Public-Private Partnerships Alleviate Water and Wastewater Infrastructure Deficits

Public-Private Partnerships Alleviate Water and Wastewater Infrastructure Deficits
From left to right: Albert Sweetnam, project director, Seaterra Wastewater Treatment Plant; Stephen Stanley, senior vice president, EPCOR Utilities; and Regina Finn, former chief executive, Ofwat, United Kingdom, address the 21st Annual National Conference of the Canadian Council for Public-Private Partnerships. (Photo courtesy of the Canadian Council for Public-Private Partnerships)

Nations on both sides of the Atlantic are struggling with water and wastewater infrastructure deficits. An international panel at the 21st Annual National Conference of the Canadian Council for Public-Private Partnerships recently held in Toronto discussed some of the benefits and limitations of public-private partnerships (P3s), in which aspects of water and wastewater system ownership and operation are privatized. 

Panelists agreed that the cost of providing water and wastewater services will continue to rise. Price pressure includes addressing infrastructure deficits of the past, increased population and more stringent environmental regulations. 

The greatest benefit of P3s is that they force proponents to consider the lifecycle costs of each system over the length of the contract, says Stephen Stanley, senior vice president, EPCOR Utilities, which operates water utilities in Alberta, British Columbia, Arizona and New Mexico. 

“For some of the projects we’ve been working on, the capital costs only make up 25 percent of the cost over a 20-year period,” he says. “The other 75 percent is taken up by long-term operations and maintenance. If you focus primarily on capital cost, it may not ultimately lead to the lowest lifecycle costs.” 

Stanley points to the fragmented utility market as an impediment to applying the benefits of P3s to some individual projects. 

“With increased regulation, the technology used to treat water and wastewater is much more complex, and in many small municipalities, the expertise required to run some of the necessary systems offers significant challenges,” he says. 

But, the private sector tends to overlook smaller P3 projects, due to the cost and complexity of establishing the terms of the contract and lower potential profits. 

“It’s probably some of these smaller projects that would benefit best from an approach where there is long-term operation provided by companies who understand the procedures and processes required,” Stanley says. “Perhaps we could bundle some of these projects across several municipalities, rather than each municipality acting on its own, to make these projects a little larger and a little more attractive for private sector involvement.” 

Regina Finn, former chief executive of Ofwat, the water services regulation authority for England and Wales, notes that in the United Kingdom, water and wastewater services were completely privatized in 1989. The policy shifted expenses from taxpayers exclusively onto ratepayers. Since then, almost $200 billion has been invested in infrastructure as rate increases have fallen from an average of 7 percent annually to 2 percent.

However, Finn notes that even relatively small rate increases can be a problem if ratepayer income is falling in real terms. She also points to the problematic perception that utility owners are reaping “private profit at public expense.” 

Albert Sweetnam is project director for the new $783 million Seaterra Wastewater Treatment Plant, which will serve Greater Victoria, British Columbia, and will employ P3 concepts. He says he agrees that public perception is critical to the acceptance of P3s.

If a new system is brought online or if deferred maintenances is finally addressed under a P3, he notes, that’s quickly reflected in increased costs. 

“The population feels the change immediately in terms of rates,” he says. “As a result, there’s more resistance from the population to P3s related to water and wastewater and that battle is still being fought around North America.”


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