Water: private property?

In November 2009 the Italian government adopted the Ronchi law which forces local governments to decrease their ownership of water management companies in Italy – by selling off their shares to private holders. In reaction to this law several referendums have been organized by grassroots organizations to demand that the government repeal the law.

Article by Michele Boato, professor in Economics, director of Gaia and a member of Alexander Langer, the Ecoinstitute of Veneto. He is also environmental and on the ground director of Federconsumatori, the Italian consumer organization.

The referendum on the proposed Ronchi bill is an occasion to tackle an important theme that has a direct impact on the lives of all Italian citizens.

When taking a position we must look at the numbers. The public system is continually plagued by 30 percent losses, but history suggests that multinationals will raise prices.

How can a community best organize their drinkable water resources?

“Long live free markets! They free us from inefficiencies and the parasites of government!”

“Markets speculate on anything and everything and they encourage theft, only the public sector can save us!”

Before confronting an issue as important or complex as access to water we must first distance ourselves from the temptation of falling into the use of superficial political attack slogans.

It would be wrong to reject the benefits of free and honest competition, as it would be wrong to undervalue the presence of a guiding and regulating public hand. This is especially true when the issue at hand is that of the provision of an essential service like health, education, mobility, waste, energy or water.   

Pure ideology  

The referendum that is gathering signatures from across Italy is not against the proposal to make the management of Italy’s water networks more efficient.

What it is against is the Ronchi bill that would oblige municipalities to entrust their water services to publically traded companies that run on a minimum of 60 percent private capital, starting in 2013. It also states that by 2015 the companies should rely on 70 percent private capital.

Moreover, there is a resistance in Italy to the idea of utilizing this type of profit driven organization, instead of a public organization that is obliged to reinvest all profits back into the improvement of services.

This bill chooses to overlook the actual system in place. It does not try to see if a public system could be made more efficient, because it is based on the ideology “private is better.”

Between the Italian regions of Arezzo and Puglia       

In recent history several Italian regions have experimented with private water management systems, the results have not been very positive.

In the city of Terni, Umbria region, when water services were privatized costs to consumers quadrupled without any improvements to services.

In the city of Latina, in the Lazio region, from 2005 to 2009, the new company AcquaLatina raised prices by 500 percent for families and by 390 percent for businesses.

In the Tuscany region, in the city of Arezzo, after a disastrous experience with water managed by a French water company, citizens have made it clear that they want to return to a publicly managed system.

Beyond all of this criticism of the private management of water, there still remain huge problems with how the public sector manages water.

We should ask ourselves why Riccardo Petrella, a main figure in the Italian grassroots water movement, shortly after being nominated President of water management in Puglia abruptly resigned from his position without explanation. He had been nominated in 2005 by the then president of the region Nichi Vendola.

And don’t forget about the enormous waste of water by the Italian chemical, energy and most importantly in the agriculture sector.

The agriculture sector uses 50 percent of all water withdrawn and 40 percent of that is lost to evaporation that is caused by inefficiencies in the irrigation systems employed.   

Moreover, in the different regions there are very few agricultural land registry offices and few updated industrial water plants.  There are even fewer municipalities who control the hundreds of thousands of private wells. Left unregulated these wells can leak unsanitary water onto the water market or they can be a source of pollution.

Finally, Italy is behind several other countries in that it does not yet have any laws to oblige new building or newly renovated buildings to incorporate rain catchers. These could be used to collect water for non-drinking uses like cleaning and gardening.   

Key terms in the debate:

In House: A type of structure where the management of public services is contracted out to a private company by the local government and where complete control of shares is also given over. According to the Ronchi bill (the bill which the referendum in question is trying to oppose) the managing companies would have to progressively transform company shares into private capital. The total public funding in an organizations would be limited to 40 percent of total capital starting in 2013 and would have to be further reduced to 30 percent by 2015. Those companies who have not yet gone public on the stock exchange but that already manage water services for a local region would have to transform 40 percent of their funding into private capital by 2011.

Remuneration: An article of the environmental code states that rates for water services should be determined taking into account “the pertinence for remuneration of capital investment.” The third question of the referendum looks to repeal this.