Privatisation and Competition in Drinking Water Supply in Germany

Recommendations for Consumer Protection

The research project "Privatisation and Competition in Drinking Water Supply" aimed at the integration of consumer concerns in the debate on privatisation and competition in the (German) drinking water markets. The study was commissioned by the "Verbraucher-Zentrale Nordrhein-Westfalen" (Consumer Council in Northrhine-Westphalia). It was directed at preparing a concept for their work as an interest group on the one hand and for concrete consumer information on the other hand. Its goal was to strengthen an integrated view on consumer protection that is currently lacking in the general debate, where only isolated issues like water quality or different market forms are discussed.

The project has finished and the results are published by the Verbraucher-Zentrale NRW. At the URL http://www.vz-nrw.de/dir160A (German) you can find the documentation of the whole study.

Drinking Water Markets in Germany

At the moment, municipal water companies (often organised in combination with other utility services) dominate the local/regional drinking water markets in Germany. Those structures are in a process of transition: Different forms of privatisation are implemented (with more or less influence of local governments) and some concessions were placed (e.g. in Rostock and Berlin). Even if there is a discussion about more competition on water markets in Germany, there is currently no legal basis for free competition with free market access for any supplier. In such a situation of transition and change it is necessary to involve the consumer perspective.

The study of ISOE concludes that under all described changes the need of regulation with respect to consumer interests is enormous. Under privatisation, therefore the share of private capital in former municipal-dominated service companies, the influence of local governments and the structures for consumer protection (e.g. through agreements on majority rules) could be safeguarded.

Under current regulation modes, the influence and structures mentioned above are endangered through concession contracts between communities and private utility companies. More know-how and competence in communities and other monitoring institutions is needed for controlling concession contracts (regulations concerning water quality, service quality, cost accounting, investment structures etc.).

Free market competition, which would be implemented by disbanding the current monopoly structures and enabling common carriage, has to be rejected from a consumer protection perspective. E.g. the technical and hygienically risks are currently uncertain and the ways to solve them are vague. Beside economical and environmental regulation, representation of consumers' interests is lacking.

The lobby work of "Verbraucher-Zentrale Nordrhein-Westfalen" refers to this three main points: perspectives of consumers under privatisation, concession placing and free competition. But independent from any change in market structure, there are some consumer interests that are not guaranteed yet. For example, there is a lack of information and transparency (e.g. consumers are not fully informed on the origin of water and the planned changes) and possibilities for participation of consumers are largely missing.

The EU-Water-Framework-Directive addresses the consultation and information of the public; this refers to questions of water planning and management. But not only decisions on water planning should be transparent, but also entrepreneurial behaviour of utility companies should be communicated to the consumers (e.g. price calculations, investment planning, cost developmentmeasures for increasing protection of ground and surface water).

Additional Literature:

The discussion paper "Privatisation in Water Industry. Perspectives for a Social-Ecological Research" (ISOE-DP 17 abstract) aims at the necessities of a social-ecological perspective in the discussion on privatisation and liberalisation of (German) water supply and sewage.

Kluge, Thomas/Alexandra Lux (2001): Privatisierung in der Wasserwirtschaft. Sozial-ökologische Forschungsperspektiven. ISOE-DP 17

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