ACM argues for a single independent financial regulator for drinking water companies

In order to maintain the availability of drinking water in the Netherlands, substantial investments will be needed in the coming years. To ensure that drinking water companies have sufficient financial scope to make these investments as well as to ensure that the costs for households and businesses do not increase more than necessary, it is important that integral and independent financial oversight is conducted over drinking water companies. At the moment, the financial oversight over drinking water companies is very fragmented. That is why the Netherlands Authority for Consumers and Markets (ACM) argues for charging a single organization with the financial oversight over drinking water companies.

The Dutch Ministry of Infrastructure and Water Management (I&W), the Dutch Human Environment and Transport Inspectorate (ILT), and ACM all play different roles in the financial oversight over drinking water companies. As a result, an integral overview is lacking, and conflicts of interest may arise, for example when shareholders not only strive for affordability but also for sufficient dividend. A single independent regulator will be better able to balance the interests of drinking water companies and consumers. That is why ACM proposes to organize the financial oversight over drinking water companies in the same way as the tariff regulation for system operators.

Manon Leijten, Member of the Board of ACM, explains: “Drinking water companies must make significant investments in the coming years, but the financial oversight over drinking water companies is very fragmented at the moment. In order to properly safeguard the public interests of availability, quality, and affordability, ACM argues for a single independent financial regulator for the entire drinking water sector.”

Ageing water pipes, risks of quality deterioration, reduced availability of drinking water sources, rising demand, and droughts caused by climate change make investments in the drinking water supply necessary. According to ILT estimates, investments by drinking water companies in 2029 will be 60 percent higher than in the 2017-2019 period. Drinking water companies will have to recoup these investments through their rates.

ACM has published its vision for oversight over the drinking water sector on its website. The Ministry of Infrastructure and Water Management plans to amend the Drinking Water Act (in Dutch: Drinkwaterwet) and has asked ACM to conduct a feasibility and enforceability test (UHT). ACM considers the proposed amendments to be insufficiently effective, and advises the minister to organize the statutory framework for financial and economic oversight over drinking water companies in an integral, independent, and transparent manner.