With the Law 11.445/07, new challenges were brought to the sanitation sector, especially in regards to tariff regulation. The “regulation by incentives” or the “price cap” regime is defined quite clearly in Chapter VI of the law. They are new concepts to the sector, but old acquaintances in the electricity sector, where ANEEL defines the parameters of tariff regulation supported basically on four key pillars: (i) the investment (CAPEX); (ii) incurred operating costs (OPEX); (iii) the losses incurred in providing the service; and (iv) the quality of service. These pillars are subject to complex and detailed regulation.
Regulatory agencies have as their main objective to provide stability to a particular sector. Thus, in the case of public concessions as sanitation, they should promote a safe and reliable environment that stimulates investment, modernization, increased productivity, improvement of services and adequate tariffs for the population served. Today in Brazil, the sector that has the regulation on a more advanced stage is the Power Sector. It is the responsibility of the federal government, which brings it together in a single Agency (ANEEL) all the regulatory rules for the sector. For the sanitation sector the process is a little more complex, considering that constitutionally the responsibility for service is municipal.
Municipalities may or may not delegate to already established agencies the responsibility for the regulation of its sanitation concessions. It is important to note that this delegation is optional, that is, some municipalities have already opted to self regulate, through the creation of municipal regulatory agencies. Examples are the cities of Natal (RN), Teresina (PI), Guaratinguetá (SP), Joinville (SC) and Tubarão (SC). The problem with creating their own agencies is laying the responsibility on a single municipality to develop all the regulatory framework necessary for a good understanding of the concession rules.
Since this is a completely new scenario to utilities, it is essential that at this moment a series of studies, public hearings and consultations take place to bring all currently existing processes - whether operational, technical and financial - in utilities, to meet the full form of Law 11.445/07, which is the regulatory framework of the sector. On the national scene, there are two prominent associations, the first brings together all the country’s regulatory agencies, and to monitor their discussions is essential to observe the likely path of regulation in Brazil. Named ABAR - Brazilian Association of Regulatory Agencies ( Associação Brasileira de Agências de Regulação), it promotes biannual meetings that attract not only representatives from agencies, as well as representatives of interested utilities, to participate in discussions that directly affect their business.
The second one brings together the main Sanitation Utilities in the country. Called Brazilian Association of State Sanitation Companies - AESBE (Associação Brasileira das Empresas Estaduais de Saneamento), it periodically organizes meetings and courses related to the regulatory process.
Source: Portal Saneamento Básico