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Top1. Introduction
It is admitted that the technological state or level and economic specificities are the principal determinants of water services quality in the case of natural monopoly (Bouchrika et al (2012)). This legitimates the researcher to ask question on the regulation of this monopoly and what is the mode of management to choose. The answers provided by economic theory are not always satisfactory because of the difficulty of implementing a well-constructed regulatory system. According to classical economic theory, the public monopoly of water leads to a market organization that leads to price fixing above the marginal cost.
However, according to the Pareto criteria it should be evident that when the regulator fix the price above the equilibrium price thus we may not be in the social optimum case. As a consequence, the propriety rights theory shows that in order to far away from such inefficient situations, the State must take over the ownership of the monopoly. Thus, the public authority can choose to produce the service itself which makes it possible to reach the optimum of Pareto. Nevertheless, it should be noted that it remains possible for the public authorities, in the context pf contract plans or partial privatization to entrust the management of the service to a private company while regulating it.
The problem is as long as it is difficult to oblige the company to produce at a competitive price, the State is obliged to subsidize the company by flat-rate transfers allowing them to cover its losses. However, this solution is not entirely satisfactory for several reasons (agency problem; asymmetric information etc.). As well we can say that the subsidies paid to the company require a tax levy that can be the cause of economic distortions. In addition, incomplete information from the authority on the company’s behavior poses another problem in regulating the management of the water service.
The major concern of the Government is to ensure that water services provide access to adequate drinking water for all respecting the equity principle (we refer to Rawlsian principle). At this stage, several social pricing approaches are possible and often used. In similar cases, the authorities can refer to the subsidies deduced from public budget to reduce the price of drinking water to be cheaper for users. But the principle of cost recover is not always perfect especially when this objective is not alone when other social objectives are incorporated in the set of social constraints.
Regulating the management of drinking water requires the creation of tariff structures that have a number of important elements to take into account. The objectives are mainly concerned with the pursuit of inter- and intra-consumer equity and the need to obtain sufficient overall revenues to meet the financial obligations in terms of resource protection. In other words, tariff systems must lead to consumer acceptance and confidence through improved quality distribution to avoid any significant health risks.
In Tunisia, the National Water Distribution Utility (NWDU) is responsible for distributing drinking water to all regions by adapting the same tariff structure. The price fixing system in Tunisia provides for a first so-called social bracket which is intended exclusively for low-revenu users, that is to say those who do not have the means to pay the true cost of the water they enjoy. It should be noted that the choice of organization and regulation of public drinking water services and its impact on quantity, quality and prices are a priority concern of public decision-makers for the effective management of services.
The work on the pricing of drinking water and the willingness to pay for a better quality of this resource shows different results from country to country.
Through a study conducted on Spanish municipalities of Baza and Guadix located in the Guadalquivir basin in Andalusia, Del Saz-Salazar et al (2019) sought to estimate the monetary value of improvements in water supply infrastructure, based on their impact on household satisfactions’ determinants (income, age, marital status, being unemployed, membership to organizations, etc.) The authors used the contingent valuation method (CVM1) and the life’s satisfaction method (LSA2). Their results suggest that the information provided on environmental and socio-economic variables are relevant in the assessment of individual satisfaction. Thus, willingness to pay (WTP) is low if the supply is high. The authors show that the individuals concerned by environmental variables are more willing to pay. However, WTP of older individuals is low since they are less interested in the environment due to their education level.