The State of the Water Industry -2004 By Karen Nowicki

“The Environmental Benchmarker and Strategist: Annual Water Issues” reports that the water and wastewater industry has been a surprising and unpredictable business in 2003. Highlights of 2003 trends are as follows:

1.) The American Council of Engineering Companies (ACED) gave the water infrastructure system of the country a general grade of “D,” and the Congressional Budget Office predicted that we will need to spend more than $800 billion over the next twenty years to fix this problem.

2.) The “foreign invasion” of recent years began to reverse directions. It seems clear that a large-scale game of “musical chairs” is starting to happen in the industry. After many major European water companies investing in American water and wastewater facilities, several major players appeared to turn (at least partially) into sellers. (See the following stories.)

3.) There appears to be a gradual slow-down in municipal outsourcing. There is also an increasingly widespread reconsideration of the benefits of privatization of public water treatment operations as public opinion on the subject has soured. For the first time in several years, the volume of outsourcing contracts in the country was actually down and fairly sharply down in 2003.

4.) Due to financially strapped municipalities, the business of private contract operation is still projected to be one of the fastest growing market niches in the water industry. The trend of turning to private companies to finance, to build, and to operate public water and wastewater systems is expected to increase.

5.) Although there isn’t a big winner corporation, Wall Street reports that the water industry was relatively stronger with most water funds out-performing in generally strong markets.

6.) Groups such as Association of Metropolitan Sewerage Agencies (AMSA) will claim their fair share for the government to help foot the bill for local authority financing.

7.) Groups will also be lobbying for federal support for interstate watershed management and water quality issues.

8.) Providing security against a possible terrorist attack on water and wastewater facilities are an immediate challenge facing the industry. There has been a lot of discussion, but there is still more work to be done and dollars still need to be spent. Again, adding to the cost of providing future water services.

9.) Installation of sufficient back-up power for pumping and distribution quickly has become a high priority as shown by the August 2003 blackout hit major cities.

10.) Technology development and implantation continues to be an active area, attracting many new players, and holding out the hope of future solutions.

To read the whole report, go to: http://waterindustry.org/ and scroll all the way to the bottom and select: “The Environmental Benchmarker and Strategist Annual Water Issue”

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The Berkeley Municipal Utilities Authority has sent a letter of intent to the NJ BPU on whether it is possible to purchase the Berkeley Water Company. The Berkeley Water Company services almost 4,000 residential and commercial customers in the northern section of the township and pumping approximately 280 million gallons per year from three wells. It grossed $1.4 million in sales in 2003.

*** A group has formed to explore the possibility of buying the private Torrington Water Company in CT and turning it into a publicly-held regional water authority. The group is concerned that the water company might be taken from local control by a multinational corporation that would lead to the sale of unblemished watershed land for residential development and increase water rates.

The privately-held Torrington Water Company was established in 1873 and supplies drinking water from its 5,400-acre watershed to 9,000 households. Approximately two-thirds of the watershed is currently preserved as open space. Tom Scoville, a member of the group investigating the purchase, said “there are three fears. Number one, when this multinational corporation comes in, we would lose local control. Number two, there’s a large amount of [open] land…that could be sold by this multinational corporation for development, putting a great burden on towns, especially if it’s residential development. Number three, the rates would go up. The ratepayers would pay more.”

State Sen. Andrew Roraback (R-Goshen) said that there was a growing trend in the state and the nation in which large foreign companies are buying small local water companies that would lead to the establishment of a public regional water authority. “All over the world, big multinationals are buying small local utilities. [When that happens], you lose local control over the land and the water, and instead of having decisions made locally about these resources, they are made by owners in foreign countries,” said Sen. Roraback.

It is not the first time CT has tried this. In the 1970s, the New Haven Water Company was dissolved and a public entity called the South Central Connecticut Regional Water Authority was set up in its place.

This process could take at least a year. First, the legislature would need to vote to establish a regional water authority that has the power to incur debt. Next, the new water authority would need to borrow money to buy the company and then with approval from the company’s shareholders, it could be purchased. Finally, the new authority would need to pay off the debt incurred in the purchase through money made from the services provided.

As a result, the purchase would preserve large tracts of land the company owns. It would also save money for the ratepayers because a public water authority would not have to make profits for its shareholders and as a nonprofit entity it would exempt from state and federal income taxes.