Regulation is a set of functions, norms, and enforcement processes that ensure both services and service providers meet nationally set guidelines and standards. Regulation can cover economic, environmental and public health aspects of service provision. In the rural water it would include setting and checking service provision standards such as water quality and tariffs so that that consumers receive the intended level of service and are protected from monopolistic behavior and unfair charges.
Published on: 16/05/2013
Why is it important for sustainable services at scale?
More formalized regulation provides a mechanism for protecting both consumers and service providers and for strengthening the long-arm of accountability relations between the two. Without regulation, rural water services may be more vulnerable to a cycle of poor services and non-payment of tariffs by unhappy consumers, and ultimately a deterioration of services. Regulation can be seen as a mechanism to balance different stakeholders’ objectives (as those may be contradictory), including to:
Regulatory functions should ideally be performed by a different entity from the one in charge of setting policy, owning the assets or from those providing the services. Separating functions is difficult in rural areas therefore it is often necessary to allocate regulatory functions to various levels of government.
Two main regulatory models are commonly found: regulation‘by contract’refers to a situation where most of the rules, particularly on tariffs and service quality, are set out in advance in a contract and conflicts are arbitrated by independent agencies. By contrast, the regulation‘by agency’model vests regulatory powers in a more autonomous entity established by law which is then in charge of conducting regulation.
The following steps can help determine what can be done to improve regulation in a rural context:
For Governments: Establish a national framework that clearly allocates regulatory functions to various levels of government,
For NGOs: build on existing regulatory arrangements and seek to strengthen capacities.
For donors: support the drafting of national legislation and model contracts and provide funds for regulatory training, including at local government level.
For international financial institutions: fund the establishment of sound regulatory mechanisms when financing reforms of the rural water sector
IRC's interest in regulation relates mainly to its application in rural areas. We recognise that much effort has gone into regulation in urban areas and many lessons have been learnt. We are currently assessing whether and how regulation makes sense also for rural areas where one typically finds a large number of informal service providers. Regulation may help them in doing a more professional job and meeting standards. However, care should be taken that regulation doesn't become punitive and that standards are set that take into account characteristics of rural service provision.