Uruguay Modernizes Water Utility

Uruguay Modernized its Water Utility and Sanitation Services to Ensure that Even More Uruguayans Receive Accountable, Costumer Oriented, and Better Service for Their Money

Uruguay's nearly universal water supply and sanitation coverage provides a high quality of service and infrastructure, compared to other Latin American countries. The key challenges confronting the OSE included an aging infrastructure, operational and financial inefficiencies, and poor basic customer services, as well as low sanitation coverage levels (56 percent of the population with household connections).

In the early 2000s a series of institutional reforms separated policy-making, regulatory, and operational responsibilities in the sector. In 2004, a constitutional amendment, declared water a human right and made the provision of water and sanitation services the exclusive responsibility of public entities.

The Government at that time was committed to enhancing the performance, competitiveness, accountability and transparency of public utilities. OSE's senior management began a flagship initiative for institutional change and administrative reform.

Previous approaches had focused largely on improving and maintaining OSEs infrastructure, placing operational and managerial performance, as well as customer service improvements on the side. As a result, OSE's coverage and infrastructure improved, but efficiency and other management issues did not.

Solution

The OSE Modernization & Systems Rehabilitation Project (APL-2) supported OSE's reform-oriented agenda, which included increased efficiency, coverage, transparency, competitiveness, and sustainability of water and sanitation services. OSE also implemented internationally recognized best management practices for customer service. This project was the second phase of the reform agenda, following the completed OSE Modernization & Systems Rehabilitation Project (APL-1), which developed a publicly disclosed performance benchmarking system and established the environmental, social and non-revenue water units.

OSE's new approach took a long-term, multi-faceted approach to modernization. The OSE team outlined a 10 year project of multiple phases that would allow for the continuation of infrastructure renewal elements and the gradual addition of newer, softer elements.

Results

OSE's transparency, client responsiveness, efficiency, and financial viability, as well as the customer experience have all improved. Before the project, OSE complied with only 23% of best practices; it now complies with 74% of them. The best practices include:

• A 24 hour call center.
• In-person client attention centers with an adequate number of personnel with appropriate training and computer support.
• At least three channels through which clients can pay their bills.

The adoption of these best practices lays the groundwork for sustainable improvement in OSE's customer service. Another best management practice was the development and operationalization of a code of ethics and the consolidation of robust company performance indicators that are published in newspapers and on its website every six months.

The implementation of a new commercial system also led to efficiency gains throughout the organization. The project supported not only the implementation of the system, but also the development of regulations and guidelines on service provision, delinquent payments, tariffs and billing among other areas.

• The non-collections ratio went from 7% in 2006 to 4% at the project's close. This increase in collection rate has a significant impact on OSE's income. For every percentage point gained in collection, OSE gains approximately US$3.5 million. The project helped increase collections by supporting over-due payments recovery, social outreach, more effective service cuts as well as fraud detection.
• Delinquent payments decreased by 20%. Since the implementation of the fraud program, OSE has been able to recuperate 3.35 million cubic meters of water lost through fraud. .
• In terms of operational efficiency, the implementation of the commercial system helped reduce the commercial cycle from a 30 to 60 day period to a 14 to 20 day period and improved the technology and procedures for meter readings; billing based on actual readings went from 77 to 90 percent.

OSE built an appropriate structure for environmental management and made meaningful strides towards institutionalizing the issue within the organization. The environmental unit now has ten qualified professionals, surpassing the legal agreement's commitment. OSE's long term vision for environmental management has also been consolidated and formalized through the approval of a company-wide Environmental Policy.

The project also supported OSE's decentralization initiative to strengthen regional laboratories by financing the construction of eight regional laboratories utilizing the integrated laboratory management system model. This initiative has led to significantly reduced times for analysis of samples. For example, the average time from extraction of a sample to the emission of the result for regional laboratories conducting physical chemical analysis went from 55 hours (December 2006) to 12 hours (June 2011).

The reliability of OSE's potable water supply infrastructure improved. The project surpassed the intermediate indicator for this objective, improving backup capacity to 790,000m3/day and ensuring a reliable water supply for Montevideo's population until 2035. The new clarification technology lowered chemical usage, saving OSE approximately US$200,000 per year and improved filter backwash efficiency resulting in a three to four percent reduction in water losses when cleaning the filters.

Non-revenue water is reduced. OSE successfully reversed a trend of increasing levels of water loss that was aggravated by decades of chronic underinvestment, particularly in maintenance. On a national level, non-revenue water decreased over the course of the project, resulting in 20.5 million of cubic meter of water recovered per year, equivalent to US$10.1 million per year.[1]

The US$27.3 million investment in the RANC program will be returned in just over three years, and in ten years OSE will see a return of US$34 million. These reductions can be attributed to a campaign on the part of RANC to establish a culture of metering, extensive pipe substitution as well as the integration of non-revenue water management in OSE's day-to-day operations. Non-revenue water is now considered a strategic issue at OSE and is incorporated in senior management's action plans. OSE's vision for non-revenue shifted from focusing efforts on operational maintenance to focusing on reducing water losses. The project laid the groundwork for this shift in vision and the adoption of more advanced, innovative approaches for non-revenue water loss methods. In addition, the project financed a pilot project to establish a District of Measurement and Control (DMC) in a town in Artigas where non-revenue water loss went from 906 l/conn/day in 2006 to 81 l/conn/day. The success of the initiative has spurred a movement to create a network of DMCs throughout the country.

Source: World Bank

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Taxonomy

• Water Utility
• Water Management