by Martin Pigeon – March 3, 2013
“A business of real public importance can only be carried on advantageously upon so large a scale as to render the liberty of competition almost illusory [...] It is much better to treat it at once as a public function.”
- J.S. Mill, 1872
Almost a year has now passed since Remunicipalisation: Putting Water Back Into Public Hands was first released. This book examined the ongoing trend of water “remunicipalisation” – how cities are taking back control of their water systems. It is exciting to give it a second life today, in the form of a Spanish book, as well as through a short animation film.
Researching and writing this book was intense: five urban water systems were studied, one per continent, with radical geographical, political and cultural differences among them.
As I looked at water struggles all over the world, more and more it felt as if I were observing the circulation of life's blood. The cities had a lot in common: their water systems were technology-intensive, comparably standardized, costly, vital... And for at least these two last reasons they had been privatized. Many investors love monopolies, and urban water networks are natural monopolies on a lifeline resource. However, after a period of significant expansion in private water management globally (1980-2000), the trend was reversing.
Lessons from remunicipalisation
As campaigners against water privatization, we encourage public water management: we welcome this new trend, but to what extent is it good news? Our research found that:
- remunicipalisation can save money for public budgets, and sometimes a lot such as in Paris where the city saved enough to reduce water tariffs by 8% without endangering investments and financial stability
- it always allows for more transparency
- it can increase the system's efficiency (performing to best technical capacity as opposed to just complying with legal standards)
- it often puts extension of coverage and equal access back on the agenda
In short, remunicipalisation works!
But other findings are equally interesting. The most striking one perhaps is that the decision to remunicipalize is usually taken mainly on financial and technical grounds. Pro-public water political campaigning does help, but the mere fact that private management fails to run systems in a technically sound and politically acceptable way can be enough to lead to remunicipalisation. In short, privatization is its own worst enemy.
The remunicipalisation wave continues. Veolia just lost one of its oldest contracts in France in the city of Rennes. A city spokesperson explained: “There’s a contradiction between the council’s aim to reduce water consumption and that of the operator whose interest is to see it increase.”
The water companies' business model for municipal contracts is outdated, at least in the EU. Consumption slowly but steadily decreased over the past 20 years, limiting revenue while costs skyrocketed, and the resulting hike in water tariffs has generated political discontent and high scrutiny. Cities that don't remunicipalize renegotiate their contracts fiercely: it is common for water multinationals to give 30% rebates these days to keep their contracts, hoping they can still recoup their costs later.
They are now trying to restructure their businesses, with two major options:
- Veolia seems to focus more on traditional engineering works and services for public and private clients, as well as new ones such as the mining and oil industry (fracking requires enormous amounts of water and involves high clean-up costs).
- Suez seems to try to capture the very management of the resource and the politics of water through “integrated water governance” contracts, trying to sell cities “water health contracts” and co-opting the language of the progressive water world.
One remark: the European Commission seems to completely ignore all of the above. It has never promoted water privatization as enthusiastically as today, imposing this failed model on Greece, Portugal and everywhere it’s given the chance. It has for the first time included water in Internal Market legislation on concession contracts, causing an uproar – and intense corporate lobbying – in Brussels these days. Indeed, “the Commission believes that the privatisation of public utilities, including water supply firms, can deliver benefits to the society when carefully made.”(EC, DG ECFIN 2012)
Making ‘public’ work
Public ownership is a pre-requisite but never a guarantee for better performance. “Public” must go hand in hand with democratization of the service. Only that way can challenges of the water sector be tackled in a sustainable way:
How can we finance costly infrastructure without giving control to corporations or banks?
How can water management be integrated in urban and land planning, in forestry and agriculture policies to improve resilience, resource quality and adapt to climate change?
How to fight other forms of privatization such as the end-of-pipe technological approach to pollution, or useless and dangerous ideas such as water rights markets?
How to translate these technical issues into political issues that all can understand and contribute to?
Remunicipalisation advances these debates by raising water issues on the political agenda and is a golden opportunity to try and solve them.
Martin Pigeon is a researcher and campaigner with Corporate Europe Observatory (CEO). CEO is a research and campaign group working to expose and challenge the privileged access and influence enjoyed by corporations and their lobby groups in EU policy making.
 The World Health Organisation estimates than every dollar invested in water supply and sanitation saves between 4 and 12 dollars in avoided health costs.