Debating Water Privatization Karen Bakker Director, Program on Water Governance Associate Professor, Department of Geography University of British Columbia Karen Bakker Director, Program on Water Governance Associate Professor, Department of Geography University of British Columbia

Private sector participation in water supply in Canadian cities

Private Participation in Developing Countries (water and sewerage) Source: WB PPI database

Some history… G Private water supply companies in many 19 th C. cities G Network coverage concentrated in wealthier areas G Public sector dominates provision during 20 th C. G Governments had access to cheap finance and the political legitimacy to develop extensive water supply networks G Majority of water supply networks are publicly owned G private sector retains role as service provider (e.g. France, Spain) G recent resurgence of private sector involvement G Private water supply companies in many 19 th C. cities G Network coverage concentrated in wealthier areas G Public sector dominates provision during 20 th C. G Governments had access to cheap finance and the political legitimacy to develop extensive water supply networks G Majority of water supply networks are publicly owned G private sector retains role as service provider (e.g. France, Spain) G recent resurgence of private sector involvement

Municipality Calgary Edmonton Halifax (water) Halifax (wastewater) Hamilton Montr é al Ottawa Toronto Vancouver Winnipeg Business Model Municipal Utility Corporatized P3 Municipal utility (former P3) Municipal utility Municipal Utility

Some definitions… Water Supply Privatization: G Private sector ownership (example: White Rock) Private sector participation in water supply (P3s): G Participation of private sector in building, operations, maintenance (ownership by public sector) (Canmore) Privatizing water resources G Tradeable water rights and water markets (Alberta) Water Supply Privatization: G Private sector ownership (example: White Rock) Private sector participation in water supply (P3s): G Participation of private sector in building, operations, maintenance (ownership by public sector) (Canmore) Privatizing water resources G Tradeable water rights and water markets (Alberta)

More definitions… Commercialization G Water managed according to commercial principles (e.g. full-cost pricing and household metering) Corporatization G Converting a water supply utility from a municipal department to a corporation (e.g. Edmonton) Commercialization G Water managed according to commercial principles (e.g. full-cost pricing and household metering) Corporatization G Converting a water supply utility from a municipal department to a corporation (e.g. Edmonton)

Does water supply privatization improve performance? ProAnti Increases efficiencyPrivate companies seek profitability, not necessarily efficiency Better accountability to customers Lower accountability (e.g. Enron) Access to financePrivate 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? 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 doesnt cost that much to treat. So companies dont 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 doesnt cost that much to treat. So companies dont 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

What does the evidence say? Without strict regulation (which is expensive and time-consuming), good contracts, and appropriate incentives, private companies: G Are not necessarily cheaper G Are not necessarily more efficient G Reduce accountability and transparency G May underperform the public sector Without strict regulation (which is expensive and time-consuming), good contracts, and appropriate incentives, private companies: G Are not necessarily cheaper G Are not necessarily more efficient G Reduce accountability and transparency G May underperform the public sector

But… G Without strict regulation and appropriate incentives, governments may… G under-invest in water infrastructure G fail to be transparent G fail to meet standards (e.g. water quality) This is true for some communities in Canada… G Without strict regulation and appropriate incentives, governments may… G under-invest in water infrastructure G fail to be transparent G fail to meet standards (e.g. water quality) This is true for some communities in Canada…

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… G Municipal Department G Municipal Agency (e.g. Commission) G External provider (public or private) G Corporatization G Privatization G Cooperative (rural areas) G Municipal Department G Municipal Agency (e.g. Commission) G External provider (public or private) G Corporatization G Privatization G Cooperative (rural areas)

1. Consider your options… MunicipalityOptionsOption selected Kingston (ON)Municipal Corporatization Corporatized utility Washington (DC) Privatization, P3 or Corporatization Corporatized utility Wales (UK)Privatization, P3 or Corporatization Not-for-profit utility; P3 for services provision York (ON)Privatization, P3 or Corporatization Municipal utility

2. Improve Governance…. G Canadas water governance has recently been characterized as shocking and unacceptable G Key issues: G Underfinancing of municipal infrastructure; G Lack of legally enforceable water quality standards; G Lack of data G Weak regulation G Canadas water governance has recently been characterized as shocking and unacceptable G Key issues: G Underfinancing of municipal infrastructure; G Lack of legally enforceable water quality standards; G Lack of data G Weak regulation

3. Do you believe water is a public good or a commodity? Public goodCommodity DefinitionPublic trustEconomic good PricingBased on affordabilityFull-cost RegulationGovernmentMarket-based GoalsSocial equity, Efficiency, Livelihoods Efficiency & Profit ManagerCommunityPrivate sector AccessHuman rightHuman need