Plan to Shed Florida Water Assets was Company Strategy Since 2001

Chuluota, FL July 17, 2004 -- In a third week of aggressive work to restore satisfactory water quality, residents finally discover significant improvement in the appearance and smell of water flowing from their water taps. For a seemingly endless succession of days, some homeowners in the Orlando suburb of Chuluota have found water causing a horrific stench and sometimes containing sediment so thick that the water appeared to be as black as dirty motor oil.

In late June, Chuluota residents were alarmed to find water hydrants being opened by the water company in seemingly random areas of their communities. Some hydrants were allowed to spill water for several days in a row. Not only were the unintended hydrants spewing hundreds of thousands of gallons of costly water into the environment, but the more water that the water company released, water problems became more serious inside the homes.

"They tell us the water is safe," stated Mr. Dennis Smith in a television news report, "but I don't think they'll find anyone willing to drink this." Mr. Smith and his wife captured a sample of the water on Saturday, July 10. After a while, the water seems to clear up and appears safe, but when Dennis picked up the jar and disturbed the sediment, it quickly turned gray; then a pitch black when shaken.

Chuluota residents are particularly sensitized to water-related issues. In 1996, the Florida Public Service Commission approved Florida Water Services' request to bill customers at uncharacteristically high rates. The rate package was based on claims that the water system needed repairs and there was a small customer base. In a 1996 meeting attended by residents, Florida Water Services representatives and Seminole County Commissioner Grant Maloy, Florida Water Services acknowledged that the rates were high and predicted a more competitive rate structure as the community grew and necessary repairs had been made.

But some legacy Chuluota residents challenge Florida Water Service's efforts to abide by their pledge. Allegations have been made that water pipes in such bad condition that they should have been replaced, were reportedly relined by Florida Water Services instead.

For the past several years, residents have also witnessed a significant downturn in customer service as frequent water quality concerns and the continuing practice to send water bills as high as $476 a month to modest sized families continued. Bills as high as $200 and $300 are common while other Orlando communities issue $40 and $50 bills to residents metered at higher water consumptions.

On July 1, 2004, Allete, the parent company of Florida Water Services, issued a Press Release. In it, Allete admits to a business strategy that was designed to offload their water and wastewater assets in Florida as far back as 2001.

"The closing of these water utility sales essentially concludes ALLETE's successful strategy of exiting its water services holdings in the Southeast. When the strategy was launched in late 2001, ALLETE owned the largest publicly-traded water and wastewater utilities in both Florida and North Carolina. Sale proceeds were used to strengthen ALLETE's balance sheet and retire debt."

Some residents in Chuluota contend that Allete's strategy goes a long way to explain why Allete appeared to be operating in a loss-prevention mode to minimize new investments that should have been made to keep operations up-to-date and in line with planned growth. The release also reveals that employees were expected to work productively during a long period of time while being aware that their future with the company would likely be a dead end.

"It was no shock to me that the new company would be in a position to point fingers at past circumstances for the problems they are finding in our water systems," states Donald A. Thomas, Jr. of WaterRateCrisis.com. "Residents don't want to be told all over again that rates will stay high or be increased when Florida Water Services is ‘retiring debt' with the money that should have been earmarked to take care of that."

In recent days, Aqua Utilities has provided stellar response to customers.

"I hope that Aqua Utilities discovers that the Chuluota experience is a perfect opportunity to prove to their entire investor and customer base how important quality customer service really is to them," concludes Thomas. "The water may be clearing up now, but the rates still make us feel like we're buying oil."





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