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Public–Private Partnerships and Their Ownership in the Urban Water Sector

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Understanding and Managing Urban Water in Transition

Part of the book series: Global Issues in Water Policy ((GLOB,volume 15))

Abstract

This chapter explores the experience of public–private partnerships (PPPs) in the provision of urban water and sanitation services. We show that there exists a wide range of PPPs available to the water industry. Across the public and the private parties, these PPPs typically differ in their allocation of decision prerogatives, risks, and revenues. The main question we address is the relationship between the ownership of the PPP and the performance of water services in terms of their technical and cost efficiency, water price, and access to water and sanitation services.

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Notes

  1. 1.

    Some authors have adopted a more restrictive definition for PPPs. Maskin and Tirole (2008) define a PPP as a situation in which the public authority typically engages its partner “both to develop the project and to operate and service it”.

  2. 2.

    In the light of their review of the literature, González-Gómez and García-Rubio (2008) conclude that although there are important economies of scale in the urban water sector, they are however not unlimited. Saal et al. (2007) conclude for instance that the excessive size of the water service companies created in England and Wales after industry reforms in 1989 has had a negative effect on the growth of productivity over the subsequent years.

  3. 3.

    For instance, in the UK case Hunt and Lynk (1995) report cost efficiency gains for utilities jointly operating water distribution and sewerage services.

  4. 4.

    See for instance Averch and Johnson (1962) for some perverse cost-minimising effects of rate-of-return regulations.

  5. 5.

    The capital-to-revenue ratio is between 10 and 12. The water industry is 3–4 times more capital intensive than the electric industry and 5–6 times more capital intensive than the railroad industry (Jordan 1998).

  6. 6.

    There is substantial evidence that politicians’ project choices are influenced significantly by the desire to please constituencies and by budgetary constraints (Levin and Tadelis 2010).

  7. 7.

    Klein (1996a, b) reviews 33 infrastructure projects of the World Bank. In these projects transaction costs represent on average 3–5 % of the total project cost, but they can reach up to 12 % for some projects.

  8. 8.

    The stochastic cost frontier approach is attractive since it allows one to distinguish the impact on the firm’s output of variation in technical efficiency from external stochastic error.

  9. 9.

    For Chile, Bitran and Valenzuela (2003) report for instance that water and sewerage rates increased by 40 % for privatised utilities compared to 20 % for non-privatised ones.

  10. 10.

    This is for instance the case in France.

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Authors and Affiliations

  1. Toulouse School of Economics (LERNA), Université Toulouse 1 Capitole, 21 Allée de Brienne, 31000, Toulouse, France

    Arnaud Reynaud

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  1. Arnaud Reynaud
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Correspondence to Arnaud Reynaud .

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Editors and Affiliations

  1. Australian Natl Univ, Crawford Sch of Public Policy, Bldg 132, Canberra, Aust Capital Terr, Australia

    Quentin Grafton

  2. Fellow, ANU Centre for European Studies, ANU College of Arts and Social Sciences, Australian National University, Canberra, Aust Capital Terr, Australia

    Katherine A. Daniell

  3. School of Economics, University of Queensland, Brisbane St Lucia, Queensland, Australia

    Céline Nauges

  4. Water Department, BRGM, French Geological Survey, Montpellier, France

    Jean-Daniel Rinaudo

  5. Crawford School of Public Policy, Australian National University, Canberra, Aust Capital Terr, Australia

    Noel Wai Wah Chan

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Reynaud, A. (2015). Public–Private Partnerships and Their Ownership in the Urban Water Sector. In: Grafton, Q., Daniell, K., Nauges, C., Rinaudo, JD., Chan, N. (eds) Understanding and Managing Urban Water in Transition. Global Issues in Water Policy, vol 15. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-9801-3_21

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