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									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.   What is Regulation?
2.    Regulatory Models.
3.   Key functions of Regulations
4.   Benefits of Regulation
5.   Regulatory Framework  for the Counties.
6.   Guiding principles of Regulation.
7.   Lessons learnt
8.   Wayforward.
9.   Conclusion
          What is Regulation?
qProcess by which oversight and rules are set 
  for public or private companies in an industry.
qThe oversight and rules often have to do with:
Ø  economic factors (tariffs or pricing) 
Ø  service level factors (water quality,   
  pressure,    access to services, etc.). 
qRegulation 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


                              Water Service Board/Water        Contractors
      Employees
                                  Service Provider



                                                           Unconnected 
                                    Connected               population
                                    population
      Price rise
                           WATER ACT 2002: INSTITUTIONAL SETUP




                                                              Water Appeal
    *                                                            Board
                                                                 WAB                         Water Services
    D                                                                                         Trust Fund
    e
    t
                                                                                                WSTF




                                                                                                              Formulation
    a




                                                                                                                Policy
    i
          National level




    l
    s                                                            MW&I
    i
                                                        Water             Water




                                                                                                                Regulation
    n
                                                      Resources          Services
    n                                                Management         Regulatory
    e                                                  Authority          Board
    w
                                                        WRMA            WASREB
    i                                         Catchment Areas                  Water
        Regional




    n
         level




    s                                             Advisory                    Services
    t                                           Committees                     Boards




                                                                                                              Provision
                                                                                                              Services
    i                                             CAACs                        WSBs
    t
    u                                                                           Water Services
    t                                     Water Resources
                                                                                  Providers
    i                                     User Associations
                                                                                   WSPs
          Local level




    o                                         WRUAs
    n
    s                            Water Resources Management                  Water and Sewerage Service




                                                                                                               Consump-
                                                                                                               tion, Use
    f
    l
    y                                              Consumers, Users
    e
    r
S
    o
    u
    r
    c
    e
    :
          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
    8/31/2014                 Water Services Regulatory Board               8
       REGULATORY MODELS(1)
qRegulatory systems can take different forms 
 according to the existing legal traditions and 
 system in the country. The most common 
 regulatory models are:
ØRegulation by independent body.
ØRegulation by contract: Generally used within the
 context of public-private partnership.
                          Regulation Models(2)
                                                                           Regulation by contract
        Regulation by institutions
                                                                           (French civil law tradition)
        (Anglo- American tradition)
                                                                                
                                                                         Government
       Appoints             Government


         
                                                                   asset holding company
    Regulator                                                                                       Arbitrator
                                                                            Contract                 Contract
                                                      Sets Tariffs and                             Monitoring
 Set Tariffs and                                     Service standards                             committees
Service standards               Utility                                           
                                                                              Utility

                     Services              Tariffs
                                                                 Services                Tariffs
                              Customers
    Source: World bank Institute “ Designing and 
                                                                             Customers
   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
q Protection from political interference:
Ø  removal of  tariff-setting decisions from the political environment
Ø Enhancing the  utilities  to make the business and social arguments 
  for tariff or service level increases.  
 
q Improved, evidence-based management and monitoring: 
Ø  Utilities often lack the systems to effectively monitor their financial 
  and operational performance.. 
 
qAccess to private capital: 
Ø boosting of  Investors and donors confidence when they make 
  investment decisions. 
   REGULATORY FRAMEWORK FOR EFFICIENT AFFORDABLE, 
      RELIABLE WATER SUPPLY FOR THE COUNTIES(1) 
Ø Provision of water services will be by licence issued by the  
  Water Services Regulator.(otherwise one shall be guilty of an 
  offence).
Ø 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)


qWater services shall be  provided by  water services 
 providers(WSPs) established by county governments.
q The WSPs shall comply with standards of 
 commercial viability set by the Water Services 
 Regulator.
q 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 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 1/3
Ø The monopolistic character of water services 
  provision means that self-regulation is typically 
  inappropriate.  Regulation should be separated 
  from provision.
Ø Regulation is one piece of a reform process and 
  must be an integrated part of it
Ø Regulators must operate independently from 
  both short term political pressures and the 
  regulated companies.
Ø Regulation is likely to be most effective if it 
  employs incentives as well as sanctions.
Lessons learned 2/3
ØRegulation should be transparent, with 
 maximum use of published performance 
 targets and achievements levels.
ØGood independent information on asset 
 conditions, performance and standards, 
 operating costs and investments efficiency is 
 an essential prerequisite for effective 
 regulation.
ØSeeking customer input as a routine part of 
 regulation is important
      Lessons learned 3/3
qIndependence is a prerequisite, but also
Ø Coherence-Tariffs and service standards are inter
  -related: higher service standards, or greater 
  coverage, mean that higher costs will be incurred.
Ø Predictability and Credibility - Depends not only 
  on well-designed regulatory framework, but also 
  on sound policy and governance frameworks for 
  the sector.
Ø 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.
qViable water services business will require:
Ø Separation of oversight and operation .
Ø Ring-fencing  of revenue accounts to keep  track of 
  costs and hold institutions to account. Hence   a  
  professional providers(separate legal entity) 
Ø good management systems and professional 
  capacity;
Ø tariffs that ensure cost recovery; and,
Ø  consumer engagement( happy customers pay their bill! )
Ø Consolidated  water services provision to achieves 
  economies of scale and to access professional 
  capacity
                      CONCLUSION(1)
Ø The principle of regulation under the Water Act 
    2002 has greatly improved sector performance
Ø There is increased compliance to regulatory 
    requirement.
Ø 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

								
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