By engaging with our community stakeholders, we aim to understand their perspectives and create shared goals. In this section

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1 Our Communities By engaging with our community stakeholders, we aim to understand their perspectives and create shared goals. Our Priorities In our work, American Water serves more than 1,500 communities, and our steady focus is on helping to build stronger, more vital communities a central aspect of our responsibilities as a neighbor. Doing business responsibly, while demonstrating our commitment to the communities where we live and work, is essential to our long-term business success and to building trust with those whom we serve. We focus our community efforts on the key objectives of demonstrating environmental stewardship of local water resources, creating future generations that understand the need to protect our water resources, supporting disaster relief and recovery efforts, and fulfilling our commitment to respecting all human rights, including the fundamental right to reliable, clean water and sanitation services. A core element of how we achieve our objectives is by engaging actively and openly with our community stakeholders to understand their perspectives and create shared goals. In addition, we continuously seek to build strong partnerships with local and regional community organizations and governments to enhance our local impact. Our own American Water employees who volunteer in their communities also play a key role in demonstrating our commitment to the communities we serve. In this section 53 Our priorities 54 Strategy and management 55 Developing solutions for communities 56 Feature: Innovative community efforts, Monterey Peninsula, California 57 Investments in technology and infrastructure 57 Drought mitigation efforts 58 Feature: Aftermath and recovery from the Joplin Tornado 60 Feature: Water supply deficit in Central Kentucky 60 Human rights 61 Performance This section highlights our approach, as well as recent examples of how we partner with our community stakeholders to address and solve important local challenges. 53

2 Strategy and Management Our approach to serving our communities includes developing partnerships with local governments, community organizations, customers and planners to support watershed-centric approaches to water resource management. Our aspirational goal is to initiate partnerships in a majority of our areas of operation to ensure American Water engages with our community stakeholders to steward local water resources. American Water also invests in innovative community programs that serve diverse populations and align with our core business of water and wastewater services. We focus our community efforts and investments in the following four areas: Water and the Environment Innovative, community-based environmental projects that improve, restore, or protect our watersheds and our communities surface and groundwater. Through our environmental grant program, community partnerships and employee volunteer activities, we are able to improve not only the environmental footprint of our own operations and activities, but also the health and sustainability of the environment and water resources in our hometown communities. Moving forward, we will develop a watershed health process to understand the greatest risks facing our local water resources and to develop solutions to address these risks. This methodology will be integrated into our Integrated Water Resource Management process to align with our overall planning and community engagement activities. $340,000+ In we donated over $340,000 to Water for People, to help support people in developing countries. 18,000 teachers New Jersey American Water provides educational resources for up to 18,000 teachers through Water Works, a partnership with Scholastic. $180,000+ In 2012, 48 projects in 10 states were awarded grants totaling more than $180,000 through our Environmental Grant Program. Water and Healthy Living Efforts that contribute to healthy communities by promoting access to safe water and sanitation, educating customers on the health benefits of water and encouraging good hygiene practices. In we donated over $340,000 to Water for People through our workplace giving campaign. Water for People helps people in developing countries improve quality of life by supporting the development of locally sustainable drinking water resources, sanitation facilities, and hygiene education programs. We have also helped to generate greater interest and awareness of water conservation and efficiency in low-income households. Environmental Education Educational programs that provide information about water conservation, water and wastewater treatment, the water cycle, watershed protection, and the environment. We continue to promote our Stream of Learning Scholarship launched in 2010, which provides scholarships to students who plan a course of study critical to the water and wastewater industry. We also offer free assistance to community members to help them understand how to read water meters, adjust irrigation systems, conserve water, and landscape with drought-tolerant plants. In addition, we conduct community learning events to educate our communities about the true value of water and stress the importance of efficiency, as well as the need for ongoing infrastructure investment. New Jersey American Water launched Water Works, a partnership with Scholastic that provides teachers in New Jersey with educational resources on water. You can learn more about the program at The partnership has been running for three years and reaches up to 18,000 teachers. Our Environmental Grant Program offers funds for innovative, community-based environmental projects that improve, restore, or protect the watersheds, surface water, or groundwater supplies through partnerships. In 2012, a total of 48 projects throughout American Water s service areas in 10 states were awarded grants totaling more than $180,

3 We also unveiled our Virtual Main Break event in New Jersey to help our community stakeholders understand the need for infrastructure investment. Featuring threedimensional street art, the event enabled American Water employees to engage with the community on how water infrastructure operates and the importance of continued work to improve our water system. The program is now being expanded to other American Water subsidiary operations. Community Sustainability Projects that meet a definitive, sustainable community need, preferably aligned with American Water s core business, and which enrich the lives of the residents who live and work in the communities we serve. We work with organizations such as the American Red Cross to support disaster relief and recovery, as well as partner with first responders and municipalities to provide funding and operational assistance. Some of our state subsidiaries offer small grants to local fire departments to provide support for vital services in the communities we serve. Our United Way workplace campaign raised nearly $1.2 million in 2011 and We also conduct our AmerICANs In Action! Month of Service event each September where nearly 1,000 employees, family members, and friends participate in over 100 community volunteer projects across American Water communities in the U.S. and Canada. Developing Solutions for Communities Designing solutions for clean water and maintaining water and wastewater systems for communities begins with a clear understanding of the community and the impact and cost of potential solutions. For instance, aging infrastructure and frequent disruptions of water services, especially during times of drought, are likely to result in inequalities of community social services, such as transportation, health, and education, as well as impact local economic growth. Furthermore, because watersheds are not often aligned with political boundaries, there is a significant need for collaboration to balance water conservation needs with community planning purposes. To address local water challenges, we engage with community members, government agencies, and local organizations to understand their needs and how water resources are used. We work with communities and their leaders to look at available options for water delivery and treatment, and assess what is most cost effective, sustainable, and environmentally friendly. This includes developing community partnerships to support watershed-centric approaches to water resource management and to develop tools and indices to assess local watershed health impacts. 55

4 Feature: Innovative Community Environmental Efforts, Monterey Peninsula, California The Monterey Peninsula is one of the most popular tourist destinations in California. However, beyond the great beaches, hiking and recreation, there is also a serious water shortage that has required developing a replacement water supply. Due to threatened biodiversity in the Carmel River, the area s primary supply source, the state ordered California American Water to reduce withdrawals from the river by up to 70 percent. Plans are underway to replace water from the Carmel River with water from seawater desalination, groundwater recharge (reuse), and aquifer storage and recovery. That project is currently pending California Public Utilities Commission approval. 900 acres The Carmel River restoration project is preserving over 900 acres of coastal watershed lands. 5,400+ acres The Carmel River restoration project will result in over 5,400 acres of contiguous regional parkland for low-impact recreation. Second-generation dam keeper Don Lingenfelter poses at the base of the San Clemente Dam. Don has held this position for more than 30 years after taking it over from his father. The 90-year-old San Clemente Dam is not seismically safe and is soon to be removed, enhancing biodiversity in the Carmel River and surrounding watershed. California American Water also just received final approval to move forward with the largest dam removal project in California history to further restore the Carmel River. The 90-yearold dam is not seismically safe and, as a result, needs to be removed. In a partnership with the State Coastal Conservancy, NOAA Fisheries, and nonprofit agencies, the dam will be removed, the sediment that has accumulated behind the dam will be left in place, and the river will be re-routed to bypass the sediment. The project will improve river flows and help restore biodiversity. It will also open 25 miles of spawning and rearing habitat for threatened steelhead trout and improve habitat for threatened California red-legged frogs. In addition, the project will enable sediment within the river to move downstream, helping replenish supplies of sand to the beach and dune areas near the river s mouth. Finally, the project will expand public recreation by preserving over 900 acres of coastal watershed lands, resulting in over 5,400 acres of contiguous regional park land for low-impact recreation. For the latest updates on the project visit A view from the top of the San Clemente Dam, with the upstream face on the left side. This represents a major victory for the river, its habitat, and generations of Monterey Peninsula residents to come. Rob MacLean, President California American Water 56

5 Investments in Technology and Infrastructure American Water invests $800 million to $1 billion annually to upgrade and maintain our systems the plants, pumps, and pipes that enable us to continue to provide high-quality, reliable water to the 14 million customers that rely on us every day. $800m to $1bn We continued to invest $800 million to $1 billion annually to upgrade and maintain our systems. Part of this effort includes investing in innovative solutions to water supply challenges. The use of innovative technologies, such as advanced metering and sensing systems to help detect and stop losses of treated water, water reuse (treating wastewater to a high quality for use in heating/cooling systems, irrigation and other applications), and desalination of seawater or brackish water sources, will help us maximize our water resources. We are focused on the development and use of innovation and technology to provide solutions to these challenges. Drought Mitigation Efforts Providing reliable service is also fundamental to our business, especially during times of drought and severe weather conditions. The record summer heat and lack of rainfall in 2012 posed some challenges, but only in limited cases did we have potentially severe water supply issues, as the hardest-hit areas were largely outside of the areas we service. While we cannot control the weather, we can and do prepare for it. Here are a few recent examples of our drought mitigation efforts: 3 Last summer in Joplin, Missouri, we installed a new gate system atop our dam to increase the depth by two feet, which added approximately 68 million gallons of water to the reservoir 3 Also in Missouri, we constructed temporary piping at lower elevations in the Meramec River to ensure that we continued to have access to this water supply as the river level dropped 3 In Central Kentucky, the new treatment plant and facilities that we opened in 2010 kept our company ahead of demand despite the extreme weather that the state experienced 3 Due to extensive community outreach and education, the amount of water used by our Monterey, California customers has dropped by 30 percent. Monterey is now cited as a national leader in water conservation. 30 percent reduction Community outreach and education has helped reduce the amount of water used by our Monterey, California customers by 30 percent. 57

6 Feature: Aftermath and Recovery from the Joplin Tornado For Joplin, Missouri residents, May 22, 2011, started like many other Sundays: A beautiful spring day. But by that evening, they would experience one of the deadliest tornadoes since modern recordkeeping began in A little after 5 p.m., an EF-5 tornado a category reserved for only the most devastating tornadoes swept through 13.8 miles of the heart of Joplin. CHALLENGES 9,000 people displaced The Joplin tornado resulted in approximately 7,500 residences and 500 businesses destroyed or damaged, displacing 9,000 people. 5.5 days Joplin American Water staff, with help from St. Louis County employees, restored the entire water system in five-and-a-half days. Missouri American Water s Joplin District distribution facility was destroyed by the May 2011 tornado. Although Missouri American Water s Joplin District Service Center and the plant s storage building were total losses, the treatment portion of the two-year-old water plant suffered only minor damage. These damages were minimal compared to the damages the rest of the community sustained: A total of 161 people died that day and more than 1,000 reported injuries. Approximately 7,500 residences and 500 businesses were destroyed or damaged, displacing 9,000 people. In the year since the disaster, Joplin has rallied and rebuilt an effort in which American Water has been proud to play a major role. First Response In the days following the storm, Missouri American Water s Joplin teams maintained a single-minded focus on restoring water service. Generators, equipment, and supplies poured in from operations across the state. With help from St. Louis County employees, Joplin American Water staff worked many 12- or 14-hour shifts to restore the entire water system in five-and-a-half days. Our ability to respond quickly to deploy resources from other districts illustrates the unique value that our scope and size brings to emergency response, said Greg Weeks, Vice President of Operations for American Water Missouri. At the same time, employees launched Joplin New Beginnings an outreach effort that grew out of long-standing community partnerships. Within days, a community consisting of American Water employees, their children s Scout troops, vendors, and dozens of people and organizations coalesced around their mutual contributions to Joplin New Beginnings three focus areas: 3 Caring for Children: Joplin School Partnership. Missouri American Water teams spent the summer months and beyond compiling boxes of supplies by grade to help local children return to their schools. 3 Caring for Customers: Joplin Economic Security Corporation (Community Action Agency). Employee and corporate donations funded Missouri American Water s H2O Help to Others program, which provides vital services to low-income families. Almost one year later, the former distribution facility located at the water treatment plant now serves as a storage facility. Working to find and turn off a leaking meter. Our ability to respond quickly to deploy resources from other districts illustrates the unique value that our scope and size brings to emergency response. Greg Weeks, Vice President of Operations American Water Missouri 58

7 3 Caring for the Community: American Red Cross. The American Red Cross created a Missouri American Water donation page on its website. And for only the third time in our history, American Water s leaders appealed to employees companywide for help in one of the communities we serve. In just four weeks, employees throughout the American Water family raised $63,500 in funds to support the Red Cross s emergency response efforts in Joplin. Operations Recovery Throughout the devastation, our customers were a top priority. We maintained a tireless focus on customer service, even as we were restoring our water system, said Weeks. As we worked in the devastated area, we listened and learned about what our customers would need as they put their lives back together. American Water employees implemented special customer service initiatives in response to the crisis. To lessen the stress on people already dealing with so much tragedy, customers whose homes were destroyed did not receive a final bill; instead, their accounts were closed as of the last reading date. The normal activation fee was waived for customers who were forced to establish service elsewhere. To help speed the reconstruction process, we streamlined demolition permits as well. Missouri American Water was the only utility to shut off all services in the impacted zone so we did not need to send field crews out when demolition permits came in. Because of this quick procedure change, we received positive comments from people saying how easy Missouri American Water was to work with, as it was taking other utilities up to a week to sign off on permits, said President Frank Kartmann. The local office handled this process with a small crew of only two American Water employees. The process changes we made to help our customers helped them rebuild homes and lives, Kartmann added. They are an example of simple steps we and other utility companies can do in emergency situations. One Year Later Joplin City Manager Mark Rohr estimated that almost 250,000 people have helped in Joplin s recovery. Of the approximately 4,000 residential services deactivated due to the storm, half have been restored. Of the 530 affected businesses, 420 have reopened and only 28 have indicated they will not rebuild or reopen. Things in Joplin continue to be far from normal, said Operations Manager Matt Barnhart. Maybe it is accurate to say there is a new normal. Our employees have shown tremendous grace under pressure and continue to do so every day. I am proud of how American Water supports this community. On the one-year anniversary of the tornado, employees and their families and friends participated in a Day of Unity, culminating with a walk along the path of devastation and ending at Cunningham Park. Missouri American Water representatives were there with a water trailer to celebrate the recovery, remember those who perished and envision a bright future for this town that has suffered so much. I see this as a unique chance to build a better Joplin, said Barnhart. Our future as a community and a water utility will consist of growth opportunities and continuing to display the resilience that everyone associates with our city. $63,500 raised in 4 weeks Employees throughout the American Water family raised $63,500 in funds to support the Red Cross s emergency response efforts in Joplin. Clearing debris from tornado damage in Joplin, Missouri. Our future as a community and a water utility will consist of growth opportunities and continuing to display the resilience that everyone associates with our city. Matt Barnhart, Operations Manager American Water 59

8 Feature: Water Supply Deficit in Central Kentucky Water supply in Central Kentucky has been an important community issue for many years, with numerous residents and stakeholders involved in discussing and developing solutions for this critical challenge. Over the years, we have made significant efforts through public forums, speaking engagements, and educational campaigns to educate the region on the importance of water and the issues affecting the water supply. Through these engagements and dialogues, we proposed a solution that would not only address this local water supply deficit issue, but also replace the aging infrastructure that had been exacerbating the problem all along. In late 2010, we began construction of a new water treatment plant in Kentucky and a 31-mile underground water transmission main. Multiple community meetings were held in the region to inform area residents and community members about the proposed project and obtain their feedback on potential routes for the pipeline to follow. Their feedback, coupled with additional field research, helped us make a well-informed decision regarding the best route for the transmission main that avoided important historical and environmentally sensitive areas. During construction, we provided constant communication to community members and residents in the affected areas with updates by phone or . We also continued to host multiple tours for community leaders and public officials of the pipeline route, the treatment plant, and the booster pump station s construction sites, and delivered materials about the project to others who were unable to participate in these site tours. These engagements with our local community stakeholders proved not only to be an invaluable process that helped us to develop the most effective solution for the issue, but also to serve the broader shared goal of improving the long-term health and sustainability of water in our communities. The new water treatment facility has also helped us to stay ahead of demand despite the extreme weather that the state experienced in the summer of Kentucky American Water hosted for government officials, regulators, business and community leaders and others a number of construction site tours of the Kentucky River Station II at Hardin s Landing water treatment facility in Owen County. Here, tour participants and American Water representatives observe construction of the pipe that transports water from the Kentucky River up a 400-foot incline to the treatment plant. Human Rights At American Water, we are committed to respecting all human rights. We also expect our suppliers and business partners to demonstrate similar commitments. We have identified three key areas of human rights impacts for our company: Human Right to Water and Sanitation We work hard each day to supply our customers with something they cannot live without: water. We believe that fulfilling this responsibility in a sustainable manner is critical to the overall health and wellness of our world. We strive to ensure a sustainable supply of clean water by focusing on infrastructure investments, water efficiency, and affordability. Human Rights in the Workplace As a major employer, we respect the human rights of our employees. We adhere to the principles laid out in the International Labour Organization s Declaration of Fundamental Rights at Work, including non-discrimination, freedom of association, and freedom from forced and child labor. These commitments are supported by our corporate code of ethics and our policies on equal employment opportunity, nondiscrimination, non-retaliation, harassment-free workplace, and health and safety; and we ensure compliance with these policies through ongoing training and annual certification. Our employees also have the opportunity and responsibility to report grievances through our Ethics Hotline. 60

9 Human Rights in the Supply Chain We rely on a large network of suppliers, vendors, and business partners to provide us with the products and services that help us achieve our business objectives. We expect our suppliers and business partners to demonstrate a similar commitment to human rights. We ensure these commitments through our Supplier Guidelines, Purchasing Policies, and our Supplier Diversity Program. For more information, see Our Supply Chain section. While respecting human rights is the responsibility of every employee at American Water, we recognize that our ability to uphold human rights requires strong oversight and governance. We therefore enlisted our Chief Ethics Officer to provide executive oversight of human rights at American Water. Performance We made significant progress toward meeting our community objectives in We continued to invest $800 million to $1 billion annually to upgrade and maintain our systems the plants, pumps, and pipes that enable us to continue to provide high-quality, reliable water. In addition, we continued to develop local partnerships to support watershed-centric approaches to water resource management. A key highlight of our progress since our last report in 2011 was the formal launch of the American Water Charitable Foundation, a nonprofit organization created to help support American Water employees in their own charitable endeavors, provide targeted assistance for disaster relief efforts, and offer funding for higher-level initiatives related to clean water, conservation, education, and sustainability. $800m to $1bn We continued to invest $800 million to $1 billion annually to upgrade and maintain our systems. AMERICAN WATER CHARITABLE FOUNDATION Solely supported by shareholder contributions from American Water and by investment income of the Foundation, the goal of the Foundation is to provide a more strategic and structured approach to our charitable giving, primarily by supporting employeefocused programs, specifically Matching Grant, Volunteer Grant, and Disaster Relief programs. In 2012, we appointed our first Employee Advisory Committee, a group of 12 employees from across American Water who will help govern the Foundation and provide ongoing strategic advice for two- or three-year terms. In 2013, we will develop a signature program for the Foundation, which we will then launch in