Utilities are public services and should not be run as businesses. This core argument challenges the prevailing notion that utilities—water, electricity, gas, and sewerage—can operate effectively under a commercial model. While recent proposals suggest turning utilities into public-benefit companies with a primary objective of delivering high-quality services, this approach still falls short. Utilities must be treated as essential public services, not as profit-seeking enterprises.
The Problem with Business Models for Utilities
Utilities do not function in isolation. They are deeply intertwined with social, environmental, and economic responsibilities that cannot be adequately addressed by a business model focused on profitability. When utilities are run as businesses, the profit motive inevitably takes precedence over the public interest. This leads to underinvestment in infrastructure, poor service quality, and a failure to meet environmental targets.
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Even public-benefit companies, which subordinate profitability to a broader aim, still operate within a corporate framework. This structure can limit their ability to fully integrate with other public services and strategic regional planning. The fundamental issue is that business models are unsuited to the functioning of utilities in the public interest.
Lessons from Scotland's Regional Governance
Prior to the establishment of the Scottish parliament, local government in Scotland functioned effectively within a framework of regions and districts. Regional authorities had powers and responsibilities for a wide range of functions, including water and sewerage, that required strategic coordination at the regional level. This integrated approach ensured that utilities were managed as part of a broader public service ecosystem, not as standalone commercial entities.
The present move towards city region governance through metro mayors and joint working is a step in the right direction. However, it needs to be formalised and given a full portfolio of responsibilities, powers, and resources for strategic planning, economic development, education, health, transportation, infrastructure, and utilities. Only then can utilities be truly integrated into public service delivery.
Key Takeaways: Why Public Services Beat Business Models
- Profit motive conflicts with public interest: Business models prioritize shareholder returns over service quality and environmental goals.
- Integrated governance works: Regional authorities in Scotland successfully managed utilities alongside other public services.
- Public-benefit companies are not enough: They still operate as companies, limiting their ability to function as true public services.
- Formalised regional governance is needed: Metro mayors and joint working must be given real powers and resources to manage utilities strategically.
Comparing Utility Governance Models
| Model | Primary Objective | Accountability | Integration with Public Services |
|---|---|---|---|
| Private Business | Profit maximization | Shareholders | Low |
| Public-Benefit Company | Public interest (subordinate to profit) | Stakeholders | Moderate |
| Essential Public Service | Public interest | Citizens and government | High |
FAQ: Utilities as Public Services
Why shouldn't utilities be run as businesses?
Utilities have social and environmental responsibilities that cannot be met by a profit-driven business model. Running them as businesses leads to underinvestment, poor service, and a failure to prioritize public interest.
What are public-benefit companies, and are they a solution?
Public-benefit companies are still companies, with profitability subordinate to a broader aim. While better than pure profit-driven models, they still operate within a corporate framework that limits their ability to function as true public services.
How can regional governance improve utility management?
Regional governance allows for strategic coordination of utilities with other public services like transportation, health, and education. Scotland's pre-parliament regional system successfully managed water and sewerage alongside other functions.
Utilities are not mere commodities; they are the backbone of a functioning society. Treating them as businesses undermines their potential to serve the public good. By embracing a model of essential public services, integrated with regional governance, we can ensure that utilities meet their social, environmental, and economic responsibilities. The shift towards city region governance must be formalised and empowered to deliver this vision.
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