American Water: A Corporate Profile
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Published by Food and Water Watch
American Water Works Company is the largest publicly traded U.S. water utility company, serving approximately 14 million people in more than 30 states and two Canadian provinces.
American Water Works Company is the largest publicly traded U.S. water utility company, serving approximately 14 million people in more than 30 states and two Canadian provinces.
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WATER
A
merican Water Works Company is the largest publicly traded U.S. water utility company, serving approximately 14 million people in more than 30 states and two Canadian provinces.
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Background
American Waer races is roos o he American Waer Works & Guaranee Company, which was ounded in McKeespor, Pa., in 1886.
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In 1914, when he company was unable o pay is debs, receivers or upse invesors reorganized he company under new managemen and creaed he American Waer Works & Elecric Company, whose name releced is sizable holding o power companies.
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Following he Grea Depression, new ederal regulaions o public uiliy holding companies orced American Waer Works & Elecric Company o resruc-ure, and i sold off is lucraive waer businesses o inance he change.
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Purchased hrough he Norheasern Waer Company,
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John H. Ware, Jr., a Pennsylvania millionaire,
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was he sole bidder or he waer asses
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and ook conrol o he newly ormed American Waer Works Company in 1947.
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The Norheasern Waer Company merged ino American Waer in 1962.
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The Ware waer dynasy lased or decades. Afer Ware reired as chair o he American Waer board o direcors in 1960, his oldes son (John H. Ware, III) ook his place, serving unil 1984;
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laer, his granddaugher Marilyn Ware Lewis chaired he board rom 1988 unil 2003.
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In 2003, German energy gian RWE bough American Waer in an audacious and ulimaely disasrous $7.6 billion deal.
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Afer jus wo years, RWE announced is plan o pull ou o he U.S. waer secor.
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Leaked minues rom a RWE board meeing revealed ha American Waer had ailed o mee any o is arges
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and ha “considerable poliical resisance o privaizaion o he waer secor” was a major acor in is ail-ure o hrive.
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RWE began selling off American Waer in April 2008,
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and had compleely divesed isel o he company by he end o 2009. A he end o 2012, American Waer sill car-ried more han a billion dollars o legacy coss associaed wih RWE’s oray and rerea.
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Strategy
American Waer, hrough is subsidiaries, ocuses on owning waer and sewer sysems.
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I arges sruggling municipal sys-ems or akeover, purchases oher privae sysems adjacen o is exising nework, and hikes waer and sewer raes.
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During 2012, i bough 10 waer and sewer sysems and hiked waer raes in nine saes.
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Tha year, i also sold is sysems in Ari-zona, New Mexico and Ohio o concenrae on saes expeced o be more proiable.
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The company is, in he words o CEO Jeffry Serba, “very acive on he public policy and regulaory ron.”
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I seeks o inluence sae governmens and regulaory agencies o auho-rize schemes and mechanisms ha aciliae rae hikes, speed up invesmen reurns and push corporae inancial risks ono consumers.
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The company pursues hal a dozen differen ricks: inrasrucure surcharges, purchased waer and power surcharges, surcharges o offse decreased revenue rom waer
conservaion, rae seting based on projecions insead o acual coss, charging he same raes saewide regardless o local condiions and proiing on inrasrucure projecs beore hey are in service.
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The company also lobbies he ederal governmen or special ax breaks and oher assisance ha could aciliae privaizaion or shareholder earnings. During 2012 and he irs hal o 2013, i spen $270,000 o lobby Con-gress, he Whie House and he Treasury Deparmen abou waer inancing legislaion and ax policy.
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While increasing raes on consumers, he company seeks o squeeze is workorce;
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rom 2011 o 2012, i cu labor coss by $17.8 million, or 3.6 percen, mos o which came ou o employee pensions.
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American Waer or is subsidiaries have violaed labor law several imes, including inerering wih proeced union organizing aciviies
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and unilaerally and improperly slashing employee beneis.
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Anoher area o ineres o he company is he “opporuniy” o exploi Marcellus Shale developmen hrough a wo-pronged sraegy o building pipelines o provide waer o drillers and hen connecing households along he pipeline o is waer sysem.
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From 2011 o 2012, American Waer doubled is sales o waer drillers, making abou $3 million in 2012 by selling more han 430 million gallons o oil and gas companies.
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The company also operaes he waer or sewer sysems o several dozen local governmens and nine miliary bases.
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I acively seeks long-erm concessions o oher governmen sysems wih a srong ineres in he lucraive 50-year Depar-men o Deense deals.
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From January 2012 hrough June 2013, he company spen $110,000 o lobby Congress and he Depar-men o Deense o suppor privaizing miliary waer uiliies.
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Key Financial Figures (2012)
American Water Works Company (AWK)
Headquarters:
Voorhees, N.J.
CEO:
Total CEO Compensation:
$3.8 million
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Revenues:
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$358 million
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American Water in the United States
H I
Privatization Contract Status
Revenue from Fully Owned Systems
< $ 1 0 0 m i l l i o n
Privatization Activity
None
Voorhees, NJ
Assessment
American Waer has come under ire rom communiies across he counry or charging high raes, providing poor service, endangering public saey and lacking public accounabiliy.
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From Birmingham, Ala., in he 1950s (“The general public will no accep ha we coninue o pay damyankees [o run he waer sysem].”)
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o Felon, Cali., in 2008,
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communiies across he counry have wresed local conrol o heir waer sysems rom American Waer. As o 2013, he company aces ongoing municipalizaion sruggles rom he Monerey Penin-sula, Cali.,
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o meropolian Chicago, Ill.
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Felton, Calif.: Local Control to Save Money
In 2008, he people o Felon successully wresed conrol o heir waer sysem rom he cluches o Caliornia American Waer.This small coasal communiy jus norh o Sana Cruz began mobilizing in he all o 2002, while he company sough a 74 percen revenue increase and was being bough by RWE.
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Over he nex ive and a hal years, Felon FLOW – Friends o Locally Owned Waer — organized dozens o meeings and undraisers, opposed he company’s rae increases beore sae regulaors and helped he San Lorenzo Valley Waer Disric purchase he local waer sysem.
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Above all, Felon FLOW led he charge behind ballo Measure W, which auhorized a special ax o pay or an $11 million bond o inance he public buyou.
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In July 2005, despie a well-lubricaed, no-holds-barred corporae campaign agains he measure,
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voers approved he bond measure by a 3-o-1 margin.
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As waer disric officials remarked, “I is hard o imagine how any sronger proo could be provided o he Fel-on communiy’s level o commimen and suppor or gaining local conrol o heir waer uiliy.”
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Caliornia American Waer coninued o igh he sale, and is legal wrangling delayed he purchase and wased public resources. The waer disric repeaedly old he company ha i waned o negoiae a setlemen and avoid eminen domain liigaion,
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bu he company reused o come o he bargaining able, orcing he disric o ile an eminen domain peiion.
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The company seemingly used legal acics o sall he pur-chase while avoiding acual adjudicaion. Firs, he company conesed he public’s righ o condemn bu wihdrew is legal challenge a week beore he sar o he rial.
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The company hen ough over he purchase price and similarly setled wih he disric less han a week beore he valuaion rial was o sar.
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Finally, a he end o May 2008, Caliornia American Waer agreed o sell Felon’s waer sysem o he San Lorenzo Valley Waer Disric.
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As par o he deal, he disric paid $10.5 mil-lion in cash and assumed $2.9 million o he sysem’s exising deb, and he company “donaed” 250 acres o waershed land. In Sepember 2008, he ransacion was compleed and he waer sysem came under public ownership.
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Despie claims by he company oherwise,
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Felon house-holds saved hundreds o dollars a year wih public conrol. In 2011, or example, a household using 800 cubic ee o waer a monh would have paid $1,625 under he company’s proposed raes,
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bu wih public ownership, ha household acually paid $1,123: $588 in waer charges
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and $535 in axes relaed o he acquisiion bond.
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In oal, public ownership cu a ypi-cal Felon household’s waer coss by abou 30 percen, saving around $500 a year.
Trenton, N.J.: Public Victory Over a Flawed Sale
In 2010 Trenon voers overwhelmingly rebuffed a proposal o sell par o heir waer sysem o American Waer.
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Three years earlier, ciy officials agreed o sell a majoriy o he ciy’s waer inrasrucure — he pipes and srucures locaed in he oulying communiies o Ewing, Hamilon, Hopewell and Lawrence Townships — o New Jersey American Waer.
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The ciy would have received $80 million, abou hal o which would have been used o pay off waer-relaed deb.
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Ciy o-icials waned o use he remaining proceeds o cover immedi-ae budge deicis and likely would have depleed he unds wihin wo or hree years.
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I was a shorsighed approach. Selling he sysem would no have addressed he underlying srucural reasons or he ciy’s budge deici, and i could have worsened he ciy’s long-erm iscal healh because he ciy would lose annual revenue rom he waer und.
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From 2007 o 2010, he ciy spen an esi-maed $15 million o is waer unds on general ciy services.
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In addiion, he inancial viabiliy o Trenon’s waer sysem would have depended on coninued bulk waer sales o New Jersey American Waer, which as par o he deal agreed o use ciy waer o mee he needs o he oulying communiies or a leas 20 years.
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I American Waer were o sop buying wa-er rom he ciy, Trenon households would have likely aced rae increases o offse he los revenue. For he oulying suburban owns, rae hikes were planned. New Jersey American Waer would have hiked raes by 30 per-cen immediaely and hen increased hem incremenally up o he level charged in is main service area.
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In mid-2010, he ypical household using 7,000 gallons a monh paid 33 percen, or $138 a year, more or waer service rom American Waer han or ciy service.
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Because he company ypically increas-es is raes every wo or hree years,
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his difference has only grown wih ime. By Augus 2013, he company had increased he ypical household’s bill by 19 percen, adding an exra $108 ono heir annual bill,
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while he ciy hadn’ increased is waer raes.
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In 2009, a group o residens, recognizing he auly logic o he sale, conesed he deal and peiioned o bring he issue o he public or a voe. Trenon officials, led by hen-Mayor Douglas Palmer and backed by New Jersey American Waer, ough heir effors and sough o sidesep public approval.
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