Big Profits, Big Bills:
Tracking Illinois’ Water Privatization
Over the past several years, private water utilities Illinois American Water and Aqua Illinois have been busy buying up depreciated water and wastewater systems across the state. These for-profit companies have purchased 34 systems since 2013, when state legislators passed a law that allows these water utilities to pass acquisition costs—$220 million and counting—onto their customers.
“The amount we pay for water and sewer services is unreasonable,” one person complained to the Illinois Commerce Commission. “I feel we are being held hostage by Illinois American Water Company.”
Ratepayers may be unsatisfied with the new private owners of their systems, but as of now, the law leaves them without a voice in determining if or when their water system is privatized. With this site, we hope to give you information about water privatization in Illinois and what you can do about it.
Explore this graphic to navigate through the approved and pending Illinois American and Aqua Illinois system acquisitions across Illinois since 2013—when Illinois lawmakers passed the Illinois Water Systems Viability Act. Hover over the pins to learn more.
When faced with the decision to privatize, small municipalities are often stuck navigating the city’s short-term financial solvency, their constituents’ utility bills and the community’s health and safety.
Sell, and the community gets an influx of extra revenue from the sale, but ratepayers often end up with higher bills. According to data released in a 2017 Chicago Tribune expose, Illinois American and Aqua Illinois were slapping Chicagoland customers with rates 20 to 70 percent higher than the rates of publicly-managed water systems using the same Lake Michigan water. Although keeping a system municipally-owned does not mean there will never be a rate increase, public water is cheaper in the long run, especially when private profit is involved.
But if local governments want to keep the system public, the municipality (read, ratepayers) has to fork out money to pay for expensive system upgrades and maintenance on a depreciating water system. According to a 2017 report from the American Society of Civil Engineers, most of the water pipes across the US were installed in the early- to mid-20th century, and their time is almost up; the pipes were projected to last about 75 to 100 years.
Cue Illinois American and Aqua Illinois: Private takeover of water systems has become a popular option for municipalities staring down a list of necessary and expensive system upgrades. These companies take on all responsibility for keeping the systems in line with federal and state mandates after the sale. For example, Alton, a Metro East city of about 30,000, sold its wastewater system to Illinois American after the Environmental Protection Agency mandated an expensive undertaking—sewer and storm drain separation—to be completed in the next 6 years.
But don’t be fooled. These companies may take responsibility for your system’s upkeep (they love touting their strict “regulatory compliance”), but they don’t always act responsibly.
Back in June 2019, Aqua Illinois found high levels of lead in University Park water and warned residents not to drink it. Nearly two years later, many of the homes are still without drinkable water.
“It’s unacceptable that this problem has been occurring for so long,” one resident told CBS 2 Chicago.
Illinois American has spent nearly $161 million on new system acquisitions since 2013, and Aqua Illinois has spent over $60 million, according to data compiled from the Illinois Commerce Commission (ICC). The two companies are set to spend millions more if their pending purchase agreements get ICC approval. So where did these for-profit water utilities spend a combined $220 million? Below is a breakdown of all Illinois American and Aqua acquisitions since 2013, the largest being Alton’s wastewater system for nearly $55 million. NOTE: These numbers include the legal costs the company spent on the acquisitions.
Hover over a slice of either pie chart to see how much either utility paid for the municipal system.
Essential Utilities (parent company of Aqua Illinois) reported year-to-date net income of $182.1 million for the first nine months of 2020, compared to $160.3 million in 2019. For the first nine months of 2020, Illinois American’s parent company, American Water, reported a net income of $561 million, compared to $502 million in 2019.
A company’s financial success tends to create demand for the company’s stock, driving the price up. This holds true for the parent companies of both Aqua and Illinois American. As you can see from the live stock charts for American Water (AWK) and Essential Utilities (WTRG), these two companies have done particularly well in the past several years. In fact, stock prices for both are trading near all-time highs.
Passed in 2013, the Illinois Water Systems Viability Act allowed Aqua Illinois and Illinois American Water to impose automatic rate hikes to finance municipal water system acquisitions, by up to 2.5 percent for one acquisition, or a total of 5 percent for multiple acquisitions, between rate cases. Just five years later, then Gov. Bruce Rauner signed the Water Privatization Act into law, extending the 2013 law for 10 additional years. The amendment also removed a 7,500-connection cap on the size of systems that the water companies can buy.
With the connection cap gone and costs covered by the private companies’ customers, publicly-owned water systems in Illinois are now targets for these profit-driven water utilities. These companies are offering up top dollar for aging water systems and, of course, wrapping the costs into their customers’ bills.
CUB fought both of these bills, arguing that customers of Illinois American Water and Aqua Illinois should not be forced to finance the companies’ acquisitions. We believe communities should be required to hold a referendum before they can sell their water system to a private operator.
Choosing to privatize is a difficult, complicated decision for officials to make, but don’t let them forget—it’s your water and your bills. If your city is considering privatization, get the facts first.
- The power to privatize your water system lies with your local elected officials. That means you will need to go to city council meetings and make your voice heard. One strategy could be to ask your local elected officials to put a non-binding referendum on the ballot. Your elected officials wouldn’t be required to abide by the results of a non-binding referendum, but such a vote could allow the entire community to weigh-in. Another strategy could be to work with a local elected official to pass an ordinance preventing the sale of your public water utility.
- Share CUB’s research with your community leaders. And while you’re at it, make sure to send them Food and Water Watch’s study on private water.
- Consider alternatives to privatization. For example, has your community explored a low interest loan from the state to help investment in your public system? The Illinois Environmental Protection Agency (IEPA) offers low interest loans to municipal water and waste water systems. The interest rate is 1.35 percent through June 30, 2021.
- Push your representatives in Congress for water infrastructure funding. Private water companies are already talking to your representatives, lobbying against such funding — it’s much easier to make the case for privatization when municipal systems are underfunded. Make sure your Congressperson knows that water infrastructure investment is important to you.