There are currently around ten privatised large water and sewerage utilities in the UK and Wales. These utilities were formed from the old regional water authorities in 1989 when the UK government sold these authorities and privatised the water industry. Since 1989 a number of water-only utilities have also been established and they currently supply around 30 per cent of the population.
Access by the private sector is by applying for an 'inset' appointment which allows a competitor to replace the incumbent for a specific geographic area and allows utilities to sell its output to customers within another utilities jurisdiction. Under 'inset' appointments, private companies also own the complete system and are responsible for all investment. To obtain an 'inset' appointment, utilities must hold a supply licence outlining the terms of the appointment and providing accountability over health and safety issues. So far eleven 'inset' appointments have been established allowing the private sector to manage infrastructure to supply water services but not wastewater services to customers.
All of these utilities are regulated by Office of Water Services (Ofwat), the water industry's watchdog body. This includes regulating the prices that can be charged to customers which is based on the investment programs of these private companies and subject to review every five years. The right for utilities to introduce price increases is also regulated by a system in which the rate of increase is a function of the cost performance of all of its competitors (Renzetti and Dupont 2003 p.14).
Ofwat also had a major role in establishing competitive access to the water industry by requiring existing privatised water utilities to establish access arrangements for competitors. These utilities are responsible for making the conditions for access publicly available and including indicative access prices for new entrants.
There are some fundamental differences and outcomes from private sector participation in the UK and France:
• The UK water industry evolved from government-owned water utilities to become privatised concerns listed on the stock exchange, whereas in France most water industries have developed on a private basis and distinct from government.
• In the UK pricing for services are controlled by Ofwat. In France price setting for services is undertaken on a competitive basis through a tendering process between the municipalities and the private sector with the contract setting out how prices will evolve.
• Ofwat has responsibility for ensuring regulations are met by water industries in the UK. In France responsibility for regulations is shared between municipalities and the national government.
• The UK reforms, which were designed to promote competition, have had limited success and only a marginal effect on the water industry (Marsden 2005 p.16). In contrast by 1992 up to 75 per cent or more of the French population was supplied by some form of a public private operation (Renzetti and Dupont 2003 p.15).
• In France the ultimate ownership of water and wastewater assets remains in public hands. Under 'inset' appointments in the UK these assets are owned by the private sector.
• There is a substantial amount of disaggregation of water management in France which has about 13,500 water distribution service areas compared to only twenty or so in the UK (Balance and Taylor 2005 p.87).