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Our public

water future

The global experience

with

remunicipalisation

EDITED BY

Satoko Kishimoto,

Emanuele Lobina and

Olivier Petitjean

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Our public water future

The global experience with

remunicipalisation

Edited by Satoko Kishimoto, Emanuele Lobina and Olivier Petitjean

Copy editing: Madeleine Bélanger Dumontier

Translation from French: Susanna Gendall (two original chapters)

Design: Ricardo Santos

Cover design: Evan Clayburg

Cover photo credits: KRuHA People’s Coalition for The Right To Water

APRIL

2015

Published by Transnational Institute (TNI), Public Services International Research

Unit (PSIRU), Multinationals Observatory, Municipal Services Project (MSP) and

the European Federation of Public Service Unions (EPSU)

Amsterdam, London, Paris, Cape Town and Brussels

ISBN 978-90-70563-50-9

Attribution-NonCommercial-NoDerivs 3.0 license. You may copy and distribute the document, in

its entirety or separate full chapters, as long as it is attributed to the authors and the publishing

organisations, cites the original source for the publication on their website, and is used for non-

commercial, educational, or public policy purposes.

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Acknowledgements

This book would never have taken shape without generous contributions

from the authors who took the time to share their experiences. We are also

very grateful for the essential contributions, research assistance and advice

in building the global list of remunicipalisation from: Régis Taisne, France

Eau Publique and his colleagues at the Fédération Nationale des Collectivités

Concédantes et Régies (National Federation of Contracting Councils and

Régies); Mary Grant, Food & Water Watch; Jeff Powell and Yuliya Yurchenko,

PSIRU, University of Greenwich; Christa Hecht, Alliance of Public Water

Associations (AöW); Moisès Subirana, Ingeniería Sin Fronteras (ISF); Ann-

Christin Sjölander; Akgun Ilhan, Right to Water Campaign Istanbul; Qun

Cui, Chinese Academy of Social Sciences; Simona Savini, Italian Forum of

Water Movements; Cesare Schieppati, Forum Provinciale per l’Acqua, Reggio

Emilia; Gaurav Dwivedi, Manthan Adhyayan Kendra India; Milo Fiasconaro,

Aqua Publica Europea. Thanks to our copy editor, Madeleine Bélanger

Dumontier, who has woven these diverse contributions into a coherent and

easily readable story.

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Table of contents

Introduction:

Calling for progressive water policies

Emanuele Lobina

Global list of remunicipalisations

Chapter 1

Water in public hands:

Remunicipalisation in the United States

Mary Grant

Chapter 2

An end to the struggle?

Jakarta residents reclaim their water system

Irfan Zamzami and Nila Ardhianie

Christa Hecht

Chapter 3

German municipalities take back control of water

Chapter 4

Turning the page on water privatisation in France

Christophe Lime

Chapter 5

Taking stock of remunicipalisation in Paris.

A conversation with Anne Le Strat

Olivier Petitjean

Chapter 6

Remunicipalisation and workers:

Building new alliances

Christine Jakob and Pablo Sanchez

Chapter 7

You are public…now what?

News ways of measuring success

David A. McDonald

Chapter 8

Trade agreements and investor protection:

A global threat to public water

Satoko Kishimoto

Conclusion:

Reclaiming public water through remunicipalisation

112

Satoko Kishimoto, Olivier Petitjean and Emanuele Lobina

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Introduction

Calling for progressive

water policies

By Emanuele Lobina

Cities, regions and countries worldwide are increasingly choosing to close

the book on water privatisation and to remunicipalise services by taking back

public control over water and sanitation management. In many cases, this is a

response to the false promises of private operators and their failure to put the

needs of communities before profit. This book looks at the growing remunici-

palisation of water supply and sanitation services as an emerging global trend,

and presents the most complete overview of remunicipalisation cases so far.

The remunicipalisation trend is a striking fact that could not be predicted as

recently as 15 years ago, and that is redesigning the landscape of the global

water sector. This trend contradicts neoliberal theorists, international financial

institutions, and their expectations of superior private sector performance.

Also, evidence increasingly points to remunicipalisation as a credible promise

of a better future for public water services and their beneficiary communities.

In brief, water remunicipalisation is a story crying out to be told.

This book aims to draw lessons and stimulate debates on water remunici-

palisation as an under-researched topic of high relevance for citizens, policy-

makers and scholars alike. Based on empirical data, the book documents

the rise of water remunicipalisation across developed, transition, and

developing countries in the last 15 years. Drawing on contributions by

activists, practitioners, and academics with direct experience and knowledge

of remunicipalisation, the book argues that remunicipalisation is a socially

and economically viable policy option for local authorities and the com-

munities they represent. As such, the book is intended to serve as a resource

for building alliances among diverse social actors – including public water

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Calling for progressive water policies

managers and decision-makers, workers and their trade unions, civic organ-

isations and social movements, experts and academics – to encourage social

learning and promote this new form of public service provision.

Defining remunicipalisation

Remunicipalisation refers to the return of previously privatised water sup-

ply and sanitation services to public service delivery. More precisely, remu-

nicipalisation is the passage of water services from privatisation in any of

its various forms – including private ownership of assets, outsourcing of

services, and public-private partnerships (PPPs)

– to full public ownership,

management and democratic control. Indeed, concessions, lease contracts,

other PPPs, and water privatisation are one and the same thing: all these terms

refer to the transfer of management control to the private sector, at various

degrees.

Water privatisation and PPPs are equally problematic, and their

problems are deep-seated.

This explains why remunicipalisation typically

occurs after local governments terminate unsatisfactory private contracts or

do not renew them after expiry. However, the remunicipalisation process is

not necessarily confined to the municipal scale. In some cases regional and

national authorities act directly as water operators, so the process unfolds

within this broader context as well.

Water remunicipalisation is more than a mere change in ownership of service

provision; it also represents a new possibility for the realisation of collec-

tive ideas of development, such as the human right to water and sustainable

water development. In other words, remunicipalisation offers opportunities

for building socially desirable, environmentally sustainable, quality public

water services benefiting present and future generations. As shown by several

contributions to this book, the aspirations of local communities for public and

accountable water services are often part of their struggle to obtain progressive

social and political change. Without taking into account these aspirations for

social justice, it is not possible to fully understand water remunicipalisation

and its global spread. Mere ownership change is not the end goal of water

remunicipalisation movements.

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Introduction

Understanding remunicipalisation

Remunicipalisation is often a collective reaction against the unsustainability

of water privatisation and PPPs. Direct experience with common problems

of private water management – from lack of infrastructure investments, to

tariff hikes and environmental hazards – has persuaded communities and

policy-makers that the public sector is better placed to provide quality services

to citizens and to promote the human right to water and sustainable water

development. As illustrated by the cases discussed in this book and its compan-

ion briefing

Here to stay: Water remunicipalisation as a global trend,

the factors

leading to water remunicipalisation are similar worldwide. The false promises

of water privatisation in developed and developing countries include: poor

performance, under-investment, disputes over operational costs and price

increases, soaring water bills, monitoring difficulties, lack of financial trans-

parency, workforce cuts and poor service quality.

Therefore, another factor

explaining the emergence of remunicipalisation as a global trend is represented

by the limitations of the private sector to promote community development.

These limitations are due to the fact that the private sector is subject to its

profit maximisation imperative, so that precious resources that could be used

for collective development are subtracted for private gain.

Despite more than three decades of relentless promotion of privatisation and

PPPs by international financial institutions and like-minded organisations,

now appears that “water remunicipalisation is a policy option that is here to stay.”

Not only have many flagships of water privatisation – from Buenos Aires

to Jakarta, from La Paz to Dar es Salaam – sunk inexorably. But citizens in

developed and developing countries have also obtained the replacement of

profit-oriented private water operations with people-oriented public water

services, and they are increasingly doing so. While the World Bank and other

organisations continue to enthusiastically promote PPPs, the emergence of

remunicipalisation as a global trend is upsetting their plans and undermining

the neoliberal project of water privatisation. And yet, the remunicipalisa-

tion trend should come as no surprise. Historically, the private sector already

showed its inadequacy to develop public water services between the end of the

and the beginning of the 20

century.

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Calling for progressive water policies

The private sector limitations that led local governments in the US and across

Europe to turn to the public sector for an answer to developmental needs 100

years ago are the same that find a response in the growth of remunicipalisation

today.

The first wave of municipalisations resulted in the present dominance

of public operators in the global water sector.

This historical surge in public

ownership, public finance, and collective civil rights allowed for the univer-

salisation of service coverage in North America and Europe. This public pre-

dominance is now being further reinforced by the widespread and increasingly

rapid diffusion of water remunicipalisation that is documented in this book.

These precedents point to the developmental potential of water remunici-

palisation in the 21

century. Still, while public ownership can be a powerful

vehicle for community development, it is not a guarantee of success.

fact, under the influence of neoliberal forces, many public water operators

are being commercialised and behave much like private companies.

This

suggests that progressive collective action cannot be satisfied with water

remunicipalisation as mere ownership change but should aim at promoting

practices that, through public ownership, enhance community development

and social justice.

Charting the emergence of the

remunicipalisation trend: An overview

This introduction is followed by empirical data on the identified cases of

water remunicipalisation that have occurred in the 15 years between March

2000 and March 2015. This data has been obtained through the refinement

and extension of data published in the companion to this book,

and rep-

resents the most comprehensive catalogue of water remunicipalisation cases

produced so far. Data collection has been a joint effort in which a number of

contributors to this book have participated, together with many other water

activists, practitioners and academics who have generously offered their time,

dedication and knowledge.

The water remunicipalisation cases are listed in two tables, one for high-

income countries and the other for middle- and low-income countries.

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Introduction

Each case indicates the population affected by remunicipalisation so as to

give a measure of the magnitude of this trend and to enable distinguishing

between urban centres of varying dimensions. In that sense, the listed cases

range from megacities to small villages. This varied picture suggests that re-

municipalisation is not only happening in urban areas. Indeed, despite their

limited size and resources, and faced with the unsustainability of privatisation,

many small towns and villages have challenged powerful private interests and

remunicipalised their water services.

The data show that the global remunicipalisation trend is strong, particularly in

developed countries. Globally, the cases of remunicipalisation have increased

from two cases in two countries in 2000, when less than one million people

in total were affected by remunicipalisation, to 235 cases in 37 countries by

March 2015. By then, the total number of people served by remunicipalised

water services had grown to exceed 100 million. Cases are more concentrated

in high-income countries, where 184 remunicipalisations took place in the

last 15 years, compared to 51 cases in middle- and low-income countries.

Two countries, France with 94 cases and the US with 58 cases, account for

the great majority of cases in high-income countries. Cases in high-income

countries show a marked acceleration: 104 remunicipalisations took place in

the five years between 2010 and early 2015, while 55 occurred between 2005

and 2009. The number of remunicipalisation cases has nearly doubled after

2009. This is due to the example of Paris which signalled an even stronger

acceleration in France, where the number of remunicipalisation cases trebled

in the same period: 63 remunicipalisations have been completed in the five

years between 2010 (when Paris remunicipalised) and early 2015, whereas

19 remunicipalisations occurred in the 10 years between 2000 and 2009. In

middle- and low-income countries, the extent and acceleration of remunici-

palisation are less pronounced. However, the list of high profile cases in upper-

middle, lower-middle and low-income countries is impressive and includes:

Accra (Ghana); Almaty (Kazakhstan); Antalya (Turkey); Bamako (Mali);

Bogota (Colombia); Budapest (Hungary); Buenos Aires (Argentina); Conakry

(Guinea); Dar es Salaam (Tanzania); Jakarta (Indonesia); Johannesburg (South

Africa); Kampala (Uganda); Kuala Lumpur (Malaysia); La Paz (Bolivia);

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Calling for progressive water policies

Maputo (Mozambique); and Rabat (Morocco). Also, the population affected

by remunicipalisation in middle- and low-income countries is far greater than

in high-income countries: over 81 million people, compared to nearly 25

million people. The surge in water remunicipalisation is global.

The main lesson that can be drawn from this analysis is that in the last 15 years

water remunicipalisation has emerged as a global trend that is here to stay.

Despite the lack of encouragement from international financial institutions,

national governments and other powerful players,

remunicipalisation has

spread across developed, transition and developing countries, primarily as a

result of the demands of local communities and the responsiveness of local

governments. The water remunicipalisation trend that only 15 years ago was

inexistent has since accelerated dramatically and keeps gaining strength. It is

now impossible for observers to ignore this new form of water service delivery,

while stakeholders and activists have the opportunity to take inspiration from

so many remunicipalisation cases for their practice and advocacy. Finally, it

would be unwise for the World Bank and other promoters of water privatisa-

tion to continue neglecting the calls for water as a common good that fuel social

resistance against privatisation and drive the global remunicipalisation trend.

A glance at this book

The global list of remunicipalisation cases and this introduction serve as

background to the book contributions. The following chapters focus on: the

experiences with water remunicipalisation in key countries, such as France,

the US, and Germany; in major cities such as Paris and Jakarta; and on cross-

cutting themes such as the challenge posed to public water services by inves-

tor protection clauses, the position of the trade union movement vis-à-vis

remunicipalisation as a social project, and performance evaluation as a way

of measuring the success of remunicipalisation. These chapters aim to draw

important lessons on the nature, process and outcomes of water remunici-

palisation by combining in-depth analysis of developments at country and

thematic levels, and the unique insights of privileged observers. These lessons

are brought together in the concluding chapter.

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Introduction

In Chapter 1 Mary Grant of Food & Water Watch discusses the extent of

water remunicipalisation in the US, its relative significance compared to pri-

vatisation, and identifies the main determinants of local government decisions

to remunicipalise. The importance of this contribution is partly due to the

fact that the US are often regarded as a reference point in relation to public

policy, and partly due to the contrast between the progressive policies of local

governments that have decided to remunicipalise their water services and

the neoliberal policies promoted and often imposed by Washington-based

multilateral agencies.

In Chapter 2 Irfan Zamzami and Nila Ardhianie of Amrta Institute for Water

Literacy write about the failure of the flagship water privatisation in Jakarta

that led to its recent termination before expiry. They explain the role played in

the local campaign against water privatisation by a civil lawsuit based on the

human right to water, and consider the urgency of activating a solidarity-based

public-public partnership to develop the capacity of the new public water

operator to guide remunicipalisation in Jakarta. This contribution is a helpful

reminder of the inability of the private sector to deliver on its own promises

of efficiency, and points to the potential of collective civil rights as a tool for

progressive change.

In Chapter 3 Christa Hecht, General Manager of the Alliance of Public Water

Associations (AöW), sketches the institutional framework of the German

water sector, provides an overview of noteworthy cases of remunicipalisation

in the country, and identifies the key lessons from this national experience.

These lessons are important as German public water services are considered a

model of efficiency and effectiveness, and German citizens and local govern-

ments are rediscovering these virtues in light of the failed experiments with

water privatisation.

In Chapter 4 Christophe Lime, President of the association of public water

operators France Eau Publique, describes the institutional framework of the

French water sector, identifies the determinants of and challenges to water

remunicipalisation, and considers the opportunities for the development of

quality public water services in France. This country is highly emblematic

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Calling for progressive water policies

given that it is now witnessing the surge of remunicipalisation after having

privatised water services more than most countries; therefore it has precious

lessons to offer, both positive and negative.

In Chapter 5 Anne Le Strat, former President of public water operator Eau de

Paris and architect of water remunicipalisation in the French capital, engages

in conversation on the outcomes of water remunicipalisation after five years

of public water operations. She then turns to reflect on the difficulties of the

Parisian transition from private to public ownership. This is followed by her

insights on citizen participation and the greater level of transparency and

democratic accountability that remunicipalisation has made possible, and the

role played by Eau de Paris as a source of inspiration for remunicipalisation

and public service strengthening outside Paris. This chapter complements

both the French and global pictures of water remunicipalisation. In fact, the

Paris remunicipalisation is symbolically powerful and many cities in France

and elsewhere have regarded and still regard Paris as an example to follow. In

addition, Eau de Paris has been proactive in establishing French and European

associations of public water operators to promote progressive ideas of public

water services.

In Chapter 6 Christine Jakob and Pablo Sanchez of the European Federation

of Public Service Unions (EPSU) discuss remunicipalisation as an opportunity

to rethink the way in which water and other public services are provided,

improving working conditions and strengthening quality public services.

This chapter is an invaluable reference for workers and social movements to

understand their respective agendas and build alliances for progressive change.

In Chapter 7 David McDonald, co-director of the Municipal Services Project,

takes a critical look at current benchmarking systems as pressurising public

utilities to behave commercially, and proposes alternative methods for per-

formance evaluation that are more respectful of the needs of community de-

velopment. These reflections are essential to help the public sector rediscover

its true public ethos.

In Chapter 8 Satoko Kishimoto of the Transnational Institute (TNI) explains

how investor-state dispute settlement mechanisms protect private sector

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Introduction

interests to the detriment of public authorities, threatening the viability of re-

municipalisation. She therefore calls for remunicipalisation to be safeguarded

as a window of opportunity for the exercise of local democracy and local

communities’ decisions on their future.

With Satoko Kishimoto and Olivier Petitjean of the Multinationals

Observatory, we offer concluding remarks in Chapter 9. Here, in addition

to a check-list for citizens and policy-makers, we offer a summary of all the

contributions to this book. This allows us to identify the outcomes of many

remunicipalisation experiences as: cost savings, increased investment, in-

novative social and environmental policies, and democratic accountability.

We also consider how public-public partnerships, workers’ involvement,

and social mobilisation offer opportunities for promoting remunicipalisa-

tion and quality public water services. This contrasts with the imposition

of policies that prioritise commercial interests over those of communities.

Remunicipalisation is here to stay and promises a public water future in which

community development comes first. We need progressive policies to help

remunicipalisation deliver progressive change.

Emanuele Lobina is Principal Lecturer, Public Services

International Research Unit (PSIRU), University of

Greenwich, UK. He joined PSIRU in 1998 and has written

extensively on the international experience with water service

reform. He regularly provides policy advice to international

organisations, central and local governments, professional

associations, trade unions and civic organisations.

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Calling for progressive water policies

Endnotes

1 While the focus of this book is on remunicipalisation as a reaction to the privatisation

of water supply and sanitation services, water privatisation policies are also extending

to water resources management and are no less controversial. On the problems with

Build-Operate-Transfer (BOT) contracts for the abstraction and storage of water, see:

Hall, D. and Lobina, E. 2006.

Pipe Dreams. The failure of the private sector to invest

in water services in developing countries.

London: Public Services International and

World Development Movement

http://www.psiru.org/sites/default/files/2006-

03-W-investment.pdf

. On the problems with large scale consumption of water by

multinationals for industrial production, see: Hall, D. and Lobina, E. 2012.

Conflicts,

companies, human rights and water – A critical review of local corporate practices

and global corporate initiatives.

PSIRU Reports, March 2012

http://www.psiru.org/

sites/default/files/2012-03-W-Resources-noannexe.docx

For a detailed explanation of why PPPs are an euphemism for water

privatisation, see: Lobina, E. and Hall, D. 2013. Water Privatisation and

Remunicipalisation: International Lessons for Jakarta. Report by the Public

Services International Research Unit prepared for submission to Central

Jakarta District Court Case No. 527/ Pdt.G/2012/PN.Jkt.Pst, November

2014. Troubled waters: Misleading industry PR and the case for public water.

Report published by Corporate Accountability International, November

http://www.psiru.org/sites/default/files/2014-W-03- JAKARTANOVEMBER2013

FINAL.docx

. Also see: Lobina, E. and Corporate Accountability International.

http://psiru/reports/troubled-waters-misleading-industry-pr-and-case-public-water

3 On the problems with water privatisation and PPPs in developing countries, see: Lobina

and Hall 2013, op. cit. On the problems with water privatisation and PPPs in developed

countries, see Lobina and Corporate Accountability International 2014, op. cit.

4 Lobina, E., Kishimoto, S. and Petitjean, O. 2014. Here to stay: Water remunicipalisa-

tion as a global trend. Report by PSIRU, Transnational Institute and Multinationals

Observatory, November

http://psiru/sites/default/files/2014-11-W-HeretoStay.pdf

5 Ibid.

6 Lobina, E. 2013. Remediable institutional alignment and water service reform:

Beyond rational choice.

International Journal of Water Governance,

1(1/2): 109-132.

7 Lobina, E. and Hall, D. 2009. Thinking inside the box: The World Bank position on

the private and public sector. PSIRU Reports, March

http://www.psiru.org/sites/

default/files/2009-03-W-wbank.doc

8 Lobina, Kishimoto and Petitjean 2014, op. cit.

9 Hall, D. and Lobina, E. 2009. Water privatization. In Arestis, P. and Sawyer, M. (eds.),

Critical essays on the privatization experience.

International Papers in Political Economy

Series, p. 75-120. Basingstoke and New York: Palgrave Macmillan

http://psiru/sites/default/files/2008-04-W-over.doc

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Introduction

10 Hall, D., Lobina, E. and Terhorst, P. 2013. Re-municipalisation in the early 21

century: Water in France and energy in Germany.

International Review of Applied

Economics,

27(2): 193-214.

11 Lobina, E. and Hall, D. 2008. The comparative advantage of the public sector in the

development of urban water supply.

Progress in Development Studies,

8(1): 85-101.

12 Lobina 2013, op. cit.

13 Castro, J. E. 2009. Systemic conditions and public policy in the water and sanitation

sector. In Castro, J. E. and Heller, L. (eds.),

Water and sanitation services – Public policy

and management,

p. 19-37. London and Sterling, VA: Earthscan; McDonald, D.

2014. Public ambiguity and the multiple meanings of corporatization.- In McDonald,

D. A. (ed),

Rethinking corporatization and public services in the global South,

p. 1-30.

London: Zed Books.

14 Lobina, Kishimoto and Petitjean 2014, op.cit.

15 To distinguish between high-income countries and middle- and low-income coun-

tries, we followed the World Bank’s classification of countries and lending groups:

http://siteresources.worldbank.org/DATASTATISTICS/Resources/CLASS.XLS

16 Hall, Lobina and Terhorst 2013, op. cit.

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Remunicipalisation

Global Trend

2000-2015

Less than one million people

in total were affected by

remunicipalisation in 2000.

235

The total number of people served

by remunicipalised water services

has grown to exceed 100 million.

Cases in 2000 Cases in 20 1 5

By year:

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

By country:

184

Cases worldwide

Total cases in

High-income countries

Cases by March 2015

Total cases in

Low and middle-income

countries

Sweden

France

USA

Canada

Belgium

Mexico

Kazakhstan

Ukraine

Hungary

Turkey

Spain

Italy

1 2

Lebanon Uzbekistan

Morocco

Albania

9 4

Germany

Russia

Cape Verde

Venezuela

Guyana

India

Mali

Central African

Republic

Uganda

Ghana

Colombia

Ecuador

Guinea

Malaysia

Uruguay

Argentina

Tanzania

Indonesia

Bolivia

Mozambique

South Africa

Sources: PSIRU, France Eau Publique, Food & Water Watch, Corporate Accountability International, Remunicipalisation Tracker

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Global list of remunicipalisations

March 2015

The cities that have remunicipalised water and sanitation services between

March 2000 and March 2015 are listed in the two tables below: one is for

high-income countries and the other for middle- and low-income countries.

The tables do not contain cases of central or local governments that remunici-

palised to subsequently reprivatise water services.

Where possible, we identified the individual cities that remunicipalised water

services (as opposed to areas comprising several cities served by the same

water operator) and indicated the date when the new public operator started

operating. In a number of cases, information was only available for an area

comprising several cities served by the same water operator that remunici-

palised at different times, in which specific case we indicated the dates when

the first and the last city in the area implemented remunicipalisation.

In other cases we could not identify the exact date of implementation of

remunicipalisation, for example because ownership transfer was still being

prepared at the time of writing or because the local government had decided

that remunicipalisation would take place after March 2015. If ownership

transfer was still pending at the time of writing, we indicated the date of the

official decision to remunicipalise and the planned implementation date if

available. More precisely, status D means that: a) an official decision to remu-

nicipalise was adopted; b) remunicipalisation had not been implemented at

the time of writing; and, c) no official decision to reprivatise had been taken

at the time of writing.

The acceleration of remunicipalisation can be concluded from comparing

the number of cases of remunicipalisation that took place in different five-

year periods: 2000-2004, 2005-2009, and 2010 to early 2015. The period

2010 to early 2015 is 63 months, while the period 2005-2009 is 60 months.

We do not expect this 5 per cent difference between the lengths of the two

periods to significantly affect our findings on the pace of remunicipalisation.

To ensure consistency when estimating the acceleration of the trend, we did

not consider unimplemented decisions to remunicipalise, only those effective

EFK, Alm.del - 2015-16 - Bilag 408: Henvendelse af 26/9-16 fra DANVA om kommentarer til McKinsey's rapport ifm. foretræde for udvalget den 27/9-16

cases for which the new public operator had started operating, whether remu-

nicipalisation had followed contractual termination, expiry of contract and

non-renewal, sale of shares, or withdrawal of the private operator (statuses T,

E, S and W, respectively).

Finally, where possible, we indicated the population affected by the remunici-

palisation. This figure does not necessarily coincide with the population of

the city or cities concerned because the number of residents served by private

water contracts is often inferior to the overall population. Where we were

unable to identify the population served by a private contract, we indicated

the entire population of the city or cities that entered a contract with a private

operator to subsequently remunicipalise water services.

Legend

: Decision to

remunicipalise,

not implemented

: Contract

expired, and

remunicipalised

: Sold by private

operator, contract

remunicipalised

: Contract

terminated, and

remunicipalised

: Private operator

withdrew, contract

remunicipalised

Table 1

High-income countries

City

Regional (Aquafin)

Hamilton

SYDEC Landes

Served

population Date Company

Status

Country

Belgium

Canada

France

3,800,000 2006 Severn Trent

490,000 2005 American Water

87,000 2000 Veolia, Suez, SAUR

2014

12,000 2000 SAUR

160,000 2001 Suez

320,000 2001 Suez

7,000 2001 Veolia

55,000 2001 Veolia

Extension of the

régies

to new cities for water (+87000) and sanitation (+50000)

France

Briançon

Grenoble

(city)

France

Grenoble Alpes Métropole

48 cities excluding Grenoble

France

Neufchâteau

Pays Châtelleraudais

(communauté d’agglomération)

Venelles

13 cities including Châtellerault and Naintré for sanitation

France

8,500 2002 SAUR

EFK, Alm.del - 2015-16 - Bilag 408: Henvendelse af 26/9-16 fra DANVA om kommentarer til McKinsey's rapport ifm. foretræde for udvalget den 27/9-16

Country

France

City

Communauté de communes

des Albères et de la Côte

Vermeille

Castres

Fraisses

Varages

Cherbourg

(communauté urbaine)

Lanvollon-Plouha

Embrun

Corte

Cournon d’Auvergne

Le Minervois

(communauté de communes)

Served

population Date Company

Status

24,000 2002

2010

12 cities which remunicipalised at expiry

France

43,000 2003 Suez

4,000 2003 Veolia

1,100 2004 Suez

46,000 2005 Veolia

5 cities

France

16,500 2005 Veolia/Suez

6,500 2006 Veolia

7,000 2007 OEHC

19,000 2007

6,300 2007

15 cities

France

Saint-Paul

(La Réunion)

100,000 2007 Veolia

Sanitation remunicipalised in 2007, water remunicipalised in 2010

France

Châtellerault/ Naintré

Tournon-sur-Rhône

38,000 2007 Veolia

11,000 2007 SAUR

France

Angers Loire Métropole

7,000 2008 SAUR

Extension of the régie to new cities for water and sanitation

France

Hauteville-Lompnes

La Fillière (SIE de La Fillière)

Belley

4,000 2008

14,000 2008 Suez

9,000 2009 Alteau

France

Benfeld et environs

17,500 2009 Suez

Sanitation, joined regional water syndicate SDEA Alsace-Moselle

France

Digne-les-Bains

La Grand’Combe (S.I.D.E

de l’Agglomération

Grand’Combienne )

Mouthe

18,500 2009 Suez

12,000 2009 Ruas

5 cities

France

1,000 2009 Suez

EFK, Alm.del - 2015-16 - Bilag 408: Henvendelse af 26/9-16 fra DANVA om kommentarer til McKinsey's rapport ifm. foretræde for udvalget den 27/9-16

Country

France

City

Served

population Date Company

Status

145,000 2009 Veolia, Suez

Greater Rouen

(Métropole Rouen Normandie)

2014

Syndicat d’Eau du Roumois

et du Plateau du Neubourg

(SERPN)

Saint-André,

Falicon et la Trinité

Greater Albi (communauté

d’agglomération de

l’Albigeois)

Annonay

Bonneville

Lucé (communauté de

communes de Lucé)

Paris

Saint-Jean-de-Braye

Bordeaux

65,000 2009 Veolia

Progressive extension of the

régie

to new cities.

France

108 cities

France

17,000 2009 Veolia/Ruas

Now part of Métropole Nice Cote d’Azur

France

84,000 2010 Suez

Sanitation only remunicipalised (water always remained public)

France

17,000 2010 SAUR

12,000 2010 Veolia

15,000 2010 Veolia

14 cities

France

2,200,000 2010 Veolia/Suez

19,000 2010 SAUR

740,000 2011 Suez

(2018)

This remunicipalisation is still debated and there are signs that the newly elected local authorities might

reconsider their decision.

France

10 cities

Brignole

Causse Noir

(SIAEP)

18,000 2011 Veolia

25,000 2011 Veolia

9,000 2011 Suez

32,000 2011 Veolia/Suez

1,100 2011 Veolia

NA 2011 Veolia/Suez

3,000 2011 Veolia

52,000 2011 Veolia

2018

5,000 2011 Veolia

France

Gueugnon

Sanitation was also remunicipalised in 2015

France

Lacs de l’Essonne

Le Gouray

Greater Nantes

Ploubezre

Saint Brieuc Agglomération

Syndicat de la Baie

EFK, Alm.del - 2015-16 - Bilag 408: Henvendelse af 26/9-16 fra DANVA om kommentarer til McKinsey's rapport ifm. foretræde for udvalget den 27/9-16

Country

France

City

Tarnos, Ondres, Boucau

and St-Martin-de-Seignaux

Vierzon

Brest Métropole

Chenal du Four

(Syndicat du Chenal du Four)

Gâtine (Syndicat Mixte

des Eaux de la Gâtine)

Landerneau

(SIDEP de Landerneau)

Served

population Date Company

Status

29,000 2011 Suez

28,000 2011 Veolia

213,000 2012 Veolia

6,000 2012 Veolia

56,000 2012 Suez

20,000 2012 Veolia

24,000 2012 Veolia

48,000 2012 Veolia

France

Muret

Part of the service is still outsourced

France

Saint-Malo

France

Schweighouse (SIVOM)

12,000 2012 Suez

Sanitation, joined regional water syndicate SDEA Alsace-Moselle

France

Sanitation

France

Sélestat

Argenton-sur-Creuse

Basse Vallée de l’Adour

(syndicat intercommunal)

Beaurepaire et

Saint-Barthélémy

Capbreton

Évry Centre Essonne

60,000 2012 Veolia

5,000 2013 Veolia

31,000 2013 Suez

25 cities

France

6,000 2013

8,000 2013 Suez

116,000 2013 Suez

6,000 2013 Veolia

19,000 2013 Veolia

77,000 2013 Suez/Veolia

France

Gannat

Joined SIVOM Sioule et Bouble

France

Kermorvan-Kersauzon

(syndicat des eaux)

Lamentin, Saint-Joseph

and Schoelcher (Martinique)

Péronne

Sanitation, joined the communité d’agglomération CACEM’s régie

France

9,000 2013

France

Saint-Pierre des Corps

15,000 2013 Veolia

Water service is still partly outsourced to Veolia (installations and meters).

Sanitation was remunicipalised in 2012.

EFK, Alm.del - 2015-16 - Bilag 408: Henvendelse af 26/9-16 fra DANVA om kommentarer til McKinsey's rapport ifm. foretræde for udvalget den 27/9-16

Country

France

City

Valence-Moissace-Puymirol

(syndicat des eaux)

Served

population Date Company

Status

5,000 2013 SAUR

46,000 2014 Veolia

58,000 2014 SEM Pyrénées

17,000 2014 Veolia

France

Aubagne

Joined SPL Eau des Collines for water

France

Barousse Comminges Save

Beaulieu, Cap d’Ail, Eze

et Villefranche-sur-Mer

Blois

Capesterre-Belle-Eau

(Guadeloupe)

Castelsarrasin

Courgent

Montpellier Méditerranée

Métropole

Now part of métropole Nice Côte d’Azur

France

48,000 2014 Veolia

(2016)

20,000 2014 Veolia

Taking effect 2016

France

13,000 2014 SAUR

400 2014 Suez

350,000 2014 Veolia

(2016)

Taking effect 2016

France

Pays d’Aubagne et de l’Étoile

105,000 2014 Veolia

12 cities, including Aubagne and La Penne-sur-Huveaune, joined SPL Eau des Collines for sanitation

France

La Penne-sur-Huveaune

Joined SPL Eau des Collines for Water

6,000 2014 Veolia

France

Mommenheim (SICTEU)

6,000 2014 Suez

Sanitation, joined regional water syndicate SDEA Alsace-Moselle

France

Portes de l’Eure (communauté

d’agglomération)

Terre de Bas

(îles des Saintes, Guadeloupe)

Terre de Haut

(îles des Saintes, Guadeloupe)

Bastia (communauté

d’agglomération)

20,000 2014 Veolia, SAUR

39 cities will be added over time as contracts expire

France

1,000 2014 Veolia

Remunicipalised together with Capesterre Belle Eau

France

2,000 2014 Veolia

Remunicipalised together with Capesterre Belle Eau

France

58,000 2015 OEHC

1,500 2015 Veolia

France

Brugheas

Joined SIVOM Sioule et Bouble

EFK, Alm.del - 2015-16 - Bilag 408: Henvendelse af 26/9-16 fra DANVA om kommentarer til McKinsey's rapport ifm. foretræde for udvalget den 27/9-16

Country

City

Served

population Date Company

Status

France

Fleury les Aubrais

Service is still partly outsourced

France

21,000 2015 SAUR

57,000 2015 Suez/Veolia

Lamentin / Saint-Joseph

(Martinique)

Sanitation was remunicipalised in 2013 - both through joining the CACEM

régie

France

Nice

(city)

Now part of Métropole Nice Côte d’Azur

France

Pays de Bitche

Joined SDEA Alsace-Moselle

France

348,000 2015 Veolia

25,000 2015 Veolia

25,000 2015 SAUR

12,000 2015 Veolia

480,000 2015 Veolia

Pays de Nay

(SEPA du Pays de Nay)

Quimperlé

Rennes

(Eau du Bassin rennais)

56 cities. Production was remunicipalised over the whole area (480000),

distirbution over Rennes city only (230000)

France

Germany

100

Germany

101

Germany

102

Germany

103

Germany

104

Germany

105

Germany

106

Italy

107

Italy

108

Italy

109

Italy

SIAEAG (Guadeloupe)

Troyes

Valence

Krefeld

Bergkamen

Stuttgart

Solingen

Bielefeld

Oranienburg

Berlin

Burg (Sachsen-Anhalt)

Rostock

Imperia

Reggio Emilia

Varese

Termoli

100,000 2015 Veolia

60,000 2015 Veolia

65,000 2015 Veolia

222,058 2005 RWE

110,000 2008 Gelsenwasser

613,392 2010- EnBW

155,768 2012 MVV Energie AG

328,864 2012 Stadtwerke Bremen/

Essent

42,000 2012 Gelsenwasser

3,501,870 2013 Veolia/RWE

22,000 2014 Veolia

200,000 2014- Remondis

200,000 2012- IREN

482,287 2012 IREN

889,000 2013 A2A

33,000 2015 Acea

EFK, Alm.del - 2015-16 - Bilag 408: Henvendelse af 26/9-16 fra DANVA om kommentarer til McKinsey's rapport ifm. foretræde for udvalget den 27/9-16

Country

110

Russia

111

Spain

112

Spain

City

Arzamas

Medina Sidonia

Served

population Date Company

Status

120,000 2014 Remondis

11,794 2003 Aqualia

126,845 2007 ACS Actividades

Huesna

(Alanís de la Sierra,

Alcolea del Río, Almadén de

de Construcción y

la Plata, Brenes, Las Cabezas,

Servicios

Cantillana, Carmona, Cañada

Rosal, Constantina, El Coronil,

El Cuervo, El Madroño, Los

Molares, Lebrija, Los Palacios

y Vfca., El Pedroso, El Real de

la Jara, Tocina, Vva. Del Río y

Minas, El Viso del Alcor, San

Nicolás del Puerto, Utrera)

Figaró Montmany

Arenys de Munt

Arteixo

La Línea de la Concepción

Manacor

Alfes

Ermua

Estella del Marqués

Guadalcacín

Montornés del Vallès

1,112 2009 CASSA Group

8,588 2011 SOREA (AGBAR)

31,005 2013 Aqualia (FCC)

62,697 2013 Aqualia (FCC)

41,049 2013 Agua Manacor S.A.

315 2014 Aigües de Catalunya

10,109 2014 Suez

1,486 2014 Aqualia

5,233 2014 Aqualia

16,217 2014 Familiar privada

2,000 2014 Canal Gestión SA

1,254 2014 Aqualia

87,247 2005 EON

96,000 2005 Aguas de Bilbao

1,200,000 2003 Suez

18,862 2004 Veolia

27,631 2004 United Water

236,191 2005 United Water (Suez)

8,918 2005 Veolia

5,228 2005 Veolia

34,094 2005 United Water

6,236 2005 Veolia

113

Spain

114

Spain

115

Spain

116

Spain

117

Spain

118

Spain

119

Spain

120

Spain

121

Spain

122

Spain

123

Spain

124

Spain

125

Sweden

126

Uruguay

127

USA

128

USA

129

USA

130

USA

131

USA

132

USA

133

USA

134

USA

Rascafría

Torrecera

Norrköping

Maldonado Department

Atlanta, GA

Angleton, TX

Plainfield, IN

Laredo, TX

Coxsackie, NY

Jackson, AL

Pekin, IL

East Aurora, NY

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Country

135

USA

136

USA

137

USA

138

USA

139

USA

140

USA

141

USA

142

USA

143

USA

144

USA

145

USA

146

USA

147

USA

148

USA

149

USA

150

USA

151

USA

152

USA

153

USA

154

USA

155

USA

156

USA

157

USA

158

USA

159

USA

City

Conroe, TX

Demopolis, AL

Five Star Water Supply

District, AL

Southern Water & Sewer

District, KY

North Brunswick, NJ

Logan, WV

Petaluma

(wastewater treatment), CA

Served

population Date Company

Status

61,533 2005 Veolia

7,483 2006 Veolia

100 2006 Veolia

23,524 2006 Veolia

40,742 2006 United Water

11,000 2006 Veolia

58,142 2007 Veolia

Houston

(water treatment), TX 2,700,000 2007 United Water (Suez)

Karnes City, TX

Winchester, NH

Stockton, CA

Fairfield-Suisun

(wastewater treatment), CA

Central Elmore

Water & Sewer Authority, AL

Cave Creek, AZ

Horn Lake, MS

Odem, TX

Hayden, ID

Durham County, NC

Burley

(wastewater treatment), ID

Surprise, AZ

Biddeford, ME

O’Fallon, MO

Kline, PA

North Adams, MA

Overton, TX

3,042 2007 Veolia

4,341 2008 United Water

300,899 2008 OMI-Thames Water

135,296 2008 United Water (Suez)

50,000 2008 Veolia

9,000 2008 American Water

15,545 2008 Southwest Water

2,499 2008 Veolia

13,294 2009 Veolia

8,000 2009 United Water

9,578 2009 Veolia

27,116 2009 American Water

21,383 2009 CH2M Hill OMI

25,002 2009 Alliance Water

Resources

1,591 2009 United Water

13,708 2010 United Water

2,554 2010 Veolia

EFK, Alm.del - 2015-16 - Bilag 408: Henvendelse af 26/9-16 fra DANVA om kommentarer til McKinsey's rapport ifm. foretræde for udvalget den 27/9-16

Country

160

USA

161

USA

162

USA

City

Freeport, IL

Evansville, IN

Gary, IN

Served

population Date Company

Status

25,638 2010 United Water

117,429 2010 American Water

180,000 2010 United Water

City voted to terminate but then negotiated a “transition agreement” with the company to avoid paying

$450,000 in termination fees. So United Water could say the deal was not officially ‘ terminated’.

163

USA

164

USA

165

USA

166

USA

167

USA

168

USA

169

USA

170

USA

171

USA

172

USA

173

USA

174

USA

175

USA

176

USA

177

USA

178

USA

179

USA

180

USA

181

USA

182

USA

183

USA

184

USA

Liberty, MO

Webb City, MO

Skaneateles, NY

Lampasas, TX

Leander, TX

Whitesburg

(water and wastewater),KY

Brunswick -Glynn County, GA

Tama, IA

Schenectady

(wastewater treatment), NY

Plymouth

(water and wastewater), NC

Manchester Township, NJ

Summit City, NJ

New Albany

(wastewater treatment), IN

Gladewater, TX

Lanett AL

Barstow, CA

Coeburn, VA

Weslaco, TX

Cameron, TX

Storm Lake, IA

Reidsville, NC

Oakland County, MI

3,000 2010 CH2M Hill OMI

10,996 2010 CH2M Hill OMI

5,116 2010 Severn Trent

7,868 2010 CH2M Hill OMI

25,740 2010 Southwest Water

2,139 2011 Veolia

79,626 2011 United Water

2,877 2011 Veolia

66,135 2011 Veolia

3,878 2011 Veolia

35,976 2011 United Water

21,457 2011 United Water

36,372 2012 American Water

6,275 2012 Veolia

6,468 2012 Veolia

22,639 2012 United Water

2,139 2013 Veolia

35,670 2013 CH2M Hill

5,770 2013 Severn Trent

10,600 2013 Veolia

14,520 2014 United Water

59,515 2014 United Water

EFK, Alm.del - 2015-16 - Bilag 408: Henvendelse af 26/9-16 fra DANVA om kommentarer til McKinsey's rapport ifm. foretræde for udvalget den 27/9-16

Table 2

Low and middle-income countries

City

Elbasan

Buenos Aires Province

(74 cities)

Buenos Aires

Buenos Aires Province

(Gran, 6th subregion)

Santa Fe and Rosario

Catamarca

Salta

La Rioja

Mendoza

Cochabamba

La Paz/El Alto

National

Bangui

Bogota

(treatment pl

ant)

Bogota

(water supply)

Machala

National

Conakry and 16 other

smaller urban centres

National

Kaposvar

Pecs

Borsodviz

Budapest

Latur

Badung Bali

Served

population Date Company

Status

Country

185

Albania

186

Argentina

187

Argentina

188

Argentina

189

Argentina

190

Argentina

191

Argentina

192

Argentina

193

Argentina

194

Bolivia

195

Bolivia

196

Cape Verde

197

Central

100,000 2007 Berlinwasser

International

2,500,000 2002 Enron

9,000,000 2006 Suez

1,700,000 2006 Impregilo

2,000,000 2006 Suez

200,000 2008 Proactiva

1,100,000 2009 Latinaguas

200,000 2010 Latin Aguas

1,100,000 2010 Saur

900,000 2000 Bechtel

1,600,000 2007 Suez

200,000 2005 Aguas de Portugal

80,000 2003 SAUR

1,500,000 2004 Suez

7,000,000

240,000

5,100,000

1,824,000

2013 Acea, Proactiva

2012 Oriolsa

2011 Vitens, Rand Water

2003 SAUR and Veolia

African

Republic

198

Colombia

199

Colombia

200

Ecuador

201

Ghana

202

Guinea

203 Guyana

203

204

Hungary

205

Hungary

206

Hungary

207

Hungary

208

India

209

Indonesia

740,000 2007 Severn Trent

64,872 2009 Suez

150,000 2009 Suez

190,000 2010 Gelsenwasser

1,740,000 2012 Suez, RWE

390,000 2012 SPML (Shubash Projects

and Marketing Ltd)

543,332 2013 Mahasara Buana, Intan

Dyandra Mulya, Dewata

Artha Kharisma

210

Indonesia

9,900,000 2015- Suez

Jakarta

The Central Jakarta District Court on 24 March 2015 annulled the privatised water contracts signed with

Suez (Palyja) and Aetra and ordered the water services to be brought back to the state-owned water company

211

Kazakhstan Ust-Kamenogorsk

303,720 2007 IR-Group

EFK, Alm.del - 2015-16 - Bilag 408: Henvendelse af 26/9-16 fra DANVA om kommentarer til McKinsey's rapport ifm. foretræde for udvalget den 27/9-16

Country

City

Served

population Date Company

Status

212

Kazakhstan

Almaty

213

Kazakhstan

Astana

(bulk water supply)

214

Lebanon

215

Malaysia

216

Malaysia

217

Mali

218

Mexico

1,600,000 2005 Veolia

639,311 2003 Veolia

400,000 2007 Suez

5,411,324 2014- Syabas, PNSB,

SPLASH, ABASS

6,100,000 2001 Prime Utilities

1,500,000 2005 SAUR

48,228 2014 Suez

2,200,000 2014 Redal (Veolia)

1,400,000 2014 Amendis (Veolia)

242,143 2008 Aguas de Mozambique

(SAUR and Aguas de

Portugal)

1,766,184 2010 Aguas de Portugal

200,000 2005 Suez

500,000 2006 Suez

130,000 2002 Suez

750,000 2005 Biwater

2,158,000 2002 Suez

1,600,000 2014 Thames Water

1,720,000 2004 ONDEO

424,113 2014 Rosvodokoanal

293,444 2008 Water Services, LLC

Tripoli

Kuala Lumpur

(Selangor state)

Indah Water Consortium

(sanitation)

Bamako

Ramos Arizpe

Rabat-Salé region

219

Morocco

Outcome still pending

Tanger-Tétouan

220

Morocco

Outcome still pending

221

Mozambique

Beira, Nampula, Quelimane

and Pemba

(and Chokwé,

Inhambane, Maxixe and Xai-Xai)

222

Mozambique

Maputo

223

South Africa Amahthali (Stutterheim)

224

South Africa

Johannesburg

225

South Africa

Nkonkobe

(Fort Beaufort)

226

Tanzania

227

Turkey

228

Turkey

229

Uganda

230

Ukraine

231

Ukraine

Dar es Salaam

Antalya

Izmit

Kampala

Lugansk

Kirovograd

247,000 2007 Veolia, then Amiwater

232

Uzbekistan

Bukhara

A second contract with Amiwater was also terminated in 2007

233

Uzbekistan

Samarkand

412,000 2007 Veolia, then Amiwater

A second contract with Amiwater was also terminated in 2007

234

Venezuela

235

Venezuela

Monagas State

Lara State

552,000 2001 FCC

1,100,000 2002 Aguas de Valencia

105,917,656

Total served population

Endnotes

1 The World Bank’s classification of countries and lending groups is available at:

http://siteresources.

worldbank.org/DATASTATISTICS/Resources/CLASS.XLS

(accessed on 14 March 2015).

EFK, Alm.del - 2015-16 - Bilag 408: Henvendelse af 26/9-16 fra DANVA om kommentarer til McKinsey's rapport ifm. foretræde for udvalget den 27/9-16

Chapter One

Water in public hands:

Remunicipalisation in

the United States

By Mary Grant

Most people in the United States receive their water and sewer services from

publicly owned and operated utilities, and the movement to retain, secure and

strengthen public water services is strong and vibrant.

The United States has about 50,000 community water systems and 20,000

wastewater collection systems.

Nearly all wastewater services are publicly

owned and public provision also dominates drinking water services.

Local

governments and other public entities serve 86 per cent of the population

through community water systems.

A long history of municipalisation

Historically, private water companies served many of the nation’s largest cities

until the turn of the 20th century, when cholera outbreaks and destructive

fires inspired a surge of municipalisations. From 1880 to 1920, thousands of

cities – including Baltimore, Boston, Chicago, Los Angeles, New York City,

Philadelphia and San Francisco – assumed public control of water provision

to improve water quality and extend service to low-income areas neglected

by private providers.

The movement to public ownership continues today. From 2007 to 2013, the

population served by privately owned community water systems fell by 7 mil-

lion, while the population served by local governments grew by 17 million.

Local governments are indeed expanding services to new areas and buying

private systems with considerable frequency. This often occurs as cities grow;

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Water in public hands: Remunicipalisation in the United States

local governments purchase systems in newly annexed areas and consolidate

them with existing public infrastructure to improve services, distribute costs

and better manage water resources.

Remunicipalisation: A strong force

Despite aggressive corporate efforts, privatisation of government-owned water

and sewer systems remains uncommon in the United States. Further, a 2012

national survey found that only 6 per cent of local governments contract out

water and sewer services to private, for-profit entities.

Although privatisation is relatively rare, every year a handful of local govern-

ments exit such arrangements and return water or sewer systems to public

operation. Remunicipalisation of water and sewer services is a strong force

among contracting governments.

Since 2000, major water companies have lost 169 contracts to remunicipalisa-

tion.

That’s a large number compared to existing private water management

contracts, considering that four of the largest companies, representing an

estimated 70 per cent of the US water outsourcing market, had a total of just

760 government clients in 2013.

How communities remunicipalise

Local governments typically remunicipalise water and sewer services by letting

contracts expire or terminating contracts for convenience. That is, many deals

allow municipalities to exit the arrangement early for any reason as long as the

private operator is given sufficient notice, although governments may have

to pay termination fees. “Termination for convenience” clauses and short

contract terms are important checks on privatisation. Without them, it can be

difficult for local governments to bring services back under public operation.

In some cases, governments have ended contracts because of serious violations

of contract provisions. This is known as “termination for cause.” It can be

difficult, however, for a government to prove that the company has materially

breached a contract, and many deals require arbitration first. Sometimes when

governments threaten to terminate a contract, companies will try to negotiate

a no-fault settlement to avoid blame or bad publicity, while waiving a portion

of the termination fees for the government.

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Chapter One

Top reasons why local governments seek public control

Local governments remunicipalise their water or sewer services primarily to

reduce costs and improve service.

Saving money

Cost savings, in particular, is a driving force of remunicipalisation in the

United States. A Food & Water Watch survey of 18 communities that re-

municipalised water or sewer services between 2007 and 2010 found that

public operation cut costs in these communities by an average 21 per cent.

Municipalities have realised significant savings by exiting privatisation ar-

rangements and returning systems to public hands. The cases of Coeburn and

that of Fairfield and Suisun are exemplary in this regard.

Coeburn, Virginia.

In 2013 Coeburn, a small town in Virginia, was struggling

to balance its budget. Its reserve fund had dropped dramatically since the

Great Recession. Although the town had been able to reduce costs in every

other department, its public works department was locked into a privatisation

contract that required a payment increase to the private company.

Since 2009, Veolia Water North America, a subsidiary of the French multina-

tional, had run Coeburn’s entire public works department, including the water

and sewer systems. In 2013, the town paid the company $1.41 million – an

astonishing 96 per cent of total annual budget. The contract was simply too

expensive, so the town council voted not to renew the deal when it expired.

In April 2014, the town resumed public operation of the department, cutting

costs by 28 per cent.

Fairfield and Suisun, California.

In 2008, after three decades of private opera-

tion of the wastewater treatment plant, the board of directors of the Fairfield-

Suisun Sewer District in California unanimously voted to cancel the contract

with United Water and use public employees to run the facility. The district

determined that remunicipalisation would save money and improve service.

The district had first privatised the operation and maintenance of the treat-

ment plant in 1976. After a series of other contractors, United Water, a

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Water in public hands: Remunicipalisation in the United States

subsidiary of French multinational Suez Environnement, took over the plant

in 2007 when it bought the company that had earlier received a five-year

deal with the district. By then, the district’s board of directors had come to

question whether private operation was in the public’s best interest. When

United Water took control, the district hired independent consultants to

review options.

The consultants found that public operation would cut costs in 5 per cent in

the first year and 10 to 15 per cent in subsequent years.

The report concluded

that private contracting costs would otherwise continue to “increase signifi-

cantly” because of market consolidation and the “profitability goals” of the

companies that would vie for any new deal.

With public operation, the district could also attract and retain the neces-

sary qualified personnel and improve performance. Under privatisation, the

district’s contractors had struggled to maintain adequate staffing and stable

management.

There were five different plant managers in the previous five

years, and the maintenance manager position was vacant at the time of the

consultants’ assessment. Staffing difficulties would have likely only worsened

over time. The consultant projected that one-fifth of the district’s staff would

retire in the coming years, and that because private contractors offered worse

compensation packages than their public counterparts in the area, it would be

more difficult for a private firm to hire the necessary staff from an increasingly

limited labour pool.

Since 2008, public operation has met or exceeded expectations. The district

has increased and then retained operation and maintenance staff levels.

the first year of public operation, remunicipalisation cut total operating costs

by 7 per cent, saving taxpayers $1.3 million.

In fact, annual operating costs

were lower by 2014 than in the final year of the privatisation contract.

Improving service

Beyond financial reasons, communities remunicipalise water and sewer ser-

vices to improve performance. Unresponsive customer service and inadequate

maintenance are frequent complaints under privatisation deals.

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Chapter One

Cameron, Texas.

In 2013, the city council of Cameron, Texas, unanimously

voted to sever its contract with Severn Trent. Four years earlier, in 2009, the

company had received a five-year deal to operate and manage the city’s water

and wastewater systems, promising to cut costs and improve service through

better staff training and system upkeep.

Within a few years, the city was deeply dissatisfied with the company’s per-

formance – from brown, foul-smelling water to inadequate treatment that

prompted requirements to boil water before consumption to other violations.

“We hired you to take care of the water,” city council member Bill Harris told

two senior Severn Trent representatives at a 2012 meeting. “I feel you’ve fallen

down on the job.”

In March 2013, the city took over the water and wastewater departments and

began “working through challenges that Severn Trent left us with.”

Despite

the problems with and frustration over the company’s performance, Cameron

had to pay $64,000 to terminate the deal early.

The city then began to address the problems left from the privatisation fail-

ure,

assisted in part by a $250,000 Community Development Block Grant

for water meter upgrades to reduce unaccounted-for water.

As part of its

water conservation and drought contingency plan, the city also prioritised

repairing water leaks. By July 2014, the utilities director Curtis Donovan

reported that the water department met all permit requirements and had a

satisfactory state review on quality levels.

Gain local control to better manage water resources

Public control makes coordination across municipal departments and

government jurisdictions possible, allowing for better resource manage-

ment. For example, many cities’ water and transportation departments work

together to time water pipeline replacements with street repairs to avoid

redundant repaving work. Cities also use wastewater department trucks for

other government tasks, including snow removal, and water department

employees can help prepare for emergencies and natural disasters such as

hurricanes.

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Water in public hands: Remunicipalisation in the United States

Private contractors and utilities, in comparison, have no incentive to share

equipment and staffing with city departments, and they are not required to

cooperate with government agencies to protect water resources, manage wa-

tersheds and work for long-term sustainability.

Cave Creek, Arizona.

In 2008, Cave Creek, Arizona, assumed full public con-

trol of its water and sewer services after buying two private water systems and

deciding against renewing contracts with American Water.

Cave Creek’s water systems had been privately owned since their inception.

Worried about insufficient water supplies and system upkeep, and facing

water shortages that left county residents with intermittent outages and low

pressure, the town decided to pursue public ownership and management to

secure its water future.

“We need to have control of the water utility so we can plan five, 10 and 20

years down the road,” explained Cave Creek Mayor Vincent Francia in 2005.

The town purchased two private water systems: the Desert Hills Water

Company for $2.5 million in 2006 and the Cave Creek Water Company

for $19.5 million in 2007. Cave Creek received low-interest loans from the

Water Infrastructure Financing Authority, the state agency responsible for

distributing federally subsidised State Revolving Fund assistance, to purchase

the systems and make necessary improvements.

At the time, the town hired American Water, which already operated the town’s

wastewater treatment plant, to run the water systems for one year. When the

contracts expired, the town opted for full public control. During 2008, the town

began publicly operating the water systems and wastewater treatment plant.

At a November 2007 meeting, Jessica Marlow, the town’s utilities manager,

said that there were three reasons why the town was taking over the operation

of the water systems: “to improve customer service,” “bring management and

services locally” and “improve financial sustainability.”

Later during the same meeting, town clerk Carrie Dyrek outlined the “advan-

tages of local control,” including that local staff will provide all services. “Who

[would be] better to assess the needs of our community?” she asked, answering:

“The local employees who live and work in this community.”

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Chapter One

In just the first two years of public control, Cave Creek invested $16.2 million

in upgrading its water systems and storage tanks to improve the reliability and

sustainability of its water supply.

Onward

Public operation of drinking water and wastewater services prevails in the

United States. Privatisation remains relatively uncommon, but each year

several communities across the country remunicipalise their water and sewer

services. The decisions to remunicipalise are pragmatic. Municipalities evalu-

ate privatisation contracts on costs and performance criteria and determine

that public operation is the best option. Local governments have saved mil-

lions of dollars and improved the quality of their water services through locally

accountable public management. For communities across the United States,

remunicipalisation has been a resounding success.

Mary Grant is a researcher for Food & Water Watch, a US non-profit consumer

advocacy organisation that works to ensure that food, water and fish people consume

is safe, accessible and sustainably produced. Her work focuses on water privatisation

and infrastructure financing in the United States.

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Water in public hands: Remunicipalisation in the United States

Endnotes

1 US Environmental Protection Agency. 2013. Federal safe drinking water information

system. FY 2013 Inventory Data. October; US Environmental Protection Agency.

2010. Clean watersheds needs survey: 2008 report to Congress, p. I-3.

2 US Environmental Protection Agency. 2014. PSC customized search. Facility

information (accessed 20 October); US Government Accountability Office. 2010.

Wastewater infrastructure financing: Stakeholder views on a national infrastructure

bank and public-private partnerships. June, p. 5.

3 This is not a percentage of the total US population. As much as 15 per cent of people

have personal sources of water, such as individual household wells, and thus are not

connected to a community water system. See US Environmental Protection Agency

2013, op. cit.; US Environmental Protection Agency. 2002. Drinking water from

household wells. January, p. 1.

4 Spar, D. and Krzysztof, B. 2009. To the tap: Public versus private water provision

at the turn of the Twentieth Century.

Business History Review

83(4): 689-697;

National Research Council. 2002.

Privatization of water services in the United States.

Washington, DC: National Academy of Science, p. 2, 30-34; Salzman, J. 2006. Thirst:

A short history of drinking water.

Duke Law School Faculty Scholarship Series.

January,

p. 18-20; Arnold, C. A. 2005. Privatization of public water services: The states’ role in

ensuring public accountability.

Pepperdine Law Review

32(3): 568-569.

5 Over this period, the total growth in the population on community water systems,

of all ownership, was 5 per cent with an additional 13 million people served. See US

Environmental Protection Agency 2013, op. cit.; US Environmental Protection Agency.

2007. Federal safe drinking water information System. FY 2007 inventory data, October.

6 For more information about the municipalisation process, see: Food & Water Watch.

2012. Municipalization guide: How U.S. communities can secure local public control

of privately owned water and sewer systems. July.

7 Homsy, G. C. and Warner, M. E. 2014. Intermunicipal cooperation: The growing

reform. In

The Municipal Yearbook 2014.

International City/County Management

Association, p. 55.

8 The number of water companies providing contract data varied over time as the

market consolidated. In 2000, 12 companies reported information about contested

government contracts, but from 2008 to 2013, only four companies provided that

information each year. See: PWF. 2006. 10

annual water outsourcing report.

Public

Works Financing.

Vol. 203. March, p. 4; PWF. 2014. 18

annual water partnerships

survey.

Public Works Financing.

Vol. 291. March, p. 20.

9 PWF 2014, op. cit., p. 19, 22, 25.

10 Food & Water Watch. 2010. The public works: How remunicipalization of water

services saves money. December.

11 Gibson, A. R. 2014. Coeburn takes over operation of town Public Works

Department.

Kingsport Times News,

23 April; Coeburn Town (VA). Public works

department. Announcement. April 2014, on file with Food & Water Watch.

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Chapter One

12 Whitley Burchett & Associates. 2007. Analysis of the use of contract operations.

3 December, p. 4-5; Fairfield-Suisun Sewer District (California). 2008. Board of

Directors meeting agenda, 28 January, p. 5-6.

13 Ibid., p. 17.

14 Ibid., p. 8 and 12.

15 Ibid., p. 7, 8 and 13.

16 Ibid., p. 6 and 8.

17 Fairfield-Suisun Sewer District (California). 2014. Comprehensive annual financial

report for the year ended June 30, 2014. 8 September, p. 63.

18 Fairfield-Suisun Sewer District (California). 2009. Comprehensive annual financial

report for the year ended June 30, 2009. 26 October, p. 5-6.

19 Operating costs were calculated as total expenses less interest and depreciation.

Fairfield-Suisun Sewer District 2014, op cit., p. 49.

20 Severn Trent Services. 2009. City of Cameron, Texas forms a public-private

partnership with Severn Trent Services. Press release, 6 May.

21 Chubb, C. 2012. Council demands action on water quality.

Cameron (TX) Herald,

8 March.

22 Ibid.

23 Cameron (Texas). 2013. Meeting minutes. 18 March, p. 2.

24 Stone, R. 2013. City of Cameron settles with Severn Trent.

Cameron (TX) Herald,

21 November.

25 Ibid.

26 Ibid.

27 Cameron (Texas). 2014. Meeting minutes. 21 July, p. 1.

28 Association of Metropolitan Sewerage Agencies and Association of Metropolitan

Water Agencies. 2002. Evaluating privatization II: An AMSA/AMWA checklist, p. 23.

29 Ropp, T. 2006. Cave Creek ponders buying water company.

The Arizona Republic,

July.

30 Watts, J. 2005. Arizona town trying to take water into its own hands.

The Bond Buyer,

14 April.

31 Duckett, B. 2009. Cave Creek pumps resources into water-system upgrades.

The

Arizona Republic,

2 September; Cave Creek (Arizona). 2013. 2013 comprehensive

annual financial report. 21 November, p. 51-52.

32 Cave Creek (Arizona). 2007. Meeting minutes. 19 November, p. 3.

33 Ibid., p. 7.

34 Duckett 2009, op. cit.

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Chapter Two

An end to the struggle?

Jakarta residents reclaim

their water system

by Irfan Zamzami and Nila Ardhianie

Privatisation of water services in Jakarta has failed. The evidence speaks for

itself. Water services coverage in the Indonesian capital remains low at only

59 per cent.

The infrastructure is in bad shape with the leakage level as high

as 44 per cent, a situation repeatedly denounced by the Governor.

As a result,

among the lucky half of the population that does get access to piped water,

water quality is poor.

Consequently, on 24 March 2015 the Central Jakarta District Court annulled

the privatised water contracts following a citizen lawsuit. Water privatisa-

tion was deemed negligent in fulfilling the human right to water for Jakarta’s

residents. The court also ordered the water services to be brought back to the

state-owned water company.

The private sector got officially involved in Jakarta’s water services in 1997,

when Suharto’s dictatorial power was still solid in Indonesia. At the time,

foreign water companies Thames (UK) and Suez (France) obtained a 25-

year concession over water management, granting them the exclusive right

to deliver water services in the capital city. Each operator was given control

over half of the metropolitan area: the western part is serviced by PT PAM

Lyonnaise Jaya (Palyja, owned at 51 per cent by Suez and at 49 per cent by

Indonesian infrastructure company Astratel Nusantara) and the eastern part

by PT Aetra Air Jakarta (Aetra, owned by Singapore-based Acuatico since 2007

with Indonesian company PT Alberta Utilities holding 5 per cent of shares).

Since then, the private operators have been earning high profits in a low-risk

business while causing huge financial losses for the public Jakarta Drinking

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An end to the struggle? Jakarta residents reclaim their water system

Water Utility (PAM Jaya), which oversees the contracts with the private con-

cessionaires. These public losses added up to as much as IDR 510 billion in

2010 (approximately US$54 million) and could reach IDR 18.2 trillion if the

cooperation agreement were to continue until its expiry date in 2022.

The government is discontented because the capital city’s water services are poor

and public money is being spent to cover losses caused by privatisation.

Water

tariffs increased on 10 occasions since, making it much higher than in other cit-

ies while service quality remains poor. Outages are frequent and in 2013 alone

nearly 40,000 complaints were filed by users regarding tap water deficiency.

Not only are residents and public managers discontented with privatisation,

water workers too have been negatively affected.

Some 2,800 of the 3,000

utility workers were transferred to the private companies after the concession

was signed, but their contractual situation remained unclear. Afterwards, the

new workers recruited directly by the private companies obtained better con-

ditions, for example on skills training, health insurance, salary and allowance,

as well as safety. This has created a double standard within the workforce. One

worker who had been working for nine years with the water utility declares

never having received a basic salary raise since privatisation.

Citizens unite to remunicipalise

Even though the resistance against water privatisation is as old as the privatisa-

tion itself, it gained momentum in 2011 when residents, water workers and

civil society organisations formed the Coalition of Jakarta Residents Opposing

Water Privatization (KMMSAJ). The coalition has organised through various

strategies, from rallies, public discussions and policy dialogues, to requesting

information disclosure, circulating petitions and filing a citizen lawsuit.

In January 2012 KMMSAJ also brought to light an alleged corruption case

that involves PAM Jaya and the two private operators by petitioning the

Corruption Eradication Commission (KPK). This corruption case, currently

being investigated by KPK, would involves IDR 561 billion (US$43.2 mil-

lion).

Tempo Magazine,

which investigated the case, found a link between this

corruption case and the Jakarta gubernatorial election in 2012.

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Chapter Two

The most important step was taken in November 2012 when KMMSAJ initi-

ated a Citizen Lawsuit against water privatisation. The defendants in the law-

suit were the President, the Vice-President, Finance Minister, Public Works

Minister, and the Governor of Jakarta. Other defendants include the Jakarta

House of Representatives, Jakarta water company PAM Jaya’s president direc-

tor, and the two private operators Palyja and Aetra.

In this lawsuit, the plaintiff accuses the defendants of negligence by unlawfully

arranging the water privatisation contract agreement. Indeed, the contract

itself is considered as violating the Constitution and other regulations related

with water resources and clean water provision, which require delivery by the

state through a public water company.

This lawsuit played an important role for its influence on policy-makers. After

the Citizen Lawsuit was launched, the Governor of Jakarta Joko Widodo de-

clared in March 2013 that water privatisation would be ended. In October 2014

then-deputy governor of Jakarta Basuki Tjahaja Purnama confirmed that the

government was considering the acquisition of the private firms’ shares through

Jakarta’s public water utility PAM Jaya considering the class-action lawsuit.

The Governor’s plan to acquire the private operators’ shares through PAM Jaya

was taken seriously by the court, and the verdict was postponed twice to create

space for an out-of-court settlement. The governor of Jakarta issued a letter in

February 2015 instructing the public water company PAM Jaya to take over

water services from the private operators. The Central Jakarta District Court’s

24 March decision to annul the privatised water contracts on the grounds that

the water privatisation was negligent in fulfilling residents’ human right to water

confirms that this is the road taken. Remunicipalisation is just one step away!

The privatisation context in Jakarta

The cooperation agreement with Aetra and Palyja was restated in 2001 to

adjust with the political and economic situation post-1998 financial crisis. It

was followed by a five-year target adjustment.

It was not until 2011 that PAM Jaya openly expressed disappointment with

the contract agreement and proposed renegotiation. The director of PAM Jaya

stated that privatisation would sink the public water utility into huge financial

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An end to the struggle? Jakarta residents reclaim their water system

losses (up to IDR 18.2 trillion) if the cooperation agreement continued as

planned until its expiry date in 2022.

The renegotiation process did not run smoothly. Aetra was the first to agree to

compromise with some renegotiated items, which were included as addendum

to the cooperation agreement in December 2012. The approved items were:

to lower the Internal Rate of Return, which was considered too high, from 22

to 15.8 per cent (the Financial and Development Supervisory Agency, BPKP,

evaluated the reasonable rate for water services in Jakarta at 14.68 per cent);

to eliminate current shortfall debt; and to decrease the leakage level from 29

to 25 per cent. Palyja, on the other hand, refused to make any changes.

The cooperation agreement has been problematic because of its emphasis on

the private operators’ business profit. The payment mechanism adopted in the

contract agreement differentiates between “water charge” and “water tariff”.

The former is the rate paid by PAM Jaya to the private operators, while the

latter is the rate paid by customers to PAM Jaya. The water charge is subject to

adjustments regardless of policy decisions related to the water tariff.

The initial water charge as of 1 April 2001 was IDR 2,400, and was to be

adjusted every six months. This soon created a structural problem because

PAM Jaya did not have similar flexibility in increasing tariffs because most

residents could not afford it.

The water charge could be raised liberally by the private operators without

considering the water tariff policy, guaranteeing continued private profits.

For PAM Jaya, every water charge increase that was not followed by a parallel

water tariff increase led to a financial shortfall. This brought the government

to issue a policy that allowed raising the water tariff automatically every six

months, effective from 23 July 2004 to 2007. Not surprisingly, Jakarta’s water

tariff has become the highest among other big cities in Indonesia.

This structure has caused massive financial losses for PAM Jaya. In 2011, when

the President Director of PAM Jaya proposed contract renegotiation, financial

loss was evaluated at IDR 154.3 billion, in addition to a decrease in asset

value from IDR 1.49 trillion before the privatisation to IDR 204.46 billion

in 2014.

A letter of support issued by the provincial government of Jakarta

later assumed all these losses from public money while guaranteeing excessive

revenue for the private operators despite dismal service quality.

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Chapter Two

At the same time, the cooperation agreement gave much leeway to the private

operators in terms of performance targets. The regulation of performance targets,

which are important to ensure quality services to citizens, was designed in such

a way that the private operators could easily evade them. For instance, technical

targets could be amended from time to time in accordance with the private

operators’ Financial Projections. The same case applied to the service standards.

Poor private performance, expensive water tariff

With no pressure whatsoever, the private operators’ performance has been

unsatisfactory. In a recent statement, PAM Jaya explained that the service

coverage ratio in 2013 was targeted for 66.37 per cent, but the private opera-

tors were only able to reach 59.01 per cent,

or lower than that of 2008. The

leakage level is 44 per cent, higher than the average level of other drinking water

companies nationally, which is 31 per cent.

The Interior Ministry’s regulation

specifies that the leakage level should not be higher than 20 per cent.

While receiving poor water services, customers have to pay expensive water

tariffs. At the beginning of the concession, the average water tariff in Jakarta

was IDR 1,700/m

. It continued to increase rapidly, mostly through the

Automatic Tariff Adjustment policy, as the private operators kept pushing

frequent increases in the water charge. Currently, the average water tariff in

Jakarta is IDR 7,020/m

, which is much higher compared to that of other big

cities in Indonesia (see Table 2.1).

Table 2.1

Comparison of average water tariffs in several big cities, Indonesia (2012)

City

Tariff (per m

)

Jakarta

Surabaya

Medan

Bekasi

Makassar

Semarang

IDR 7,020

IDR 2,600

IDR 2,294

IDR 2,300

IDR 2,000

IDR 2,600

Sources: (1), (2), (4)

TribunNews

31 January 2012; (3)

Bisnis Indonesia

24 September 2012; (5) Department

of Public Works; (6)

Okezone

10 May 2012.

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An end to the struggle? Jakarta residents reclaim their water system

Water supply challenges in Jakarta

In a heavily populated city like Jakarta (9.6 million inhabitants), providing

safe drinking water through a piped network is no simple task. In the context

of rapidly increasing demand, the piped water infrastructure supplies 297 mil-

lion cubic meters of water per year. Additional water needs tax groundwater

resources, and excessive exploitation is causing environmental problems such

as land subsidence and saltwater intrusion. Besides, use of Jakarta’s ground-

water is a serious public health concern because it is vastly contaminated with

E-coli (as much as 90 per cent

Most residents use groundwater because piped water services cover less than

half of the population. This unserved population is mostly composed of

poor communities, in North and West Jakarta for example. In these neigh-

bourhoods, residents have to buy water in jerry cans at a cost as high as

IDR 15,000/day (US$1.15), while daily income is generally less than IDR

30,000.

Even more dismal is sanitation coverage that stagnates at a low 5

per cent, accelerating environmental degradation.

In taking back the responsibility for water services, public utility PAM Jaya

will have to tackle these daunting challenges.

Public water works better in Indonesia

With ever deepening problems, Jakarta has no other realistic options than

terminating the water privatisation contract and bringing back services to

PAM Jaya. In Indonesia, public water management is proven to perform better

than privatised utilities. Water services in cities such as Surabaya, Palembang,

Banjarmasin, Medan and Malang, which are fully managed by public entities,

perform far better than Jakarta’s and at lower water tariffs (see Table 2.2).

In taking over the water services from the private operators, three possible sce-

narios have been considered: 1) PAM Jaya buys the private operators’ shares;

2) the governor declares through a decree that the contracts are unilaterally

terminated; 3) the citizen lawsuit leads the court to nullify the contract agree-

ments and water management returns back to PAM Jaya. After the court’s

decision of March 2015, the city administration is eager to pursue the third

option. The governor hopes that an expected private operator attempt in

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Chapter Two

appealing the court decision will be rejected. At the same time, the city ad-

ministration’s legal bureau is also preparing in case that the private operators

resort to international arbitrage.

Table 2.2

Comparison of water utilities performance in several cities, Indonesia

Water utilities

Average

water tariff

Leakage level

(%)

Service

coverage (%)

Surabaya

Palembang

Banjarmasin

Medan

Malang

Jakarta

2,800

3,800

4,120

2,226

4,000

7,800

66.62

59.01

Sources: (1) The Indonesian Drinking Water Association (Perpamsi) 2013; (2)

TribunNews

2013; (3) Department

of Public Works 2013; (4) Perpamsi 2010; (5) Malang Drinking Water Company 2015; (6)

JPNN

2013.

Towards remunicipalisation: Financing

Should the governor decide to follow the initial plan for PAM Jaya to buy

Palyja’s shares, PAM Jaya needs to gather sufficient funds for the repurchase.

In early 2015, PAM Jaya stated that if the share purchase were to take place, it

would consider assistance from banks.

PAM Jaya, however, still has another

alternative through internal financing if public water management can gener-

ate enough savings through enhanced efficiency due to the merger of two

contracts into one sole public operator.

Based on Amrta Institute’s estimation, the efficiency gains from terminating

the privatisation contract could yield as much as IDR 171 billion. These

savings would come from the reduction of operational costs compared to the

private operators’, costs which were previously borne by PAM Jaya through

the water charge. After privatisation is ended, PAM Jaya will be free from the

water charge scheme and will be able to stop accounting costs not related with

water production.

For instance, there would be no more costs for “technical assistance”, which in

the Jakarta contracts refers to the fees paid to shareholders every year. Under

public management, administrative fees will be reduced significantly. Salary

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An end to the struggle? Jakarta residents reclaim their water system

costs will go down too as expensive foreign executives will no longer need to be

paid. Direct public management has a significant advantage on costs of insur-

ance and rent for buildings. Travel, external consulting services, advertising will

be reduced dramatically compared to the amount spent by private operators.

Public-public partnership as a way forward

Furthermore, the next task for PAM Jaya in the post-privatisation period

would be to rethink water management to improve services. The public

water utility could benefit from external expertise through a partnership with

another public institution, known as public-public partnership (PuP).

A PuP is “collaboration between two or more public authorities or organisa-

tions, based on solidarity, to improve the capacity and effectiveness of one

partner in providing public water or sanitation services. They have been de-

scribed as: “a peer relationship forged around common values and objectives,

which exclude profit-seeking.”

As mentioned above, a number of public water utilities in Indonesia have

outstanding performances. PuPs would give an opportunity for PAM Jaya to

work together with other good water utilities such as in Surabaya, Palembang,

Banjarmasin, Medan, Malang, and even with foreign public water utilities, in

the areas of “training and developing human resources, technical support on a

wide range of issues, improving efficiency and building institutional capacity,

financing water services, and improving participation.”

The priority objectives of such an initiative would be to improve its basic

performance on service coverage and to reduce leakage. PAM Jaya has set to

achieve the goal to increase water coverage to 80 per cent in 2015, which at

current production rates would amount to a 10,999 liter/second deficit, and to

97 per cent in 2030, which will create 22,636 liter/second of water production

deficit. Teaming up with a public water utility that has proven to be able to

boost service coverage and reduce leakage level could bring the experience,

skills, and technology necessary to up production considerably.

A PuP could eventually be an opportunity for public operators to work to-

gether to achieve ambitious goals. The people of Jakarta should receive drink-

able water, and serious efforts to boost sanitation coverage must be made.

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Chapter Two

Irfan Zamzami and Nila Ardhianie are researchers at the

Indonesia-based Amrta Institute for Water Literacy, a non-

profit, research-based advocacy group working on water

resources.

Endnotes

Jaringan Berita di Indonesia.

2013. Hampir 40 Ribu Warga Jakarta Keluhkan

Air Mati. 30 December.

http://www.jpnn.com/read/2013/12/30/208221/

Hampir-40-Ribu-Warga-Jakarta-Keluhkan-Air-Mati-

2 Oleh Risky Widia Puspitasari. 2014. Akuisisi Palyja tunggu sidang gu-

gatan selesai.

Kontan.co,

17 July.

http://nasional.kontan.co.id/news/

akuisisi-palyja-tunggu-sidang-gugatan-selesai

3 AMRTA Institute, TNI and PSI. 2015. Jakarta court cancels world’s biggest water

privatisation after 18-year failure. Press release, March 25.

http://www.tni.org/

pressrelease/jakarta-court-cancels-worlds-biggest-water-privatisation-after-

18-year-failure

Kompas.com.

2014. Basuki: Pemprov Tetap Ambil Palyja dan Aetra. 24 March.

http://lipsus.kompas.com/gebrakan-jokowi-basuki/read/

xml/2014/03/24/2227119/Basuki.Pemprov.Tetap.Ambil.Palyja.dan.Aetra

Jaringan Berita di Indonesia

2013, op.cit.

6 AMRTA Institute. 2010. Jakarta Water Labor Union’s Rally.

http://www.youtube.com/watch?v=WsAH6rmsqYk

Tempo.co.

2012. Diduga Korupsi Rp 561 Miliar, PAM Jaya Dilaporkan ke

KPK. 31 January.

http://www.tempo.co/read/news/2012/01/31/063380816/

Diduga-Korupsi-Rp-561-Miliar-PAM-Jaya-Dilaporkan-ke-KPK

Tempo Magazine.

2014. Leaks in Jakarta’s water account. 14-20 July, p. 67.

9 M. Taufikul Basari. 2012. AIR MINUM MAHAL: Sejumlah Warga Gugat SBY Dan

Jokowi.

Kabar24,13

December.

http://kabar24.bisnis.com/read/20121213/

16/109706/air-minum-mahal-sejumlah-warga-gugat-sby-dan-jokowi

10 Sita W. Dewi. 2014. Negotiations hit impasse because of legal challenge.

The Jakarta

Post,

October 11.

http://m.thejakartapost.com/news/2014/10/11/negotiations-hit-

impasse-because-legal-challenge.html

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An end to the struggle? Jakarta residents reclaim their water system

Bisnis.com.

2011. PDAM Jaya Klaim Terancam Merugi Rp18,2 Triliun.

22 December.

http://m.bisnis.com/industri/read/20111222/45/57497/

pdam-jaya-klaim-terancam-merugi-rp18-2-triliun

Jaringan Berita di Indonesia.

2013. Hampir 40 Ribu Warga Jakarta Keluhkan

Air Mati. 30 December.

http://www.jpnn.com/read/2013/12/30/208221/

Hampir-40-Ribu-Warga-Jakarta-Keluhkan-Air-Mati-

Tempo.

2013. PDAM Jakarta Kehilangan 7.500 Meter Kubik Air Per Detik.

16 March.

http://www.tempo.co/read/news/2013/03/16/090467457/

PDAM-Jakarta-Kehilangan-7500-Meter-Kubik-Air-Per-Detik

Tribunnews.com.

2011. 90 Persen Air Tanah Jakarta Mengandung Bakteri E-Coli.

7 June.

http://www.tribunnews.com/metropolitan/2011/06/07/

90-persen-air-tanah-jakarta-mengandung-bakteri-e-coli

Tribunnews.com.

2012. Faisal Berharap Pengelolaan Air Bersih Kembali ke

Warga. 28 June.

http://www.tribunnews.com/metropolitan/2012/06/28/

faisal-berharap-pengelolaan-air-bersih-kembali-ke-warga

16 Jakarta Environmental Agency cited in: Ropesta Sitorus. 2013. Sanitasi Jakarta Buruk,

Ini Penyebabnya.

detikNews,

13 November.

http://news.detik.com/read/2013/11/13/

121632/2411672/10/2/sanitasi-jakarta-buruk-ini-penyebabnya

Koran Jakarta.

2015. PDAM Jaya Siap Akuisisi Pal. 9 January.

http://www.koran-jakarta.com/?26751-pdam%20jaya%20siap%20akuisisi%20pal

18 Barratut Taqiyyah. 2015. Ahok Berharap Banding Palyja Ditolak.

Kontan,

26 March.

http://regional.kontan.co.id/news/ahok-berharap-banding-palyja-ditolak

19 According to Supreme Audit Agency (BPK) findings in 2009, there is a total

of IDR 3.9 billion (US$313,000) in costs from Palyja that are not related with

water production such as costs to cover school fees for children, personal travel,

house rental and flood insurance, and a number of other unreasonable fees for

expatriate personnel.

20 Hall, D., Lobina, E., Corral, V., Hoedeman, O., Terhorst, P., Pigeon, M. and

Kishimoto, S. 2009. Public-public partnerships (PUPs) in water. Lancanster, UK:

PSIRU.

http://www.psiru.org/reports/2009-03-W-PUPS.doc

21 Ibid.

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Chapter Three

German municipalities

take back control of water

By Christa Hecht

In Germany, water has traditionally been owned and managed by the mu-

nicipalities. Since the Middle Ages, there have existed public associations to

carry out irrigation and drainage operations. In the 19th century, corporations

and cooperatives were formed to ensure water management and wastewater

removal in the growing industrial centres, mainly to prevent epidemics.

Today, there are more than 12,000 water and land associations, water and

wastewater associations, and dike and sluice associations in Germany. In ad-

dition to water supply and wastewater treatment, they are also responsible for

the preservation of water resources under the EU Water Framework Directive.

An estimated 6,060 water operators deliver clean tap water to citizens and

there are over 6,900 wastewater operators.

Water governance is based on local working units that are close to users.

Sustainable management of water resources for future generations and envi-

ronmental protection are key principles.

Municipalities are responsible for providing citizens with drinking wa-

ter and wastewater removal as public services of general interest (named

Daseinsvorsorge).

Local governments have the competence to determine the

organisational form of water management. Smaller towns often join mu-

nicipal associations to provide water and/or sanitation services and benefit

from such inter-municipal cooperation. The right of self-government of the

municipalities is protected by the German Constitution.

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German municipalities take back control of water

Municipalities can use several organisational and legal forms for water supply

and wastewater removal in Germany:

• Government-operated system

• Municipal Company or Public Law Company (PLC)

• Special-purpose association

• Water and land association

• Special legal association in North-Rhine-Westphalia

• Other forms of inter-municipal cooperation

• Public-private partnership

• Concession/operational contract with a private company

Table 3.1

Water management in Germany (2014)

Legal structure

Wastewater treatment

Water supply

Public service legal structures

Public companies/municipal

companies (PLC/Ltd. Co)

92%

(28% associations

and inter-municipal

cooperation)

64%

(23% associations

and inter-municipal

cooperation)

21%

Public-private partnerships

Other private companies

15%

Source:

Branchenbild der Deutschen Wasserwirtschaft

2011 and own research.

From the 1950

to the 1990

After the Second World War water management developed in different ways

in the East and West. In the Federal Republic of Germany (West), the histori-

cally decentralised structure survived with the constitutional protection of

local self-government. In the German Democratic Republic (East), the water

sector was centralised in departments for ground and surface water and for

urban water management oriented on river basins and government districts

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Chapter three

with 15 large state-owned utilities. After the fall of the Berlin Wall and the

reunification the latter were decentralised and the utilities and their water

network infrastructure were handed over to the municipalities.

Through this process the German states in the eastern part of the country

wrote clauses into their new federal laws to open up for private investments

in the water sector, allowing concessions, operation agreements and public-

private partnerships. As a result, some full-fledged privatisations and partial

ones took place in the 1990s in the former eastern part of Germany. On the

western side of the country some privatisations had already taken place begin-

ning in the 1980s in financially stressed municipalities.

While in the 1980s and 1990s advocates of privatisation promised greater

efficiency and better service from the private sector, the traction of these

arguments in favour of privatisation has now faded completely. These days

Germans equate privatisation with higher rates for users, while profits soar for

the private operators. Studies have indeed demonstrated that after privatisa-

tion prices for water services generally increased.

Politicians have had to acknowledge that in the public water management sec-

tor the knowledge and experience of engineers, scientists or technical experts

was at least as valuable as in the private industry. When it comes to taking

social and environmental concerns seriously in the planning of infrastructure,

to setting tariff pricing and to using the resources responsibly, they now see

that the public water sector is also clearly superior.

Public water operators also tend to be of great significance to the regional

economy because they often concentrate their investments in local small

and medium-size companies for infrastructure and maintenance works –

contrary to private operators who tend to contract out work exclusively to

their subsidiaries.

In 2007 the Alliance of Public Water Associations (AöW) was founded by

public water operators to fight against privatisation and to lobby for public

management. In the last few years, there has been significant progress towards

achieving these objectives. Since 2012, at least six German cities have decided

to remunicipalise water services.

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German municipalities take back control of water

Key remunicipalisations in Germany

Berlin

In 1999 the Berlin House of Representatives approved the Senate proposal

to sell 49.9 per cent of Berlin Wasser Holding AG to a consortium of private

German and French companies. RWE Aqua GmbH and Vivendi (now Veolia

Wasser GmbH) bought the shares for €1,679 billion. This was preceded by

tense discussions and a largely unsuccessful complaint filed by two members’

groups of the Berlin Parliament before the state’s Constitutional Court.

Nonetheless, the project went ahead, negatively affecting the 3.5 million

residents of the German capital. The main terms of this partial privatisation

included: a four-year exclusion from any increases in tariffs, a ban on layoffs

until 2014 as negotiated with the trade union

and a level of investments of

€2.5 billion for the first 10 years (€250 million per year). The state of Berlin also

guaranteed profits for the private investors; if the profit targets were not met,

it would be obliged to make up for the difference by drawing from its budget.

The contract was signed until 2028.

Additional terms of the contract secured a decisive influence for the investors

on the Management Board, even though they did not have a majority of shares.

They included the expansion of activities in the German and international

telecommunications and water markets and creating 700 new jobs in subsidiary

companies by 2009. The partial privatisation of Berlin’s water utility (Berliner

Wasserbetriebe)

was intended to become a flagship for successful privatisation.

However, by 2004 water prices had increased in roughly 35 per cent.

Between

1999 and 2011 the private investors banked €1,526 billion in profits, equivalent

to a 7 per cent annual profit rate relative to purchase price.

The revenues to

the state of Berlin increased, but the €365 million of its possible share of profit

were not accessed. The cause is not explained.

Despite high profits, the invest-

ments in infrastructure decreased after 2009 and in 2013 a study showed an

investment gap compared to planned spending.

Due to financial losses in its

international activities, Berlin’s water operator reduced these activities and they

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Chapter three

will be stopped completely in the future. The exclusion of layoffs for employees

was extended until 2020.

Popular discontent with the high prices of water fuelled political debate and

voices emerged against the privatisation. A referendum proposal was pushed

forward by the citizens’ initiative

Berliner Wassertisch

(Berlin Water Table) in

2011 to demand transparency on the terms of the privatisation contract, which

had been kept secret until then. The initiative was supported by 98.2 per cent

of voters. A few days after this referendum the contracts were published online

by the

Berliner Wasserbetriebe.

Berlin citizens saw the favourable conditions

the private investors had guaranteed for themselves as the main reason why the

water price had increased so much.

Moreover in 2012 the German Federal Cartel Office ordered Berlin’s water

utility to lower the water price in 18 per cent due to what it considered to

be abusive pricing. A comparative analysis of the Cartel Office showed that

the price was significantly higher than in comparable companies (they are all

publicly owned).

In 2012 Berlin bought back the shares from RWE Aqua GmbH for €654

million and in 2013, the shares from Veolia for €590 million. To do so the city

of Berlin took a loan that must now be repaid through water bills (and thus

citizens) over a period of 30 years.

Since the buy-back, investments in infrastructure have increased and the price

for wastewater treatment was lowered too.

Rostock

In 1993 the urban water and wastewater systems of the city of Rostock and

the 29 surrounding municipalities were privatised through a 25-year contract

with Eurawasser Nord GmbH (originally part of the Suez Group). Some

200,000 residents and 320 staff were affected.

The municipalities have decried the lack of transparency ever since and their

inability to influence the private operator. Compared to other cities, prices

are roughly 20 per cent higher, but this does not translate into higher quality

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German municipalities take back control of water

services or significant reinvestment in the water systems. The utility was sold

in 2011 to Remondis Group by the first private owner and the affected mu-

nicipalities did not have a say.

In 2014 the City Council of Rostock decided to cancel the contract at the end

of the term in 2018, in consultation with the 29 other municipalities. After

this decision, Eurawasser Nord GmbH stopped sponsoring events and sport-

ing clubs in the city. In the coming years, difficult negotiations are expected

for the transfer of water management from the private investor to a new public

company.

Stuttgart

In 2002, Stuttgart, a city with 613,392 inhabitants in the south of Germany,

fully privatised the water supply by contracting EnBW Regional, a subsidiary

of EnBW AG (exchange-listed stock corporation).

Citizens in Stuttgart led a strong public campaign for some years. In 2010 the lo-

cal citizens’ initiative

Wasserforum

successfully collected 27,000 signatures for a

referendum on remunicipalisation. At the 17 June 2010 City Council meeting,

Stuttgart decided to terminate the contract with EnBW Regional at the end of

December 2013. Following this decision EnBW Regional decided to increase

the price for the water service in 2012. The City of Stuttgart has appealed the

court against this increase, but a judgement has not yet been rendered.

After Stuttgart’s decision to remunicipalise the water works, a major conflict

over the repurchase price of the water network erupted. The city is willing

to pay €150 million, whereas EnBW AG wants to sell at €600 million. Now

the management of water supply by EnBW Regional was extended until this

conflict about the water price increase and the repurchase price is resolved.

Lessons learned

Selling away the municipal silverware during financial crunches is not a good

solution. Municipalities end up making themselves vulnerable to blackmail

by private investors.

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Chapter three

The contracts are usually designed in favour of private investors and any buy-

back is very expensive for the citizens. In Germany, citizens have paid as much

as twice or triple the combined value of utilities and infrastructure, although

all along they were the ones to finance these through water charges.

The message to mayors and members of city councils is to steer clear of

privatisation.

Christa Hecht has been General Manager of the Alliance of

Public Water Associations (AöW) in Berlin since March 2010.

Previously, she worked at the Department of Women’s Affairs in

the City of Frankfurt/Main before joining the German Union

for Public Services as the Managing Director, Vice-President

for Hessen. In the water sector she was a member of the Board

of Directors of the

Berliner Wasserbetriebe

from 1999 to 2003.

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German municipalities take back control of water

Endnotes

Ruester, S. and Zschille, M. 2010. The impact of governance structure on

firm performance: An application to the German water distribution sector.

Utilities Policy

18 (3): 154-162.

Contract of trust with the trade union.

Verband Deutscher Grundstücksnutzer

e. V,

excerpt from the complaints,

2 March 2012.

Judgement

OLG Düsseldorf,

24 February 2014,

VI-2 Kart 4/12 (V)

paragraph 175.

Schaefer, C. and Warm, S. 2014. Berliner Wasserbetriebe (BWB) – Water

and sewage company in Berlin. Working Paper CIRIEC No 2014/01, p. 28.

http://www.ciriec.ulg.ac.be/fr/telechargements/WORKING_PAPERS/WP14-01.pdf

;

Hüesker, F. 2011. Kommunale Daseinsvorsorge in der Wasserwirtschaft:

Auswirkungen der Privatisierung am Beispiel der Wasserbetriebe des

Landes Berlin. Munich; Berlin Senatsverwaltung für Finanzen. 2014.

Berliner Beteiligungsbericht 2014 Band 1, p. 75.

www.berlin.de/sen/finanzen/vermoegen/downloads/artikel.7206.php

Report: Requirements for sustainable rehabilitation of water

and wastewater system in Berlin, 2014.

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Chapter four

Turning the page on water

privatisation in France

By Christophe Lime

France is home to the leading water multinationals and is one of the few

countries in the world to have given private companies a predominant role in

managing water and sanitation services. Its particular type of concession and

lease contracts (délégation

de service public)

has been both promoted by the

private sector as a model to replicate across the world, and reviled by others

as the epitome of water privatisation and its ills. Recently, however, there

have been several large-scale cases of remunicipalisation of water services in

France, including in Paris in 2010. This shift back to public management is a

significant breakthrough in a landscape that was once largely dominated by

the private sector. France Eau Publique is a national network of public water

operators created to foster the sharing of experiences and expertise and to

promote public water management to counter the lobbying of private water

companies.

A fragmented landscape

In France, water supply and sanitation services fall under the jurisdiction of

city councils, which can either provide these services themselves (25 per cent

provide water services and over 40 per cent, sanitation) or transfer them to

an inter-communal body. Such bodies are growing in importance. There are

some large water services that serve large populations of more than 1 million

people, such as Eau de Paris, the Interdepartmental Syndicate for Sanitation of

Greater Paris (SIAAP), the Water Syndicate of Île-de-France (SEDIF), Grand

Lyon, Marseille Provence Métropole and Lille Métropole Europe. However,

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Turning the page on water privatisation in France

for the most part, water and sanitation services in France remain very small:

9,500 water and 13,500 sanitation providers (mainly municipal) serve less

than 2,000 inhabitants; only 75 water and 100 sanitation providers serve more

than 100,000 inhabitants.

Local authorities choose between public and private

management

When it comes to public services, under French law water and sanitation

services are considered of an “industrial and commercial nature” and the

competent local authority may choose between:

• Managing the service directly through a “régie”, which is either financial-

ly autonomous and legally integrated with the local council or financially

and

legally autonomous, operating at arm’s length from the council.

• Delegating management to an external company, usually private under

a fixed-term contract called

délégation de service public

(DSP, “public

service delegation”). This is not exactly a “privatisation” in the narrow

sense of selling publicly owned assets, since the water system remains the

property of the council, which may also decide to modify or terminate

the contract unilaterally before its term (but usually not without paying

hefty compensation, as illustrated below).

Since 2010, a new law gives councils another option: Local Public Companies

(sociétés

publiques locales,

SPL). These are public limited companies governed

by private law, but whose shareholders are two local councils or more. They

must operate for the sole benefit of the shareholding councils; as such they can

be considered a form of public management.

Opposition to outsourcing water services

There was a marked increase in delegation contracts and outsourcing to pri-

vate companies during the 1970s and 1980s in France, as well as substantial

consolidation among private companies providing water and sanitation ser-

vices. This consolidation led to the constitution of three major private groups,

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Chapter four

with stakes in other local services (waste management, heating, parking, food

services) and in the construction sector: Veolia (formerly Générale des Eaux,

Vivendi), Suez Environment (formerly Lyonnaise des Eaux) and SAUR. The

proportion of the French population served by a private operator eventually

peaked at the turn of the millennium at more than 70 per cent for water supply

and about 55 per cent for sanitation.

Delegation contracts became the dominant management model in the ab-

sence of competition requirements and because of the widespread practice

of enticing councils with “entry fees” (large sums paid at the onset of private

contracts) – and in some cases because of outright corruption. The associated

tariff increases and high profit margins (often hidden in unspent “provisions”

or “guarantees” for network renewal) highlighted by council-commissioned

audits, auditors’ courts and citizen groups, and several cases of proven or

alleged corruption led French lawmakers to introduce new regulations in

1993. Law No. 93-122 on the prevention of corruption and transparency in

economic life and public procedures – the so-called “loi

Sapin”

updated several

times since – required competitive awarding of contracts, prohibited “entry

fees” and any form of payment or service provision outside the contract’s pur-

pose, capped the duration of contracts to 20 years (with exceptions), limited

the use of “additional clauses” and set reporting obligations, among others.

Twenty years on, the rate of contract renewal for private providers remains

high and stable (87 per cent on average, with a 0.3 per cent drop per year since

1998, excluding remunicipalisations). For long, competition among private

providers was virtually inexistent, its sole engines being a small number of

independent companies that survived consolidation in the water sector and

the “threat” of remunicipalisation. However, since 2009-2010, there are signs

of increased competition between the large private operators, but it largely

focuses on prices and takes the form of extensive internal restructuring to

achieve a “low cost” service, resulting in a decline in service quality. This

change can be partly explained by the trend towards greater control of water

and sanitation services by local councils, whether they choose to renew the

outgoing provider or not.

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Turning the page on water privatisation in France

Despite these positive developments, asymmetry of information remains part

and parcel of service outsourcing. There is little transparency particularly when

it comes to financial reporting, with private providers drafting their annual

reports based on allocation assumptions unrelated to actual expenses. At

the same time, in the long history of outsourcing, small and medium-sized

councils have too often lost the in-house expertise necessary to monitor and

control the proper implementation of contracts (a role that cannot be replaced

by external auditors).

Lastly, delegation-type contracts are characterised by a lack of flexibility and

adaptability to changes in the scope and organisation of water and sanita-

tion services (particularly in relation to the development of inter-communal

management bodies). Even if the average duration of such contracts has been

significantly reduced (11 years on average since 1998), it still amounts to

nearly two local electoral mandates.

Amendments to the original contracts are usually possible, but local coun-

cils rarely have the higher hand when it comes to negotiating such amend-

ments, while unilateral modification or termination can prove extremely

costly because it usually involves compensating the private providers for the

unamortised portion of investments incurred and sometimes even for “lost

profits”. The latter compensation scenario is highly questionable, especially

when providers have been reporting budget deficits for years and suddenly

claim that they will lose profits if their contract is terminated...

Return to public management

Over the last 20 years, all of these factors have led a growing number of

councils in France to challenge the very principle of “public service delega-

tion” and to choose a return to public management, the first cases being the

Tursan Water Syndicate in 1995, SIVOM Durance Luberon in 1997, and

Grenoble in 2000 against the backdrop of criminal prosecutions and strong

media attention. But given the “contractual inertia” mentioned above, ac-

tual remunicipalisation has often been delayed (unilateral terminations

are rare).

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Chapter four

It is only since the mid-2000s that there has been a significant trend towards

a return of water and sanitation services to public management. Public water

management has been “gaining” about 1 per cent on average every year since

2008 (in terms of population covered). Water remunicipalisation in Paris,

initiated in 2003 but not completed until 2010, was a flagship case in this

regard and has inspired other policy-makers.

Today the remunicipalisation movement brings together councils of all sizes,

from “small” towns of a few thousand inhabitants (such as Neufchâteau,

Venelles, Varages, Embrun and Digne-les-Bains) to large cities or syndicates

(such as Brest Métropole Océane, the agglomeration of Aubagne-Pays de

l’Étoile, Rennes). Remunicipalisation took effect at the beginning of 2015

in Nice Côte d’Azur and should be a reality in Montpellier Méditerranée

Métropole in 2016.

It should be noted that the very term “remunicipalisation” of water and sanita-

tion services is not always entirely appropriate. On the one hand, an increasing

number of services are no longer managed at the municipal level, having been

taken on at the inter-communal level. On the other hand, some cities have

never had public water management, such as Rennes whose water services have

been privately managed since the late 19th century or Nice where Veolia has

been providing water for 151 years.

Furthermore, with the rise in inter-communal cooperation and the resulting

reorganisation of water and sanitation services, all remunicipalisations do

not result in the creation of a new

régie

(or SPL). Several inter-communal

bodies have expanded their service area upon the expiry of smaller delegation

contracts, as the Urban Community of Cherbourg did (approximately 35,000

new users in 2002) and the Metropolitan Rouen Normandie (about 100,000

new users since 2011). And let us not forget that large, predominantly rural

régies

have been expanding their service area for 50 years by integrating already

existing

régies

or councils, which had previously outsourced their services.

Primarily rural services such as Noréade in the North of France, the Alsace-

Moselle SDEA and the Vienne Water Syndicate are among the largest public

water services in France today.

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Turning the page on water privatisation in France

Key issues and challenges

The experience of dozens of successful remunicipalisations of water and/or

sanitation services in France demonstrates that returning to public manage-

ment is both desirable and feasible, including for small councils. There are

important lessons and recommendations that can be drawn:

• The need for political “champions” is absolutely essential: by definition,

public management involves stronger accountability by officials and

employees; the active involvement of politicians is therefore critical.

• Remunicipalisation can create legitimate concerns and hurdles (espe-

cially when councils no longer have strong in-house expertise), and the

active support of peers (officials or managers) from other councils that

have already returned to public management – or from long-standing

régies

– is an undeniable advantage.

• Anticipation and preparation are important. Although some new

régies

were created quickly after contract termination (e.g. Castres established a

special team to create its

régie

and take over the management of water and

sanitation services in less than six months), experience shows that there is

a lot of benefit in initiating preliminary studies at least two years before

contract expiry (or even longer for larger services), and in separating the

issue of contract liquidation (which is often insufficiently addressed in

the drafting of contracts) from that of setting up a new public operator,

because they require a different set of skills and expertise. It can also be

difficult to choose one or more consultants for project management

assistance that are sufficiently competent and independent; feedback

from other councils is an important contribution in this regard.

• Integrating employees of the former private provider requires great care.

As their knowledge of the water network and service is comprehensive,

it is critical to attract them to the new public provider and, if possible,

to involve them in the remunicipalisation project. Maintaining existing

wage conditions is now standard practice, although it may be neces-

sary to simplify and streamline the various employment conditions

accumulated over the years. We have found that employees (if not top

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Chapter four

executives) are generally willing to join remunicipalised operators. They

tend to appreciate the fact that their work becomes more focused on

public service values and the common good, which are often under-

mined by private operators’ fixation with profitability and market com-

petition. The main difficulty lies in establishing the list of employees

to be transferred in such a way that the new entity can take over the

service without being encumbered by surplus staff or employees with

unsuitable profiles. To achieve this, a process of social negotiation is

recommended, involving elected councillors, labour representatives

and managers, in order to agree on a framework agreement as soon as

possible.

• Lastly, given that information and communication technologies are

becoming increasingly sophisticated and indispensable, the transfer of

data and information systems (supervision of works, client manage-

ment, asset management, etc.) should be as high a priority as transfer-

ring equipment.

While each situation is unique and one council’s experience is never identical

to another’s, exchanges are always positive and contribute to managing change

better. This is why France Eau Publique offers local authorities wishing to

return to public management a “sponsorship” programme that brings them

support from one or several councils that share the same characteristics and

have already gone through a remunicipalisation process.

Beyond remunicipalisation, councils and their public operators must con-

stantly seek to improve their performance. Committed to the twin principles

of cooperation and solidarity – versus commercial competition – the members

of France Eau Publique can pool their knowledge, expertise and best practices,

develop synergies and share tools to serve the common good and build sustain-

able water services.

Lastly, the cause of public water management needs to be promoted and

defended against the powerful lobbying of private operators. Policy-makers

need to hear that outsourcing water services to private operators does not

guarantee better performance, neither from an operational (technical, service

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Turning the page on water privatisation in France

quality, etc.) nor an economic point of view. Most public providers can offer

quality water, safe services and environmentally friendly orientations.

Christophe Lime is President of France Eau Publique

and deputy Mayor of Besançon.

France Eau Publique

brings together councils and public operators that are

members of the National Federation of Contracting Councils and Régies (FNCCR

in its French acronym) and that wish to share knowledge and experience, seek

mutual support and promote public water management. France Eau Publique is

an extension of FNCCR’s earlier

“conseil d’orientation des régies”

and of the work

conducted within the Aqua Publica Europea network.

For the members of France Eau Publique, the performance imperatives of public

water management must serve the public good, not private interests. Members

consider public water management as the sole guarantor of transparent,

sustainable and civic-minded services, of public assets, and of water resources.

France Eau Publique has four main objectives:

Develop synergies

and exchange good practices and contacts between

experts and representatives of public operators;

Foster mutual emulation

, to demonstrate the excellence of

public management;

Support emerging public operators

by providing ongoing assistance,

helping them to succeed and strengthening the collective momentum;

Gradually constitute a counterweight

to the lobbying of the large private

corporations, in order to promote public management and its values.

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Chapter five

Taking stock of

remunicipalisation in Paris:

A conversation with Anne Le Strat

By Olivier Petitjean

France’s Regional Court of Auditors recently published two reports: an assessment

of Paris’s water policy and an audit on the performance of remunicipalised public

water utility Eau de Paris. These were the first official evaluations of water services

since the 2010 flagship return to public management in the capital. As such, the stakes

were high for the future of the debate on public versus private management of water

in France. Both reports turned out to be generally very positive on Eau de Paris. Is it

an implicit endorsement of the remunicipalisation?

The report does not directly seek to compare current public management with

the performance of the former private providers Suez and Veolia. To make this

kind of comparison, one needs to go back to previous reports by the Court of

Auditors on water management in Paris, particularly that of 2000, just before

we took over the Paris council. It’s like night and day! These reports are often

quite critical as they are meant to identify gaps to encourage local governments

to improve public management. All things considered, the recent reports on

water in Paris were actually extremely positive.

The second report of the Regional Court of Auditors does stress that the return to public

management enabled Paris to lower the price of water while maintaining a high level

of investment.

That is correct, and it is rewarding to see it acknowledged by the Court of

Auditors. The report on Paris’s broader water policy is even more positive than

the one focused on the transition to public management because it endorses

the main strategic directions we have given to this policy. This includes those

decisions that were initially met with scepticism among the administrative

services of the council, for instance keeping the non-potable water network

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Taking stock of remunicipalisation in Paris: A conversation with Anne Le Strat

and developing it for use in public gardens, for street cleaning, etc. The report

also commends the Paris administration for its implementation of a water

policy that goes beyond the smaller water cycle and takes into account issues

of water conservation, sustainability and democracy.

So all in all, the return to public management of water in Paris seems like a resounding

success?

Eau de Paris enjoys a good reputation, and rightly so. It works! We have

lowered the price of water while maintaining an ambitious investment pro-

gramme over the long term, and our governance is very innovative in many

ways. Some of our innovations are even adopted by private companies.

This is interesting to note, because private companies keep claiming that they are the

“innovators”... What kind of “innovation” are you talking about?

Eau de Paris is the only water operator that has its staff, users and civic as-

sociations represented on the Board, with full voting rights. It is a democratic

breakthrough that has inspired others. Representation of users on the Board is

something that is now being openly considered by Antoine Frérot, the CEO

of Veolia; this would have been inconceivable a few years ago. Eau de Paris

was also a trailblazer on issues such as gender equality at work; protecting

water resources through partnerships with farmers to protect water quality

upstream; water conservation, with extensive distribution of “water conserva-

tion kits”. In the technical realm, we have also been very innovative in terms of

user services (call centre, monitoring leaks, managing letters and complaints,

etc). This is why Eau de Paris has been awarded the prize for “best customer

service” in water distribution in France for the last three years.

Despite the Regional Court of Auditors’ very positive account of water management in

Paris, when the reports were made public the French media seem to have only picked

up on one aspect: the likelihood of a future water price increase in Paris. Why is it so?

First, it should be noted that not all media focus on the negative aspects. Some

media emphasised how positive the reports actually were. That said, some

media chose to focus their headlines on a possible future increase in the price

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Chapter five

of water. Obviously these journalists did not take the time to read the whole

report, and one might question their objectivity. Private corporations are an

important source of advertising revenue, and it was mostly those outlets that

are heavily dependent on advertising that hammered on this issue.

In any case, the reality is that Eau de Paris is confronted, like most water services

in France and Europe, with the so-called problem of “price scissors”: on the one

hand, revenue from billing tends to decrease because of lower water consump-

tion; on the other hand, costs keep going up, mainly because of new water

treatment standards. This trend is not related to the debate on public versus

private management of water, and is not specific to Eau de Paris. In fact, Eau de

Paris is comparatively in a pretty good financial situation to face these changes.

But it’s true that eventually Eau de Paris will probably have to increase its prices

to balance its budget, like other water services. For me, the fundamental issue

should be how the water service is financed: it’s no longer possible to fund water

services solely through a consumption-based tariff calculated from a set price per

cubic meter of water. This is all the more true if the utility’s policy is to encourage

users to reduce their consumption of water, as is the case for Eau de Paris.

What is the solution to keep water services affordable for users?

We should differentiate between types of water usage in Paris, notably com-

mercial and domestic. Commercial users should be charged more. Today,

commercial users (such as cafes, restaurants, hairdressers, dry cleaners, den-

tists, etc) are actually paying less for their water than households, because they

can deduct this expense from their tax bill. It is a politically sensitive issue and

it would not be an easy policy to implement from a technical point of view

either, but I think it would create a fairer system.

Transition

Can you talk about the complexity of the transition to public management, and how

it has been managed?

It is true that the transition was complex. One must recall that before the

creation of Eau de Paris, we had three distinct contracts for water: one for

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Taking stock of remunicipalisation in Paris: A conversation with Anne Le Strat

water production with a

“société d’économie mixte”

whose majority shareholder

was the city government, while Suez and Veolia had minority shares;

and two

separate contracts for water distribution with Suez and Veolia, for the city’s left

and right banks respectively. It was a very complex situation, and there was no

real precedent on which to build. We encountered a number of difficulties in

taking back the service in-house, for example with the transition from private

to public sector accounting systems. But these difficulties have now been

overcome, as the report from the Court of Auditors highlights.

How difficult was it to integrate former employees of Suez and Veolia into the new

public entity?

The French labour code allowed for the transfer of the technicians who worked

on the distribution network, but most of Suez and Veolia executives were

transferred within these companies just before remunicipalisation. There were

negotiations to reach a social agreement on harmonisation of wage conditions

for all staff. But the remunicipalisation was sometimes perceived as a merger of

the two former distributors (subsidiaries of Suez and Veolia) into the publicly

managed production side (the former

“société d’économie mixte”),

which was a

source of frustration for some formerly private employees. These are common

problems with such restructuring. Building a common culture takes time.

Did Veolia and Suez try to create obstacles?

That much is clear. This is something I will talk about in my forthcoming

book, and it is also recounted in some detail in Agnes Sinai’s book about the

remunicipalisation process:

L’eau à Paris, retour vers le public.

Nevertheless,

there was a sharp difference between Suez, which remained relatively construc-

tive, and Veolia, which really tried to make our task as difficult as possible.

Are water services now entirely provided by Eau de Paris, or are there still some aspects

of the service that are outsourced to the private sector?

There is no service “delegation” to the private sector any more. We signed

transitional outsourcing contracts for managing information systems over

the first two years, so that Eau de Paris would have time to set up its own

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Chapter five

information system. Information systems are an incredibly important issue

because they are used for billing, for water meter data collection and man-

agement, and for monitoring maintenance works, but this issue is too often

overlooked. Eau de Paris currently controls and manages its own information

system, but remains semi-dependent on Suez and Veolia, as some of their

proprietary software is still being used to process the information. A study is

underway within Eau de Paris to break off this dependency completely. Even

today, when we request some purely technical information from Veolia, it

can be hard to get it.

There is still another contract with Veolia, which is a simple outsourcing

contract and not a service delegation, for water meter management (instal-

lation and maintenance). Again, Eau de Paris is currently looking at taking

over this task internally.

The Paris Water Observatory

What was the initial idea behind the creation of the Paris Water Observatory?

The aim of the Paris Water Observatory is to establish a space for citizen

oversight and information, and to make the elected representatives of the City

of Paris, its administration and the employees of Eau de Paris accountable to

citizens. All acts, reports and official proceedings related to water management

must be submitted to the Observatory before they are considered by the Paris

Council. Initially, people were sceptical, but now they see the benefit. The

Observatory is not just another so-called citizen committee that only rubber-

stamps decisions already made. The Observatory does not have decision-

making powers but citizens’ views are taken into account and, perhaps more

importantly, all the information is made available in an accessible way.

This is also why Eau de Paris integrated both non-profit organisations and a

representative of the Water Observatory on its Board, with voting rights. The

Council staff may not always be happy with this because it may take them

more time to explain issues or to get their points across... But ultimately it

leads to greater water democracy, and this is good for public management.

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Taking stock of remunicipalisation in Paris: A conversation with Anne Le Strat

Is there any equivalent elsewhere?

Grenoble has created a users’ committee, which is consulted on the price of

water. Viry-Châtillon (Lacs de l’Essonne) also has an open governance model

with a strong role for civil society, inspired by what is happening in Paris. But

overall the Paris Water Observatory has no real equivalent. Most public opera-

tors are reluctant to open up their governance to users and civic associations

because it is seen as time-consuming and resource-intensive. Yet I think it is

essential for a quality public service. It is these democratic innovations that

are of most interest to peers from other water services abroad who visit Paris

in preparation for a return to public management.

Does it involve a great number of people?

The Observatory has enabled a number of people to build knowledge on water

issues. They are not necessarily very many, but they come from neighbourhood

committees, social housing institutions and associations among others. They

believe in the Observatory and have wide networks and influence among

Parisians. The consumer and environmental organisations that have a seat

on the board of Eau de Paris are influential in a similar way:

Que Choisir

and

France Nature Environnement

are very big organisations, with national

scope. The return to public management and the creation of the Paris Water

Observatory have revitalised civil society participation. This is paradoxical

because when we decided to remunicipalise in the early 2000s, Parisian civil

society was not very active on the issue of water. We were quite isolated, be-

cause most of the council administration and most of the unions were not

in favour of a return to public management of water. Now this has changed.

To what extent is the role of the Observatory formalised?

The Paris Water Observatory exists by virtue of an official order from the

Mayor, as an extra-municipal committee on water policy. It was the Paris

Council that created the Observatory, not Eau de Paris. It might have been

possible to set it up as an independent organisation, but what’s interesting

about an extra-municipal committee is that the City administration is in

charge of the administrative functions and logistics. As long as the politicians

give enough power to the Observatory, it is a win-win situation.

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Chapter five

Networking and support for public management

elsewhere

The Paris remunicipalisation quickly acquired a huge symbolic and political im-

portance both nationally and internationally. You travelled the world to support

movements against the privatisation of water, and Eau de Paris entered public-public

partnerships with other public operators worldwide and played a key role in the

creation of French and European networks of public operators (France Eau Publique

and Aqua Publica Europea, respectively). When did this global outreach start?

It began quite early, even before the remunicipalisation itself, because I took

a strong stance in favour of public management. I was often asked to talk

about the Parisian experience, beginning with the referendum campaign on

the human right to water in Colombia in 2009, then in Berlin, in Italy, etc.

The position I found myself in was unusual in that I had both political re-

sponsibilities as an activist, a councillor and deputy mayor, and operational

responsibilities as the president of the

“société d’économie mixte”,

and then of

Eau de Paris. I am also one of the few people to have been around for the whole

remunicipalisation process from 2001. Over the last 12 years, directors have

changed, and other politicians have left. And of course, we’re talking about

Paris, the capital of France, home of the big water multinationals – a huge

symbol. All of this gave me a very singular outlook.

Eau de Paris is often seen as an “activist” water operator, committed to the promotion

of public water management. Is this an institutional reality, or did it only reflect your

personal commitment while you were president?

There are two aspects to this question. On the one hand, there is the active

promotion of public management and the fight against privatisation – this

was a personal commitment on my part, rather than an institutional com-

mitment. Within Eau de Paris, most employees are satisfied, but they are not

activists, and do not want to dedicate their free time to the defence of public

management, which is perfectly understandable. Eau de Paris is not in itself

an activist organisation. But there is also the question of public service values,

and commitment to these values within Eau de Paris. There are people from

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Taking stock of remunicipalisation in Paris: A conversation with Anne Le Strat

the private sector who have joined us in this creative venture to build a local

public service, and who would now find it impossible to go back to narrow

market-based orientations.

You also played a role in setting up other institutional structures, such as Aqua

Publica Europea

and France Eau Publique. Can you tell us about these networks?

Aqua Publica Europea was originally founded by a small group of people

who shared the idea that it was necessary to defend public management at the

European level and to create a counterweight to the lobbying of the private

water sector in Brussels. With regards to France Eau Publique, there already

existed a committee of public operators, but we wanted to create a French

branch of Aqua Publica Europea in order to build up our own strength and

pool our resources. The comparative advantage of a multinational is the ability

to pool skills, expertise and resources across the whole company. The objective

of France Eau Publique is to introduce the same kind of mechanisms among a

large number of public operators, including group purchasing.

What is your view on the progress of public water management in France since 2011?

There’s clearly a positive trend towards remunicipalisation, but it’s not massive.

There have been significant remunicipalisation cases, including in cities such

as Nice that have right-wing councils. This is very important because it shows

that the preference for public services goes beyond political differences (on

the other side of the political spectrum, some left-wing politicians have had

a very ambiguous position on this debate). When Eau de Paris returned to

public management, it was a cause for celebration for many public operators

in France, because they knew they would no longer be regarded as black sheep.

And many cities that have maintained privatised services have used the threat

of remunicipalisation to negotiate better terms with their private providers.

Suez and Veolia have had to change their contracts, and now they make less

profit. The burden of proof is reversed: now it is private providers that have to

convince cities that it is better for them to remain with a private operator than

to remunicipalise. Given the history of water management in France, this is

an enormous achievement.

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Chapter five

Until 2014 Anne Le Strat was President of Eau de Paris,

deputy mayor of Paris in charge of water and sanitation,

and president of Aqua Public Europea. Since her election to

the Paris Council in 2001, she has played a key role in the

remunicipalisation of water services in Paris.

She was interviewed by French writer and researcher Olivier

Petitjean, who is currently the chief editor at the Multinationals

Observatory, an investigative website on French transna-

tional corporations.

Endnotes

1 Paris is one of the few cities in the world to have two water networks, one for drinking

water and one for non-potable water.

2 In French law, a “société d’économie mixte” (mixed sector company) is an anonymous

company that is majority owned by public shareholders, with at least one private

shareholder. It is often used by local councils to undertake public works or in some

cases to manage public services.

3 Eau de Paris. 2014.

L’eau à Paris, retour vers le public.

Second edition, April.

Paris: Eau de Paris.

http://www.eaudeparis.fr/uploads/tx_edpevents/

LivreRemunicipalisation_01.pdf

4 Aqua Publica Europea (APE) brings together publicly owned water and sanitation

operators, and their national and regional associations, from all over Europe. Its

members provide water and sanitation services to over 70 million European citizens.

Chapter six

Remunicipalisation and workers:

Building new alliances

By Christine Jakob and Pablo Sanchez

Remunicipalisation is a major political development that is taking shape glob-

ally. It is rooted in the failures of public-private partnerships (PPPs) and of

privatisation generally speaking.

After a 20-year privatisation and outsourcing drive in many cities, policy-

makers have started to draw up a balance sheet. Even global financial institu-

tions such as the World Bank and the International Monetary Fund have

acknowledged the mixed effects of privatisation, especially regarding its disap-

pointing technical efficiency and labour productivity.

There is now increasing

evidence in the water and waste sectors of an important trend in the opposite

direction to counter well-documented negative effects on levels of inequality,

child poverty and other social indicators.

However, there is very little comparative analysis about the effects of privatisa-

tion on public sector workers. One reason is that workers affected by privatisa-

tion tend to be ‘bought off’ through early retirement schemes, while others

do not even oppose it. Labour relations change for incoming employees of a

newly privatised utility, creating a two-tiered system with senior staff keeping

their privileges negotiated under public ownership.

Public sector workers tend to have higher protection through collective bar-

gaining coverage and are less affected by precarious work. Once the private

sector takes over, workers being transferred from the previously public em-

ployer may have a competitive advantage within the enterprise. This makes the

privatisation versus remunicipalisation debate more complex because workers

and their trade unions are not only concerned with efficiency gains or the

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Remunicipalisation and workers: Building new alliances

public good but need to look broadly at the ‘bread and butter’ issues behind

such policy options.

On top of that, in some countries of the European Union, the status of public

service workers and in particular their ability to act through collective bargain-

ing and social dialogue has been undermined during the neoliberal reforms

that followed the financial crisis. This adds to the complexity of the decision-

making process for labour organisations.

For trade unions, privatisation tends to be bad news in terms of the general

level of pay and working conditions. However, it would be overly idealistic

to think that all trade union organisations oppose privatisation in all circum-

stances

and support public management. This article draws some lessons and

highlights some avenues for further investigation on remunicipalisation from

the point of view of workers. As there is scant literature about the employment

conditions of workers after remunicipalisation, this article tries to modestly

contribute to a debate that will require further reflection.

Remunicipalisation under austerity

Each case of remunicipalisation is different because the conditions for taking

back services in-house depend on the way they were first privatised. So it is

very difficult to compare the effects of privatisation and remunicipalisation

on workers.

However, the debates about remunicipalisation mirror those that took place

at the end of the 19th century during the expansion of the organised labour

movement in Europe. The rise of labour and social-democratic organisations

made the demand for public services very popular among working class people,

and especially organised workers. The society they envisioned would create

publicly owned schools, transportation, electricity and water, among others. In

many countries the rise of this new political force created the municipal model.

The main difference today is that we have a much more integrated global

economy with transnational service providers, which did not exist during the

previous wave of municipalisations and nationalisations, and the financing of

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Chapter six

the economy is much more subject to speculation and the power of financial

markets. In that respect it is important for the organised labour movement, and

the trade union movement in particular, to rediscover a vision of society and

not just deal with the ‘bread and butter’ concerns of their unionised members.

Local governments are facing budgetary cuts related with austerity policies

implemented by central governments as well as European and international

financial institutions. Some cases have made the headlines in France, Spain and

Greece where it is often argued that public sector workers are “too expensive” or

that it is difficult to sustain pension funds given the high levels of unemployment.

Remunicipalisation is an opportunity to rethink the ways public services are

provided while protecting the living conditions of public sector workers and

that of the communities they cater for. Remunicipalisation should re-open

a debate about the values of the public sector: equal access to services for

all citizens, accountable, democratic and transparent management with a

decision-making process in which all stakeholders are involved.

In practice: remunicipalisation and the trade union

movement

Once a remunicipalisation process gets started, workers’ organisations look at

the way in which working conditions may be affected. There is a need to have

a full understanding of the proposed legal status for the new utility in order to

be able to improve the delivery of public services.

One of the first important steps is to look at what labour code will apply after

the change of ownership because it can have an important impact in terms of

job creation by the new municipal owner.

In several concrete cases, such as in France, unions have not openly supported

remunicipalisation, in particular in the water sector, to avoid undermining

the level of pay and employment terms and conditions. In the recent remu-

nicipalisation in Montpellier the union movement was split, some trade

unions having consulted only those employed in the company. Others did

more comprehensive consultations. In the end those unions communicating

about the type of company they wanted were key to garnering the necessary

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Remunicipalisation and workers: Building new alliances

support to continue with the process. An employer is normally bound to

replace the employment contract keeping the same terms and conditions but

it can start applying different ones to the new employees (due to the change

in collective agreement). This can certainly be dangerous. So it is important

for trade unions to discuss with each other what kind of ownership model

they support and to be united in the remunicipalisation process.

Also the level of social dialogue with the new employer is important. For ex-

ample, how will issues of outsourcing and subcontracting be dealt with in the

new public structure? Therefore it is important for new employers to explain

the potential gains for workers but also for trade unions to make the case among

their individual members that remunicipalisation can create better companies.

This is quite problematic as trade unions tend to represent the interests and

views of their affiliated (individual) members, not often do they represent

the views of all workers. This might seem obvious but trade unions in their

democratic decision-making process will consult those who participate in the

organisation through paying dues and attending meetings. So it is likely that

affiliated members have better working conditions and safer ones than others

working in the subcontracted or outsourced sectors. This ‘divide and rule’ logic

has been used in different sectors to increase profits for private companies but

also to undermine labour density. Trade unions need to counter this trend by

promoting the good of society as a whole and not just their members.

Therefore it is advisable for the trade union movement to see remunicipalisation

as an opportunity to increase its influence in society and in the labour force as

a whole.

Remunicipalisation is a reality

Remunicipalisation is defined as taking back municipal services that were previ-

ously under private management, for example under a long-term concession.

It can also mean bringing regional services back into public ownership. This

trend has built up over the last 10 years. A recent study

shows that most remu-

nicipalisation drives are happening in historic municipal sectors such as water

and sanitation.

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Chapter six

Despite continued financial and ideological pressures driven by neoliberal

policies there are clear signs that municipalities in Europe are increasingly

moving towards remunicipalisation and no longer see privatisation as a vi-

able option. Some European trade union organisations such as the European

Federation of Public Service Unions (EPSU) encourage their affiliates to pro-

mote remunicipalisation in their transnational meetings and through targeted

research in this area.

In Germany more and more municipalities are trying to reverse privatisation

in the energy and gas sector and become themselves producers of energy. Some

72 new public energy companies have been created in Germany since 2005.

In addition, more than 1,000 cooperatives active in the energy sector have

been created. By 2016 over 2,000 concessions in the energy sector will come

to an end in Germany, announcing a new wave of remunicipalisations.

A study in 2011 by Leipzig University of over 100 German municipalities con-

cluded that the trend is moving towards greater provision by the public sector.

Half of the municipalities with budget deficits plan some form of restructuring

of municipal services, of which 41 per cent are considering moving towards

inter-municipal cooperation and 36 per cent would opt for remunicipalisa-

tion; less than 3 per cent are considering privatisation.

However, antitrust authorities and the courts are making it very difficult for

municipalities to take back their water networks as they are obliged to publicly

tender and then have to apply themselves to this call. There is currently an

exemplary case in the municipality of Titisee-Neustadt where the mayor is

challenging the constitutional court on this issue.

In Medina Sidonia (in the province of Cadiz, Spain), the water sector company

was transformed into a multi-sectoral local company dealing with public street

lighting, water, laboratory analysis and waste. The idea is to make econo-

mies of scale in order to generate savings and to create more jobs. The city’s

waste company was remunicipalised in January 2014 and it has increased its

workforce in two months by almost 20 per cent.

At a much bigger scale, the

remunicipalisation of water in Paris in 2010 has led to the ‘exporting’ of public

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Remunicipalisation and workers: Building new alliances

worker know-how to other public companies trying to build solidarity and

public-public partnerships.

Last but not least, remunicipalisation has helped to slow down the privatisa-

tion trend elsewhere around the globe. When private utilities are going back

to public ownership many wonder why they privatised in the first place. This

has fuelled debates about the benefits and interests behind privatisation that

very often are linked to aggressive lobbying and corruption. For unions that

defend a more democratic and transparent society this should be a motivating

factor to encourage remunicipalisation as an alternative to privatisation.

In France, municipalities and regions continue to remunicipalise water ser-

vices or public transport. Even in the UK, where the national government

itself is pushing through privatisations in health care and prisons, outsourc-

ing has rarely been used by municipalities, despite having to achieve cuts of

7 per cent per year: the

Financial Times

suggested that “local authorities have

grown skeptical about the savings outsourcing can deliver, as well as fearing a

backlash against private companies making large profits from the taxpayer.”

Table 6.1

Recent remunicipalisations in selected European countries

Sector

Process

Countries

Factors

Water

Municipalisation of services

France,

Hungary

Germany

Private failure, cost,

control, contract

expiry

Private failure, cost,

control, contract

expiry

Cost, private failure,

public objectives,

control

Cost, control,

contract expiry

Cost, effectiveness,

employment,

contract expiry

Electricity

New stadtwerke, purchase

of private companies

Municipalisation of contracts

and concessions

Public

transport

UK, France

Waste

Contracts brought

management in-house, inter-municipal

incinerators

Cleaning

Contracts brought in-house

Germany, UK,

France, etc.

UK, Finland

Source: Hall, D. 2012. Re-municipalising municipal services in Europe. Report commissioned by EPSU to

PSIRU, May. London: PSIRU.

http://www.epsu.org/a/8683

(accessed 23 February 2015).

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Chapter six

Benefits of remunicipalisation

In addition to the reasons that have led municipalities to end privatisation,

including cost-savings or regaining democratic control, there are numerous

opportunities for the trade union movement emerging from remunicipalisa-

tion.

Remunicipalisation is an opportunity for trade unions to improve working

conditions.

A private company running a long-term concession, especially in

the water sector, tends to externalise key elements of technical know-how.

This can be used as a bargaining chip during the renegotiation of the contract

and it adds to its profitability to convince employers to keep the valuable

technical knowledge of workers in-house because it is a profitable investment

over the long-term for all workers. For organised workers the aim should be

to improve the conditions of all the workers of a company in order to reach a

level playing field between pay scales and unite rather than divide workers. A

remunicipalised entity tries to make economies of scale to be able to improve

employment and wages. This rationalisation can allow achieving broader so-

cial goals by generating discussions with workers on how to run the company

better. For instance, in the municipality of Almada in Portugal a consultation

with workers raised awareness on access to water as a basic human right. This

resulted in an improvement of in-house services and a decision was taken to

outsource only to local small and medium-sized enterprises.

The improvement of governance and worker participation in the public company.

The remunicipalisation process improved the transparency of local service provi-

sion in the cases of Paris, Naples and Hamilton.

This resulted in a broader consul-

tation with workers newly employed by the local companies. Remunicipalisation

is not only about the renegotiation of wages and benefits but it also encourages

consultation with workers on the general performance of a public company.

Socially responsible companies should include decent work, social dialogue and

should have at heart workers’ participation.

Trade unions can gain from a better understanding of socially responsible standards

in municipal companies.

A public company with social, environmental and com-

munity goals that consults its workers (and their organisations) can serve as a

model of progressive management. Further, working for a company that takes

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Remunicipalisation and workers: Building new alliances

into account social goals is more rewarding and motivating for workers. The

current economic crisis and austerity measures have hit a number of European

economies. It is essential that the trade union movement exemplify that you can

make a difference locally if you start with your own workers. Medina Sidonia is

a good example. The new multi-sectoral municipal company created more jobs

and improved working conditions to ensure more effective service provision. The

company also promotes sustainable public procurement with small and medium

enterprises that are based in the city to maintain local jobs.

Insourcing can result

in savings because it increases efficiency. This allows increasing the number of

workers as Medina Sidonia did.

Remunicipalisation clearly can have major benefits and should be broadly

supported by the trade union movement.

Christine Jakob is Local and Regional Government Policy

Officer at the European Federation of Public Service Unions

(EPSU).

Pablo Sanchez is Campaigns Coordinator at the European

Federation of Public Service Unions (EPSU).

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Chapter six

Endnotes

1 See the study by Hall, D. 2014. Public and private sector efficiency. A briefing for

EPSU by PSIRU, September. Brussels: EPSU.

http://www.epsu.org/IMG/pdf/

efficiency.pdf

(accessed 11 February 2015).

2 See sections 4 and 6 on public goods and equality in: Hall, D. 2014. Why we need

public spending. Report for EPSU and PSI by PSIRU, May. Brussels: EPSU.

http://www.world-psi.org/sites/default/files/documents/research/wwnps_en.pdf

(accessed 23 February 2015).

3 The most comprehensive study by a workers’ organisation is a study that the Canadian

Union of Public Employees did about privatisation and remunicipalisation in

Hamilton. Loxely, S. 1999. An analysis of a public-private sector-partnership: The

Hamilton - Wentworth - Philips Utilities Management Corporation PPP. Ottawa:

CUPE.

http://www.archives.gov.on.ca/en/e_records/walkerton/part2info/

partieswithstanding/pdf/CUPEppp.pdf

(accessed 23 February 2015).

4 Lobina, E., Kishimoto, S. and Petitjean, O. 2014.

Here to stay: Remunicipalisation

as a global trend.

Amsterdam: PSIRU, TNI and Multinationals Observatory.

http://www.tni.org/sites/www.tni.org/files/download/heretostay-en.pdf

(accessed 23 February 2015).

5 Remunicipalisation was promoted at the last EPSU Congress (see p. 53-54):

http://www.epsu.org/IMG/pdf/brochure_resolutions_EN.pdf

6 Rothman, O. 2011. Renaissance der Kommunalwirtschaft – Re-kommunalisierung

interessant zur Steigerung von Einfluss und Einnahmen. Study, 27 July. Leipzig,

Germany: University of Leipzig.

http://www.zv.uni-leipzig.de/service/presse/

nachrichten.html?ifab_modus=detail&ifab_id=4191

7 The scale is too small to be able to make this a general rule but the team of 17 workers

grew to 20 immediately after the remunicipalisation.

Financial Times.

2012. Savings from outsourcing doubted by state. 23 January.

9 Although technically not remunicipalised this company demonstrates how strong

public ethos can benefit communities more broadly speaking.

10 See the Remunicipalisation Tracker for details on these cases:

http://www.remunicipalisation.org

11 Medina Sidonia has almost 12,000 inhabitants and in December 2014 it had 2,223

registered unemployed residents, see:

http://www.foro-ciudad.com/cadiz/medina-

sidonia/mensaje-12415004.html

(accessed 1 February 2015).

Chapter seven

You are public…now what?

News ways of measuring success

By David A. McDonald

Congratulations! You’ve just taken back public control of your water services

after years of privatisation. The struggle was hard, the transition was challeng-

ing, but your public systems are now up and running.

The challenges do not end here, of course. If remunicipalisation is going to

be effective it will require new ways of thinking about ‘success’ and how water

services are measured and evaluated.

Undoing the structures and logics of privatisation will take years, possibly

decades. The ideologies and mechanisms of neoliberalism have penetrated so

deeply into state organisations that remaking public services will require much

more than just a change of ownership; it will also require a deliberate effort to

remake and rethink how we evaluate performance.

The vast majority of performance indicators used in the water sector around

the world are driven by notions of financial efficiency, used in turn to com-

pare water operators with one other. Benchmarking – as these inter-utility

comparisons are called – has become ubiquitous, ushering in an increasingly

homogenised form of performance evaluation, often foisted upon water op-

erators regardless of their social, political or economic contexts.

This is not to say that we should never compare water systems or measure

operator performance. Far from it. Water operators can learn from each other,

and water users should be supplied with information that allows them to

demand better outcomes locally, knowing what is possible elsewhere.

The problem with current benchmarking systems is their narrow empha-

sis on financial performance evaluation, the highly centralised nature of

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You are public…now what? News ways of measuring success

decision-making, and the lack of indicators that look specifically at the ‘public’

nature of a water operator.

If remunicipalisation is going to be effective it will require new ways of think-

ing about success and how this is measured and evaluated. Herein lies what

may prove to be the most difficult part of the remunicipalisation process.

Although there is no singular way to measure public sector water performance,

any alternative to the current benchmarking systems must begin with a critical

review of the institutions and ideologies that inform them.

The aims of this chapter are to briefly review the history of benchmarking

systems, highlight their main problems, and hint at possible alternatives for

the future.

Current benchmarking systems

Performance benchmarking in the water sector is a relatively new, but well-

established practice.

The International Benchmarking Network for Water and

Sanitation Utilities was the first major international initiative – established by

the World Bank in 1996 – followed by the formation of two benchmarking

task groups within the International Water Association (IWA) in the late

1990s.

The International Organization for Standardization (ISO) published

its framework on drinking water and wastewater services in 2007, with more

than 260 performance indicators.

There are now dozens of national water benchmarking associations and a

growing number of regional groups. European water operators have been par-

ticularly active in this regard (e.g. the European Benchmarking Cooperation

and Aquabench), but there are few national – and virtually no regional –

benchmarking associations dedicated to water services in Africa, Asia or Latin

America.

Performance evaluation does exist in these regions, but assessment

methods are largely imported (some would say imposed) by international

financial institutions and funders such as the World Bank and the United

States Agency for International Development.

Despite this diversity there is broad consensus within the benchmarking com-

munity as to why performance should be compared: it is seen to enhance

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Chapter seven

transparency and accountability among water operators; to create oppor-

tunities for public participation in decision-making; and to contribute to

“consensus-based global solutions” for water service provision.

There is also broad agreement as to what gets measured. Although every

benchmarking system has its own unique characteristics, most draw heavily

(if not entirely) on the more than 260 metrics established by ISO and IWA.

The European Benchmarking Cooperation system, for example, is “fully

aligned” with IWA protocol and indicators, which are used as “repositories”

of performance criteria “for reasons of standardisation.”

Although too lengthy to list in their entirely here, the kinds of criteria used

include such measures as: number of water and sanitation workers per 1,000

connections; length of transmission and distribution mains renovated; per-

centages of unaccounted-for water; number of complaints due to water supply

interruptions; volume of electricity consumed; per capita consumption of

water; number of mains failures; average time to complete repairs; and price

variations for different types of consumers.

Collecting this data is another matter. With so much information to gather

benchmarking can overwhelm managers and frontline staff. Even the best

trained and resourced water operators in the world complain about how taxing

it is.

But even more challenging is the question of how to analyse and compare this

data once it is gathered. There are highly technical debates about statistical

methodologies, making the full benchmarking process almost impossible for

some municipalities, and with outcomes that are largely impenetrable to the

average citizen even if it is completed.

Continued outsourcing of some water

services can make it hard to track costs, while different ages of infrastructure

(and uncertainty about their condition) greatly affect statistical evaluations. In

other words, there may be considerable agreement on what kind of performance

data to collect and why, but there are substantial differences in terms of how it

is assessed, leading to diverse outcomes and interpretations across jurisdictions.

Another concern is that performance measurement can oversimplify complex

problems.

For example, metrics looking at the maintenance and replacement

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You are public…now what? News ways of measuring success

of infrastructure can focus on technical or managerial questions while ig-

noring deeper political or governance questions, such as equitable coverage

and environmental sustainability. Internal decisions can be skewed by this

misplaced focus on quantitative

outputs

at the expense of qualitative

outcomes,

with benchmarking becoming an end, rather than a means, to improved

water services.

Criticisms of benchmarking

For proponents of benchmarking, none of these challenges are deemed fatal

to the measurement enterprise, and they have not altered the underlying prin-

ciples of, or enthusiasm for, performance evaluations and the criteria they use.

There are more radical critiques of the process, however. One of these con-

cerns is that benchmarking practices are anti-democratic, conducted by

‘experts’ with little effort to include citizens or workers in the evaluation

process. Instead of enhancing transparency, benchmarking systems tend to

be conducted behind closed doors and can be manipulated by managers and

policy-makers that want to “produce truth” in ways that may be completely

disconnected from realities on the ground, possibly reinforcing unequal forms

of service delivery, and serving to shape the way people perceive water plan-

ning and investments.

In this regard, benchmarking becomes a gatekeeping

tool for constructing ‘common sense’ from the top-down, often celebrating

market-based concepts of success and progress while marginalising alternative

forms of water governance and valuation.

A second critique is that benchmarking is used to promote commercialisa-

tion in the water sector, by giving competitive advantage to private operators

in rule-setting. Critics argue that benchmarking organisations are stacked

with large multinational corporations acting in their own interests, shaping

‘international standards’ across a wide swath of topics, from environmental

sustainability to corporate governance.

The ISO has come under particular

fire, with critics arguing that most of its committee work is conducted in a

handful of countries in the North and dominated by large multinationals,

making it little more than a “corporate private regime.”

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Chapter seven

On a related note, current benchmarking systems are also criticised for en-

couraging – even requiring – commercial behaviour by water operators. When

used as a way to simulate market pressures, water benchmarking “strongly

motivates operators to be efficient and innovative, mitigating their operating

costs and expenses” and easing the way for market-oriented water managers

to succeed.

Benchmarking can even prepare the ground for outright priva-

tisation, forcing public water operators to make their financial performance

accessible for corporate review, in an effort to “pinpoint those [utilities] with

revenue-generating potential”

and to “identify viable markets”

for private

takeover.

A third fundamental criticism of current benchmarking systems is that its

universal performance criteria homogenise water and the people that use it,

ignoring cultural and political differences and imposing Eurocentric standards

on the rest of the world. By contrast, critics argue that there are no constant,

universal truths: “the common good can never be specified

a priori

(…) as

a static measure for the quality of governance,”

implying that universal

standards for performance measurement are practically and philosophically

impossible – a radical critique indeed. At the very least, these concerns suggest

that we must “remain vigilant about the temptation to unequivocally use

‘science’ and the objectification it entails in dealing with water’s complexity.”

An alternative measurement system?

Where does this leave us with regards to performance evaluation of remunici-

palised water utilities? Should benchmarking be rejected outright as a top-

down, commercial and homogenising force? At one level, yes. Mainstream

benchmarking systems are so deeply embedded in market ideology and so

inherently technocratic as to make them difficult to reconcile with the aims

of public, transparent and equitable water services.

But I am equally convinced that we cannot abandon efforts to measure the

success (or failure) of water services entirely. Nor are all benchmarking sys-

tems – or the people that run them – inherently neoliberal. Tracking and

understanding unaccounted-for water can take on many different aims and

characteristics, for example.

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You are public…now what? News ways of measuring success

And without some commonly agreed upon performance criteria how are we

to establish global demands for improved water access, affordability or worker

health and safety? How can we share common experiences of ‘good’ (versus

‘best’) practice and use these to improve equity in water services elsewhere?

And most concerning of all, if we abandon benchmarking altogether, are we

simply leaving this powerful tool in the hands of those who (intentionally or

otherwise) can use performance indicators to commercialise water services or

overlook inequalities?

My proposal is thus an urgent but modest one: to work towards building al-

ternative methods of performance evaluation and to create counter narratives

of progressive reforms. An alternative model would offer some standardised

measurement principles and criteria – without which it would be impossible

to have a meaningful dialogue across jurisdictions – but be much suppler than

current benchmarking systems in their encouragement of local interpretations

and prioritisations that are not captive to the logic of the market.

I would also advocate for an alternative model that retains some existing

mainstream performance indicators, such as measurements of water quality,

response times for repairs, and the numbers of employees per 1,000 connec-

tions. Not only are such indicators important in their own right, they offer

a strategic entry point for the introduction of new and modified systems of

measurement that ask deeper questions about water quality across income

groups, about the impact of the inability to pay on unaccounted-for water

levels or the gendered composition of the workforce to name but a few of the

types of equity-oriented metrics that could be employed.

These alternative indicators build on work that has already begun in practice,

such as the ‘performance principles’ used by more than two dozen public water

operators in Brazil, including universality, equity, social participation and

access.

The Municipal Services Project has expanded on these indicators in

the form of ‘normative criteria’ for performance, which have been applied to

the study of a wide range of public services around the world.

Qualitative

factors such as public ethos and public sector solidarity have also been added.

These alternative frameworks remain fairly abstract, however, serving as high-

level reference points for comparative research on public services, as opposed

to sector-specific indicators with clear quantitative measurements. In this

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Chapter seven

regard, much work remains to be done in translating these broad principles

into concrete day-to-day variables of analysis that can empirically foreground

questions of equity and public access.

It may also be wise to consider a much reduced number of indicators than

current benchmarking systems employ. As noted above, the more than 260

measurements that make up mainstream benchmarking systems are difficult (if

not impossible) for many water operators to manage, and impenetrable in their

scope and analysis for the average citizen. The challenge is to find a balance be-

tween the complex reality of water systems and the need for simplification that

“helps focus people’s minds.”

It may also be useful to look at ways of represent-

ing benchmarking in visual formats, such as the ‘spider diagrams’ employed by

City Blueprints for Water used to simplify and pictorialise its benchmarking

system,

though other visual representations could also be effective.

None of this will be easy. Decisions on the total number of performance

indicators and how to compare and prioritise these metrics will be challenging.

It will also be difficult to attract managers and policy-makers to an alternative

benchmarking model if they do not see (or want to see) the problems of cur-

rent systems, not to mention the time and resources that will be required to

make the analytical and organisational shift.

And yet, the timing could not be better. With more than 180 water services

having been remunicipalised over the past 15 years, and with dozens (if not

hundreds) looking at the possibility of remunicipalisation in the next de-

cade,

the political will to think about what it means to be ‘public’ is as strong

as ever. These newly remunicipalised entities are well placed to see the need for

changes to the way we do performance evaluation, and they have the opera-

tional mandate to try and make it happen. This trend provides an exceptional

opportunity to collectively build an alternative measurement future.

Congratulations are still in order, but the longer term struggle has really just

begun.

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You are public…now what? News ways of measuring success

David A. McDonald is Professor of Global Development

Studies at Queen’s University, Canada, and co-director of the

Municipal Services Project.

Endnotes

1 Pidd, M. 2012.

Measuring the performance of public services: Principles and practice.

Cambridge: Cambridge University Press.

2 Cabrera, E., Dane, P., Haskins, S. and Theuretzbacher-Fritz, H. 2011.

Benchmarking

water services: Guiding water utilities to excellence.

London: IWA Publishing.

3 Berg, S. 2013.

Best practices in regulating state-owned and municipal water utilities.

Economic Commission for Latin America and the Caribbean, May. United Nations:

Santiago; Berg, S. and Corton, M. L. 2007. Water utility benchmarking for

managerial and policy decisions: Lessons from developing countries. In

International

Water Association Conference on Performance Assessment of Urban Infrastructure Services.

4 See: Water and Sanitation Programme. 2010.

The state of african utilities:

Performance assessment and benchmarking report.

Washington, DC: Water and

Sanitation Programme.

http://african-utilies-benchmarking.appspot.com/

(accessed 10 August 2014).

5 European Benchmarking Cooperation. 2014. Methodology Part II: Reference guide.

Version 5.1, 27 May. Mimeo, p. 5.

6 Abbott, M. and Cohen, B. 2009. Productivity and efficiency in the water industry.

Utilities Policy

17(3-4): 233-44; Parsons, L. J. 2002. Using stochastic frontier analysis

for performance measurement and benchmarking. In T. B. Fomby, R. Carter Hill,

I. Jeliazkov, J. C. Escanciano and E. Hillebrand (series eds.),

Book Series: Advances in

Econometrics

(Vol. 16), p. 317-350. Bingley, UK: Emerald Group Publishing Limited.

7 Bogetoft, P. 2013.

Performance benchmarking: Measuring and managing performance.

New York: Springer.

8 Boelens, R. and Vos, J. 2012. The danger of naturalizing water policy concepts:

Water productivity and efficiency discourses from field irrigation to virtual water

trade.

Agricultural Water Management,

108: 16-26, p. 18.

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Chapter seven

9 Bowerman, M. and Francis, G. 2001. Benchmarking as a tool for modernization

of local government.

Financial Accountability and Management

17(4): 321–29.

10 Nadvi, K. and Waltring, F. 2004. Making sense of global standards. In H. Schmitz

(ed),

Local enterprises in the global economy: Issues of governance and upgrading,

p. 53-95, Cheltemham: Edward Elgar Publishing; Prakash, A. and Potoski, M. 2006.

Racing to the bottom? Trade, environmental governance, and ISO 14001.

American Journal of Political Science,

50(2): 350-364.

11 Haufler, V. 2000.

Negotiating international standards for environmental management

systems: The ISO 14000 standards.

New York: UN Vision Project on Global Public

Policy Networks, p. 6.

12 Marques, R. C. and Simões, P. T. F. 2010.

Regulation of water and wastewater services:

An international comparison.

London: IWA Publishing, p. 15.

13 See IBNET’s website:

http://www.ib-net.org/en/texts.php?folder_id=78

14 Van den Berg, C. and Danilenko, A. 2011.

The IBNET water supply and sanitation

performance blue book: The International Benchmarking Network of Water and

Sanitation Utilities Databook.

Washington, DC: World Bank Publications, p. 4.

15 Dahl, A. and Soss, J. 2012. Neoliberalism for the common good? Public value

governance and the downsizing of democracy. Background Paper, June. Minneapolis:

Centre for Integrative Leadership, p. 31.

16 Zwarteveen, M. Z. and Boelens, R. 2014. Defining, researching and struggling

for water justice: Some conceptual building blocks for research and action.

Water International,

39(2): 143-158, p. 151-2.

17 ASSAMAE. 2007.

Successful experiences in municipal public water and sanitation

services from Brazil.

Amsterdam: Transnational Institute.

18 McDonald, D. A. 2014.

Rethinking corporatization and public services in the Global

South.

London: Zed Books; McDonald, D. A. and Ruiters, G. 2012.

Alternatives

to privatization: Public options for essential services in the global South.

New York:

Routledge.

19 Pidd 2012, op. cit., p. 75-6.

20 van Leeuwen, C. J., Frijns, J., van Wezel, A. and van de Ven, F. H. 2012. City

blueprints: 24 indicators to assess the sustainability of the urban water cycle.

Water resources management,

26(8): 2177-2197, p. 2180.

21 Lobina, E., Kishimoto, S. and Petitjean, O. 2014.

Here to stay: Remunicipalisation

as a global trend.

Amsterdam: PSIRU, TNI and Multinationals Observatory.

http://www.tni.org/sites/www.tni.org/files/download/heretostay-en.pdf

Chapter eight

Trade agreements and

investor protection:

A global threat to public water

Satoko Kishimoto

Investor-state dispute settlement (ISDS) cases are emerging as a major threat

to public water, especially in remunicipalisation cases where municipalities

want to take back water into public hands after failed privatisation. ISDS is

included in numerous bilateral investment treaties and is being used by water

multinationals to claim exorbitant amounts of public money in compensation

for cancelled service management contracts. The sole threat of an ISDS case in

opaque and industry-biased international tribunals can be enough to convince

a local government to stick with private water despite poor performance.

With new trade and investment treaties such as the Transatlantic Trade and

Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP) ex-

pected to promote ISDS further, the balance of power will tip even more in

favour of private firms and leave public authorities with limited policy control

over essential services. No less worrying is the international Trade in Services

Agreement (TiSA) that could make the liberalisation and privatisation of

water irreversible.

Remunicipalisation: A global trend

Remunicipalisation in the water sector and for other social services is a sig-

nificant trend because it demonstrates that past decisions to privatise are

reversible. By March 2015, more than 235 cities and communities in 37

countries had taken back control of their water services over the last 15 years.

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Trade agreements and investor protection: A global threat to public water

Box 1

What is investor-state dispute settlement?

ISDS gives foreign investors the ability to directly sue countries in private

international tribunals for compensation over health, environmental, fi-

nancial and other domestic policies that allegedly undermine their corpo-

rate rights. Arbitration mechanisms generally designate the World Bank’s

International Centre for Settlement of Investment Disputes (ICSID) or

other tribunals such as at the International Chamber of Commerce as adju-

dicators. Investor-state lawsuits are decided by private arbitrators selected by

the conflicting parties, not by independent judges. There is a demonstrated

arbitrator bias in favour of investors: 42% of cases

have been decided in

favour of the state compared to 31% for investors. Another 27% of cases

were settled without ruling (often resulting in major payments by govern-

ments).

This extended investor protection mechanism is found in over

3,000 existing international and bilateral investment treaties worldwide.

And this number is growing. Reasons to remunicipalise water services are

similar worldwide: deterioration of services, under-investment, disputes

over operational costs and price increases, soaring water bills, difficulties in

monitoring private operators, and lack of financial transparency. Generally,

municipalities decide to revert to public management when they find private

contracts to be socially and financially unsustainable. How best to provide

essential services is a critical matter for citizens, and elected officials have to

make a responsive choice based on citizens’ needs. Almost all cases of remu-

nicipalisation happened when it was (newly) elected local councils that took

the bold decision to reverse privatisation. In some cases, residents exercised

direct democracy to be heard by their local governments, for example through

a referendum.

When service providers do not meet expectations, policy-

makers can reverse a service contract based on pragmatic considerations to

best respond to citizens’ needs in a cost-effective way. The ability to respond

to new information on service performance or shifting public opinion is an

essential part of democracy.

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Chapter eight

This chapter examines remunicipalisation cases in which national and local

governments were sued by water multinationals using traditional litigation

strategies in national courts and the increasingly common investor protection

clauses from bilateral investment treaties (BITs), and how this has affected

their policy options. The chapter also explains why trade and investment

agreements such as the TTIP, TPP and TiSA would undermine the remu-

nicipalisation trend if signed.

Companies are well protected against remunicipalisation

In the last 15 years, many of the municipalities that have terminated private

contracts around the world have experienced harsh financial consequences.

Termination fees or compensations paid to private water companies are com-

monplace. Multinationals are generally well protected by national commercial

law in the event of contract termination to be compensated for profits that

were expected until the end of the contract period. The water privatisation

contract in Jakarta (analysed in this book), for example, defines that in the

event of any type of termination either by the municipality or the private

company, even if due to bankruptcy, the municipality will have to pay a con-

siderable compensation to the private company.

Another stark example is Castres, a city in Southern France that terminated the

contract with Suez in 2004 after a seven-year battle initiated by a small group

of committed citizens. In 1997, citizens filed a court case and the regional

Toulouse Administrative Court ruled that the price of water was too high;

moreover, the contract itself was deemed illegal as the former mayor had signed

it without consulting the town council, as legally required. Nevertheless, the

company, stung by the unilateral termination that followed, went to the court

again in 2003 to ask for the reimbursement of investments (€66 million) and

damages (€58.8 million). The court ruled that the city had to pay €30 million

to Suez to compensate for investments.

We observe how private water companies have the higher hand in similar liti-

gations elsewhere. Set compensation for investments made tend to overlook

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Trade agreements and investor protection: A global threat to public water

past profit gains from the private contract. Commercial law also disregards the

quality of public service delivery when examining such contracts.

Yet serious violations of service provision standards by private companies are

often at the centre of the motivation for remunicipalisation. Many cases, from

Buenos Aires to Jakarta, show that disputes and conflicts over violations of

contractual obligations between parties tax public authorities of enormous

time and resources to prove.

Municipalities face even harsher conditions when investor protection regimes

are strengthened through BITs. In other words, private companies can use this

additional tool to maximise gains when they lose a contract.

ISDS as a mounting threat to public water

In the 1990s, Argentina privatised most of its utility services as part of the neo-

liberal government’s agenda. During the same period, Argentina entered 50

BITs whose investor protection mechanisms would come to play an infamous

role in future renationalisation cases. In water and sanitation services, 18 con-

cession contracts were signed. Among them, nine were terminated between

1997 and 2008.

Tariffs, service performance and investment became core

issues and sources of conflict between companies and the responsible public

authorities in all cases. Six cases were brought before the ICSID. Argentina is

the country that has been most sued under international investment treaties in

the world (on 55 known cases). To put this case in context, two-thirds of those

cases have to do with recovery measures taken by Argentina following the

2001-2002 national economic crisis. The government passed an Emergency

Law in 2002 abandoning dollar-peso parity of exchange and devaluated the

currency, in order to help the crisis-hit economy to recover. Argentina also

defaulted on its debt and froze the public services tariffs to keep them afford-

able for residents.

For example, France’s SAUR International filed against Argentina in 2004

concerning a water and sewerage concession in the Mendoza province,

claiming they had been expropriated without compensation. SAUR invoked

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Chapter eight

a violation of the

fair and equitable treatment standard

under the Argentina-

France bilateral investment treaty. The ICSID tribunal found Argentina liable

for claims by SAUR in June 2012.

As another example, the province of Buenos Aires made a concession contract

with Azurix, a subsidiary of US-based Enron in 1999 for 30 years and quickly

faced opposition over tariff increase, water quality and delays in infrastructure

investment. During the ensuing negotiation process, Azurix terminated the

concession contract without complying with commitments made due to the

bankruptcy of its parent company Enron. Azurix still filed a complaint with

ICSID against the Argentine government and the province of Buenos Aires,

claiming public authorities purposely delayed the permission to increase the

water tariff and breached the Argentina-US treaty. ICSID ruled in 2006 that

the Argentine government should pay US$165 million with interest to Azurix

and cover the ICSID expenses.

During that time, Santa Fe province terminated the contract with Aguas

Provinciales de Santa Fe whose majority shareholders were Suez (France)

and Agbar (Spain) due to dissatisfaction with services and a strong public

campaign in 2005. Prior to this, Aguas Provinciales de Santa Fe filed a case

at ICSID and demanded US$243.8 million from the Argentine state, blam-

ing the public authority for its failure to increase tariffs after the country’s

abolition of the dollar-peso parity in 2002, which changed trading condi-

tions. The company said the government’s action destabilised the conces-

sion, and amounted to expropriation, breaching the clause on fair and

equitable treatment under the Argentina-France and the Argentina-Spain

BITs. ICSID accepted this jurisdiction in 2006.

Aguas Argentinas SA,

the Suez-led water company that operated in the city of Buenos Aires made

almost identical claims

at ICSID prior to the government terminating

the contract in 2006.

The use of ISDS in BITs to demand compensation has increased in the last

few years. Mexico, for instance, received notice of four investor disputes

during 2013.

One of them was from French water treatment company

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Trade agreements and investor protection: A global threat to public water

Degrémont, which notified Mexico of a potential ISDS claim at ICSID

under the France-Mexico BIT. The dispute concerns investment in local

company Tapsa, which operated four water treatment plants from 1999 in

the city of Puebla until the contract with the municipal government was

terminated in 2012 on the grounds that water quality had fallen below of-

ficial standards. Degrémont says the termination and subsequent occupation

of the plants by state officials amounted to an indirect expropriation and

exercise of arbitrary power. The compensation requested by Degrémont is

still unknown.

In fact, a state can be sued over mere disagreements on tariff increases, before

remunicipalisation is even considered. Estonian company Tallinna Vesi and

its owner United Utilities Tallinn brought a claim against the national gov-

ernment under a BIT in October 2014. United Utilities is a UK company

registered in the Netherlands, which enables Tallinna Vesi and United Utilities

Tallinn to use the Estonia-Netherlands BIT. The company alleges that Estonia

breached the fair and equitable treatment standard of the BIT in refusing

Tallinna Vesi’s application for tariff increases on the basis of a new law passed

in 2010. The law gives the Estonian competition authority power to cap

utility companies’ profits at what it determines to be “reasonable” levels. The

companies are seeking damages over €90 million to cover their projected total

losses over the lifetime of the contract up until 2020.

Chilling effect on policy

The threat of a lawsuit often prevents governments from passing laws or adopt-

ing new policies in the public interest. The case of Bulgarian capital Sofia

is a good example. Residents of Sofia have suffered from illegal water price

increases and scant investment since the city signed a privatisation contract

in 2000 with Sofiyska Voda, whose major shareholder is Veolia. Additional

clauses were secretly added in 2008 and one of these clauses enables the com-

pany to take Bulgaria to the Vienna International Arbitral Centre. In 2011, the

city disconnected 1,000 households from water supply and prosecuted 5,000

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Chapter eight

more for non-payment of water bills upon a request from the privatized utility.

While these actions were violating the human right to water, the municipality

said its hands were tied by the private concessionaire’s threat to sue authorities

for unpaid bills. Citizens and some elected officials had collected enough

signatures to hold a referendum on remunicipalisation of water services but

the city did not allow such a plebiscite since the private company was also ready

to file a lawsuit should it take place.

This kind of chilling effect is observed in many places. Montbéliard in France

decided in 2010 to remunicipalise the water system managed by Veolia since

1992. The decision was confirmed by an official vote of the council in 2013

and was expected to take effect in 2015 (seven years before the end of the

concession contract). But Veolia challenged this decision before a national

court and asked for litigation to obtain €95 million in compensation for

breach of contract.

In 2014 the city gave in to the threat and reversed its

decision to remunicipalise.

These cases show that private companies effectively exercise their power and

end up distorting public policies. Across the globe, there is mounting evi-

dence that investors successfully reverse new policies and regulations drafted

to protect public health and the environment. If the threat of traditional

litigation was already an effective deterrent, it is even more so with ISDS

disputes because they raise the costs of such a political decision even further

and tend to lead to even more unaffordable compensations.

It is not difficult

to imagine that water multinationals will use this powerful tool against states

and municipalities in the event of remunicipalisation.

Remunicipalisation is not easy. It requires overcoming a range of technical

hurdles in addition to the legal ones discussed above. Public authorities often

have to either buy back shares or disburse significant compensation costs.

The current global investment framework marked by the rise of ISDS certainly

makes remunicipalisation harder. The choice of how to provide essential ser-

vices such as water should be based on democratic decisions and should not

be guided by foreign investors’ interests.

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Trade agreements and investor protection: A global threat to public water

Box 1

TTIP

The Transatlantic Trade and Investment Partnership (TTIP) is a proposed

trade and investment agreement that has been under negotiation between

the United States and the European Union since the summer of 2013.

The negotiators on both sides want to include ISDS. The process is widely

criticised, in large part because of its secrecy, the agreement’s expansive

scope, and some controversial clauses including ISDS. According to the

European Commission, there will be sectoral exceptions for public services

(public education, health and social services, and water).

Whether this

will indeed be the case remains to be seen. Moreover, exempting the water

sector from trade liberalisation under the TTIP is not an effective guarantee

against investor-state cases by water multinationals: If investor protection

and ISDS are included in the agreement, the corporations can make use

of this to ‘protect their investments’ even in the water sector, effectively

circumventing the exemption. In those countries where the water sector

is already partly liberalised, the TTIP would create a serious obstacle for

remunicipalisation.

Box 3

TPP

The Trans-Pacific Partnership (TPP) is another proposed regulatory and in-

vestment treaty. As of 2014, 12 countries throughout the Asia-Pacific region

had participated in negotiations: Australia, Brunei Darussalam, Canada,

Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United

States and Vietnam. While the text under negotiation is secret, it is known

to include cross-border services, government procurement and investment,

among others. The TPP’s starting point on government procurement for

instance seems to be based on a similar agreement under the World Trade

Organisation, which excludes water services. However, there is a tendency

to expand and deepen liberalisation’s scope and it is still unknown how

water services are treated under the TPP.

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Chapter eight

New trade and investment treaties

Including investor protection clauses in the TTIP, TPP or Comprehensive

Economic and Trade Agreement (CETA) would extend the use of ISDS glob-

ally. Regarding remunicipalisation and renationalisation, as foreign investors

private operators can claim a violation of investor protection on the grounds

of expropriation and exercise of arbitrary state power (e.g. Degrémont vs

Mexico, Azurix vs Argentina) or following devaluation of local currency (e.g.

Aguas Provinciales de Santa Fe vs Argentina). Civil society campaigners fight-

ing excessive investor protection and investor rights see the concept of “fair

and equitable treatment”

as potentially the most dangerous for taxpayers and

regulators. This principle is the one most used in investors’ successful claims.

Protecting investors’ “legitimate

expectations,”

it creates the “right” to a stable

regulatory environment for investors, preventing governments from altering

laws or regulations, even in light of new conditions or democratic processes.

Public protests are rapidly building up on the trade and investment treaties

under negotiation because they would strengthen massively such investor

protection and cover large parts of the world.

TiSA and public services

Although TiSA has gotten less attention so far compared with the TTIP, TPP

and CETA, it may have the biggest potential impact on public services and

may effectively restrict the policy space of municipalities. One could question

why TiSA is needed as the comprehensive General Agreement on Trade in

Services (GATT) already exists under the World Trade Organisation. TiSA is

an attempt to go further and speed up the process among like-minded states

that are committed to extending service liberalisation outside of the WTO.

The transnational private services industry pushes this agenda openly and

aggressively.

How would TiSA affect public services? In theory, the GATT and TiSA both

exclude services “provided in the exercise of governmental authority” from

their scope. However, TiSA defines public services extremely narrowly as “any

service which is supplied neither on a commercial basis nor in competition

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Trade agreements and investor protection: A global threat to public water

with one or more service suppliers.” In practice, public services such as health

care, social services, education, waste, water and postal service systems are

delivered to the population through a more complex and mixed system than

that, being funded in whole or in part by governments and regulated more

or less tightly. So in fact this narrow definition leaves little or no effective

protection for public services.

What is even more striking about TiSA is that it could effectively deprive local

authorities of key public service policy space. Its “standstill” clause would

lock in current levels of service liberalisation permanently, by banning any

moves from market to public provision of services unless there exist explicit

exemptions. That is, once a city or state liberalises and/or introduces a public-

private mix to service delivery, the level of liberalisation is fixed and a (future)

government cannot go back on this decision.

Take the example of the National Health Service (NHS) in the UK, which is

publicly run. The government’s Health and Social Care Act of 2012 opened

the door for private service providers. Since this act came into force, 70 per

cent of health services put out to tender have gone to the private sector.

Saving the NHS from further privatisation has been the focus of the growing

protest against the TiSA (and the TTIP) in the UK. Indeed, if the UK govern-

ment wanted to change health policy and regulation after signing on to the

agreement to bring the NHS fully back into public hands, TiSA’s standstill

clause would likely prevent it.

In the UK, water, railway and energy services were privatised in the 1980s and

1990s. After decades of private management, public opinion polls have shown

that the majority of people want public ownership of these services (71 per

cent for water, 68 per cent for energy, 66 per cent for railway).

TiSA’s stand-

still provision would be enough for private investors to claim the impossibility

to reverse privatisation and they would not even need to bring the government

before an international arbitration court to settle the matter (while they could

certainly do so to obtain lucrative compensation). The standstill provision

precludes remunicipalisation and renationalisation unless sectors have been

explicitly excluded in the agreement.

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Chapter eight

TiSA

The Trade in Services Agreement (TiSA) negotiations were launched in late

2012 with the aim to liberalise global trade in services and to improve rules

in the areas of licensing, financial services, telecoms, e-commerce, maritime

transport and professionals moving abroad temporarily to provide services.

The EU and the US are the main proponents of the agreement. The original

16 members of the TiSA have expanded their ranks to include 23 parties.

Since the EU represents 28 member states, there are 50 countries repre-

sented. Criticism about the secrecy of the agreement arose after WikiLeaks

released part of the negotiated document in June 2014. Public Services

International (PSI), a global trade union federation, warns that TiSA makes

it easier for multinationals to take over vital public services, such as health

care and education. PSI warns that TiSA will also restrict governments’

rights to regulate stronger standards in the public interest. ISDS does not

appear to have been included in the negotiation so far but this treaty could

have devastating impacts on the prospects for remunicipalisation.

Box 4

Trading away democracy

The TTIP, TPP, CETA and TiSA are increasingly being challenged in Europe

and elsewhere. In October 2014, over 400 actions were organized in 20

European countries to reject the secret trade deals that the EU is negotiating.

A European Citizens’ Initiative had collected one million signatures in just

two months by December 2014 to call on the EU to stop negotiations on the

TTIP and not to ratify CETA.

Critics are particularly concerned about ISDS

provisions in CETA and their probable inclusion in the TTIP.

The European Commission held a public consultation on ISDS in the summer

of 2014. Nearly 150,000 people contributed from a wide range of institutions

– the highest number of responses ever for an EU consultation – showing the

strength of public opinion on the matter. This included the European associa-

tion of public water operators Aqua Publica Europea, which considers “that

recourse to ISDS will not improve in any way the investment flow between

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Trade agreements and investor protection: A global threat to public water

the US and EU, may create discriminatory conditions for domestic companies

and, above all, can lead to a limitation of states’ right to decide how to organize

the provision of public services.”

The European Commission nevertheless

made clear that it would not drop the controversial ISDS provisions from the

TTIP negotiation.

There is growing concern by parliamentarians and local authorities with the

secrecy of negotiations. The three umbrella organisations of German munici-

palities jointly denounced the risks posed to public services by the CETA,

TTIP and TiSA.

They argue that public services should be taken out of these

agreements and remunicipalisation of public services should not be impeded.

Herta Däubler-Gmelin, professor of law and former Minister of Justice in

Germany, sharply pointed to the lack of legitimacy of these negotiations and

the threat they represent to the principles of democracy

as they will require

changes in laws at the national level.

At least CETA now excludes certain services such as drinking water due to

strong public pressure. If drinking water services were to be included in TiSA,

the effect would be even greater than what was feared in the case of CETA.

CETA

The Comprehensive Economic and Trade Agreement (CETA) is a free trade

agreement between Canada and the EU. It includes an ISDS mechanism.

On September 2014, Canada and the EU announced the conclusion of the

negotiation process. The agreement must still be approved by the European

Council and the Parliament, and ratified in Canada. If approved, the agree-

ment will come into effect in 2016. As regards water services, after con-

siderable pressure from the public to exclude them from the agreement,

Canada and the EU have included broad reservations on ‘market access and

national treatment’ obligations with respect to the collection, purification

and distribution of water. These reservations give governments the authority

to restore public monopolies where water privatisation has failed, but foreign

investors can still challenge this decision under the fair and equitable treat-

ment principle and the expropriation provisions of the investment chapter.

Box 5

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Chapter eight

Conclusion

Remunicipalisation is a response of municipalities and citizens to devast-

ing privatisations and is a clear expression of the desire to take services back

into public hands. Remunicipalisation is a remedy for municipalities when

a private company fails to meet its contractual obligations and when a pri-

vate contract becomes socially and financially unsustainable. This small but

legitimate window to exercise democracy must not be allowed to close due to

excessive investor protection through ISDS.

Satoko Kishimoto is coordinator of the Reclaiming Public Water

Network and the Water Justice Project at the Transnational

Institute (TNI).

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Trade agreements and investor protection: A global threat to public water

Endnotes

1 Lobina, E., Kishimoto, S. and Petitjean, O. 2014.

Here to stay: Remunicipalisation as a

global trend.

Amsterdam: PSIRU, TNI and Multinationals Observatory.

http://www.

tni.org/briefing/here-stay-water-remunicipalisation-global-trend?context=599

2 “The majority of known cases are handled by the World Bank ’s International Center

for Settlement of Investment Disputes (ICSID) in Washington. The second most

used rules are those of the United Nations Commission on International Trade

Law (UNCITRAL). The Permanent Court of Arbitration (PCA) in The Hague,

the London Court of International Arbitration (LCIA) as well as the Paris-based

International Chamber of Commerce (ICC) and the Stockholm Chamber of

Commerce (SCC), both business organisations, also regularly handle disputes.”

Taken from: Eberhardt, P. and Olivet, C. 2012.

Profiting from injustice: How law firms,

arbitrators and financiers are fuelling an investment arbitration boom.

Brussels and

Amsterdam: Corporate Europe Observatory and Transnational Institute, p. 14.

http://www.tni.org/sites/www.tni.org/files/download/profitingfrominjustice.pdf

3 Olivet, C. and Eberhardt, P. 2014.

Profiting from crisis: How corporations and

lawyers are scavenging profits from Europe’s crisis countries.

Amsterdam and Brussels:

Transnational Institute and Corporate Europe Observatory, p. 11.

http://www.tni.org/sites/www.tni.org/files/download/profiting_from_crisis_1.pdf

4 See the cases of Berlin, Stuttgart and Antalya on the Remunicipalisation Tracker:

http://www.remunicipalisation.org

5 See the detailed case of Castres on the Remunicipalisation Tracker:

http://www.remunicipalisation.org/#case_Castres

6 PSI, TNI, Amrta Institute for Water Literacy and Jakarta Water Trade Union. 2014.

The unfair cooperation agreement on water privatisation.

The eve of de-privatization

in Jakarta series 3.

http://www.tni.org/sites/www.tni.org/files/download/

fact_sheets_3_the_unfair_final.pdf

; Azpiazu, D. and Castro, J. E. 2012.

Aguas públicas: Buenos Aires in muddled waters. In Pigeon, M., McDonald, D. A.,

Hoedeman, O. and Kishimoto, S. (eds.),

Remunicipalisation: Putting water back into

public hands,

p. 58-73. Amsterdam: TNI.

http://www.municipalservicesproject.org/

sites/municipalservicesproject.org/files/uploadsfile/remunicipalisation-chap4-

BuenosAires.pdf

7 Buenos Aires (city), Buenos Aires province, Gran (sixth largest sub-region of Buenos

Aires province), Santa Fe, Tucuman, Mendoza, Catamarca, Salta, La Rioja. See for

more details: Dagdeviren, H. 2011. Political economy of contractual disputes in

private water and sanitation: Lessons from Argentina.

Annals of Public and Cooperative

Economics

82 (1): 25-44.

8 Spalton, C. 2012. Argentina held liable in water tariff case.

Global Arbitration Review,

13 June.

http://globalarbitrationreview.com/b/30609/

9 Refer to the detailed case found in the Remunicipalisation Tracker:

http://www.remunicipalisation.org/#case_Buenos%20Aires%20Province

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Chapter eight

Global Arbitration Review.

2006. Argentina suffers arbitration blow. 16 June;

the detailed case is also on the Remunicipalisation Tracker:

http://www.remunicipalisation.org/#case_Santa%20Fe%20Province

Global Arbitration Review.

2006. Argentina loses on jurisdiction. 11 August.

Global Arbitration Review.

2014. Investors line up against Mexico. 4 November.

Global Arbitration Review.

2014. Water utility taps Estonia for damages. 14 October.

14 Refer to the detailed case on the Remunicipalisation Tracker:

http://www.remunicipalisation.org/#case_Sofia

15 Refer to the detailed case on the Remunicipalisation Tracker:

http://www.remunicipalisation.org/#case_Montbeliard

16 Knottnerus, R., van Os, R., van der PasPietje, H. and Vervest, P. 2015.

Socialising

losses, privatising gains: How Dutch investment treaties harm the public interest.

Briefing

(January). Amsterdam: SOMO, Both ENDS, Milieudefensie and TNI, p. 6.

http://www.tni.org/briefing/socialising-losses-privatising-gains

17 For analysis on the challenges of remunicipalisation, see: McDonald, D. A. 2012.

Remunicipalisation works! In Pigeon, M., McDonald, D. A., Hoedeman, O. and

Kishimoto, S. (eds.),

Remunicipalisation: Putting water back into public hands,

p. 8-22.

Amsterdam: TNI.

http://www.tni.org/briefing/remunicipalisation?context=599

;

Kishimoto et al 2014, op.cit., p. 5.

18 European Commission. 2014. Letter from the Directorate General on Trade, 11

December.

http://www.parliament.uk/documents/commons-committees/Health/

Health-Committee-TTIP-correspondence.pdf

19 Eberhardt, P., Redlin, B. and Toubeau, C. 2014.

Trading away democracy: How CETA’s

investor protection rules threaten the public good in Canada and the EU.

Amsterdam:

TNI.

http://www.tni.org/briefing/trading-away-democracy

20 Sinclair, S. and Mertins-Kirkwood, H. 2014.

TISA versus public services.

PSI

Special Report. Ferney-Voltaire, France: PSI.

http://www.world-psi.org/en/

psi-special-report-tisa-versus-public-services

21 McCluskey, L. 2014. The NHS is being taken over by Wall Street. And Cameron won’t

stop it.

The Guardian,

17 July.

http://www.theguardian.com/commentisfree/2014/

jul/17/nhs-taken-over-wall-street-cameron-health-service-privatisation

We Own It.

n.d. The cost of privatised living.

http://weownit.org.uk/privatisation-failing/cost-privatised-living

23 Trumbo Vila, S. 2014.

European civil society rejects TTIP, CETA and TISA.

13 October.

http://www.tni.org/article/european-civil-society-rejects-ttip-ceta-and-tisa

24 Stop TTIP. 2014. Self-organised European citizens’ initiative against US and Canada

trade deals tops a million signatures in record time. Press release, 4 December.

https://stop-ttip.org/self-organised-european-citizens-initiative-us-canada-

trade-deals-tops-million-signatures-record-time/

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Trade agreements and investor protection: A global threat to public water

25 Corporate Europe Observatory. 2015. TTIP investor rights: The many

voices ignored by the Commission. 3 February.

http://corporateeurope.org/

international-trade/2015/02/ttip-investor-rights-many-voices-ignored-commission

26 European Federation of Public Service Unions. 2014. Municipalities concerned about

CETA, TTIP and TISA. 28 October.

http://www.epsu.org/a/10865

27 PSI. 2014. Speech – Herta Däubler-Gmelin, former Member of Parliament and

Minister of Justice, Germany. 17 October, Geneva.

https://www.youtube.com/

watch?v=bWQrxP_ALak&index=5&list=PLTth89T4iWwzzMQq2fjNA6jD8Hp3KwJHz

28 Sinclair, S., Trew, S. and Mertins-Kirkwood, H. (eds.). 2014.

Making sense of the

CETA: An analysis of the final text of the Canada-European Union Comprehensive

Economic and Trade Agreement.

September. Ottawa: Canadian Centre for Policy

Alternatives, p. 112-120.

https://www.policyalternatives.ca/sites/default/files/

uploads/publications/National%20Office/2014/09/Making_Sense_of_the_CETA.

pdf

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Conclusion

Reclaiming public water

through remunicipalisation

Satoko Kishimoto, Olivier Petitjean and Emanuele Lobina

Remunicipalisation is an undeniable trend as evidenced by the analysis pre-

sented in this book. Despite more than three decades of relentless promotion

of privatisation and public-private partnerships (PPPs) by international finan-

cial institutions and national governments, many cities, regions and countries

have chosen to close the book on private water and to bring services back into

public control. More than 235 cities from 37 countries have remunicipalised

water services over the last 15 years.

Remunicipalisation is generally a collective reaction to the unsustainability of

water privatisation and PPPs. The pace of this trend has accelerated dramati-

cally. It has been most symbolic in France, the country with the longest history

of water privatisation, which is also home to the leading water multinationals.

The experiences in other key countries (US, Germany) and major cities (Paris,

Jakarta) featured in this book also demonstrate that privatisation and PPPs

fail to deliver on the promised benefits to local governments and citizens and

that public management is better suited to meet the long-term needs of end

users, local authorities and society at large – including the need to protect our

local and global environment.

In most countries, the expansion of modern water and sanitation systems hap-

pened as a result of public ownership and investment in response to increasing

demand and public health concerns in urban areas. In the 1990s, however,

many countries privatised their water and sanitation services as a result of

strong international pressure to open up the services sector. Thus a similar

public effort is required today to address our pressing water challenges, such as

urbanisation and access to water and sanitation in the South, climate change

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Reclaiming public water through remunicipalisation

and water conservation. The global experience with remunicipalisation shows

yet again, that a collaborative and democratic public sector is in a better posi-

tion to lead the way into a sustainable water future.

By way of conclusion, we offer an overview of the key lessons from the cases

presented in this book and also draw from our global list of remunicipalisation

to illustrate additional cross-cutting themes such as the challenge posed to

public water services by investor protection clauses, the position of the trade

union movement vis-à-vis remunicipalisation as a social project, and perfor-

mance evaluation as a way of measuring the success of remunicipalisation.

Stop irresponsible policy prescriptions

Despite the failures of the flagship privatisations of the 1990s, including in

Buenos Aires and Jakarta, international financial institutions continue to

promote water privatisation as a solution to provide access to safe water in

the South.

A more recent example is that of Lagos, Nigeria, the largest city in Africa

with 21 million people. Only 5 per cent of residents have household water

connections and sanitation is non-existent across much of the metropolis,

while hospitals are full of people suffering from diarrhea and other water-

borne diseases. Because of the lack of access to water, people have either il-

legally connected to the public water network of the Lagos Water Corporation

(LWC) or rely on buying low quality water from private vendors. Lagos’s

reality mirrors the challenges in many other places in the world where access

to clean and affordable water is an ongoing struggle. It is clear that investments

and institutional reform are needed. In 2014, the World Bank’s International

Finance Corporation recommended private sector participation in LWC. The

public utility rejected this policy advice, leading the bank to withdraw its

loan commitment.

International and regional development banks have to

stop imposing such irresponsible policy conditions and abusing the power of

money. The Nigerian government and the public water utility LWC have to

create space for democratic discussions on how they want to improve services.

The international community should respect and support this process.

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Conclusion

Today, the same flawed model of water privatisation and private sector invest-

ment prescribed in the South is being promoted in the European Union in

the context of the financial and economic crisis, as a way to improve public

finances and to fund cash-strapped water services. This has been the case

in Greece where the attempt to privatise the water operators of Athens and

Thessaloniki failed in the face of public resistance and concurring court deci-

sions

; other countries such as Portugal, Ireland, Spain or Italy have experi-

enced similar attempts. The Portuguese Court of Auditors recently uncovered

the asymmetry that is intrinsic in PPP contracts between municipalities and

private companies, which makes it difficult for municipalities to monitor

the quality of investments and to assess financial implications.

Indeed, past

experience shows that such policies turn out to be worse for public budgets in

the long term, and lead to poor services and a loss of democratic transparency.

There is too much counter-evidence to believe naively what the private water

sector promises to deliver. The growing list of remunicipalisation from around

the world demonstrates that privatisation and PPPs are socially and financially

unsustainable; it also shows how hard local authorities and citizens have to

work to take back their services. There is growing awareness and evidence that

service management by the private sector is very expensive.

Reject privatisation and PPP

, there are