The remunicipalization of parisian water services


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The remunicipalization of parisian water services

  1. 1. This article was downloaded by: [IWRA Organisation ]On: 13 June 2012, At: 12:56Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registeredoffice: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK Water International Publication details, including instructions for authors and subscription information: The remunicipalization of Parisian water services: new challenges for local authorities and policy implications a Joyce Valdovinos a Université Sorbonne Nouvelle Paris 3, Paris, France Available online: 15 Mar 2012To cite this article: Joyce Valdovinos (2012): The remunicipalization of Parisian water services:new challenges for local authorities and policy implications, Water International, 37:2, 107-120To link to this article: SCROLL DOWN FOR ARTICLEFull terms and conditions of use: article may be used for research, teaching, and private study purposes. Anysubstantial or systematic reproduction, redistribution, reselling, loan, sub-licensing,systematic supply, or distribution in any form to anyone is expressly forbidden.The publisher does not give any warranty express or implied or make any representationthat the contents will be complete or accurate or up to date. The accuracy of anyinstructions, formulae, and drug doses should be independently verified with primarysources. The publisher shall not be liable for any loss, actions, claims, proceedings,demand, or costs or damages whatsoever or howsoever caused arising directly orindirectly in connection with or arising out of the use of this material.
  2. 2. Water International Vol. 37, No. 2, March 2012, 107–120 The remunicipalization of Parisian water services: new challenges for local authorities and policy implications Joyce Valdovinos* Université Sorbonne Nouvelle Paris 3, Paris, France (Received 23 January 2011; final version received 22 February 2012) In 2010, Parisian authorities remunicipalized water services. This paper addresses three main questions: How did this reform come about? Why did public authorities return toDownloaded by [IWRA Organisation ] at 12:56 13 June 2012 a public management model for water services? What are the main policy implications? It identifies two critical factors: (1) the promotion of a “revisited” model of public-pri- vate partnerships by international institutions, and (2) the rise of a new political vision amongst local authorities concerning their own role as key actors in water services management. Keywords: water services; remunicipalization; public management; public-private partnership; Paris Introduction While it is more common that public authorities move from a public management model to a private one, there have been a few examples of the opposite process. The return of certain cities to public management after having adopted a public-private partnership (PPP) raises interesting questions concerning the decision-making process, the identification of the actors involved, and the policy implications of such a decision. With these points in mind, this article examines the remunicipalization of water services in Paris in three main sections. The first section explores the main characteristics of water services management in France as well as the elements that favoured a long tradition of PPPs in the water sector. The second part analyzes the remunicipalization process, its actors, and the reasons that led public authorities not to renew the contracts with private operators. Policy implications of this reform and its place within a broader international context are studied in the third and final part. An appendix reviews relevant theory. Water services management in France Looking at water PPPs in France from a historical perspective France has a long tradition of PPPs in water services. In 2006, 4814 water distribution contracts and 4068 water sanitation contracts were signed with the private sector (BIPE/FP2E 2008); for 2009, the private sector provided drinking water services to 79% of the French population and wastewater services to 53% (Bauby 2009). The development *Email: ISSN 0250-8060 print/ISSN 1941-1707 online © 2012 International Water Resources Association
  3. 3. 108 J. Valdovinos of this model was favoured by several factors, including strong fiscal centralization, the rigid character of public accounting, the creation of private water companies, and the establishment of a legal framework that protected the interests of the concessionaries. Water services management is a responsibility of the commune, the smallest French administrative subdivision managed by a municipal council. In 1828, French collectivi- ties became legally responsible for supplying water within their territory; the 1884 French Municipal Law is particularly important in the creation of a single legal regime for all French communes. This law established the framework for the organization of the com- mune as well as for local elections for the municipal council. Six years later, with the 1890 Syndicats de Communes, municipalities obtained the capacity of creating joint boards with other municipalities in order to manage an activity of common interest (Barraqué and Le Bris 2007). Pezon (2010) analyzes the organization and the management of French water services through three main periods that are characterized by institutional arrangements betweenDownloaded by [IWRA Organisation ] at 12:56 13 June 2012 the public and private sectors: (1) municipal concession (1850–1910), (2) municipal regie (1910–1970), and (3) inter-municipal affermage or lease contract (1970 onward). In the first period, municipalities delegated water services operation and investments to private entrepreneurs through long-term contracts. In the second period, private-sector involve- ment was reduced to the design and construction of water works, while municipalities reappropriated the operation of water services. Finally, the third period was characterized by the growth of lease contracts in which a group of municipalities are put in charge of investments while the operation of water services is delegated to the private sector through a 10-to-20-year contract. At the same time that the delegation of water services management increased, the largest French private water companies broadened their activities at the national and inter- national levels and became important actors in the provision of water services around the world. The development of French water companies The first of these companies is Veolia Environnement, which was created as the Compagnie Générale des Eaux (CGE) by Napoleonic decree in December of 1853 and whose share- holders were barons and bankers of the French Empire. The main development goals of the CGE were the irrigation of rural areas and the provision of water to towns and cities. The first contracts that it obtained were two concessions for supplying water – to Lyon in 1853 and to Nantes in 1854 – as well as a number of contracts that the company bought from smaller concessionaries, such as in the case of the Parisian suburbs in 1857 (Pezon 2010). Three years later, the company also became responsible for providing water supply services in Paris under a 50-year concession contract. From then until 1881, the company did not look to develop new services but rather to extend its activities in existing services, and to obtain at least 4% profit from each contract (Pezon 2010). The CGE was forced to change its strategy in 1880, when the Société Lyonnaise des Eaux et de l’Eclairage (SLEE), known today as Suez Environnement, was created by Crédit Lyonnaise in Paris. The firm was born in a context characterized by fast urban growth and important health concerns, such as the need to prevent epidemics and disease, especially through the rehabilitation of housing projects and the improvement of water supply and waste evacuation services. The goal of the SLEE’s creation was to guarantee the purchase and the lease of all concessions and enterprises related to water and electricity services in France and abroad (Lyonnaise des Eaux 2011). In light of the rapid growth of water consumption in France,
  4. 4. Water International 109 this firm extended its activities to other areas of the country through the creation of a common subsidiary with another company – Société des Eaux du Nord, in 1912 – and through the acquisition of other companies, such as Eaux de Dunkerque in 1924. After the First World War, the activities of the SLEE gradually evolved from urban lighting and gas distribution to energy investments. The firm’s activities significantly changed following the nationalization of the gas and electricity sectors in 1946, which pushed the firm to refocus its activities on the water sector. The SLEE became Lyonnaise des Eaux (LDE) and strengthened its diversification strategy in terms of its sectors of activ- ity and geographical presence. The firm acquired several other companies, such as Eaux des Calais (1954), Eaux de Douai (1959), Sita (created in 1919), Dégrémont (created in 1939), and Pompes Funèbres Générales (1978). The firm also entered the communica- tions sector, with the creation of Lyonnaise Communication, which later became Noos. The LDE merged in 1990 with Dumez, a housing and public works company, as well as with the financial company Suez, becoming Suez Lyonnaise des Eaux. The group changedDownloaded by [IWRA Organisation ] at 12:56 13 June 2012 its name to Suez and refocused its activity on two main sectors: energy and the environ- ment. In 2001, LDE became a subsidiary of the group Suez for the provision of water and wastewater services in France, and in 2003, all activities related to water and waste services were regrouped in the branch Suez Environnement. On 25 February 2005, Suez and Gaz de France (GDF) announced their merger and three years later became GDF-SUEZ. The new organization of the group was structured around five energy business lines and one environmental business line, under the new firm Suez Environnement (Suez Environnement 2011). As in the case of Suez Environnement, a large number of companies that provided services in different sectors in the early nineteenth century eventually became part of the CGE a number of years later. The development of the energy sector within the firm started with the creation of Chauffage Service in 1935 as a company specializing in heating and air condition systems. This company merged with the Compagnie Générale de Chauffe (today Dalkia) in 1960 and joined the CGE in 1967. Waste services were incorporated into the group in 1980 and 1990, with the annex- ing of two pioneering companies in the sector: François Grandjouan, created in 1867 and winner of a street-cleaning contract with the city of Nantes, and Soulier Brothers, founded in 1870 and responsible for waste services in Rouen and Chauny. The sector was rein- forced with the acquisition in 1980 of the Compagnie Générale d’Entreprises Automobiles (CGEA, later becoming Connex and Onyx), which entered the waste collection market of Paris in 1919. In 1990, the group acquired Groupe Soulier and six years later the Onyx cleaning division was created. The third sector that was included in the group’s main activ- ities was the transportation sector, when the Compagnie Générale Française de Tramways (CGFT) merged with the CGE in 1980. The CGFT had been created in 1875 and had oper- ated the first tramways in three French cities: Le Havre, Nancy, and Marseille. All these mergers allowed the group to strengthen its presence in the French territory in several sec- tors while operating through five main subsidiaries: (1) Veolia Eau–Compagnie Générale des Eaux, (2) Veolia Water Solutions and Technologies France, (3) Veolia Transport, (4) Veolia Proprété, and (5) Veolia Energie (Veolia Environnement 2011). Over time, Veolia Environnement has extended its activities to 77 countries and Suez Environnement operates today in over 35 countries, making them the two largest private water operators worldwide. The development of these companies would not have been possible without a correspondingly favourable legal framework. Two laws and one government circular should be highlighted: the law of 2 March 1982 that established the decentralization of the system by limiting the prefect’s executive powers (Legifrance
  5. 5. 110 J. Valdovinos 2012a), as well as the 1992 Water Act (Legifrance 2012b) and the government circular M49, which “placed a requirement on local authorities to charge by volume of water used (rather than a flat rate), and to maintain a balanced budget for water services [which makes reference to the principle] ‘water pays for water’ (rather than being cross-subsidized)” (Szarka 2002, p. 174). As the number of PPP contracts increased during the 1980s and 1990s, the difficulties in ensuring effective regulation mechanisms became evident. The general conditions laid out within a number of contracts signed during this period were characterized by a lack of transparency, an informal style of contract negotiation, uncompetitive calls for tender, and an inefficient regulation framework (Bauby 2009). This situation led to an increas- ing number of disagreements between local authorities and their private concessionaries, mainly on the renegotiation and termination of contracts, which ended up in administrative courts, and for the most serious cases, in the court of final appeals (the Conseil d’Etat) (Pezon 2010).Downloaded by [IWRA Organisation ] at 12:56 13 June 2012 While in the nineteenth century the Conseil d’Etat protected the concessionaries’ rights and interests, putting strict restrictions on contract termination practices and limiting the power of public authorities to interfere in the commercial relationship between households and private operators, it was not until the 1990s that two regulatory laws were introduced. The first was the Sapin Law of 29 January 1993, which established that any delegation of public services must be submitted to a process of competition. The goal was to create a transparent and competitive framework for governing calls for tender, to prevent corruption in economic activities and government procedures (Legifrance 2009). The Barnier law, dating from 2 February 1995, specified that a contract in the sector of water, sanitation, or waste management may not be longer than 20 years. This law also established the obligation of municipalities to write an annual report about the price and the quality of the public service being provided (Legifrance 2012c). The Mazeaud law supplemented this by obliging the private operator to present a report including the quality of the service and their operation accounts (Legifrance 2012d). Finally, a ruling of the Conseil d’Etat passed on 8 April 2009 stipulates that both laws – Sapin and Barnier – are to be applied retroactively to all delegation contracts which had been concluded before 1993 (Conseil d’Etat 2009). In other words, this means that all contracts which were signed before 1993 for a period of either 30 or 40 years will have to respect the 20-year term stipulated by the Barnier law. All these laws show an evolution of the French legal framework with regard to the delegation of public services to the private sector. Although the percentage of renewed con- tracts with the private sector between 1998 and 2001 was close to 90% (Guérin-Schneider et al. 2003), collectivities have increasingly become more attentive to contract terms. And in some cases, such as that of the city of Paris, they have decided to return to public management. The remunicipalization of Parisian water services Involvement of the private sector in Parisian water services Most of the water supply for Paris (55%) comes from underground sources within a 150 km radius around the city. These sources are located in the southern regions of Provins, Sens, and Fontainebleau, yielding 260 million litres per day, and in the western region of Dreux, where 80 million litres of water are extracted per day (Eau de Paris 2009). The collected water is treated in four plants, which are located in Longueville, Sorques, Saint Cloud, and L’Haÿ-les-Roses, and it is transported, after treatment, to reservoirs in Paris through a
  6. 6. Water International 111 system of aqueducts. The other 45% is taken from two rivers, the Seine and the Marne, and treated in the plants of Ivry, Orly, and Joinville. In total, Paris has five reservoirs with a stor- age capacity of 1120 million litres of drinking water, allowing the city to meet the variable demands of the population’s daily consumption, calculated at an average 550,000 m3 of water (Eau de Paris 2009). Since 1 January 2010, the Parisian water services have been managed by the municipal government, through the new municipal undertaking Eau de Paris. This situation came after 25 years of private-sector operation. In 1984, water distribution and the maintenance, renewal, and extension of the water system were delegated to the Compagnie des Eaux de Paris, a subsidiary of Veolia, which was in charge of the right bank of the Seine, and to Eau et Force–Parisienne des Eaux, a subsidiary of Suez, which was responsible for the left bank. Three years later, on 1 February 1987, the services of production, transportation, and quality of water were delegated to a mixed-capital company called Eau de Paris. During a session of the Council of Paris held on 24 and 25 November 2008, the munic-Downloaded by [IWRA Organisation ] at 12:56 13 June 2012 ipal assembly decided not to renew water distribution contracts with the subsidiaries of Veolia and Suez. The current reform included several stages. First, the mixed-capital com- pany Eau de Paris became a municipal undertaking with commercial status, and became at the same time (1 May 2009) the sole operator of water services, including the production, treatment, and distribution of water. Following the transfer of activities and personnel from the old mixed-capital company to the new municipal undertaking, the Centre de Recherche, d’Expertise et de Contrôle des Eaux de Paris (CRECEP), in charge of research and water analysis in Paris, was incorporated into Eau de Paris as well. The last stage of the reform took place on 1 January 2010, with the transfer of employees and activities of the two private companies in charge of water distribution to Eau de Paris. It is important to mention that this reform does not exclude the possibility of resort- ing to the private sector for carrying out specific activities. Indeed, the provision of water services in Paris has been characterized by the involvement of both the public and pri- vate sectors. The degree of private participation has varied through time: in 1860, certain services, such as connecting private residences to the network, metering, and billing were delegated to the Compagnie Générale des Eaux under a 50-year concession, while water services provision and management were the responsibility of local authorities. This changed in 1984 when Jacques Chirac, mayor of Paris at the time, decided to delegate the management of water services. The delegation of water services distribution to private operators was possible in large part thanks to the close relationship between Jacques Chirac and Jerôme Monod, personal secretary of Chirac in 1974 and general secretary from 1976 to 1978 of the political party Rassemblement pour la République (RPR), of which Chirac was president. One year later, when Monod became project manager at Lyonnaise des Eaux, a subsidiary of Suez, he met several water managers in France and abroad. His connections with politicians, and particularly with the mayor of Paris at the time, represented key elements for obtaining a number of concession and leasing contracts in different cities without any calls for tender, such as in the case of Paris. Other than water services, during the time that Chirac was the mayor of Paris (1977–1995), many public services were privatized, including funeral services, the munic- ipal printing office, the cleaning of crèches, and the maintenance of school gardens (Stefanovitch 2005, p. 229). This wave of public service privatizations took place in an international environment characterized by the spread of neo-liberal ideas emphasizing the transfer of public services management to the private sector.
  7. 7. 112 J. Valdovinos Understanding the reform The intention to reform the Parisian water services, announced by the mayor of Paris, Bertrand Delanoë, on 5 November 2007, became reality when the municipal assembly began discussing the creation and status of a new municipal undertaking that would be entirely in charge of water services. This raises the question of why the municipal govern- ment decided to adopt a model based on public management following 25 years of PPPs. Four main factors can be identified: (1) favourable political conditions, (2) evidence of irregularities in the performance of the contracts awarded by the Parisian local government to the two companies in charge of water distribution, (3) continuity within and reinforce- ment of the general strategies of the Delanoë administration, and (4) the active involvement of the local government staff in charge of water services management in retaking control of the public service.Downloaded by [IWRA Organisation ] at 12:56 13 June 2012 Favourable political conditions After decades of right-wing government, a coalition of Socialists, Communists, and Ecologists won the municipal elections and came to office at Paris city hall (Le Strat 2010). This victory brought Bertrand Delanoë to power as the new mayor of Paris in 2001 and established the topic of water services delegation as one of the priorities of the new munic- ipal government. The political conditions within which the reform took place were quite favourable since the main actors involved in the process were part of a large left-wing political alliance. When the reform started, Anne Le Strat, project leader in charge of water services remuncipalization, was an ecologist deputy in a plural majority and with the support of a Socialist mayor. Irregularities in contract performance Following the end of Chirac’s mandate, no studies pertaining to water services were carried out until the arrival of Jean Tiberi, mayor of Paris from 1995 to 2001. On 9 March 2000, Tiberi ordered an internal inquiry into the activities of Suez and Veolia in the Parisian water services, which resulted in a report presented by the Inspection Générale de la Ville de Paris in 2001 (Stefanovitch 2005). The conclusions of the inquiry emphasized the absence of any status reports on water distribution services and consequently the difficulty of identifying and verifying the work that should have been completed since 1984 in order to improve the piping system. The information provided by this report is complemented by two other studies: the “Report on the Management of the Protection and the Distribution of Drinking and Non-Drinking Water” carried out by the Chambre Régionale des Comptes d’Ile de France on 7 September 2000, and the “Report on Commercial Service Management of the Parisian Water Services” carried out by the Cabinet Service Public 2000 in 2002 (Le Strat 2008). These studies converged on two points. Firstly, they showed a lack of transparency with regard to the transfer of technical and financial data provided by the subsidiaries of Veolia and Suez. Secondly, there was a discrepancy between the financial gains declared by the two private companies in charge of water distribution and their actual profits, which have been estimated at an amount two to three times higher (Le Strat 2008). This point was also raised by Touly and Lenglet (2006), who added that these reports also mention the existence of billing inequalities on both banks of the Seine, and by Stefanovitch (2005), who pointed out that both companies made a higher profit by providing annual maintenance guarantees that overestimated the subsequent actual costs by a third.
  8. 8. Water International 113 As a result of the reports’ findings, local authorities decided to “prioritize the reempowerment of the municipal bodies by endowing them with the expertise necessary to guarantee a minimum control over the provision of water services” (Le Strat 2010, p. 2). In order to accomplish this, three initiatives with the goal of recovering control of the ser- vice were undertaken. The first one was carried out on 21 December 2003 and consisted of adding amendments to the water distribution contracts, stipulating the replacement of branch pipes containing lead by the end of 2009. (This was based on European directive 98/83/CE of 3 November 1998 [Europa 2012], which established 2013 as the deadline for changing all branch pipes containing lead.) While P. Grandjean, a project manager at Veolia Eau France, asserts (personal commu- nication, 9 April 2009) that the amendments of 2003 were concluded together with Parisian local authorities in 2001 and 2002 through an exchange of emails, the local government presented another version. According to the project leader of the water services reform, Anne Le Strat, the contract amendments were concluded with both companies during aDownloaded by [IWRA Organisation ] at 12:56 13 June 2012 larger negotiation process that was more or less difficult depending on the issues that were under negotiation – such as maintenance projects, billing management, and the economic gains obtained by the two private companies (Le Strat 2010). The second initiative carried out by the municipal government was the reconfiguration of Eau de Paris’s shareholders: 70% of capital stocks currently belong to the city of Paris, 2% to small mixed-capital companies, and 28% to the Caisse des Dépots et Consignations (Le Strat 2008). The importance of this modification is that before 2007, Veolia and Suez were also shareholders of Eau de Paris, which was in charge of the inspection of water distribution companies in Paris. In other words, they participated in the inspection of their own activities. Finally, the third initiative involved the change in status of Eau de Paris from a mixed-capital company to a municipal undertaking, which today is the sole public operator of water services in the city. The construction of a political project The election of Delanoë as mayor of Paris in 2001 marked the arrival of the Left in the Parisian city hall, “a bastion of conservatism since 1871” (Burke 2008). During the eleven years that Delanoë has been at the head of the city of Paris, an array of projects have been implemented, permitting the strengthening of a public relations strategy stressing proximity with the Parisian population. Original initiatives such as Paris Plage, Nuit Blanche, and the system of self-service bicycles called Vélib’ are all part of his political project. They have had a noticeable impact on the international stage, as they have been adopted by other big cities and have provoked interest on the part of many local decision makers worldwide. With the remunicipalization of Parisian water services, the current local government has put water issues at the centre of its priorities. The reform itself has developed into a larger environmental programme, which includes different projects such as the Action Plan against Noise, the Waste Material Prevention Plan, and the Climate Plan. Local authorities: from political vision to active involvement The municipal team in charge of the remunicipalization process, under the leadership of Anne Le Strat, showed an active involvement in the configuration of a new model of water services management under the responsibility of the public sector. According to Le Strat (personal communication, 19 March 2009), the strong commitment of Parisian public authorities to this reform was based on the advantages that returning to public
  9. 9. 114 J. Valdovinos management of water services might bring, such as a better functioning of water services; more transparency; the recovery of economic gains; greater democratic and public control; and the capacity to stabilize the price of water services. Two of the main arguments for returning to public management expressed by the local government were related to reasserting public control in this domain and the potential for financial gain. The first was based on considering that water is “the property and heritage of the collectivity” and that returning to public management is for “the benefit of public interest, with the goal of offering a sustainable public service” (Le Strat 2008, p. 116). The second argument raised the importance of obtaining financial gains estimated at C30 mil- lion per year, an amount that will be invested in the maintenance of the water system and in the stabilization of the price of water services. This is important because water con- sumption in Paris has been dropping since 1985, and this tendency has become stronger in the last five years, reaching a decline of up to 2% per year (Barucq and Fel 2008). The fall in water consumption entails a loss in profits, in the general turnover and therefore inDownloaded by [IWRA Organisation ] at 12:56 13 June 2012 the operator’s investment capacity, elements that consequently lead to a possible increase in the price of those services. Although the price of water services in Paris is lower than the average price in many European cities (BIPE/FP2E 2008), its stabilization remains an important element in maintaining the performance of the service. Policy implications of returning to public water services management Putting the Parisian case study into an international context Returning to public management of water services after having delegated their partial or total operation to the private sector entails significant policy implications for local author- ities. It raises the question of what the main difficulties are that local governments face when returning to a public management model of water services. Before exploring the main difficulties involved in the reappropriation of water services management by local authorities, it is important to mention that remunicipalization can be a result of different situations. In a recent report by the World Bank, Marin (2009) states that only 18 water PPPs out of the 228 contracts that have been signed in developing countries since 1990 have returned to public management after the expiration of the contract, while 22 were terminated early. Ducci (2007) and Marin (2009) identify a number of main rea- sons which account for the exit of private operators from water services: (1) national policy changes (as in some cases in Venezuela and Uruguay); (2) political and social conflicts (the cases of Cochabamba, Bolivia, and Tucuman, Argentina, are well known); (3) corruption scandals (the cities of Atlanta, USA, and Grenoble, France, are two good examples); and (4) financial failure of the project (as in the cases of Santa Fe, Córdoba, and Buenos Aires, Argentina). The remunicipalization of water services in Paris is not the sole example of such a policy change. Several cities around the world have also decided to return to public management after the non-renewal of contracts (such as in the cases of Johannesburg, South Africa; Kampala, Uganda; Amman, Jordan; Tripoli, Libya; Monagas, Venezuela; and Kosovo) or following the early termination of contracts (such as in the cases of Dar es Salaam, Tanzania; Kelantan, Malaysia; Buenos Aires and Tucuman, Argentina; La Paz–El Alto, Bolivia; Antalya, Turkey; and Borsodviz, Hungary). When the local government of Paris announced that water services were to be pro- vided by the new municipal undertaking Eau de Paris, a debate began in France and abroad regarding the scope and limitations of the process, its feasibility, the administrative, economic, and legal difficulties that local authorities had to face, and the benefits and
  10. 10. Water International 115 advantages of such a decision. This was particularly spurred on by the open public relations strategy of the Parisian local authorities concerning the promotion of public water services management in a number of national and international events, such as the Colloquium for Water Services Regulation in France and the Istanbul Water Consensus for Local and Regional Authorities. The Parisian local government has also supported the creation of Aqua Publica Europea, the European Association for Public Water Management, launched on 18 March 2008 as an initiative of seven public operators from Belgium, France, Italy, and Switzerland to promote “the performance of public management, by sharing and exchanging good practices in the fields of technical and management services of water” (Aqua Publica Europea 2009). Elements to consider when remunicipalizing water services Even though the remunicipalization process can vary according to local context, depend-Downloaded by [IWRA Organisation ] at 12:56 13 June 2012 ing on the conditions of the public service, the involvement of the local government, the duration of the contract, and the degree of private participation, local authorities should consider a number of key elements when returning to public water services management. Negotiation process If local authorities decide to terminate the contract before the stipulated date, a negotia- tion process between the local government and private operators concerning cancellation conditions may turn difficult, particularly if PPP contracts do not establish mechanisms of conflict resolution. According to the journalist and consultant M. Laimé (personal communication, 13 April 2009), for Parisian local authorities the most difficult aspects to negotiate with private operators after the expiration of a contract were the transfer of personnel, technical information, and the adoption of new technologies used by private operators (such as the télé-relève, which measures water consumption from a distance through the use of small radios placed inside water meters). While public authorities in Paris have tended to concentrate on technical issues con- cerning the remunicipalization of water services, the official position of Veolia and Suez remains that the reform has been a purely political decision of the mayor. According to D. Olivier, a project manager on the executive committee of Veolia Water, “this reform is a political decision announced by Mr. Delanoë that we respect and it is not linked to any dissatisfaction concerning our provision of the service. The primary person responsi- ble for contracts is the mayor [and] collectivities are free to choose their water [services] management model” (personal communication, 17 March 2009). A. Braïlowsky, a high- level director at Suez Environnement, comments that the reform “is a commendable and acceptable political project” (personal communication, 16 April 2009). Contrary to these declarations from the private sector, local Parisian authorities main- tain that the negotiation process unfolded in a tense atmosphere. Le Strat, one of the main actors involved in the process, states that “at the beginning of the reform, the compa- nies [in charge of water distribution] reacted badly. In my opinion, they did not think that this reform would take place. Their official strategy consisted of playing the game with the municipal government, but without making the negotiation process easier, espe- cially concerning the transfer of information. However, we cannot say that there has been a breaking-off of relations” (personal communication, 19 March 2009).
  11. 11. 116 J. Valdovinos Users’ involvement Considering that one of the most powerful arguments of local authorities when returning to public management is to guarantee a democratic and efficient public service, the involvement of users as key actors in the process is essential. In the case of Paris, local authorities introduced a citizens’ control mechanism via a group called the Municipal Water Observatory (Observatoire Municipal de l’Eau) that “enables users to evaluate the provision of services [and] also provides a space for discus- sion between all stakeholders and for putting forward ideas that concern issues on water at the municipal level” (Le Strat 2010). Evaluation of private operators’ performance and the advantages of returning to public management It is fundamental that before making the decision to cancel (or not renew) a PPP contract,Downloaded by [IWRA Organisation ] at 12:56 13 June 2012 studies on the performance of private operators and the possible benefits and risks of reas- suming their provision by local authorities be carried out. This is particularly important when considering the current situation of the public service in terms of investment needs and financial costs for guaranteeing an efficient performance. In the case of Paris, the stud- ies and inquiries carried out in 2001 allowed local authorities to measure the performance of private operators in carrying out their established activities. Their decision to remunic- ipalize water services was made after a long planning process that included an evaluation of subsequent risks and benefits. A long-term and multi-actor process Remunicipalizing water services is not an easy process. Quite to the contrary, a process of this type ought to include larger reforms in the public sector with the goal of improving the performance of the service. Nickson and Franceys (2003) make reference to the notion of new public management (NPM), a group of reforms that seek to improve performance on the “four E’s”: efficiency, effectiveness, equity, and enabling. These reforms cannot be implemented without a long-term planning process and multi-actor involvement. Conclusions This paper has aimed to analyze the process of remunicipalization of Parisian water ser- vices, including the identification of the main actors involved in the reform and its policy implications. Although 90% of water services are managed by public authorities (Frérot 2009), a considerable number of cities around the world have established water PPPs with international private operators. A number of these contracts have been terminated early or simply not renewed at the end of their duration because of reasons such as national pol- icy changes, social or political conflicts, corruption scandals, or financial failure of the projects. Once local authorities have decided to cancel or not to renew the contract, they can choose between changing the concessionary or returning to public management. The majority of local governments that have chosen the latter option have had to face a number of difficulties, including negotiating with private operators the transfer of personnel, infor- mation, and technology, as well as the configuration of an efficient public model of water services provision. The case study of the city of Paris is an example of how it is possible to return to public management after years of having adopted water PPPs. Nevertheless, it is important to stay
  12. 12. Water International 117 cautious when trying to evaluate the feasibility of such a reform, considering that the choice of a water services management model depends on several factors, such as water sources, water system characteristics, available infrastructure, the needs of the population, price setting, and the costs of water services. The case of Paris is unique in that the efficiency of the water system is estimated at 96.2%, a rate much higher than that obtained by other French or European cities (Barucq and Fel 2008). The traditional debate on the benefits and disadvantages of public versus private water services management has evolved during the past 20 years. Two main factors have con- tributed to this situation. On the one hand, after a number of failed experiences, the early termination of contracts, and a number of cases of remunicipalization of water services, the long-term delegation of urban services is no longer presented as the solution for solv- ing all problems related to water services management. Furthermore, the discourse used by some international financial institutions, such as the World Bank, promotes a “revisited” model of PPPs that is characterized by the establishment of shorter-term contracts; newDownloaded by [IWRA Organisation ] at 12:56 13 June 2012 fields of activity, such as irrigation services and the management of rural water supplies in small towns; the move towards a larger number of business actors, including international operators and new regional and local private operators; and finally, the involvement of the private sector in infrastructure projects. On the other hand, a new political vision has taken root amongst local authorities con- cerning their own role as key actors in water services management. The Parisian local government is a good example of this, since it had established a number of partnerships with other metropolises in the water sector and was one of the founders of the first European association promoting public water management. These initiatives are not oriented solely towards local actors: they are the result of the participation of multiple actors, and their scope extends to local, regional, and international levels. Indeed, the internationalization of water services reform in the French capital, through an array of open and active public relations strategies conducted by the municipal government, highlights a new configuration of “local” and “international” spaces and boundaries. Acknowledgements I would like to thank members of the municipal government of Paris, managers at Veolia and Suez, and the experts on the subject who kindly agreed to share their opinions and knowledge with me. References Aqua Publica Europea, 2009. Presentation of Aqua Publica Europea [online]. Available from: http:// [Accessed 23 November 2011]. Barraqué, B., and Le Bris, C., 2007. Water sector regulation in France [online]. CESifo DICE Report 2. Available from: [Accessed 20 February 2012]. Barucq, C., and Fel, L., 2008. Analyse de la performance de la gestion du service de distribution de l’eau à Paris. Final Report. Paris: BIPE. Bauby, P., 1995. Quelle(s) definition(s) du “service public”? [online]. Association Internationale de Techniciens, Experts et Chercheurs. Available from: php?article302 [Accessed 15 November 2011]. Bauby, P., 2009. The French system of water services. Working paper 3. Paris: CIRIEC. BIPE/FP2E, 2008. Les services collectifs d’eau et d’assainissement en France. Données économiques, sociales et environnementales [online]. Available from: http://www. [Accessed 20 February 2012].
  13. 13. 118 J. Valdovinos Burke, J., 2008. Definitively a mayor à la mode. The Observer, 6 January [online]. Available from: [Accessed 20 November 2011]. Conseil d’État, 2009. Assemblée du contentieux sur le rapport de la 3ème sous-section. Séance du 3 avril 2009. Lecture du 8 avril 2009. N ◦ 271737, 27178 [online]. Available from: http://www. 3-avril.html [Accessed 20 February 2012]. Ducci, J., 2007. Salida de operadores privados internacionales de agua en América Latina. New York: Banco Interamericano de Desarrollo. Eau de Paris, 2009. Provenance de l’eau [online]. Available from: provenance-de-l-eau?page_id=151 [Accessed 20 February 2012]. Europa, 2012. Council Directive 98/83/EC of 3 November 1998 on the quality of water intended for human consumption [online]. Available from: [Accessed 20 February 2012]. Frérot, A., 2009. L’eau. Pour une culture de la responsabilité. Paris: Autrement. Guérin-Schneider, L., Bonnet, F., and Breuil, L., 2003. Dix ans de loi Sapin dans les services d’eau et d’assainissement: évolutions et perspectives du modèle de délégation à la française. Responsabilité & Environnement Annales des Mines, 31, 44–57.Downloaded by [IWRA Organisation ] at 12:56 13 June 2012 Hardin, G., 1968. The tragedy of the commons. Science, 162 (3859), 1243–1248. Héritier, A., 2001. Data protection comes under the umbrella of “common goods” too [online]. Max Planck Research. Available from: [Accessed 20 November 2011]. Héritier, A., 2002. Common goods: reinventing European and international governance. Lanham, MD: Rowman & Littlefield. Holzinger, K., 2008. Transnational common goods: strategic constellations, collective action problems, and multi-level provision. New York, NY : Palgrave Macmillan. Le Strat, A., 2008. Fluctuat nec mergitur: quand Paris se réapproprie de son eau. In: A. Le Strat, ed. Manifestes pour l’eau publique. Paris: Documentation de la Fondation Copernic, Syllepse, 105–116. Le Strat, A., 2010. Paris: an example of how local authorities can regain control of water management [online]. Available from: 20Chapter%20by%20Anne%20Le%20Strat%20En_final.pdf [Accessed 20 November 2011]. Legifrance, 2009. Loi n◦ 93-122 du 29 janvier 1993 relative à la prévention de la corruption et à la transparence de la vie économique et des procédures publiques [online]. Available from: Texte=20090618 [Accessed 4 January 2010]. Legifrance, 2012a. Loi n◦ 82-213 du 2 mars 1982 relative aux droits et libertés des com- munes, des départements et des regions [online]. Available from: [Accessed 20 February 2012]. Legifrance, 2012b. Loi n◦ 92-3 du 3 janvier 1992 sur l’eau [online]. Available from: http://www. [Accessed 20 February 2012]. Legifrance 2012c. Loi n◦ 95-101 du 2 février 1995 relative au renforcement de la pro- tection de l’environnement [online]. Available from: [Accessed 20 February 2012]. Legifrance, 2012d. Loi n◦ 95-127 du 8 février 1995 relative aux marchés publics et délégations de service public [online]. Available from: JORFTEXT000000350927&dateTexte= [Accessed 20 February 2012]. Lyonnaise des Eaux, 2011. Qui sommes nous? Histoire de 1880 à 1946 [online]. Available from: [Accessed 29 November 2011]. Malkin, J., and Wildavsky, A., 1991. Why the traditional distinction between public and private goods should be abandoned. Journal of Theoretical Politics, 3 (4), 355–378. Marin, P., 2009. Public-private partnerships for urban water utilities: a review of experiences in developing countries. Washington: World Bank, PPIAF. Nickson, A., and Franceys, R., (2003). Tapping the market: the challenge of institutional reform in the urban water sector. New York: Palgrave Macmillan. Ostrom, E., 1990. Governing the commons: the evolution of institutions for collective action. Cambridge: Cambridge University Press.
  14. 14. Water International 119 Pezon, C., 2010. How the Compagnie Générale des Eaux survived the end of concession contracts in France 100 years ago. Water Policy, 13 (2), 178–186. Samuelson, P., 1954. The pure theory of public expenditure. Review of Economics and Statistics, 36 (4), 387–389. Stefanovitch, Y., 2005. L’empire de l’eau. Suez, Bouygues et Vivendi. Argent, politique et goût du secret. Paris: Ramsay. Suez Environnement, 2011. History [online]. Available from: en/profile/about-us/history/history/ [Accessed 23 November 2011]. Szarka, J., 2002. The shaping of environmental policy in France. New York: Berghahn Books. Touly, J.L., and Lenglet, R., 2006. L’eau des multinationales. Les vérités inavouables. Paris: Fayard. Veolia Environnement, 2011. Our history [online]. Available from: history/[Accessed 22 November 2011]. Appendix: a review of terms When talking about private involvement in the provision of water services, it is fundamental to dis-Downloaded by [IWRA Organisation ] at 12:56 13 June 2012 tinguish between water resources and water services. Water is often portrayed as a common property good, characterized by not being exclusive (any individual can gain access to the resource in its natural state) and by its characteristic of rivalry (its consumption by one individual will have an effect on that of another). This perception can be questioned, considering that, while it is true that water is an open-access resource, water services involve economic costs to cover investments in infrastructure, technology, and qualified personnel, making water a good of limited access. In this article, water services refer to all the necessary stages for delivering drinking water in urban areas: water collection, purification, stocking, distribution, sanitation, treatment, and restitution to the natural environment. As Holzinger (2008) rightly points out, a resource should not be confused with the good(s) or the service(s) that the resource provides. Indeed, from one single resource it is possible to obtain different kinds of goods and services with diverse degrees of excludability and rivalry. These conditions of excludability and rivalry are the two main characteristics used for differen- tiating a public good from a private one in the field of economics. Samuelson (1954) distinguishes between ordinary private consumption goods, defined as those “which can be parceled out among different individuals”, and collective consumption goods, characterized by the fact that “each indi- vidual’s consumption of such a good leads to no subtraction from any other individual’s consumption of that good”. His theory on determining the optimal allocation of resources in the presence of both private goods and public goods is based on the idea that each individual has “ordinal preferences with respect to his consumption of all goods”, but in the presence of public goods, individuals do not reveal their real preferences and seek instead the highest consumption of the good without assuming the good’s production and provision costs. This theory is applied by Hardin (1968) to open access resources or common property resources. His main thesis is known as the “tragedy of the commons”, which occurs because individuals, as rational beings, increase the use of common goods, defined as “those goods to which there is general access, and which, when utilized by one person, do not lose their use for others” (Heritier 2001), in order to maximize the benefits while neglecting the negative costs. This situation leads to a constant degradation of the resources, which are generally scarce. Both authors show the importance of creating efficient mechanisms for producing and providing these goods, as well as the inherent difficulties therein. Contrary to pure private goods, the manage- ment of common goods should be based on different forms of collective action (Holzinger 2008). Héritier (2002), taking up the work of Ostrom (1990), proposes a classification of common goods depending on their level of excludability (degree of access to a good) and rivalry conditions, which refer to the effect of one individual’s consumption on that of another: (1) public goods, characterized by non-excludability and non-rivalry conditions; (2) common pool resources, defined as those which are accessible to everyone, though one individual’s consumption results in the reduction of another’s consumption; and (3) club goods or tool goods, whose characteristics are limited accessibility and rival consumption. It is important to mention that this classification is based on an economic perspective and dif- fers from what Héritier (2002) calls the “institutional-political approach”, according to which a good should not be defined by its inherent qualities, such as the criteria of non-rivalry and non- excludability, but by a social decision. Malkin and Wildavsky (1991) state that “the distinctions
  15. 15. 120 J. Valdovinos between public and private goods are not found in nature, but are chosen by us. Thus, what is a pub- lic good in one community might be a private good in another. It is this moveable boundary between public and private that makes it essential to analyse public policy.” Holzinger (2008) proposes three economic models to provide these goods: (1) privatization of a good’s provision, (2) intervention of the state as an “external power” capable of preventing free-rider behaviour, and (3) a governance model, defined by Ostrom (1990) as a model built by users without the intervention of an external authority. The provision of water services is considered a public service, which means that their provision is of public interest, or in other words, it is an activity that goes beyond private interests. There is no universal consensus about what a public service is, considering that its definition can greatly vary according to the historical, cultural, economic, and political evolutions of each local context. Nevertheless, the general understanding of a public service is that certain social activities should not be subject to the logic of the free market and to the quest for economic gains; instead, the state should work to guarantee collective public access to certain specific goods (Bauby 1995). Deciding that a specific activity constitutes a public service is a competence of public authorities, who can decide between public, private, community, or mixed management models. Indeed, public authorities can deliver the public service directly or delegate its provision to aDownloaded by [IWRA Organisation ] at 12:56 13 June 2012 public or a private operator. In the case of water services, public management means that the state, through local authorities, is responsible for the provision of the service. There are some cases in which the state decides to delegate a part or the totality of its responsibility to the community or to user associations, which is known as community or social management. Finally, water services operation and provision can also be delegated to the private sector. There are different degrees of private participation, going from a large diversity of PPPs to the privatization of the services. A PPP consists of establishing contractual agreements between a public agency (national, regional, or local) and one or more private companies for the delivery of a service or the construc- tion of infrastructure. PPPs can be divided into different categories, which can involve more or less private participation: divestitures, concessions, lease and management contracts, mixed-ownership companies, contract services, technical assistance contracts, and a large number of contracts involv- ing the construction, financing, operation, and transfer of water facilities. In the case of privatizing services, their ownership and operation are fully transferred to the private sector.