Real unemployment hovers
somewhere around 30%, and the state is so broke that half the people
eligible for unemployment benefits can’t receive them. Life may be
tough and most people live in poverty, but that doesn’t mean they can’t
be made a little poorer. That’s the lesson locals learned after
bailed-out insurance villain AIG took over their water utility and
instantly raised rates to squeeze an extra $1 million in profits out of
its new customers, forcing some to consider choosing between running
water and food.
The towns are so rural,
their residents have yet to be touched by the Internet revolution.
Forget comment sections or forum threads. In Clinton, you have to track
down actual hand-written notes that residents filed with city hall to
read their complaints about the rate increase. Luckily, city officials
were nice enough to scan some of them.
Here’s one, dated August 8, 2009:
My husband and I are on a fixed income and with everything going up in
price this would be very a very large burden on us as well as most of
the citizens of Clinton. Our town is mostly of people like us and this
would be such a hardship for us. A 50.8% raise is outrageous on
anything. Please do not let this happen. It would mean the difference
in bringing buying food and medicine or paying a high water bill to
make someone else’s life easier.
Here is how the AIG takeover
went down: In 2005, flush with cash from its shady dealings in the
mortgage derivatives market, AIG announced that it was in the process
of acquiring Utilities Inc., a holding company that controlled scores
of small water utilities across 17 different states. With just 300,000
customers, the company wasn’t huge, but it boasted of being the largest
privately held water utility in the country.
“We have long
considered water infrastructure as an attractive investment opportunity
and an excellent complement to [our] existing energy infrastructure
portfolio. Utilities Inc. is a leader in this industry and we are
pleased that [we have] the opportunity to acquire this business,” AIG
Chairman and CEO Win J. Neuger gloated in a press release.
AIG
had reason to be pleased with its purchase. Water utilities are one
hell of a profitable business, with international corporations easily
making a 20 to 30% profit margin, according to a 2007 report by Food
and Water Watch. In the US, federal regulations limit profits to 10%, a
pesky rule that companies easily subvert by shuffling their income
around and “investing” it in side businesses. These kinds of returns
would be the envy of the pharmaceutical and oil industries. How do
water companies do it? According to Food and Water Watch, they charge
50% more for services than public utilities and pocket the difference,
thereby unleashing the potential of the free market.
People who
have been ripped off by bailed-out banks’ schemes to trick late fees
out of their customers will recognize what Utilities Inc. did to the
people of Middlesboro and Clinton. In the summer of 2008, as AIG was
teetering and desperate for funds, it “upgraded” its billing system,
and suddenly a slew of late fee charges hit the struggling locals.
Residents
had been getting their water bills like clockwork for as long as anyone
could remember, but confusion and disorder set in as soon as Utilities
rolled out its new and improved billing system. Monthly statements
started coming late or didn’t come in for months at a time. People were
double-billed and double-penalized for bills that never arrived. One
month, a bill would include sewer fees, the next month it wouldn’t—and
you’d be charged if didn’t catch the omission. It’s obvious the new
invoice system was designed for pure harassment, creating chaos and
reaping the rewards of the late fees it generated.
Internally,
Utilities referred to their revamp of the billing system as “Project
Phoenix.” It sounded eerily similar to the CIA’s “Phoenix Program,”
which was designed to terrorize, kill and torture uppity Vietnamese
villagers into submission during the Vietnam War. One month after
Project Phoenix started wreaking havoc on locals, AIG collapsed and
took the first of over $150 billion in taxpayer bailout funds. That
meant Project Phoenix could still go on terrorizing locals—which it did.
Here is how a local newspaper described the new billing program in Clinton in March, 2008:
It wasn’t until the summer of 2008 that the new bills began to arrive
and from Day One, they were messed up. Few customers here in Clinton
[called] the water company because they got multiple bills. One
business thought it got a break when its bill went down somewhat, only
to discover that the bill hadn’t included sewer costs. This went on for
several months. Finally, the [sewer bill] showed up – due in full – on
one bill. Requests to spread out the payment fell on deaf ears. . . .
Some of us were so confused by the bills, we paid them every time they
came in. . . . Fears of bad credit reports and shut offs kept most
customers paying whenever a bill arrived.
To make it harder for
Clinton residents to file complaints, AIG closed the utility’s local
office as soon as it took over the company. Pleas made by phone were
rejected.
Local citizens are angry, upset and fearful. Many
senior citizens on fixed incomes are already stretched past the
breaking point. Others living below the poverty line without hope of
getting a job are worried about how to pay another rising utility bill.
Customers we’ve talked to “want to do something,” but say they cannot
afford to file to intervene in the case. The trip to Frankfort is
daunting and expensive. Some dare not leave the jobs or businesses they
have for the time it would take to travel…
In November 2008,
right as AIG was recieving the second installment of its bailout and
the economy was in a free-fall, AIG’s water utility notified Middlesbro
and Clinton residents that it would be raising rates by 51%. It would
mean more than $750,000 in additional revenue a year, just from 8,000
customers. The money wouldn’t be used to fund infrastructure
improvements—none had been made and none were planned. No, according to
a company spokesman, the utility was trying to recoup money it had
invested in its “improved” billing system, in effect forcing the
victims of the billing system to pay for their own fleecing.
It
seems Utilities was quite honest about explaining that a good chunk of
the $750,000 would be transferred straight into the pockets of its
investors, according to the West Kentucky Journal of Politics and
Issues.
[Another] reason came from [the] company’s financial
expert, Pauline M. Ahern, who opined that a rate increase will allow
[the utility] to “earn a range of common equity cost ratio of 11.60% to
12.10%.” In the present market, that is an attractive return on
investment.
One million dollars may not seem like much these
days, but it sure meant a lot to the poverty-stricken residents of
Middlesbro and Clinton. There were quite a few bleak handwritten
statements filed with Clinton’s city hall during a public hearing on
the water rates increase. It makes sense to quote them to get a feel
for the level of despair that exists in rural communities like this all
over the United States.
Here’s one from August 8, 2009:
I get $675.00 a month, if they raise the water, or utilities, I can’t
pay them. I would have to go without water, etc. or gas. I’m disabled
and I can’t walk. Raising the utilities hurt a lot of people here in
Clinton. Not just me but everyone. As it is I can’t pay the water bills
because its high. But I pay what I can.
And here is another from August 12, 2009:
I feel that a rate increase of 50.8% will add a heavy burden on our
small rural community. Our citizin [sic] that lives in our city are on
Social Security, have full time jobs that pay barely minimum wage or
are working as many as 3 part time jobs to make their monthly budget.
And another from May, 2009:
“I always have a high bills [sic] to pay. I pay what I can. I am on
disable. [sic] I try not to use too much water. But yet I have a high
water bill. If the bill goes up, I will be lucky to pay them $10.00
instead of $80.00.
In the end, Kentucky’s regulatory commission
reduced the water rate increase from 50.1% to 30%. How long before they
try raise the rate again? Or until the energy company decides to follow
suit? It’s hard to say. But one thing is for certain: AIG’s takeover
shows again that the American people were screwed by the bailed-out
billionaires, who, instead of showing gratitude or willingness to
reciprocate, have been preying upon the most vulnerable Americans like
they are 15th century barons soaking the peasants.
And as our
cities and states start leasing out and selling public infrastructure
to pay off their municipal debts, we can expect banks to gain more
control of public wealth. Middlesbro and Clinton are a glimpse into the
future of post-privatized America.
What
are we getting in return for the bailout? So far, predatory credit card
rates, exorbitant bank fees and obscene Wall Street bonuses. But we’re
being robbed in other, sneakier ways, too. It seems that taxpayers in
the poorest, most vulnerable parts of the county are getting plundered
by the same institutions they bailed out. One example is AIG’s
underhanded fleecing of residents of rural Kentucky.
