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Warren Has a Plan for Your Drinking Water—but It’s Risky
Private utilities have a better record on health. Naturally, she wants to put them out of business.
Tap water may not appear on most politicians’ priority lists, but as you’ve probably heard by now, Elizabeth Warren has a plan for everything. Her campaign site describes her wish to “take action to protect our drinking water”—a praiseworthy commitment to a resource that is essential to America’s economy, health and everyday life.
As usual, the devil’s in the details. Ms. Warren vows to prohibit the privatization of infrastructure for water treatment and delivery. She also supports legislation introduced in the Senate by fellow presidential candidate Bernie Sanders that would provide incentives for communities to terminate contracts with private water suppliers and restore water utilities to public ownership and management. These proposals punish what’s proven to work: high-performing, investor-owned water utilities. The runoff from Ms. Warren’s policies would hurt Americans in every region and economic stratum.
Today 85% of drinking water utilities are owned and managed by municipalities and other public entities. The rest are controlled by private companies, some closely held, others traded publicly. While there are many excellent municipal water suppliers, academic studies consistently show that for-profit companies do a better job than government entities at removing contaminants from drinking water, as concluded last year in a report from the National Academy of Sciences.
One key reason for this is that there are too many drinking-water utilities. It would be logical to have a few hundred of them to handle water distribution throughout the country. Instead, the U.S. has about 50,000 water suppliers, many times the combined number of electricity and gas utilities. This amounts to more than 16 water utilities for every U.S. county. These little providers aren’t only in rural places; Los Angeles County, the nation’s most populous, has more than 200 of them. In all, 92% of drinking-water utilities serve 10,000 or fewer customers each.
Such an unwieldy number of utilities leads to inefficiency and waste. Far worse, it has a direct effect on public health. The smaller the drinking-water utility, the greater the likelihood that it lacks the funds needed to hire highly skilled engineers, buy new treatment equipment, and replace aging infrastructure. Government companies are nearly 30% more likely than their private counterparts to incur violations of the Safe Drinking Water Act, according to a 2016 study in the American Journal of Political Science. Many of these violations go on for years, subjecting millions to water with unsafe levels of contaminants.
There are a few reasons for the disparity. Private water companies are subject to a layer of regulatory oversight from state public utility commissions from which municipal utilities are ordinarily exempt. When violations are found, regulators are often reluctant to hit small municipalities with fines, and are quicker to punish violations of private operators. That fear of a financial penalty encourages private companies to be vigilant.
One solution is to encourage the consolidation of utilities, starting with the many serial violators of health standards. Incentives should be given to smaller communities to merge their utilities with their neighbors’. And, contrary to Ms. Warren’s plan, it would also be helpful to sell local water services to private companies, or outsource their management. This way, they would have adequate funding to hire staff, comply with ever more complex regulation, invest in infrastructure, and become more efficient through mergers.
Fears of price gouging by private water companies are overblown, as state utility commissions have the authority to set rates. In contrast, mayors and other elected officials overseeing government-run water systems often keep rates artificially low to avoid a revolt among taxpayers. Those consumers may not know that their utility has incurred health violations, or that something like 40% of the system’s water is lost to leaks due to long-deferred infrastructure repairs.
As a drinking-water activist, I focus only on getting the safest water possible to the largest number of people at an affordable price. I’m agnostic as to who delivers the water. With the right incentives in place, both public and private companies can do so with equal competence and concern for the public good. Ms. Warren’s ideologically driven plan would exclude private companies from the nation’s water systems while doing little to improve the public suppliers.
Mr. Siegel is author of “Troubled Water: What’s Wrong With What We Drink.”
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