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Title page 1

Contents 6

Foreword 4

Acknowledgements 5

Acronyms 9

Executive Summary 11

1. Introduction 14

1.1. Report overview and structure 15

1.2. Overall context for the analysis 15

1.3. Water and sanitation services are delivered by multiple providers 16

1.3.1. Water services are spread across different actors 16

1.3.2. Sanitation has suffered from low investment 18

1.3.3. Cost recovery and performance remain a challenge 19

1.4. Important efforts to address regulatory complexity have been made 19

1.4.1. Recent progress to strengthen the policy landscape 19

1.4.2. Governance arrangements for the economic regulation of water supply and sanitation remain complex 21

References 23

Notes 23

2. Strengthening tariff-setting practices and governance in the Philippine water supply and sanitation sector 24

2.1. State of play analysis 26

2.1.1. Tariff-setting in the Philippines' water supply and sanitation sector 26

2.1.2. Comparing tariff frameworks within the Philippines and internationally 31

2.2. Key areas for regulatory reform 32

2.2.1. Building an enabling regulatory environment 33

2.2.2. Setting priorities and direction 34

2.2.3. Harmonising tariff-setting approaches 35

2.2.4. Improving data 38

2.2.5. Providing incentives 39

2.2.6. Tackling affordability 42

2.2.7. Complementing tariffs with other policy instruments 43

2.3. Conclusions and recommendations 43

References 44

3. Aggregating water and sanitation services delivery in the Philippines 46

3.1. State of play analysis 48

3.1.1. There are more and less successful management models for water services 48

3.1.2. Sanitation services are generally lagging 51

3.2. Key opportunities for aggregation 51

3.2.1. Forms and benefits of aggregation 52

3.2.2. Opportunities in the Philippines 57

3.3. Conclusions and recommendations 65

3.3.1. Determining the agenda for aggregation 65

3.3.2. Potential pathways for aggregation in the Philippines 67

References 68

Notes 71

4. Development of a Centralised National Integrated Water Information System 72

4.1. State of play analysis 74

4.1.1. Centralised National Integrated Water Information system 74

4.1.2. Enhancement of Listahang Tubig waterworks information system 78

4.1.3. Investments in bulk metering and monitoring tools to improve data accuracy 81

4.1.4. Policies, regulations and protocols to promote digitalised integrated information systems 83

4.2. Key areas for action 85

4.2.1. Centralised national integrated water information system 85

4.2.2. Investments in bulk metering and monitoring tools to improve data accuracy 87

4.2.3. Enhancing Governance, Legal Frameworks and Public Engagement 88

4.3. Conclusions and recommendations 92

References 94

5. Recommended action plan resulting from the National Dialogue on Water 95

Annex A. Tariff setting in theory and practice 105

References 112

Notes 112

Annex B. Tariff-setting practices: utilising agile approaches and regulatory tools to achieve meaningful reform 114

Annex C. Enabling regulation, policies and principles for aggregation 116

References 121

Notes 121

Annex D. Aggregation - country experiences 122

References 126

Annex E. Centralised information systems 127

References 130

Annex F. Smart water management system for metropolitan waterwork 131

References 133

Tables 7

Table 1.1. Service providers by type 17

Table 1.2. Recent water sector policies and reforms 21

Table 2.1. Overview of economic regulators in the Philippines' water supply and sanitation sector 26

Table 2.2. State of play - tariff methodologies and challenges 28

Table 2.3. Assessment of existing tariff arrangements against regulatory objectives 31

Table 2.4. Comparative analysis of international approaches to tariff design, by regulatory objective 32

Table 3.1. Performance of water districts in Terms of Operating Ratio in 2015 49

Table 3.2. Increasing levels of formalisation and transfer of responsibility 53

Table 3.3. Comparative overview of aggregation experiences and lessons for the Philippines 55

Table 3.4. Barriers to full aggregation 57

Table 4.1. Fragmentation of water data systems 76

Table 4.2. Key agencies in the water sectors 84

Table 4.3. The Waterworks modernisation project: a step-by-step approach 88

Table 4.4. Improvement measures and strategic actions 89

Table 5.1. Recommended action plan resulting from the National Dialogue on Water in the Philippines 97

Figures 7

Figure 4.1. Water Management Information Networking System (WINS) 86

Boxes 8

Box 2.1. OECD best practice principles for the governance of regulators 30

Box 2.2. Resolution on KPIs and useful life of assets 38

Box 2.3. Tariff adjustments and incentives 40

Box 2.4. The evolution of Italy's water tariff methodology 41

Box 3.1. Lessons from France, Portugal and Brazil on aggregation 54

Box 3.2. OECD Best Practice Principles on Licensing and Permitting 66

Box 4.1. Water Management Information Networking System (WINS) in Korea 85

Box 4.2. Local waterworks modernisation project in Korea 87

Box 4.3. Korea's electronic government act 90

Box 4.4. The public data act - promotion of public data disclosure and utilisation 91

Annex Tables 8

Table A A.1. Examples of tariff-based incentives in the water supply and sanitation sector 108

Table A A.2. Overview of tariff design options and parameters 109

Table A A.3. Overview of relevant parameters for tariff design, by category 110

Table A A.4. Sample of international approaches to tariff design in the water supply and sanitation sector 111

Table A B.1. Agile principles and their application in the water supply and sanitation sector 115

Table A E.1. Elements of the information system 127

Table A E.2. Nine water management agency-specific information systems 128

Annex Figures 7

Figure A A.1. The relationship between objectives, principles and the tariff methodology 105

Figure A E.1. National Integrated Water Management Information Platform Connection and Integration Diagram 127

Figure A E.2. Three phases of integration 129

Figure A E.3. Public Water information Service 130

Figure A F.1. Smart Water Management System (SWM) Concept Diagram 132

Annex Boxes 8

Box A A.1. Tariff-setting practices: incentive design 108

Box A A.2. Operational parameters for tariff design 110

Box A C.1. Success factors for the aggregation of Water Supply and Sanitation Utilities 118

Box A C.2. Financial support and other incentives for aggregation 120

Box A E.1. National Waterworks Information System 130

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