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Welsh Water and WG

Typical nonsensical response from our WG ministers. Why would they want to stop the Welsh people having choice. No one is denying that Dwr Cymru / Welsh Water has been a good model, but that doesn’t mean it cannot be bettered. If Glas Cymru really do reinvest all profits, then clearly they are going to have a serious competitive advantage over their rivals meaning the competition will find it hard to compete. What exactly is wrong with competition? Why would you want to reduce consumer choice? That is exactly how complacency sets in and leads to monopolistic practices. This is not good news.

More politics by numbers from the Welsh Socialists.

Re: Welsh Water and WG

But wasn't the denationalisation of the utilities handled very badly? I can't really see a way that Dwr Cymru can be improved. The profits it makes are recycled back into the company and not to share holders.

I suppose it all depends on what type of Capitalism you want. There's the 'competition is better argument' and there is the Cooperative model which I think suits Wales better.

For the more competition model to work, you'd need a lot more competition which I don't think will come. I do think utilities are best run by companies such as Dwr Cymru, they just seem more trustworthy to me, although I may be being very naive about it.

Re: Welsh Water and WG

This is still an open issue right? According to the article:

"Welsh Water will be protected from competition to supply businesses, the Welsh government has vowed."

but

"The bill [to introduce competition] will apply to England and Wales, and a small number of provisions will extend to Scotland."

What is the balance of power that would allow the Welsh Government's vow to come into force on this one?

Re: Welsh Water and WG

Me
What is the balance of power that would allow the Welsh Government's vow to come into force on this one?


It's one of those complex ones! The UK Parliament can change the law for England and Wales but the Assembly sets the eligibility threshold. By keeping the eligibility threshold high (currently 50 million litres)the law change would effectively be blocked in Wales.

A good explanation here.

http://www.eversheds.com/global/en/what/articles/index.page?ArticleID=en/Energy/Draft_Water_Bill_published_180712

Re: Welsh Water and WG

SP

i'm not suggesting change the Dwr Cymru operating model if it works. But surely it is in everyone's interests if there is competition as it forces prices down. A de facto monopoly can lead to rising prices and under investment. There will be no incentive for Dwr Cymru to provide the best possible service it can.

Why should we in Wales be subject to state capitalism? that went out with Gorbachev

Re: Welsh Water and WG

Ash
currently 50 million litres


what is currently 50m litres? what does that mean in layman's terms?

Re: Welsh Water and WG

Jantra
what is currently 50m litres? what does that mean in layman's terms?


It means customers that use over 50 million litres of water a year - that's an awful lot of water! There have been a few 50m+ users in Wales that have attempted to use suppliers other than Dwr Cymru - and our friendly neighbourhood water co-op has been anything but amenable!

http://www.bbc.co.uk/news/uk-wales-north-east-wales-22089791

I think 50m+ users are things like steel works, power stations etc - not ordinary factories.

Re: Welsh Water and WG

How would competition work in real terms? Who owns the water infrastructure in Wales? If it's Dwr Cymru are we suggesting that some new company sets up its own infrastructure to service customers? The costs of doing so would make the cost of supplying water completely un-competitive surely?

Or are we suggesting that there is a similar sort of arrangement as the railways whereby the infrastructure is owned by one body and then companies bid against each other for the franchise in a geographical area? That doesn't really engender competition though. See the railways. It's a monopoly in all but name.

Or would it be any number of companies offering to supply you with water whilst all using the same infrastructure? How would they be regulated and how would the cost of continued investment and infrastructure upgrades be divvied up?

I'm not against competition but this is possibly a case of 'if it's not broke don't fix it' surely? We have a good service for a reasonable price and the comfort of knowing that there is continued investment for all of our benefits because of the not for profit model. If private companies who wish to bid are informed that they have to spend the same amount as current on infrastructure and investment in technology regardless of what profit they make then fair enough, bring it on.

Can anyone enlighten me?

Re: Welsh Water and WG

I always felt privatising utilities that are natural monopolies is rather difficult. The railways have been a disaster (masked by a big increase in state spending).

Re: Welsh Water and WG

Karl

I think (and may be wrong so happy to be corrected) that the idea is that you will have a seller of the water and a distributor of the water. The customer interacts with the seller only. By having more than one seller results (in theory) better pricing for the customer. What happens in practice is the seller has around 700 different tariffs in which to confuse the customer.

The seller purchases the water from the distributor.

Re: Welsh Water and WG

Jantra is right here. Its just like electricity or gas. The idea is splitting up the distribution/production from the final retailer to the consumer.

For this model to properly work, you really need competition in both supply and sale. I don't know how integrated our water system is in the UK: I don't think there is a national network in the same way there is for gas or electricity. So I think, the competition in the supply is going to be quite limited. So trying to introduce competition in the downstream market will be very complicated (the upstream supplier can act like a monopolist still, and there is no room for the downstream sellers to compete except very much on the margins - because its the upstream producer that takes all the profits).

So I'm not sure there is a massively strong rationale for competition here.

BUT, I agree with Jantra that the knee-jerk reaction of the Welsh Government that this proposal is inherently damaging and wrong is worrying.

First, I think it partly reflects a mix of misplaced idealism that says because something is "not-for-profit" it is inherently fairer and more cost-effective because shareholder's aren't skimming off the top. But as Jantra says, without the profit motive incentives are blunted. Time and time again, the evidence is that the potential for profits (or, more precisely, the ability to earn a return at the margin), improves productivity. The question then becomes whether this extra productivity offsets the required return to shareholders.

Second, its another example you see time and time again in Welsh Government thinking: capture by producer interests. Dwr Cymru says this is bad, therefore it must be bad. Teachers don't like league tables, therefore they must be bad. Doctor's don't want greater choice in the NHS, therefore it must be a bad idea. It fundamentally misses the point that incumbant suppliers (like doctors or teachers) are interest groups that will fight to protect their interests, which do not necessarily align with the consumers/users of services (and indeed, may be opposed to them). It's really damaging to Welsh public services and now, it seems, supposedly privatised services too.

Re: Welsh Water and WG

Who is the distributor? Is it the company that also currently sells the water ie. Dwr Cymru or Glas Cymru or whatever they are actually called? Because surely they can set the price of water the seller has to pay at a level which takes their competitor out of the game?

I'm confused (not difficult I know) but are the benefits of a free market in this case illusory? I will try to delve into this over the weekend because it seems to me as though it just ideological bullshit with little in it for the consumer. The gas and electricity markets are on the face of it subject to competition but in fact operate pretty much like a cartel. I do not want my water fucked around with in a similar fashion.

Re: Welsh Water and WG

It's all a moot point anyway. The Wales Office has issued the following statement.

"We are working closely with the Welsh government in finalising the Water Bill and have no intention of forcing competition on Wales.

However, making sure we have enough water is one of the major challenges we face in coming years. The changes we are making to the water industry will encourage economic growth and build resilience for the future."


Re: Welsh Water and WG

Jantra
SP

i'm not suggesting change the Dwr Cymru operating model if it works. But surely it is in everyone's interests if there is competition as it forces prices down. A de facto monopoly can lead to rising prices and under investment. There will be no incentive for Dwr Cymru to provide the best possible service it can.

Why should we in Wales be subject to state capitalism? that went out with Gorbachev


But you'd need an awful lot of competition to lower prices to make it worthwhile. I'm no expert, but as Dwr Cymru is a non for profit company they have no incentive to increase prices. What happens if the competition is flawed and they all offer a bad service such as our internet providers or gas companies?

Welsh Water are bastards mind. My parents have been having problems with them for years which even went to court, but as they are the only provider they cannot shirk responsibilities and blame others.

As Dwr Cymru isn't owned by the Government it isn't State Capitalism more of a Co-op, no?

Re: Welsh Water and WG

Ok state sponsored capitalism, a half way house. A co op is a good analogy of course but they usually operate in a free market and not the Stalinist society we find ourselves in here in Wales

Re: Welsh Water and WG

Could someone explain what is the problem of supply of water. As far as I am aware Cardiff has a plentiful supply of water both from the Brecon beacons and from the huge reservoir at Llandegfedd.

The real problem is sewage: why is it that no-one mentions that? That is the big cost.

Re: Welsh Water and WG

RandomComment
Jantra is right here. Its just like electricity or gas. The idea is splitting up the distribution/production from the final retailer to the consumer.

For this model to properly work, you really need competition in both supply and sale. I don't know how integrated our water system is in the UK: I don't think there is a national network in the same way there is for gas or electricity. So I think, the competition in the supply is going to be quite limited. So trying to introduce competition in the downstream market will be very complicated (the upstream supplier can act like a monopolist still, and there is no room for the downstream sellers to compete except very much on the margins - because its the upstream producer that takes all the profits).

So I'm not sure there is a massively strong rationale for competition here.

BUT, I agree with Jantra that the knee-jerk reaction of the Welsh Government that this proposal is inherently damaging and wrong is worrying.

First, I think it partly reflects a mix of misplaced idealism that says because something is "not-for-profit" it is inherently fairer and more cost-effective because shareholder's aren't skimming off the top. But as Jantra says, without the profit motive incentives are blunted. Time and time again, the evidence is that the potential for profits (or, more precisely, the ability to earn a return at the margin), improves productivity. The question then becomes whether this extra productivity offsets the required return to shareholders.

Second, its another example you see time and time again in Welsh Government thinking: capture by producer interests. Dwr Cymru says this is bad, therefore it must be bad. Teachers don't like league tables, therefore they must be bad. Doctor's don't want greater choice in the NHS, therefore it must be a bad idea. It fundamentally misses the point that incumbant suppliers (like doctors or teachers) are interest groups that will fight to protect their interests, which do not necessarily align with the consumers/users of services (and indeed, may be opposed to them). It's really damaging to Welsh public services and now, it seems, supposedly privatised services too.


It is the misplaced idealism of the chicago school that says we have to introduce competion into a system that is a natural monopoly. Improved productivity! The stuff falls out of the sky for gods sake.

Look at how Thames Water has ignored its mains pipes and has higher leakage rates, has been drained of money (dividends) and so has difficulty funding capital projects. To build the Supersewer they double the debt increasing interest payments, reducing profits and tax payable, and charge the customer twice what it costs them to borrow. It is a scam with no real risk for an Australian Bank but hey London does not notice what is just small change to them.

This form of capitalism has been a disaster in the electricity market (just look at the horse trading between the government and potential nuclear providers, yeah we have a real market bollocks), rail market (subsidised by government to a far greater extent than the old BR) and the gas market (two years running the UK has come close to running out of supply, shutting down supply to large industrial users, because the ever efficient market does not invest in storage capacity).

Instead of sorting the banks out and getting funding to real capitalists running real companies in real competition lets fart around in an area guaranteed to deliver massive profits at little risk to our friends and party funders. The whole arrangement stinks just like the sewers. But hey guaranteed directorships pile up, just look at Blair, smelling of roses.

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