Privatization of Water Services in the United States An Assessment of Issues and Experience (2002) / Chapter Skim
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1. Key Issues in Water Services Privatization
1. Key Issues in Water Services Privatization
Pages 10-28
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From page 10... ...
In addition, private water companies saw profitable opportunities in the ownership and operation of water utilities and began to promote their services. These conditions led city officials across the United States to consider the pros and cons of privatizing some or all components of their water supply and wastewater utility systems.
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From page 11... ...
Ownership and operation of water services ranges from fully public to fully private, with several possible public-private partnerships in between. This study will assess public, private, and public-private drinking water supply and wastewater systems in the United States in light of the following water management concerns: long-term water supply; stewardship of water resources; the ability to manage water from a regional or watershed perspective; the ability to implement conservation strategies; water quality (both at the tap and in the environment)
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From page 12... ...
water and wastewater industry. All three forms share similar goals in terms of assigning specific tasks and operating risks to financially sound and technically competent private companies or consortia under multiyear contracts.
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From page 13... ...
of Percentage of Population Percentage of Served Systems Water Systems Served Population Served 25-500 31,904 59.2 5.2 million 2.0 501-3,300 14,040 26.0 19.8 million 7.8 3,301-10,000 4,356 8.1 25.4 million 10.0 10,001-100,000 3,276 6.1 91.0 million 35.9 >100,000 347 0.6 112.4 million 44.3 Total 53,923 100.0 253.8 million 100.0 NOTE: Total systems based on U.S. Environmental Protection Agency, EPA Drinking Water Information System Factoids: FYl999 Inventory Data.
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From page 14... ...
There are about 4,000 investor-owned water utilities in the United States, some of which serve large populations (e.g., Indianapolis Water Company)
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From page 15... ...
, the actual proportion of water services provided by private water companies, whether measured by customers served or by volume of water handled, has remained relatively steady in the United States since World War II, and currently stands at roughly 14 percent (EPA, 1997~.
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From page 16... ...
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From page 17... ...
-Citizen's water assetsa Thames Water PLC- 11/22/99 607 26.7 256 $4,732 E'town (ETW) Median Multiples 26.7 265 $2,738 aAsset purchase, multiples as adjusted to reflect capitalization structure similar to other publicly traded water utilities.
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From page 18... ...
Operating risks may be contractually assumed by private companies. But failures in services that affect health, fire safety, and other public goods will be attributed to political leaders.
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From page 19... ...
Philosophically, some political leaders believe that subjecting public management monopolies to vigorous private competition is beneficial. Advances in treatment technology to meet increasingly stringent regulatory standards are also motivating some local governments to consider outsourcing the management of individual treatment plants, conveyance systems, and other services to private firms.
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From page 20... ...
Outsourcing of operations and maintenance alone is often driven by a desire for cost savings through economies of scale and service efficiencies that may be possible through private enterprises. Few local governments want to sell their entire water system to a private water company and lose control of the community water supply and responsibilities like rate setting.
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From page 21... ...
Tampa Bay Water is a state-created regional water wholesaler that supplies water to municipally operated utilities in the Tampa Bay metropolitan area. In 1999, Tampa Bay Water signed a 30-year water supply contract under which Poseidon Resources is obligated to deliver 25 million gallons per day of drinking water from a large desalination plant set for operation by December 31, 2002.
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From page 22... ...
to manage and operate several utilities from a central office. Provision of water services is based on access to information such as data on consumer demand, on quality levels
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From page 23... ...
Many U.S. cities also have arrangements with private firms to provide water services, and these firms often reliably deliver high-quality water services at competitive prices, with high levels of consumer satisfaction.
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From page 24... ...
For one group's evaluation of the problems with water services privatization, the reader is referred to a 2001 report from the Public Citizen group (Public Citizen, 2001~. Inadequacies in performance can be resolved through negotiation between the contractor and the city.
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From page 25... ...
They are concerned about water quality: will they continue to receive consistently good-quality water in the long run? Citizens may also have concerns regarding new channels of communication and the airing of grievances: if they have questions regarding their water services under new privatization arrangements, do they voice their concerns with city officials or with a private firm?
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From page 26... ...
Bidding for the operation of complex organizations such as water and wastewater utilities is ripe for accusations of political favoritism. A review of the media coverage in competitive bid processes such as those in Birmingham, Atlanta, and New Orleans reveals charges that political favors were granted in connection with these bids.
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From page 27... ...
Another concern of private operators is gaining timely access to accurate condition assessments and maintenance records during their preparation of technical and cost proposals. Some private operators believe they operate on an "uneven playing field" because publicly owned utilities can issue tax-free bonds, thus raising capital at lower interest rates than the taxable debt available to a private company.
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From page 28... ...
Federal grants provided up to 85 percent of the capital cost of publicly owned wastewater treatment plants built during the 1970s and 1980s. In 1988, Congress voted to phase out these construction grants, but since 1989, Congress has provided seed funding for states to set up revolving loan funds for municipal wastewater projects.
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