Characteristics of Well-Performing Public Water Utilities (Water Supply & Sanitation Working Notes No.9, May 2006)

This study focuses on public providers that seek to improve performance while remaining in the public sector. A public utility is defined here as an organization that is majority owned and controlled by government and could consist of number of different forms, some of which may be undistinguished from the government unit that they may be part of. Further, the public utility has not engaged a private operator beyond a short term period and has engaged the private operator for very specialized functions. The water supply sector includes a wide range of organizational models, most of which involve some mix of the public and private involvement. The number and types of organizational models and ownership structures have increased substantially over the years since the introduction of private and public-private hybrid models.

Table of Contents:

Acronyms and Abbreviations

1.    Introduction
1.1    Background
1.2    The Taxonomy of Public Water Utilities
1.3    Objectives, Audience, and Scope of the Report
1.4    Methodology
1.5    How teh Report is Organized

2.    Overview of Public Water Utility Cases
2.1    Sample of Case Studies
2.2    Summary of Case Studies

3.    Case Study Findings
3.1    External Autonomy
3.2    External Accountability
3.3    Internal Accountability for Results
3.4    Market Orientation
3.5    Customer Orientation
3.6    Corporate Culture
3.7    Conclusions on Public Utility Cases

4.    Lesson Learned – Instilling Good Performance Among Public Utilities
4.1    The Reform Process is Inherently Political and Requires the Full Commitment of Its Policy Makers to Correctly Balance Financial and Political Objectives
4.2    Success is Often Unattainable without Reforming the External Environment, with Emphasis on the Role of the Owner
4.3    Fundamental Reforms are not a Quick Fix and Cannot be Substituted by Private Sector Participation
4.4    There Must be an Adherence to Financial Sustainability Objectives
4.5    Other External Stakeholders May be Important to Balance Potentially Conflicting Objectives of Politicians
4.6    Certain Decisions Must be Left to Utility Managers
4.7    Separating Functions and Arm’s Length Transactions are Important Elements of the Institutional Setup
4.8    Customers can be an Important Voice for Improving Performance

5.    Actions for Aligning ”Owner” Incentives
5.1    Creating a Central Policy and Oversight Body for Water Supply and Sanitation Services
5.2    Establishing a National Benchmark System to Monitor Performance
5.3    Creating Incentives through Intergovernmental Transfers
5.4    Promoting Arrangements with Multiple Stakeholders
5.5    Establishing Governments as Guarantors for Utility Performance
5.6    Establishing Performance-Based Agreements between the Owner and the Utility

Bibliography