Tariff recommendations: A Panacea for the Portuguese water sector?

Abstract

In Portugal, in the early twenty first century, the water utilities industry was still quite complex displaying considerable financial shortcomings. That issue occurred, mainly, at the retail level due to faulty rate setting practices, stressing, perhaps, arbitrariness and political influence in price-setting strategies. To cope with that situation, the water sector regulator published tariff guidelines to harmonize cost analyses, tariff structures and levels, creating a basis for comparison. The suggestion of two-part tariffs with increasing block rates seems to lack enough flexibility and proper supporting material. Thus, our analysis focuses on assessing whether the recommendations issued are able to achieve the proposed objectives through the suggested procedures, reviewing the structure proposed and possible adjustments.