We Need Cheap Water!

This past week, a group in California called Public Water Now, an anti-privatization movement aimed at re-municipalization of community water systems, has successfully garnered enough signatures to place their initiative on November ballots.  If successful, water systems under the ownership and operation or private water companies, like California American Water, would be taken by eminent domain.  According to reports, “the grassroots group wants to force a public takeover of California American Water and make water service on the Monterey Peninsula a public utility. Public Water Now is hopeful a public utility would mean local control and lower water bills for customers.

What the public needs to know is that we don’t need “lower water bills” – what we need is sustainable water utilities.  Lower bills and a chronic underinvestment in our nation’s water infrastructure is why we in the U.S. are facing a $1T water infrastructure deficit.

Americans simply don’t pay enough for tap water.  In fact, on an annual basis, we Americans pay four times more for coffee than we do for our tap water.  What we really need at this critical time is more investment, not less.  And this intiataive could actually worsen California’s water woes.

My caution has nothing to do with public v. private.  And it would be imprudent and inaccurate to paint all public systems with a broad brush, because I know and have worked with many good ones.  I have great respect for water utilities, regardless of ownership, who operate their systems responsibly, sustainably, and in compliance with our laws.  It’s not an easy job, and it’s a thankless profession.

But the fact is that 85% of the nation’s water and wastewater services are provided by local governments; and less than 15% is provided by private water companies, like Suez, American Water, Inframark, Aqua America, and Veolia.  These are all great companies who have unique expertise at providing water and wastewater services to their customers.  Private water isn’t perfect.  Like any company, private utilities make mistakes on occasion, but by and large they work assiduously and have a darn good track record for providing clean, safe, and healthy waters for their customers.  Toward this end, a recent National Academy of Science study that looked at increasing violations of drinking water standards in the U.S. concluded that “privately owned utilities appear to be less vulnerable to violations than public ownership.”

Why is this you ask?  For starters, if private companies fail to live up to public expectations, or fail to comply with environmental and public health laws, they are subject to civil and criminal enforcement or legal proceedings to take-back systems through eminent domain.  Public officials or failing public systems are rarely, if ever, held to the same standard.  As one former Clinton Justice Department official once said, “There is a significant reluctance within the [EPA} and Justice Department to bring actions against municipalities, because there’s a view that they are cash-strapped, and fines would ultimately be paid by local taxpayers.”

If all systems were held to the same standard and level of accountability, we likely wouldn’t have a $1T infrastructure deficit or unacceptable levels of noncompliance in the water sector.  Thus, it is these very real reputational and legal risks that hold private companies to account for their performance.  Until the recent Flint crisis, where numerous state and local officials have been criminally charged, not so for public officials.

Unfortunately, many cities simply fail to charge enough for water for a host of reasons, often times due to rancor politics and opposition to increased taxes.  Many communities simply are unaware of the full cost of providing water services, i.e., the cost of maintaining and replacing aging pipes, pumps, valves, etc., and treatment systems.  Thus, the water and wastewater systems at the local level fall into disrepair.

And there is the issue of affordability and ensuring that households on fixed income and those in economically disadvantaged communities can afford water.  After all, it is a human necessity.  The issue of affordabilitiy is a critical one that states must do a better job solving.

Indeed, we are faced with a dire situation here in the U.S. where failing systems, many of them public, simply are not held accountable.  And with public resources dwindling at a time when needs are increasing, the track record of many local governments to do the right thing and make the hard decisions is not good.  I hope this changes.  The solution is a matter of governance and good government.

The public utility commission (PUC) in California and most other states regulate private utilities, not publics. So while privates and publics both set their own rates, privates are capped. Very few public officials run for office pledging to increase water tariffs, or at least the ones who want to win elections. The rate setting process for most publics is driven purely by local politics, which by itself is appropriate.  However, the fact that many states and the federal government have largely treated failing public systems with kid gloves when they are in noncompliance and have continued to subsidize those that aren’t sustainable is the real crux of the matter.  This fundamentally is a failure of leadership and governance more than it is a lack of funding.

If the public wants to take back their water systems from private companies, they need to wake up and hold their elected officials accountable for making the right decisions.  That is, those tough decisions that may involve raising water rates to pay for sustainable water provision.

As the old adage goes – Californians beware of what you ask for, because you might just get that cheap water.

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