THE REGULATORY FRAMEWORK FOR
EFFICIENT, AFFORDABLE, RELIABLE
WATER SUPPLY SYSTEMS FOR THE
COUNTIES
ENGINEERS INTERNATIONAL CONFERENCE
9TH -12TH MAY 2012
ENG. R. GAKUBIA
CEO -WASREB
CONTENTS
1.
2.
3.
4.
5.
6.
7.
8.
9.
What is Regulation?
Regulatory Models.
Key functions of Regulations
Benefits of Regulation
Regulatory Framework for the Counties.
Guiding principles of Regulation.
Lessons learnt
Wayforward.
Conclusion
What is Regulation?
Process by which oversight and rules are set
for public or private companies in an industry.
The oversight and rules often have to do with:
 economic factors (tariffs or pricing)
 service level factors (water quality, pressure,
access to services, etc.).
Regulation places constraints on behavior,
through incentives and sanctions.
Clientilist model of water provision
Source: Vivien Forster, ‘Ten years of Water Service Reform in Latin America: Towards an Anglo-French Model’ [2005]
Reformed model of water
provision
But: Some Missing Features ???
Politicians
= ??
Policy - Makers
Undue
influence
Regulatory Agency
Lay-offs
Employees
Water Service Board/Water
Service Provider
Connected
population
Price rise
Contractors
Unconnected
population
S
o
u
r
c
e
:
MW&I
Water
Resources
Management
Authority
WRMA
Catchment Areas
Advisory
Committees
CAACs
Water
Services
Regulatory
Board
WASREB
Water
Services
Boards
WSBs
Water Services
Providers
WSPs
Water Resources
User Associations
WRUAs
Water Resources Management
Water and Sewerage Service
Consumers, Users
Consumption, Use
Regional
level
Local level
D
e
t
a
i
l
s
i
n
n
e
w
i
n
s
t
i
t
u
t
i
o
n
s
f
l
y
e
r
National level
*
Regulation
Water Services
Trust Fund
WSTF
Services
Provision
Water Appeal
Board
WAB
Policy
Formulation
WATER ACT 2002: INSTITUTIONAL SETUP
WATER ACT 2002: REGULATION OF
WATER SERVICES
Water Services Regulatory Board
Licence
Water Services Boards
Service Provision
Agreement
Water Service Providers
Service Provision Rules
Customers
Institutional Framework - Separated Policy , Regulatory and Service Provision Funct
April 10, 2015
Water Services Regulatory Board
8
REGULATORY MODELS(1)
Regulatory systems can take different forms
according to the existing legal traditions and
system in the country. The most common
regulatory models are:
Regulation by independent body.
Regulation by contract: Generally used within the
context of public-private partnership.
Regulation Models(2)
Regulation by contract
(French civil law tradition)
Regulation by institutions
(Anglo- American tradition)
Government
Appoints
Government
asset holding company
Regulator
Arbitrator
Contract
Contract
Monitoring
committees
Sets Tariffs and
Service standards
Set Tariffs and
Service standards
Utility
Utility
Services
Tariffs
Customers
Source: World bank Institute “ Designing and
Implementing Successful Utility Reform” 2010
Services
Tariffs
Customers
Key functions of Regulation
• Licensing – Competition Regulation: (decides
which provider is allowed access to the market).
• Setting Performance Standards and
Performance Monitoring:(Water quality, service
levels, financial standards, defination of consumer rights,
complaints handling mechanism).
• Tariff Regulation: to promote the financial sustainability
of the utility through cost recovery tariffs.
• Enforcement: taking action when a utility does not meet
the established standards.
Benefits of Regulation
 Protection from political interference:
 removal of tariff-setting decisions from the political environment
 Enhancing the utilities to make the business and social arguments
for tariff or service level increases.
 Improved, evidence-based management and monitoring:
 Utilities often lack the systems to effectively monitor their financial
and operational performance..
Access to private capital:
 boosting of Investors and donors confidence when they make
investment decisions.
REGULATORY FRAMEWORK FOR EFFICIENT AFFORDABLE,
RELIABLE WATER SUPPLY FOR THE COUNTIES(1)
 Provision of water services will be by licence issued by the
Water Services Regulator.(otherwise one shall be guilty of an
offence).
 Licence requirement are exempted in the provision of water
services :—
• (a) by a person to his employees;
• (b) on the premises of an institution to the occupants where
the source of supply of the water is lawfully under the control
of the institution or where the water is supplied to it in bulk
by a licensee;
• (c) in circumstances which are prescribed by rules made by
the Regulator to be exempt from the requirement for a
license.
REGULATORY FRAMEWORK FOR EFFICIENT, AFFORDABLE,
RELIABLE WATER SUPPLY FOR THE COUNTIES (2)
Water services shall be provided by water services
providers(WSPs) established by county governments.
 The WSPs shall comply with standards of
commercial viability set by the Water Services
Regulator.
 The WSP must submit its Memorandum and Articles
of Associations that conform to the model developed
and approved by the Water Services Regulator.
Guiding principles of Regulations
1. Benefits of Regulation must exceed its Costs
2. Regulation is a Means to an End, not an End in
Itself
3. What ultimately matters are outcomessustainable water supply and sanitation services
- not regulatory rules (“performance not
processes”).
4. Quality of service standards must be realistic,
affordable, monitorable and enforced
5. Whenever possible, use benchmarks rather than
actual costs for prices or subsidies
Lessons learnt 1/3
 The monopolistic character of water services
provision means that self-regulation is typically
inappropriate. Regulation should be separated
from provision.
 Regulation is one piece of a reform process and
must be an integrated part of it
 Regulators must operate independently from
both short term political pressures and the
regulated companies.
 Regulation is likely to be most effective if it
employs incentives as well as sanctions.
Lessons learned 2/3
Regulation should be transparent, with
maximum use of published performance
targets and achievements levels.
Good independent information on asset
conditions, performance and standards,
operating costs and investments efficiency is
an essential prerequisite for effective
regulation.
Seeking customer input as a routine part of
regulation is important
Lessons learned 3/3
Independence is a prerequisite, but also
 Coherence-Tariffs and service standards are interrelated: higher service standards, or greater
coverage, mean that higher costs will be incurred.
 Predictability and Credibility - Depends not only
on well-designed regulatory framework, but also
on sound policy and governance frameworks for
the sector.
 Legitimacy and accountability-Regulatory
processes need to be understood and generally
accepted by consumers, who bear the ultimate
impact of tariff and service standards decisions.
WAY FORWARD- COUNTY WATER SERVICES.
Viable water services business will require:
 Separation of oversight and operation .
 Ring-fencing of revenue accounts to keep track of
costs and hold institutions to account. Hence a
professional providers(separate legal entity)
 good management systems and professional
capacity;
 tariffs that ensure cost recovery; and,
 consumer engagement( happy customers pay their bill! )
 Consolidated water services provision to achieves
economies of scale and to access professional
capacity
CONCLUSION(1)
 The principle of regulation under the Water Act
2002 has greatly improved sector performance
 There is increased compliance to regulatory
requirement.
 Trends indicate good performance for WSPs that
have:
-good governance
-right Management quality and skills mix
-embraced commercialization.
CONCLUSION(2)
• Service standards and pricing are dependent on the
quality of the water services infrastructure.
• The IEK( the learned society of the engineering profession) in
persuit of its mission “ providing information and leadership to
the engineering profession on issues of concern to public and profession”
remains a valued stakeholder in the quality of water
services infrastructure.
• Hence IEK should as right be represented in the
board of Water Services Regulator as a body as well
as in any other national body set up to develop
service infrastructure.
Thank you for your attention!
www.wasreb.go.ke