The environment minister said today that the reorganisation of Portugal's water supply industry will save €92 million per year by merging the existing regional supply companies.
The minister explained that "water rates will be 10% lower and sanitation rates down 16% compared to what was expected."
"We are talking about €92 million per year savings in operating costs up to 2045. In total, municipalities will save €4.1 billion in the fees that they are charged,” adding that the next five years he wants to see a single supply rate across the country.
Following the forced merger of 19 municipal water supply companies, five new ones will be created by July 1st.
As a result of reduced operating costs, the reform will allow reductions in the tariff charged to municipalities, but not to consumers.
Jorge Moreira da Silva explained that the reform of the water sector was essential to its financial sustainability at a time when the debts of municipalities to suppliers are about €400 million and to ensure necessary investments estimated at €634 million, mostly in leaking municipal networks.
The reorganisation also means that Portugal will qualify for €3.7 billion in EU funds.
What Moreia da Silva did not point out today is that charges to consumers remain unaffected by these supply cost reductions as councils and their water supply companies still may charge whatever they think they can get away with.
Prices may be standardised from the new water suppliers to councils and their companies but consumers in greedy, badly run or indebted councils can be charged up to 400% more than in others for the same liquid.
The end game for Moreia da Silva is to reorganise the supply side of this industry under the Aguas de Portugal group holding company which then will be privatised having had the benefit of the massive EC grant.
If the consumer also benefitted from the cost reductions which today Moreia da Silva was crowing about, there might be more sympathy for his plans.
Working towards privatisation while keeping the options open for councils to charge what they want to consumers means councils are unlikely to complain at this reorganisation of suppliers. Nor will councils complain at the privatisation of the main supply company until they start to be charged steeply increased amounts to satisfy post privatisation shareholders.
The consumer always will be the loser as there is no regulation of prices from council to end user - councils have no interest in upgrading their leaking networks or of becoming more efficient as they are local monopolies able to operate and charge what they want in an unregulated market.
