Regulation of water and sanitation services : getting better service to poor people

Practical guidance is provided for a better understanding of the impact that existing regulatory arrangements have on water services to poor customers and how to adapt them to be more conducive to expanding access and improving service. Out-based aid (OBA) schemes could act as powerful levers to trigger rule changes which can make the overall regulatory arrangements more beneficial. OBA is a strategy for supporting basic services where policy concerns would justify public funding to complete or replace user fees.

The design of OBA schemes has to include an evaluation of the regulatory arrangements in order to identify what changes could potentially be made to get better services. Changes in the short term may reduce the need for external subsidies substantially and have to be designed already at pilot level.The scale-up phase could then include an analysis for implementation in the broader regulatory regime. Political resistance or higher social cost already evident at pilot level may result in the risk that the subsidy program will not go ahead, and will constrain policy-makers to reconsider regulatory changes.