Don't privatize water

Marc Sobel / Guest CommentaryNovember 16, 2012 

A for profit company approached the County Board of Supervisors in April requesting the county to allow the privatization of all the County's water and waste treatment special districts affecting 6,000 connections. This would not include existing privately owned systems like Hillview Water Company.

At first glance sure why not -- Government is usually an expensive regulator and it cost more to do everything than the private sector does it for. But after you look at some facts you will see this is not such a good idea.

A private company will tell you sure we can give you good reliable service and save you money, but can they really deliver. Hillview Water Co, the largest privately owned system in our area is not known for the best quality water and has struggled to provide good service. The private Co in the valley that handled trash is being sued by the county and has been replaced.

Private companies are by law allowed by the PUC to make money, generally about 12% on operations. So right off the bat they have to save 12% on cost just to keep our same rates. They will say they can do it by lowering labor cost, economies of scale, they will eliminate waste, etc. Just to get back to the same rates, they would have to cut labor cost by 25-30%. So would service suffer? What would they not maintain to keep cost down?

Here is the game. Private companies will make lots of promises, keep the rates low and even guarantee low rates for a year or two. Promise to provide even better service, even fix problems. They will say just about anything to get your support. After they are locked in, then they will make an assessment of your system, show how you need improvements, propose much higher budgets and go before the PUC and ask for rate hikes to support the system. Of course these higher rates mean they will receive more profit.

The current system operator is the county. The county sets prices and manages the system. If you don't like the service the buck stops at your elected county supervisor. There is no motive to do anymore than to provide good service. The county might be able to reduce some cost by outsourcing billing and collection, a perfect way to use the private sector in a competitive way.

Privatization is a legal form of a monopoly. No competition equals higher prices. There is little incentive to provide good service as bad service has no consequences. Why should we be willing to be put in such a position?

We get local control with our Madera County Board of Supervisors verses regulation from the PUC in Sacramento. Do you want to travel to Sacramento to complain when they put in for a rate increase?

There is a growing consensus that privatization in Madera County will not benefit its citizens. Admittedly there is a lot more to this and many questions still daunt us. Supervisor Wheeler said 24 districts have problems. So fix them. The county has the power to help these districts now. These districts will have to pay for fixing them one way or the other.

Change of direction

A special committee held its first meeting Nov. 7attended by about 80 people. After a staff presentation which posed a wide range of options and questions, the public got to speak, including myself.

It did not take long to see the community was very against selling our systems to a private company. A whole host of issues were presented and for the most part many questions remain unanswered. County staff said it has no expertise in these areas.

After some discussion the committee decided to recommend to the special district's board of directors (supervisors) that the county hire an expert to assist staff to formulate a plan to seek proposals and to provide help in the following areas: Management services, operations and maintenance, fleet service, meter reading, water sampling, billing and collection. The Special Districts would share in the cost estimated at $40,000.

They tabled sending a 'Letter of Interest' to contractors. I think the county is now on the right tract to work towards a system wide review that puts a new priority on providing better, more efficient service to the community. Thanks to community comments the outright sale to a private company, seems to have been placed on the back burner for the time being.

Here is the website with links regarding the issue

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