Water Supply and Sanitation Policy in Developing Countries Part 2 is our second MOOC in a two-part sequence, and looks at ‘Developing Effective Interventions’. Here we invite you to develop analytical skills and deep understanding about a complex, controversial policy problem – one with no simple, easy answers. About half a billion people on our planet still lack access to improved water supplies and about two billion do not have improved sanitation services, leading to an unknown but very large number of avoidable deaths each year from water-related diseases. Millions of dollars are spent on avoidable health care expenditures, and people – mostly women – spend many billions of hours carrying water from sources outside the home. Reducing these costs is a major global challenge for us all in the 21st century. Join us to explore the challenging and complex political, economic, social, and technical dimensions of the policy interventions that donors, national governments and water utilities use to address this challenge. This second MOOC consists of the following seven sessions: • Session 1: Introduction and how our ‘ancient instincts’ affect water policy interventions. • Session 2: Planning better policy interventions: Roles, features and examples of planning protocols. • Session 3: Water pricing, tariff design and subsidies. • Session 4: Providing information to households and communities to improve water and sanitation conditions. • Session 5: Changing the institutions that deliver water and sanitation services: Privatization in developing countries. • Session 6: Changing institutions: Lessons from the UK water privatization story. • Session 7: Changing institutions: Improving regulation of the water and sanitation sector. Your instructors for this course have worked in and studied this sector for many years. Professor Dale Whittington has worked on water and sanitation policy and planning issues for over 40 years in more than two dozen low and middle-income countries. Dr Duncan Thomas has worked in the UK and European water sectors for 15 years, focusing on overcoming barriers to technological, organizational, regulatory and policy innovations. Please watch this introductory video outlining the course: https://youtu.be/KkBmo3EKkkI
Video 7-0 Regulation of the water utilities in LDCs
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Water Supply and Sanitation Policy in Developing Countries Part 2: Developing Effective Interventions
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Changing institutions: Improving regulation of the water and sanitation sector
與講師見面
Dr Duncan ThomasLecturer
Alliance Manchester Business School
Prof Dale WhittingtonProfessor
Manchester Business School
This is the first video on the subject of water regulation.
We can think of public regulation of water utilities as another type
of policy intervention.
We may choose to deploy to improve outcomes in the water and
sanitation sector.
In almost call cases when they decided that the private
sector will play a major role in the delivery of water and
sanitation services, this triggers the establishment of a water regulator.
In the first video for this session on regulation, I will describe the context
for water regulation in low and middle income countries.
In the second, third and fourth videos we will take an in-depth
look at the regulatory model developed for use in the United Kingdom.
In later videos, we will conclude both the session and
the course with a discussion of the case of the North Penn Water Authority.
Usually we think of regulation as imposing restrictions or
rules against undesirable behaviors.
There are four main types of undesirable behaviors that often concern
water regulators.
I find it useful to classify these undesirable behaviors into financial,
public health, environmental and social.
From a financial perspective, the water regulator may be assigned their
task of preventing a water utility from exercising monopoly pricing.
From a public health perspective,
the water regulator may be assigned the responsibility of ensuring that a private
water utility meets drinking water quality standards.
Alternatively this regulatory task may be assigned to a health ministry and
not the water regulator.
From an environmental perspective, the water regulator may be assigned
the responsibility of ensuring that affluent discharges from municipal waste
water treatment plants do not result in surface water quality violations.
Again this regulatory task may be assigned
to a separate environmental protection agency, not the water regulator.
And from the social perspective,
the water regulator may be assigned the responsibility of ensuring that poor
households have access to improved water and sanitation services.
But as we discussed in our previous videos on the design of subsidies,
this regulatory task also may be best assigned to other government institutions.
In industrialized countries,
the primary task of most water regulators has been to prevent monopoly pricing.
In other words, it has been to ensure that private water utilities do not set
water tariffs far above their cost.
Many public utilities do not have an independent regulator that approves their
pricing and tariff policies.
This is because it's typically assumed that publicly on
water utilities will naturally behave in the public interest and
do not need additional regulatory oversight.
As we've seen in this course, this assumption is often not justified because
public water utilities may engage in a variety of rent seeking and
corrupt activities.
The most common approach used in industrialized countries to regulate
private water utilities is called rate of return regulation.
With rate of return regulation the regulator has three main tasks.
The first is to determine reasonable expenditures by the private water company.
Note how different this is from a private corporation that assumes that commercial
risk associated with its expenditure decision.
The second is to decide how much profit or rate of return is
reasonable given the capital at risk in the risk profile of the business.
The revenues is a private water companies that are considered quite secure, so it's
assumed that investors and private water companies are not assuming much risk.
Regulators thus typically allow rate of return that's relatively modest compared
to other corporate enterprises.
The third task is to estimate the tariff that will allow the company to recover its
cost and receive this predetermined rate of return on its capital investment.
The private water company,
has a financial incentive to increase its capital expenditures in order to
increase the rate base on which its rate of return is calculated.
The regulator must thus scrutinize the private water company's expenditures and
approve its capital investment plans,
to ensure that the companies rate base is not too high.
One of the concerns about rate of return regulation is that, the private
water company does not have a sufficient incentive to use capital wisely.
And will be biased towards capital expenditures,
relative to achieving operating efficiencies.
In developing countries however, the water regulator often has a different role
with respect to pricing and tariff regulation.
As we've seen in previous videos the problem in low income countries is not
that the water prices are too high.
Instead they're typically much too low.
In low income countries there's often a regulator that oversees publicly owned
water utilities.
If the water utility is publicly owned, and monopoly pricing is a remote risk,
what precisely is the role of water regulator in a low income country?
There's several answers to this question.
First, as we've seen, when tariffs are too low,
water utilities have less incentive to produce and deliver water efficiently.
Here an important responsibility of the water regulator is to
nudge water utilities toward more efficient operations.
One approach is for the regulator to publicize performance indicators for
different utilities.
This can enable private citizens in the state to better understand how effectively
different utilities are performing.
Effectively benchmarking one utility against another.
Second, in developing countries where prices are too low,
the regulator must play a role in making the case to the government
in civil society that tariffs actually have to be increased.
In this case, the objectives of the regulator in the water utility are not
opposed to each other.
It's just that it's often easier and more credible for the regulator to argue for
higher prices than it is for the water utility.
Third, in developing countries, the regulator has an important role to play in
terms of public education and outreach.
This can involve various kinds of information treatments as we discussed
previously in this course.
Fourth, the water regulator may need to be established and staff trained,
even though the water utility is publicly owned because there maybe plans for
engaging a private operator in the future.
Here, it's important to establish a regulatory capacity in advance so
that the regulator is in place and ready to do its job if and
when an private operator is engaged.
If the water regulator in low income countries has several new roles and
responsibilities are not common in high income countries.
Where would a newly established water regulator go to hire its staff?
Who makes a good regulator?
In the early 1990s, the World Bank and other international donors first began
pushing for the involvement of private operators in the water and
sanitation sector in developing countries.
But there were few water regulators in low and middle income countries.
At the time few people in the water sector had anticipated this shift toward
the private sector.
Many senior water professionals were both skeptical of this policy shift and
untrained in regulation.
So as it turned out, most of the professional staff of the new regulatory
institutions in low income countries, were hired from the younger generation.
This younger generation of water professionals and
economists was typically more open to the new ideas.
And they needed the jobs in the new regulatory institutions.
But where were they to obtain the training they needed to be a regulator?
At the time, few universities around the world offered programs in regulation.
What happened was that the World Bank provided seed money to
the Public Utility Research Center at Warrington College of Business at
the University of Florida at Gainesville in the United States,
to design a two week course on utility regulation and strategy.
The course began in 1997 and is offered twice a year.
I had the privilege of teaching in this program for a few years.
Over 3,200 regulators, managers, and
policy makers from 152 nations have attended the two week program to date.
The two key faculty were professors Sanford Berg and Mark Jamison.
They've made a tremendous contribution to the field of regulation
in developing countries.
Also, you can take a look at this link below their names where you
can find a variety of resources on regulation.
Academic programs and regulatory agencies around the world have used these materials
in their own training programs.
The glossary is now in ten languages.
So if you're interested in working for a water regulatory agency,
this course at the University of Florida and
the associated resources is a great place to start.
Thanks for watching this video.
