Post-Privatization Failure and a Move toward Customer Corporations

Just over a decade after privatisation, the water supply industry in England and Wales is undergoing a period of restructuring; many water companies have withdrawn from equity markets, some have separated asset ownership from operation and maintenance, and others have made proposals to return water supply infrastructure to public control through “mutuals” or “customer corporations.” This paper situates the restructuring of the water industry within broader debates over “associative self-governance” taking place in Britain. The paper argues that the failure of the post-privatisation regulatory model to contain the contradictions between stable returns and the efficiency imperative, on the one hand, and politically acceptable rates of return and the equity imperative, on the other, led to a re-regulation of the water supply industry, which was a key factor in restructuring. Restructuring has entailed multiple strategies (diversification, internationalisation, vertical de-integration, mutualisation, securitisation), which are briefly analysed. In contrast to analyses which depict restructuring as a “retreat of the market,” the analysis emphasises the continuity of the commercial governance model applied in the water supply industry in 1989. In interpreting restructuring as an industry response to re-regulation of services provision, the paper interrogates the incentive structure underpinning current moves towards a “mutual” future for public services in Britain.