Question

Under what condition are cities MOST likely to privatize utility provision?

A) When the demand for new service drops off
B) When most of the utility's customers are located near transportation lines
C) When the city's density is declining as a result of suburban flight
D) When utility usage is growing faster than the population
E) When the cost of building the utility's infrastructure is high

Answer 1

The Answer is E) When the cost of building the utility's infrastructure is high

Many local governments do not have enough funds to expand public utilities. In such a case, government officials believe it is better to privatize energy provision to a company rather than take loans from a bank.

A private company will invest, develop and manage the facility and might agree on a fixed price with the local government.