Urban water tariffs

What is it about?

Since 1990 Chile has implemented significant reforms to improve water, sewerage, and wastewater treatment services. In 1990, the Chilean Government created the water regulator, the “Superintendencia de Servicios Sanitarios” (SISS) which managed the privatization of the Chilean water industry. The adoption of the Law 19549 in 1998 was the main driver to privatize water companies in Chile. In 2001, the Chilean Government opted not to continue with the approach of selling shares and it decided to transfer to the private sector, for a fixed term, the rights for the exploitation of the water companies whose ownership was still entirely public. As a result of the privatization, currently 95.7% of customers are supplied by private water companies and the remaining 4.3% by pubic concessionaires. The regulator´s review of water tariffs is set to take place every five years. The process to set water tariffs is based on the definition of a hypothetical efficient firm. Based on the estimation of the long-term costs of this hypothetical efficient firm, both the SISS and water company propose the water tariff to be charged by the regulated firm. The SISS also undertakes regular reviews to determine the level of performance of the water utilities. In order to insure access and affordability, subsidies are directly provided to the most vulnerable. Families are classified in order of priority, with the poorest families receiving highest priority. The central government transfers the block subsidy to the municipalities; the latter use this to pay a share of the water bill for those eligible.

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Why is it important?

Over the last 30 years, the Chilean water industry has carried out significant legal and institutional reforms to improve water and sanitation services (WSS), becoming a success example from the point of view of coverage and service quality.