Two and a half years ago, the city of Stockton voted to abandon privatization of city water after four years of poor service, contamination, and soaring rates. It’s a textbook case of why public services should never be privatized – investors merely want to generate profits and don’t care about the quality of service, so they’ll cut corners and jack up rates.
One might have thought that this experience would have led the state legislature to stay as far away from water privatization as possible. And you’d be wrong, as the San Francisco Chronicle reported over the weekend:
Private companies could own, operate and profit from reservoirs and other water-storage projects built with billions in taxpayer dollars under a little-noticed provision of the $11.1 billion water bond that was approved by the Legislature and goes before California voters next year.
Lawmakers barely discussed the provision while considering the bond, and water experts who were asked about it by The Chronicle said they knew little about it or why it was a necessary part of the plan to overhaul the state’s water system….
The bond provides for the formation of what are known as joint powers authorities – usually a coalition of public entities that pool resources for projects they probably couldn’t do, or couldn’t afford to do, on their own. The water bond, though, specifically allows for the creation of joint powers authorities that “may include in their membership governmental and nongovernmental partners that are not located within their respective hydrologic regions in financing the surface storage projects.”
This came at the request of the Glenn-Colusa Irrigation District in the Sacramento Valley, where the $3.5 billion Sites Reservoir is going to be built, partly with funding from this bond. Instead of water fees going to pay off the costs of construction and operation, some would go into the pockets of an investor. In short, users would have to pay an investor to take a shower, wash their clothes, or cook their dinner.
As the Chronicle article shows, water privatization tends to benefit a few wealthy individuals (Stewart Resnick) and distorts the usage of water:
In a controversial agreement, the state officials turned control of the bank over to the Kern County Water Agency in 1995 in exchange for water rights to 45,000 acre-feet of water, or enough to meet the annual needs of about 90,000 households. Later that year, the Kern Water Bank Authority formed as a joint powers authority that includes the Kern County Water Agency, four other water districts and one private company, the Westside Mutual Water Co.
Westside now owns 48 percent of the shares of the water bank. The company is owned by Los Angeles billionaire Stewart Resnick and his Paramount Farms company…
Paramount Farms is in the midst of a significant expansion, according to the company. Most Kern County farmers have suffered through years of drought, and the water agency there declared a state of emergency this year due to a lack of water.
Arnold Schwarzenegger sells these kind of private funding deals to the voters as a way to save money – but they’ll spend more for the water fees than they would if we paid for this out of tax revenue.
Privatization of water resources – in any form – is a line that should never be crossed. Some places in California do get their water through private companies, such as we who live on the Monterey Peninsula. It’s a totally unnecessary situation, and should be avoided when possible. This news will only further damage the bond’s already doubtful prospects for passage. Which would be just fine by me given the numerous flaws in the proposal.
The private water company you have in Monterey, California American Water (CalAm), has a long record. And it’s not a pretty one.
When the U.K. was suffering a drought, it was found that the German parent company of CalAm, RWE Thames, had let the underground pipes go without maintenance and repair for so long, that millions of gallons of potable water were being lost each day from leaks and breaks.
After they moved into California in a big way as California American, they had a long history of similar service lapses. Customers of a private water system in Santa Cruz County that CalAm had purchased, complained of calls unanswered, days without water service, and slow repairs that closed roads for days and even weeks on end. But, worse yet were the bills.
For starters, CalAm constantly petitioned the PUC to be allowed to raise rates to cover their shoddy service. When they dug up the main local highway to repair a water main in the middle of winter, rain delays pushed the cost of the work up (and seriously inconvenienced residents all over the area). Since there was no reason for CalAm to have waited so long to begin the repair, customers were outraged that they were asked to pay for the poor planning. This after their had already risen 100% or more year after year, to three or more times those of the public water service that handles the rest of the area. When residents voted to tax themselves to buy CalAm out, the company fought the proposal through the PUC, took it to court, then attempted to have a pumping plant that had been paid for with public money included in the value of the buy-out.
But in other areas, it was worse. One small farming town in central California saw their bills rise 1,300% as soon as CalAm took over. The local elementary school, thinking the $2,000 bill was a mistake because their normal bill was only $200, found out differently when their water was shut off when they questioned it. Low-income farmworkers suffered a similar fate.
If farmers think it’s difficult to get the government to allocate more water to their fields in times of scarcity, I invite them to consider how much more difficult it will be under private ownership. Public entities are subject to pressure by the citizens they serve and the elected officials who represent them. Private companies only respond to one thing–money. This one fact could serve to drive out small farmers and to drive up the cost of food.
A woman I met through MoveOn said her community in the Midwest was trying to get rid of a well-known candy company, who had bought their water company. When residents complained of smells and foul taste, the company said they didn’t have to make government-mandated safety tests public. Private testing revealed a number of dangerous contaminants.
These are just a few of the pitfalls of private water systems. We let this ill-considered idea pass at our peril.
Your article states that “Privatization of water resources – in any form – is a line that should never be crossed.”
Well this is naive; you even state that there are many areas in CA where water is served by a private water company. There are many good private utilities and some bad ones…just as is the case with public water agencies. Public or private is not the real issue. The issue is competent management and leadership. Without that, any agency whether public or private is not going to succeed. Myself and four others did our masters thesis at UCSB on privatization in water service. You should really read our full report, available at
http://www.waterproject.info. Maybe then you will not be so quick to make blanket statements like the one I quoted. What we need in this state is leadership, not hype. There are indeed many problems with the water bond proposal (see the many fold critiques on aquanomics.com for example), but privatization fears are my least of concern.