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A NEW BUSINESS MODEL FOR A COMPETITIVE MUNICIPAL UTILITY

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Abstract:

There have been numerous approaches to enhancing the competitiveness of municipal utilities. These are usually driven by the risk of possible privatization, customer expectations, or both.

One way to measure our risk of privatization is to measure customer satisfaction. We might conclude that high satisfaction among current customers would imply little support for privatization, while low customer satisfaction would imply greater support.

The City of Safford Municipal Utilities asked their customers about satisfaction as well as loyalty, communications, and general attitude toward the utility department. The message was very clear; Safford Municipal Utilities were at risk. Drastic change was necessary

Privatization could provide the solution, but what does a private corporation have that a municipal utility does not have? The major differences in the Safford case were the organizational freedoms and the economic incentives found in private sector enterprise.

The challenge was to create a new corporation using the current utility employees that would have the organizational freedoms and economic incentives that you would expect from a privatization effort. Gila Resources was the result of that effort

This business model provides the organizational freedoms through new and different personnel and governance policies than those of the City. It provides the economic incentives through profit sharing between the employees, the company and the City.

Document Type: Research Article

DOI: https://doi.org/10.2175/193864700784547340

Publication date: 2000-01-01

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