Privatizing Providence Water will hurt Rhode Island ratepayers, imperil crucial resource

To protect ratepayers, safeguard a critical public resource and maintain public accountability, the Rhode Island General Assembly should reject two related bills that would allow the City of Providence to sell or lease the Providence Water Supply Board (PWSB) in order to infuse cash into the city’s pension fund.

The bills, House bill H8123 and Senate bill S2838, are moving through the General Assembly. S2838 is getting a hearing Tuesday, May 29, 2018, at 4:30 or later in the Senate Judiciary Committee, Room 313 of the State House. The House bill is before the Finance Committee and does not yet have a hearing.

Selling Providence Water, which supplies clean water to about 60 percent of Rhode Islanders, has come up repeatedly over the past 30 years. In that time frame, many municipalities worldwide have experimented with water utility privatization. Private or public-private partnerships typically cause water rates to rise by 59 percent, according to Food and Water Watch, and often leads to mismanagement, lower water quality, poor service and a loss of public control over a resource we cannot live without.

When municipalities in Georgia, North Carolina, Indiana, Texas and Florida privatized their water, corruption, environmental problems and a flood of customer complaints followed. Private water utilities set huge rate increases, failed to comply with federal laws regarding water contamination and used haphazard billing practices.

One of the companies interested in running PWSB, the French-owned Suez, ran the Atlanta system, where residents got brown tap water but the mayor got a Suez-funded $12,000 vacation in Paris. Atlanta later reclaimed public control over its water, as did Indianapolis and dozens of other cities. That can be expensive. Indianapolis paid $29 million to end its contract with Veolia. Fort Wayne paid $67 million to buy out its contract from the firm Aqua. Paris, France, saved $46 million in the first year after terminating its contract with private water companies Veolia and Suez.

If these two bills pass Rhode Islanders can expect higher bills. After privatization, water rates typically increase at about three times the rate of inflation. Market forces, not the public good, will drive decisions made by any entity controlling PWSB. Looking at water as a commodity rather than a critical public resource allows companies to justify higher rates, diversion – selling water for export, for example – or cost-cutting measures that could damage our water infrastructure and service. In Dillon Beach, California, where the private, investor-owned Cal Water owns the water system and sets the rates, residents ration water and pay more than municipalities with publicly managed water. Cal Water’s CEO, on the other hand, was making $2,759,796 in annual compensation by 2015.

Those interested in the deal have publicly acknowledged that rates are likely to increase. Vincent Mesolella, chairman of the quasi-public Narragansett Bay Commission (NBC), which runs two water treatment facilities and manages sewers, wants the NBC to buy the PWSB. He said in a GoLocalProv interview on May 15 that water rates would likely rise after 3 or 5 years. Providence Mayor Jorge Elorza, who wants to fix the pension problem in an election year, has said there would be below-average rate hikes. It is unlikely legislation can enshrine that promise.

Ceding control of Providence Water via public-private partnership or to a private firm means there will be a lack of public oversight. It would be difficult to monitor how the system is maintained, or what corners are cut to ensure profitability.

Already, a lack of transparency is on display. Mesolella, in his interview, said the sale or lease had “nothing to do with the pension” problem and that the proposed sale or lease was “not a bailout.”

But the recommendation to sell or lease PWSB came from a 2016 analysis from the National Resource Network (NRN), commissioned by Providence, that was designed specifically to help address Providence’s financial problems. Page 83 of the report reads “Revenue Initiative: Monetize PWSB, Proceeds to Retiree Liabilities.”

Mesolella’s framing of the sale as disconnected from the pension problem is disingenuous at best and at worst an effort to mislead the public. According to a Providence Journal article, NBC spokeswoman Jamie Samons said merging NBC’s operation and the water supply board has been a 25-year dream for Mesolella. What is at the root of that dream? Will it be a nightmare for Rhode Islanders?

We cannot solve decades of financial mismanagement and political pandering by putting water, critical to our health, economy and future, at risk. We cannot trust that a private entity will protect Rhode Islanders’ interests, but we know there is a market incentive to raise rates and cut management costs. Research indicates that privatizing water increases inequality and hits low-income and marginalized communities especially hard. And we know that once the PWSB is sold or leased to a private utility, we will have no control over it.

And now, there are market incentives for private entities to take control of water, or to encourage weak water laws. By 2025, water scarcity is predicted to be a widespread problem. A private entity stands to profit from exporting clean water like that supplied by the Scituate Reservoir, that feeds PWSB. In Maine, Michigan and California, weak laws allow multinational corporations like Nestlé to mine water — to take billions of gallons, sometimes via expired permits, for just a couple of hundred dollars a year.

Rather than joining the scores of cities worldwide that have experimented with privatizing water and then paid millions to reclaim it as a public resource, Providence should abandon the idea of treating water like a commodity and keep its water public.

Here’s a link to a petition to sign if you are opposed to losing this valuable resource:

https://petitions.moveon.org/sign/keep-the-providence-water.fb47?source=c.fb&r_by=592799

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About Gillian Kiley 1 Article
Gillian Kiley is a parent and a Cranston resident who works in nonprofit and higher education communications.

1 Comment

  1. this is a really important issue because there is so much to lose.
    However, Providence really does have pension obligations that will likely be financed thru much reduced pensions and/or increasing already high taxes which can undermine the city’s chances of providing services and attracting business, investment. As I understand it, Providence is not allowed to profit on water sales to other communities, perhaps that should be allowed at a slowly increasing rate. After all, the city invested resources and political capital in developing the water supply and has done a good job of protecting the water including by keeping people and development out of the immediate watershed.
    That said, I do have complaints about the Providence Water Supply bureaucracy. They went from quarterly to monthly billing, thus tripling transaction costs. They are reportedly spending about $25 million to move offices to a remote Industrial Park, closing their more convenient Academy Avenue office. The PUC has proven useless on controlling such costs that are passed on to users.

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