Arizona Water Resource Volume 12 Number 1

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2 Arizona Water Resource July - August 2003 Privatz�Zatzon...continued from page I privatization has not been a high profile issue in the state. Yet priva- tization is a theme in the history and current affairs of Arizona wa- ter. With privatization garnering much attention on the national and international scenes, an Arizona perspective on the issue is timely. "The Private Era" carne first Such a perspective would acknowledge that Arizona has long had privatized water services, despite much current news coverage treating privatization as a breaking development. Consider, for ex- ample, the drum roll beat of a lead in a recent `Arizona Republic" story about the city of Phoenix negotiating with a private firm for wastewater treatment services: "For the first time in its 122 -year his- tory, the city of Phoenix is turning part of its water system over to a private company." The statement is not exactly true, or at least it needs qualifications. In his book "Fuel for Growth," Douglas Kupel notes that during the early history of Arizona cities private companies mainly provided the water services for a growing population. Kupel calls this period of Arizona water history as "The Private Era." Phoenix was incorporated as a city in 1881 and according to Kupel by 1898 discontent with the operations of the private water system sparked citizen agitation for municipal ownership. Public sector continues to grow The shift from private to public controlled water utilities may not be a movement confined only to Arizona's early history. Gary Woodard, assistant director of knowledge transfer, University of Arizona's Center for the Sustainability of Arid and semi -Arid Hy- drology and Riparian Areas, argues such a movement continues to- day, with public utilities taking over private water operations, albeit without the fanfare accorded to private takeovers of public utilities. He says, "We have had the opposite of privatization going on for many decades in a big way. Tucson Water grew by buying up private water companies. Oro Valley has decided to buy out the two private water companies serving it. Sierra Vista is just beginning that process." He says plans are now underway for Green Valley Water to become public. He says, "So it is an odd thing with people saying privatization offers advantages. If so, why is it that 99 percent of the cases where you go from one form to another historically has been from private to public ?" Woodard says at one time public utilities bought private ones as part of a strip annexation wars in the Phoenix area. "What they would do — Scottsdale, Phoenix or whomever — is buy a private water company serving an unincorporated area, make it part of their water department and charge them a much higher rate for wa- ter because it was not within the city's limits. Then a year or so later they would propose making that area part of the city limits, and part of the pitch would be the price of water will drop in half. It was a strategic ploy to have the cities grow" Privatization makes inroads Many private water utilities now operate in Arizona. The Ari- zona Corporation Commission lists 306 privately owned water utili- ties operating in the state, most relatively small, serving from about a half dozen customers to a few companies that serve more than 50,000 customers. This often ensures a degree or more of local ac- countability, with decision making at the community level. Most of these systems do not hold pretensions of making anybody rich, including present owners and operators, who often are one and the same person. Most of these companies and their operations are not significant players in the ongoing privatization controversy. Yet some smaller water operations are now playing a role in the larger national privatization movement. "What we have seen in about the last five years has been this incredible consolidation, acquisition and merger by the big boys, with them buying up these smaller companies and stretching privatization where it had not been before," says Hugh Jackson of Public Citizen, an organization critical of privatization of water services. Consider Arizona- American Water Company, a subsidiary of American Water Works Company, Inc., which has recently been purchased by RWE, a German multi- national company and one of the world's largest utility groups and the third largest provider of water and wastewater services in the world. American Water Works serves 15 million people in 27 states and three Canadian provinces and was the largest publicly traded water company in the United States before joining the larger RWE family of water utilities. Various Arizona utilities are included within this extended international water services family, with Arizona- American provid- ing water and wastewater services to more than 230,000 Arizonans. Communities serviced by Arizona- American operations include Sun City and Sun City West, the Town of Youngtown, Surprise, the southern half of Paradise Valley, a small portion of western Scottsdale, Bullhead City, Lake Havasu City and surrounding areas and the historic community of Tubac. Tucson considers privatization The Tucson City Council once expressed an interest in priva- tization as a possible solution to problems confronting its water utility. This was shortly after efforts to introduce Central Arizona Project water went awry when the quality of delivered water fell far short of expectations. A public furor resulted, with Tucson Water the target of much criticism and many complaints. The City Coun- cil charged the Citizens Water Advisory Committee to review man- agement options and come up with a recommendation, with priva- tization a prime strategy to consider. This was in 1997, and Wayne Adickes of the University of Arizona's Chemistry Department was the chairman of the committee undertaking the study. The study was thorough and covered a lot of ground. Adickes said, "We looked at what was out there and what had been done elsewhere. We looked at everything we could under the sun, hun- dreds of options." Although privatization was given due consideration, Adickes did not believe it was a serious contender for the City Council's consideration and adoption, even though the council had identified it as an option. As a result the committee did not spend as much time studying privatization as it did other management options. He says, "We did not look at privatization very seriously because of the political atmosphere. The City Council made it very clear that they were not going to accept that. So why should we waste our time ?" Continued on page 12