Liberalization of water services in Europe: The end of the French water exception?

Abstract

Unlike energy, telecommunications, railways, and other national public utilities, local public utilities like water rarely have been the object of any explicit European liberalization policy. This status quo could evolve, however, under the influence of the European Commission (EC). Since 2004, the EC's discussions on public-private partnerships have called into question the French principle of intuitu personae, in which the mayor-the head of a municipality-is free to choose any operator in the franchise bidding procedure (the so-called delegation procedure). France differs from other European countries in this respect. The water sector in France is a hybrid model; the operation of utilities can be either private or public, while at the same time the delegation procedure is based on trust relationships. In the context of liberalization, future European regulations could lead to the emergence of new private operators or public firms, emancipated from municipal supervision. However, increasing competition could also lead to the abandonment of some less profitable market segments, notably in rural areas. There is a need for regulation regarding fair competition and the operational performance of water services. Due to the international market share of French private operators, the emergence of new actors in France and the evolution of bidding procedures in Europe could impact the water market in other parts of the world.