Co-ordination and collaboration with the competition authority
The water and waste services regulator should be subject to a principle of subsidiarity with regard to the competition authority. Its function is also to promote and defend competition, to respond to gaps in the market, besides ensuring the carrying out of public interest goals not necessarily ensured by the market, starting with ensuring the on-going and unbroken supply of certain goods and services essential to the community.
One of ERSAR’s tasks is to promote competition and contribute to the
establishment of well-functioning markets where natural or legal monopolies are the norm to help develop and support the progressive opening of these sectors and the development of healthy competition where that is possible. It should be noted that the progressive adoption of competition in the regulated sectors will ultimately reduce ERSAR’s role in regards to the competition authority. Conceptually, sectoral regulation will have reached its final goal when it is no longer necessary for society.
However, while this is theoretically possible within a long-term perspective, in practical terms this is unlikely to eventuate.
The fact that the public water and waste services operate within a natural or legal monopoly market structure and under the scope of exclusivity of rights does not exclude the need to consider measures to introduce competition.
The management of these services may allow for the existence of competition and access to the market, particularly when the service holders (State, municipalities, etc.) decide to involve private utilities to manage systems through a delegation or a concession contract, to participate in the capital of companies integrated in the State owned business sector or the simple provision of services, typically infrastructure operation through a services provision contract.
In any of the described situations, competition should be ensured and maximised through public procurement rules, and it assumes special importance for issues such as:
- • Non-discrimination, transparency and equal treatment within the scope of public procurement procedures, which seek to enable the participation of the greatest number of competitors in conditions involving equality of opportunities.
- • Time limits or termination clauses in contractual arrangements. Limitations on time need to seek a balance between investor certainty in terms of the return on and recovery of investment, which is in turn a driving factor in terms of the attractiveness of the contract for private bodies, and market development’s that allow an increase in the instances of competition within the market.
- • The existence of limits on the alteration of contracts, so as to prevent the distortion of the rules and underlying principles which led to the choice of the winning bidder. This is again an important factor in underpinning investor confidence and providing a degree of certainty to the market.
In some ancillary water and waste systems service provision markets (subcontracting), competition problems may arise through the existence of significant buyer power on the part of the contracting entities. This is often a concern in markets that display attributes of oligopsony. This may lead to restrictions in competitive tensions in these markets, for example those involving construction, the supply of products and equipment and public infrastructure consultants.
Portuguese policy recognises that utilities authorised by law to manage services of general economic interest or which have the form of a legal monopoly should remain subject to competition rules, in so far as this does not constitute an obstacle to their compliance, in law or in fact, with the particular mission which has been entrusted to them. This issue is particularly important with regard to the application of the State aid system.
Finally, unbundling of activities similar to that which was undertaken in the electricity and rail transportation sectors may be usefully considered in order to reduce the scope of the monopoly and liberalise certain activities.
The competition authority is normally responsible for the regulation of market competition, including the public drinking supply of water, waste water management, and solid waste management services and the various associated markets. The application of competition rules should be ensured, with regard to principle of the market economy and that of free competition, taking into account the efficient functioning of the markets, a high level of technical progress and the achievement of the greatest benefit to the users.
Relations with the Minister are based on the independence of the regulator. ERSAR meets periodically with the Minister to discuss relevant topics about the sector and pending issues. These meetings may occur both at the request of the Minister or at the request of ERSAR and are mostly related to strategic collaboration aspects or inter-ministerial issues, since ERSAR does not usually interact with other ministers.