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Water Companies’ Reputations, Business Practices Going Down the Drain

Sept. 19, 2002

Water Companies’ Reputations, Business Practices Going Down the Drain

Sewerage and Water Board Should Reject All Bids, Focus on Improving Public System

NEW ORLEANS — The international water conglomerates trying to persuade New Orleans to privatize the city’s water and wastewater system aren’t fit to provide such a vital public service, a new Public Citizen report explains.

Two for the Road: An Update on the Companies Vying for Control of New Orleans’ Water examines recent developments connected to the two corporate finalists being considered by the New Orleans Sewerage and Water Board: USFilter, a subsidiary of Vivendi Universal, and United Water, a subsidiary of Suez.

At a press conference today, an international coalition encouraged the New Orleans’ city water board to reject all three bids, due to be voted on in the coming days.

“Water will soon be one of New Orleans’ greatest assets as much of the country faces shortages and droughts,” said Edward Melendez, principal of the Urban Conservancy. “We support democratically controlled management of the city’s water system, both for the well being of citizens and the economic development of our community. Urban Conservancy urges citizens to reject all bids for privatization of water services in the city and to demand close scrutiny of any process to reengineer our city’s water services.”

“New Orleans is faced with a tough decision,” said Aaron Viles, Gulf States Field Organizer for the United States Public Interest Research Group. “But the thing to remember is there are no corporate white knights riding in to save us from ourselves.”

One of the companies is mired in dizzying financial uncertainties, while both have recent histories of operational bungling and putting profits ahead of public interest. Among developments detailed in the report:

· Despite assertions by company officials to the contrary, USFilter remains hopelessly entangled with Vivendi Universal, its debt-choked, mission-puzzled corporate parent. While USFilter executives have attempted to distance their company from Vivendi as it scrambles for deals, Vivendi has proclaimed that it has no intention of reducing its control in the water side of the corporation’s far-flung interests. USFilter could find itself cannibalized, squeezed and drained as the corporate parent tries to eke every last drop out of the corporate “cash cow” to bankroll whatever whimsical strategy Vivendi Universal finally lands on.

· United Water’s performance in Atlanta, where the company’s long-term contract was once touted as the model for municipal water privatization, has been so dismal that the company has been put on 90-day notice that the contract may be terminated. Atlanta officials have identified myriad problems with United Water’s operation of the city’s water system, including billing the city for work that was never done, dramatic staff reductions and an unacceptable increase in backlogged maintenance requests.

· Houston considered privatization but determined it would be in the public’s interest to instead re-engineer the publicly owned system. However, Houston did privatize operation of a water treatment plant, contracting with United Water. After its contract was not renewed, United Water decided to sue the city for $900,000. Houston has countersued for $2 million, claiming United Water failed to maintain the plant and that necessary repairs will cost $2 million.

“Vivendi is a debt-smothered giant desperately trying to stave off financial ruin, and is clueless about what it wants to be when it grows up,” said Wenonah Hauter, director of Public Citizen’s Critical Mass Energy and Environment Program. “Suez never misses an opportunity to slash a workforce, break a promise and show that it cares more about getting money from you than getting water to you.”

A third bid before the Sewerage and Water Board, presented by the public water system, promises more savings than either private bid. But none of the three bids offers truly significant savings. Moreover, all three bids were submitted under a flawed process that fails to account for the total future responsibilities and expenses of operating the system safely and efficiently.

Experiences in other cities show that the most money could be saved by continuing to identify opportunities for efficiencies under public ownership, and implementing those opportunities through a focused re-engineering program—not a de facto, inadequate restructuring of the water and sewer system’s administration as would happen if the employees’ bid is accepted.

Public Citizen urges the board to reject all the bids and instead allow employees to comprehensively re-engineer the system to address all future challenges, based on the fundamental mission of providing the people of New Orleans safe, reliable, affordable and publicly controlled water and sewer service.

“There’s a looming world water crisis that private companies are taking advantage of,” said Tony Clarke, executive director of the Polaris Institute. “In all likelihood, the water companies are interested in New Orleans because they want access to the mighty Mississippi River for bulk water sales in the future.”

Click here to view a copy of Public Citizen’s report.