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#Water

Water sector ownership and operation

  • 11 July 2019
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In water system operations, what matters most is the ability to provide reliable, efficient, affordable supply of high-quality water to citizens. This CERRE report highlights that for both private and publicly owned models, an independent regulator is crucial to ensure appropriate level of infrastructure investments that will guarantee optimal water supply to citizens.

The issue of water sector ownership and operations has grown in political importance recently with Italy and the UK currently considering the review of the organisation of their water sector. The report ‘Water Sector Ownership and Operation: An Evolving International Debate’ reviews international and economic considerations, providing a framework for thinking about the complex issues at hand. It highlights that the investments and quality incentives created by a regulatory regime are more important than simply the ownership of assets or operations.

“The water sector relies heavily on a long-lived fixed infrastructure that is too costly to duplicate. This implies limited potential for direct competition. At the same time, the state of this infrastructure is fundamental to deliver reliable supply of high-quality affordable water, as well as environmental protection and water conservation”, explains Professor Sean Ennis of the University of East Anglia, lead researcher for the CERRE report.

With ageing water systems around Europe, investment has become ever more critical. Some estimate that OECD countries need to invest $17 trillion in their water systems in the coming decades. Whatever operational structure is chosen, determining the optimal level of investment for necessary infrastructure or treatment upgrades remains crucial for water systems going forward.

To achieve the right balance, the authors insist on the need for a strong economic regulator independent of both government and firms, which can act to ensure the necessary level of investment occurs.

“Appropriate and independent regulation plays a key role in water system operation. An independent regulator can act to prevent excess investment or encourage investment where it is lacking, and limit the potential for political intervention. Even under public operation we note that an independent economic regulator can be valuable, this time to mitigate under-investment”, highlight the researchers.

The report features possible options that are worth exploring, including on the on-going revision of the Drinking Water Directive: “a well-functioning water sector in Italy as well as in other European countries requires dealing with multiple and somewhat contradictory goals such as access to water, environmental performance, public health, affordability, investments and scarcity management. A one-model-fits-all approach is not an option given the significant differences in local geography and climate across Europe. Nevertheless, having robust European legislation would allow for a more dynamic and efficient water sector. Increased transparency for consumers will certainly remain a cornerstone to be further factored in future regimes too,” concludes Ennis.

Document(s)
REPORT | Water Sector Ownership and Operation: an Evolving International Debate
Author(s)
David Deller 2019 Sq
David Deller
Senior Research Associate
University of East Anglia

David Deller is a Senior Research Associate at the Centre for Competition Policy, University of East Anglia. He is an applied economist specialising in policy questions affecting the regulated utilities, in particular energy and water.

Since 2013, Mr Deller’s research has looked at consumer behaviour, often around consumers’ apparent reluctance to switch energy suppliers, and has developed a broad array of empirical evidence to shed light on distributional and fairness issues in the energy market.

Much of his work has been facilitated by close co-operation with external partners including Ofgem, Which?, Anglian Water and the Centre on Regulation in Europe (CERRE).

Mr Deller holds a PhD in Economics from the University of Essex and a bachelor degree in Economics and Management from the University of Oxford.

Sean Ennis
Sean Ennis
CERRE Research Fellow
University of East Anglia

Sean Ennis is Director of the Centre for Competition Policy and a Professor of Competition Policy at Norwich Business School, University of East Anglia.

Previously, he was a Senior Economist in the Competition Division of the OECD. Prior to that, he has served as an Executive Director of the Competition Commission of Mauritius, as an Economist at the European Commission’s DG Competition and at the U.S. Department of Justice’s Antitrust Division.

Over the years, Mr Ennis has published research studies and reports published by economic journals and submitted to the European Parliament, the G20, the OECD and the World Bank. He has co-authored reports for regulatory and government agencies in Australia, Greece, Mexico, Romania, the United Kingdom and the United States.

He received a BA (Hons) in Economics from King’s College, Cambridge and a PhD in Economics from the University of California at Berkeley.

More publications

on #Water

Proprietà e gestione del settore idrico
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