Europe: Privatised Services Back in Public Hands
By Julio Godoy
BERLIN, Jan 28, 2010 (IPS) - After the wave of de-privatisation of water services facilities that started across the world two years ago, municipalities in Europe are now buying back the electricity utilities they sold to private investors in the late 1980s and early 1990s.
In Germany, numerous city and regional governments have already ended the privatisation of the electricity facilities, or are in negotiations with the private owners.
Around the Bavarian capital of Munich, some 500 km southeast of Berlin, "the local governments are now convinced that municipal utilities are public goods that belong to state hands," Christoph Goebel, mayor of Graefelfing town, told IPS.
In Ottobrunn, another town on the periphery of Munich, the local government has just grounded a city-owned electricity provider. It says "the selling of the municipal utilities to private companies, which only obey the shareowners' interest, has proven to be a mistake."
In the federal state of Bavaria alone, some 2,000 licences for municipal utilities given to private companies 20 years ago are due to end this year. Most cities are unwilling to extend these licences, according to mayors and law counsellors. Instead, city governments are planning to take back the management of electricity and water facilities.
Matthias Albrecht, a Munich-based lawyer specialising in lease of public utilities, told the local ?Sueddeutsche Zeitung? newspaper that "the buyout of grids and other electricity facilities is practically free of economic risks" for city and regional governments. "I have observed that city and regional governments are good managers."
In Berlin, the city government is seeking a change in the terms of concession on water facilities to French company Veolia. The contract with Veolia ends only in 2028, and the city government cannot adjust it at will, but it would like "to modify the distribution of profits," Ulrich Nussbaum, Berlin commissioner for finances, told IPS.
"There are several points in the concession that need to be modified urgently," Nussbaum added.
Michael Cunnac, head of the Berlin-branch of Veolia, agreed to negotiations. "The city government and us will discuss the contract in a constructive way," he said. But Cunnac made clear that Veolia is not willing to terminate the contract. "An end of the concession is out of question."
Similar trends in the re-municipalisation of public utilities privatised during the last 20 years are emerging in many cities all over Germany, and in other European countries.
The city governments are only belatedly following the advice of economists and local activists. In a study released in 2006, Heinz Josef Bontrup, professor of urban economy at the University of Gelsenkirchen, concluded that "the privatisation of municipal utilities is not beneficial, both in financial terms and in the quality of services to the people they provide."
In Paris, the municipal administration will this year regain control of all water services for the city, ending a private monopoly that has lasted more than 100 years.
When city mayor Bertrand Delanoë announced the end of the private monopoly of water services in June 2008, he promised "to offer a better service, at a better price. We also promise that prices would be stable."
Both considerations are now the basis for local governments' claims in support of re-municipalisation of public utilities, Olivier Hoedemann, member of the Corporate Europe Observatory (CEO), told IPS.
CEO is a watchdog group monitoring large European private companies. It set up a Water Re-municipalisation Tracker in 2008 to document the decline of the privatisation of water facilities around the world.
"The privatisation of water facilities has proven all over the world to be a major mistake, both in terms of prices and of the quality of services provided to the citizens," Hoedemann said in an interview.
Hoedemann said that German re-municipalisation of public utilities is in line with a global trend. "Even the European Commission (EC), which for many years supported the privatisation of public goods in developing countries, has changed its position, and now supports the public management of municipal facilities."
He pointed to the new EC water facility, a European programme to support development of state-managed water utilities in the group of 78 African, Caribbean and Pacific (ACP) countries.
The water facility, to be officially presented next month, will allocate 200 million euros (290 million dollars) up to 2013 for the development of the water sector in the ACP countries.
The EC water facility also focuses more on sustainable improvement in the capacity of local governments and local civil society organisations for better water services for the poorest, in cooperation with European partners.
"In this sense, the facility constitutes a real change compared to the first phase of the former EC water facility (2004 to present), where the emphasis was put on supporting public-private partnerships and grants for projects of large EU-based non-governmental organisations, both of which have yielded unsatisfactory results," Hoedemann told IPS.
Most remarkably, he said, the EC has for the first time allocated a separate budget of 40 million euros (56.2 million US dollars) to support cooperation between public water companies in Europe and the ACP countries.
"The Commission now seems to have realised that improving the existing public water supply in developing countries is the most effective way to promote access to clean water and that this can be done through not-for-profit cooperation with efficiently operating public drinking water companies, whether from Europe or from the ACP countries themselves," Hoedemann said.
Hoedemann said there is increasing interest in such public-public partnerships across the world as a result of the failure of water privatisation, and also as a solution to the water crisis in developing countries.
"When the Water Re-municipalisation Tracker counted earlier 2009, we found over 130 such partnerships, in over 70 countries," Hoedemann said. "Also, the United Nations has started supporting this approach, through the Global Water Operator Partnerships Alliance, hosted by U.N.-Habitat."