Debating Water PrivatizationDebating Water Privatization

Karen BakkerDirector, Program on Water GovernanceAssociate Professor, Department of

Geography University of British Columbia

Karen BakkerDirector, Program on Water GovernanceAssociate Professor, Department of

Geography University of British Columbia

Private sector participation in water supply in Canadian cities

Private sector participation in water supply in Canadian cities

Type of contract Operator Start Date Duration (years)

Goderich (ON) Management contract: water treatment

US Filter 2000 5

Moncton (NB) BOT: water treatment facility

US Filter 1998 20

Canmore (AB) Management contract: water treatment

EPCOR 2000 10

Hamilton ( ON) Management contract: wastewater treatment

cancelled

1994 10

Halifax (NS) BOT and management contract: wastewater treatment

United Water 2002 30

Type of contract Operator Start Date Duration

(years) Goderich (ON) Management contract:

water treatment US Filter 2000 5

Moncton (NB) BOT: water treatment facility

US Filter 1998 20

Canmore (AB) Management contract: water treatment

EPCOR 2000 10

Hamilton ( ON) Management contract: wastewater treatment

cancelled

1994 10

Halifax (NS) BOT and management contract: wastewater treatment

United Water 2002 30

Private Participation in Developing Countries (water and sewerage)

Private Participation in Developing Countries (water and sewerage)

Source: WB PPI database

0

5000

10000

15000

20000

25000

30000

35000

1987 1991 1995 1999

US$ million

Some history…Some history…

Private water supply companies in many 19th C. cities Network coverage concentrated in wealthier areas

Public sector dominates provision during 20th C. Governments had access to cheap finance and the political legitimacy to develop extensive water supply networks

Majority of water supply networks are publicly owned private sector retains role as service provider (e.g. France, Spain)

recent resurgence of private sector involvement

Private water supply companies in many 19th C. cities Network coverage concentrated in wealthier areas

Public sector dominates provision during 20th C. Governments had access to cheap finance and the political legitimacy to develop extensive water supply networks

Majority of water supply networks are publicly owned private sector retains role as service provider (e.g. France, Spain)

recent resurgence of private sector involvement

Municipality

Calgary

Edmonton

Halifax (water)

Halifax (wastewater)

Hamilton

Montréal

Ottawa

Toronto

Vancouver

Winnipeg

Business Model

Municipal Utility

Corporatized

Corporatized

P3

Municipal utility (former P3)

Municipal utility

Municipal Utility

Municipal Utility

Municipal Utility

Municipal Utility

Some definitions…Some definitions…

Water Supply Privatization: Private sector ownership (example: White Rock)

Private sector participation in water supply (P3s): Participation of private sector in building, operations, maintenance (ownership by public sector) (Canmore)

Privatizing water resources Tradeable water rights and water markets (Alberta)

Water Supply Privatization: Private sector ownership (example: White Rock)

Private sector participation in water supply (P3s): Participation of private sector in building, operations, maintenance (ownership by public sector) (Canmore)

Privatizing water resources Tradeable water rights and water markets (Alberta)

More definitions…More definitions…

CommercializationWater managed according to commercial principles (e.g. full-cost pricing and household metering)

CorporatizationConverting a water supply utility from a municipal department to a corporation (e.g. Edmonton)

CommercializationWater managed according to commercial principles (e.g. full-cost pricing and household metering)

CorporatizationConverting a water supply utility from a municipal department to a corporation (e.g. Edmonton)

Does water supply privatization

improve performance?

Does water supply privatization

improve performance? Pro Anti

Increases efficiency Private companies seek profitability, not necessarily efficiency

Better accountability to customers

Lower accountability (e.g. Enron)

Access to finance Private finance is more expensive for consumers in long run

More resources to buy in expertise

Short-term view and job-shedding reduces in-house expertise

Full cost pricing ensures adequate investment

Higher prices create affordability problems

Does privatization lead to

water conservation?

Does privatization lead to

water conservation?“Leakage of treated water is not a problem cost-wise. After all the money spent on pipes, a bit of money spent on chemicals etc. is incidental. The water doesn’t cost that much to treat. So companies don’t really lose a lot of money this way, until resources are tight…It is cheaper to go on treating and leaking as long as water is plentiful”

-senior water manager, Thames Water

“Leakage of treated water is not a problem cost-wise. After all the money spent on pipes, a bit of money spent on chemicals etc. is incidental. The water doesn’t cost that much to treat. So companies don’t really lose a lot of money this way, until resources are tight…It is cheaper to go on treating and leaking as long as water is plentiful”

-senior water manager, Thames Water

Dysentery and Household Water Disconnection Rates, England and Wales (1989-97)

0

5000

10000

15000

20000

25000

1989/90 1991/92 1993/94 1995/96

Disconnections (properties) and Reported

Cases of Dysentery (individuals)

HouseholdDisconnectionRates

Reported casesof dysentery(1989 - 1993only)

What does the evidence say?

What does the evidence say?

Without strict regulation (which is expensive and time-consuming), good contracts, and appropriate incentives, private companies:

Are not necessarily cheaperAre not necessarily more efficientReduce accountability and transparencyMay underperform the public sector

Without strict regulation (which is expensive and time-consuming), good contracts, and appropriate incentives, private companies:

Are not necessarily cheaperAre not necessarily more efficientReduce accountability and transparencyMay underperform the public sector

But…But…Without strict regulation and appropriate incentives, governments may…

under-invest in water infrastructurefail to be transparentfail to meet standards (e.g. water quality)

This is true for some communities in Canada…

Without strict regulation and appropriate incentives, governments may…

under-invest in water infrastructurefail to be transparentfail to meet standards (e.g. water quality)

This is true for some communities in Canada…

Debating Privatization:

What should we do?

Debating Privatization:

What should we do?1. Consider your options

2. Improve governance

3. Debate the BIG question: Is water a public good or a

commodity?

1. Consider your options

2. Improve governance

3. Debate the BIG question: Is water a public good or a

commodity?

1. Consider your options…

1. Consider your options…

Municipal DepartmentMunicipal Agency (e.g. Commission)External provider (public or private)

CorporatizationPrivatizationCooperative (rural areas)

Municipal DepartmentMunicipal Agency (e.g. Commission)External provider (public or private)

CorporatizationPrivatizationCooperative (rural areas)

1. Consider your options…

1. Consider your options…

Municipality Options Option selected

Kingston (ON) MunicipalCorporatization

Corporatized utility

Washington (DC)

Privatization, P3or Corporatization

Corporatized utility

Wales (UK) Privatization, P3or Corporatization

Not-for-profit utility; P3 for services provision

York (ON) Privatization, P3or Corporatization

Municipal utility

2. Improve Governance….2. Improve

Governance….Canada’s water governance has recently been characterized as ‘shocking’ and ‘unacceptable’

Key issues: Underfinancing of municipal infrastructure;Lack of legally enforceable water quality standards;

Lack of dataWeak regulation

Canada’s water governance has recently been characterized as ‘shocking’ and ‘unacceptable’

Key issues: Underfinancing of municipal infrastructure;Lack of legally enforceable water quality standards;

Lack of dataWeak regulation

3. Do you believe water is a public good or a commodity?

3. Do you believe water is a public good or a commodity?

Public good Commodity

Definition Public trust Economic good

Pricing Based on affordability Full-cost

Regulation Government Market-based

Goals Social equity, Efficiency,Livelihoods

Efficiency & Profit

Manager Community Private sector

Access Human right Human need