Hard Water: The Uphill Campaign to Privatize

Canada's Waterworks

By Bob Carty

HAMILTON, Canada, February 13, 2003 — Determined to shed its image as a grimy steel

town, this mid-sized city of hard hats and rough necks decided in 1995 to carve itself a niche in a

purer, more refined line of work — water.

Investment gurus were predicting water would be the boom business of the 21st century. They

called water a "commodity" and estimated the potential revenue flow at C$4 trillion.

Hamilton councilors thought the city could get in at the ground level by creating an international

private water utility business. It turned its waterworks and sewage treatment operations over to a

local waste management company. The city encouraged the company to chase down water utility

contracts around the world using Hamilton as a model of privatization. Councilors believed they

could sit back and watch the company grow. They dreamed a river of jobs and money would

flow into this industrial city located on the shores of one of the world's greatest freshwater lakes,

Lake Ontario.

Barely a year later, on a cold January morning in 1996, the dream began to unravel when Bill

Baldwin went to check on the home of his vacationing sister. Opening the basement door, he

found three feet of stinking raw sewage.

"I said, 'Oh my God, what's this?' You could tell it was sewage because of the brownish color.

Then I went out on the street and I saw the neighbors carrying furniture up from their basements

to the driveway. They were flooded out too."

Hamilton had experienced sewage spills and backups before. But this was by far the worst on

record — 182 million liters (48 million gallons) of untreated human waste, heavy metals and

chemicals spilled into Hamilton harbor and then into Lake Ontario. More than 115 houses and

businesses were flooded. The city would later place the blame for the spill on the operators of the

city sewage system — private operators who had just taken control a year earlier.

"I expected as good or better service," Baldwin said of the privatization. He sighed as he recalled

wading through the basement sewage to install a pump. "It didn't happen that way."

But that was only the beginning of Hamilton's troubled experience with water privatization. Over

the next six years, residents would see more sewage spills, environmental fines left unpaid for

years, and rising tariffs for water services. The city would also find itself dragged through the

wreckage of two financial scandals, including the Enron meltdown.

The Hamilton experience heightened Canadian suspicions that profits and water mix no better

than oil and water. Since Hamilton, there have been repeated protests against attempts to

privatize water utilities in Canada. From Halifax to Vancouver, whenever word has leaked out

that a city government might privatize its waterworks, the idea has been met with angry public

meetings, intense lobbying campaigns and negative media coverage.

It has not been encouraging for the big water corporations. "Canada is a very strange country,"

said Gérard Payen, the senior executive vice president of Suez, the Paris-based private water

utility. "There are many people very vocal against private water companies; they do not know

how it could work."

Still, private companies are making major inroads into the water sector. Payen's company, Suez,

through its subsidiaries Ondeo Degremont and United Water, recently won a C$465 million

($298 million) sewage treatment contract in Halifax. Payen sees it as a foot in the door: "I think

this Canadian experience in Halifax will be viewed as a success and maybe private water

operators will be more accepted in Canada. I hope so."

USF Canada, a subsidiary of the French giant Vivendi Environnement, is trying to win more

contracts by showing off its treatment plant in Moncton, New Brunswick, where once unsavory

water now runs clean. And American Water Works — a U.S. water company recently acquired

by the third-largest corporation in the sector, Thames Water, owned by RWE AG of Germany

— has captured a 10-year, C$71.2 million ($45.9 million) contract to manage and operate the

water utility in London, Ontario, and several nearby municipalities.