WATER COMPANY SALE SLOWED DOWN - Attorney General's Office Raises Questions

(11/05/2002)
West Virginia's State Attorney General's office is trying to stop the sale of West Virginia-American Water to a foreign company. The West Virginia Public Service Commission has already approved the transaction. The Charleston Gazette

State Tries To Stop Water Company Sale By Tara Tuckwiller
Staff Writer

Thames Water should not be allowed to buy West Virginia-American Water until state regulators slow down and thoroughly investigate some important matters that never came to light during public hearings, the state attorney general's office says.

On Monday, Senior Deputy Attorney General Silas Taylor petitioned the Public Service Commission to vacate its Oct. 23 order that permits the sale. The PSC should hear new evidence, and the attorney general's office wants to intervene, Taylor said.

The PSC will "review the motion and discuss a response on it," said public information specialist Bob Teets.

Rather than a "careful and deliberate" consideration of whether 25 percent of West Virginians should get their water from a German megacorporation — Thames' parent corporation RWE — Taylor wrote that "the proposal has instead been placed on fast-track by state regulators."

"The enormous profit to American Water stockholders creates tremendous pressure to consummate the deal as quickly as possible to prevent a loss of $1.6 billion in stockholder wealth."

That $1.6 billion comes from the high price Thames is willing to pay for American Water — $16 per share more than it is worth.

Thames will recoup that cost, Taylor wrote, partly by getting involved in West Virginia sewage. Thames promotes its expertise and experience with sewage, but it has a questionable environmental record with sewage in England, Taylor wrote.

Although American Water's environmental regulations were disclosed at length to the PSC, "At no point in the [PSC] proceedings did RWE or Thames Water disclose that the experience and expertise of Thames Water Plc included such a questionable history of environmental violations. ...

"Now that the facts have been revealed, it is imperative that the proceedings be reopened so that the commission may consider their impact on the public interest."

Thames has now announced it will create a new subsidiary to hold its U.S. companies. That's in addition to the current corporate pyramid: West Virginia-American, American Water, Thames Holdings and RWE.

In addition to West Virginia-American, "the remaining companies are simply holding companies — companies which have no purpose other than to acquire and hold stock and to manipulate the activities of the various companies they own for the sole purpose of generating profits for the stockholders of RWE."

West Virginia-American built its network with lots of help from public grants and loans, Taylor pointed out.

That "would not have been tolerated but for the extensive control exercised by the public over WV Water" through the Public Service Commission, he wrote.

He said that control can be seriously undermined by a foreign takeover in three ways "that received little or no attention during the commission hearings":

International trade agreements, such as GATT and NAFTA, under which foreign corporations can appeal to a World Trade Organization dispute panel if they think local regulation is unnecessary, "effectively making this commission's regulatory control reviewable by an international tribunal." If the PSC tried to stop Thames from selling West Virginia's water to foreign countries, Thames could sue the state. "Similar claims have already been filed against Canada and Bolivia, after both governments backed off of water privatization agreements following public outcry."

A California company is suing British Columbia for $10 billion after it banned water exports. An American corporation is suing Bolivia for scrapping a private-water deal that forced people to "get special permits just to collect rainwater in roof tanks, even though water bills were a third of average wages."

RWE "will be engaged in substantial unregulated activities, such as coal mining and energy trading ... Should one of the unregulated aspects of RWE suffer economic disaster, to what extent will American Water, including WV Water, be adversely affected?

"Will earnings that would otherwise have been retained to improve and expand West Virginia's water infrastructure be diverted to stockholder dividends or used to subsidize RWE's losing ventures? ... Will the water held by RWE in trust for West Virginia citizens be held hostage to a world economy turned sour?

"Water is basic. It is a necessity of life. Should West Virginia risk losing control over its water?"

Taylor pointed out that the Oct. 23 order isn't final, because Thames and West Virginia-American haven't filed some necessary modifications to the deal. Even if it were final, it wasn't in effect when Taylor filed his petition.

This would be the first time a foreign company buys an American water system. Other foreign companies have gotten contracts to manage American water systems. Taylor wrote, "Many large municipalities such as Atlanta and Milwaukee are unhappy with the results and are considering contract termination.

"That will not be an option for WV Water and the other waterworks already acquired by American Water, the seller in this controversial transaction."