Strengthening Economic Regulation of Water and Sanitation Services in the Philippines

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

Abstract

This chapter analyses the state of play and challenges observed in the Philippine water supply and sanitation sector, with a focus on tariff-setting arrangements and the regulatory governance and performance frameworks that support tariff design and implementation. It outlines regulatory objectives that can guide tariff-setting and identifies constraints and challenges to setting cost-covering tariffs. The chapter provides a set of recommendations for government and regulators to support better design and governance of tariff-setting arrangements and their implementation.

Key findings and recommendations

Effective economic regulation and tariff-setting practices, which are consistently implemented, enforced and evaluated, drive better outcomes, including better service standards and enhanced water security. Economic regulation can be designed to support financial viability, target service quality, enhance efficiency, support equity and support a resilient water supply and sanitation sector.

To fully realise these benefits, economic regulation must be supported by effective governance arrangements. In the Philippines, a number of challenges continue to constrain its implementation. These issues include a complex and fragmented regulatory framework for water supply and sanitation where regulators hold unclear and overlapping mandates, where oversight mechanisms are limited or inconsistent and where regulators lack autonomy or make unco-ordinated decisions.

Regarding tariff-setting, institutional roles and responsibilities are fragmented, with multiple methodologies in operation. At the local level, inconsistent tariff methodology design and undue political interference mean that tariffs often do not provide for full cost recovery, undermining financial sustainability and the achievement of quality and access objectives. Tariff-based incentives are currently not used to encourage service providers to achieve objectives and improve performance, while their potential depends on a level of understanding and credibility that is currently lacking.

Comparing international practices, the tariff-setting arrangements in the Philippines display various gaps and inconsistencies. Tariff-setting will inevitably need to balance competing aims, including financial sustainability, maintaining a rate of return that is attractive for investors, quality, efficiency of service, affordability, equity and sustainability. A more unified tariff framework should operate based on consistent principles and practices. Tariff methodologies need to become more cost-reflective as well as performance-based. There is a need to look at how incentives can play a role, considering both short- and long-term objectives and the need to provide regulatory agility and flexibility.

Based on a discussion of the theory and practice of tariff setting, as set out in Annex A, this chapter identifies recommendations and concrete options for reform over the short- and long-term in the following areas:

• Building an enabling regulatory environment;

• Setting priorities and direction;

• Tackling affordability;

• Harmonising tariff-setting approaches;

• Providing incentives;

• Improving data; and

• Complementing tariffs with other policy instruments.

The chapter identifies the creation of a single independent economic regulator, such as the proposed Water Regulatory Commission, as a crucial step in the evolution of the regulatory landscape, though interim actions can also contribute to improving the effectiveness of economic regulation. Effective reform will be dependent on institutional alignment, capacity building and political buy-in. There is a need for effective communication and harmonisation will require significant development of data and monitoring systems. Finally, transition should be inclusive and adaptive, recognising the diversity of WSPs and local contexts, but also gradual, by phasing-in reforms through light-handed regulation. Progress can be purposefully and gradually realised by utilising agile management approaches and regulatory tools (see Annex A). Such transitional considerations are discussed further in the context of a proposed roadmap for reform in Chapter 5.

This chapter discusses the state of play of tariff setting and regulatory governance in the water supply and sanitation sector in the Philippines and identifies key areas for regulatory reform. An introduction to the theory and practice of tariff setting, including a discussion on regulatory objectives, tariff principles and options for tariff design, is provided in Annex A. Tariff setting in theory and practice.

The focus of this chapter is on tariffs for the provision of water supply and sanitation services. Tariff methodologies for bulk water are not covered in this chapter, although certain recommendations may be relevant when considering bulk water tariff methodologies as well.

2.1. State of play analysis

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

The economic regulation of the water supply and sanitation sector in the Philippines is fragmented across multiple regulators that differ in their functions and powers, resulting in a complex and often inconsistent regulatory landscape. These authorities currently oversee a diverse set of entities, which differ in legal structure, service level and operational model. There are currently no independent economic regulators in the sector: instead, regulators are part of central or local government departments. Regulators’ mandates for the economic regulation of sanitation services tend to be more limited than for water supply services, with LGUs taking a larger role in setting regulation and tariffs. Table 2.1 shows the current allocation of the main regulatory functions to different agencies, according to the types of entities they regulate.

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

Economic regulator	Entities subject to its/their economic regulation	Regulatory setup	Main regulatory functions
Local Water Utilities Administration (LWUA)	Water districts	Regulation by government (national level)	Issuance of certificate of conformance Technical assistance Loan and grant administration Financial and performance oversight Setting service level standards and monitoring Monitoring compliance with water quality standards Tariff review and approval
National Water Resources Board (NWRB)	Private operators, as well as some water districts and community-based organisations on a voluntary basis	Regulation by government (national level)	Issuance of certificate of public convenience (water providers) Setting service level standards and monitoring Monitoring compliance with water quality standards Tariff review and approval Dispute resolution
Metropolitan Waterworks and Sewerage System Regulatory Office (MWSS-RO)	Metro Manila concessionaires (Manila Water Company and Maynilad Water Services)	Regulation by contract	Concession oversight Tariff review and approval Setting service level standards and monitoring (including quality standards) Monitoring compliance with water quality standards Dispute resolution
Local Government Units (LGUs)	LGU-run utilities	Self-regulation	Tariff review and approval Infrastructure development Consumer complaints handling
Specialised bodies (Philippine Economic Zone Authority (PEZA), Tourism Infrastructure and Enterprise Zone Authority (TIEZA), Subic Bay Metropolitan Authority (SBMA) and Clark Development Co-operation (CDC))	Water providers in designated tourist, economic or metropolitan zones (private contractors)	Regulation by contract with government oversight / self-regulation	Tariff- and fee-setting Setting service level standards and monitoring Monitoring compliance with water quality standards Infrastructure development
NWRB (for community-based utilities) / LWUA (for LWUA registered associations)	Rural Waterworks and Sanitation Associations (RWSAs)	Regulation by government (national level)	Application of above NWRB/LWUA functions to RWSAs: Dispute resolution

Source: (PIDS, 2020[1]; NEDA, 2021[2]).

Tariff regulation in the Philippines is fragmented in terms of institutional roles and responsibilities for tariff setting and the multitude of tariff methodologies in operation (see Table 2.2). This fragmentation is also reflected in the inconsistent way that sanitation services are accounted for in tariff structures, including the fact that sanitation is not accounted for in tariff structures across all water utilities, as well as the different sets of indicators to assess performance and provide incentives, where they apply. Given the fragmentation of the sector and overarching regulatory framework, some differences in methodology can be expected and may serve a purpose where differentiation is justified based on fundamental characteristics of water supply and sanitation providers. However, in practice this is often not the case, since differentiation is an outcome more of legal structures and legacy arrangements, rather than evidence-based reform or objective characteristics. Differentiation in this form contributes to varied outcomes and expectations across the sector.

In particular at the local level, inconsistent approaches, methodological deficiencies and undue political interference means that tariffs often do not provide for full cost recovery. This undermines financial sustainability and the achievement of quality and access objectives. LGU-run utilities and smaller providers often face pressure to prioritise affordability and access considerations over operational and capital cost recovery, as well as debt financing. Affordability and rates of return caps specified in administrative issuances and contractual agreements further complicate the determination and implementation of cost-reflective tariffs in the sector.

Tariff systems currently provide little incentive to providers. Tariff-based incentives, such as linking tariff adjustments to indicators of service quality, operational efficiency, non-revenue water reduction or other specific targets, are currently not used to encourage service providers to achieve objectives and improve performance, while their potential depends on a level of understanding and credibility that is currently lacking. Beyond providing for the financial sustainability of the sector, tariff designs are inconsistent in their concern for social safeguards and environmental sustainability, such as climate resilience.

Table 2.2. State of play – tariff methodologies and challenges

Regulator	Tariff methodology	Identified challenges
NWRB	Tariff calculated based on cash-flow projections (considering OPEX and anticipated investments and an allowed return of 12% applicable only to private operators). Tariff methodology differentiated according to three categories of providers.	Tariff methodology does not incentivise improvements in efficiency or other targets Cash-flow basis does not ensure tariff stability or cost-reflectivity over time Allowed rate of return is not market-based Anticipated investments may not always be realised in practice, but no explicit clawback
LWUA	Tariff calculated based on historical and projected cash-flows, including cost of debt, reserve allowance and anticipated investments	Tariff methodology does not incentivise improvements in efficiency or other targets Non-regular tariff review intervals in practice reduce cost-reflectivity of tariffs Cash-flow basis does not ensure tariff stability or cost-reflectivity over time Lack of return on investment may lead WDs to favour debt financing model, impacting decision-making
MWSS-RO	Tariff calculated based on cash-flow projections (considering OPEX and anticipated investments and an allowed return of up to 12%). Tariff rewards and penalties linked to billed water volume, non-revenue water and OPEX performance beyond a set bandwidth and environmental, sanitation and sewerage targets. Capital expenditure (capex) is remunerated within a 15% bandwidth around the anticipated capex budget.	Cash-flow basis does not ensure tariff stability or cost-reflectivity over time Allowed return is not market-based Allowed 15% bandwidth around anticipated capex weakens efficiency incentive on capex
LGUs	Ad hoc, often no formal or standardised methodology	Tariff methodologies not standardised nor based on robust tariff methodologies Political interference and lack of capacity often result in tariffs below cost levels Tariff methodology does not incentivise improvements in efficiency or other targets
Special zones (TIEZA, PEZA, CDC)	Tariff methodologies vary but are generally based on cash-flow projections (considering OPEX and anticipated investments and an allowed return of 12%)	Cash-flow basis does not ensure tariff stability or cost-reflectivity over time Allowed return is not market-based Political interest to keep special zones attractive to investors may result in tariffs below cost-recovery levels

Source: Developed by authors based on regulatory documents and stakeholder interviews.

Regulatory objectives

Tariff design in the Philippines water supply and sanitation sector has been shaped by a history of evolving institutional reforms and regulations. These reforms aimed to strengthen sector financing and investment, formalise economic regulation and more recently harmonise or unify tariff-setting frameworks. Drawing on Philippine sector policies and regulatory instruments, as well as on OECD principles and international regulatory practice, five broad regulatory objectives have been identified, which are relevant to tariff design in the water supply and sanitation sector. All these ambitions remain relevant and are reflected in a set of aspirational regulatory objectives that could play a role in tariff design in the Philippines context:

1. Achieving financial viability

Financial viability relates to the ability for WSPs to earn back the full costs of their operations including a reasonable return through the tariffs they charge, thereby allowing them to be financially sustainable in the long-term. Tariffs are intended to cover all costs related to the service provision, including operations and maintenance and capital investments. A key goal is to enable providers to become self-financing and creditworthy, reducing reliance on government subsidies. A financially viable tariff regime, which is also predictable and transparent, attracts investment and enables network expansion.

2. Raising the bar in terms of service quality

Tariffs can support the achievement of improvements in service quality by ensuring the recovery of investments in quality improvements and appropriate incentives to improve quality.

3. Improving efficiency

Tariff structures are expected to incentivise operational and organisational efficiency and reduce non-revenue water. Performance-based regulation is encouraged to align tariffs with service delivery outcomes.

4. Supporting equity and universal access

Tariffs should be affordable, especially for poor and marginalised communities, while cross-subsidisation may support the expansion of services to more remote areas, where appropriate, considering existing social policy instruments.

5. Building resilience and environmental sustainability

There are a series of emerging challenges that regulators will need to address. Issues such as resilience to extreme weather events and cybersecurity are critical for infrastructure network operations, as is the promotion of new technologies to improve sustainability, environmental protection and overall operational efficiency. Digitalisation and the use of emerging technologies hold a lot of potential for operational improvements but also bring associated risks. Where investments to mitigate these emerging challenges overlap with the core aims of tariff-setting, i.e., result in improved service efficiency, quality or long-term financial viability, then they may be integrated into tariff design. To avoid distortions, such as risks of over-payment, this integration would typically take the form of performance incentives and require the setting and monitoring of KPIs. However, this decision requires careful consideration of existing environmental regulation and enforcement regimes, as well as ongoing strategic planning and climate financing initiatives.

Constraints and challenges

In defining the appropriate tariff methodology, regulators need to consider the impact of external factors. These factors are often not directly within the control of economic regulators but may nonetheless affect their ability to regulate with success. The feasibility of a tariff methodology depends on the available data and information, institutional capacities within entities, sector challenges and the legislative context. For example, a complex tariff methodology with a wide range of variables depends on reliable and up-to-date information for those same variables. Moreover, incentives only achieve impact if the relevant regulated entities fully understand them and have the capacity to act. External factors shape the environment within which the regulator must operate and will affect the effectiveness of any given methodology.

There are several contextual constraints and challenges that may hinder the realisation of effective tariff frameworks that support the performance of water supply and sanitation providers in the Philippines. These external factors include:

• First, as noted regarding the political economy and governance context, tariff-setting is politically sensitive depending on the sectors, jurisdictions and institutional contexts. As mentioned above, there is fragmentation in terms of institutional roles and responsibilities, the regulatory framework and thus in terms of tariff arrangements. Tariff setting at the local level can be subject to political rather than economic constraints, resulting in inefficiencies and unsustainable services.

• Second, there are significant economic and financial constraints – high production and operating costs and low tariff levels mean that providers such as LGU-run utilities are operating at a loss (World Bank, 2022[3]). There is limited fiscal capacity at the local level, reducing their ability to invest or borrow.

• Third, there are capacity gaps in water supply and sanitation utilities, especially at the local level, to conduct business planning, tariff modelling, forecasting, performance monitoring and data management, while the DILG’s oversight function over LGU-run utilities is limited to general supervision due to the principle of local autonomy.

• These constraints are compounded by limited public awareness of the link between tariffs, service improvements and sustainability. A further complication is the low willingness to pay among consumers, especially in poor or rural areas, due to distrust in service quality or affordability concerns (World Bank, 2022[3]).

Crucially, the success of economic regulation also depends on an effective governance framework i.e. the existence of effective regulatory processes and the good governance of regulators. The OECD has defined a set of relevant principles for the governance of regulators, to support countries to create effective regulatory authorities in their sectors (Box 2.1).

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

To support countries in considering the right setup and governance for their regulators, the OECD defined seven key principles. These principles define a framework for achieving good governance, thereby shaping the right conditions for regulators to effectively fulfil their mandates. They cover:

• Role clarity: An effective regulator must have clear objectives, with clear and linked functions and the mechanisms to co-ordinate with other relevant bodies to achieve the desired regulatory outcomes.

• Preventing undue influence and maintaining trust: It is important that regulatory decisions and functions are conducted with the utmost integrity to ensure that there is confidence in the regulatory regime. This is even more important for ensuring the rule of law, encouraging investment and having an enabling environment for inclusive growth built on trust.

• Decision-making and governing body structure for independent regulators: Regulators require governance arrangements that ensure their effective functioning, preserve regulatory integrity and deliver mandated regulatory objectives

• Accountability and transparency: Businesses and citizens expect the delivery of regulatory outcomes from government and regulatory agencies, and the proper use of public authority and resources to achieve them. Regulators are generally accountable to: i) ministers and the legislature; ii) regulated entities; iii) the public.

• Engagement: Good regulators have established mechanisms for engagement with stakeholders as part of achieving their objectives. The knowledge of regulated sectors and the businesses and citizens affected by regulatory schemes can support regulators to regulate effectively.

• Funding: The amount and source of funding for a regulator will determine its organisation and operations. It should not influence the regulatory decisions and the regulator should be enabled to be impartial and efficient to achieve its objectives.

• Performance evaluation: It is important that regulators are aware of the impacts of their regulatory actions and decisions. This helps drive improvements and enhance systems and processes internally. It also demonstrates the effectiveness of the regulator to whom it is accountable and helps to build confidence in the regulatory system.

Source: (OECD, 2014[4]).

2.1.2. Comparing tariff frameworks within the Philippines and internationally

The existing tariff frameworks for water supply and sanitation in the Philippines display various gaps and inconsistencies. These are identified by comparing the arrangements across regulatory authorities and internationally and considering the extent to which approaches match the core regulatory objectives discussed above. Based on these comparative analyses, various options may be identified to improve arrangements and to standardise or unify approaches. Implementing these options would help bring the Philippines closer to international good practice.

Relative comparison shows the inconsistencies, not only in the regulatory arrangements and methodologies in place, but also in the objectives that are being addressed by different institutions. A comparative assessment of the existing methodologies of the relevant regulatory authorities against the main regulatory objectives conducted in the context of this policy dialogue is provided in Table 2.3. Authorities are mostly consistent in their focus on financial viability and affordability, though for the latter objective their focus usually does not include the expansion of service coverage. Environmental sustainability, efficiency and service quality are less consistently prioritised or integrated into current arrangements, except in the case of MWSS-RO’s regulation by contract arrangements for concessionaires, which represent the most comprehensive framework.

Table 2.3. Assessment of existing tariff arrangements against regulatory objectives

	Does the tariff methodology contribute to the objective of:
Regulator	Achieving financial viability	Raising quality	Improving efficiency	Ensuring equity	Building resilience & environmental sustainability
NWRB	Yes, tariffs reflect full costs but no market-based return	Limited, tariff model remunerates but does not incentivise investment in quality improvements, KPI data not validated	No efficiency incentives or sufficient scrutiny of costs	Affordability threshold supports affordability, no incentives to increase coverage	Not explicitly considered
LWUA	Largely, tariffs reflect full costs as well as a reserve fund, but no return on equity	Somewhat, tariff model remunerates investment in quality improvements and non-compliance on quality KPIs can negatively affect the approval of new tariff proposals	No efficiency incentives or sufficient scrutiny of costs	Affordability threshold supports affordability, no incentives to increase coverage	Not explicitly considered
MWSS-RO	Yes, tariffs reflect full costs but no market-based return	Largely, methodology allows for investment in quality improvements and includes rewards and penalties linked to sanitation, sewerage and non-revenue water targets	Somewhat, cost efficiency incentives for some OPEX categories, incentives on capex weaker (only if discrepancies exceed 15% bandwidth)	Affordability threshold supports affordability, no incentives to increase coverage	Tariff methodology allows for rewards and penalties linked to environmental targets
LGUs	No, tariffs often below cost recovery	No, lack of targets and financial viability	No efficient incentives nor sufficient scrutiny of costs	Affordability threshold supports affordability, no incentives to increase coverage	Not explicitly considered

Note: Table does not include an assessment for special zones (TIEZA, PEZA, CDC) as methodologies can differ between zones, complicating an overarching scoring on objectives.

Source: Developed by authors based on regulatory documents and stakeholder interviews.

Further comparison with international approaches provides insight into how tariffs can balance regulatory objectives and the degree of existing gaps in the Philippines’ water supply and sanitation sector. The analysis provided in Table 2.4 summarises for each objective area the state of play, degree of the gap witnessed and international country examples that may be considered good practice in the relevant area.

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

Objective	Philippine State of play	Good Practice country examples	Gap summary
Financial viability	Tariff structures vary; many utilities, especially LGU-run systems, operate below full cost recovery or do not consider a market-based return. At local level, political pressure leads to tariff suppression.	Chile: Model company approach ensures full cost recovery with incentives. Portugal: Tariffs must cover efficient costs, evaluated by ERSAR.	High gap – Inconsistent cost recovery undermines financial sustainability.
Raising service quality	No standardised requirement to link tariff methodology to measurable improvements in quality or coverage. LGU-run utilities may invest reactively.	Peru: Tariffs reviewed every five years, linked to service goals in Optimised Master Plans. UK: Outcome Delivery Incentives (ODIs) reward or penalise quality outcomes.	Moderate to high gap – Weak linkage between pricing and service expectations.
Improving efficiency	Few clear incentives for operators to improve efficiency. Performance benchmarking is still limited, especially outside WDs.	Australia: Price caps and TOTEX approach reward cost savings. Chile: Utilities keep gains if they outperform the “model company”.	High gap – Lack of incentive frameworks for efficiency or innovation.
Ensuring equity	Incremental block tariff systems with often higher tariffs for industrial and commercial users. Affordability criteria restrict minimum tariffs for all residential users and lead to poor targeting. Tariffs are not differentiated based on ability to pay and do not incentivise service expansion.	Colombia: Stratified tariff system based on household income tiers. France: Separate affordability programmes, not embedded in pricing.	Moderate gap – Equity pursued, but ineffectively and inconsistently and mainly focused on affordability rather than service coverage.
Resilience & environmental sustainability	Tariffs reflect costs of treatment and distribution but not the cost of raw water. Tariffs incentivise conservation of piped water use via block tariff structures, but incentives for reuse, energy efficiency or wastewater treatment upgrades are less prevalent. Most providers have flat or basic volumetric tariffs with no explicit green incentives. Few tariffs include incentives for on-site sanitation management or sludge reuse.	Portugal: Tariffs encourage reuse and proper sludge treatment; performance indicators include energy use and effluent quality. UK: ODIs include leakage reduction, greenhouse gas emissions and pollution control; incentives for demand-side management. France: Separate charges or incentives for sludge-to-energy, wastewater reuse projects and energy efficiency in service contracts.	High gap – Tariffs do not reflect environmental costs nor promote sustainable practices in water supply and sanitation operations.

Source: Developed by authors based on (OECD, 2010[5]; OECD, 2015[6]), regulatory documents and stakeholder interviews.

2.2. Key areas for regulatory reform

Based on the findings and analysis conducted, it is evident that a comprehensive reform of the regulatory framework for the water supply and sanitation sector in the Philippines is not only necessary but inevitable. The fragmented nature of the sector, combined with institutional inefficiencies, underscores the urgent need for structural change. The pace and success of this reform, however, will largely depend on political commitment and the availability of resources from the national government to drive and sustain such transformative efforts.

This section identifies and discusses the following key areas of recommendations for the Philippine government to consider when improving economic regulation of the sector:

• Building an enabling regulatory environment

• Setting priorities and direction

• Improving data

• Harmonising tariff-setting approaches

• Providing incentives

• Tackling affordability

• Complementing tariffs with other policy instruments

2.2.1. Building an enabling regulatory environment

Reshaping the regulatory landscape for the water supply and sanitation sector in the Philippines can help consolidate regulatory functions that are currently spread across institutions. Ideally, such a transformation would include the creation of a single independent water regulator (Scenario 1), as envisaged at the time of drafting. However, the advice also considers a situation where such an independent regulator is not yet established (Scenario 2), to support progress regardless of the success of legislative reform.

Scenario 1: an independent water regulator is created

One of the most critical steps for the sector reform agenda is the creation of a central and independent regulator. The creation of this proposed body provides an opportunity to repair a scattered regulatory landscape and remove regulatory gaps and overlaps. Crucially, the regulator would bring within the scope of economic regulation large parts of the sector that are at present effectively unregulated and provide the basis to harmonise approaches. Moreover, its independence as a regulatory authority can support trust in the objectivity and impartiality of its decision-making. The key responsibility of the regulator would be economic regulation, particularly in setting tariffs across the sector. This is a highly complex task in the Philippine context, given the wide diversity of service providers operating at different administrative levels – ranging from small-scale local utilities to larger municipal or regional providers.

For the independent regulator to be successful, it must be granted robust authority and effective governance, based on international good practices. It should be equipped with the necessary competencies, functions, resources and powers to effectively enforce regulatory oversight, ensure market stability and intervene when disruptions occur in service delivery or pricing. To ensure its independence, not just its legal status matters, but also other arrangements such as regarding role clarity, government guidance, staff, leadership, resources and institutional culture. Independence arrangements should be complemented with robust accountability mechanisms, to ensure transparent decision-making and enhance trust.

Scenario 2: there is no independent water regulator yet

If legislation to establish the independent water regulator is not passed within a reasonable time, other components of the reform strategy can still proceed but require more collaboration. In such a scenario, existing regulators can take the lead in implementing reforms, relying on increased coordination, joint approaches and guidance to harmonise approaches. The responsibilities originally envisioned for the independent regulator – such as harmonising tariff methodologies and establishing common principles for tariff-setting – would fall to the current regulatory bodies, including the NWRB, LWUA, MWSS-RO, LGUs and special zone regulators. However, without a unified independent regulatory authority, the effectiveness and coherence of these efforts is likely to be more limited. In such a situation, large parts of the sector would remain effectively unregulated due to regulatory gaps. This fragmented approach could therefore result in less consistency and efficiency compared with a unified regulatory framework under a dedicated national authority.

The remainder of this section formulates recommendations aimed at “economic regulators” in the sector in general, which may apply both to the current set of economic regulators prior to the establishment of a unified independent water regulator and to this new regulator once it is established.

Recommendations

Short-term

• Establish a “regulatory taskforce”, bringing together all economic regulators in the sector, to build consistency by increasing the level of co-ordination and foster, harmonised approaches in relation to the functions performed, joint actions and guidance.

• Consider how the taskforce could support capacity-building and resource-pooling through joint training programmes, secondments and staff exchanges, shared services, as well as connecting it to regional or international peer networks, to improve capacities across authorities.

Medium-term

• Prioritise the creation of a single independent economic regulator for the sector, thereby consolidating the fragmented regulatory landscape and removing gaps and overlaps.

• Grant the independent water regulator with robust authority and effective governance arrangements to support its effectiveness, including full independence (legal status, role clarity, government guidance, staff, leadership, resources and institutional culture) and accountability mechanisms – based on the OECD best practice principles for the governance of regulators (see Box 2.1 in section 2.1 “State of Play analysis”.

2.2.2. Setting priorities and direction

Clarity on goals and priorities is essential for the effectiveness of economic regulation of the water supply and sanitation sector in the Philippines. There is a multitude of possible regulatory objectives and principles that tariff methodologies can address, but which may at times be at odds with each other (see sections on “Regulatory objectives” and “Tariff principles” in section 2.1.1 and in Annex A: Tariff setting in theory and practice. Economic regulators are expected to integrate financial viability and affordability objectives with broader policy goals, including improvements in service quality, environmental sustainability and infrastructure investment. Regulators must therefore consider a comprehensive framework that aligns a variety of regulatory objectives. The relevance of each and their respective level of priority, are context dependent, as they depend on sectoral challenges and political priorities.

Legislation should clearly state the regulatory objectives that economic regulators in the water supply and sanitation sector are expected to achieve. Without such guidance, regulators may not have sufficient information to establish priorities in their work. Where conflicts between objectives may arise, legislation should clarify the trade-offs regulators are expected to make and provide guidance on the way in which conflicts should be resolved, or the ways in which different risks should be weighted and assessed in decision-making (OECD, 2014[4]). This will be important to ensure regulatory approaches and aims align with policy objectives. Moreover, it will support consistency in priorities across regulators within a scattered regulatory landscape. A set of potential regulatory objectives to consider is included in section 2.1.1 on “Regulatory objectives”.

Regulatory objectives may change over time, as the sector develops and challenges evolve. While sectors are still developing or financially unstable, governments and regulators may put a stronger emphasis on financial viability and efficiency as regulatory objectives, while embedding requirements for a minimum quality level of service, prudent investment for the utility business and returns on investment. As sectors and regulatory frameworks mature and become more stable, they may shift their emphasis to additional regulatory objectives – thereby increasing complexity in terms of instruments, rules and monitoring mechanisms required – to support a wider range of policy goals.

Based on regulatory objectives as defined in legislation, economic regulators in the WSS sector can jointly determine the appropriate set of tariff principles that informs their tariff-setting functions. A critical early step in the reform process is achieving a collective understanding of the core principles guiding the tariff-setting. These principles should be informed by international best practices but adapted to the specific socio-economic and institutional realities of the Philippines (see section on “Tariff principles” in Annex A). Clear and consistent tariff principles will support the achievement of broader regulatory objectives and help ensure transparency, fairness and sustainability in pricing structures.

In conclusion, while reforming the Philippine water sector is a complex and long-term undertaking, establishing a strong regulatory foundation guided by clear regulatory objectives and tariff principles is a critical first step – that can and should be established in the short-term. This will lay the groundwork for a more efficient, equitable and sustainable water supply system nationwide.

Recommendations

Short-term

• A structured forum should be formed, such as a roundtable, task force or working group, bringing together policymakers, regulators and relevant stakeholders of the water supply and sanitation sector to agree on the key regulatory objectives for economic regulation that can guide the work of regulators. These objectives can first be defined in interim guidance prior to the codification of objectives in legislation by policymakers to provide long-term certainty.

• Develop formal co-operation agreements (such as MOUs) between economic regulators and other public bodies to define roles and responsibilities and processes for consultation and joint action, to improve role clarity and coherence.

• Economic regulators should jointly define and publish core tariff design principles for tariffs for water supply and sanitation services, applicable across all provider types, to build a shared understanding and support the achievement of regulatory objectives – this process should be government-mandated but regulator-led. A shared oversight committee of regulators could monitor the implementation of such principles.

Medium-term

• Policymakers should define in legislation the key regulatory objectives that should be achieved through tariff regulation, as well as the trade-offs economic regulators are expected to make and the way in which conflicts should be resolved, thereby providing clarity to regulators on what they are expected to achieve.

• Periodically review the set of regulatory objectives for economic regulation as sector challenges evolve, to ensure objectives stay relevant and up to date.

2.2.3. Harmonising tariff-setting approaches

The many tariff methodologies currently applied for the sector show various deficiencies and inconsistencies, resulting in a need to improve and harmonise approaches. A harmonised or unified tariff approach can bring together existing tariff methodologies and remove inconsistencies and “random differences” that are currently witnessed. At present, the main differences between tariff methodologies do not relate to fundamental characteristics of the providers to which they are applied but rather depend on the legal structure of the provider and the economic regulator they fall under. A study by the World Bank came to similar conclusions, noting significant differences in tariff setting across regulators with conflicting guidelines and suggesting a “harmonisation of the tariff-setting formula and principles” (World Bank, 2022[3]).

The establishment of a single water regulator would make the process to harmonise tariff approaches easier, but progress can be made either way. The analysis by the OECD found that an independent national authority (such as the proposed regulator) can play a central role in managing the unification of tariff methodologies and ultimately hold the authority to regulate a nationally applicable tariff framework. In the absence (or in anticipation) of such a centralised regulatory body, efforts towards harmonisation, effective governance and improvements to methodologies can still support a more effective tariff framework and should be established.

Harmonising the tariff methodologies will require regulators to standardise their approaches and build consistency. This harmonised framework, even if delivered by different institutions, should operate based on the same principles and practices, and utilise similar tools to enable efficient coordination and harmonisation over time. Regulators and stakeholders would be encouraged to reach consensus on a core set of data essential for tariff-setting and performance monitoring, which should be standardised and consistently collected across all providers to enable meaningful analysis and regulatory decision-making. Tariff methodologies need to become more cost-reflective, enabling full cost recovery, as well as performance-based, to achieve desired outcomes.

The harmonisation of approaches can and should be supported by the development of joint guidance material that guides the tariff-setting process. This would be based on a common set of tariff principles and methodologies and a standardisation of data, definitions and indicators. Ideally, the process of harmonisation would be government-mandated but regulator-led, through a collaborative process that involves regulators, government, providers and users. Pending the creation of the WRC, this process may require coordination mechanisms such as the creation of a coordinating body, or inter-agency working groups, task forces, coordination committees, etc.). The process itself can leverage insights and expertise across stakeholders and support buy-in.

Within the harmonised tariff framework, differentiation will be essential to keep things proportionate. The sector’s fragmentation means that a uniform tariff-setting model may not be practical or equitable. Stakeholder consensus already points to the impracticality of applying a uniform methodology across all service providers. Therefore, the development of a classification system for service providers and a tailored tariff-setting framework appears to be the more viable path forward. This would involve categorising service providers into groups based on fundamental characteristics such as size, location, capacity or service coverage, to differentiate tariff methodologies and tailor the complexity of the regulatory framework. This differentiation would result in a set of “non-negotiable” core items that are included in each tariff methodology – such as operational and capital costs – as well as some additional elements that may be added for some providers depending on their maturity – such as specific performance incentives.

The process of harmonising tariff approaches can be used to remove existing deficiencies in methodologies. An obvious example is the rate of return currently incorporated into methodologies, which has been capped at 12% for decades. This cap, which is not market-based, introduces a risk that tariffs are not fully cost reflective. On the other hand, in the case of LWUA’s methodology, no return on investment is considered but only the cost of debt, thereby potentially incentivising debt financing. In addition, tariffs across the sector are determined based on cash flows, which undermines tariff stability over time.

Recommendations

Short-term

• Economic regulators may jointly develop non-binding tariff methodology guidance and tariff protocols that provide standardised definitions and approaches, further supporting harmonisation and consistency in anticipation of the establishment of an independent water regulator. This process should be government-mandated but regulator-led and involve:

  • Common tariff principles: the guidance should define a common set of tariff principles applied across the sector;

  • Standardised definitions and approaches: these relate to the operational parameters, but will depend on the preferred framework (e.g. definitions for OPEX, capex, rate of return, KPIs, etc.); and

  • Standardisation of reporting: uniform templates and guidance for tariff proposals, investment plans and KPI tracking (Box 2.2).

• Develop a classification system of providers based on fundamental characteristics such as size, location, capacity or service coverage, to ensure proportionality by tailoring tariff methodologies and their complexity to the profile of providers. In developing this classification, care should be taken to keep the classification simple by limiting the number of “provider classes” to a minimum.

• Use the process of harmonising tariff approaches to remove existing deficiencies in methodologies, such as returns on investment that are currently not market-based.

• Regulators should explore the use of shared tools (benchmarking and performance metrics, shared registries and databases, open data portals, etc.) to enhance co-operation, harmonise approaches and build consistency. Procedural tools, such as codes of practice, can provide semi-formal rulebooks to guide the work of authorities.

Medium-term

• Consider the use of accounting costs as a basis for tariff setting at least for some (larger) providers, to improve tariff stability and cost-reflectivity over time.

• At the local/LGU level, initiate requirements for medium-term investment and service plans as a basis for tariff proposals, supported by technical assistance at the appropriate level (to be defined), to provide for full cost recovery and improve financial sustainability.

• Move from an interim non-binding tariff setting framework to a more formalised one, allowing for differentiation by WSP type based on fundamental characteristics but harmonising common principles and review cycles, thereby further improving consistency while maintaining proportionality.

• Aim to have a comprehensive hybrid model – combining cost-recovery (accounting costs-based) principles and performance incentives – implemented, especially for all larger providers, considering priority objectives and principles.

• Establish regulatory review protocols with clear adjustment mechanisms, evaluation cycles and dispute resolution systems as a next step in the evolution of the national framework, to ensure approaches can adapt to changing circumstances and remain fit-for-purpose.

• Consider how tariff principles and approaches for water supply and sanitation may be applied or adjusted for the development of tariff methodologies for bulk water supply arrangements.

Long-term

• Enable contract-based and benchmarking regulation for LGUs and smaller providers, supported by model contracts and shared support services.

Box 2.2. Resolution on KPIs and useful life of assets

NWRB adopted Resolution 05-0625 in June 2025, establishing a comprehensive set of KPIs for water service providers. These KPIs, developed through expert consultations and aligned with national standards and international benchmarks, are categorised into financial and operational indicators.

Financial KPIs (15 Indicators) evaluate tariff compliance, financial viability and efficiency:

• Tariff and compliance: adherence to approved rates and business plans.

• Efficiency ratios: operating/capital expenditure ratios, return on assets, net income margin.

• Liquidity and solvency: current and quick ratios, debt-to-equity, debt service coverage.

• Asset and revenue management: collection period and efficiency, reserve funds (for cooperatives), collection periods, percentage of repairs and maintenance, asset validation

Operational KPIs (11 Indicators) assess service quality, infrastructure and customer responsiveness:

• Service quality: targets for non-revenue water (≤20%), minimum pressure, daily supply hours and water quality standards.

• Infrastructure: metered connections, capacity, meter testing/sealing and coverage.

• Customer and HR metrics: response times to complaints, employee ratios and gender balance.

The resolution also updated the depreciation lifespan of assets for financial planning to align with industry norms. These KPIs and asset life guidelines aim to improve performance monitoring, financial management and long-term sustainability of water service providers.

Source: (NWRB, 2025[7]).

2.2.4. Improving data

Access to reliable and standardised data is a prerequisite for defining and implementing any sound tariff-setting methodology. An essential component of effective economic regulation in the water sector is the systematic collection, management and analysis of accurate and reliable data. Without it, regulators cannot ensure accuracy, transparency, fairness or sustainability in tariff-setting, nor can they effectively monitor and benchmark the performance of regulated entities or ensure accountability across the sector.

There is no single approach to benchmarking key performance indicators (KPIs) across regulatory authorities in the Philippines. Each regulatory authority uses a different approach to assess performance, in line with their regulatory mandate and capacity. In addition, where the same KPIs are used, the definitions used for indicators may also differ. Different methodologies and reporting standards are used for different institutions, which does not allow for comparison or accurate reporting.

Currently, the Philippine water supply and sanitation sector suffers from significant information gaps. Data collection efforts are fragmented across various regulatory and administrative levels, with no unified national database in place. This lack of coordination not only hampers regulatory oversight but also makes it exceedingly difficult to assess the performance of service providers and to design appropriate, evidence-based tariff-setting methodologies. Establishing a centralised and comprehensive data management system is therefore critical. However, the development of such a system faces substantial challenges, including limited financial resources, institutional capacity and technical infrastructure.

To determine the most suitable approach for the Philippines, a detailed diagnostic and feasibility assessment should be undertaken. This should explore different models of data governance, collection methods, reporting protocols and validation mechanisms. One starting point would be to organise a series of stakeholder workshops and technical consultations. These workshops would serve multiple purposes: raising awareness, mapping existing data assets, identifying information gaps and fostering agreement on priority data requirements and standards.

As a follow-up to the diagnostic, the development of a robust data strategy for the water supply and sanitation sector should be prioritised. This strategy must outline clear processes for data collection, storage, validation, analysis and dissemination, based on a common set of data definitions. It should also define roles and responsibilities across institutions. Ideally, a single entity – such as the proposed Water Regulatory Commission – should be mandated with the authority to oversee the collection and management of sectoral data. This entity should be equipped with the appropriate legal mandate, institutional autonomy and technical capabilities to carry out this function effectively. Prior to the establishment of the regulator, a robust data management strategy must clearly define the allocation of data collection responsibilities among existing institutions. In the short-term, the reform process should initiate concrete steps towards this goal, such as launching planning activities, holding capacity-building workshops and training and piloting initial data-gathering exercises with stakeholders. These efforts will lay the foundation for a well-informed regulatory environment.

Recommendations

Short-term

• Undertake a detailed diagnostic and feasibility assessment to explore different models of data governance, collection methods, reporting protocols and validation mechanisms, using workshop sessions with sector stakeholders. Where such frameworks do not yet exist, the assessment should also identify what data is currently available, its ownership and the extent of its accessibility.

• Map existing benchmarking practices across regulators to identify parallels, gaps and inconsistencies and support the identification of a common harmonised performance monitoring framework with KPIs. The complexity of the performance monitoring framework should be tailored according to the size and capacity of providers, avoiding a one-size-fits-all approach and the framework should be based on uniform definitions and data validation.

• Initiate benchmarking and transparency initiatives, such as a national performance database and reporting standards for providers, to improve the quality and comparability of data.

Medium-term

• Develop a robust data strategy as a priority, outlining clear processes for data collection, storage, validation, analysis and dissemination based on a common set of data definitions and assigning responsibilities and resources, to support effective data management and usage.

• Integrate environmental and resilience indicators into the set of KPIs defined and monitored to improve insights into performance.

2.2.5. Providing incentives

Tariff incentives provide scope to encourage better performance, but their impact in the water supply and sanitation sector in the Philippines is likely to be more limited in the short-term. The impact of incentives depends on capacities and the maturity of the regulatory framework. Incentives as applied through tariff systems only work insofar as providers understand them and hold the capacity to react. Moreover, the willingness of providers to respond to them depends on their belief that incentives will be provided not just today but also in the long-term, as incentives often encourage structural changes or long-term investments that cannot be earned back in one year. As such, the success of tariff incentives in achieving better outcomes will increase as regulatory frameworks become more mature and credible.

To avoid overcomplicating tariff methodologies, the introduction of tariff incentives requires a gradual and phased approach. This means that incentives are first applied to the largest providers with the largest capacity to act, focusing on low-complexity incentives. At present, this is already in place for the Manila concessionaires, which are subject to several tariff incentives. Over time, tariff incentives can be expanded across more providers as capacities grow and additional incentives may be introduced (Box 2.3 and Box 2.4), however, while always keeping an eye on the overall complexity of tariff models. Pilots may be considered to test the effectiveness of incentives and improve regulatory models.

Recommendations

Short-term

• Introduce tariff incentives based on a gradual and phased approach, with fewer incentives and a lower complexity of methodologies for smaller providers, to keep approaches proportionate and effective.

Medium-term

• Launch pilot programmes for performance-linked tariffs and benchmarking regulation within selected WDs and LGU-run utilities, considering gradual implementation and low complexity, to test the effectiveness of approaches.

Box 2.3. Tariff adjustments and incentives

There is a broad consensus among stakeholders in the Philippine water supply and sanitation sector that tariff-setting processes – particularly the introduction of new tariffs – must be grounded in a transparent, well-defined and robust methodology. Moreover, the tariff framework should include clear provisions for periodic tariff adjustments, ensuring adaptability to changing economic and operational conditions.

International regulatory practice offers various models in which regulatory authorities are empowered to adjust tariffs periodically over time. In some jurisdictions, regulators are also granted extraordinary powers to revise tariffs in response to unforeseen events such as economic crises, natural disasters or public health emergencies. However, the exercise of such powers is typically limited to exceptional circumstances and should not replace regular adjustment mechanisms embedded within the regulatory framework.

A widely adopted approach among water regulators is the integration of inflation-based adjustments, often using the Consumer Price Index (CPI) or other inflation indices. Under this model, tariffs are set for a multi-year regulatory period but are subject to annual adjustments based on a predictable formula. This enhances transparency, investor confidence and planning certainty for utilities and consumers alike.

More advanced tariff-setting methodologies incorporate performance- and investment-linked variables, making the process more dynamic and outcome-oriented. In addition to inflation, these models may include incentives linked to:

• Capital investment commitments, where tariff adjustments are tied to the utility’s delivery on agreed infrastructure projects;

• Key Performance Indicators (KPIs), such as reductions in non-revenue water, improvements in service coverage or customer satisfaction metrics;

• Operational efficiency benchmarks, rewarding utilities that achieve cost savings or productivity gains beyond a given target (the well-known “RPI-X” model is one example);

• Service quality targets, such as continuity of supply, water quality compliance or response time to customer complaints;

• Environmental metrics, including energy efficiency or carbon reduction goals;

• Demand projections or consumption patterns, adjusting tariffs based on shifts in usage behaviour.

By embedding such variables within the tariff adjustment formula, regulators can align pricing with policy objectives, incentivise efficient and sustainable utility operations and provide a more predictable and credible tariff path that strikes a balance between the interests of all stakeholders—consumers, utilities, regulators and investors.

Source: Developed by authors based on case study and gap analysis, OECD work and literature review.

Box 2.4. The evolution of Italy’s water tariff methodology

A good practice example for the use of incentives comes from the Regulatory Authority for Energy, Networks and Environment’s (Autorità di Regolazione per Energia Reti e Ambiente, ARERA) in Italy, which has developed its tariff methodology and the sophistication of incentive structures over multiple iterations.

The fourth regulatory period for Italy’s water services (MTI-4) consolidates tariff rules while embedding environmental sustainability, energy efficiency and climate resilience into the sector’s economic framework. The regulation strengthens utilities’ capacity to invest, stabilises cost recovery and explicitly links tariffs to environmental protection and service quality.

The approach by rests on four main pillars:

• Energy and environmental sustainability: embedding efficiency, renewable energy, resource reuse and reduced plastic consumption into tariff recognition.

• Climate resilience: financing rainwater and drainage infrastructure and supporting large upstream works critical for supply security.

• Energy cost management: shielding utilities from price volatility while incentivising lower consumption and self-production.

• Environmental and resource cost internalisation: valuing ecosystem impacts and opportunity costs of scarce resources in tariff structures.

These pillars are reinforced by a complementary system of technical quality standards, including a new Water Resilience indicator, which measures utilities’ ability to ensure supply under climate stress.

Specific incentives include:

• A reward for utilities that increase the share of treated wastewater reused (2025 vs. 2023 baseline);

• A reward for reducing purchased electricity by at least 5%;

• An innovation Fund to finance the reuse of wastewater and self-production of energy;

• Recognition in tariffs of self-generated electricity costs, provided they are not already covered elsewhere;

• Incentives linked to energy savings achieved, with sharing of efficiency gains between utilities and consumers; and

• Performance-based rewards under macro-indicators, covering leaks, service continuity, water and sewer quality, sludge disposal and treated water quality.

Notes: See also Annex C – ARERA of the OECD publication The Role of Economic Regulators in the Green Transition: Driving Sustainable Change in Network Sectors (OECD, 2024[8]).

Source: Information provided by ARERA, 2025.

2.2.6. Tackling affordability

One of the most critical aspects of tariff-setting in the water sector relates to addressing affordability challenges. Affordability is closely tied to the human right to water and the principle of universal access to essential services, as well as the acceptability of water tariffs. Ensuring that water services remain financially accessible to all segments of the population is fundamental to achieving equitable and inclusive service delivery.

Challenging aspects of tariff design lie in balancing financial viability – by ensuring that tariffs reflect the full cost of water provision – with affordability. Striking this balance is essential for achieving long-term financial viability while safeguarding the needs of the most vulnerable populations. Balancing these principles should be informed by regulatory objectives and the potential of other policy instruments to address policy objectives. For example, while most countries address financial viability through their tariff methodologies, they may choose to target the objective of affordability either through cross-subsidisation within the tariff framework or targeted subsidies outside the tariff framework (or a mix of both).

Although there is no universally agreed threshold for affordability, a commonly referenced benchmark is that water tariffs should not exceed 3–5% of a household’s income (UNDP, 2006[9]; WAREG, 2017[10]; UNICEF and WHO, 2021[11]; Martins et al., 2023[12]) . However, applying a uniform national affordability rate may not always be appropriate, particularly in countries with significant regional economic disparities such as is the case for the Philippines. Adopting regionally differentiated affordability thresholds can help ensure that water remains accessible to low-income communities without placing an undue financial burden on them. To support such an approach, regional income data can be obtained from the Philippine Statistics Authority, or alternatively, specific data-sharing agreements can be established with the agency to access the necessary information.

Recommendations

Short-term

• Separate affordability and access objectives from tariff structures through guidelines on targeted subsidies and lifeline rates (considering all forms of subsidies, not only those implemented through the water tariff but also direct subsidies channelled through the social system), to avoid distorting or diluting cost-recovery and tariff incentives (OECD, 2022[13]).

Medium-term

• Consider regional differentiation and apply affordability thresholds only to low-income households, to ensure affordability criteria target those most in need.

2.2.7. Complementing tariffs with other policy instruments

Tariff setting is a foundational regulatory function but is not sufficient in and of itself. Its strength lies in ensuring financial viability, incentivising desired behaviour and targets and promoting fairness (non-discrimination) within the system. However, broader policy goals – like equity, environment, resilience and social welfare – usually require complementary instruments to achieve efficient and just outcomes. This is more important in the short term, when tariff incentives are still expected to have a more limited impact (see section 2.2.5 on “Providing incentives”).

In the current context in the water supply and sanitation sector, additional policy instruments such as subsidies or public funding are likely needed to support policy objectives. There may be some circumstances where performance incentives encourage operators to target certain efficiency and quality improvements that also favour resilience and environmental protection, but these decisions should be made with a holistic view of the policy and regulatory landscape. When significant investment is needed to improve outcomes in a context of weak financial sustainability or regulatory instability, tariff incentives need to be complemented with other policy instruments such as subsidies or public funding. In general, social goals such as affordability and increasing access may best be addressed outside tariff methodologies, for example through targeted subsidies rather than cross-subsidisation, to avoid distorting or diluting cost-recovery and performance incentives (World Bank, 2018[14]; OECD, 2022[13]).

Recommendations

Short-term

• Assess the potential for tariff incentives to support policy objectives in terms of quality, service coverage and environmental considerations based on a gap assessment in terms of sector investment needs. This assessment should feed into decisions on other policy instruments such as subsidies or public funding to complement tariff incentives to achieve policy objectives.

2.3. Conclusions and recommendations

The Philippines water supply and sanitation sector faces a range of challenges that complicate the economic regulation of service provision in the sector. These challenges include among other things a scattered regulatory landscape, political influence in decision-making, poor sector performance and inconsistencies in approaches. Considering these challenges, significant regulatory reform, along several axes is needed. This reform can help ensure economic regulation can fulfil its potential and deliver the outcomes stakeholders expect.

The way forward requires setting a clear strategic direction for tariff design and delivery by identifying the priority objectives and principles, the preferred short and long-term initiatives and transitional arrangements and these choices will ultimately need to be reflected in policy and planning. Each choice will need to be tested with stakeholders to ensure feasibility across governance levels.

Chapter 5 summarises the main recommendations for each area for regulatory reform. These recommendations, which include options for standardisation and harmonisation, are aimed at achieving regulatory objectives effectively and efficiently and ensuring alignment of tariff design and delivery with core principles. They cover the same key areas as covered under the section “Key areas for regulatory reform”.

References

[12] Martins, R. et al. (2023), “Water affordability across and within European countries: a microdata analysis”, Utilities Policy, Vol. 83, p. 101609, https://doi.org/10.1016/j.jup.2023.101609.

[2] NEDA (2021), Philippine Water Supply and Sanitation Master Plan, National Economic and Development Authority (NEDA), Pasig City, Philippines, https://faolex.fao.org/docs/pdf/phi214382.pdf (accessed on 13 December 2024).

[7] NWRB (2025), NWRB Resolution No. 05-0625.

[8] OECD (2024), The Role of Economic Regulators in the Green Transition: Driving Sustainable Change in Network Sectors, The Governance of Regulators, OECD Publishing, Paris, https://doi.org/10.1787/7d4704c9-en.

[13] OECD (2022), Reform of Water Supply and Wastewater Treatment in Lithuania: Practical Options to Foster Consolidation of Utilities, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/f966a980-en.

[6] OECD (2015), The Governance of Water Regulators, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/9789264231092-en.

[4] OECD (2014), The Governance of Regulators, OECD Best Practice Principles for Regulatory Policy, OECD Publishing, Paris, https://doi.org/10.1787/9789264209015-en.

[5] OECD (2010), Pricing Water Resources and Water and Sanitation Services, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/9789264083608-en.

[1] PIDS (2020), The Philippine Local Government Water Sector, https://pidswebs.pids.gov.ph/CDN/PUBLICATIONS/pidsdps2033.pdf (accessed on 5 December 2024).

[9] UNDP (2006), Human Development Report 2006, https://hdr.undp.org/system/files/documents/human-development-report-2006-english.human-development-report-2006-english (accessed on 21 August 2025).

[11] UNICEF and WHO (2021), The Measurement and Monitoring of Water Supply, Sanitation and Hygiene (WASH) Affordability, https://iris.who.int/bitstream/handle/10665/341067/9789240023284-eng.pdf (accessed on 21 August 2025).

[10] WAREG (2017), Affordability in European Water Systems, https://www.wareg.org/documents/affordability-in-european-water-systems/ (accessed on 21 August 2025).

[3] World Bank (2022), “Strengthening PH Water Supply and Sanitation Services”.

[14] World Bank (2018), Aligning Institutions and Incentives for Sustainable Water Supply and Sanitation Services, https://documents1.worldbank.org/curated/en/271871525756383450/pdf/Aligning-institutions-and-incentives-for-sustainable-water-supply-and-sanitation-services.pdf (accessed on 12 May 2025).