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

What is Aggregation?

Grouping of several municipalities into a single administrative structure for the provision of a service

town A town B

town Ctown 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

Aggregation: Essential Pre-requisites

Political support and commitment Identify a “Champion” to pilot the aggregation Adapt approach to local culture & circumstances Keep public informed of benefits attained and

progress Consider whether a carefully-constructed, well-

implemented public consultation, education and communication program is necessary according to local circumstances

Drivers for Aggregation (1)

(Supply)

BOTTOM UP & TOP DOWN APPROACHES - DEMAND OR SUPPLY DRIVEN

Government Driven

Central Government

Province

District

Sub District

Village(Customer Base)

Customer Driven(Demand)

Economies of scale

Access to professional & technical resources, in-house or procured

Access to water resources

Access to private sector,

local &/or international Access to finance

Cost sharingImproved management systems & technology

aggregation

Drivers for Aggregation(2)

Outline of the presentation

What is aggregation? Aggregation models The process of aggregation Summary

Aggregation: no standard blueprint

Each aggregation has a unique character

Tailor aggregation to specific circumstances and needs

Lessons can be drawn from other aggregations

Scale: The optimum size of utility

SCALE

Two Towns Several Towns Regional Provider National TerritoryHungary, The Philippines,

FranceBrazil Italy, England and Wales,

The Netherlands

Scope of Aggregation

SCOPE

A single servicee.g. bulk supply

All municipal services

All water and sanitation services

A single function e.g. procurement

All functionsSeveral functions

What services?

What functions?

Nimes (France), The Netherlandsonly water

Dunavarsany (Hungary), water first, waste water later

Italy,England and Wales

Governance arrangements

temporary

permanent

Association

Time-limited agreement for specific purpose

Permanent aggregated structure

Governance arrangements: Voting rights in Board

….Or a mixture of the various methods

Method Pluses (++) and Minuses (- -) Power tilted to…

Specific powers for the largest 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

Large entity needs vote of 1 or more smaller entities

++ Democratic- - Small entities have greater 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

Outline of the presentation

What is aggregation? Aggregation models The process of aggregation Summary

Process of aggregation

PROCESS

Voluntary Voluntary with incentives Mandated

The Philippines, France, Brazil

Hungary Italy, 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

Entry and Exit Conditions

Entry and exit conditions must be carefully specified

Entry implies commitment and obligations to partners and should not be entered into lightly

Exit has potential to damage/weaken the aggregated entity and should be made difficult and expensive!

Is aggregation a suitable option? Adding up the pros and cons for the individual municipality

Potential Pluses ++ Possible Minuses - -

++ 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

++ Integrated Water Resource Management

++ More professional staffing

++ Improved governance through greater network of accountability

- - 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

Essential Trade Off

Outline of the presentation

What is aggregation? Aggregation models The process of aggregation Summary

Aggregation: define scale, scope and process

SCALE

Two Towns National Territory

SCOPE

A single service or function

All services and functions

PROCESS

Voluntary Mandated

Improved efficiency of service delivery (economies of scale)

Enhanced professional capacity in service provision

Cost sharing to mitigate high-cost systems Multiple utility ownership will enhance

autonomy of the utility

Potential Benefits

Need to balance interests of all participating municipalities to overcome resistance

Role of central government: assist; incentivize; and/or mandate

Aggregation without asset ownership transfer can overcome resistance (but gives aggregated utility less autonomy)

Aggregation must be seen as one element of broader reform process: Requires corporatization Might require reform of the oversight of service provider Might require adjustment (standardization) of tariffs and subsidies Sometimes combined with private sector participation

The politics of aggregation

Actual benefits depend on political & other local circumstances

More information

Available from:

www.worldbank.org/watsan