17 Jan 2012

Good performance or poor oversight?

Jack Moss of Aquafed (the International Federation of Private Water Operators) showed this slide during a presentation in which he discussed the "unlevel playing field" that private operators (investor owned utilities and contract operators) face.

His point is that the lights of contracts (open-tendered with clear targets and published), regulation (reporting, hearings and outside oversight), academic studies (on regulatory data), and competition (for contracts) on private operators are capable of showing good and bad performance -- as well as attracting the attention of citizens, activists, the media and politicians.

But that's obvious. What's NOT so obvious -- and yet so important -- is the LACK of lights shining on public (or municipal) water operators. The Los Angeles Department of Water and Power does not have to compete for its service area. It does not have a fixed-term performance contract. LADWP is regulated by the LA city council, which does not specialize in water regulation, spend all its time on water regulation, compare LADWP to other operators, or have an arm's length relationship to LADWP (they share a budget, for example).

All of these factors make it more difficult to know what LADWP is up to, hold LADWP to a performance standard or punish LADWP for failure (remember the burst pipes that resulted when LADWP screwed up watering restrictions)?

But LADWP is not alone -- at least 80 percent of Americans (and perhaps a similar share of world citizens) get their water from public utilities that are not under the spot light.

Bottom Line: What gets measured gets managed, and we surely need to know what ALL water utilities are doing in their quest to deliver clean affordable water to customers.


chris corbin said...

Wow. That's a good one. I never understood the scare of private ownership for water utilities. These private owner/operators generally bring more capital, with–as you addressed– lights of scrutiny pointed directly at them. In my mind, these lights eliminate all the risk, which is not necessarily a good thing.

Mohamad Mova Al' Afghani said...

Met with Jack and Gerard. Agree with what they said. However delegation to private sector turns on some light, but turns off some others. Agree also with what you said that more lights are needed for the public sector.

Fixed Carbon said...

Brings to mind the PGE situation with natural gas explosion in San Francisco. Private firm, very secretive record keeping, deferred maintenance. Same sort of idea with the Deepwater Horizon disaster in the gulf. Regulatory capture?

WolfeGeo said...

The goal of private corporations is to make money for their investors. Not a bad thing but it may come at the expense of their clients, clients who aren't in a position to drop them and hire another water company. There often isn't another company. News reports from NC (my state), concerning private water companies, generally report high cost, unresponsive service or a lower level of service, and requests for rate increases of up to 80%.

I'm sure there are many fine, well run private utilities. I just don't agree with the concept that private is necessarily better. And believe me a lot of light shines on public utilities. They are also held accountable, required to comply with state and federal regulations, and welcome recommendations from the academic community.

David Zetland said...

@WolfeGeo -- you list of public obligations ("held accountable, required to comply with state and federal regulations, and welcome recommendations from the academic community") is not only a subset of the obligations attached to public utilities, but a VERY WEAK list of obligations. What about "serve the interests of their customers before their own interests"?) As you may well know, BOTH private and public utilities have to respond to regulations. The process is more transparent and more "arms length" for private (IOU) utilities. Your complaints (80% increase, etc.) are difficult to pin on the business model; it's more likely that they can be blamed on spineless regulators and/or previous underinvestment. As for high public bills, check this article out.

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