In its new Water Sector Strategy, Ontario promises to promote public-private partnerships and innovative financing for water infrastructure.
Acknowledging the challenges of maintaining and upgrading municipal water and wastewater facilities, the Strategy looks to the Alternative Financing and Procurement model: “Many municipalities have the potential to attract private sector partners and realize financial savings through this model. Infrastructure Ontario and P3 Canada are considering educational outreach programs, workshops, and training sessions for municipalities across Ontario.”
So far so good. But the Strategy is missing a key piece of the puzzle: full-cost pricing. Public-private partnerships will succeed only if water and wastewater systems are financially sustainable. And full-cost pricing is the only way to guarantee financial sustainability. Although the Strategy briefly mentions “ensuring financial sustainability,” nowhere does it refer to pricing as the means to achieve this.*
Pricing is also a key, but unacknowledged, component in both promoting water conservation and helping build a water conservation industry – two goals of the provincial Strategy. The Strategy includes several references to increasing water conservation, but not a single reference to pricing as a means to do so. Instead, it focusses exclusively on technologies.
To take but one example: “Ontarians currently consume water at double the average rate of Europeans, and Canada consumes the most water per capita in the world. This level of consumption puts a strain on our water sources. Ontario’s water users should be made aware of the latest technologies and practices that can help them reduce the water they use and lower the energy it takes to distribute and treat it.”
Being aware of conservation technologies will only take us so far. It is full-cost pricing that will provide incentives for households and businesses to adopt these technologies. Water prices communicate information about the value and scarcity of water and the costs of treating and distributing it. Prices that reflect full costs provide consumers with financial incentives to monitor their water use and minimize waste. They thus spur demand for conservation technologies and services and help nurture this growing sector.
The costs of under-priced water mount as infrastructure decays and as demands strain limited sources. To effectively address these problems, Ontario will have to amend its Strategy to include full-cost pricing.
* For more on the links between public-private partnerships, full-cost pricing, and sustainable water systems, see my 2011 study, A Bridge Over Troubled Waters: Alternative Financing and Delivery of Water and Wastewater Services.