www.iwahq.org

PUBLIC RESPONSABILITIES

I. Andrade*, J. Rosa**

*The Water and Waste Services Regulation Authority, isabel.andrade@ersar.pt

**The Water and Waste Services Regulation Authority, rosa.joaofilipe@gmail.com

W&S services in Portugal are historically and primarily a municipal responsibility. Since the early

90’s central government was allowed to intervene, in accordance to the principle of subsidiarity,

whenever local action proved to be insufficient. State’s intervention translates into the creation and

management of regional bulk systems.

While State-owned systems can only be operated by “in house” companies, municipalities, that

initially provided the services using solely their own administrative bodies, have been given, over the

years, different management possibilities.

W&S SERVICES IN PORTUGAL

GOVERNANCE MODELS

LESSONS LEARNED

inspiring change

The analysis of the strengths and weaknesses of the Portuguese experience, with this diversity of governance models, shows that there is no one-size-fits-all solution. The decision to change an existing

W&S services’ operator or system’s scale, even if not including private partners, should be based on an assessment of the gains expected to result of such modification, taking into account both existing and

expected technical and financial conditions.

The existence of different governance models, through their benchmark, is also a driver for the optimization of their performance, promoting quality of service and its affordability to users.

System ownership Participation of different stakeholders in the operator

+ Regional systems allow for scale

economies

+ More capacity to raise capital for

investment

+ More effective implementation of

national strategies

– Difficult articulation with

municipalities as owners of retail

systems

+ Proximity to populations

+/– Scale economies are possible

but dependent of voluntary

agreements between municipalities

(very few cases exist)

– More permeable to the interference

of political criteria in the decision-

making

+ No need to create a new entity

+ Better public acceptance

– Inefficiencies deriving namely

from public constraints

(regarding management and

budget)

+ Business unit under private law

(more flexible management rules

and efficient cost-recovery

guidance)

+ Possibility of benefitting from

private know-how (minor

shareholder)

– Still subject to some public

budgetary constraints

+ Possibility of sharing risk and

investment responsibilities with

private sector

+ Sharing of know-how

– Difficulty in the risk allocation and

management

– Complexity in managing the

contract

Private companies State or locally owned

companies

Municipalities (through

administrative bodies) State Municipalities

System ownership (who creates the system, chooses the

operator and defines public service

obligations?)

State/central government

Regional bulk systems (with few

exceptions)

Created by legislative act

Municipalities

Bulk or retail systems

Local or regional systems (if

municipalities agree to aggregate)

Operator’s nature (Management of the service implies the collaboration of different

stakeholders?)

State-owned companies

State is usually the main shareholder. Municipalities may hold a

position in the share capital of the operator.

Private companies may hold a minority share.

Municipalities (administrative bodies)

Several municipalities may create an association.

Municipal-owned companies

Several municipalities may hold a shareholder position.

Private companies may hold a minority share.

Local or State owned-companies created in result

of a partnership between the State and the

municipalities

Several municipalities and central government establish a

partnership to manage a municipal system.

Private companies

The private operator manages the system under a concession

contract.

EVOLUTION

At the retail level, municipalities continue to be responsible for the provision of W&S services for the

vast majority of the Portuguese population. Lately, making use of the new possibilities created by law,

companies (private and municipal-owned) have increased their relevance and now represent nearly

40% of the sector.

Figure 2 - Evolution of the Portuguese W&S retail services (population potentially served)

(a) Drinking water sector (b) Sewerage sector

Regional State-owned companies have started in the late 90’s, firstly in the drinking water sector and a

few years later in the sewerage sector. These operators are larger, serve more people and are

therefore more effective. Nowadays they are responsible for serving the majority of the Portuguese

population.

Access to water and sanitation is essential to an adequate standard of living, including adequate housing and health. Providing water and sanitation to people implies the use

of natural resources. States (through its different bodies) play several roles to ensure that such individual rights are respected and to manage and protect natural resources,

simultaneously promoting a good public service.

In what concerns the provision of water and sewerage (W&S) services, public authorities may choose to use their own means (adopting or not a commercial form), or assign

this provision to private operators, retaining more or less control over the way services are delivered to end users. In Portugal, historic evolution shows the use of different

governance models, combining central and local government intervention and different ways of private participation, in search for the best solution to each case.

PRESENT SITUATION

Figure 1 - Evolution of the Portuguese W&S bulk services (population potentially served)

(a) Drinking water sector (b) Sewerage sector

Figure 3 – Present picture of Portuguese W&S bulk services (2012)

(c) Population density per operator – drinking water

supply service (Pop/km2)

(d) Population density per operator – sewerage

service (Pop/km2)

(a) Drinking water sector (b) Sewerage sector

(c) Population density per operator – drinking water

supply service (Pop/km2)

(d) Population density per operator - sewerage

service (Pop/km2)

(a) Drinking water sector (b) Sewerage sector

Figure 4 – Present picture of Portuguese W&S retail services (2012)

W&S operators of bulk services are fewer and larger in terms of area and population. They are mostly state-owned companies. At retail level, the sector is still fairly fragmented, comprising 280 operators. The

vast majority only operate on one municipality. Municipal-owned companies operate 21 services and private companies 28 services. Around one quarter of municipal-owned and private companies serve

more than 100k inhabitants (typically urban areas) compared to only 6% of municipalities.

Water and sanitation Services Governance

Lessons learned from the Portuguese

Experience