A Guide to the Systems of Provision Approach by Kate Bayliss & Ben Fine

Author:Kate Bayliss & Ben Fine
Language: eng
Format: epub
ISBN: 9783030541439
Publisher: Springer International Publishing

4.3.2 Water

Like housing, water has material features that distinguish its production and consumption from those of other commodities. A key element of water is its leakiness. It seeps out of pipes and taps and it evaporates. It flows downhill and can be difficult to contain, and leaks are often difficult to detect. Water sources sometimes have to be shared across regional and international boundaries. It is heavy to transport relative to value and so is typically used close to source. Delivery systems tend to be fixed and capital-intensive, relying on networks of pipes and pumps that are not easily moveable, so investments are long-term. There are considerable scale economies, and delivery is usually monopolistic. The availability of water is unpredictable due to variability in rainfall and is also affected by pollution and climate change.

In England and Wales (EW), most people access water via household taps and have little regard to the origins of their water. Their main interaction with the production process is just through the payment of water bills. As far as the consumer is concerned, little appears to have changed since the sector was privatized in the 1980s. However, this superficial continuity conceals substantial changes in the underlying social and economic relations in water provisioning. Bayliss (2014, 2017) found in her analysis of the SoP for water in EW that, while for consumers, water flows through the tap as always, the nature of producers, and their methods of maximizing shareholder returns, had changed dramatically.

The water sector in EW was privatized in 1989 when the regional public water companies were listed on the London Stock Exchange. Water is now provided by ten integrated, privately owned, regional water companies (and some smaller water only companies), each responsible for the whole chain of activities from abstraction to water treatment and distribution, delivery to end users, billing and waste-water management. Bayliss (2014) showed that the ways that these companies operated varied, based on the nature of their ownerships. She found that the four companies that were owned by consortia of financial investors (mostly based offshore in Jersey) had distinctive corporate structures that were different from those of other ownership types such as those that remained listed on the stock exchange.

Bayliss found that the reason for this was that these finance-owned companies had been able to use complex securitization structures via Cayman Islands subsidiaries to increase their debt levels substantially. With a complex vertical chain of intermediate holding companies, interest and dividend payments were channelled to other group companies in a series of opaque transactions. A portion of the debt raised was used to pay special dividends to shareholders and to pay for the acquisition debt (the cost to the investors of acquiring the utility), which was added to the debts of the water company. As a result, some water companies became heavily indebted. Investors also make profits in other ways that are unrelated to production processes. Methods include loans from shareholders to the water utility at higher than market rates of interest,

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