Bigot S/ANDBZ/Abaca/Sipa USA via AP Images
A Veolia employee at a French water treatment facility. There was significant opposition to the company’s earlier attempt to take over rival utility firm Suez.
The Biden administration’s proposed multitrillion-dollar infrastructure package will give states and municipalities plentiful resources to rebuild their physical environments. But it also serves as a target for financiers, privatizers, and monopolists, who see a large pot of funding in front of them, ready for snatching. That’s one context for the $15.4 billion merger announced Monday between Suez and Veolia, two French firms that happen to be the largest water corporations in the world. The deal should signal to the White House that they must build guardrails into the infrastructure package, to prevent the funding from going into public treasuries and then immediately out to private companies.
Since the 19th century, Suez and Veolia have been sparring for private control over water, an internationally recognized human right that has increasingly been slipping out of the grip of the public sector. Eight months ago, tensions heightened as Veolia bought a large stake in Suez, in a hostile takeover bid that threatened the jobs of Suez executives. Suez rejected a $13.4 billion offer back in February, but has now agreed to this boosted bid.
A company called Suez will still exist, as some of its assets will be spun off. But that will be a much smaller company, and critically, its U.S. business will migrate to Veolia in advance of the infrastructure package. The new Veolia will have annual revenue of around $44 billion, more than five times the bundle of Suez assets that will create “new Suez.”
In the U.S., Veolia operates water treatment plants and entire water systems, and virtually wherever high-profile problems have arisen, the company is not far behind. Veolia was contracted to assess water for the city of Flint, Michigan, and according to contemporaneous emails the company knew about the lead risk months before residents and informed city managers, but never made public its recommendations to find an alternative water supply. Veolia’s subsequent report identified Flint’s water as “safe,” and its one recommendation, adding a chemical called ferric chloride to address persistent discoloration, allegedly accelerated pipe corrosion and acidity in the water, according to a lawsuit from the Michigan attorney general. In Pittsburgh, a similar lead contamination crisis also coincided with Veolia’s entry, in this case to manage city water system operations. Veolia replaced an anti-corrosion chemical with a cheaper knockoff, and reduced the city’s water quality staff by half. Simultaneously, the company increased water rates by 20 percent over four years, and issued inaccurate bills that overcharged residents by as much as 600 percent, leading to unnecessary water shutoffs. As lead concentrations increased, Pittsburgh sued Veolia for malfeasance, but eventually dropped the case.
These case studies reflect the telltale signs of water privatization, where cities and states sell off their public water infrastructure to be managed or owned by for-profit companies, in exchange for a one-time and short-term cash infusion. The deals both introduce the profit motive into a basic human need and relinquish democratic control of how safely and affordably that need is met. They’re often justified as a source of up-front revenue for the municipality selling the concession. But the consequences are grave, and affect more and more of us: Today, one in six Americans must deal with a privatized water agency.
“Any dollar that is spent on CEO salaries, returns to investors, marketing, or lobbying, is money that’s not being spent on the service,” said Donald Cohen of In the Public Interest, a nonprofit research entity that studies privatization. That layer of profit, newly added to a previously government-run water system, must be paid for either through hiking rates or degrading services. “We’ve been funding our water systems by not paying for them,” Cohen said. “But there’s only one source of money for all the stuff we want, and that’s us. The only change is who pays and when we pay.”
So the same problems keep cropping up. Privatized water systems cut staff: In New York City, Veolia took over operations in 14 wastewater treatment plants in 2011 and immediately cut 20 percent of the workforce. The average job loss after a water privatization deal is 34 percent, according to a 2009 Food & Water Watch study. Privatizers also cut corners on quality and maintenance to allow for that layer of profit. On the revenue side, ratepayers fork over about 59 percent more for water to privatized systems than to government-owned utilities, and capital financing costs can be as much as 150 percent higher. Gabrielle Gurley wrote about much of this in our last print issue, showing that communities of color in particular have suffered from the commodification of water.
Water privatization deals both introduce the profit motive into a basic human need and relinquish democratic control of how safely and affordably that need is met.
You can now add to this litany of problems that of the consolidation of the biggest water companies. “Veolia’s plan to dominate public water services all across the globe is becoming a terrifying reality,” said Mary Grant of Food & Water Watch in a statement. There already were few bidders in water privatization deals; Veolia and Suez merging takes one out of the equation and creates a real giant in the space. Fewer bidders translates to a lower price for water systems that have been put on the market, and one dominant firm would have the connections and the clout to win those contracts. This has already begun; last week, the city council in Binghamton, New York, was poised to give Veolia a contract to audit the city’s treatment plant, until public outcry led to a cancellation of the vote.
“More consolidation is more extraction,” Cohen said. “More market power gives them an opportunity to expand.” Cohen sketched out a potential path for Veolia to up its domination of water that he called a “surround strategy.” Veolia could entice small water agencies in the vicinity of a metro area to privatize, and from there learn the ins and outs of the big city’s system, positioning the company to take it over.
Today, opportunity is knocking even louder. Normally, privatizers thrive when cities are desperate and cash-strapped. But cities soon could be teeming with money from the COVID crisis relief bill and President Biden’s proposed infrastructure bill. Funding will be available to upgrade and overhaul water systems, and a bulked-up Veolia will present itself as a quick and ready solution. “If you’re a mayor and someone comes to you and says, ‘Do this deal, you won’t have to worry about it, you have other things to deal with,’ I can see why you’d do it,” said Cohen.
Language within the infrastructure bill could tilt the playing field to a company like Veolia and grant incentives to privatize or outsource water system repair and operation. Last year, the House’s H.R. 2, its version of an infrastructure bill, quietly included incentives to privatize water systems, by giving systems that go private an additional three years to comply with EPA water standards, and weakened enforcement thereafter. The proviso eventually got pulled from the bill, which never passed Congress.
This time around, with an even bigger water giant pushing from the outside, that market power may yield political power, and drop in language to benefit privatization. Even if the language is neutral, without public capacity to manage public infrastructure, inevitably privatizers and consultants will take over—and be sure to take their cut.
One drawback to the merger is that practically every antitrust authority around the world will have to approve it, since Veolia and Suez operate globally. That Veolia went forward with the deal nonetheless makes clear that the company believes that no country in the world will block their drive to monopoly. That says a lot about how multinationals don’t view anti-competition laws as much of a barrier to their cornering a market.
For Americans, the Veolia/Suez merger could lead to higher prices, worse quality, and severe inequities in who pays and who gets neglected. “This is all very logical corporate behavior,” Cohen said. “They only care about market share.”
