The questions around water privatization are never simple. Is water a right or a commodity? Should it be a public service, to be provided, or a private good, to be traded?
For communities, any change to their water provider can be a source of concern and alarm. Any private company taking over a water supply contract must, from the outset, establish two-way communication with communities, listen to fears and allay them with concrete evidence. The privatization of water is a particularly challenging issue when it comes to convincing communities of its benefits.
Pros and Cons
Since the 1980s, privatization has become increasingly more common in the United States and around the world. Today, between 15 and 20 percent of American homes receive private water, a rate that has remained relatively steady for over a decade.
We must recognize that the history of water privatization in the United States has been mixed for the American people. The Atlanta 2003 crisis stands as a testament to some of the more negative sides of privatization, where a lack of competition and incentives, as well as poor oversight, led to severe corporate mismanagement of the water supply.
In contrast, Indianapolis and Veolia held the country’s largest public-private partnership in the water sector from 2002 to 2010, with resources being poured into clean water research and specific projects such as ISO acquisition and addressing common sources of customer complaints.
Customers are mainly concerned about two things: increased rates and reduced spending on maintenance. In order for a utility or municipality to get a community on board with privatization plans, addressing these two areas is crucial.
How to communicate
Utility companies and municipalities should carry the shared burden of communication about water privatization and addressing any concerns from communities. However, they should do this in two distinct yet compatible ways. Utilities can lay out the business case for privatization, explaining what economic advantages can be gained, and the effect on job creation, taxes and infrastructure. Municipalities, in comparison, should rely on more local concerns such as the age of specific water infrastructure, which repairs or upgrades should be carried out first, and how the influx of funds will be spent. Furthermore, municipalities must prove to customers they worked hard to find the best deal possible.
For example, a strong example of such close communication came when Indianapolis transferred both its waste and water systems to Citizens Energy Group for a deal worth $1.9 billion. This deal led the city to lose much of its debt burden and see a windfall in the hundreds of millions of dollars, which went toward transportation, city parks and the clearing of old residential buildings to be renovated.
If a rate increase is necessary, organizations should stay away from false promises. Transferring water from a public utility to private ownership, to a company or consortium concerned with turning a profit and paying taxes, will almost always lead to rate hikes. Instead of denying this reality, utilities and their private partners must break down exactly what this extra money will be used for. The upgrading of water infrastructure in the United States is estimated to need $1 trillion in investment over the next 25 years. Making it clear that this will be the first priority of any private providers is key. Alarming statistics make the need for such repairs abundantly clear, such as 6 billion gallons of treated water lost every day in 2017.
Municipalities also have a powerful arrow in their quiver: pulling back the curtain on the way a privatization deal came together. How many private companies entered a public tender? What were the minimal criteria of price and experience needed to enter? Can the losing bids be made public in order to show the value of the winning option?
There have been numerous examples of water privatization cases in the US where, despite strong administration and care for the community by the private company, a lack of engagement has sunk contracts. Customers must understand why their rates are going up, must be made aware of water quality, and what efforts private firms will make to ensure water becomes cleaner. The responsibility for this communication falls on the shoulders of the utility and municipality involved. Privatizing water does not absolve them of the need to explain why.