Water Torture: Privatization Leaves Us High And Dry

Here in the UK the government spent most of the last 150 years (and loads of taxpayer cash) buying up the water companies, convinced that private corporations are not the best organisations to deliver such an essential service. All that changed in 1989 when the Thatcher government flogged off the lot under the 1988 Water Act. And in case no one was interested in picking up a monopoly or two, the firesale came with some additional incentives; £5 billion worth of debts owed by the water authorities would be written off and a £1.6 billion subsidy would be given up front. Monopoly, debt write-off and a cash incentive still not enough for you? Well, how about having the companies at a bargain basement 22% discount too?! Unsurprisingly pre-tax profits of the 10 water companies then rose by almost 150% in the first 9 years of privatisation. OFWAT, the sector's regulatory body, identified three main components of customers' bills: operating costs, capital charges (for investment and renewals), and operating profits. Over the period since privatisation, operating expenditure as a proportion of bills has shrunk; the capital charges have risen; but operating profits, which have more than doubled, account for virtually the entire increase in customers' bills. And the tide shows no signs of turning. In the week when Thames Water announced that there would be a hosepipe ban in London, the company's shareholders also enjoyed a 10% profit. No "cash drought" on the horizon then? Although it's raining cash for investors it's more like a golden-shower for the less fortunate customers. Not only has OFWAT agreed to further massive price hikes, but Thames Water also manages to lose over a third of the water through the antiquated Victorian pipe system that they just can't seem to afford to fix (pissing away 1 billion litres a year, enough to fully supply Birmingham). The company had agreed an investment plan with the regulator, but then curiously spent £350 million less on it than planned, the equivalent of 10% off every customer's bill. So where did that 10% end up? Drained away down the profit plug hole perhaps? _ http://www.schnews.org.uk/archive/news536.htm [Proofreader's note: this article was edited for spelling and typos on March 27, 2006]

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