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

LWV North Orange County National 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

LWV North Orange County National Privatization Study 2012 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 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 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 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 Government Levels  Foreign  National  State  Local City District County

LWV North Orange County National Privatization Study 2012 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 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 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 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 Some Rate Comparisons

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

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