Water is a merit good that has important implications in economic, social and environmentaldimensions (OECD, 2003). Moreover, urban water supply is considereda service of general interest in the European Union (EU, 2001). As a consequence,local water services management has become a key issue during the last decades. Additionally, it has been observed an increasing of private operators into the watersector. Thus, public-private partnerships (PPP) have emerged as a usual way ofcollaboration in the management of local water services (World Bank, 2006).Departamento de Economí

García Valiñas, María A.

González Gómez, Francisco

Melissas, Nicolás

Suarez Pandiello, Javier

El Servicio de Difusión de la Creación Intelectual

 1 
 
Pricing and contracting-out in Spanish urbanwater sector:  
Theoretical foundations andevidence 
 
 
María A. García Valiñas 
(University of Oviedo) 
 
Francisco González Gómez 
(University of Granada) 
 
Nicolás Melissas 
(Instituto Tecnológico Autónomo de México (ITAM) 
 
Javier Suárez Pandiello 
(University of Oviedo) 
 
 
Abstract 
 
Water is a merit good that has important implications in economic, social 
and environmentaldimensions (OECD, 2003). Moreover, urban water 
supply is considereda service of general interest in the European Union 
(EU, 2001). As a consequence,local water services management has 
become a key issue during the last decades. 
 
Additionally, it has been observed an increasing of private operators into 
the watersector. Thus, public-private partnerships (PPP) have emerged as a 
usual way ofcollaboration in the management of local water services 
(World Bank, 2006). 
 
Several studies have investigated the process and consequences of PPP 
schemesin water sector. According to Menard (2012), PPP is primarily a 
contractual approachto the delivery of infrastructures, goods and services 
traditionally providedby the public sector or by private operators subject to 
 2 
 
tight command-and-controlregulation, such as public utilities. Thus, some 
papers have analysed the consequencesof PPP on prices (Hall and Lobina, 
2004; Lobina, 2005; García et al., 2005;Chong et al., 2006; Carpentier et 
al., 2006; Martínez-Espiñeira et al., 2009; Ruesterand Zschille, 2010; 
Picazo-Tadeo et al., 2012), quality (Shaoul, 1997; Lobina andHall, 2000), 
or effciency, (González-Gómez and García-Rubio, 2008; Picazo-Tadeoet 
al. 2009a and b) with different conclusions. Andrés et al. (2008) and 
Gassneret al. (2008) also address the debate of private versus public water 
utilities indeveloping and transition economies. 
 
In this research in progress we analyse both theoretically and empirically 
PPPsin the water sector. So, we will describe the institutional water sector 
frameworkin Spain. After that, we will develop a theoretical model to 
explain PPP and auctioningin the water sector, assuming profit 
maximization in the case of private operator,and the presence of a vote-
maximizing local government. Moreover, based on adatabase of Spanish 
municipalities recently privatized, we will test the effects of PPPon several 
key variables.  
 
Findings support that, in a context of limited resources, local governments 
areusing public-private partnerships in order to get additional fundings to 
reduce their indebtness levels. Moreover, the fact of setting a high 
reservationprice as a way to guarantee a minimum amount of resources has 
had consequences in terms of water price increases after water services 
privatization. 
 
References 
Andrés, L., Guasch, J.L., Haven T., Foster, V., (2008). The impact of 
private sector participation in infrastructure: Lights, shadows and 
 3 
 
the road ahead. LatinAmerican Development Forum Series. 
Washington, DC: World Bank. 
Carpentier, A., Nauges, C., Reynaud, A., Thomas, A., (2006). “Effets de 
ladélégation sur le prix de l’eau potable en France: Une analyseà 
partir de lalittrature sur les effets de traitement.”Economie et 
Prévision 174(3), 1-20. 
Chong, E., Huet, F., Saussier, S., Steiner, F., (2006).“Public-private 
partnershipsand prices: Evidence from water distribution in 
France.”Review of IndustrialOrganization 29(1/2), 149-169. 
EU, European Union, (2001). Services of General Interest. Report to the 
LaekenEuropean Council. Commision of the European 
Communities.COM (2001) 598 final. Brussels. 
García-Valiñas, M.A , González-Gómez, F.J. y Picazo Tadeo, A., 2012. “Is 
theprice of water for residential use related to provider ownership? 
Empirical evidencefrom Spain”, forthcoming in Utilities Policy. 
Gassner, K., Popov, A., Pushak, N., (2008). “Does private sector 
participationimprove performance in electricity and water 
distribution? An empirical assessmentin developing and transition 
countries.”PPIAF Trends and Policies Series.Washington, DC: 
PPIAF. 
González-Gómez, F., García-Rubio, M.A. (2008). “Efficiency in the 
managementof urban water services. What have we learned after 
Hall, D., Lobina, E., (2004). “Private and public interests in water and 
energy.”Natural Resources Forum 28, 268-277. 
Lobina, E., (2005). “Problems with private water concessions: A review of 
experiencesand analysis of dynamics.”Water Resources Development 
21 (1), 55-87. 
 4 
 
Lobina, E., Hall, D., (2000). “Public sector alternatives to water supply and 
sewerageprivatisation: Case studies.”Water Resources Development 
16(1), 35-55. 
Martinez-Espiñneira, R., García-Valiñas, M.A., González-Gómez, F., 
2009.“Doesprivate management of water supply services really 
increase prices? An empiricalanalysis.”Urban Studies 46(4), 923-
945. 
Menard, G. (2012).” Is public-private partnership obsolete? Assessing the 
obstaclesand shortcomings of PPP”, forthcoming in P. De Vries and 
E. Yehoue (eds.), TheRoutledge Companion to Public-Private 
Partnership, London: Routledge. Availableat http://halshs.archives-
ouvertes.fr/docs/00/65/30/90/PDF/2011{Menard-Public-Private 
Partnership.pdf. 
OECD.(2003). Improving water management. OECD. Paris. 
Picazo-Tadeo, A.J., González-Gómez, F., Sáez-Fernández, F.J., (2009a). 
“Accountingfor operating environments in measuring water utilities' 
managerial effciency.”The Service Industries Journal 29(6), 761-
773. 
Picazo-Tadeo, A.J., Sáez-Fernández, F.J., González-Gómez, F., (2009b). 
“The roleof environmental factors in water utilities' technical 
effciency.Empirical evidencefrom Spanish companies.”Applied 
Economics 41(5), 615-628. 
Ruester, S., Zschille, M., (2010). The impact of governance structure on 
firmperformance: An application to the German water distribution 
sector.”UtilitiesPolicy 18(3), 154-162. 
 5 
 
Shaoul, J., (1997). “A critical financial analysis of the performance of 
privatized industries: the case of water industry in England and 
Wales.”Critical Perspectiveson Accounting 8, 479-505. 
World Bank (2006).Approaches to Private Participation in Water 
Services:A Toolkit. TheWorld Bank and Public-Private Infrastructure 
Advisory Facility,Washington DC, USA. 


English

Pricing and contracting-out in Spanish urbanwater sector: theoretical foundations and evidence

Servicio de Difusión de la Creación Intelectual

 1  Pricing and contracting-out in Spanish urbanwater sector:  Theoretical foundations andevidence   María A. García Valiñas (University of Oviedo)  Francisco González Gómez (University of Granada)  Nicolás Melissas (Instituto Tecnológico Autónomo de México (ITAM)  Javier Suárez Pandiello (University of Oviedo)   Abstract  Water is a merit good that has important implications in economic, social and environmentaldimensions (OECD, 2003). Moreover, urban water supply is considereda service of general interest in the European Union (EU, 2001). As a consequence,local water services management has become a key issue during the last decades.  Additionally, it has been observed an increasing of private operators into the watersector. Thus, public-private partnerships (PPP) have emerged as a usual way ofcollaboration in the management of local water services (World Bank, 2006).  Several studies have investigated the process and consequences of PPP schemesin water sector. According to Menard (2012), PPP is primarily a contractual approachto the delivery of infrastructures, goods and services traditionally providedby the public sector or by private operators subject to  2  tight command-and-controlregulation, such as public utilities. Thus, some papers have analysed the consequencesof PPP on prices (Hall and Lobina, 2004; Lobina, 2005; García et al., 2005;Chong et al., 2006; Carpentier et al., 2006; Martínez-Espiñeira et al., 2009; Ruesterand Zschille, 2010; Picazo-Tadeo et al., 2012), quality (Shaoul, 1997; Lobina andHall, 2000), or effciency, (González-Gómez and García-Rubio, 2008; Picazo-Tadeoet al. 2009a and b) with different conclusions. Andrés et al. (2008) and Gassneret al. (2008) also address the debate of private versus public water utilities indeveloping and transition economies.  In this research in progress we analyse both theoretically and empirically PPPsin the water sector. So, we will describe the institutional water sector frameworkin Spain. After that, we will develop a theoretical model to explain PPP and auctioningin the water sector, assuming profit maximization in the case of private operator,and the presence of a vote-maximizing local government. Moreover, based on adatabase of Spanish municipalities recently privatized, we will test the effects of PPPon several key variables.   Findings support that, in a context of limited resources, local governments areusing public-private partnerships in order to get additional fundings to reduce their indebtness levels. Moreover, the fact of setting a high reservationprice as a way to guarantee a minimum amount of resources has had consequences in terms of water price increases after water services privatization.  References Andrés, L., Guasch, J.L., Haven T., Foster, V., (2008). The impact of private sector participation in infrastructure: Lights, shadows and  3  the road ahead. LatinAmerican Development Forum Series. Washington, DC: World Bank. Carpentier, A., Nauges, C., Reynaud, A., Thomas, A., (2006). “Effets de ladélégation sur le prix de l’eau potable en France: Une analyseà partir de lalittrature sur les effets de traitement.”Economie et Prévision 174(3), 1-20. Chong, E., Huet, F., Saussier, S., Steiner, F., (2006).“Public-private partnershipsand prices: Evidence from water distribution in France.”Review of IndustrialOrganization 29(1/2), 149-169. EU, European Union, (2001). Services of General Interest. Report to the LaekenEuropean Council. Commision of the European Communities.COM (2001) 598 final. Brussels. García-Valiñas, M.A , González-Gómez, F.J. y Picazo Tadeo, A., 2012. “Is theprice of water for residential use related to provider ownership? Empirical evidencefrom Spain”, forthcoming in Utilities Policy. Gassner, K., Popov, A., Pushak, N., (2008). “Does private sector participationimprove performance in electricity and water distribution? An empirical assessmentin developing and transition countries.”PPIAF Trends and Policies Series.Washington, DC: PPIAF. González-Gómez, F., García-Rubio, M.A. (2008). “Efficiency in the managementof urban water services. What have we learned after Hall, D., Lobina, E., (2004). “Private and public interests in water and energy.”Natural Resources Forum 28, 268-277. Lobina, E., (2005). “Problems with private water concessions: A review of experiencesand analysis of dynamics.”Water Resources Development 21 (1), 55-87.  4  Lobina, E., Hall, D., (2000). “Public sector alternatives to water supply and sewerageprivatisation: Case studies.”Water Resources Development 16(1), 35-55. Martinez-Espiñneira, R., García-Valiñas, M.A., González-Gómez, F., 2009.“Doesprivate management of water supply services really increase prices? An empiricalanalysis.”Urban Studies 46(4), 923-945. Menard, G. (2012).” Is public-private partnership obsolete? Assessing the obstaclesand shortcomings of PPP”, forthcoming in P. De Vries and E. Yehoue (eds.), TheRoutledge Companion to Public-Private Partnership, London: Routledge. Availableat http://halshs.archives-ouvertes.fr/docs/00/65/30/90/PDF/2011{Menard-Public-Private Partnership.pdf. OECD.(2003). Improving water management. OECD. Paris. Picazo-Tadeo, A.J., González-Gómez, F., Sáez-Fernández, F.J., (2009a). “Accountingfor operating environments in measuring water utilities' managerial effciency.”The Service Industries Journal 29(6), 761-773. Picazo-Tadeo, A.J., Sáez-Fernández, F.J., González-Gómez, F., (2009b). “The roleof environmental factors in water utilities' technical effciency.Empirical evidencefrom Spanish companies.”Applied Economics 41(5), 615-628. Ruester, S., Zschille, M., (2010). The impact of governance structure on firmperformance: An application to the German water distribution sector.”UtilitiesPolicy 18(3), 154-162.  5  Shaoul, J., (1997). “A critical financial analysis of the performance of privatized industries: the case of water industry in England and Wales.”Critical Perspectiveson Accounting 8, 479-505. World Bank (2006).Approaches to Private Participation in Water Services:A Toolkit. TheWorld Bank and Public-Private Infrastructure Advisory Facility,Washington DC, USA. 

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Pricing and contracting-out in Spanish urbanwater sector: theoretical foundations and evidence

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