Independent report blasts West Virginia American Water Company; urges municipal takeover of water system two years after chemical spill polluted water of 300,000 people

CHARLESTON, W.Va. – On January 9, 2014, at about 10 a.m., fire departments in Kanawha County, the home to West Virginia’s state capital, where dispatched to two locations because reports of a “chemical odor” were being called in by citizens. It was at least four hours before emergency response officials realized they had a major public health crisis on their hands – the water for 300,000 people served by the Elk River was unsafe for human use.’

It wasn’t until about 2 p.m. that Mike Dorsey, the emergency response coordinator for the West Virginia Department of Environmental Protection, determined that the release of the coal-mining cleaning chemical 4-methylcyclohexane methanol (MCHM) at a site owned by Freedom Industries along the Elk River had reached the water intake of the West Virginia American Water Company (WVAW).

Two years later, the consequences and root cause of that tragedy have yet to be addressed, say experts with Boston Action Research (BAR), a project of the Civil Society Institute (CSI). In a report recently released, BAR researchers argued that privately owned WVAW has still not taken the necessary steps to prepare for a future crisis, hold down rates, avoid major service disruptions, and invest in aging infrastructure.

The root cause of these problems, according to the BAR report, is that WVAW is guided by a profit motive.

According to the report, “WVAW pays a higher percentage of its profits in dividend payments to its parent corporation, American Water Company, than its subsidiaries in other states on average, which sends precious financial resources out of West Virginia that could otherwise be invested in the water system.” It concludes, “Given the ongoing shortcomings of WVAW … [t]he best course of action for West Virginians is to assume public ownership and operation (municipalization) of the Charleston regional water system.”

So, as the West Virginia legislature convened for its 2016 session this week, it has numerous findings to ponder from the BAR report, including:

• WVAW was unprepared for the spill. West Virginia Public Service Commission staff found that WVAW violated numerous regulations in the wake of the disaster, including failure to notify the public on a timely basis, maintain their system, have adequate storage capacity, have water pollution monitoring equipment, and have a source water protection plan.
• WVAW continues to be unprepared for a major spill today.
• WVAW has been unable to control water bills through expansion of its system to include ever more ratepayers. The recent 28 percent rate hike push is a clear indication of this problem.
• Despite frequent rate cases that increase water rates, problems of high leak rates and boil water notices have been persistent for WVAW over the last 10 years.

The BAR report argues, “WVAW serves as an example of how things can go wrong when transparency and accountability suffer in a privatized water scheme … As the infrastructure ages and deteriorates due to apparent neglect, the water system experiences high leak rates, plus frequent boil water notices when mains fail. Repairs and deferred investment require considerable infusions of cash, leading to frequent rate hike increases. While the rate cases and interrupted customer service shine light on WVAW’s inability to control customer costs, the Freedom Industries chemical spill … shows how unprepared the company is to deal with disasters.”

Grant Smith, senior energy analyst and lead report author, said: “It would be wonderful to be releasing a report today on the second anniversary of the West Virginia water crisis saying that things are much better when it comes to safe, clean drinking water in the state. But that would not be accurate. After decades of rate increases and what can only be described as ‘malpractice,’ the best course of action for West Virginians is to assume public ownership and operation (municipalization) of the Charleston Regional Water System. Public control has a better chance of ensuring public accountability, establishing standards and goals for rebuilding the infrastructure that can be measured.”

Smith concluded, “The company strategy reflects that of its parent (company), which is to keep expanding to spread the cost of infrastructure to more rate payers to control cost. However, the strategy has not worked in West Virginia.”

Pointing out that WVAW serves about 40 percent of West Virginia’s residents – one of the highest privatization rates in the nation – the report noted several options that could reverse privatization. “There are options for local officials and the public to look into municipalizing the Charleston regional water system: (1) generally, local government has the ability to raise funds and accept state and federal dollars for its purposes; (2) a takeover could be negotiated if WVAW were willing to sell, or local government could seek to use eminent domain; (3) although legal analysis is required, West Virginia law provides for the formation of regional water authorities and public service districts; and (4) new legislation could be passed for the public takeover of the Charleston system.”

Charleston residents involved in the report shared their insight as well.

Cathy Kunkel, who served as the report’s editor and is with Advocates for a Safe Water System in Charleston, said: “In the last two years, we have learned that we have a serious infrastructure problem here. At the current rate of investment, it will take nearly 400 years for West Virginia American Water to replace all of the water mains in our system. Main breaks are an increasingly common occurrence. … But West Virginia American Water is not planning to invest more in main replacement.”

She added, “The water company has fought to keep important information about water system safety, including its emergency response plan, out of the investigation and out of the public eye. The water company has fought to limit that investigation to narrow its scope as much as possible. Yet, the water company also says it plans to ask for another rate increase so that water customers will pay for the company’s expenses resulting from the spill. West Virginia American Water doesn’t want us to know what it did wrong, but it wants us to pay the bill.”

Pam Nixon, also of Charleston, is with the West Virginia branch of the NAACP, and is a former environmental advocate for the West Virginia Department of Environmental Protection. She offered, “I don’t trust drinking or cooking with West Virginia American water still today, and the feeling is the same for most in my family. We continue to buy bottled water two years later.”

She offered, “I’m lucky. I can afford the bottled water. (But) this lack of adequate water systems always hit minority communities, rural low income families and the elderly the hardest. This is an added burden on low income individuals. West Virginia is a low income state and the lack of drinking water is an environmental justice issue. We don’t want their apologies from the company at the same time they’re asking for a 28 percent increase. We expect accountability.”

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Boston Action Research is a project of the nonprofit and nonpartisan Civil Society Institute based in Newton, Mass. It is a think tank that serves as a catalyst for change by creating problem-solving interactions among people, and between communities, government and business that can help to improve society.

© Michael M. Barrick, 2016

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