The Fight to Take Public Assets Back from Private Control May Be Winning in California
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While high profile privatizations have dominated the news in recent years, a new trend is quietly emerging -- communities taking public assets back under public control. The trend is most pronounced in the area of water resources. In communities across the country, people are deciding that water is just too precious to subject to the profit motive.
No state has seen more of these "reverse" privatizations than California. Today, multiple towns are fighting for-profit firms for control of the public's water. One of those firms is the New Jersey-based for-profit American Water (known as California American Water Co. or Cal Am in California).
On the scenic Monterey Peninsula, a citizen's group called "Public Water Now" makes a compelling case for public control of the peninsula's scarce water resources. Public Water Now alleges that Cal Am's long-term mismanagement of the water resources and failed efforts to secure new water resources have cost ratepayers some $100 million since 2004.
In 1995, a court ordered pumping of the area's primary water source, the Carmel River, to be cut back by 70 percent by 2017. With the deadline looming, Cal Am has failed to secure another source of water. "Cal Am has shown either poor planning, poor management, poor judgment, poor decision-making, or all of the above," says Public Water Now's website. Even though it has failed in its major responsibility to the Monterey Peninsula, the firm has raked in a steady rate of profit from peninsula residents -- 30 cents on the dollar in pretax profits for 2012.
After abandoning two prior plans for establishing desalination facilities, Cal Am has a new proposal for another "desal" plant. The project would depend on a ratepayer surcharge and a public bond offering. This would pass nearly all risks on to ratepayers say critics, but at the end of the day ratepayers would have no ownership stake in the asset.
Some peninsula residents are saying enough. They want public control of the public's scarce water resources.
When it Comes to Precious Water, Is it Better to Be a Renter or an Owner?
In the United States, 86 percent of Americans receive their water services from a publicly owned and operated utility. But for-profit firms have made inroads in recent decades and see public water as a new profit center. In 2011, Citigroup economist Willem Buiter predicted that "water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals."
"Any solution to the Monterey Peninsula's serious water problem demands long term planning, long term investment and a consistent public planning process unfettered by short term demands for shareholder profitability. Public ownership and public control would make the whole process easier and remove conflicts of interest," Wenonah Hauter, Executive Director of the non-profit watchdog group Food & Water Watch, told CMD.
Cal Am is "so strongly driven by pure profit that they will simply ignore more economical options," says Ron Cohen. Cohen, a successful software executive, founded the nonprofit advocacy organization Public Water Now. The group studied the situation and drafted an initiative for voters that would require the Monterey Peninsula Water Management District to pursue a public purchase of Cal Am's local assets.
"You just have to ask yourself," Cohen said, "do you want to be a renter for the rest of your life, and for generations to come, or do you want to be an owner?"
The initiative reads: "The voters of the District assert that the District should, as soon as practicable and to the extent permitted by law, pursue the acquisition of Cal Am's water system assets and infrastructure in order to deliver maximum value to ratepayers in perpetuity. Such public ownership of the water system not only will remove Cal Am's current for-profit, investor-driven bias, but will also eliminate the excessive fees, costly procedures, and burdensome jurisdictional control of the CPUC over water service on the Monterey Peninsula."