Another perspective on Key’s leadership.

23.3.17

The Editor,NZ Herald,

Dear Sir,

As the smiles fade and the bonhomie passes, along with the adulation by some writers, may I suggest another perspective on the ‘smile and run’ money man who has purported to lead this country.

The record shows a ‘leader’ of a government that has used massive immigration to give a false impression of a ‘sound economy.’

There is a history of denying any housing crisis, thus providing little useful response to a deepening social problem of major proportions.

We have seen little effective action to curb rampant speculative investment and manipulation from both local and overseas sources.

There have been distressing scenes of deprivation, homelessness, rack renting, and desperate people, not seen since the Great Depression.

Add to this, considerable unrest within the underfunded and undermined education and medical fields. There have been anti-environmental measures regarding global warming, conservation areas, our rivers and lakes.

Further, government statements that nobody ‘owns’ water are incorrect, because those who achieve rights to ‘take water’ get a right to posses it, bottle it, make huge profits here and overseas. Then there are those who have the right to take water for huge irrigation schemes.

There’s a lot more, but wording limits preclude it.

Posted on March 23, 2017March 23, 2017 by Tony Holman

Water – A fundamental need and right for our people.

I first wrote to leaders of all Parliamentary Parties in June of 2007 with the following proposition:

“that there should be entrenched legislation enacted to ensure that our water supplies are protected from privatisation and from international control. That entrenched legislation should also be bolstered by the need for a prior citizens referendum.”

Subsequent to the original letter to Leaders further correspondence set out additional concerns about powers which already exist (under the RMA) which allow private companies to become “requiring authorities” and “network utility operators” with the powers of local authorities and government regarding water and compulsory acquisition powers under the Public Works Act!

The next aspect related to some of the key issues which have arisen as some local authorities and Watercare have looked at, or been using water as a commodity which (being so vital) could be used as a tax/rate/profit-making device – a bit like the infamous old ‘salt tax.’

Some of the principal problems with that approach include treating water as a “commodity” not as a right and essential to life, to agriculture and to industry. Immediately one moves from the human need and right to have good potable water at the lowest possible cost and to treat it as a privately owned/supplied commodity one is rapidly moving to privatisation and profit making out of the “gold of this millennium.” A recent press article (Business section, NZ Herald) set out this approach very starkly.

“So legislation also has to prevent public owners of supply and reticulation from being able to do things as exemplified by Metrowater and proposals relating to Watercare (largely pushed by Auckland City Council) and advocated in the article.

Any legislation relating to the ‘reform’ of Watercare and/or Auckland governance must ensure that all of the above matters are dealt with in the public interest..

Finally I note that a book entitled “Troubled Water,” highlights some of the principles and pressures on this most precious gift of life – water. It also emphasizes the worrying fact that only 1% of the water on this planet is fresh water and over half of that is already polluted and that percentage is increasing quite quickly!

Having outlined those matters, I would now like to re-emphasize what I see as some of the political opportunities in this matter. Firstly, I believe that the protection argument (entrenching legislation etc) can be seen as one of wisdom, foresight and enshrining a fundamental human right and need.’

Further, not only would that be good for the whole country, but any parties adopting these policies would have the moral high ground as the initiators.

I sincerely hope your Party will see the need both morally and politically for urgently adopting these policies. I look forward to constructive engagement.”

Sincerely,

Tony Holman QSO.

That letter to Party leaders received no substantive or supportive replies
Since that time, a number of things have worsened:

Global warming is seeing a rapid reduction in fresh water as glaciers melt and rush to the sea. The ice sheets at the poles are doing likewise.

In New Zealand alone, our glaciers are retreating at an unprecedented rate, with huge implications for the future of water supplies for drinking and other uses, including power production.

Yet despite all of this, the government is allowing private companies to take huge amounts of water from springs and other sources, bottle it for large profits, and sales here and abroad.

This, in my view, is totally reckless for a host of reasons, not the least of which is that some of the formerly pristine sources of potable water for domestic and industrial supplies is becoming polluted from infiltration of farming fertilisers and animal waste.

Life-giving potable water is a human necessity and right and should be fully protected in all ways instead of allowing increasing pollution of our remaining supplies and of selling our best water for the benefit of a few.

This whole problem needs to be made a very big election issue, while there is still something to protect and retain.

Tony Holman QSO. 20.3.17

Posted on March 20, 2017March 20, 2017 by Tony Holman

Proposal to Parliamentarians to protect NZ’s water supplies and public ownership.

16 November, 2007.

Dear Parliamentary Party Leader,

re: Water & anti-privatisation legislation.

I first wrote to you and all leaders of Parliamentary Parties in June of this year with the following proposition:

that there should be entrenched legislation enacted to ensure that our water supplies are protected from privatisation and from international control. That entrenched legislation should also be bolstered by the need for a prior citizens referendum.

Subsequent to the original letter to Leaders further correspondence set out additional concerns about powers which already exist (under the RMA) which allow private companies to become “requiring authorities” and “network utility operators” with the powers of local authorities and government with respect to water and compulsory acquisition powers under the Public Works Act!

So legislation also has to prevent public owners of supply and reticulation from being able to do things as exemplified by Metrowater and proposals relating to Watercare (largely pushed by Auckland City Council) and advocated in the article.

Any legislation relating to the ‘reform’ of Watercare and/or Auckland governance must ensure that all of the above matters are dealt with in the public interest.

I am also attaching copy of an item I have had published in the North Shore Grey Power newsletter (5000+ members) and which I will be sending to all Grey Power branches as well as other organizations in the near future.

Finally (and perhaps it should have been at the top of the attachments) are some extracts from a book entitled “Troubled Water,” which highlight some of the principles and pressures on this most precious gift of life – water.

Further, not only would that be good for the whole country, but any parties adopting these policies would have the moral high ground as the initiators.

I sincerely hope your Party will see the need both morally and politically for urgently adopting these policies. I look forward to constructive engagement.

(Note: none of the attachments referred to above are included with this post).

Posted on February 19, 2017February 19, 2017 by Tony Holman

Regulation of PPPs from World Bank Report.

NOTE: This material is included here to show some of the requirements and arguments of the World Bank. I do not agree with most of them which are simply a rationale created to support the policies of the Bank. It is not an independent assessment of pros and cons of their policies, nor of the realities of what happens in practice.

Natural monopolies such as water utilities require economic regulation: a visible hand to substitute for the lack of market forces and ensure that the service provider does not abuse its monopolistic position. This approach is not easy to achieve in practice. Whether or not the government owns the utility, there is always a strong asymmetry of information between regula- tor and operator. Private operators can abuse their monopoly position to extract undue and excessive profits. Public water utilities can be captured by special interests, resulting in overstaffing, perks for political appointees, sloppy work and procurement practices, and lack of client orientation.

Water PPPs Are Not Necessarily More Difficult to Regulate
Than Public Utilities
Concerns about the difficulty of regulating private operators, in the chal- lenging context of developing countries, have been one of the major argu- ments against PPPs for urban water utilities. A regulator can, indeed, be captured by a private operator, which has strong financial interests at stake. Water PPPs are complex contracts and, in many cases, local governments with little experience in complex transactions face powerful multination- als. However, one might also observe that at least private operators operate under a framework that fosters accountability. A detailed contract spells out performance targets and mandates regular reporting. Methods for setting tariffs are stated in regulations and/or contracts, with usually much greater transparency than before. Private operators can be fined for noncompliance and can even have their contracts cancelled. Finally, PPPs tend to receive intense scrutiny from civil society—much more, in fact, than poorly per- forming public utilities.

Regulation of Water PPPs

Various Options Are Available for a Viable Regulatory System

The regulatory frameworks under which water PPPs operate in the develop- ing world fall into two broad categories. In some countries, the focus has been on regulation by contracts, with all elements detailed in the contract

Toward More Sustainable Water PPPs 131

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Public-Private Partnerships for Urban Water Utilities

and a dedicated team assigned to supervise its execution on the govern- ment’s behalf. In others, the focus has been on the establishment of a broad legal and regulatory framework for the sector, usually accompanied by the creation of a regulatory agency with various degrees of discretionary power. In practice, the difference between these two approaches is not always obvi- ous, and assessing how well they have worked would go beyond the scope of this study. Nonetheless, this review of PPP performance highlights the following observations:

Clear and detailed contracts are important, whether they are at the core or just one element of regulation. The most recent literature (Ehrhardt and others 2007), as well as this review, shows that the use of contracts as the main point of reference for holding private operators accountable has worked well in places as diverse as Western Africa, Macao (China), Colom- bia, the Czech Republic, and Morocco.

Anchoring the regulation of water PPPs in a comprehensive regulatory framework, in which contracts are present but the main tools are the laws and regulations, has had more mixed results, especially where newly created regulatory agencies were granted significant discretionary power. In Chile, the regulatory arrangement has worked well, but the regulator had been in place for a long time before the transfer to the private sector and was, by then, a respected and credible player. In many other places, the establish- ment of credible regulatory agencies has proved challenging, which eventu- ally affected the implementation of many contracts.

The difficulties encountered with regulatory agencies are not themselves surprising: building a whole regulatory framework takes time and the pro- cess can be easily derailed. In this context, processing a single contract to address a well-identified problem may be simpler. Still, establishing a strong framework might be worth the effort, because once a framework is in place, it provides a clear and standardized point of reference that reduces the dis- cretion that can be exercised by parties negotiating individual contracts or their adjustments. Ultimately, the right choice of whether to focus on the contract or on the framework must depend on the specifics of the country, including, among other things, the type of legal and regulatory framework (if any) that governs its water supply and sanitation sector, the current level of institutional capacity within government, and the urgency of engaging in a given partnership at the time of the decision.

Transparency Must Be a Cornerstone of Regulation

PPPs are by nature incomplete contracts, and in the volatile environment of developing countries, it is natural that they be adjusted over time to changing conditions. However, the issue of contract renegotiation has been

controversial. In many cases, it has been conducted behind closed doors, without transparency. In a comprehensive study on renegotiation of infra- structure PPPs in Latin America, Guasch (2004) found that a high propor- tion of water PPPs ended up being renegotiated shortly after the start of the contract.67 All this activity fueled criticism that private operators could have been taking advantage ofcontractual adjustments to make financial gains, and it has undermined the credibility of the PPP approach as a valid option to improve the performance of urban water utilities in several countries.

Progress is clearly needed in this area. It is essential that the ongoing supervision and regulation of a PPP contract be carried out in a structured and fully transparent manner. All PPP contracts should be made available for public scrutiny as a standard policy. Performance monitoring and report- ing of obligations must be strictly enforced and the results made available to the public as a matter of routine. Governments also have an obligation to communicate to the public the rationale and justifications behind each regulatory decision. This is especially important for all that is related to tar- iff adjustments (even when based on existing contractual clauses) or other modifications that may affect the financial equilibrium of a PPP. Contractual adjustments are probably unavoidable in the volatile environment of devel- oping countries, but they cannot be expected to be accepted by the popula- tion and other stakeholders unless conducted in full transparency. This is an area where the involvement of international financial institutions during the implementation phase can be of much value, especially in countries with weak governance and institutional capacity.

Incorporation of Social Goals

Social issues have been controversial in many water PPPs. It is clear that more needs to be done to ensure that more PPP projects benefit the poor. To do this, designers of PPP projects must explicitly recognize and factor in the costs of social goals as well as consider the options of subsidizing the poor and unlinking customer tariffs from the remuneration of the private operator. Also, the wide-ranging impacts of PPPs on the workforce deserve further study in order to be better addressed.

For the period 1985–2000, the study found that renegotiation in the water sector had occurred in 74 percent of cases, a much higher incidence than in other infrastructure sectors. Guasch also found that renegotiation had occurred sooner than in other sectors, taking place on average just 1.6 years after the award of the contract, and was (in most cases) instigated by the private operator. It must be noted that this study used widely defined criteria for renegotia- tion, and its sample included contractual arrangements that are not considered in the present study, including build, operate, and transfer (BOTs) and similar arrangements for new treatment plants.

(Dec. 2015)

Posted on February 14, 2017February 14, 2017 by Tony Holman

Water and the “Stench of Exploitation.”

New Zealanders need to be vigilant about the potential for privatisation of our most important asset – water, especially in the context of the government’s frenzied sale of our remaining public assets. The lessons from privatised water in the UK provide more than enough warning. It’s a case of rob the public to enrich the company’s investors.

In an article in the ‘Guardian’ a month or so ago, columnist Nick Cohen, didn’t mince his words. “How long,” he asked, “will it be before the stench from the monopolistic exploitation of water – the very stuff of life – reaches the public’s nostrils?”

Thames Water, Britain’s largest water company, proposes to increase its water levies on the millions of households it supplies, to build a multi-billion pound “super sewer.” (Thames Water is basically controlled by a consortium led by the Australian bank, Macquarie.)

Clearly a new sewer is needed, but what is being criticised is that this company has paid out 1.2 billion pounds in dividends to its investors. It has not provided funding from its ongoing levies over the years, but has instead paid out maximum dividends, while ignoring infrastructural needs. It has been high prices, high dividends and low infrastructural investment.

The Lib-Dem deputy leader has described this as “totally unacceptable.” But more significant is the comment of Jonson Cox (a former CEO of other water companies), who is now head of Ofwat, the water regulatory body. His view is that former colleagues were using “morally questionable” practices.

Further weight was added by a former Ofwat boss (Sir Ian Byatt) who suggested that some 19^th century style dividend controls be brought back to life to clamp down on water company practices.

A ‘Guardian’ editorial suggested that regulators “…are worried that the whole dubious edifice of public utilities being owned by private monopolies is in danger of being discredited by obscure company structures, opaque tax regimes and a widespread perception that the customer is being ripped off.”

More than one observer has railed against the water companies, noting among their practices: widespread tax avoidance, high levels of ‘commercial confidentiality,’ loaded their books with debt and provided massive returns to their shareholders.

What seems surprising is that anyone (especially an intellectual newspaper) should expect any different sort of outcome. To give over the precious public natural resource of water to a monopoly, is to give that monopoly a licence to rip off the public. What is even worse is that most of the shares in UK’s water companies are not held by the public, but by private equity. To add a final insult to injuries, many of these shares are foreign-owned, so the profits go off shore.

The public are captives to their suppliers, and either have to pay increasingly exorbitant prices, or reduce their consumption of this vital necessity of life, so that hygiene and other health factors are affected for an increasing number.

Whether by choice or poverty, one of the results of increasing water rates is that there are rising levels of bad debts for Thames Water, because some residents can’t pay, and others won’t pay. Sir Tony Redmond of the Consumer Council for Water said: “Our research shows that one in seven customers say they can’t afford their water bills.”

And “regulators” such as Ofwat are usually ineffective at keeping up with the games the big boys play. They suffer from legal constraints and difficulties with the accounting practices of the monopolies. Even when they unravel a situation and have some sort of solution there is inevitably a time lag which ensures continuing unreasonable profits for the company and suffering for the consumer.

But that’s the nub of the matter. Why should water, a necessity of life, be owned by a few profit-takers instead of the tried and true publicly owned, publicly controlled, non-profit making bodies which we have traditionally had in New Zealand.

There’s a story that one of the northern water companies rationed water to its own customers because it wanted to sell water to a neighbouring company at a higher price!

Don’t think it wont happen here. It is already happening with long-term contracts with firms such as United Water Limited, and the water companies controlling water supply to dairy farmers in Canterbury.

The price of water depends ultimately on the ownership of that water and its distribution. And the price of that that to a minimum is constant public vigilance to ensure that this vital asset remains publicly owned, with direct accountability through a publicly elected Board and with the traditional requirement that it be a non-profit organisation.

This is something that needs to be constantly hammered home to governments and councils by all of us.

(26.10.13)