta, officials thought they could save money on repairs by contracting with United Water, a French-owned firm, to buy and run Atlanta's system. In the first four years of a 20-year contract, residents complained of rate hikes, brown water and poor service. Operating fees and complaints cost the city tens of millions of dollars, even while United Water was billing the city for work it didn't do. In January, Atlanta pulled the plug on that deal.

Water shakedowns are especially risky now that global corporations can use far-reaching international trade agreements to their advantage. When San Francisco-based Bechtel took over water management in Bolivia in 1999, bills soared so high that farmers could no longer irrigate their fields and citizens staged massive protests. Many were injured and one demonstrator was killed. The government canceled its contract. Bechtel is now suing the poorest country in South America at a secret World Bank tribunal to recoup "lost profits." The press, the public and citizens of Bolivia have been denied admittance to proceedings.

This is what happens when water is a commodity for sale to the highest bidder. The people lose their voice -- not only in developing countries, but also in Stockton, California.

A corporation's chief goal is to make a profit, which is often invested into new projects oceans apart from the community where the corporation operates -- or simply pocketed. In Stockton's case, Thames Water likely will use profits to solve its German parent company's financial woes. If Stockton retains public control of its water system, those same profits could have been invested in the community. If and when consumers pay their first water bill to OMI-Thames, they should question what they're paying for.

Jane Kelly is the director of the West Coast office of Public Citizen, a national, nonprofit consumer advocacy organization. She can be reached at (510) 663-0888, or Web site:

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