News
BackThe ongoing negotiations in Brussels on the Directive on the award of concession contracts took once again centre stage. The focus of events in the European Parliament and the Brussels Office of the State of North Rhine-Westphalia was in particular on the consequences of the legislative proposal for water supply. Once more, the usefulness of the Directive proposal was called into question.
The experiences, which France and Great Britain had made with regard to liberalisation and privatisation, were described in the discussions. Anne-Marie Perret, Federal Secretary of the French trade union, Force Ouvrière-Fonctionnaires said that the water supply in France was mainly in the hands of three corporations - Veolia, GDF Suez and SAUR. According to Perret, in 2010 these three companies had generated a sales volume of € 12 billion. With regard to water supply and water disposal, France too had a number of laws, which are to ensure control over this sector. However, there had been a number of scandals in the 90ies, which in the end resulted in some regions, among them Paris, bringing water supply back to the local authorities, concluded Perret. Since 2010, the public sector was once again in charge of the water network in the Capital of France; hence problems in respect of water management were a thing of the past. Apart from that, consumers in Paris were now paying significantly less for their water than customers in the surrounding regions.
David Hall, Professor at the University of Greenwich, described how the water sector in Great Britain had been developing over the past decades. During the Thatcher era, the responsibility for water supply had been taken away from communities; thus water had been “nationalised”. Not long afterwards the water sector had been privatised, even though a large part of the British population had been against privatisation. On top of that, by providing tax reliefs and special depreciation allowances, the state had granted private multinational water companies about £ 7 billion in subsidies, criticised Hall. In the first years after privatisation, investments had even increased; but prices had unfortunately too. The current situation was that because of the distribution of dividends to parent companies, the debt ratio of water companies was constantly on the increase. The contracts would expire in 2014. However, it was not quite clear what would be happening then as a passage in the contracts would provide for a 25-year period of cancellation. This was a clause, which would ensure that in fact the current companies would never lose their concession, said Hall. There was no competition, in spite of privatisation; Professor Hall does not see how the situation would ever change.
Matthias Dierkes, who represented the German enterprise Gelsenwasser AG, criticised the ongoing negotiations on the Directive on Concessions. The company was almost 99 percent publicly owned. Water operators were responsible for water quality, the water network and the supply of customers; water intake (from streams, groundwater etc.) would also fall within their scope of responsibility. The situation in France was completely different: here responsibility was shared; customers who complained were referred from one authority to the next until they would finally give up. In Germany, most of Stadtwerke (public utility companies) belonged to the communities who would represent interests at local level. In Germany, citizens, who encountered problems, had the option of contacting Stadtwerke; apart from that they were able to voice their opinions in elections. In contrast to the claims of the Commission, a distortion of the Single Market in the water sector had never been established. Dierkes also criticised the high transaction costs of tendering, which were associated with the new Directive. These costs were very high. Any reduction of the term of the concessions would not make sense either. Based on a shorter term, companies would be able to delay investments in the water network, which in turn would have a negative impact on water quality.
Unfortunately, the European Commission and many MEPs have adopted a completely different point of view. The Italian Social Democrat, EU representative Pier Antonio Panzeri for example considers the Directive very useful as it would complement the Single Market. What was needed was more transparency and competition. Good progress had been made in the ongoing trialogues between Council, European Parliament and Commission: however, the term of concessions was not part of the discussions. With regard to the model of Stadtwerke, attempts were still being made to find a formulation. Kristin Schreiber, cabinet member of EU Commissioner Barnier, added that it had not been written down anywhere whether water had to be supplied by the private or the public sector; here the Commission would a adopt a neutral position. Each community had to have the option to organise itself. The Directive should only be applied if the decision had been made that the service would be provided by a private company. With regard to Stadtwerke and cooperation association, the Commission was now working on a formulation, which would in particular allow Germany, but also Austria, to continue using the current water supply model.
In spite of the protestations by the Commission said Johannes Remmel, Minister for Climate Protection, Environment, Agriculture, Nature Conservation and Consumer Protection in North Rhine-Westphalia, one had to admit sometimes that draft bills had simply failed and that it would be better to withdraw the Directive.
However, one thing has clearly emerged in the discussion on the Directive on Concessions: protests are in particular coming from Germany, Austria and Slovenia - from all political groups. These countries have a well-established water supply system, which is mainly provided by the public sector. In other countries, water supply, which is often provided by private companies, is not such a great success; hence the different point of view of the policy makers in these countries. However, instead of taking a leaf out of the book from water sectors that are working well, the Commission has proposed a Directive, which might be acceptable to countries with a poor private system, which, however, in particular in Member States such as Germany and Austria, puts the continuation of public water supply, which in some cases has been working well for more than a hundred years, at risk. The foray of the European Commission has incidentally also led to the European Citizens’ Initiative “Water is a Human Right”. The initiative has already been supported by almost 1.5 million people throughout the European Union. The frantic redrafting work by the Commission is now revealing how poorly the directive proposal has actually been drawn up. AK EUROPA and many trade union federations are sure: the optimal solution lies in rejecting the Commission proposal!
Further information:
AK EUROPA Position on the award of concession contracts
David Hall, Professor at the University of Greenwich, described how the water sector in Great Britain had been developing over the past decades. During the Thatcher era, the responsibility for water supply had been taken away from communities; thus water had been “nationalised”. Not long afterwards the water sector had been privatised, even though a large part of the British population had been against privatisation. On top of that, by providing tax reliefs and special depreciation allowances, the state had granted private multinational water companies about £ 7 billion in subsidies, criticised Hall. In the first years after privatisation, investments had even increased; but prices had unfortunately too. The current situation was that because of the distribution of dividends to parent companies, the debt ratio of water companies was constantly on the increase. The contracts would expire in 2014. However, it was not quite clear what would be happening then as a passage in the contracts would provide for a 25-year period of cancellation. This was a clause, which would ensure that in fact the current companies would never lose their concession, said Hall. There was no competition, in spite of privatisation; Professor Hall does not see how the situation would ever change.
Matthias Dierkes, who represented the German enterprise Gelsenwasser AG, criticised the ongoing negotiations on the Directive on Concessions. The company was almost 99 percent publicly owned. Water operators were responsible for water quality, the water network and the supply of customers; water intake (from streams, groundwater etc.) would also fall within their scope of responsibility. The situation in France was completely different: here responsibility was shared; customers who complained were referred from one authority to the next until they would finally give up. In Germany, most of Stadtwerke (public utility companies) belonged to the communities who would represent interests at local level. In Germany, citizens, who encountered problems, had the option of contacting Stadtwerke; apart from that they were able to voice their opinions in elections. In contrast to the claims of the Commission, a distortion of the Single Market in the water sector had never been established. Dierkes also criticised the high transaction costs of tendering, which were associated with the new Directive. These costs were very high. Any reduction of the term of the concessions would not make sense either. Based on a shorter term, companies would be able to delay investments in the water network, which in turn would have a negative impact on water quality.
Unfortunately, the European Commission and many MEPs have adopted a completely different point of view. The Italian Social Democrat, EU representative Pier Antonio Panzeri for example considers the Directive very useful as it would complement the Single Market. What was needed was more transparency and competition. Good progress had been made in the ongoing trialogues between Council, European Parliament and Commission: however, the term of concessions was not part of the discussions. With regard to the model of Stadtwerke, attempts were still being made to find a formulation. Kristin Schreiber, cabinet member of EU Commissioner Barnier, added that it had not been written down anywhere whether water had to be supplied by the private or the public sector; here the Commission would a adopt a neutral position. Each community had to have the option to organise itself. The Directive should only be applied if the decision had been made that the service would be provided by a private company. With regard to Stadtwerke and cooperation association, the Commission was now working on a formulation, which would in particular allow Germany, but also Austria, to continue using the current water supply model.
In spite of the protestations by the Commission said Johannes Remmel, Minister for Climate Protection, Environment, Agriculture, Nature Conservation and Consumer Protection in North Rhine-Westphalia, one had to admit sometimes that draft bills had simply failed and that it would be better to withdraw the Directive.
However, one thing has clearly emerged in the discussion on the Directive on Concessions: protests are in particular coming from Germany, Austria and Slovenia - from all political groups. These countries have a well-established water supply system, which is mainly provided by the public sector. In other countries, water supply, which is often provided by private companies, is not such a great success; hence the different point of view of the policy makers in these countries. However, instead of taking a leaf out of the book from water sectors that are working well, the Commission has proposed a Directive, which might be acceptable to countries with a poor private system, which, however, in particular in Member States such as Germany and Austria, puts the continuation of public water supply, which in some cases has been working well for more than a hundred years, at risk. The foray of the European Commission has incidentally also led to the European Citizens’ Initiative “Water is a Human Right”. The initiative has already been supported by almost 1.5 million people throughout the European Union. The frantic redrafting work by the Commission is now revealing how poorly the directive proposal has actually been drawn up. AK EUROPA and many trade union federations are sure: the optimal solution lies in rejecting the Commission proposal!
Further information:
AK EUROPA Position on the award of concession contracts