What’s happening with Galasa?

Galasa is our local water company, supplying homes in the Levante and the Almanzora areas. It’s a public company, owned 51% by the Diputación (provincial council) and the rest by the local councils that make up the towns it supplies.

In brief, water supplies in Andalusia are guaranteed by the local councils, who are responsible for ensuring everyone has a supply of fresh potable water (hah!).

Sadly, Galasa is bankrupt and looks likely to be wound down in early December. Leaving us all without water, and with a great big pile of debt. Nobody knows what’s going to happen next.galasa water

 

Galasa has, in my opinion, three fundamental problems:

  1. An artificially low profit margin
  2. An ageing infrastructure
  3. A confusing and paralysing management and shareholder structure

Let’s take this by parts. Remember that Galasa doesn’t have control over the water prices it charges consumers – that’s set by the local councils, although some have delegated this back to the provincial council for a unified pricing structure to be set. This explains why water in some villages in the Almanzora costs half of what it costs on the coast.

First off, Galasa and farming has emptied the local aquifers. Meaning the only way to get fresh water is by buying it – either from the desalination plants or from other regional water bodies up north. The first option is easier, but the price is set at an artificially high price which is similar to what Galasa charges consumers (the debt of the desalination plants, also state owned, is in essence being passed onto Galasa). The second option is politically charged, slow and difficult (they have to get national and regional government approval to transfer large amounts of water in a go, and store it in the dams).

So Galasa really doesn’t make much per cube of water, and it actually sells water at a loss in some villages. It has a artificially low profit margin, and is even forced to sell at a loss in some cases. But the politicians are happy, so who cares?

Secondly, the infrastructure of the province is crumbling. It’s estimated that Galasa loses as much as 50% of its water, according to a PSOE report. Galasa purchased 12 cubic ha of water from the desalination plants last year, but only sold 6. This cost the company €2,5 million.

But the infrastructure isn’t within the power of Galasa, in a bizarre situation. The company is only responsible for the intra-village infrastructure, and for repairs within urban areas. The upgrading of the infrastructure is up to the village councils, which obviously aren’t going to spend a penny on them because there’s no money, and no reason to. So Galasa is forced to repair the many broken pipes (look at Turre, the main street is being dug up every two weeks on average) but can’t replace the pipes. But it has to pay for the water which is lost through the leaks.

And thirdly, Galasa is publicly owned, which translates as being in the hands of the politicians. The management is appointed by whichever party is running the provincial council, and are rarely people with experience of running public utilities. I understand the current head is a secondary school teacher from Huércal-Overa who is also a town councillor. He’s paid €80,000 a year for the job (down from previous salaries, I should note, in a rare example of cost-cutting). Whether he is doing a good job or not I don’t know. I suppose the theory is that the bosses and ruling council don’t have to be administrators, as they can employ people for that – they have to be politicians, to deal with the Administration. Does that make sense? You have to enter the Terry Pratchett alternate head space enjoyed by Spanish politicians for it to make sense.

Which is probably why Galasa has a dire record of chasing payments, or finding people illegally tapping into the water network. They’re trying to improve this, but the reports coming out of there don’t seem hopeful.

So, Galasa is bankrupt.

It has a public debt of around €40 million – nobody seems quite sure- and you’ll remember that this summer it had the electricity cut off because it couldn’t pay Endesa. Endesa is privately owned, and doesn’t mess around when you don’t pay the bill. It owed them around €1.5 million.

We believe there are better solutions than those proposed by the management of Galasa which do not adversely penalise the consumer – PSOE statement July 2016

So, what’s the solution?

Well, there isn’t one, according to the politicians, who frankly seem more interested is blaming one another for the mess. They’ve been ignoring the problem for years now and every party is as guilty as the other, despite what they say now.

Back in the summer, the PP controlled provincial council tried to put up water prices by 33%, and set one single tariff for all consumers (meaning those mountain villages that have really low water rates might see a 200% increase). The motion passed, but PSOE councils are refusing the implement the price rise, saying that consumers shouldn’t be affected by the mismanagement of the company. So it’s one hell of a mess, and nobody seems sure if the water prices have gone up or not.

So now it seems to be a game of political chicken, with the PP and PSOE in a stand-off to see who blinks first before Dec 1.

So why is it exploding now?

Because of a national law governing the balance sheets of public companies, passed in 2012. The law explicitly says that any public company whose debts outstrip their assets must be wound down on December 1, 2016. Galasa SA will go in front of a mercantile judge (the IU party have happily said they’ll be the one to take them there) who will wind it down.

What then?

God only knows.

No, really?

OK then, God doesn’t know either.

The IU and PSOE issued a joint statement last week saying that the PP wants Galasa to go under so they can privatise the remainder of the company. The PP said it will sue the spokespeople of both parties for slander, which will be fun.

The responsibility for providing water is with local councils. Currently they have delegated that responsibility to Galasa, but if that company closes the responsibility returns to the councils. Along, incidentally, with the debt of Galasa.

So the debt will be shared out amongst the provincial council and the local council shareholders. The IU estimates the debt will be around €1 million a council, if memory serves me right, with €20 million for the Diputación. It’s not a debt most councils will be able to afford.

The Socialist PSOE party has warned that councils will collapse if state-owned water company Galasa goes bankrupt in December. – COSTA ALMERÍA NEWS quote CAN 587

We can expect two days of water cuts this Dec 1 and 2 as workers at the company go on strike to demand a promise is made to keep their jobs. There will be probably be some effort from the Diputación to keep the taps flowing, but nothing seems to have been publicly suggested.

After that – well, I’ve got a large water tank on the roof, and I suggest you do the same.

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6 Replies to “What’s happening with Galasa?”

  1. Pay 4 university students 20k each n tell them the ground rules n this company would fly
    Or let the mafia run it.. they might cheat less.

  2. Adopt a cooperative or mutual ownership structure or the not for private profit Welsh Water model. Letting consumers own the company is likely to leadvto a new approach. The debt needs writing off in practice but retained in the books as contingent liabilities of the current shareholders. Then bring in those 4 business students.

  3. Emanagua which supplies water in Nijar is also financially strapped.

    The underlying problem is simple – in a semi desert area of the world people pay too little for water. Emanagua pricing structure has high fixed charges and low per cubic metre charges.

    Agriculture is cosseted and politically powerful..
    Inefficient management structures make things worse.
    Poor maintenance was a feature of British water aupply until the structure was changed by privatisation.

    Versions of the Galasa problem will be repeated throughout the region
    until price is used properly and structures are changed.

    I’m in my 70s and not holdig my breath!

  4. My Wife and I are in our 80’s.
    We require Water to continue to live. Just get the problem sorted.
    In my opinion the Government, Councils, and Management are HOPELESS.

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