In the early 19th century, most of the water utilities in the U.S. were privately owned. Water utilities began shifting from private to public during the turn of the century in an effort to provide universal access to clean water. Today, many water systems are publicly owned. However, cities across the U.S. are now considering privatizing their water systems due to various economic and environmental factors.
Public water systems usually consist of nonprofit entities managed by local or state governments. Private water systems can be for-profits that are managed by investors and shareholders. Rather than a utility being a taxpayer-funded service, a corporation takes over this process for profitability. Privatization of water systems can mean either outsourcing services, operations and maintenance, or the sale of water utility assets to a private company. Outsourcing services and operations is much more common in the U.S. than selling utility assets to private companies.
High-quality, reliable drinking water and wastewater treatment services require significant investment and resources. Since the establishment of the Safe Drinking Water Act (SDWA) and effluent standards set by the EPA, some smaller water utilities struggle to keep up with the wide range of requirements. In some situations, private utilities may be better able to provide the resources to meet these standards than smaller public utilities.
The topic of water privatization continues to be a controversial subject. Groups across the country have made varied arguments for, and against, the privatization of water and wastewater systems.
Arguments Supporting Privatization
- It can improve infrastructure and deliver safe drinking water. Water system privatization can lead to safer water because profitability can only be achieved through high-quality, clean water.
- Privatization provides options for municipalities facing urgent water infrastructure and operational needs. A private water company can bring in specialized employees that can provide quality care to the water systems in place, adding expertise throughout the process.
- Communities lack access to capital for infrastructure investment. Operators often struggle to apply for grants or access other funding. Private water companies have resources on hand to invest in improving water systems, conducting research and developing new technologies.
- Private companies may be more efficient. Private companies are subject to competitive pressures to be more efficient that public operators don’t have to face.
Arguments Against Privatization
- It probably does not lead to cost savings. Many studies have concluded no evidence of cost savings.
- Privatization may lead to loss of equality in utilities access. Those who pay for the water are going to get it, and those who are unable to pay and can’t find assistance could be left without water.
- Privatization could lead to higher rates for lower service. Rate hikes can occur when privatizing, and private companies may focus on profit maximization rather than on quantity and quality of service.
- It requires government to give up control of a good that is essential to life, which could lead to accountability issues. Government oversight of the water supply and facilities may be more stable and secure, long term.
This is not an exhaustive list of all privatization pros and cons. Communities face a wide range of considerations when deciding whether or not to privatize their wastewater. Every city has different circumstances, so there is no one-size-fits-all solution. Some communities have successfully privatized their water systems, and others have opted for a public operation. Since issues surrounding this topic vary from city to city, it’s vital to weigh each region's unique political, demographic, economic and physical needs.
Are you looking for alternative funding sources to support your water or wastewater system? Check out Envirosight's free guide to water and wastewater grants.
Photo courtesy of USDA by Lance Cheung, via Flickr: https://flic.kr/p/bmbr7B