27/05/2013
Boring old water companies, the function of which was once to supply households and businesses with water, and take away their sewage, have now become the darlings of the city as a result of their new status of risk-free milche cows.
Latest in line for a shareholder bonanza is Yorkshire Water which, after a decade of lax control by water regulator Ofwat, has been able to
double its prices to its 4.7 million-strong captive customer base, plus 130,000 businesses, while minimising its capital spend, thus yielding
record profits.
Proof of the pudding comes from shareholders led by Infracapital, the infrastructure arm of the British fund manager M&G Investments. Having acquired the business in 2007 for roughly £3 billion in 2007, they are now putting up for sale a 30 percent stake, at an expected price of £1.5 billion. That puts the overall value of the company at £5 billion, a 40 percent hike in value in a mere five years.
Goldman Sachs and the Gulf state of Abu Dhabi are believed to be among those negotiating to buy into this bonanza, in the expectation that soft regulation will continue to allow the company to milk its customer base.
At last, though, someone seems to be noticing. Jonson Cox, Ofwat chairman and former chief executive of Yorkshire Water and Anglian Water, has served warning of tougher controls in the next five-year price review.
He feels the companies and shareholders have benefited at the expense of customers. "The past few years have been very kind to the owners of water companies at a time when life is very challenging for customers", he says.
For this unwilling customer, this is too little too late. Not only has Yorkshire Water benefited from being able to over-price its product, its predatory arrears collection is geared deliberately to inflating customer debts. It manipulates the court system and uses court fees as penalties to discourage late payers â in complete contravention of the industry codes of practice.
Between the wars, tenants in London and Glasgow, faced with predatory landlords, mounted a series of rent strikes, forcing landlords to reduce their charges â but not before huge and prolonged battles with police and bailiffs.
It seems to me, though, that history needs to be repeated. If even an Ofwat chairman is saying that the system has been "very kind" to owners of water companies, then it is time for a bit of "tough love" from the customer base.
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This, of course, brings up the issue of privatisation. And one of the poisonous developments in this debate has been the conflation of the different types of public ownership under the one heading of "state ownership", often linked with "nationalisation".
There is a world of difference between public ownership of a monopoly enterprise such as water (and sewage) by a local community, where there is an accountable, elected management - i.e., a local council. This is better known as municipalisation. After all, there is no one arguing in principle against public ownership and management, at this level, of assets such as public parks and libraries.
Most water businesses started up as municipal enterprises, owned by the local communities that they served. Over time, their assets were been gradually expropriated by forced amalgamations until they were shoe-horned into these giant utility companies that we know today.
The assets of these "mega-utilities" were then sold off to the highest bidders under the guise of "privatisation", which was effectively the end point of the theft of municipal assets, with the funds acquired stolen by central government, which had no entitlement to them.
The new water companies have been given a license then to extract maximum yield from our investment, forcing us to pay back the cost of taking from us our own assets. These have now become cash-cows for multinational equity companies, with their monopolies carefully protected by statute.
Thus, it wasn't exactly a "stupid" idea to privatise the utilities, as some will assert. It was plain theft ... the government selling off enterprises that weren't theirs to sell. They have vested our assets in modern-day robber barons which now have a license squeeze money from us under the guise of providing a service.
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