Comment by Nursie | Hacker News Reader

Comment by Nursie | Hacker News Reader

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> Forecasts indicate that by 2055 England’s public water supply could be short by 5bn litres a day

> Water companies in England and Wales lose about 1tn litres of water through leaky pipes each year.

Seems like there's most of a solution here, just staring us in the face, no? Problem being of course, that the privatised water companies have little incentive or investment in order to tackle the problem.

Are we ready to admit that selling off critical national infrastructure was a stupid idea, yet?

It's the same story with power and gas, wherever they get turned over to the private sector, things get worse. Fundamentally I don't give the first shit about choosing an energy provider. I don't want to find a new deal every few years. I don't give a shit about choice, I just want someone to do it well and charge reasonably. Instead you get stuck in a market offering discounted signup rates and you have to switch every year, while the companies draw their earnings from the minority of people who forget or otherwise can't be bothered to switch.

I don't miss that from the UK. Here in communist Western Australia we maintained ownership of the water, power and gas infrastructure, where other parts of the country set up privatised energy marketplaces. When the UK and the rest of Australia were screaming about rocketing bills, we were protected from some of the fluctuations in international energy prices over the last few years and any profits got ploughed back into infrastructure or the state coffers rather than heading off to private hands. It's just better...

The system works fine for electricity and gas, because the grid itself is maintained by the government. You have private energy producers competing to produce electricity, and private energy companies buying it off them and selling it to the consumer. Maybe it would be more efficient if it was maintained solely by the state, but it's not too bad.

Unfortunately, the water system doesn't work that way. It has been parcelled off to various private companies, giving them a natural monopoly.

I’m not sure “works fine” is a great descriptor of the UK energy sector… people do get the energy they need, at least, but they have to be on the watch for better deals all the time and make sure not to become a ‘profitable customer’ aka sucker.

The price-discovery aspect of supply seems a bit broken as well - suppliers bid daily on their price to supply power, and the cheapest X units are selected (where X is the daily demand), then they all get paid out at the level of the most expensive provider in the selected mix. Seems to me that it leaves the consumer significantly overpaying, though it must be a nice little earner for those that can provide cheap power.

But you’re right that water is in a worse state due to the monopoly side of things.

Huh, I did not know about the wholesale price issue, that's pretty bad.

It also incentivises avoiding cheap sources from dominating the market.

It's my understanding, though don't take it as 100% gospel truth.

I can see that the model does incentivise both cheaper energy sources (more over-pay leads to greate investment possibilities) and pricing honestly. If the scheme chose the cheapest X units and paid them out at their bid rates, there would be incentive to bid as close as you can to what you predict the day's cutoff would be... but it does seem likely to not achieve the best overall price.

It's true, see https://www.carbonbrief.org/factcheck-why-expensive-gas-not-...

From that article:

> The UK’s electricity market operates using a system known as “marginal pricing”. This means that all of the power plants running in each half-hour period are paid the same price, set by the final generator that has to switch on to meet demand, which is known as the “marginal” unit.

> While this is unfamiliar to many people, marginal pricing is far from unique to the UK’s electricity market. It is used in most electricity markets in Europe and around the world, as well as being widely used in commodity markets in general.

The thing that's unique about the UK is that the marginal price is almost always (98% of the time) set by the price of gas. That means when the gas price increases, the wholesale price of electricity, and hence consumer bills, increase in direct response.

Of course the situation is also made worse by the fact that gas is used directly for heating and cooking in a high proportion of British homes.

The market will regulate itself! There will appear a new water company that makes things right and obviously will get all the customers, do not worry!

In a free market, if clean water gets expensive enough, then infrastructure overhauls to actually cut down on the leaks become economical. If everything is nationalized, you're relying on political goodwill instead to pay for those overhauls.

I have no clue how UK's "privatized water companies" work though. I'm not going to be too surprised if UK's system somehow manages to combine all the disadvantages of private ownership with all the disadvantages of state ownership in a single system.

Water companies in the UK operate under regional monopoly, so most people only get a single company they can buy water from.

The free market approach seems to require allowing water companies to even build and maintain parallel infrastructure that can't be shared, if they consider it to be economical. That would require immense capital investment, meaning the barrier to entry would likely be very high. The "efficient" case, where joining an existing pipe infrastructure is cheap, due to competition, would entail having several parallel networks of pipes running between reservoirs and people's homes. This was viewed as profoundly wasteful, even by the Thatcher government that privatised water, and that's why it's forbidden by regional monopoly.

You can't switch water suppliers, so there is no such incentive to be competitive.

It does, AFAICT, there is no competition in infrastructure or supply. There are only targets to meet on service standard and agreed price levels with the state.

The companies seem to operate on a model of doing as little maintenance as they can get away with while taking on debt and paying out to shareholders and the C-suite whenever possible. This has been done in complicity with the regulatory body who wanted to keep bills as low as possible for as long as possible, so played along with the zero-investment model.

It is a clusterfuck.

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