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State-owned company under water

December 31st, 2010 Posted in Privatisation, Utilities by

Northern Ireland Water: “The trusted and reliable provider of Northern Ireland’s most essential public service.”

There is failure and then there is causing a drought in Northern Ireland, one of the wettest parts of the United Kingdom.

Northern Ireland Water, until 2007 a state utility, and now a state owned corporation, have done more damage to reputation of the Province this Christmas than the more usual suspects, who like the pipes in the ground seem to be stuck somewhere between the 1860s and 1970s.

NIW’s priority at the moment is to fix leaks and restore supply. When normal service resumes they, and local politicians responsible for their operating environment have over 30 years of under-investment and bad decisions to reconsider.

Decisions largely tackled in the rest of the UK by the decision to privatise and regulate the industry in 1989, leading to higher levels of investment on the back of market-based charges and yardstick competition.

The Northern Ireland Minister Owen Paterson has pledged support from the mainland. This might be premature. Although NIA politicians have been quick to highlight they don’t run this corporation (for the last 3 years at least), they do set the rules. Including for example civil emergency planning signed off only in August.

And one of the most inexcusable decisions made recently (April) was not to introduce water metering on the grounds it it politically unpopular. Without metering there is little incentive for users to invest in their end of the supply chain, and less money in the system for investment. The notion that utility pricing can be set intelligently, with a view to the long-term, in isolation from supply and demand, and be politically popular makes little sense.

The mainland in that regard should not provide support for improvements without a significant changes in the structure of the industry, including full privatisation and regulatory reform. We’ve already seen in the south what unconditional bailouts look like, and the north, as the UK’s most subsidised region, is long overdue a desovietisation programme.

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