Water Privatization and

Remunicipalization in France

Tra Hoang

Ownership of WaterFrench Environment Code, art. L.210-1:“Water is part of the common heritage of the

nation. Its protection, enhancement and development as a usable resource, with due respect to natural equilibriums, are of general interest.

The use of water belongs to all within the framework of laws and regulations as well as that of previously established rights”

Water is a commons and a universal right. Availability and access to fresh water are fundamental human rights.

Water is a limited resource to be protected as essential for human life and future generations .

Water can not be owned as private property and sold as a commodity.

France

Five major rivers5,500 km of coastline450 aquifers65 millions inhabitants

2 types of territories relevant for water policy

6 river basin districts corresponding to the major French river basins.

26 Regions(4 of which are oversea)

101 Departments(5 of which are oversea)

36783 municipalities

Regarding the management of drinking water supply and sanitation utilities, it is decentralized at the municipality level.

In France, The general principle is that the costs of water use must be paid by the users(Environment Code, art. L.210-1)

the law provides for a variety of different fees. Each water user is billed for its water use and charged fees based on use. All fees are collected by the administrator of the water agency based on public collection procedures and rules.

Water PrivatizationIn the 1990s many countries privatized their

water and sanitation services, particularly in the European Union (EU), and from international financial institutions such as the World Bank, the International Monetary Fund and the World Trade Organisation (WTO) to 'open up' national services.

FranceFrance could be described as the birthplace of water privatization.

Privatized water has been well established in France since the days of Napoleon. Since the French revolution, town councils have been responsible for water management throughout France. Water supply is traditionally the responsibility of local governments (municipalities). Water utilities are organized by municipalities and are financially autonomous.

Some municipalities or municipal associations manage water and/or sanitation services directly (gestion directe), while in other cases they contract services out to the private sector (gestion déléguée). The latter is usually done through a lease contract (affermage) or a concession contract. Yet, most municipalities have been delegating the job to private water companies. As a result, 74% of French people use water distributed by three leaders in water supply: Veolia, Suez and Saur.

Management mode

Local government control or delegation26% of the population served by a public operator and 74% by a private operator (Source: BIPE/FP2E 2006 Report)

Three large private French water companies:Veolia Environnememt (known as Compagnie Générale des Eaux in

France) provided drinking water to 24.6 million people and wastewater services to 16.7 million people in 2010, in partnership with more than 8,000 municipalities.

SUEZ (known as Compagnie Lyonnaise des Eaux in France) provided 12 million people with water services in 5,000 municipalities and 9 million with wastewater services in 2,600 municipalities.

SAUR provides water and sanitation services to 5.5 million people in more than 6,700 municipalities and municipal associations, mainly in rural and peri-urban areas.

Each year, these companies increase the price of France's water anaverage of 10%. Together, the three have built a structural and opaquemonopoly.

In France, water was never considered a common use good. In this sense, Michel Prieur critiques the French system, stating that water should have been considered a collective heritage by French legislation in order for it to be better protected (Prieur 1996).

“The business of water started with the realization that there was money to be made delivering it to places where people needed it the most - homes and factories.”

Private sector participation in water supply and sanitation has a long tradition in France and has provided many benefits to municipalities, such as lower levels of public debt. However, it is not without its critics.

CrisisMany of the privatized operations in France

missed targets to expand and upgrade networks, introduced high price increases, and unaffordable connection fees.

consumers face steep water rate hikes, rapidly crumbling infrastructure, excessive leaks, water service disruptions and unaccountable management.

A 2003 audit found the private companies operating throughout France, including Paris, overstated company costs and in turn were able to underreport their profit margins.

For example, the regional board found that La Compagnie des Eaux de Paris (Veolia-Paris) estimated a 5.1 percent margin while the board estimated a 12.3 percent margin, “which is almost three times the margin submitted.

Additionally, the audit found that these companies would, in some cases, include stipulations within their contracts that allowed them to increase prices even as consumption decreased or stagnated in order to maintain profit margins.

After privatization, customer fees in France increased 150 percent while the water quality declined. In a French government report, it was revealed that over 5.2 million people had received “bacterially unacceptable water”.

According to a 1999 OECD-based study, French consumers pay some of the highest water rates in the European Union.

Furthermore, a study from the University of Paris highlighted that, “consumers pay more when municipalities choose [Public-Private Partnerships].

In cities around France, the revolt against powerful water companies is growing. The protest is rooted in several proven cases of corruption and illegally elevated water rates.

GrenoblePrivate water utilities have been used as a vehicle for financing election

campaigns and other political activities, leading to corrupt practices despite several laws passed to prevent corruption in the 1990s.

“What happened at the time of the privatization in 1989 is what happens in all the French-style privatizations when public utilities are out-sourced, in French cities and foreign ones. There’s a huge increase in prices.” Raymond Avrillier led a citizens’ protest against the private water deal.

In 1999, French courts sentenced former ministers and leading Suez executives to prison sentences for their involvement in the corrupt operation, and ordered the company to pay back all water charges imposed between 1990 and 1998. Once the court cancelled the Grenoble contract and returned water services to the city municipality, prices were immediately brought down. By the end of 2002, the price of water in Grenoble, at 2.14 euros a cubic metre, was about the lowest in all French cities.

ToulouseThe operation of Toulouse’s water utility was handed over to

Générale des Eaux (Veolia) in 1990. In September 2003 Eau Secours, along with individual customers, filed complaints with the Tribunal Administrative de Toulouse claiming that the company was overcharging. The plaintiffs said the upfront fee the company paid for the concession was being clawed back as an illegal, hidden tax on the water customers.

Anne Bouzinac: “Our goal here in Toulouse is the return to a public service. Because you have to realize the official figures show that the cost of a publicly owned service is, on average, twenty per cent lower than a contracted out service.”

Now the city council has agreed to renegotiate the water prices but people in Toulouse want to see water services returned to public control.

CastreIn Castre, a small city east of Toulouse, there is another

citizens’ protest movement over water rates. Their complaint is a common one - questionable accounting that results in what they consider price gouging. (Castre’s water was privatized in 1991 through a 30-year concession to Suez Lyonnaise des Eaux.)

After a tribunal concluded that Castre’s water rates were illegally high, Castre mayor Pascal Bugis and his council voted to cancel its contract with Suez in June 2003. The transfer back to the city is set to happen in spring 2004. There is still a debate over whether Suez should repay the users for the money it overcharged them.

“We’ve seen the company’s methods and we don’t want it to stay here and continue to do what it’s doing, while it more or less hides its practices. We would prefer a return to a public service.” A citizen and protest organizer explains.

Is the Water Privatization Trend Ending?Today, in a bid to reduce costs and control privatization,

the French government is finally returning the country's water to the public sector.

More than 40 French municipalities and urban communities have taken water services back into public hands over the last ten years, and brought improved services, and reduced prices.

The water supply of Paris was privatized in 1984 (the city's water was operated by Veolia and Suez) when a conservative mayor awarded two lease contracts, each covering one half of the city. In 2010 a socialist mayor re-municipalized the water system of the French capital.

Water prices in Paris, France are dropping just one year after the city took back control of the water system from private operators.

"Water is a common asset making it part of our living heritage, our common living heritage and humanity; we have to ensure public control and management of this resource.“ said Le Strat, Deputy Mayor of Paris Anne.

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