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Higher Water Rates Would Kick Puerto Rico When She’s Down

By: Frank Worley-Lopez - Jul 15, 2015, 1:19 pm
Amid water rations and crippling debt, the Puerto Rico Aqueducts and Sewers Authority raising rates is the wrong way to go.
Amid water rations and crippling debt, the Puerto Rico Aqueducts and Sewers Authority raising rates is the wrong way to go. (@justinwdes)

Confusion and disappointment weren’t the only things to come out of the meeting with bond holders this week in New York. El Vocero reports that the Puerto Rico Aqueducts and Sewers Authority (PRASA) is considering raising rates again.

The idea is to increase charges so the troubled public utility can access the bond market to raise more money for desperately needed improvements. This is a bad idea.

The island is in the midst of water rationing affecting more than 1 million people, some for as long as 48 hours. PRASA, like its sister agency PREPA (Electric Power Authority), has billions in debt that according to Governor Alejandro García Padilla cannot be paid.

So why increase rates in the middle of a 10-year recession and water rationing to obtain more debt that can’t be paid?

I have a better idea.

Why not break up the water authority and sell it off to small and medium-size business operators? In fact, why not give the utility away for free in pieces, at no cost to business operators that are willing to do the major improvements themselves?

In a number of places where I have lived, the local water utility is just that: local. A small business or cooperative organization manages local water distribution and treatment. Major water supplies may still come from government owned or managed reservoirs or rivers, but in some towns, water comes from wells or local streams.

In this case, the response to any problem is local, not national, so it tends to be more timely. The people who produce the water live in the same community that is getting the water. If you are out of water, so are they. This is an extraordinary motivator for excellent service.

If memory serves, I’ve only lost water service once in the last 13 years, and it was due to major repairs on a water main that supplies much of the area. That’s it. One time in 13 years.

In Puerto Rico, I lost water service nearly every week!

So, my proposal is to start small: maybe a handful of municipalities on the south side of the island. The mayors can reach out and find a company that currently provides water service within another US jurisdiction that is willing to open an office in Puerto Rico, and manage the water supply for these four or five municipal governments.

The conditions are: management and employees must live in the area they supply with water; quick and efficient electronic or telephone support and reporting; short repair times; and major improvements and interconnection with other water supplies on the island, in order to share resources in case of an emergency.

In exchange, the PRASA must hand over the property and control of water service in that area, and provide tech support and non-interference. In addition, it must exempt the new company from any and all union contracts and requirements. In other words, no unions allowed (if you’ve followed my blog for a while, you knew this was coming).

You will be amazed at not only how quickly water rates on the island fall but how much better PRASA becomes as a utility, once they have a little competition in their back yard. If they don’t, then keep expanding the process to more and more municipalities.

This will end the need for an increase in water rates. It will prohibit PRASA from entering into more debt, while creating the kinds of improvements needed to make the system better for everyone. There’s no reason why a “debt charge” couldn’t be included in all water bills to pay down the existing debt. This shouldn’t be a problem since water rates will naturally fall once unions and government are out of the way.

The idea is that government should ensure basic infrastructure as a fundamental part of its purpose or job. However, government should not provide such services. It may seem like a minor difference in semantics, but the impact is major.

Government’s job is oversight. Intervene when things go wrong, but only long enough to fix them and move on. When government provides, then government never leaves, and it only takes a short amount of time for it to find a way to justify its useless existence with more uselessness.