Revisiting Water and Wastewater Utility Privatization

Elizabeth Brubaker
October 3, 2003

Prepared for the Government of Ontario Panel on the Role of Government
Presented at “Public Goals, Private Means” Research Colloquium
Faculty of Law, University of Toronto

Table of Contents
Introduction
Ontario: Where are we now?
   Case study: Hamilton
Canada: Understanding successes and failures
   Case study: Halifax .
The United States: Thousands of experiments .
   Case study: Atlanta
Europe: Two models, one spectacular success
   Case study: England and Wales .
The Developing World: The real lessons
Making Sense of the Debate in Ontario
   The state of the debate
   The myth of public-sector accountability
Endnotes
 
Introduction
The 1990s was a time of tremendous optimism regarding water and wastewater utility privatization. It was a decade of experimentation with asset sales, long-term concessions, and shorter-tern operating contracts. Early experience-starting with the privatization of water and wastewater systems in England and Wales and continuing with the negotiation of thousands of operating contracts in the United States-bred confidence. Inspired by successes elsewhere, and encouraged by industry consultants and upper levels of government, Canadian municipalities began testing the waters. In Ontario, several dozen entered into public-private partnerships.
In the last two years, however, privatization has stalled in the province, as it has across the country. Indeed, since Vancouver cancelled plans for the private design, construction and operation of its first drinking water filtration plant, Canadian municipalities have steadily retreated from private-sector solutions to their water and wastewater problems. Halifax’s decision to pull out of its agreement with a private firm to design, build, and operate three sewage treatment plants is but the latest in a series of defeats for privatization.
What has happened? Is it time to reassess privatization’s potential? What can Ontario learn from a decade of experience, both in the province and further afield?
Recent years have seen several high-profile failures-most notably, that of the Atlanta drinking water contract. And critics of privatization have become a formidable force; they have succeeded in re-shaping the debate from one about municipal needs and solutions to one about tainting the very source of life with private profit.
But the fact remains that, in many jurisdictions around the world, water and wastewater utility privatization has been extraordinarily successful. It has brought in investment in infrastructure. It has made available greater expertise. It has encouraged innovation. It has promoted efficiency. It has curbed the conflicts of interest that prevent governments that own, finance, or operate water systems from strictly enforcing the laws and regulations that govern them. As a result of all these factors, it has improved performance and brought greater compliance with health and environmental standards.

Ontario’s needs remain as pressing as ever. An astonishing 61 percent of municipally owned water treatment plants failed the latest round of provincial inspections. More than two years after the Walkerton water tragedy, 407 of 665 facilities continued to experience problems with training, sampling, disinfections, or water quality. Wastewater facilities also perform poorly. One-hundred-and-one facilities appeared on the provincial non-compliance list for 2001, the last year for which date is available. Both water and wastewater infrastructure require enormous investment-almost $13 billion and $19 billion respectively, according to one estimate. Ontario’s needs are indisputable. Privatization, accompanied by strict regulation, remains the most promising way to meet those needs.

To view this entire report in PDF form, click here.

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