ENG. R. GAKUBIACEO -WASREB

ENGINEERS INTERNATIONAL CONFERENCE 9TH -12TH MAY 2012

THE REGULATORY FRAMEWORK FOR EFFICIENT, AFFORDABLE, RELIABLE WATER SUPPLY SYSTEMS FOR THE

COUNTIES

CONTENTS1. What is Regulation?2. Regulatory Models.3. Key functions of Regulations4. Benefits of Regulation5. Regulatory Framework for the Counties.6. Guiding principles of Regulation.7. Lessons learnt8. Wayforward.9. 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 provisionSource: 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 ???

Water Service Board/Water Service Provider

Regulatory Agency

Policy - MakersPoliticians

Employees Contractors

Connected population

Unconnected population

Lay-offs

Undue influence

Price rise

= ??

WATER ACT 2002: INSTITUTIONAL SETUP

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Details in new institutions flyer

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Water and Sewerage ServiceWater Resources Management

Water AppealBoardWAB

WaterServices

RegulatoryBoard

WASREB

WaterResources

Management AuthorityWRMA

WaterServicesBoardsWSBs

Catchment Areas Advisory

Committees CAACs

Water Services Providers

WSPs

Consumers, Users

Water Resources User Associations

WRUAs

Water ServicesTrust Fund

WSTF

April 21, 2023 Water Services Regulatory Board 8

WATER ACT 2002: REGULATION OF WATER SERVICES

Water Services Regulatory Board

Water Services Boards

Licence

Water Service Providers

Service Provision Agreement

Customers

Service Provision Rules

Institutional Framework - Separated Policy , Regulatory and Service Provision FunctionsInstitutional Framework - Separated Policy , Regulatory and Service Provision Functions

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 institutions(Anglo- American tradition)

Regulation by contract(French civil law tradition)

Regulator

Government

Utility

Customers

Services Tariffs

Set Tariffs andService standards

Appoints

Government

asset holding company

Utility

Customers

Contract

Services Tariffs

ContractMonitoringcommittees

Arbitrator

Sets Tariffs and Service standards

Source: World bank Institute “ Designing and Implementing Successful Utility Reform” 2010

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 Regulations1. Benefits of Regulation must exceed its Costs2. Regulation is a Means to an End, not an End in

Itself3. What ultimately matters are outcomes-

sustainable 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 1/3The 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 2/3Regulation 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 3/3Independence is a prerequisite, but alsoCoherence-Tariffs and service standards are inter-

related: 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