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Privatization of Utilities

Privatization of Utilities. LWV Privatization Study 2012. A Public Utility is …. A public organization that maintains the infrastructure for a public service, such as for: Electricity Gas Heat Water Waste Disposal Telecommunications. Privatization Is ….

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Privatization of Utilities

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  1. Privatization of Utilities LWV Privatization Study 2012 LWV North Orange County National Privatization Study 2012

  2. A Public Utility is … A public organization that maintains the infrastructure for a public service, such as for: Electricity Gas Heat Water Waste Disposal Telecommunications LWV North Orange County National Privatization Study 2012

  3. Privatization Is … The process of transferring property from public ownership to private ownership and/or transferring the management of a service or activity from the government to the private sector. LWV North Orange County National Privatization Study 2012

  4. Privatization Strategies • Attrition • Cessation of service • Transfer of assets • Sale of infrastructure • Contracting out • Service provided by private contractor • Deregulation • Elimination of government monopoly LWV North Orange County National Privatization Study 2012

  5. Why Privatize A Public Utility ? • Efficiency • Innovation • Quality • Reduce costs • Less regulation • Raise funds • Increase tax base LWV North Orange County National Privatization Study 2012

  6. Why NOT Privatize ? • Increase cost to consumers • Accountability • Transparency • Corruption • Loss of control • Loss of expertise • Oversight LWV North Orange County National Privatization Study 2012

  7. Government Levels • Foreign • National • State • Local • City • District • County LWV North Orange County National Privatization Study 2012

  8. DoD Utilities Privatization • 1998 – Sec of Defense policy for military departments to privatize installation utilities • 150 Air Force utility systems privatized (March, 2011) • Awarded value of $1.5B • Cost avoidance of $238M LWV North Orange County National Privatization Study 2012

  9. Privatization Can Be A Disaster • The California electricity crisis • 1998 –partial divestiture of electricity generation stations • 2000 – wholesale price of electricity deregulated – not retail prices (CPUC) • Higher demand, less supply led to rolling blackouts LWV North Orange County National Privatization Study 2012

  10. City of Franklin, Ohio • Pilot project for privatization of wastewater plant constructed with federal grant funds. (1994) – EPA approved. • 24 months planning/negotiating process • Fair price for plant, reasonable rates, proper maintenance, transparency, conflict resolution. • 20 year contract with buyback provisions • Rates reduced by 23 % during first year • Future rate increases were limited to increases in the rate of inflation • Pace of economic development increased LWV North Orange County National Privatization Study 2012

  11. Columbia, MO • Argument to privatize water and electric utilities* • Immediate cash infusion • Increase tax base • Reduce municipal employees • Cited Florissant, MO sale of water utility for $14.5M in 2002 • Funds used for public improvements * David Stokes, policy analyst for the Show-Me Institute, a Missouri-based think tank (2010) LWV North Orange County National Privatization Study 2012

  12. Some Rate Comparisons LWV North Orange County National Privatization Study 2012

  13. Near-by Water Rates Source: City of Fullerton LWV North Orange County National Privatization Study 2012

  14. Reverse Privatization (Municipalization) • Felton, CA regained control of water system (2008) • According to a 2002 Century Foundation survey of 245 municipalities, 73 % ended private water contracts because of poor service*. • Some cities op for a public-public partnership (PUP). *Source: Tara Lohan, Water Solutions, the Summer 2010 issue of YES! Magazine. LWV North Orange County National Privatization Study 2012

  15. Guidelines For Utilities Privatization • Determine “there is a problem” • Perform realistic feasibility study • Hire experienced consultant • Include financial and oversight protections in service agreement • Write detailed transition plan • Provide for conflict resolution • Include “outs” (buybacks, etc.) LWV North Orange County National Privatization Study 2012

  16. “Our country must seek a pragmatic balance between social and economic returns.” - Nora Leech (LWVWA), Privatization: The Public Policy Debate LWV North Orange County National Privatization Study 2012

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