Don't soak water customers with big rate increases

People should not struggle to pay their water bills even as private companies make big profits. Illinois should close the spigot on excessive costs.

Like some other states, Illinois has seen private companies snap up municipal water and wastewater operations and then raise rates for consumers, forcing some people to ration their water use. Since 2013, the two biggest private water companies in the state, Aqua Illinois and Illinois American Water, have purchased 59 public water systems and have passed $402 million in acquisition costs onto their customers, according to the Citizens Utility Board.

Now, Aqua is pushing for a rate increase of as much as $29.91 per month, according CUB. Illinois American wants to raise water and wastewater bills by up to $29 a month, CUB says. The Illinois Commerce Commission, which must approve the requests, should ensure any increases don't place an undue burden on customers while boosting company profits.

For example, Illinois American Water has raised its dividends 16 years in a row, Bryan McDaniel, CUB's director of governmental affairs, said. Private water companies must pay dividends and taxes — and the cost of acquisitions — so on average, their systems will be more expensive to operate than municipal counterparts. In Illinois, for-profit companies charge 20% to 70% more than public utilities, McDaniel said.

At a Wednesday press conference in Bolingbrook, four Illinois legislators and CUB urged state regulators to reject the proposed rate hikes. State Rep. Nabeela Syed, D-Palatine, called the proposed increases "absolutely inexcusable." The ICC has scheduled four public hearings on the proposals.

State Rep. Abdelnasser Rashid, D-Bridgeview, told us, "I am very concerned about the privatization of water utilities. … We need to course correct."

Rashid, who was not at the press conference, earlier this year co-sponsored a bill introduced by Syed that would require a referendum before a public water system can be sold. The bill also would make it harder for private water companies to entice communities to sell their water systems. The bill did not make it out of committee, and similar bills have failed in the Legislature in the past.

Referendums make sense because once a village board or city council votes to sell a water system, it's virtually impossible to buy it back, no matter how high rates go. Chicagoans, burned by the sale of the city's parking meters, are likely to be skeptical of privatization, but residents of other communities never know when their local officials might put a water system up for sale.

Private companies offer to buy public water operations when cash-strapped communities need money to fix up their aging water systems or are facing other big costs, such as pension liabilities. After the sale, customers often see rates shoot up not just to cover the cost of updating their water service but also to fork over additional money to the water companies to help them buy more public water systems. In all, private water companies serve 1.5 million customers in Illinois, including in many Chicago's suburbs.

Public water systems turned into cash cows

People who can't afford the higher rates may have their water turned off. Water systems are a monopoly, so there is no competitor people can turn to for lower rates.

The Legislature has had a history of making it easier for private water companies to turn public water systems into cash cows. In 2018, lawmakers got rid of a rule the limited private companies to buying only systems with fewer than 7,500 connections. Lawmakers also approved a surcharge that essentially lets private water companies spend money more quickly and recoup it from customers. As with about 14 other states, Illinois enacted a law favored by private water companies that provides a financial incentive for municipalities to sell out. Going forward, the Legislature should reverse course and start implementing reforms.

Municipally-owned systems aren't perfect. Earlier this month, Chicago ordered a boil order for some neighborhoods after a water main break. And last week, thousands of other residents were under another boil order. But for-profit water companies also have had service problems. On July 10, a consent order was entered over $900,000 worth of lead remediation for Aqua Illinois' University Park residents.

The sale of a public water system has such far-reaching consequences that it shouldn't be authorized without the support of the community at the ballot box. For those systems already in private hands, the ICC should keep a wary eye on requests for significant rate hikes.

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