Regulation and Privatisation of the Public Water Supply in England, France and Germany

Abstract

Faced with liberalisation proposals and an increasing internationalisation of water resource management, the question arises as to how a change of the regulatory framework in Germany would affect the market structure and the supply conditions in this area. The water supply companies in Germany have invested ca. €2.5 billion annually to achieve a high technical standard, which has resulted in high cost increases and price hikes. It is thus presumed that there is a high rationalisation potential for the municipal water suppliers. The questions of economic efficiency and the participation of private providers in the water supply have increasingly gained importance. A liberalisation of the water supply can take place in different ways; the concrete basic features depend on what regulations the market for drinking water is or should be subject to and in what way and to what extent the private sector is involved into the organisation of water supply. In the EU-15, the only country where the provision of operational services in the water supply has been totally passed to the private sector is the United Kingdom, but this is only true for England and Wales. Another singular case is France, where there is a mix of mainly private operating companies and municipalities which have divided the regional supply areas among themselves. In six other EU-15 countries where some privatisation took place, either the municipalities or (majority) publicly owned companies are controlling water supply. In the remaining seven countries, the water supply is organised by municipality companies only. In this paper the two unique forms of privatisation in France and England/Wales as well as the German method of privatisation as an example for the interaction of municipalities and majority publicly owned water companies are discussed, especially with regard to the corresponding effects on competition and market structures.