The Fraser Institute

The Fraser Institute

January 22, 2007 07:00 ET

The Fraser Institute: Canada's Aging Water and Wastewater Systems in Desperate Need of New Investment and Management

TORONTO, ONTARIO--(CCNMatthews - Jan. 22, 2007) - Cash-strapped governments across Canada need to encourage private investment in water and wastewater systems if the nation wants to better protect public health and the environment, urges a new report from The Fraser Institute, an independent research organization with offices across Canada.

While the exact number of Canadian communities with substandard water and wastewater systems is unknown, problems across the country have been well documented, says the report, Water and Wastewater Treatment in Canada: Tapping into Private-Sector Capital, Expertise, and Efficiencies. Names such as Walkerton, North Battleford and Kashechewan represent the most serious failures of drinking water delivery systems while significant amounts of wastewater on both the Atlantic and Pacific coasts are discharged into receiving waters with little if any treatment.

The report points out that the failure of Canadian water systems is due primarily to the age of the systems, a growing population that exceeds the capacity of the systems, poor management and ill-trained staff, lax regulation, and a lack of capital and operating funds.

"For many years, local governments have refused to raise water prices to sustainable levels, thereby starving their water systems of much needed capital for upgrades," said Elizabeth Brubaker, Executive Director of Environment Probe and author of the report. "Clearly we can't count on the status quo to meet the challenges facing our water systems. Governments need to consider the benefits provided by private investment and private expertise."

Brubaker says the estimated cost for maintaining, refurbishing, and expanding Canada's water and wastewater infrastructure in the coming decades could be as much as $90 billion, an investment the public sector has been unable or unwilling to provide.

By encouraging private investment, public funds would be freed for other purposes. Financial risks would be transferred from the public to the private sector, and private capital has historically been used more efficiently than public capital.

Although Canada has limited experience with privately funded water infrastructure, there is clear evidence of success. Moncton, New Brunswick saw immediate benefits from private involvement when it contracted USF Canada to finance, design, build, and operate a state-of-the-art water filtration plant in 1998. That plant was built for at least 25 per cent less than the city had planned to spend.

In the wake of the deficiencies in the public utility commission that operated the Walkerton systems when tainted water killed seven people and sickened 2,300, Walkerton and the surrounding municipality of Brockton recently concluded a service agreement with Veolia Water Canada. The fixed-fee contract, renewable after five years at the municipality's discretion, includes operations, maintenance, and management of the municipality's three drinking-water systems and its wastewater treatment plant.

The report also suggests the federal government can play a significant role in facilitating private-sector involvement by encouraging private operation or oversight of Canada's worst run water facilities-those on First Nation reserves. Across Canada, the federal government can educate decision-makers and the public about the benefits of private involvement, and help develop models for the effective economic regulation of water and wastewater services. It can also enforce existing health and environmental standards, prompting municipalities to seek assistance from those with greater expertise and ensuring that those providing that expertise perform satisfactorily.

Although people often associate privatization with deregulation, or a loss of control, the privatization of water utilities does not in any way imply deregulation. On the contrary, it goes hand-in-hand with a new focus on regulation, Brubaker said.

"A private owner or operator is inherently more accountable - to provincial regulators, the public, municipal governments or the market. The optimal model for success is private financing and operation with public regulation."

Water and Wastewater Treatment in Canada: Tapping into Private-Sector Capital, Expertise, and Efficiencies will appear in the forthcoming book, A Breath of Fresh Air: Market Solutions for Improving Canada's Environment, to be published by The Fraser Institute later this year.

The Fraser Institute is an independent research and educational organization based in Canada. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit

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