The bill also outlines that the fees imposed on consumers should be set such that they suffice to cover the maintenance and repairs of water supply infrastructure while generating at most a “reasonable” return on capital.
Pinja Perholehto (SDP) on Sunday warned that the profit expectations of investors could as a result start influencing the operations of water utilities ahead of the needs of municipal residents. Petri Honkonen (Centre), in turn, voiced his alarm about the bill by pointing to the notorious electricity distribution business divestment by Fortum in 2014. The business was sold to a consortium of primarily foreign investors, resulting in near-immediate increase in transmission prices.
Ruling-party lawmakers have accused their opposition counterparts of fomenting unwarranted fears.
“Public ownership and control [of water supply utilities] will strengthen, not deteriorate,” Minister of Finance Riikka Purra (PS) chimed in on X on Monday.
Her argument appears to be based on the current lack of regulation governing the ownership structures of water supply utilities. Olli-Matti Verta, the head of water resources management at the Ministry of Agriculture and Forestry, similarly pointed out that the bill would undeniably tighten the regulatory environment, despite allowing outside investors to acquire stakes of up to 49 per cent.
“It’s been estimated that this way municipalities can continue to control and organise the water supply also in the future,” he said to Helsingin Sanomat on Monday.
Petri Kuoppamäki, a professor of business law at Aalto University, challenged the argument, reminding that also minority owners can hold significant leverage through instruments such as a shareholder’s agreement.
“The ownership can also be distributed in a way that 49 is the largest stake,” he added to the newspaper.
A shareholder’s agreement is a means for shareholders to deviate from the limited liability companies act on issues such as financing and dividend distribution. A private shareholder could utilise the agreement to, for example, set profit targets that exceed those that would be set under complete public ownership.
“This could lead to the water fees of municipal residents rising. This is precisely the situation they’ve had in Tallinn. There foreign capital investors had minority stakes in utilities, and yet water fees rose significantly,” reminded Kuoppamäki.
He also pointed out that shareholder’s agreements fall within the scope of confidential business information, meaning their contents could not be subjected to public scrutiny.
The bill does not account for the possibility in tremendous detail, outlining simply that “the preservation of municipal control should be taken into consideration also when drafting a shareholder’s agreement”.
Kuoppamäki stated to Helsingin Sanomat that water supply companies should be regulated such that they are fully in public ownership or organised as co-operatives because water supply is a natural monopoly. It is impossible, he elaborated, to increase competition by de-regulating the market because there is simply no rationale for building two parallel water infrastructures.
The owner of water utilities can therefore dictate the fees.
“I’m a professor of competition law and a proponent of the free market, but the market mechanism doesn’t work at all in this realm [and] this kind of a business is a licence to print money,” he commented.
Verta from the Ministry of Agriculture and Forestry appeased the concerns, highlighting that the privatisations of water utilities have been rare despite the lack of regulation in the domain.
“The new act is an attempt to make sure that if a municipality wanted to start privatising, there’d be boundary conditions for it,” he said.
The bill stops short of prescribing that water supply has to be fully in public ownership due to the sovereignty granted to municipalities under the constitution. “The legislation has to leave various options for organising the water supply,” said Verta.
Aleksi Teivainen – HT
