Tariff settingTS1ADefine criteria, rules and processes for tariff setting, tariff structure, approval, and service invoicing

In Peru, Legislative Decree 1280/2016 and Emergency Decree 11/2020 stipulate that the economic regulation of water and sanitation services aims to guarantee the availability and efficient and sustainable management of such services, and of the products and services that derive from such services, when there is no competition in their provision. Economic regulation is based on the principles of economic efficiency, financial viability, social equity, environmental sustainability, risk prevention, simplicity, transparency, non-discrimination and the cost-benefit ratio.

The economic regulation of these services is the exclusive and exclusionary prerogative of the National Superintendency of Sanitation Services (SUNASS) on a national level, and includes, among other faculties, tariff-setting, review and readjustment, the establishment of the tariff structure and access charges, and the deregulation process. SUNASS determines the economic costs of service provision based on its assessment of optimized master plans drawn up by providers with the aim of providing universal coverage, its assessment of municipal management unit service provision plans, of specialized operators, and of the provisions set forth in public-private partnership contracts.

The tariff system stipulated in Law 2066 is based on the principles of economic efficiency, neutrality, solidarity, redistribution, financial sufficiency, simplicity and transparency, so that tariffs don’t transfer the costs of inefficient management to users or allow the operator to implement anti-competitive practices; on the principle that each user should have the same tariff treatment as other users in the same tariff category; on the principle that the tariff structure redistribute costs according to user ability to pay, and thereby recovering costs and expenses related to operations, expansion, replacement and maintenance, as well as return on shareholder equity; on the principle that tariff formulas be easy to understand, apply and monitor; and that the tariff system be explicit and fully available to the public.

The principles governing rates, tariffs and fees are:

1. Total recovery of operational and maintenance costs.
2. Recovery of repair costs ensuring service sustainability.
3. Guarantee of the lowest price to users, while ensuring service safety and continuity.
4. Neutrality, simplicity and transparency, as set out in the previous article.
5. Return on investments made with loans, without remunerating capital obtained through donations, grants or non-refundable contributions.

The tariff is approved by the Superintendency of Basic Sanitation based on the technically grounded opinion of the municipal government, which shall, in turn, carry out consultations through popular participation processes.

In Kenya, the Water Services Regulatory Board (WASREB) is required to evaluate and recommend water and sewerage tariffs to the water service providers at county level, and approve the imposition of such tariffs in line with consumer protection standards and the interests of other stakeholder. There are three kinds of tariff (type I, II and III) according to the type of cost that each cover. Type I covers operational and maintenance costs, with some basic administrative ones. Type II incudes the above plus the repayment of existing debts. Finally, type III tariffs include all the costs of other tariffs with the addition of the costs of investments and depreciation (full cost recovery). This tariff structure ensures access to all, with differentiated prices for different socio-economic groups.