tap into the private sector
owned is wiser than flush with profits, say academics KAREN
BAKKER and DAVID CAMERON, and ADELE HURLEY, a former International
Joint Commission co-chair
BAKKER, DAVID CAMERON AND ADELE HURLEY
Globe and Mail
Since the release of Ontario's Walkerton inquiry report,
the need to address the security of Canada's drinking water
has become more obvious and urgent. Cities such as Halifax
and Moncton have already privatized the operation of their
water systems. Is this the solution?
The multinational water-service firms that dominate the
global water-supply contract market actively seek such
contracts. Two French companies, Lyonnaise des Eaux and
Vivendi, are among the largest in the world, with tens
of millions of customers. But most water-supply systems
around the world, and in Canada, remain in public hands.
Tapping into multinational expertise brings clear advantages,
but also higher risks. Hamilton, Ont., signed a 10-year
contract in 1994 with Philip Services, which ran into
financial difficulty. So did the next owner, an Enron
subsidiary. Hamilton has dealt with four operators of
its water-supply system in eight years.
Municipal debates about water-supply management focus
on the need for accountability and oversight -- which
is why citizens opposed Vancouver's plans to involve private
companies in building and operating a water filtration
plant. Accountability was also a factor in Toronto City
Council's recent decision to retain direct control of
its water-supply system through a council committee, rather
than an autonomous municipal services board or stand-alone
One real fear is that private companies will promise
optimistic savings, and then try to renegotiate once the
contract is under way. Last month, Atlanta, Ga., cancelled
its 20-year contract with United Water, a subsidiary of
Suez-Lyonnaise des Eaux, citing failure to deliver on
promised cost savings.
So how should citizens, governments and private corporations
participate in water-supply management decisions? The
University of Toronto Munk Centre's Program on Water Issues
has identified seven models: direct-managed municipal
service; autonomous board or commission; co-operative
management; Crown corporation; a private corporation,
government-owned; delegated management; and a private
After considering its options, Washington, D.C., retained
public ownership and developed a system to increase efficiency
and match private-sector performance standards. A Welsh
water and wastewater company, privatized in 1989, was
restructured in 2001 as a not-for-profit corporation.
Now owned by "members" and prohibited from diversifying,
the company's risk rating has dropped and its credit rating
has improved, giving consumers lower water bills.
Other municipalities combine commercial management practices
and public ownership.
Dutch public water companies operate with no subsidies,
widespread metering and full cost-recovery pricing. The
Dutch system uses incentives rather than ownership to
manage water, supported by stringent regulation.
Private companies want to maximize profit; if effectively
regulated, they may also increase efficiency -- but not
necessarily at a lower cost to consumers. After the 1989
water privatization in England and Wales, water prices
increased substantially. So did disconnections of residences
for non-payment of bills, raising fears about public health.
Concerned about dysentery and other water-related illnesses,
the government banned residential disconnections.
The English case shows how involving private companies
in water supply without effective regulation may have
an environmental impact. The English also found increased
leakage from water-supply pipes. When questioned, company
managers argued that to go below an "economic level
of leakage" would reduce their profits. To protect
the infrastructure, the government had to impose leakage
The English experience underlines the importance of strict
regulation for effective water management. But private
companies aren't keen on strict regulation. English regulators
have found it difficult to maintain affordable prices
and high environmental standards, while ensuring levels
of profit acceptable to private companies and their shareholders.
The world's largest water-supply company, Suez-Lyonnaise
des Eaux, recently told the Philippine government that
it wanted to end a 25-year contract only five years after
it was signed because of disputes with regulators.
As the Walkerton tragedy reminded us, robust regulation
is necessary for effective water-supply management, whether
it is under public or private ownership. Experience shows
that when private companies cannot earn a healthy profit,
they retreat. The resulting ownership changes and contract
cancellations can be prolonged and expensive, with risks
to public health. When it comes to a resource that is
essential for life and health, why expose Canadians to
Karen Bakker is an environmental geography professor
at the University of British Columbia. David Cameron,
a political science professor at the University of Toronto,
was an author of Report of the Walkerton Inquiry:
A Strategy for Safe Drinking Water Part II. Adèle
Hurley is a former Canadian co-chair of the International