Models of Aggregation for Water Supply and Sanitation Provision Capacity building module

Outline of the presentation  What is aggregation?  Aggregation models  The process of aggregation  Summary  Case studies

What is aggregation? Grouping of several municipalities into a single administrative structure for the provision of a service town A town B town C town D Aggregated service provider aggregation

Aggregation: one of many management models Aggregation of small towns Professional support to medium operators Scaling up demand response approach Strengthening community management models public private partnership Small scale independent providers Engaging the public sector

Drivers for aggregation Increased efficiency Access to professional services Access to water resources Access to PSP Access to finance Cost sharing

Outline of the presentation  What is aggregation?  Aggregation models  The process of aggregation  Summary  Case studies

Scale: the optimum size of utility SCALE Two Towns Several TownsRegional ProviderNational Territory Hungary, The Philippines, France Brazil Italy, England and Wales, The Netherlands

Scope of Aggregation SCOPE A single service e.g. bulk supply All municipal services All water and sanitation services A single function e.g. procurement All functions Several functions What services? What functions? Nimes (France), The Netherlands only water Dunavarsany (Hungary), water first, waste water later Italy, England and Wales

Governance arrangements  Loose association  Permanent structure owned by municipalities  Supralevel of local governments temporary permanent

Governance arrangements –voting rights in Board Method++ and --Power tilted to… Specific powers for the dominating entity ++ Confidence for larger entity -- Small entities have limited influence larger entities smaller entities % of population in each entity ++ Democratic -- Small entities have limited influence # of connections or value of the assets ++ A sound economic basis -- Varies from year to year One entity = one seat++ simple and transparent -- can be unacceptable to larger entities ….Or a mixture of the various methods

Outline of the presentation  What is aggregation?  Aggregation models  The process of aggregation  Summary  Case studies

Is aggregation a suitable option? Adding up the pros and cons ++--  Facilitates access to water resources  Economies of scale in works, procurement & support services  Access to finance (private & donors)  Attract private operator  Cost sharing between towns  IWRM – lower control over water resources – lower tailoring services to the needs of the end users – Loss of competition – Lower accountability to customers & citizens – Resistance to cost sharing – Potentially high transaction costs

Process of aggregation PROCESS Voluntary Voluntary with incentivesMandated The Philippines, France, Brazil HungaryItaly, The Netherlands, England and Wales

Stages in the Aggregation Process Preparatory Phase Analytical Phase Implementation Phase Initiate the aggregation process Identify key drivers for aggregation Identify aggregation candidates and stakeholders Choose an appropriate consultation process Establish group to lead the process Choose an appropriate aggregation process Assess drivers, constraints, and potential issues Assess benefits and costs for each entity Assess benefits and costs for alternative groupings Choose the most appropriate aggregation model Define an aggregation plan Define procedure to resolve disputes Monitor Progress against that plan

Outline of the presentation  What is aggregation?  Aggregation models  The process of aggregation  Summary  Case studies

Aggregation: define scale, scope and process SCALE Two Towns National Territory SCOPE A single service or function All services and functions PROCESS Voluntary Mandated

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Outline of the presentation  What is aggregation?  Aggregation models  The process of aggregation  Summary  Case studies

Case studies  France  Philippines  Hungary  Brazil  Italy  The Netherlands  England and Wales

Syndicates in France DriversEconomies of Scale, regional cooperation and PSP in highly decentralized environment (36,000 (often rural) municipalities) ConstraintsPolitical legitimacy (direct taxation but indirect citizen representation) ScaleNormally 2- 5 municipalities of similar size (< 5,000 pop) ScopeVariable (pick and choose operating functions / often on WS and not sewerage) ProcessUsually voluntary –central govt representative at local level (prefect) has right to mandate membership ModelAssets: asset ownership remains with municipalities, syndicate has usage rights Exit: allowed with permission of assembly if joining elsewhere Voting: mixed (max 50% seats for larger municipalities; min one seat per municipality) Harmonization: working towards harmonized tariffs and services

Local Government Units, Philippines DriversEconomies of scale and to lesser degree access to PSP, Access to government loans, access to water ConstraintsConflicting legal interpretations and political disunity ScaleVaries widely (from Manilla with 10m pop to rural LGUs with 30,000 pop in 3 towns) ScopeVaries (several or all functions; sometimes also other services than WSS) Processmainly voluntary – pace and route varies widely ModelAssets: in most cases transferred to aggregated entity Exit: municipalities can exit / cannot be dispelled Voting: by # of connections or assets (problematic at times) Harmonization: uniform tariffs

Dunavarsany, Hungary DriversPolitical ( compliance with EU standards) ConstraintsLegislative unclarity Scale8 municipalities, total 20,000 pop; one municipality much larger than other seven ScopeWater and wastewater; solid waste being considered ProcessVoluntary with financial incentives from national government Originally 4 member municipalities, 4 more joined later ModelAssets: no, not allowed by law Exit: allowed - but on reimbursing loss of additional grant Voting: based on contribution to budget Harmonization: working towards uniform tariff

Dos Lagos, Brazil DriversEconomies of scale and access to government finance and to lesser degree access to PSP ConstraintsPolitical disputes between local and state level Scale5 municipalities; total 310,000 pop ScopeWater supply and sanitation in some municipalities ProcessStrong financial incentives from state government ModelAssets: remain with state (bulk water infra) and municipalities (distribution network) Exit: limited Voting: loose association; no board in place Harmonization: uniform tariffs

Consortium & Convenzione, Italy DriversEfficiency, political ( compliance with EU standards) ConstraintsLocal political resistance, vested private sector interests ScaleNo standard size, municipalities, avg total population is 640,000 ScopeAll functions integrated ProcessMandatory ModelTwo models: Consortium (new public entity) and Convenzione (agreement between existing entities) Assets: municipalities keep existing assets; aggregated entity owns new assets Voting: vary but mainly based on population Harmonization: uniform tariffs (some exceptions)

Public water PLCs, The Netherlands DriversEconomies of scale ConstraintsResistance to aggregation among existing utilities Scale1-40 municipalities; 200,000 – 1.600,000 connections ScopeWater supply ProcessInitially voluntary, later mandatory threshold size of 100,000 pop ModelAssets: either owned by public water PLC of by member municipalities Exit: no Voting: based on population harmonization: uniform tariffs

Regional Water Authorities, England and Wales DriversWater resources, access to financing (for WW treatment) ConstraintsInstitutional design flaw (regulator and regulatee); lack of accountability ScaleMore than 100,000 population Scopewater supply, wastewater and water resource management ProcessMandatory ModelAssets: owned by RWA Exit: no Voting: fixed key, including local and central government appointees (not all municipalities represented) Harmonization: uniform tariffs Note: RWAs were divested to the private sector in 1989