Aggregation of Water and Sanitation Provision : Finding the Optimal Scale for Operations

When several municipalities unite in a single administrative structure - a process known as aggregation - they can lower the cost of utility services through economies of scale. Aggregation of water supply and sanitation (WSS) services is established practice in some countries and is likely to spread, as decentralization policies leave some service providers too small to be efficient or sustainable. Aggregation offers returns such as shared overhead and lower unit costs through bulk purchasing and pooled operations, plus other benefits that lower costs to customers or improved service at the current cost. Other benefits include greater access to financing, better distribution of skills, more opportunities for cross-subsidization and efficiency, access to new water resources, and new solutions to pollution problems. In 2005, the author studied 21 instances of aggregation of WSS services aggregations, looking for innovative models and factors that contributed to success. The practices author identified may help other countries aggregate municipal utilities.