Management, delegation and the optimal nonlinear pricing and capacity planning: the case of the French Water Utilities.

In France, local communities have a local requirement of providing water services under optimum conditions in terms of techniques and cost-effectiveness, and subject to respect different kind of standards in terms of water quality and level of services. Rate-setting varies across regions and local territories due to a variety of organizational features of services and availability of water resources. The management of these local public services can be public or private. Local governments have the right, by the constitution, to delegate water service management to private companies which operate under the oversight of local municipal authorities. The purpose of this paper is both, to present the French organizational system of providing drinking water services, and collecting and treating wastewater services and to determine the optimal nonlinear pricing rules for water services. The model presents a standard water distribution system and a separate wastewater collection and treatment system. Technical and financial constraints are considered. The optimization process provides the optimal pricing rules for drinking water and sewerage services. These prices reflect efficiently the costs of systems constraints, the cyclicity of demands, the time-of-use, heterogeneity types of consumers and the real value of water resources scarcity. They provide important guidance in the design of efficient water rates and in the development of different water utilities planning strategies.