Public sector water utilities (B2.01)


Most water services – including regulation and ecosystem protection, as well as water supply and sanitation and irrigation infrastructure – are provided by public utilities. There are several types of public utility, with varying levels of autonomy, which affects the way in which they can operate. In ascending order of autonomy, the main types are:

  • Government department (within ministry or separate ministry);
  • Special water unit, reporting to a minister or mayor;
  • Fully autonomous, ‘commercial’ water utility with its own sources of funding;
  • Company wholly or majority-owned by the public sector.

The principle of subsidiarity is often applied in the context of public water services, insofar as water units tend to be under the jurisdiction of a local or municipal authorities. Irrigation agencies, however, are usually highly centralised. Bureaucratic bottlenecks yet seem to affect both centralised and decentralised public service providers, and reform here is often impeded by strong vested interests.

Aside from administrative issues, many public water service and irrigation agencies are also proven to be inefficient in regards to finances, whether it relates to having the financial capacity to fund projects or to even set and collect user fees. In addition, since public utilities normally benefit from a monopoly status it is very difficult from a users’ perspective to provide any feedback regarding customer dissatisfaction.

Reform can yield efficiency gains of the sort that are normally associated with the private sector. Since each public water organisation is different, a unique and tailored package of solutions is required in order for the public utility to provide at its best possible competence. A clear definition of the respective responsibilities of service providers and regulatory bodies is an essential starting point.

The following are some common elements for reform (improved efficiency) for public service providers:

  • A clear and effective regulatory framework (both financial and service delivery, A2);
  • Independence from government and day-to-day interference;
  • Commitment to effectively monitored performance targets (e.g. new connections, leakage reduction, reliability, bill collection rates, financial break-even, etc.);
  • Tariff setting that improve cost recovery (C7.01);
  • Motivation and training of staff oriented to customer needs;
  • Sub-contracting services to the private sector where feasible and efficient;
  • Restructuring the organisation to reflect new goals and orientation.

Lessons learned

The following can be learnt from experience with public service providers of water supply and sanitation services:

  • While water services are typically provided by governments, there are rising concerns over issues of efficiency and accountability.
  • Drastic reform is easier to contemplate when the water situation is desperate and public discontent with service levels is high.
  • Consultation with water users is vital in order to ensure the provision of services that people really want and are willing to pay for. Note that users should be identified: women may be the main users of domestic water, but consultation often takes place only with (male) community leaders.
  • Immediate and early improvements in the standard of service (e.g. water quality, reliability, pressure) will help offset the unpopularity of tariff increases or layoffs.
  • Correcting inefficiencies in water use (C6) (e.g. high levels of leakage) can reduce the need for unpopular tariff increases.
  • When the effectiveness of the public water system is low, collaboration with the private or community-based sector can help to improve the quality of the water supply and sanitation services.