It seems that the loudest and most contentious debate around drinking water is the whether and to what extent private, for profit, entities should be involved through public-private partnerships (P3s) or even outright privatization of water system assets and operation.
The debate is about to get louder as the City of Winnipeg recently voted to dissolve its water and waste department to make way for a new stand-alone utility that may include a partnership with a private engineering consortium.
But when it comes to drinking water, are these the most pressing issues we face?
Certainly those with financial interests think so. Private companies wanting to exploit business opportunities and those currently employed by public systems are making their voices heard.
Yet for a water consumer whose main concerns are drinking water quality and fair water costs, this debate is anything but clear. One thing seems certain: the way government regulates our water appears to have a much greater impact on what comes through the tap than the whether the system is public or private.
In fact, safe, affordable drinking water is not exclusively linked to public or private ownership. Evidence has shown that the nature of water system ownership is simply not much of a critical factor in water quality for developed countries. It might not even make much of a difference in the price you pay.
By far the most common form of water supply system ownership in Canada is the municipal model. There are a few government-owned corporations, some P3s and some very small private systems, but there doesn’t seem to be a broad enough sample to draw a firm conclusions from the Canadian experience.
The United States, however, has a diverse mix of public and private ownership. A study by the Brookings Institute analyzing data reported by all systems under the Safe Drinking Water Act found that there was little difference in the number of violations based on ownership type, but there were bigger differences based on system size, location and type of water source.
The same study examined the cost of drinking water and found that it didn’t vary significantly by ownership type. Interestingly, the study found evidence that the frequency of violations and water fees dropped in both public and private systems when there was a mix of ownership types within a county, suggesting that a diversity of approaches in a local area caused all types of systems to pull up their socks.
Other studies—usually focusing on a sample of water systems in individual U.S. states—have found that private systems charge a higher price. What is not clear from these studies is whether the prices of private systems are higher due to having to return a profit to shareholders, or whether there are reasonable explanations for the higher charges, such as private involvement coinciding with the increased investment in infrastructure, or the water system being more financially self-sufficient (recovering a larger share of costs directly through water fees rather than relying on general tax revenues).
In many cases, the promises that accompany increased private involvement in water—efficiency, increased access to finance, additional technical expertise and improved service—have not materialized to any measurable degree. Even the World Bank, long accused of foisting privatized water systems on reluctant countries in the developing world, has concluded that “there is no statistically significant difference between the efficiency performance of public and private operators in this sector.”
That the purported benefits of competition don’t materialize in the municipal water sector should not really be a surprise. While there may be some competition at the contracting stage, there is simply no way for water consumers to exercise any choice in who provides their water on a day-to-day basis. It is a sector currently immune to meaningful competition.
But while the potential promises of P3s and privatization have not been borne out, it is also clear that the doomsday scenarios painted by public system advocates are not a likely, let alone inevitable, result—at least in more developed countries. A former water analyst for Public Citizen (a pro-public water system organization) writes: “Contrary to the critics’ contentions, private operators have a respectable record of providing quality water and complying with environmental standards.”
There certainly are some privatization horror stories: Cochabamba, Bolivia and Atlanta, Georgia to name two. But there are also public system horror stories: Milwaukee, Wisconsin and Walkerton, Ontario, are the sites of the largest waterborne disease outbreaks in the United States and Canada, and both were public systems. The evidence shows that both public and private operators are capable of mismanaging water treatment and supply.
The issue of safe drinking water is much less a question of ownership and more a question of governance.
Does this mean that Canadians should be unconcerned about the spectre of increased private involvement in the provision of their drinking water? No, we should remain concerned. The question is not whether private systems will work at all, but whether they will work in a Canadian social, political and legal context. The track record of Canadian regulators on environmental and public health issues does not inspire confidence that private systems would be regulated with the vigour and effectiveness needed to ensure the safe and reliable delivery of water services.
There are also other legitimate concerns that arise alongside increased private sector involvement, most notably the marked decrease in public access to records and documentation, and less direct accountability to the communities served. Additionally, once management of the system has gone to a private company, it becomes the holder of the institutional knowledge and expertise related to the local water system—creating the risk that a municipality cannot resume operation of its own services and will remain at the mercy of a single company at the time of contract renewal.
And regarding whether private or public water service comes in at a lower monthly cost, the price of water services in Canada are so low that the differences between communities are not particularly significant. Meanwhile, truly important questions such as the number of health care dollars that would be saved by investing in drinking water treatment or whether water systems are investing enough in maintenance and system upgrades continue to go undiscussed in the public realm.
In short, the jury is still out on whether privatization and P3s provide any real benefits at all and there are risks involved, which support maintenance of the status quo. While it may be tolerable to engage in economic and ideological experimentation in industries and services less critical to our health and well being, the provision of safe drinking water is not one of the areas where Canada should be rushing to follow the latest global trends. It’s open to other countries to be the guinea pigs of the world if they choose, but Canada should continue to build on its already enviable experience of providing safe, clean drinking water through the system we have. And if the time comes when that system is abandoned, it needs to be done on the basis of hard evidence, not untested economic theories—regardless of how elegant they may be.
The real danger of the privatization and P3 debates is less in how they are ultimately resolved, and more in ability to distract attention from the real issues of concern—safety, reliability, protecting source waters and promoting water use efficiency and reuse. To that end, let’s start debating about whether our water regulations are strong enough to ensure all operators—public or private—provide safe, clean drinking water for all citizens.
Randy Christensen is the managing lawyer of the Vancouver office of Ecojustice Canada. His practice focuses on water-related issues.
