Since 2013, Illinois American Water has added 85,000 new drinking and waste water customers in the Metro East, as the company’s footprint now sprawls from Waterloo in the south to Grafton in the north.
A state law passed in 2013 allowed private water companies to impose rate hikes on customers in the region to recover the costs of acquiring or repairing a water system.
“What that allows for is a spread of those investment costs among a large customer base,” said Illinois American Water President Rebecca Losli.
However, many customers and some city leaders argue that rates have gotten out of control now that those decisions are no longer under municipal oversight and instead in the hands of a corporation.
Those communities are left facing a difficult decision — spend millions of taxpayer dollars on upgrading aging drinking water and sewer infrastructure or sell facilities to a private company that can afford to maintain it.
As some towns like Madison debate the advantages and disadvantages of keeping water systems locally owned or selling to the publicly traded subsidiary of American Water, there are others that are taking a different approach.
A consortium of smaller water districts in Madison and Jersey counties are pooling their resources to take advantage of the available groundwater — and eventually separate their system completely from Illinois American Water in the hopes of maintaining local control.
“We think this is a better solution — to regionalize with several communities — and we can run it more cost efficiently,” said Greg Bates, one of the water district managers involved in the project.
The push against private water
The consortium of small-town and rural water districts — Bunker Hill, Carlinville, Central Macoupin County Water District, Dorchester, Fieldon, Fosterburg Water District and Jersey County Rural Water — call the new organization the Illinois Alluvial Regional Water Company.
The new group will be a separate nonprofit that will soon run a treatment plant in Jersey County that will serve the roughly 35,000 people among the seven towns and water districts. The motivation lies in getting control of the prices these groups all pay for their water.
There’s been a 60% increase in prices for those that get water from the Jersey County Rural Water Company in the past three years, said Bates, the company’s manager.
“I think our customers feel like they're being robbed, to be honest,” Bates said. “But we have no choice but to pass it on because it's the cost of doing business.”
For those in Fosterburg, the difference is more stark: 79.4% over the past three years. In 2022, the water Fosterburg bought from Illinois American Water cost $3.44 per 1,000 gallons. Now, it’s $6.18.
“We try to make the rate increase, I guess, as palatable as we can, but there's a breaking point,” said Steve Strohbeck, a farmer who also serves as chairman of the Fosterburg Water District. “We have to make money to survive.”
The price has drastically increased over the past couple of years, said Mark Voumard, Fosterburg’s district manager.
“Enough is enough,” Voumard said. “We're drawing a line in the sand.”
Given all this, the group believes it can take advantage of the naturally occurring groundwater and create its own supply.
The treatment plant, planned to be under construction near the rural community of Nutwood starting this fall, will require less oversight and treatment because groundwater is safer than surface water, Voumard said.
They hope to be operational by 2028 or 2029, Voumard said.
Right now, communities that buy water from Illinois American Water or are serviced directly by the company only have the Illinois Commerce Commission to push back against rate hike requests. But fighting the increases is a challenge because the attorney’s fees are pricey, Bates said.
While critics may agree with the philosophy behind local control of drinking water, many question if such a project like the Illinois Alluvial Regional Water Company can work financially — and that’s not lost on the backers.
“It’s a big risk,” Strohbeck said. “I won’t live long enough to see the (financial) benefits of it, but hopefully our kids will."
The Citizens Utility Board has largely led the opposition against rate increases proposed by companies like Illinois American Water. Last year, the consumer-advocate group lobbied against Illinois American Water’s $110 million rate hike request.
The nonprofit argues that, while every decision may be different for each community, publicly owned water provides more benefits than privately owned water.
“You lose local control, and it tends to be more expensive,” said Bryan McDaniel, director of government affairs for the board.
Many times, elected officials in small towns don’t want to make the unpopular decision to raise water rates, but that leaves the systems falling into disrepair. Unfortunately, the towns may be left to sell their water, McDaniel said.
“Once the system's gone, it's gone,” McDaniel said.
Most water systems in Illinois are still publicly owned, unlike gas or electric, which are dominated by private entities, McDaniel said. However, the trend — 61 sales for more than $400 million — concerns the nonprofit.
“Here we sit, the wealthiest country in the world, and we’re privatizing one of our public assets like water,” McDaniel said. “It’s sad, and it’s expensive for ratepayers in the longer run.”
Alton serves as a good example of a town that would have liked to keep its wastewater system instead of selling to Illinois American Water, former Mayor Brant Walker said.
“I can’t stress this enough: I would not have liked to have sold the treatment plant to Illinois American Water,” Walker said.
The Illinois Commerce Commission approved the $54.85 million sale in 2019.
The problem for Walker’s administration from 2013 to 2021 was twofold: Alton needed to separate its storm and sewer systems because of mandates from the federal government decades earlier, and it was behind on pension payments for police and firefighters.
The cost of both was too much to bear, Walker said — and the city was left with no choice but to sell to its only option in the area.
“I think it's better suited that it stays in the hands of locals, instead of big corporate America,” Walker said.
Why others have opted for Illinois American Water
Many municipalities find themselves in similar situations to Alton’s — strapped with millions of dollars in repairs to their water systems and the city’s leaders reaching out to Illinois American Water about acquiring their system, Losli said.
“American Water, being the largest water and wastewater company in the United States, we bring a buying power and also an expertise that is unmatched,” she said.
When buying Granite City’s wastewater treatment plant for $86.25 million last year, Illinois American Water spread that cost out over what it calls tariff groups, or a region of the state.
“We're able to spread those costs over a larger group, and that over time makes it a more affordable solution for those communities,” Losli said.
Many of the systems Illinois American Water buys are depreciating, which is why repairs and upgrades are needed, Losli said.
“A lot of times wastewater is out of sight, out of mind,” she said. “You flush your toilet, it goes away and you don't think about it. But when you under invest in wastewater systems, the impacts on the environment, and so those discharges to the community, whether it's a local creek or the Mississippi River, can happen. Making responsible investments is how we keep those waterways clean.”
There are a number of communities across the Metro East that prefer a private company instead of keeping those services in house.
“You're going to always find people that have got a complaint here or there about it,” said Grafton Mayor Mike Morrow. “But as far as I'm concerned, from the city aspect, I think it's pretty darn good."
Grafton has long been serviced by Illinois American Water, years before Morrow became mayor in 2021. For a small town, finding the funds and manpower to keep the water systems would be a challenge, Morrow said.
“Like my dad used to say, ‘Sometimes you just have to pay the man the money when it comes to tuning up the car and doing other things that weren't in his wheelhouse,’” Morrow said.
Jim Vernier, a former mayor of Shiloh, believes Illinois American Water has worked out well for his village, too.
The company purchased Shiloh’s wastewater system for $3.66 million in a sale that was finalized in 2020. The St. Clair County village has a piecemeal system that is serviced by a variety of surrounding communities.
What the municipality owned made up roughly a third of the village’s population, which also hadn’t been profitable. The drinking water in the same area had also been owned by Illinois American Water for the past 20 years, so Shiloh leaders decided to sell the sewers too, said Vernier, now a village trustee.
“We just didn't have the money to invest in it, and, if we did, other portions of the community would have had to suffer for the money that was being invested into the water and sewer system for that small 30% of the population,” Vernier said.
While the price of sewer services have gone up more than some expected, costs have gone up for everything, Vernier said. In his eyes, private enterprise has generally made operations and costs more efficient.
Legislative solutions
Illinois Rep. Amy Elik, R-Godfrey, said rising utility prices are some of the most-discussed topics by her constituents in Madison County.
“It’s very urgent,” she said. “When you get to the point where you’ve called your state representative on utility prices, you’ve probably tried some other things.”
She and Erica Harriss, R-Glen Carbon, believe a bill that would require more substantive public notices and public meetings would help reduce some of the questions that community members may have when Illinois American Water is planning to buy a municipal water or sewer system.
“I was trying to make it more robust public notice, so that the community members who are relying on their elected officials on a very complex decision, at least have a say in it,” Elik said.
While the Illinois House passed the legislation this spring by a unanimous vote, the Illinois Senate didn’t get the bill passed by the June deadline.
“I can understand why communities are looking for an option, and American Water is there to make a deal,” Elik said. “But people need to understand you're going to pay someone for those improvements.”
Losli, the Illinois American Water president, said the company tries its best to communicate with every community that it’s considering business within, and they’d support future attempts to pass the legislation.
The Citizens Utility Board has also crafted a larger reform of the system with legislation that stalled in the Senate this spring that would dictate the water utility company pay 80% of the costs associated with acquiring a drinking water or wastewater system, and the residents would cover the remaining 20%.
“It's happening quickly,” McDaniel said. “So, we're just trying to slow these rate increases down.”
However, requiring companies like Illinois American Water to pay more would be bad for two reasons, Losli said.
First: It jeopardizes a company to make those investments and maintain those municipal water systems. “It's the most vulnerable in our communities that are at risk,” Losli said. “It's folks that can't get bottled water whenever there's a water main break or there's a pump station that's down and our lift stations are not delivering water.”
Second: Illinois American Water believes this proposal would make it more difficult for communities to sell their water systems at a fair market value. “There’s a real risk to being able to make those investments that we need to make to our mains and our sewers,” Losli said. “And then on the acquisition front, really creating an obstacle for communities to want to sell.”
She said it’s not lost on Illinois American Water that many people are upset about increasing prices, which is why the company is strategic about when they expand.
The company tracks what’s called the bill-to-income ratio, which compares the price of water to median household income. That rate has actually gone down since 2012, sitting at 0.8% and below the 2% industry standard, Losli said.
Illinois American Water has a low-income rate program where qualified customers can receive a credit to help pay their bill. The company also has another program with the Salvation Army to help customers make their payments.
But the consumer advocates suggest there is another player in the game that’s not doing its part to maintain water infrastructure and keep prices down: the federal government.
“This isn't the time to be cutting water funding for our water systems,” McDaniel said. “Private water loves it when funding for water systems gets cut because then they step right up.”
