FAQs

Below we’ve compiled a list of questions commonly asked by people who are new to the private water service industry. If you don't see the answer to your question, please Ask an Expert by clicking here and you’ll be connected to a team member who will find out for you.

Can private water companies help rural communities obtain access to water?

Private water companies are expanding to provide water to many rural areas throughout the country. This benefits thousands of customers who previously did not have water service, or who were receiving an unacceptable quality of water. It also provides fire protection capabilities for many customers who previously had no connection to an adequate water supply.

Can private water systems provide lower operational costs?

Because many private water systems are regionalized, they have the ability to provide economies of scale and a high level of efficiency. The purchase of a municipally owned water system by an investor-owned water utility will likely result in lower costs for materials, employee benefits, insurance and administration. Nationwide affiliations and mass purchasing power may result in significant savings on the cost of items such as fire hydrants, valves, pipes and meters.

Does the NAWC and the private water industry work with the UN on its implementation of a human right to water and sanitation?

The NAWC, its members and global partner, AquaFed, have worked closely with the United Nations on its implementation of a human right to water and sanitation, including the recent country visit to the U.S. of the U.N. Independent Expert on this issue, Catarina de Albuquerque. Ms. de Albuquerque has explicitly stated, ‘Human rights [to water and sanitation] do not require a particular model of service provision. They do not exclude private provision (including privatization).’ So although the DC-based lobbying group, Food & Water Watch, would like to play on water as a human right as background for its anti-private diatribes, in fact that's far from the truth.

How are customer rates established under public-private partnerships?

When a private water company is working within a partnership, the setting of the community’s water rates remains the responsibility of the city (mayor, city manager, city council or other governing body). Notwithstanding, public utility commissions (PUCs) set rates for privately owned and operated utilities based on evidence displayed during proceedings. No matter what the model – public or private – the main driver of rate increases is capital investment to provide reliable service.

How do private water companies benefit local economies?

Private water companies contribute to a community’s economic base by providing quality water and dependable service that entices new businesses to come to the area. The companies also help the local economy by paying state gross receipts, property and other business taxes. These taxes assist in the support of community services and facilities.

How do private water operating companies fulfill their public service mission while remaining a viable company?

Public-private partnerships are successful when both parties – the city and the company –are willing to cooperate to make projects a “win-win” for all involved, especially the end customers. Private water companies run very efficient utilities in part because they employ business accounting and asset management practices but they also have bargaining power to pay for equipment, tools, chemicals and other goods to keep their operation costs lower than a municipality that was trying to manage systems without help.

How does a private water system finance its operation?

An investor-owned water utility uses a combination of private capital and borrowed funds to build and expand its system. Access to private capital eliminates the need to issue municipal bonds and reliance on limited public capital to maintain a reliable and safe water supply. Virtually all costs are covered by rates or fees for service.

What are the operational benefits of privatization?

Private and investor-owned water systems provide municipalities, suburban areas and other entities with the professionalism, staff training, and advanced technology required to operate water systems under today’s stringent water quality standards. Private companies are well positioned to address proposed water quality regulations. They often have better access to capital needed to construct newer, improved facilities, leaving the municipality’s limited capital available for other purposes.

What benefits do communities realize from privatization?

Customers of investor-owned water systems receive dependable service and a safe, clean supply of quality water, and, in a number of cases, a reduction in their monthly water bills. Private water companies diligently work with state and federal officials to ensure that all standards are maintained, and that drinking water is clean and safe.

In addition, privatization can turn a municipality’s hidden equity into cash for the community. This is capital that can be put to use for other beneficial community needs or that can be invested for a long-term source of revenue. Also, privatization may create a new source of tax revenue to support municipal services. It offers a way for municipalities to utilize private sector resources and incentives to maintain, upgrade or expand existing systems.

What water quality and public health standards do water public-private partnerships have to comply with?

The first priorities for water utilities, no matter the model of ownership, operation or manner of partnership arrangement, are the health of customers and good environmental stewardship. The U.S. Environmental Protection Agency (EPA) and individual states make no distinction between models when it comes to regulation standards. That said, our largest member company received an outstanding score of 99.9 percent in drinking water compliance and a 99.6 percent in wastewater compliance with EPA standards. Also in 2010, the EPA published a series of case studies focused on the significant challenges facing small systems and how utilizing public-private partnerships were helping them stay in compliance.

Who is Food and Water Watch?

Food & Water Watch is a D.C.-based lobbying and PR organization. It was created in 2005 by 12 former members of Public Citizen, the group formed by Ralph Nader in 1971. As a marketing organization, the group has no technical water system management experience and has never had the responsibility of providing water and wastewater services to a community. Food & Water Watch is ideologically opposed to the involvement of the private sector. To advance their beliefs, they produce "reports" which are factually incorrect and misleading. As they lack technical expertise, they're unable to work with communities in providing solutions. By comparison, our members help provide water and wastewater services to nearly 73 million Americans every day. More than 2,000 water and wastewater facilities are operated in PPP arrangements. We believe the contrast between those who deliver solutions and those who lack expertise but criticize via reports is telling.

Why do cities consider public-private partnerships for water and/or wastewater?

Public-private partnerships have enabled the construction of state-of-the-art water treatment facilities while using efficient operations to hold down the costs that would have traditionally been passed through to customers. Professional water contract operators share in the risk of projects with cities and savings are realized through effective cost controls, technology applications, operational innovations and the economies of scale leveraged by larger companies with expert staff.

Why would a municipality be interested in selling to a private water company?

The advantages most commonly cited are that privatization provides cash to the community, creates a new tax source, takes advantage of economies of scale; and provides access to capital.

Municipalities also are interested in privatization as a means of alleviating the administrative burdens associated with operating a utility. This allows them to have more time and resources to govern. In addition, privatizing a municipal water system shifts the risk of supplying drinking water from the municipality to the private water company.