Saint John Telegraph-Journal
November 11, 2002
Cities like Saint John faced with spending millions of dollars to overhaul aging water systems might want to consider privatizing the service.
Elizabeth Brubaker, executive-director of Environment Probe, has just written a book titled Liquid Assets: Privatizing and Regulating Canada’s Water Utilities.
She believes that allowing the private sector to provide Canadians with water and sewerage services isn’t only cheaper, it inspires innovation and eliminates a conflict of interest that Canadians often choose not to think about.
“I’m concerned that, when you have the public sector financing, building, operating, owning and regulating, you put the public sector in a conflict of interest. It becomes very difficult for it to crack down on poorly performing systems,” Ms. Brubaker said in an interview this weekend.
Lack of regulation was the impetus behind England’s and Wales’ decision to privatize their systems. In those cases, prosecutions increased even as pollution levels dropped.
“The government started getting really tough. It had no qualms at all about taking anybody to court who was continuing to pollute.”
It has been estimated that upgrading Saint John’s water and sewerage system will cost about $200 million. The financial burden is shifting towards the system’s users because, even with the province and federal governments kicking in, water and sewerage charges per household are expected to peak at $875 in 2011. Today, they’re $427.50. Without help from the other two levels of government, the bill will triple today’s rates.
Privatized systems are generally about 15 to 45 per cent cheaper to build and operate for a variety of reasons, the most obvious being that competition results in efficiency, says Ms. Brubaker, using the city of Moncton as an example.
Metro Moncton’s water treatment plan came on line two years ago in a public private partnership between the City of Moncton and builder USF Canada.
“When it bid out its water treatment plant, it learned that, through competition, it could encourage efficiency and innovation. The firm that won that job actually ended up using a different sized plant and saving quite a lot of money in the process. They had the incentive to try to figure out how to do things better.”
The plant was built at a cost of $23 million, between $8 million and $10 million less than a publicly designed and built plant would have cost. All told, the city expects to save between $14 million and $17 million in capital and operating costs over the course of the 20-year lease.
The partners have been talking about a second arrangement for a 20-year, $200-million-plus rebuilding and maintenance program of its water and sewer pipes. That process is continuing, with Moncton also seeking other proposals, including one from its own engineering department. It will probably be next year before someone is chosen to start the job.
Meanwhile, Ms. Brubaker says there are several of multinational companies with deep pockets and huge amounts of expertise that would be willing and eager to invest in Saint John’s water and sewerage infrastructure, even though 20 per cent of it dates back to before 1900. Many systems in the country are just as old, says Ms. Brubaker.
“The private sector often bids very ferociously for the opportunity to upgrade those kinds of systems.”