Chapter 1 Water and Wastewater Systems 1-1

Introduction 1-1

Water Systems 1-4

Water Delivery Systems 1-5

Water System Classifications 1-5

Ownership of Community Water Systems 1-5

Supply Sources—Community Water Systems (CWS) 1-6

Investor Owned Community Water Systems 1-7

Capital Intensity 1-10

Regulations 1-11

Wastewater Facilities 1-13

EPA—History and Funding 1-13

Private and Public Treatment Works—Definitions 1-15

Valuation 1-16

Definition Clarification 1-16

Financing 1-16

Current Needs 1-17

Privatization Update and Debate 1-18

Chapter 2 1997 Survey of Privatization and/or
Condemnations in PUC/PSC Jurisdictions 2-1

Summary 2-1

Methodology 2-1

Results Summarized 2-3

Chapter 3 Water and Wastewater Infrastructure Values 3-1

Introduction 3-1

Theory 3-1

Capitalized Value 3-1

Monopoly 3-2

Theory 3-2

Natural Monopoly 3-2

Relevance of Natural Monopoly Concept in Regulations in the New Millennium 3-2

Rate-making 3-3

Market Rate 3-3

Elasticities 3-3

Revenue Requirements 3-4

U.S. Regulatory Approach 3-4

Price Cap Rates 3-5

Price Cap in a Long-Term (20 year) Contract 3-6

Acquisition/Contract Valuation 3-7

Historical Costs/Replacement Costs 3-7

Accounting Principles 3-7

Asset Sale—Victorian Model (electricity) 3-7

Contract Operations—Ownership Format 3-8

Planning Discount Rates—Allocating a Resource Over Time 3-8

Valuation Issues in U.S. Water and Wastewater Privatization Transactions KPMG 3-9

Notes and Relevant Data Sources 3-12

Chapter 4 Restructuring 4-1

Summary 4-1

USA 4-1

Tax Structure 4-1

California 4-2

Proposition 218 4-2

Two-Thirds Electoral Approval Required for Asset Transfer 4-3

Current Trends in the U.S. 4-3

Forms of Privatization 4-4

U.S. Foreign Business Relationships 4-4

The Competitors in the U.S. Water/Wastewater Markets 4-5

Restructuring—the Electricity Analogue 4-6

United Kingdom (UK) 4-7

Background 4-7

Environment 4-7

History of the Water Industry in England and Wales 4-8

Regulatory Structure 4-8

Regulatory Tools (OFWAT) 4-9

Statistics of Main UK Water Systems 4-9

Companies 4-9

Finances 4-10

Performance Attributes 4-10

Household Bills 4-11

Customer Service 4-11

Major Assets 4-12

Statistical Facts 4-12

Case Study—Anglian Water, United Kingdom 4-12

Overview 4-12

Subsidiaries 4-13

Rate Structure of Anglian Water 4-14

Revenue Sources for Anglian Water 4-14

International Currency Fluctuations 4-15

AWI—A Case Study of a Subsidiary (Moa Point—Wellington, New Zealand) 4-15

France 4-16

Economic and Environmental Statistics 4-16

Water Services Structure 4-16

Market Share 4-17

Flag Fall—Initiation Fee 4-17

Global Rankings—Water and Wastewater Companies 4-18

Rate Increase—Rate Tax 4-22

Foreign Investments by French Water Companies 4-22

Case Study—Suez Lyonnaise des Eaux Group 4-23

Chapter 5 Australia’s Experience Under the National Competition Policy 5-1

Introduction 5-1

USA/Australia—Some Comparative Notes 5-1

Australia 5-2

Immediate History Prior to Adoption of NCP 5-2

Main Elements of Reform 5-2

Regulatory Oversight 5-3

The Trade Practices Act 5-3

Prices Surveillance Act 5-4

Legislative and Intergovernmental Agreements 5-4

Ongoing Privatization in Australia’s Water and Wastewater Sectors 5-5

Comment 5-6

Chapter 6 Conclusion 6-1

Short-term 6-1

Long-term 6-1