Development Aspects Impressum Editors

Dealing with conflicts over water tariffs and the effects of macroeconomic shocks

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  Design a tariff scheme based on micro-metering of consumption, to encourage rational use of water and simplify the billing base. This ensures clarity for users and facilitates control and regulation of the providers’ income.
  
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  Determine whether service delivery costs will be recovered partially or in total from tariff income. If only partially, it will be necessary to establish how the nec- essary funds will be provided and what institutional and financial arrangements will be made to secure the financing to ensure the service’s sustainability.
  
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  Define beforehand how service provision risks will be shared between the state and the company, and ensure that such risks are fully reflected in the terms of the contract and in the business’s financial structure, providing contractual mitiga- tion and adjustment mechanisms in order to deal rationally and equitably with any contingencies that might disturb the equilibrium. This would avert oppor- tunistic behaviour by either the concessioning authority or the utility company.
  
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  Establish specific regulations on debt levels in order to avoid negative impacts from macroeconomic shocks and opportunistic behaviour by the company in “offsetting” costs, which should be done consistently with the risk allocation set forth in the contract.
  

5. Improving access to information on service provision

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  Define the content and frequency of reports to be submitted by the company: business and investment plans, service provision report and annual inventory, quarterly statements, monthly budget execution and reports prepared for regu- lar tariff reviews
  
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  Set standards for the plan of regulatory accounts to be used by the company, specifying the type of plan, accounts to be included, breakdowns and cost cen- tres to be used, along with instructions for submission, i.e. regulatory accounting
  
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  Create and implement instruments for the regulator to develop its own informa- tion, so that it can define a set of efficient costs by which the utility company’s behaviour should be guided. These instruments should be developed using an integrated approach incorporating elements of technical design, such as demand, assets and investments, operation of networks and plants, operating costs, pro- cess innovation and technological change, and financial considerations, e.g. de- mand and consumption factors, operating costs and investments, general and industry-specific efficiency indicators, the cost of capital and optimum levels of debt.
  
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  Make arrangements for technical and accounting information provided by the company to be reviewed by certifiers or auditors who should be hired by the concessioning authority or regulator, in order to avoid their capture by the utility.
  
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  Develop benchmarking systems, defining indicators, markets and companies to
  

compare with utilities in Argentina and abroad.

6.