Regulation: Catalyst for Better Governance of Water Utilities?

Brief

Although regulation of water services is not introduced per se to combat corruption, it can play an important role in improving sector and utility governance in a sustainable manner.

“The design of a regulatory systems is very country-specific. In many countries such as Burkina Faso, or in Uganda […] contracts between governments and utilities which set performance targets for a multi-year period are common practice. In other countries, regulatory units are created in the water administration, or competition authorities perform regulatory functions in combination with ‘public control’ mechanisms – as in Germany. In about 57 countries worldwide, autonomous water services regulatory authorities or regulatory units in ministries have been established at national or regional levels.”

This brief first outlines the corruption and integrity hot spots utilities face in their day-to-day operations before exploring how regulators, when ensuring that utilities comply with rules (for example by implementing tariff-setting procedures, licensing of utilities, public performance reporting, service standards), can develop an enabling regulatory framework that will support integrity in the water sector.

Regulation can serve both as a control limiting undesirable behaviour, and as a facilitator creating an enabling environment for conduct based on integrity.

The author recommends a combination of incentive-based tools, such as corporate governance guidelines and benchmarking, with cooperative approaches where partnerships with utilities, users and institutions can further “support utilities in building an integrity infrastructure.”

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The brief includes a note of caution. “To make a regulatory system effective and legitimate, the regulator itself must be safeguarded against corruption, capture and undue interference from stakeholders.”

It closes with a set of recommendations on first steps and measures to be implemented.

 

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