The announcement regarding Riga City Council’s plans to sign a public and private partnership to form a joint association with a single waste management manager for 20 years has caused major discussions among politicians about possible signs of a monopoly.
«The new waste management model in Riga could create a monopoly situation in the city and increase service price»
«Riga City Council’s responsible specialists failed to answer questions asked by our faction in regards to the planned waste management model,» says National Alliance deputy Baiba Broka. «We conceptually support Riga City Council’s cooperation with private companies by forming public-private partner enterprises. We definitely support waste sorting and recycling in Riga, but our deputies were not provided with information about the project’s financial justifications, as well as investment recovery terms and risk division. The main concerns are related to the possible price rise and the formation of a monopoly.»
As BNN was told by Riga City Council’s Housing and Environmental Department, major investments are necessary (EUR 27.3 million without VAT) to develop the waste management system. This includes upgrading the existing vehicle park (80 units); procurement of new containers (40,000 units); installation of household waste collection points (2,500 units); installation of underground-type containers in Old Riga (120 units); establishment of sorted waste collection fields.
The department explains that in accordance with the law, it would not be possible to realize the aforementioned tasks within five to seven years of usual service procurements. Investments and contracts for longer periods of time would only result in a more rapid tariff increase, representatives of Riga City Council’s Housing and Environmental Department.
Nils Josts, member of Unity’s faction in Riga City Council, notes that signing the contract with a single partner for twenty years is risky for Riga’s residents, as the contract’s project is unknown, as are its conditions, the private partner’s duties, the municipality’s right to terminate the contract, as well as any knowledge about any unforeseen surprises that may arise during such a long time.
«For twenty years Riga will have only one waste management company that will not allow residents to pick the best possible offer and will force everyone to pay a single company. On top of that, residents will not be able to refuse services of this company if they find its service quality lacking and if prices go up,» Josts says.
The department promised BNN that «creation of a joint-association with a single waste management company in the municipality will help ensure high service quality because there will be a transparent waste flow, all aforementioned conditions will be met and, according to survey results, residents will be provided with an opportunity to sort their waste and not fear rise of waste management costs.»
Monopoly – beneficial or not?
Vyacheslav Stepanenko, head of the Housing and Environmental Committee, says he sees nothing bad in offering equal tariffs and equal services to all Riga residents. Stepanenko emphasized that public and private partnership agreement provides that the waste management company will only be able to raise tariffs following a decision from Riga City Council.
Juris Puce, head of For Latvia’s Development party, explains that «forming a single waste management company for 20 years means Riga City Council intends to create a monopoly in the waste management field.»
«It seems Ushakovs does not understand basic economic principles. Existence of a private monopoly on the market means consumers will definitely lose without competition,» Puce said.
«Riga residents could end up paying twice as much for the municipality’s near-sighted decisions»
Even the Competition Council is concerned that Riga City Council’s possible support and realization of public and private partnership procedure in the choice of waste management approach is near-sighted. The choice of the waste manager, which includes the signing of a public and private partnership contract for 20 years, without first assessing the possible influence of this decision on competition would completely close the market for development competition, CC explains.
«Even now we can conclude that Latvia’s waste management market is becoming narrow, denying private companies the right to compete. If competition in Riga, which is a very important market for Latvia, is stifled for 20 years, we can expect competition to disappear completely from the waste management market. I would like to point out that residents will be the ones who will experience the worst consequences of this. It is in society’s best interest to receive services at competitive prices. If competition is non-existent, any benefits from unhindered activity of a monopoly could be denied completely,» CC chairperson Skaidrite Abrama comments the situation.
CC emphasizes that the state and municipalities have to take into account the interests of society when making important decisions.
In spite of concerns voiced in relation to the appearance of a monopoly on the waste management market, Riga City Council has supported the formation of a single waste management company.