Water utilities in developing countries face major challenges in serving poor people. Poor people often cannot afford a connection or lack necessary legal documents to obtain one. As a result, they frequently turn to ‘informal’ providers instead. Regulation affects all these issues, and better company-community partnerships could make a positive difference.

A team led by Building Partnerships for Development in Water and Sanitation (BPD) and supported by the German development cooperation organisation (GTZ) partnered with regulators in Kenya, Mozambique, Rwanda and Zambia to analyse regulation of water utilities. The project was informed by previous BPD research, which found that regulation can play a decisive role in making water and sanitation accessible to poor people and giving the private sector incentives to serve them. Regulation can introduce obstacles, such as outlawing small-scale providers, or it can shape partnerships and be responsive to needs.

Each country’s existing regulatory framework was evaluated using BPD’s innovative methodology, developed to identify the constraints that stakeholders like regulators, customers and utilities face. Action plans were then drawn up. The team aimed to raise awareness about how regulatory issues can encourage or undermine service to poor customers and establish common understandings. Involving regulatory agencies in neighbouring countries enabled cross-learning.

Five key areas emerged where regulators can impact service to poorer communities:

• Regulating access - poor people benefit greatly from expansion of the network, which a regulator can encourage through coverage targets, broader service levels and support to small providers.
• Regulating quality - technical standards affect the service poor consumers receive.  Regulators that allow flexibility in the ‘level of service’ offered by utilities can boost provision.
• Regulating price - ‘pro-poor’ tariffs need to be considered carefully, as they often do not deliver the desired effect and can undermine the financial viability of service provision.
• Regulating alternative providers is not an easy challenge, yet these providers often serve  poor people in large numbers. Constructive engagement from the regulator here can be particularly beneficial.
• Protecting consumers - poor people need appropriate means of recourse and clear channels of communication with the regulator.

Time will tell whether the regulators’ pro-poor action plans succeed. The intermediate results presented in this report highlight the countries’ regulatory contexts, detail regulators’ plans to serve poor people better and present a methodology developed to explore how regulation can improve services. Valuable lessons learned so far include:

• Newly established regulators may find dealing with poor people a challenge, but early action here can mainstream a pro-poor approach.
• Regulators benefit greatly by putting in place mechanisms that relay regulation to ground level and make it ‘local’.
• Regulators themselves can and should be an important arbiter in the relationships between water service providers and poor consumers.
• Partnerships are of increasing interest to regulators. They need to decide whether to become formal partners or to engage from outside the partnership itself.
• The industry needs better ways of obtaining reliable data about their poor consumers.
• All regulators need to develop (and share lessons about) better ways to regulate small-scale providers.

Source(s):
‘Adapting regulation to the needs of the poor: Experience in 4 East African Countries’, BPD: London, by Sophie Tremolet, 2006.  Published in association with GTZ and the World Bank Institute. Full document.

Funded by: BPD, GTZ & the World Bank Institute

id21 Research Highlight: 31 May 2007

Further Information:
David Schaub-Jones
Outreach & Research Officer
BPD Water and Sanitation
2nd floor, 47–49 Durham Street
London SE11 5JD, UK

Tel: +44 (0) 207 793 4557
Fax: +44 (0) 207 582 0963
Contact the contributor: davidsj@bpdws.org

BPD Water and Sanitation, UK

Sophie Tremolet

Contact the contributor: sophie@tremolet.com

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'id21 insights: New directions for water governance'

'Uganda’s state-owned water company turns itself around'

'Understanding and helping water vendors'

'Securing the future for water services'