Competition and Regulation in the Water Sector

Competition in water services is increasingly promoted by governments, but the appropriateness of excessive reliance on competition should not be under-estimated. Though water services are considered a “natural monopoly, ”governments are increasingly opening this sector up to private participation and competition. This also facilitates the use of new financing models which put more and in some cases the entire cost burden on consumers. Opening concession contracts to competitive bidding has had significant benefits. Government may be best suited as a regulator and not a service provider, as under government control, water tends to be under priced and infrastructure tends to receive underinvestment. Alternative ways of managing water resources such as tradable rights are also explored. his document comprises proceedings in the original languages of a Roundtable on Competition and Regulation in the Water Sector which was held by the Working Party n°2 of the Competition Committee in February 2004.