05 January 2010

Privatization of water is GOOD

Robert Cruickshank (historian, activist, and teacher) writes that "Privatization of water resources - in any form - is a line that should never be crossed."

He's wrong.

In his anti-privatization, anti-business screed,* he draws a broad, unconditional conclusion based on two examples (privatization in Stockton and of the Kern County Water Bank). This is the worst form of argument ("Look! A privatization failure! All privatization is bad!"), a form that any 5th grader can demolish.

[steps into his 5th grader shoes, kinda tight, but comfy...]

Privatization saved the lives of poor children in Buenos Aires, and here's a book on why it may be better everywhere. Ok, so now we know that Cruickshank is wrong. I look forward to his retraction/clarification.

[back into my old shoes...]

Oh, and Cruickshank attacks CalAm for their water management in Monterey (where he lives). I did a consulting job for them (I agreed to keep my report confidential); let me tell you that CalAm's operations put the operations of most public agencies (EBMUC, MET, LADWP) to SHAME.

Bottom Line: Privatization doesn't work sometimes, and public agencies fail sometimes. They fail because of bad management (a human trait) and/or poor oversight (a community responsibility). Let's tone down the hysteria and try to improve things.

* Clipped and distributed by "DWR's California Water News (A daily compilation for DWR personnel of significant news articles and comment)." For some reason, they REFUSE to distribute ANY of my blog posts, but are happy to distribute this posts and others from C-WIN and alternet. I've asked Ted Thomas (Chief, Media and Public Information Branch) why they are excluding appropriate comments like my forbes piece, and he says "We are not an official news source. We simply compile news clips as a free service to DWR employees and to others who ask to receive them." I think that those weasel words hide a hidden agenda, to control the flow of information to DWR employees and maintain a pro-public agency bias. Given that DWR doesn't actually serve the people of California, I am starting to equate Thomas et al. with employees in the Ministry of Truth.

7 comments:

  1. I suggest not condeming Mr. Cruickshank too fast for his anti privatization perspective. While it may sound anti-market to state that private utilities do not assure any efficiency over those owned by the public, I closer examination reveals markets not at work. These "privates" are regulated "monopolies" who have no incentive to perform "efficiently." Monterey is a great example. Starting in January 2007 under contract to the Division of Ratepayer Advocates, California Public Utilities Commission, I opened up a public/political/technical water dialogue process that produced a regional water supply project for the 21st century indeed. Out regional project was designed to compete with the Cal Am desalination alternatives, be publicly owned, not draw directly from ocean sources, be off-grid (or at least carbon neutral), less costly than the Cal Am alternatives, and be politically "implementable." We succeeded and today the project is proposed to be sponsored by the Marina Coast Water District and the Monterey County Water Resources Agency. The costs are at least $1,200/acre-foot cheaper than the Cal Am alternatives. The project supplies water for the Monterey Peninsula and the Marina and Fort Ord demands as well. Essentially, using a public dialogue process and public agencies, we were able to compete favorably with Cal Am and it looks like we won. The agencies are still negotiating and the CPUC will hear from them on February 9, 2010. If they have no deal then we will go to a CPUC hearing scheduled to begin in March. We all believe agreement is forthcoming. Cal Am could not provide water cheaper and was further hobbled by its regulatorily approved 8% return to shareholders for capital investments. Thus, public agencies only need to be 92% as efficient at private utilities to compete favorably.
    Interested in hearing more about the Monterey Regional Project? Go to www.waterformontereycounty.org or contact me at steve@seacompany.org
    Perhaps Mr. Cruickshank is closer to the applied reality of Cal Am's continuing blunders in water managment in Monterey. He seems to reflect what I found to be common knowlege there.

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  2. Sorry, Steve, but I have to agree with David on this one. Cruickshank is just wrong about the very facts. (See my blog entry at http://privatewaterlaw.wordpress.com.) Also, I think your example is actually pro-private because it shows the value of competition, rather than the traditional approach of handing the local public agency a monopoly. The private companies generally welcome true competition on equal terms with the public sector; too often they don't get that chance. In your case, does your project have tax-exempt, i.e.,subsidized, financing, or other tax-funded subsidies?

    Wes Strickland
    Santa Barbara, CA

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  3. Wes,
    The project qualifies for public funding such as SRF loans and Title XVI funds. However, the costs stated do not include any subsidy. Again, there was NO incentive for Cal Am to find an efficient "private" project. They, like all private utilities, are regulated monopolies. You cannot accuse the public agencies without recognizing the monopolistic nature of the privates. If we had not provided some "competition" in the form of a public project, Cal Am may have never been successful in solving their problems. They already have a Cease and Desist Enforcement Order against their Carmel River water by the SWRCB. Their groundwater source, the Seaside Basin, is in overdraft and adjudicated. Without our "competition" serious water use moratoriums would occur, devastating the Monterey Peninsula economy. When it comes to regulated utilities and public utilities, "competition" must take a different form. Essentially we are talking about the political market, not the economic market.

    Great to hear from you Wes! I am a big fan of Wes Stricklamd. I will check out your document and may comment further. Happy New Year Wes!

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  4. Aah yes, California Water News, my favorite unbiased information resource. Don't get me started on my experience with them.

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  5. Hi David, Happy New Year across the dateline. Just a note that in the dark you are mistaking bushes for bears. The DWR does not cover blogs, not mine, not yours, not Peter Gleick's, Aquafornia, WaterWired, NRDC and onwards. This Ministry of Truth stuff from you has a truthiness problem. -EG

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  6. WaterSourceWaterBank06 January, 2010 12:24

    Emily,

    Not sure if I understand your comment, but this is what I received from DWR:

    ______, 2009
    Hello Mr. Walker,

    I wanted to write to let you know how much I appreciate the opinions and perspectives that you bring to water discussions occurring here in the West.

    I have followed your comments on numerous issues for which I am currently either professionally involved or personally interested. While I see from your many online posts that you are a retired water rights analyst, I was wondering if there are consulting/advocacy projects on which you might still be active?

    Thank you and I hope to be able to continue benefiting from your thoughtful analysis on so many important water issues.

    Sincerely,

    Rich ______ ( withheld)

    ReplyDelete
  7. @Steve -- I'll defer on your comment, but you will note my point on logic; and I agree with Wes.

    @Emily -- Alternet and C-Win are blogs. Truthiness shall prevail!

    @Ray -- you continue to wonder off the point, but in such a charming and useless way...

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