Executive Summary

Less than three years after purchasing American Water, the largest water company in the United States, German conglomerate RWE announced it was abandoning its hopes to turn water into “blue gold.” RWE, among the largest utility companies in the world, abruptly decided that water is a “very local business,” and that building a global water empire country-by-country was impractical.

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In announcing its purchase of New Jersey-based American Water Works six days after 9/11, RWE pledged not only to make long-term commitments to restore failing municipal water systems, but also to help the United States recover from the tragedy.

But troubles quickly emerged. Customers protested huge rate increases — 2,000 percent in one community. Complaints of poor customer service, malfunctioning fire hydrants, boil-water notices and other problems mounted. And citizens grew uncomfortable with the idea of corporations controlling their local water system.

Perhaps most unsettling, under RWE’s ownership, American Water has engaged in a pattern of political and legal maneuvering — most notably in Lexington, Ky., where the corporation worked to defeat a local effort to return the city’s water system to public ownership. Nevertheless, despite its best efforts, the corporate behemoth has failed to suppress the movement for public water. Felton, Stockton and Montara, Calif., as well as several other cities and towns, have successfully pried their water systems from its stranglehold. Inspired by these victories, many more communities have mounted campaigns for non-profit, local water, including Larkfield-Wikiup, Calif.; Champaign-Urbana, Ill.; and Chattanooga, Tenn. 

While citizens are trying to reestablish public control of their water systems, RWE is selling American Water to private interests through stock offerings on Wall Street. The results of the initial sale were disappointing. The stock fetched 10 to 17 percent less than expected. Although the reception was lukewarm, American Water’s CEO has plans to revive the company through expansion: “We will become a consolidator.” 

RWE’s short, uneasy U.S. experiment is a cautionary tale for all concerned — water companies, regulators, elected officials and citizens alike. The American Water experience raises the question: Should a resource so essential to life be controlled by multinational, for-profit corporations, or safeguarded by the public with strong local oversight and accountability measures?