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Case Title:

US Water Resource Utility and Management: Should it be Privatized?

Publication Year : 2007

Authors: Menaka Rao

Industry: Services

Region:USA

Case Code: PPP0005B

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
The Water Industry is one of the three largest industries in the world (along with Oil & Gas and Electricity) in terms of assets deployed. It has been said by some that the global water industry today resembles the world petroleum industry in 1920. The supply of fresh water on our planet is no larger today than when humans first walked the Earth. However, there are now more than six billion people globally competing for this finite resource, which is becoming increasingly scarce by means of pollution. Available fresh water is less than 1% of all water on earth with the actual usable/accessible water supply less than 1/100th of this. A third of all nations are suffering from water stress. Since 1950 world population doubled, but water use tripled. When compared to any other industry, water has a more obvious and compelling business model with the most persistent demand and probably the most predictable future. This is mainly because, there is no substitute for water and users cannot postpone purchases, there is a price-inelastic demand. Conveyance system to the end user creates a natural monopoly with huge barriers to entry and demand is unaffected by inflation, recession, interest rates, changing preferences, or inventory loss.

It is believed, that the water industry has more wind in its sails than any other global industry. To reduce municipal burdens water systems to privatise are encouraged, most often through investor owned companies. This trend saw tremendous momentum in the new millennium, more so in developed countries. Privatisation favors the buyer.

The privatisation of water combines an underlying business model with an inexorable demand and this is in perpetuity.

Pedagogical Objectives:

  • To discuss whether the US water utilities need to be privatised
  • To understand the adversities and advantages of water privatization in a developed country like the US.

Keywords : Water, Commoditization, Water Consumption, Water Privatization, Public Private Partnerships, Investor, Design, Build and Operate(DBO), Operations and Maintenance contracts(O&M), Social responsibility, Corporate, US Federal

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