Sedapal vs. Sunass: The Water War

Sedapal Considers a Third Party Should Evaluate Its Water Tariff Calculation

Last week, in an interview with Gestión, the executive president of Sunass, Mauro Gutiérrez, warned that water rates in Lima could double within two years and even increase eightfold in some parts of the country. This is due to a legal provision from the Ministry of Housing (MVCS) that establishes criteria for rate increases, which, according to the regulator, will drive up the cost of water to the point of pushing several thousand Peruvians into poverty.

Although the regulation is still to be regulated, rate increases have already been implemented under this new methodology. Sedapal, indicated Sunass, has already done so this year, and the increase was 8.4%. The most questionable aspect is that such an increase, had the previous methodology been followed, would have been half, as the increase was previously subject to goals. So, we have that the Drinking Water and Sanitation Service Providers (EPS) nationwide can increase their revenues without the need to meet certain objectives.

"Lamentablemente el regulador no maneja la misma información que nosotros. Cabría la posibilidad de hacer un peritaje, de parte de un tercero, para que determine quién tiene la razón, contando con datos fidedignos para que evalúen"

After the revelations, the MVCS has said that rates will not necessarily rise abruptly, that the increase will be progressive, and that the ministry is not interfering in the regulator's functions. On the other hand, Sedapal has criticized Sunass and asserts that the regulator has provided figures on its goals and income that do not match what the EPS records. And, as reported today, it has stated that a third party should validate its water rate.

In this controversy between regulator and regulated, the only thing that is clear is that the rate for the drinking water service will increase, and it will be the user who will ultimately have to bear the cost. It is not sensible for EPSs to be able to raise their rates without improving the service. This is something that would have to be adjusted. It is known that currently, the poorest are the ones who pay the most expensive water. And if, as Sunass warns, rates skyrocket, the situation will be even more dire. EPSs require incentives to improve their management, and the regulations should aim for that.

Detailed prompt for AI image generation: A group of people gathered around a table, discussing water prices and regulations. The group should include representatives from Sedapal, Sunass, and the Ministry of Housing. The setting should be a formal meeting room, with documents and charts visible on the table.

Regarding the figures presented, Sedapal's management team questions the validity of these records, as they claim that Sunass has recognized a "tariff imbalance" in Sedapal that they deny to them. Gestión spoke with the general manager, Julio De la Rocha; Humberto Reyes, manager of Development and Research; and Percy Echave, Head of the Operational and Financial Planning Team of the Lima Service Provider (EPS). The general message they left is that Sunass needs to be more transparent about the various calculations they make about Sedapal.

As you may recall, the executive president of Sunass, Mauro Gutiérrez, assured that in the case of Sedapal's water rate, it should increase by 97% as a result of the tariff rebalancing that D.Leg. 1620 requires them to do in a maximum of two years.

Loose Figures

Sedapal's management team claims to be unaware of how Sunass has concluded that they need to increase their water rate. "In March, they presented a mid-term evaluation, including the first two regulated years, where they say Sedapal has no tariff imbalance. So, how can they now say we need to double the rate. There is a contradiction," says Reyes.

As you may recall, Sedapal's current tariff model is in force for the 2022-2026 period. According to this scheme approved by Sunass, in 2024 they were entitled to a tariff increase of 8.4%, which could have been lower, according to the same regulator, if it was subject to compliance with goals. However, as a result of D. Leg. 1620, they were able to approve the full increase.

Sunass assured Gestión that Sedapal only met 55.6% of its 12 management goals, so if the increase had been subject to meeting these, the rate increase for 2024 would have been 4.6%, not 8.4%. But Sedapal says it is unaware of the most recent results of its goal compliance.

Detailed prompt for AI image generation: A graph or chart showing the comparison of water rates between Sedapal and other major cities in Latin America, with clear labeling and data points.

"Regarding the first regulated year, Sunass told us that we complied at 80%. For the second year, they tell us they are still reviewing. If you tell them that we have complied at 55.6%, then they should substantiate it. When we ask for an audience to request information, they don't give it to us. It cannot be possible that the supervised do not have the data and the press does," questions De La Rocha.

For this reason, Sedapal's general manager suggests that an audited diagnosis should be made on Sedapal's financial reality and tariff model, contrasting the figures that the EPS itself generates and those that Sunass claims to have.

Regional Position

To demand tariff increases, the Lima EPS has repeatedly said that, compared to other Latin American capitals, Sedapal has the lowest rate. However, Sunass claims that, after its rate increase approved this year, Sedapal is now in the middle of the table, ahead of its Chilean counterpart, Aguas Andinas. The difference would be only US$ 0.04 per cubic meter (m3) of water (see table).

  • Sunass bases its claim on a study by the Association of Water and Sanitation Regulators of the Americas (Aderasa), which it claims is already updated to 2024.
  • However, Sedapal's Reyes asserts that this is not what the Aderasa report says. Its document shows the average tariff level of the company in 2022, and does not consider that Sedapal is above Santiago. They charge approximately US$ 1.03 per m3, while Sedapal charges US$ 0.90 per m3.

As part of his assignment, it was Reyes who formally consulted Sunass whether they could raise the water rate in 2024 without subjecting it to goal compliance, a request that was validated by the regulator, as Gestión also reported.

Detailed prompt for AI image generation: A visualization showing the projected increases in water rates for different regions of Peru, as described in the article. The visualization should include clear labeling, data points, and a color-coded legend to distinguish the different scenarios.

In this controversy between the regulator and the regulated, the only thing that is clear is that the water service rate will increase, and it will be the user who will ultimately have to bear the cost. It is not sensible for EPSs to be able to raise their rates without improving the service. This is something that would have to be adjusted. It is known that currently, the poorest are the ones who pay the most expensive water. And if, as Sunass warns, rates skyrocket, the situation will be even more dire. EPSs require incentives to improve their management, and the regulations should aim for that.