The Theory of Water and Utility Pricing - Global Drinking Water Management and Conservation - page 101

cheapest in terms of the average cost of provision of water and wastewater services
in the largest cities compared to other member states (Forfas 2008 ).
According to a report from the Local Government Ef

ciency Review Group in
Ireland (Ireland Department of the Environment, Heritage and Local Government
(DoEHLG) 2010 ) the costs of provision of water services have been increasing by
roughly 5 percent per year since 2007, primarily due to (a) increases in energy
costs, (b) regulatory compliance with both national and EU legislation, and (c)
infrastructure investment costs for both water and wastewater treatment. Although
the local authorities have been permitted to charge the full costs of provision for
water and wastewater services to nonresidential users, full cost recovery has not
been achieved (Forfas 2008 ). It should be noted that the water charges in Ireland do
not include pro t. Currently, the nonresidential sector is only charged the marginal

cost of providing water services 2 (Commission on Taxation 2009 ). It is important to
note that in addition to the cost associated with infrastructure renewal, operating
costs are fully recovered in other EU member states (OECD 2010 ). Moreover, a
lack of independent regulation of nonresidential charges leads to considerable
pricing variations among the local authorities and the group water schemes (Brady
and Gray 2013 ). A pricing assessment conducted in 2008 showed large pricing
differences, with charges ranging from

€ €

0.99/m3 in Galway City to 2.71/m3 in

€

Wexford. The average charge was 2.08/m3 (Forfas 2008 ). As a matter of fact, the

volumetric charges imposed by group water schemes were some 35 percent lower
than the prices charged by local authorities, resulting in inadequate cost recovery
(Brady and Gray 2013 ).

5.7.2.2 France

Although some municipalities in France provide water and sewage services
directly, most municipalities delegate the management of all or part of the public
water supply utility to a private operator with contracts with a predetermined
duration (Porcher 2014 ). This contract de

nes the payment to the operator, which
will be included in the water price to be paid by the users. According to a 2006
report from Dexia Cr dit Local de France ( 2006 ), 63 percent of French medium-

sized cities contract out the services of potable water treatment and distribution, and
58 percent also contract out their sewage treatment. Moreover, 71 percent of the
population in France is served by a private operator for water provision and
56 percent for water sewage (Cour des Comptes 2011 ). As a result, the unregulated
private operators tend to maximize pro

é

t by pricing above marginal cost, resulting
in a level of output below the socially optimal level (Porcher 2014 ). As shown
above, a standard result is that social ef ciency requires that marginal prices equal

2 This marginal cost is the difference between the cost of providing water service infrastructure to
residential users and the total cost of providing water to all users (Forfas 2008 ).