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Water sector defends 40% tariff hike to cover network costs

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A study commissioned by the Portuguese Association of Environmental Sector Enterprises (AEPSA) from FUNDEC of the Higher Technical Institute indicates that tariff systems, in general, in Portugal, “have capacity and can and should be increased”, given that the population “has the capacity to pay and pays much less” than in other countries and sectors in Portugal. Increasing transparency in the allocation of subsidies is one of the recommendations.

The water tariff will have to be raised by 40% to cover the network's operating costs and ensure the necessary investments to rehabilitate the assets, according to the legal principle of the user pays, without neglecting the allocation of the social tariff to the households that really need it. This is one of the main conclusions of “PENSAARP2030”, part of the study “Support model for water supply and sanitation services in Portugal”, developed by the Association for Training and Development in Civil Engineering and Architecture (FUNDEC) of the Higher Technical Institute at the request of the Portuguese Association of Environmental Sector Companies (AEPSA).

The study, which will be presented on Tuesday at the Cultural Center of Belém (CCB), indicates that “tariff systems, in general, in Portugal, have the capacity and can and should be increased, given that the population has the capacity to pay and pay for them.” However, the tariffs are much lower than in other countries and sectors in Portugal”.

Among the various recommendations of this document prepared by Professor Rui Cunha Marques, for a better performance of the water sector, is the intelligent allocation of subsidies, the receipt of which must be conditional on improving operational results, and the allocation of subsidies must be “clear” in relation to the objectives to be achieved, through the quantification of measures related to the efficiency of services and their economic and environmental sustainability.

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On the other hand, these same subsidies must be allocated in a transparent, participatory and competitive manner, and obligations must be imposed and accountable to their beneficiaries.

“It is necessary to review in a fair and appropriate manner the allocation of funds from the Environment Fund, which has been allocated in an unclear manner and without transparent or objective criteria. In 2024 alone, the Environment Fund has allocated around 1,800 million euros.

Another recommendation concerns the elimination of subsidies for the operation of entities that manage services, with “the social tariff to be extended and generalized to all administrative entities, in compliance with the provisions of Portuguese legislation and following the recommendations of the regulatory entity.”

This study also notes that total support for water supply and sanitation services, which exclusively includes support for exploration and investment, amounted to more than 223 million euros in 2021 in Portugal, and in the last ten years, it is estimated at 1.4 billion euros. The subsidies were allocated to the operation of water services.

In the same year, operating subsidies totalled over €121 million, meaning that each Portuguese person paid at least €12.3 in taxes that year to support water supply and sanitation services.

“Amounts that could have been directed by municipalities to other investments, or public services of priority for regional development. However, the sector seems to offer an average level of performance below what is desirable and sustainable, and reveals an increase in asymmetry, in an increasingly sharp difference between the best and the worst performers, in the various administrative entities,” you can read in the document.

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Rui Cunha Marques, author of the study, highlights that the granting of subsidies to the water sector in Portugal stands out for its lack of fairness and transparency. “The lack of specific, clear and non-discretionary rules, the granting of subsidies that are not competitive as a rule, and the lack of defined objectives in terms of performance and targets, mean that the results are much lower than what would be desirable. Furthermore, the subsidies are directed to certain administrative bodies, allowing them to artificially reduce tariffs.

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