Drinking water privatization spawns worldwide controversy

Oct. 27, 2004

Whether in town halls, the back rooms of Congress, or the corridors of the World Bank, privatization of drinking water systems continues to be a hot issue.

The key issues are whether utilities managed by profit-driven private companies will deliver healthful water, and whether rates charged customers will go up or down. There also can be questions about funding of needed improvements to protect against terrorist attacks; loss of control to an international corporation or international trade agreements; and corruption, operational transparency, and job losses.

In the US, the water privatization business has grown an average of 19% over the past 7 years, and today about 15% of the population gets its water from a system that's privately owned or operated, says the National Assn. of Water Companies (Louis Jenny, 202-833-0139).

NAWC says more than 92% of water utilities with some form of private ownership or management have renewed their contracts since 1998, indicating the concept is working. But major controversies in the past few years (Atlanta; New Orleans; Indianapolis; Pekin, IL; Hamilton, Ontario; Puerto Rico; etc.), including some canceled contracts, have made many people question the idea.

A few of the latest battles have been resolved for the moment at local government meetings (e.g., Lee, MA) while others are winding their way through ballot boxes or courts of law and public opinion (e.g., Lexington, KY; Stockton, CA; Felton, CA).

Other battles are shaping up in the US Congress, where private water companies continue to push for changes in funding (more low-cost loans and fewer grants), regulations and tax laws (removing or raising caps on how many "private activity" bonds can be issued in a state), and incentives (requiring public utilities to consider privatization in the process of acquiring federal subsidies through the Drinking Water State Revolving Fund, or DWSRF).

Negotiations over the long-stalled reauthorization of the DWSRF, which has been funded in stopgap fashion in recent years at flat levels, despite EPA assessments of huge shortfalls (up to $500 billion) over the next 20 years, may move forward in the next Congress.

There are hundreds of private water companies operating in North America. Many are subsidiaries of international corporations. A few of the largest players include: