Governance arrangements for both public and private utilities

Governance arrangements for both public and private utilities can take many forms. Governance arrangements define the relationship between the service provider, its owners, its customers and regulatory entities. They determine the financial autonomy of the service provider and thus its ability to maintain its assets, expand services, attract and retain qualified staff, and ultimately to provide high-quality services. Key aspects of governance arrangements are the extent to which the entity in charge of providing services is insulated from arbitrary political intervention; and whether there is an explicit mandate and political will to allow the service provider to recover all or at least most of its costs through tariffs and retain these revenues. If water supply is the responsibility of a department that is integrated in the administration of a city, town or municipality, there is a risk that tariff revenues are diverted for other purposes. In some cases, there is also a risk that staff are appointed mainly on political grounds rather than based on their professional credentials. These risks are particularly high in developing countries. Municipal or inter-municipal utilities with a separate legal personality and budget as well as a certain extent of managerial autonomy can mitigate these risks.

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