Improving Water Services Through Competition

Abstract

Water sector reforms in recent years have concentrated on involving the private sector in the operation and management of monopoly water utilities. Much effort has gone into regulation to stop utilities from abusing their monopoly power, but relatively little into considering ways to reduce that monopoly power. This Note explains how to bring competitive pressures to bear in the water industry. It shows that while it can be difficult to implement conventional product market competition, this option should not be ruled out. Better, cheaper water services can also be achieved by increasing the use of competition in purchasing inputs, relying on competitive bidding for the right to supply an area, and benchmarking rival utilities in different areas.