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An Idea That’s All Wet

There’s a story in Tuesday’s Wall Street Journal about the attempt by several towns around the country to take over their currently privately run water supply.  Over and over the proponents of these types of actions, whether taken against oil companies in some foreign countries or water companies here, blame profits for rising prices.

Of course net profit (when it exists at all) is always a small percentage of the revenue of nearly any operation.  And profit is the necessary motivation to keep us working hard to please each other.  Any profit a company earns would always dwarfed by the extra expense that is paid when government, with its inefficiencies and corruption (same thing, really) tries to do the same job.  This is why market economies work and communism doesn’t.

From the story:

Municipalities in Massachusetts, California and Texas have recently filed lawsuits or set ballot measures in a bid to gain control of their water systems. Private firms have defended their rate increases, saying they have had to spend money to improve the infrastructure and are entitled to make a profit……………

In the 1980s and 1990s, private water companies pushed to buy or manage municipal systems at the same time the costs of maintaining these systems were rising because of age, which made sales attractive to cities, said Tony Arnold, a University of Louisville law professor who has studied water privatization. “In order to make a profit [and] invest in upgrades to the system, the companies [had] to raise water rates substantially and quickly,” he said………………….

“Communities large and small are increasingly seeking to maintain or revert back to public control of their water systems,” said Seth Gladstone, spokesman for the group. Privatization raises costs because of the profits companies must make, he said, adding that customers have more oversight of local systems.

Michael Deane, executive director of the National Association of Water Companies, said although some of the towns attempting to take over their water systems have received a lot of attention, other cash-strapped ones are still turning to private companies. Private community water systems served about 42 million Americans in 2012, and public systems served some 300 million, he said.

Municipalities sometimes keep water prices impractically low, Mr. Deane said. “Oftentimes the city council may not be as responsible as [state] public service commissions in making sure the utility has the funds it needs to make improvements,” he said.

Public-service commissions generally regulate private companies but not publicly owned systems.


Some of you may recall that around 15 years ago then-mayor Ken Pringle tried to sell our water company to Jersey American.  Unfortunately the plan was rejected in a public referendum.  Had it passed, rates might or might not have been higher than than we are paying absent the sale, but even if they had gone up some it’s doubtful we would have paid more than the $5 million maintenance bill we’re on the hook for now.  Plus we would have had the money from the sale.  And we can’t say we weren’t warned about all the work our system was going to need because we were warned at the time.

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