Professional Documents
Culture Documents
Enforcement and nonpayment of water services
An analysis of utilities at the USMexico border.
Ismael Aguilar‐Benitez1 and Jean‐Daniel Saphores2
DRAFT
1 Associate Researcher/Professor, El Colegio de la Frontera Norte, Técnicos 277 Colonia
Tecnológico Monterrey, Nuevo León, México; E‐mail: iaguilar@colef.mx.
2 Associate Professor, Civil and Environmental Engineering, Economics, and Planning, Policy and
Design, University of California, Irvine 92697, USA. Phone: (949) 824 7334; E‐mail:
saphores@uci.edu.
CONTENTS
I. Project Overview .................................................................................................................................................................. 1
II. Survey of Water Utilities ................................................................................................................................................. 3
II.1 Survey overview .......................................................................................................................................................... 3
II.2 General information about our respondents................................................................................................... 5
II.2.1 Utility size .............................................................................................................................................................. 5
II.2.2 Metering and water use ................................................................................................................................... 9
II.2.3 Information, water quality and customer service .............................................................................. 11
II.3 Billing and financial information ........................................................................................................................ 14
II.4 Late and non‐payment policies ........................................................................................................................... 20
II.5 Challenges ahead ....................................................................................................................................................... 24
III. Case Studies....................................................................................................................................................................... 26
III.1 Legal and Institutional contexts for Mexican and U.S. Water Utilities .............................................. 26
III.1.1 Legal and Institutional context at the Federal level in Mexico .................................................... 26
III.1.2 Legal context for water services in Baja California, Chihuahua and Tamaulipas................. 27
III.1.3 Legal and Institutional context at the Federal level in The United States ............................... 30
III.1.4 Legal context for water services in California and Texas ............................................................... 31
III.2 General characteristics of the water utilities analyzed in this study ................................................. 33
III.2.1 Mexican water utilities ................................................................................................................................. 33
III.2.2 U. S. water utilities .......................................................................................................................................... 36
III.3 Nonpayment for water services in border twin cities ............................................................................. 39
III.3.1 CESPT, Tijuana – SDWD, San Diego ......................................................................................................... 40
III.3.2 JMAS, Ciudad Juarez – EPWU, El Paso .................................................................................................... 45
III.3.3 COMAPA Nuevo Laredo‐ LWUD, Laredo ............................................................................................... 49
III.4 Conclusions ................................................................................................................................................................ 54
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IV. Econometric problems .................................................................................................................................................. 57
Acknowledgements .............................................................................................................................................................. 58
References ................................................................................................................................................................................ 59
Appendix A: Survey Instrument ..................................................................................................................................... A1
Table of Tables
Table 1. Survey response rate ........................................................................................................................................... 4
Table 2. Summary of reported challenges facing border water utilities. ....................................................... 25
Table of Figures
Figure 1. Map of the Study Area ........................................................................................................................................ 2
Figure 2. Location of Respondents. .................................................................................................................................. 4
Figure 3. Distribution of the total number of accounts served for our respondents .................................. 5
Figure 4. Distribution of the number of residential accounts served. ............................................................... 6
Figure 5. Total number of residential waste water accounts served. ................................................................ 6
Figure 6. Total number of accounts per employee. ................................................................................................... 7
Figure 7. Total number of accounts per billing/collection staff. .......................................................................... 8
Figure 8. Total number of accounts per technical staff ........................................................................................... 8
Figure 9. Percentage of metered residential accounts. ............................................................................................ 9
Figure 10. Percentage of working residential meters ........................................................................................... 10
Figure 11. Average monthly residential water consumption by account. ..................................................... 11
Figure 12. Publicized water quality problems that required boiling water. ................................................ 12
Figure 13. Water restrictions during the 2007‐08 fiscal year. ........................................................................... 13
Figure 14. Frequency of monthly customer complaints. ....................................................................................... 14
Figure 15. Time to pay a residential water bill ......................................................................................................... 15
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Figure 16. Payment methods available (other than utility offices) .................................................................. 16
Figure 17. Number of payment methods (other than the utility’s offices) .................................................... 16
Figure 18. Average monthly water bill (in 2005 US dollars). .............................................................................. 17
Figure 19. Payment for qualified low income households. .................................................................................. 17
Figure 20. Percentage of total unpaid residential water bills at the end of 2007. ...................................... 18
Figure 21. Billing and collection costs per account (in 2005 US dollars). ...................................................... 19
Figure 22. Percentage of late residential payers. ..................................................................................................... 20
Figure 23. Reconnection charge (in $2005). .............................................................................................................. 21
Figure 24. Percentage of households who pay their late payment penalty. ................................................. 21
Figure 25. Percentage of residential accounts disconnect every month. ....................................................... 23
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I. PROJECT OVERVIEW
In many Mexican cities, widespread non‐payment of water services affects the financial
health of water utilities. This impacts the delivery of water services, affects environmental
quality through inadequate waste water treatment, and hurts poor households who are not
connected to municipal water systems because they need to buy their water from
expensive vendors. By contrast, non‐payment does not seem to be a problem on the US
side of the border. In this project, we analyze the link between non‐payment and
enforcement. We conduct an institutional analysis of twin cities along the border (San
Diego / Tijuana, El Paso / Ciudad Juarez, and Laredo / Nuevo Laredo) and we explain why
an econometric analysis of the data collected by surveying selected water utilities along the
border ran into major problems. This work helps us shed some light on strategies to curb
non‐payment and on appropriate ways to increase available funds for financing much
needed water infrastructure at the border.
The Mexico‐U.S. border region spans 3,300 kilometers from the Golf de Mexico to
the Pacific Ocean. On the Mexican side this region includes six states (Baja California,
Sonora, Chihuahua, Coahuila, Nuevo Leon and Tamaulipas) and more than 200
municipalities, with 16 million inhabitants (CONAGUA, 2008). The border region is
characterized by water scarcity and a high population growth rate.
The geographical area of interest for this study was defined by the area of influence
of the North American Development Bank (Nadbank). It includes Mexican municipalities
within 300 kilometers of the Mexico‐U.S. border and U.S. water utilities within 100
kilometers in the U.S. Figure 1 shows a map of our study area. Water utilities located in this
area can apply for certification to the Border Environmental Cooperation Commission
(BECC) and may apply for funding from the North America Development Bank. This is
important because the availability of water infrastructure funding may affect enforcement
policies; border utilities therefore enjoy a situation different than utilities located inside
each country.
1
For our survey, we initially relied on a contact list provided by NadBank and on lists
organized by the National Association of Water Utilities (ANEAS) directory; using the
internet, we updated the information as of August 2008.
Figure 1. Map of the Study Area
2
II. SURVEY OF WATER UTILITIES
II.1 SURVEY OVERVIEW
Our survey instrument includes a transmittal letter, a questionnaire, and two letters of
support: the first one is from Jorge Silva, who provides technical assistance and coordinates
training for the North American Development Bank; and the second letter is from Professor
William Cooper, who directs the Urban Water Research Center at the University of
California at Irvine. We also tried to get a letter of support from the American Water Works
Association (AWWA), but we were unsuccessful as the AWWA was concerned about survey
fatigue for its members.
To test our survey instrument we conducted a pilot test of five Mexican water utilities
during July 2008. Following suggestions from these utilities, the length of the original questionnaire
was slightly reduced and some terms were clarified. This questionnaire is organized in three
sections: the first section focuses on general characteristics of each water utility, the second section
asks for billing and payment collection data, and the final section concentrates on policies for
dealing with nonpayment and late payment behavior. A copy of the survey instrument is
provided in Appendix A.
This survey was conducted between August 2008 and April 2009 by email, mail, fax,
and by phone for follow‐up questions. Administering the survey took a long time for
several reasons: 1) we were trying hard to have a high response rate; 2) we did not always
have the right contact person; 3) answering all questions typically required the input from
several utility staff; and 4) we had problems with student turn‐over on the US side of the
study. Because our respondents were often very busy (especially in smaller utilities), we
often had to remind them several times to complete our survey.
In the end, our efforts paid off because we obtained a response rate that is slightly
over 54 percent, which is far better than the response rates typically obtained by the
AWWA. Our break‐down of our responses by state and country is provided in Table 1. Moreover,
the geographical area covered by our survey is shown on Figure 2.
3
Table 1. Survey response rate
Country State Number of Number of Response
utilities respondents rate
targeted
United States Arizona 13 6 46.2%
California 21 14 66.7%
New Mexico 3 2 66.7%
Texas 18 11 61.1%
Summary 55 33 60.0%
Mexico Baja California 4 4 100.0%
Chihuahua 26 14 53.9%
Coahuila 8 6 75.0%
Sonora 19 6 31.6%
Tamaulipas 11 4 36.4%
Summary 68 34 50.0%
Global summary 123 67 54.5%
Figure 2. Location of Respondents.
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II.2 GENERAL INFORMATION ABOUT OUR RESPONDENTS
In this section, we summarize information about the general characteristics of the water
utilities that returned a filled questionnaire.
II.2.1 UTILITY SIZE
After inquiring about cities served, the first three survey questions were designed to
characterize the size of water utilities participating in our survey.
Figure 3. Distribution of the total number of accounts served for our respondents
From Figure 3, we see that 40 out of 67 respondents are small to medium size (less than
20,000 accounts), with a slightly larger representation of U.S. utilities in that category (22
out of 40). By contrast, there are more large Mexican water utilities (9 versus only 2 in the
US). A similar pattern is present for the number of residential accounts (Figure 4). Figure
5 shows the distribution of utilities by the number of residential waste water accounts. As
for Figures 3 and 4, we note that our respondents exhibit a lot of size diversity.
5
Figure 4. Distribution of the number of residential accounts served.
Figure 5. Total number of residential waste water accounts served.
6
Another way to consider size is to consider the number of employees working for a utility.
The number of staff, however, may also reflect the relative cost of labor to capital,
especially when comparing cities across the border, or the presence of political jobs. It is
therefore of interest to represent the number of accounts per employee (see Figure 6); we
see that the distribution of accounts per employee tends to be lower for Mexican water
utilities, with a mode around 200 to 300 accounts per employees. By contrast, the
observed range for U.S. border utilities is much larger; it reflects the presence of small
water systems (which need a core number of staff people no matter how small they are)
but also the better efficiency of larger water utilities that can handle many more accounts
per staff. The number of accounts per staff assigned to billing and collection suggests a
better efficiency in U.S. water utilities (Figure 7). Several reasons may explain this
situation. First, information technology may be much more readily available north of the
border; second, labor may be relatively cheaper than capital in Mexico;
Figure 6. Total number of accounts per employee.
7
Figure 7. Total number of accounts per billing/collection staff.
Figure 8. Total number of accounts per technical staff
8
and third, more staff may be needed in Mexico in order to organize payment campaigns
(we will come back to this question when we analyze the third part of our survey). By
contrast, water utilities north of the border tend to have more technical staff than their
southern counterpart. This is reflected in Figure 8, which shows a lower mode for U.S.
utilities (500 to 999 accounts for technical staff) compared to double that amount for
Mexican border water utilities. This suggests that Mexican border water utilities may be
bloated with administrative staff while they are insufficiently staffed with technical people
who can take care of the infrastructure.
II.2.2 METERING AND WATER USE
Metering and the percentage of working meters help make users responsible for their
water use through information and the price signal; they give an indication of how well a
utility is run, but it may also indicate insufficient spending.
Figure 9. Percentage of metered residential accounts.
9
Figure 9 shows the distribution of the percentage of metered residential accounts. A look
at the data reveals that only two U.S. border water utilities are less than 100 percent
metered (although their coverage is 90 and 95 percent respectively). By contrast, 8
Mexican border water utilities have meters installed on less than half of their residential
accounts: three each are in Chihuahua and Sonora, and two are located in Coahuila. In
Mexico, the state of Baja California, which is served by only 4 regional water utilities,
appears to do best for metering: in three of its utilities, residential metering exceeds 98
percent and the fourth one has 85 percent coverage.
Figure 10. Percentage of working residential meters
The effectiveness of metering is conditional on how well meters work, however. Figure 10
suggests that a number of Mexican border water utilities have a high number of defective
meters (four have less than half of their meters working properly), which may be partly
related to the relative lack of technical staff suggested by Figure 8. By contrast, all but two
10
U.S. border water utilities (and these two, the percentage of working meters is 88 and 90
percent respectively) have at least 91 percent of their meters working properly.
Figure 11. Average monthly residential water consumption by account.
Defective metering is likely to remove an incentive for households to conserve water and to
worsen an already tense situation for a number of Mexican border water utilities. Figure
11 shows, however, that U.S. border residents tend to consume a lot more water per
account than their Mexican counterparts. Several factors may explain this situation,
including wealth (which impacts the number of water‐using appliances and the ownership
of pools) and land ownership (as outdoor water use could reach half of residential
consumption along the border).
II.2.3 INFORMATION, WATER QUALITY AND CUSTOMER SERVICE
Providing information about water quality and tracking consumer complaints is an integral
part of good management for a utility; it is an essential component of trust building
between a water utility and the public it serves. Providing useful information to
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households is also expensive and time consuming, however. In the United States, the
Federal Safe Drinking Water Act (SDWA) requires utilities to produce annual “Consumer
Confidence Reports” that provide information about the source of a community’s water, its
constituents, and sources of contaminants. All U.S. border water utilities who answered
our survey are providing this information, although three utilities did not answer this
question. Most of these utilities appear to just meet these requirements, although a few
utilities go further and provide data every six months or after each violation, in addition to
the annual requirement (one utility each). A number of utilities publicize this information
on their website or through educational programs.
The situation is more complex south of the border, where eight water utilities (24
percent) provide no water quality information to the public, while others use a variety of
ways to communicate with their customers: eight utilities rely on the press or the radio,
five (15 percent) had extensive outreach programs with visits to schools and workplaces,
and four (12 percent) provide water quality information through water bills. Five utilities
did not specify how they provide information, and four utilities skipped this question.
Figure 12. Publicized water quality problems that required boiling water.
12
Withholding information will likely not erode public confidence about water quality
and households may then purchase expensive bottled water or sodas. Unfortunately, five
border Mexican water utilities (15 percent) had publicized water quality problems that
required boiling water during the 2007‐08 fiscal year.
Water quantity is also an issue along the border, especially on the Mexican side. As
shown on Figure 13, five Mexican water utilities (15 percent) had to implement water
restrictions during the 2007‐08 fiscal year, and one (3 percent) had to do the same on the
U.S. side. The situation is likely worse south of the border partly because of the financial
situation of Mexican water utilities (which is linked to non‐payment of water bills but also
to the under‐development of bond markets in Mexico) that prevents them from investing in
infrastructure although it is urgently needed to cope with the population boom in border
cities.
Figure 13. Water restrictions during the 200708 fiscal year.
Another measure of service quality is how customer complaints are tracked and handled.
Given the general statistics above, one may expect U.S. water utilities to do a better job at
tracking customer complaints to control how they were handled. Surprisingly, this is not
13
the case. As shown on Figure 14, a staggering 50 percent (16 out of 32; one U.S. utility did
not answer this question) of U.S. border water utilities do not track customer complaints,
versus “only” 33 percent (11 out of 33; one Mexican utility ignored this question) south of
the borders. As expected, we note that Mexican border water utilities tend to receive more
customer complaints, which is hardly surprising given the difficulties they encounter (see
the statistics on water restrictions and water quality above), but some Mexican border
water utilities are doing quite well (with 4 utilities experiencing fewer than one complaint
per 1,000 account per month and one experiencing fewer than one in 10,000 accounts.
Figure 14. Frequency of monthly customer complaints.
II.3 BILLING AND FINANCIAL INFORMATION
The second part of our survey includes ten questions dealing with financial issues.
First, we inquired about billing frequency; this is important because more frequent
billing gives households an opportunity to adapt their water use to the price signal but also
to detect leaks; more frequent billing also provides income more frequently to a water
14
utility but it may be costly. All Mexican border water utilities and 25 (76 percent) out of 33
U.S. border water utilities bill their residential customers monthly; the exception is 8 (24
percent) US border water utilities that send bills every other month.
From Figure 15, we see that the time allowed to pay a water bill varies widely in the
U.S. (from 10 to 50 days), but even more in Mexico (from a low of 3 days to a high of 60
days). Almost half (48 percent) of the US border water utilities allow 20 to 21 days; in
Mexico, by contrast, approximately 29 percent of border water utilities give their
residential customers 2 weeks to pay, and the same proportion gives them 4 weeks.
In Mexico and even more so in the US, water utilities tend to offer a wide variety of
payment options. From Figure 16, we see that Mexican border water utilities tend to offer
physical locations such as grocery stores and bank, whereas US border water utilities rely
more on the phone and the internet. On both side of the border, utilities offer a number of
payment options (Figure 17); with the exception of 8 water utilities, Mexican border water
utilities tend to offer almost as many payment options as their northern counterparts.
Figure 15. Time to pay a residential water bill
15
Figure 16. Payment methods available (other than utility offices)
Figure 17. Number of payment methods (other than the utility’s offices)
16
Figure 18. Average monthly water bill (in 2005 US dollars).
Figure 19. Payment for qualified low income households.
17
A look at Figure 18 shows the average monthly water bill is larger in the U.S. than in
Mexico; this reflects that U.S. border households consume on average more water than
their Mexican counterparts, and also that water is more expensive in the U.S. The median
value of an average monthly water bill among our respondents is $10.80 for Mexico and
$53.00 for the US. Given than the US Gross Domestic Product per capita is roughly 3.2
times larger than the Mexican one, U.S. border residents spend a larger proportion of their
monthly income on water.
As shown in Figure 19, however, Mexican border water utilities appear much more
willing to offer special pricing to qualified low income households (31 of 34 utilities ) than
in the U.S. (2 out of 33 utilities). Likewise, Mexican border water utilities are quite willing
to offer payment plans to qualified low income households (29 out of 34 ), although their
northern counterparts are showing more flexibility there (7 out of 33 U.S. utilities). This
need for flexibility in Mexico probably reflects a different attitude towards water (seen as a
“different” good) but also the reality of dealing with chronic non‐payment problems.
Figure 20. Percentage of total unpaid residential water bills at the end of 2007.
18
Figure 21. Billing and collection costs per account (in 2005 US dollars).
In spite of these payment policies, Mexican border water utilities are suffering from
a high percentage of non‐payment of their water bills (see Figure 20). Among our
respondents, the median percentage of total unpaid bills at the end of 2007 reached a
staggering 35 percent in Mexico (it ranged from a low of 3 percent to a high of 89 percent);
by contrast, on the American side, the median percentage of total unpaid bills was a much
more viable 5 percent, with a low of 0.1 percent and a high of 17 percent.
Unfortunately, questions about total operating costs and total revenues may have
been misunderstood by a number of water utilities, so we are not presenting these results
yet. Indeed, a number of utilities (especially on the U.S. side) reported operating costs an
order of magnitude larger than revenues, which suggests that they included capital costs.
The distribution of billing and collection costs per account is shown on Figure 21.
For Mexican border water utilities, we distinguish two groups: a low cost group, with an
annual billing/collection cost per account comprised between $10 and $19, and a high cost
group of 6 utilities with billing/collection costs in excess of $100 per year. Data for the
19
latter are plausible if they include the high costs of organizing payment campaigns; this will
be checked. For US border water utilities, we observe a mode in the $30 to $49 range, with
a few low cost utilities and a handful of high cost one. We also note that over 30 percent of
our respondents did not provide information about billing/collection costs. Several
reasons may explain this situation: 1) smaller utilities may not have a separate
billing/collection department; 2) billing/collection may be part of another department
(e.g., the finance department) so there is no separate budget; or 3) this information may be
politically sensitive so it is not provided.
II.4 LATE AND NON‐PAYMENT POLICIES
Another focus of our survey was to understand late and non‐payment policies; the purpose
of the third part of our survey is to collect information about these issues.
Figure 22. Percentage of late residential payers.
20
Figure 23. Reconnection charge (in $2005).
Figure 24. Percentage of households who pay their late payment penalty.
21
Our first question inquired about the percentage of residential accounts that were
late in paying their water bills. Figure 22 shows that the numbers varied greatly. For 36
percent of US border utilities, fewer than 10 percent of residential accounts were late; the
largest percentage was 42 percent. On the Mexican side, however, over 40 percent (14) of
utilities saw at least 40 percent of their residential bills paid late, if they were paid at all. In
fact, the largest percentage of late bills is a staggering 70 percent.
This difference between the US and Mexico may appear surprising given that the
percentage of border water utilities that imposes a financial penalty for late payers is
higher in Mexico (91 percent; 31/34) than in the US (79 percent; 26 out of 33).
Mexican border water utilities also impose reconnection charges, although the
amount they charge is typically between $1 and $10 (Figure 23). On the US side, the
median reconnection charge is between $20 and $30, but one water utility surprisingly
does not charge any reconnection fee.
Figure 24 sheds some light on the lack of deterrence effect of late charges: we see
that in general fewer than half of households pay their late‐payment penalties. Our field
work reveals that these are often negotiated away during payment campaign designed to
entice non‐payers or late‐payers to settle their accounts.
One way to motivate non‐payers (or late‐payers) is to disconnect them.
Disconnection is of course legal in the U.S., and for 28 of the 34 (82 percent) Mexican
border water utilities that answered our survey; note, however, that it is considered
controversial there. Disconnection appears to be used by Mexican border water utilities
even more than by their US counterparts, but to no avail (see Figure 25); it is even used by
2 of the utilities that reported it was not legal to do so.
22
Figure 25. Percentage of residential accounts disconnect every month.
Utilities in both Mexico (65 percent) and in the U.S. (57 percent) also rely on other
measures apart from disconnection to promote payment for water services. These other
measures include repeated visits by utility representatives (9 cases), administrative
procedure leading to seizure of personal effects (7 cases), publicizing the names of people
who don’t pay (2 cases), or pressure decrease. In the US, water utilities resort to placing
liens on the property of households who don’t pay, using collection agencies, or trying to
work out payment arrangements.
Most Mexican border water utilities (29 out of 34, or 85 percent) but only one US
border water utility also organized payment campaigns to try to foster payment. The
duration of these campaigns varied considerably, from one day to most of the year. They
included substantial discounts (the reported median value is 35 percent) for 26 of the 29
Mexican border water utilities that organized them. These discounts were authorized at
the local level or at the state level. For the former, discounts were granted either by the
board of directors, the general manager, the president of the utility, or the treasurer. At the
23
state level, discounts were authorized either by the executive or the legislative branches.
The reported total value of the discounts varies greatly and we do not believe that it is very
reliable as we know from our fieldwork that some utilities do not keep good track of the
discounts granted to late‐payers.
II.5 CHALLENGES AHEAD
Our last question asked our respondents to list the main challenges facing their utility over
the next five year. We received a variety of answers; they are summarized in Table 2.
On the Mexican side, the main concern is by far improving payment collection (12
mentions); this would provide Mexican border water utilities with much needed resources
to address their second biggest concern, which is to expand their infrastructure, both for
drinking water and for wastewater, and to increase their physical efficiency; the latter
would also enable them to reduce leaks. The third main concern, which is related, is to find
new water sources, to promote water conservation, and to expand coverage; this includes
providing service 24 hours a day, which was mentioned twice. Other concerns include the
cost of energy used for pumping and water treatment. In addition, a couple of utilities
would like to clarify water law and are concerned about politics; we are surprised this was
not mentioned more often as our field work suggests that water utilities are often involved
in political battles. Overall, answers suggest that Mexican border water utilities are aware
of their problems and would like to improve service and address pressing issues, but they
cannot do so partly because of their inability to get paid for their services.
On the U.S. side, by far the main concern is how to finance and build new
infrastructure, both for drinking water and for wastewater (15 mentions jointly). This is
followed by finding new sources of water and general concerns about the economic
situation, as many residents recently lost their jobs and/or their houses. The economic
crisis also made it difficult for utilities to increase their rates as the cost of wholesale water
is increasing and new water quality regulations require additional investments. In
addition, utilities are concerned about water conservation and about managing the
drought; a couple of utilities are also having trouble finding qualified staff.
24
In summary, the top three concerns about the future are: 1) financing and building
new water infrastructure; 2) finding new sources and promoting water conservation; and
3) on the Mexican side, increasing collection efficiency.
Table 2. Summary of reported challenges facing border water utilities.
Note: Most water utilities had more than one major concern about the next five years.
25
III. CASE STUDIES
III.1 LEGAL AND INSTITUTIONAL CONTEXTS FOR MEXICAN AND U.S. WATER UTILITIES
The most common way to penalize for nonpayment of a public service is suspending or
cancelling service. For example, disconnection is a common measure for nonpayment of
electricity or gas services. Unlike for electricity, disconnection of water services for
enforcing payment is common in U.S. cities but uncommon in Mexico where disconnection
policies depend on political aspects (e.g. political campaigns, governors and mayors’
political affiliation) and the institutional context (i.e. states’ water law). By contrast,
payment campaigns are common for promoting payment for water services Mexican water
utilities but they are not used in the U.S. (they are not necessary). Therefore, it is important
to know the institutional contexts defined mainly by the federal and states water
institutions and laws to understand the different possibilities of enforcement. In this
section we briefly summarize the main aspects of legal and institutional frameworks for
water services in Mexico and in the U.S.A. Because in both countries water laws and codes
are approved and enforced at the state and local levels, we summarize here some of the
main characteristics of the legal and institutional contexts for three Mexican municipalities
and their three counterparts in the U. S.
III.1.1 LEGAL AND INSTITUTIONAL CONTEXT AT THE FEDERAL LEVEL IN MEXICO
Until the 1980’s, water in Mexico was managed through a centralized institutional
arrangement. In 1983, a decentralization process began and the responsibility for
managing urban services, including water, was transferred to the municipalities. Consistent
with this new framework, in April 2004 the National Water Law was amended. Since then,
the stakeholders involved in managing this resource are:
• The federal water agency, Comision Nacional del Agua (CONAGUA);
• The basin organizations, at the regional level;
• The respective governments and water agencies, at the state level; and
26
• The municipalities and utilities.
At the federal level, CONAGUA was established as a decentralized, autonomous agency
of the Mexican Ministry of Environmental and Natural Resources (SERMARNAT). Through
CONAGUA, the Executive branch of the federal government exercises powers of authority
over water‐related matters. It is the highest technical, regulatory and advisory agency in
the country for the comprehensive management of water and its inherent common good.
Although urban water systems in Mexico were decentralized in 1983, two federal agencies
(CONAGUA and SSA, the Secretaría de Salubridad y Asistencia) still regulate water systems
by setting official standards for water services and the quality of water for human
consumption. However, the responsibility for enforcing these standards is not clearly
defined; they are expected to be enforced by SSA, State Governments and CONAGUA
according to their “corresponding spheres of authority”.
The next level in water management is basin organizations, which are specialized
legal and administrative technical units answering directly to the head of CONAGUA, with
regional jurisdiction over basins, as set forth in the law and regulations, and with a specific
budget and resources as set by CONAGUA.
The third level in the administration of water resources, states and state water
agencies, is responsible for duties such as developing and monitoring state programs,
executing agreements, and establishing cooperative agreements when needed.
The last level in the management of water resources in Mexico is the municipalities,
with federal regulations, state legislation and local statutes. Article 115 of the Constitution
establishes the provision of municipal public services, which sets forth, inter alia, that:
“Municipalities will be responsible for the following public services and functions: I.
Drinking water and wastewater collection, treatment and disposal.”
III.1.2 LEGAL CONTEXT FOR WATER SERVICES IN BAJA CALIFORNIA, CHIHUAHUA AND
TAMAULIPAS
In Baja California there is only one type of organization for the supply of water services.
The formal organizations for providing water services are state organisms called state
27
commission for public services (Comision Estatal de Servicios Publicos). These
commissions are ruled by a state’s administrative council. This council set the operational
rules and approves annual budgets. The state’s governor is the chair of the council and all
the managers are appointed by him. Water rates and increases are authorized by the Baja
California State Congress.
The law that rules water services in Baja California is obsolete (“Ley que reglamenta
el servicio de agua potable en el estado de Baja California”); it was approved in 1969. This
law has been amended two times, in 1999 article 95 was amended to allow sanctions for
illegal connections. In 2003 article 17, which states the rules for late payment of water
services, was amended to allow sanctions for industrial users. However, this article states
clearly that residential users, schools and public hospital are banned from services
suspension and disconnection.
In Chihuahua, a state Central Water and Wastewater Board (Junta Central de Agua y
Saneamiento del Estado de Chihuahua) administers both urban (Junta Municipal de Agua y
Saneamiento, JMAS) and rural (Juntas Rurales de Agua y Saneamiento, JRAS) water boards.
The Central Board is governed by a Council, the president and the members of this council
are state officials appointed by the governor, although they also invite federal officials. The
Central Board approves annual budgets, rate structures and rate increases. Additionally
they provide training and technical assistance.
The municipal water boards of Chihuahua are formally decentralized from the state
government and are governed by an administrative council; however rates, budget and
infrastructure plan must be authorized by the Central Board.
In Chihuahua there is not a state water law, the legal framework for water services
is provided by different articles of the state Constitution (Constitución Política del Estado
Libre y Soberano del Estado de Chihuahua); the environmental state law (Ley de Equilibrio
Ecológico y Protección al Ambiente del Estado de Chihuahua), the law for state bodies (Ley
de Entidades Paraestatales del Estado de Chihuahua) and state codes (Código
Administrativo del Estado de Chihuahua y del Código Fiscal del Estado de Chihuahua y el
Código Municipal para el Estado de Chihuahua). The municipal code for the state of
Chihuahua (Articulo 1595) allows late payment charges for water services, however
28
disconnection is not mentioned in any law nor code. There is a proposal for a Chihuahua
Water Law in the state Congress since 2006, but it has been not discussed for approval.
In Tamaulipas there are two types of organizations for the supply of water services:
municipal councils (Comisiones Municipales de Agua Potable y Alcantarillado, COMAPA)
and water and wastewater boards (Junta de Agua y Drenaje, JAD). Most municipalities have
adopted a decentralized legal model (COMAPA), and Matamoros is the only municipality
that remains centralized as a board (JAD). There is no significant difference in the way they
are administrated since both have a manager and are governed by administrative councils.
As usual in border water utilities, the chair of the council is the mayor of each municipality.
The COMAPAs’ and JAD’s councils include municipal officers and state officers. Water rate
structures and raises are authorized by the Tamaulipas congress (Ley Estatal del Agua,
article 25).
The Tamaulipas water law (TWL) was approved in 2006 (Ley de Aguas del Estado
de Tamaulipas). The TWL rules municipal water utilities but it says little about
performance or quality of service. For example, although Article 138 broadly references
water quality, it does not state clearly who should set standards or enforce them. The TWL
also refers to public participation (Article 18, paragraph XIII and Articles 40 and 41), but
water users have no role in the decision‐making process because representatives are
typically appointed by politicians or captured by various interest groups rather than
elected by customers. Articles 151 and 195 of this law allow for temporary suspension of
service for delinquent users but they do not set rules for disconnection. It only states
suspension of services as a possibility; delinquent users “may” be penalized.
In general in the three Mexican states we study here, state water laws do not set an
adequate legal framework for the enforcement of payment for water services.
Responsibilities and rights are not explicitly stated (for example regarding quality of water
and who is able to approve discounts or exceptions). More specifically, in Baja California
disconnection is simply banned; in Chihuahua disconnection is not even mentioned
because there is no specific law for water or water services, and in Tamaulipas the
“suspension of water services” is only a possibility, but there are no clear rules on legal
disconnection of service due to nonpayment. In summary, the legal context for the
29
enforcement of water services payment do not differ significantly among the three states
analyzed in this study. It seems reasonable to expect that, as a result of those inadequate
legal contexts water utilities would weakly enforce payment for water services. In general
water services in the Mexican cities studied are considered an entitlement rather than a
service for which users have to pay.
III.1.3 LEGAL AND INSTITUTIONAL CONTEXT AT THE FEDERAL LEVEL IN THE UNITED STATES
Water in the United States is regulated by the U.S. constitution and the U.S. Environmental
Protection Agency (EPA). However, the states have the primary authority and
responsibility for the allocation and management of water resources within their
boundaries. The U.S. federal government basically overseas service standards, while state
and local governments are responsible for establishing other types of relevant provisions.
Water quality and the levels suitable for human consumption are regulated by the EPA. One
important aspect is that in the United States, the 1996 Amendments to the Safe Water
Drinking Act recognize the right to public information about water quality, so that water
systems serving the same people all year round must provide annual consumer confidence
reports on the source and quality of their tap water.
In the USA, responsibility for adequate, safe and reliable water services ultimately
rests with state and local agencies (National Research Council, 2002). The local
government in U.S. cities is defined as a “council‐manager” form of government. The city's
powers are exercised by an elected city council.3 City councils are responsible for setting
policy, approving annual budgets, setting tax rates, buying and selling property,
establishing the city's administrative departments, holding public meetings, adopting city
ordinances, and establishing city services. Most cities have a Utilities department that is in
charge of water management, although some cities also have created authorities for
managing their water resources, and others have long term contracts with private firms for
the provision of water services and infrastructure management.
3 Hereinafter, "the Council."
30
In the United States, because the legal regulatory framework is so concrete, there is
relatively little room for bad practices.
III.1.4 LEGAL CONTEXT FOR WATER SERVICES IN CALIFORNIA AND TEXAS
In this subsection, we review briefly the legal context in California and Texas, which are the
two U.S. states where our case studies are located. We also summarize relevant aspects of
water regulations in San Diego, Laredo, and El Paso.
California
All waters in California are the property of the state and water rights are user rights.4
California’s water law is contained in the California Code of Regulations, Title 23
(http://www.calregs.com).
Several agencies regulate water in California. The State Water Board is responsible
for water rights and water quality at the state level. The Department of Water Resources is
responsible for the planning of the use of water and for developing rules and regulations.
Moreover, the California Department of Public Health, through the Drinking Water
Program (DWP) regulates public water systems. Among other functions, the DWP certifies
drinking water treatment. Additionally, the California Environmental Quality Act (CEQA)
requires state and local agencies to identify environmental impacts of their actions. CEQA
includes the requirement of developing a water supply assessment.
Let us now focus on San Diego. Chapter 6 of the San Diego Municipal Code contains
specific regulations for water services.5 One important section for this work is Division 5 of
article 7, which focuses on water rates and charges. It requires guarantee deposits from all
applicants equivalent to the estimated amount payable for two billing periods, except for
single family dwellings and applicants with at least one other active water account
provided they have no prior record of delinquency for water service (§67.0221). Water
bills are considered past due 16 days after the statement date of the water bill. Users are
4 Web page of the National Science and Technology Center of the Bureau of Land Management; California
water rights fact sheet (http://www.blm.gov/nstc/WaterLaws/california.html) accessed on June 25th, 2009.
5 See San Diego municipal code available at: http://docs.sandiego.gov/municode/MuniCodeChapter06/
31
charged interest for each day their payment is overdue. If the user becomes delinquent (16
days after the statement) and continues delinquency for a period of 45 calendar days, the
Department discontinues water services until all water bills, including, charges, deposits,
fees and interest, are paid (§67.0223).
The Independent Rates Oversight Committee (IROC) oversees SDWD rates; it serves
as an official advisory body to the Mayor and City Council on policy issues related to
services provided by the public utilities departments, including Water and Metropolitan
Wastewater Departments.
Texas
In Texas, the state constitution is the main legal instrument governing water at the state
level. Although it also contains some water services regulations, most of them are in the
Texas Water Code and the Texas Administrative Code. The Texas Commission on
Environmental Quality (TCEQ) sets water standards and reporting requirements for public
water supply in the state and it is responsible for enforcing these rules. Title 30 of the
Texas Administrative Code (30 TAC) includes detailed standards and norms for water
sources, minimum pressures and water treatments. Water systems are subject to periodic
inspection and they must submit information to TCEQ. Moreover, rule 290.271 mandates
public water systems to submit annual reports with clear water quality information. Lastly,
the local government level is basically governed by the municipal code of each city.
The municipal code for El Paso, Texas, includes ordinances for water services in
Title 15, chapter 15.12, which authorizes the Public Service Board (PSB) to promulgate
rules and regulations on all subjects relevant to the operation of the city’s water services.
Section IX of the PSB Rules and Regulations estates that the utility has the right to
discontinue service and to apply costumer’s water service guarantee or deposits to
amounts owed the utility for nonpayment.
Likewise, the municipal code of ordinances of Laredo, Texas includes specific rules
for water services in Section II of Chapter 31 (titled utilities). Article II sets rules on use
restrictions, water conservation, and rates and charges. Importantly for this work, section
31‐141.1. sets the requirement of security deposits from all customers. This deposit is
32
refundable. The amount deposited by residential users depends on the size of the meter,
starting at $100 for a three‐quarter‐inch meter and increasing to $800 for a four inch meter
inside city limits. Residential users 65 years or older who have an unsatisfactory credit
history with the city may apply for a reduced $30 dollars deposit. If a user is convicted of
three (3) or more distinct rule violations the utility is authorized to discontinue water
service. Services can be restored only upon payment of a reconnection charge established
of ten dollar, and any other costs incurred by the city utilities in discontinuing service.
Municipal codes, specific utility rules and regulations regulate almost all aspects of
water services in U. S. cities. Regulations cover everything from technical issues to types of
penalties and user fees, as well as emergency plans. They are much more specific than
similar ordinances in Mexico. The commercial orientation of water services in the U. S. is
highlighted when municipal codes refer to users as “consumers” or “customers”. This
creates a client service orientation where users consciously assume the duty of paying for
water services. This duty is backed up by security deposits from all users, with exceptions
specified in municipal codes.
Paradoxically, although water services in all three cities studied in the U.S. are
managed by their municipal government, they enjoy relative financial autonomy. One
important factor in understanding the greater autonomy in designing and approving rates
is that city council and utilities boards meetings in both California and Texas are open to
the public; this mechanism provides customers with information about possible rate
increases and collects customer feedback before any action is taken. Let us now look more
in‐depth at the water utilities analyzed for our case studies, starting with the Mexican side.
III.2 GENERAL CHARACTERISTICS OF THE WATER UTILITIES ANALYZED IN THIS STUDY
III.2.1 MEXICAN WATER UTILITIES
South of the border, we analyzed three water utilities: one in Baja California (the CESPT), one in
Chihuahua (JDAS in Ciudad Juarez) and the last one in Tamaulipas (COMAPA in Nuevo Laredo).
33
Tijuana, Baja California (CESPT)
The municipality of Tijuana, Baja California, Mexico, is located at the northwest of the state
of Baja California, Mexico. It is bordered to the north by the San Diego Metropolitan. With a
local population estimated at 1.6 million, the Tijuana region is growing rapidly: its
population grew by 6.4 percent annually over the 1990‐2005 period. As for December
2007, CESPT provided water and sanitation coverage for 95 percent and 80 percent of the
population respectively.
The main water source for the city is the Rio Colorado (90 percent), located at 250
km from Tijuana. The Colorado River – Tijuana aqueduct was built in the 1975 and
enlarged in 1991. Approximately 10 percent of the water needs are supplied with
groundwater from three aquifers; Rio Tijuana, La Mision and Rosarito.6
The agency responsible for the supply of water and sanitation services in Tijuana is
the Comision Estatal de Servicios Publicos de Tijuana (CESPT). CESPT also supplies water
services for the population of Rosarito, Baja California. The CESPT has its own director but
in general it is ruled by a state’s administrative council. This council sets the operational
rules and approves the annual budget. The state’s governor is the chair of the council and
all the directors are appointed by him. Water rates and increases are authorized by the
State congress.
In 2008 CEPT provided water services for 537,000 accounts, approximately 90
percent of which (480,000) are residential. The CESPT operates three water treatment
plants and 12 wastewater treatment plants. Because of the large size of the service area,
the CESPT provides water services in seven operation and maintenance sections (distritos).
CESPT has about five employees for each 1,000 accounts.
In 2009 CESPT completed the construction of three wastewater treatment plants.
With this new infrastructure CESPT provides full waste water treatment for Tijuana, which
is unusual for Mexican cities. However, many neighborhoods are still unconnected to the
sewage system. CESPT has a plan to reuse water. As for July 2009, CESPT implemented a
Project (Proyecto Morado) for the irrigation with treated waters of green areas in the
6 See The Tijuana Master Plan for Water and Wastewater Infrastructure, available at
http://www.epa.gov/border2012/infrastructure/tijuana/index.html.
34
Parque Morelos. The long term goal is to substitute 20 percent of the water from the Rio
Colorado, which is very costly, with treated water.7
Ciudad Juarez, Chihuahua (JDAS)
Ciudad Juarez is located at the north of the state of Chihuahua, Mexico. To the north, Ciudad
Juarez is bordered by its so called sister city, El Paso, Texas. Both cities belong to a region
known as the Paso del Norte. In 2005, Ciudad Juarez’ population was 1.3 million people
(Conteo Nacional de Poblacion, 2005, INEGI) with a 2020 forecast of 1.6 million. Its
population has grown annually by approximately 4.6 percent from 1990 to 2005.
The Junta Municipal de Agua y Saneamiento (JMAS) is the agency charged with
providing water and sanitation services to the population of Ciudad Juarez. It relies on the
Hueco Bolson for the city’s drinking water supply. This water source is shared with El Paso,
Texas. The JMAS system pumps water from 142 wells, which is chlorinated for human
consumption. There are two wastewater treatment plants in Ciudad Juarez; both are
managed by a private company, Degremont. As of December 2008, JMAS supplies water to
372,483 accounts; 96 percent of these accounts are residential and ~3.7 percent are
commercial.
JMAS is formally decentralized from the state government and is governed by an
administrative council; however rates, budget and infrastructure plan must be authorized
by the Central Water and Wastewater Board (Junta Central de Agua y Saneamiento del
Estado de Chihuahua). It is worth noting that in an eight years period, the JMAS of Ciudad
Juarez was managed by five different persons (1999‐2001; 2001‐2002; 2002; 2002‐2004;
2004‐2007); in only one year (2002) JMAS had three different managers. In the Mexican
political context this implies a high politicization of water services.
Nuevo Laredo, Tamaulipas (COMAPA)
The city of Nuevo Laredo is located in the northern region of the state of Tamaulipas and
borders the United States and the state of Nuevo Leon to the north. Nuevo Laredo is
virtually flat, with no major elevations or depressions. According to the 2005 Population
7 In‐person interview with Hernando Duran, CESPT Director, March 9, 2009
35
and Housing Census, it has a population of 355,827 inhabitants.
The only source of water for urban use in Nuevo Laredo is the Rio Grande River,
which also serves as the boundary between Mexico and the United States. This river has
two natural spillways, the Coyote stream to the south of Alazanas, and smaller streams to
the west, such as Laguito, Estero Reventado, Abandonado, Sandra, Ortillo, Carrizo, Aguas
Negras, El Gobierno, Ramireño and Cedena, from which water is also pumped.8
The city’s first water system was built in 1926. Currently, the decentralized entity
responsible for providing water and sewer services in Nuevo Laredo is the local water
utility, Comisión Municipal de Agua Potable y Alcantarillado (COMAPA‐Nuevo Laredo),
established as such in 2002. As of September 2007, COMAPA‐Nuevo Laredo provides
service to a total of 107,609 users, who are mostly residential users (95 percent).
Commercial users represent only 4.8 percent; while industrial users rank third (0.2
percent). Total water consumption in 2007 was 661,877,304 gallons.
COMAPA‐Nuevo Laredo has two water treatment plants: the Central and
Southeastern plants, as well as three wastewater treatment plants: the International
Wastewater Treatment Plant (IWWTP), the ORADEL WWTP and the Land Reserve WWTP.
Nuevo Laredo ordinances call for the establishment of a board of directors, composed of
the mayor and representatives of the town council and advisory council, a district delegate,
state and municipal officials, and a representative of the state water agency.
III.2.2 U. S. WATER UTILITIES
North of the border, we analyzed three water utilities: one in California (the San Diego
Water Department (SDWD)), and two in Texas (the El Paso Water Utility (EPWU) and the
Laredo Water Utility Department (LWUD)).
San Diego Water Department (SDWD)
San Diego is located at the southwest of California and borders at the south with Tijuana,
Mexico. In 2008 its population of 3,001,071 made San Diego the third largest city in the
8 http://nuevolaredo.gob.mx/ciudad/datosgenerales.shtml
36
state. The City of San Diego entered the municipal water supply business in 1901 when the
City bought the water system from a private company. In 2009, the City of San Diego Water
Department served more than 1.3 million people populating more than 200 square miles of
developed land. In addition to three water treatment plants, San Diego maintains and
operates more than 3,302 miles of water lines, 49 water pump plants. SDWD delivers more
than 200 million gallons of water per day serving over 1.3 million customers in four cities:
San Diego, Del Mar, Imperial Beach and Coronado.
The City of San Diego operates two water reclamation plants: North City and South
Bay. These plants treat wastewater to a level that is approved for irrigation, manufacturing
and other non‐potable purposes. The North City Plant has a treatment capacity of 30
million gallons (mgd) a day and the South Bay Plant can treat 15 mgd. Recycled water gives
San Diego a dependable, locally controlled resource (see
www.sandiego.gov/water/recycled/index.shtml). However, these plants operate way
under capacity (~6.25 mgd at tertiary level; also some at secondary level)
On average, San Diego must import nearly 90 percent of its water from other areas,
specifically northern California and the Colorado River. San Diego and other local water
distributors formed the San Diego County Water Authority for the express purpose of
purchasing Colorado River water from the Metropolitan Water District of Southern
California and conveying it to San Diego County.
During in‐person interviews SDWD officials mentioned that securing water sources
for the long run was one of the main challenges facing their utility. They are looking at
groundwater in Tijuana basin as one option. Unlike for Tijuana, desalination is not viable
economically for San Diego. Like Tijuana, SDWS wants to increase its use of recycled water
and improve water conservation. A plan was created to decrease the percentage of
imported water over the long run: by 2030, local supply (runoff) should cover 12 percent
of needs and conservation/reuse should provide another 19 percent. The SDWD
implemented a water conservation program in 2009; this program includes conservation
rebates for water saving devices (in‐person meetings, March 10, 2009).
37
El Paso Water Utility (EPWU)
El Paso is the county seat of El Paso County, Texas; it is the sixth‐largest city in Texas with a
population of 606,913 in 2006 (www.ci.el‐paso.tx.us), which is projected to reach 767,750
by year 2020. The average population growth rate for the last ten years was 2.5 percent
(www.census.gov/census2000/states/tx.html, Turner et al, 2003: 195).
El Paso has four separate utilities: water, wastewater, stormwater, and reclaimed
water. The Public Service Board (PSB) was established May 22, 1952, by City Ordinance No.
752 to completely manage and operate the water and wastewater system for the City of El
Paso. The Public Service Board includes the Mayor and four citizens appointed for four
years. EPWU has had a very stable leadership: Edmund G. "Ed" Archuleta has been manager
of the El Paso Water Utilities Public Service Board since January 1989.9
EPWU provides water services inside and outside city limits; however, bonds place
restrictions on what can be done outside of city limits. El Paso depends on both
groundwater and surface water. The Hueco Bolson began to be used for drinking water
purposes during the first decade of the 20th century (Turner et al, 2003: 200). The Hueco
Bolson continues to provide a significant portion of El Paso’s water supply. In 2003, EPWU
had 69 wells in the Hueco Bolson and 19 wells in the Bolson de la Mesilla. Approximately
55 percent of El Paso’s water supply is groundwater and 45 percent from surface water. El
Paso shares some aquifers with Juarez; some are saline. EPWU operates two water
treatment plants fed by the Rio Grande/ Rio Bravo (Turner et al, 2003: 200‐204).
As of December 2007, EPWU supplied water services to 195,089 accounts, 82
percent of which were residential accounts. Almost all residential accounts are metered
(99.2 percent).
Currently, EPWU is evaluating the importation of groundwater from West Texas
Counties, and the cost of desalinating additional water in el Paso County.10
9 See the El Paso Water utility web page: http://www.epwu.org/about/leadership.html
10 2009 Strategic Plan, available at http://www.epwu.org/public_info/2009_strategic_plan.pdf
38
Laredo Water Utility Department (LWUD)
The city of Laredo is located in Webb County in the state of Texas, on the banks of the Rio
Grande River. It borders the Mexican states of Tamaulipas and Nuevo Leon to the south.
Laredo is the largest city in the county, covering an area of 88.44 square miles. Its
population in 2005 was 207,787.11
The main source of water for Laredo is the Rio Grande River, from which
approximately 45 million gallons/day is pumped. Water and sewer services are currently
provided by the city government through its Utilities Department.12 This city is the only
one in the study that has previous experience with a private operator. In 2002, it entered
into a five‐year agreement with the United Water company; however, this arrangement
only worked until mid‐2005, when control was returned to the local government. The
Utilities Department of the City of Laredo has a customer base of 51,043 accounts, with 91
percent residential users and 9 percent commercial users.
Laredo has two water treatment plants; Jefferson and Colombia, with a join capacity
of 66 million gallons/day, as well as three wastewater treatment plants (North, South Side
and Zacate).
In Laredo, the Water Utilities Department (LWUD) is developing a five‐year plan, the
Comprehensive Water and Sewer Plan to address infrastructure issues. The last plan the
utility had was the Wastewater Master Plan developed in 1996. LWUD plans to invest
around $300 million over five years, in both water and wastewater projects. Its main
infrastructure projects include: construction of a new water plant; expansion and
rehabilitation of the Jefferson Water Treatment Plant; construction of two new wastewater
plants and expansion of the current wastewater treatment plants.
III.3 NONPAYMENT FOR WATER SERVICES IN BORDER TWIN CITIES
In this section we focus on the analysis of the nonpayment phenomenon for the three pairs
of cities of the study. The previous section indicated key differences in the legal and
11 U.S. Census Bureau, www.census.gov.
12 Web page of the Laredo utilities department : http://www.ci.laredo.tx.us/Utilities05/about.htm.
39
institutional context within Mexican and U.S. water utilities. Here we address specific
aspects that have been identified in the literature as factors that might influence payment
behavior. Specifically we analyze differences in the billing and collection process, rate
structures and affordability of water bills, collection efficiency, policies and strategies for
the enforcement of water services payment and finally the impact of nonpayment on the
financial situation of the water utilities.
III.3.1 CESPT, TIJUANA – SDWD, SAN DIEGO
The commercial area of the CESPT in Tijuana has 380 employees. They are organized in six
departments, including a billing and collection department that employs 200 workers.13
The CESPT bills its customers monthly. Starting in 1997, the CESPT has been utilizing an
automatic billing process, which they call on‐site billing. CESPT is the only one of the three
Mexican utilities to use this billing process. It works as follows: after a meter has been read,
the bill is printed on site (using a teller automatic device (ATP) and a portable printer) and
delivered immediately. This on‐site billing process gives two additional days for customers
to pay their water bill. On‐site billing is feasible because approximately 96 percent of
residential accounts are effectively metered. Note that approximately 3,000 residential
accounts are still unmetered; they are charged a flat rate.
According to CESPT officials, the number of billing complaints decreased as a result
of on‐site billing (on average less than 50 billing complaints per month for more than
48,000 accounts) mainly because the ATP reduces human billing errors. Indeed, it is linked
with the CESPT consumption database and it flags readings that differ significantly from an
account’s average water consumption. Once users receive their bill they have 20 days to
pay. After this period CESPT sends a reminder; the billing system generates an automatic
cutoff notice if an account owes more than $500 Mexican pesos. Therefore, delinquency is
based on the amount owed rather than time. Personnel shortages are an obstacle for
13 Most data and information for the CESPT in this section was collected through in‐person interviews with
Jose Rodriguez, of the commercial section and the commercial area staff, March 9, 2008.
40
installing flow reduction devices for delinquent accounts; the billing area has 200
employees for approximately 2,500 delinquent accounts per month.14
The CESPT provides several options for paying water bills; it has nine offices
distributed throughout the city and two automatic payment machines. Customers can also
pay at banks, local grocery stores, and supermarkets. They can also make payments by
internet. Two mobile payment offices give another payment option for poorer areas in the
city. Grocery stores charge $5 Mexican pesos for water bill payments, but other options are
free. However, grocery stores Oxxo are the most common places to pay water bills as there
are around 150 Oxxo’s stores distributed along Tijuana and Rosarito.
The San Diego Water Department (SDWD) has a small staff when compared with
CESPT; 36 employees work in its customer service area and twelve employees working in
billing and collections tasks. Water services in San Diego are fully metered; a typical single‐
family domestic customer has a 3/4‐inch meter (although some larger homes may have a
1‐inch meter). The SDWD submit water bill bi‐monthly. From 2003 to March 2008, the
Water Department issued monthly bills, with every other bill based on a scheduled
estimate of usage and charges. However, customers complained about receiving bills based
on estimates because the SDWD had not enough meter readers. Then, the SDWD returned
to bi–monthly billing, separating the city in two halves; half of the City’s meters are read on
odd–numbered months and the other half during even‐numbered months. Bi‐monthly
billing eliminates scheduled estimates. Besides, bi–monthly billing saves the Water and
Metropolitan Wastewater Departments $630,000 in printing and mailing costs each year. 15
Customers have 15 calendar days to pay their water bill. If it is not paid on time the
SDWD sends a reminder on day 25 and a shutoff notice on day 38. Users can be late without
being delinquent during a 23 days period but they have to pay interest for each day they
are late. In practice, people have 45 days to pay; actual shut‐off takes place between days
45 and 51. On day 75, the SDWD close an account and refer it to the Treasurer's Office.16
14 In‐person interview with Hugo Martinez, responsible of the Billing section, CESPT, March 9, 2008
15 In‐person interview with Michael Bresnahan, Deputy Director Customer Support Division, SDWD; March
10, 2008. See also the SDWD web page: http://www.sandiego.gov/water/rates/billing.shtml.
16 For details of the payment process see the LWUD web page ww.sandiego.gov/water/rates/timeline.shtml.
41
The SDWD offers several payment options: by mail, by internet, at two city locations
(water department, Civic Center Plaza building), at one business Location, and at seven USA
checks cashing places. Most users pay their water bills by mail (~57 percent), the next
more frequent option is banks (18 percent of all accounts); 8 percent pay by direct debit,
which is the cheapest option; 7.5 percent of all accounts use the Electronic Bill Presentment
and Payment (EBPP) system (available only to residential users); few people pay in person
at the SDWD offices.17
Let us now compare water rates. CESPT water rates have twelve water consumption
blocks for water services; the first block includes the first five cubic meters of water
consumption and the highest block is for water consumption from 61 to 200,000 cubic
meters. The average rate is $15 Mexican pesos (equivalent to 1.1 U.S. dollars in July 2009).
In fact, CESPT’s water rates for Tijuana and Rosarito are considered among the most
expensive in Mexico. However, the share of average household monthly income spent in
water services by Tijuana households is only 0.97 percent. To put this number in context,
the maximum share proposed to ensure affordability is 2.5 percent in a developed country
(the U.S.) and 5 percent for Asian developing countries (Fankhauser and Tepic, 2006).
Water rates are updated regularly (every six months; the last update was in July 2009). The
Director of the CESPT considers that the rate structure is adequate for cost recovery.18 It is
worth noting that since March 2003 residential rates are tax free but taxes apply to
commercial and industrial water uses. Additionally, water consumption is free for retirees
who consume up to 25 cubic meters; they also get a 50 percent discount for up to 40 cubic
meters.
On the U.S. side, the SDWD calculate water bills as a combination of a monthly
meter‐based fee and the amount of water used. For billing purposes, the Water Department
measures water in hundreds of cubic feet or HCF. Each HCF equals 748.05 gallons. Bi‐
monthly charges for a typical single‐family include: a base fee ($33.04); the first 14 HCF
billed at $2.795 per HCF; the next 14 HCF used billed at $3.032per HCF; and each HCF used
17 In‐Person interview with SDWD staff, March 10, 2009; also see
www.sandiego.gov/water/rates/where.shtml
18 In‐person interview, Hernando Duran, CESPT Director March 9, 2009.
42
above the first 28 HCF is billed at $3.404 per HCF. The total bill for multi‐family domestic
customers is a combination of the monthly meter‐based fee (which is based on the size of
the meter) and the amount of water used. These customers pay $3.032 per HCF.19 On
average the share of average household monthly income spent in water services by San
Diego’s households is 1.7 percent, which is considered affordable.
During in‐person interview, SDWD officials stated that they offer no discount and no
payment plan for poor households (as instructed by City Council); however, the SDWD
website suggests otherwise.20 According to their Web Page, the SDWD can grant extensions
under limited conditions that include: health and safety, legal negotiations, or in case of
negative impacts on other ratepayers. The SDWD can also defer payments for up to 12
months.
In Tijuana, the CESPT usually reports a commercial efficiency indicator to the federal
water agency (CONAGUA). This indicator measures the billed amount that is effectively
collected; at the end of 2007 they report a 82 percent commercial efficiency. Some
international funding sources required CESPT to reach a 78 percent commercial efficiency
as a requirement to get loans. However, if collection efficiency is measured as the percent
of compliant users, then the average percent of users who do not pay on time increases to
53 percent, i.e., five out of ten users do not pay on time monthly. According to CESPT
officials, one factor that explains this outstanding number of late payers is that current
legal framework that obstructs service disconnection for residential users. In Baja
California, the state water law allows only for flow reduction. Furthermore, article 162
states that residential users must sign their cutoff notice and admit water consumption
before implementing disconnection, which is undoable. In addition, the state government
issues each year an edict called “cero recargos” by which all late payment charges for
delinquent accounts are waived. This edict is valid from April to December, which means
that most of the year charges are not applied.21 Payment behavior is different by type of
water users in Tijuana. About 60 percent of delinquent accounts are residential accounts
19 The detailed meter base fee can be consulted on: http://www.sandiego.gov/water/rates/rates.shtml.
20 See the SDWD Web Site: www.sandiego.gov/water/rates/procedures.shtml.
21 In‐person interview with Jose Rodriguez director of the commercial department and billing and collection
staff, march 9, 2008
43
and approximately 29 percent are government buildings; only 10 percent are commercial
or industrial users. This show how the legal context affects payment of water services;
most commercial and industrial users pay their water bills because otherwise they get
disconnected.
By contrast, in San Diego the SDWD collects almost everything that is billed.
However, the SDWD do not report the monthly number of users who could be classified as
late payers or delinquent. In fact they did not answer the corresponding questions in our
survey. However, in our in‐person interview SDWD officials told us that most people pay by
the due date; 76 percent of accounts pay before day 25 and almost 99 percent pay prior to
the shut‐off date. Only estimated 1 percent of residential accounts get disconnected but
approximately 24 percent are late payers.
On the Mexican side, the CESPT implemented in January 2008 a Collection Program
following an important increase in late payment rates at the end of 2007; the latter was
probably associated with the international crisis that affected the Mexican economy. This
program includes: 1) cleaning the users’ database (dropping abandoned and uninhabited
houses); 2) dropping households with debts below $500 Mexican pesos; and 3) dropping
houses whose meter is inside because flow reduction cannot be implemented. The CESPT
intensified flow reduction and the delivery of cut off notices (approximately 47,000 in
January 2008); although CESPT is not authorized to disconnect, this warning works well
with late users.22 As a result of this strategy the collection rate was double the average rate
during January and February.23 Another strategy implemented by the CESPT to promote
payment is based on economic incentives. Regular users who remain punctual for at least
four months get a 15 percent discount in their water bills. Also, regular users may pay six
months of their water use in advance and get an 8 percent discount. If regulars users decide
to pay one year of water use in advance they get a 10 percent discount. Payments are due
in January and estimated water consumption is based on past consumption.
In 2008, uncollected billed for the CESPT amounted to $600 million pesos (equivalent
to about $4.5 million dollars using a 13.5 pesos/dollar rate). This is the equivalent to the
22 In‐person interview with Gustavo Hernandez and Jose Rodriguez, CESPT, March 9, 2008.
23 in‐person interview with Hernando Duran, CESPT Director, March 9, 2008.
44
billed amount for three months of water services for the whole cities of Tijuana and
Rosarito or 27 percent of the utility’s annual budget. A third of this debt is unrecoverable
because delinquent users are the government or abandoned houses. The annual
recoverable rate is 57 percent of the debt but the equivalent to the recovered amount is
again uncollected during the next year because of the annual edict of discounts for
delinquent users, which creates a vicious circle that promotes late payment.
In San Diego, since the SDWD collects almost everything it bills, such enforcement
strategies are not needed besides disconnection after the 38th day. It is worth noting that
the SDWD does not penalize late payment, only users who get disconnected; these users
have to pay a $30 dollars meter shut‐off meter fee and $25 for restoring their service.
The SDWD typically write off ~$250,000 out of $450,000,000, or 0.056 percent of the
billed amount. This represents people who move without paying or who go bankrupt.
Therefore, while nonpayment clearly affects the financial viability of the CESPT, it is clearly
not the case for the SDWD.
III.3.2 JMAS, CIUDAD JUAREZ – EPWU, EL PASO
In Ciudad Juarez, the JMAS billing and collection department had 306 employees at the end
of 2007. Water bills were sent monthly. Water users have 20 days from the day of the
meter reading to the due date to pay their bill. Although JMAS officials refused to interview
with us, it is very likely that meter reading and billing takes several days so the time
available to pay is shorter than 20 days.24 Water users in Ciudad Juarez can pay at three
types of locations: JMAS offices, banks and grocery stores. Grocery stores charge $5
Mexican pesos for their service.
In El Paso, the EPWU also has monthly billing; however, the EPWU employs only 20
meter readers, who like the CESPT in Tijuana and the SDWD in San Diego, have automatic
24 Although we requested and had a formal meeting with JMAS officials on September 22, 2008, they refused
to provide detailed information about nonpayment issues arguing they were not authorized by the state
Water and Sanitation Central Board (Junta Central de Agua y Saneamiento del Estado de Chihuahua ‐JCAS).
JMAS also refused to answer our questionnaire; fortunately, JCAS (Federico Perez Guevara, Subdireccion de
Planeacion y Evaluacion) helped us to the questionnaire with data they collected from the JMAS. Therefore,
we can conclude that JMAS refused to provide information because of a highly politicized local context, which
is not uncommon for water services in Mexico.
45
hand‐held devices to capture readings. It takes three days after a reading to print the
corresponding bill and mail it. Water users have two weeks to pay, and there is a 7 day
grace period, followed by another seven days before the EPWU would deliver a cut‐off
notice. Consequently, water users have up to a month to pay their water bills. A payment
center is located at the EPWU offices. In addition, water users can pay at nine payment
centers connected to the EPWU billing system. Western Union also accepts water bill
payments for a one dollar charge. Water bills may also be paid by internet but phone
payments (using credit cards) are not available.
The JMAS of Ciudad Juarez has a complex rate structure that defines seven categories of
users: flat rates for unmetered residential accounts, metered residential services,
commercial users, industrial users, public buildings, public schools, and government. The
last three categories generate a significant part of the unrecoverable debt. JMAS’ water
schedule has nine blocks for residential users and 17 for the other users. The first
consumption block for residential users is from 0 to 23 cubic meters of water. The last
block is for 151 cubic meters or more. Water bills also include a charge of $0.30 Mexican
pesos for water withdrawal costs. The combination of a broad number of categories for
users and a large number of blocks produces a complex rates structure. The simplest rate is
the one for residential users with unmetered services; the minimum charge is $110 pesos.
The average water monthly bill is $183 (the equivalent to US $13.5). JMAS offers a discount
of up to 50 percent and payment plans for retirees, senior citizens, disabled people, and
public schools. For example, in July 2008 the state government implemented a program
called “Juntos Podemos”, which granted a 50 percent of discount for disabled persons and
senior citizens who request it; more than 9,000 households received this discount.25 JMAS
also grants payment plans for poor households.
In contrasts with Ciudad Juarez, water rates in El Paso are the same for residential and
commercial customers, but they are lower for the largest commercial customers. The
EPWU sets monthly minimum charges for water service, based on meter size, with a 400
cubic feet (4CCF's) volume allowance. The minimum charge is $4.79 for meters less than 1“
up to $119.07 for 8” meters. Total monthly charges include the minimum charge plus a
25 See http://www.agua.org.mx/content/view/5402/89/).
46
commodity charge for water used. For residential customers only, four hundred cubic feet
of water are included at the minimum price. Water used in excess of the volume allowance
is billed under a three block structure based on a customer’s average winter consumption
(AWC):26 $1.45 for each hundred cubic feet (Ccf) over the 4 (Ccf) to 150 percent of the
(AWC); $3.40 for each hundred cubic feet between 150 and 250 percent of the AWC; and
$4.87 for each Ccf over 250 percent of the AWC. The average monthly water bill for El Paso
users is approximately $40, or 1.4 percent of the monthly average household income.
Water rates are reviewed internally every year and adjusted if needed; revenues have to
cover planned expenses. EPWU offers payment plans for people on a case by case basis; it
depends on how much they owe and for how long. Customer service employees can make
arrangement on their own for smaller amounts; for larger ones, they need to consult their
supervisor. Unlike JMAS which does not require deposits to ensure payment of water
services, EPWU requires a deposit: $25 for residential units (single family); $50 for a
duplex; $75 for commercial users. EPWU keeps this deposit until the account is closed.
Additionally, there is a set up fee of $20 for new residential connections.
During our in‐person interviews, JMAS officials declared that approximately 50
percent of residential users payments are late, although the person who answered our
questionnaire reported that 75 percent of residential users do not pay on time; only one
out of four households pay their water services on time. JMAS applies disconnection
systematically only for industrial and commercial users. As a consequence, overdue bills do
not accumulate for these two categories of users. By contrast, residential users tend to
accumulate important debts for unpaid water services.
The situation is quite different in El Paso. During our interview EPWU officials told
us that less than one percent of the water billed remains uncollected at the end of the year.
At the same time, approximately 19 percent of residential users do not pay on time. This
apparent inconsistency highlights different ways of measuring payment: Commercial
Efficiency (which measures the amount of money collected) and Collection Efficiency
(which should be measured as the percent of users who pay on time). For EPWU
26 Average Winter Consumption (AWC) is the average amount of water used during the most recent
December, January and February billing periods.
47
delinquent accounts are those that do not pay within a month of receiving their water bill.
Late payers can pay within a month without suffering penalties; many pay before becoming
delinquent and most pay within two months (disconnection occurs after two months). A 6
percent charge is applied for late payment.
In Ciudad Juarez, like in Tijuana, JMAS disconnects accounts selectively, and only
accounts with a high debt. In 2007 only 5 percent of delinquent residential accounts were
disconnected because of nonpayment. Selective disconnection is applied even though
article 1572 of the administrative code of the state of Chihuahua states that no user is
exempt from paying the “corresponding rights” for the use of water. However, since there
is no water law in Chihuahua, the JCAS (Junta Central de Agua y Saneamiento del estado de
Coahuila) is the institution that sets the rules for nonpayment penalties. As of January 2009
the high percent of nonpayment led the JMAS to disconnect between 2,500 and 3,000
accounts monthly. It is interesting that some users offered a bribe to JMAS employees to
avoid disconnection; in fact the JMAS manager exhorted delinquent water users to refrain
from offering bribes.27 Like the CESPT in Tijuana, JMAS implements payment campaigns; its
commercial department can approve discounts of up to 35 percent of an accumulated debt
or up to $10,000 Mexican pesos. Discounts higher than $10,000 pesos must be approved by
the JMAS Board. Formally JMAS charges 1.5 percent of the overdue bill as a late payment
fee, but most of these charges are waived during payment campaigns.
The unrecovered amount for JMAS in 2007 was the equivalent of 15 percent of the
amount it billed. Its total unrecovered debt reached one billion of Mexican pesos in July
2009 or the equivalent to 120 percent of JMAS’ budget for 2007. However, this debt
includes unpaid bills from the public sector, schools, and abandoned houses and buildings;
therefore, it its very likely that the actual unpaid amount is smaller. Nevertheless, this is a
big challenge for the financial sustainability of JMAS.
Like the San Diego Water Department, the main policy that EPWU implements for
dealing with nonpayment of water services is disconnection. If water bills are unpaid after
a month of the due date EPWU submits a cut off notice. However, the utility sometimes
27 Ciudad Juarez local newspaper, Bien Informado http://bieninformado.com/?c=151&a=52907, accessed on
July 15, 2009.
48
does not have enough manpower to disconnect delinquent users during one cycle so it is
done during the next cycle. Also, there is no disconnection when the outside temperature
exceeds 100 F. On average EPWU report that 3 percent of its residential accounts are
disconnected monthly. EPWU also implements a few other measures to foster compliance:
there is a $10 reconnection fee during normal business hours, and $15 after 5 PM. These
fees have not changed in over 10 years. There is also a $100 fine for tempering with a water
meter and a $500 fine for tempering with a water hydrant. Delinquent users are not
reported to credit bureaus.
Unlike JMAS, EPWU is doing well financially partly because of decisions that were
made a while ago: 30,000 acres in El Paso alone were bought and sold to developers and
some of the proceeds were invested into infrastructure. The water development board
provides funding for capital needs and they have been very successful with receiving
federal grants (on average $10 million per year); recently EPWU received money for
reclaiming water. The availability of public funding has allowed the upkeep and the
development of the water infrastructure over the last 20 years. Since public funding has
been available, there is less pressure for adjusting rates; in fact the share of the average
monthly household income is fairly low (1.4 percent). Since water rates are affordable, and
effective enforcement policies are in place, nonpayment is low (1 percent) and its impact
on the financial situation of the EPWU is negligible.
III.3.3 COMAPA NUEVO LAREDO LWUD, LAREDO
Like most Mexican water utilities, the COMAPA of Nuevo Laredo bills monthly. Billing in
Nuevo Laredo is not as efficient as in Tijuana: it takes COMAPA a month after a meter is
read to send water bills. Meter reading and billing is organized in seven sections; six of
them are for residential users and one is for commercial and industrial users. Each billing
zone has a different due date. In total there are 356 collecting routes. Formally, users have
15 days to pay but because bill delivery takes several days, users have approximately 10
days to pay on time. COMAPA sends payment reminders for late users with their next water
bill, along with a disconnection warning two months after an unpaid bill. There are few
49
options to pay for water services in Nuevo Laredo; users may pay at COMAPA offices at
three different addresses (two are downtown, which are far for people living west of the
city), and a third office is located at the Colonia Tanque Matamoros, which is more
accessible for low income users. Only during payment campaigns does COMAPA have
mobile payment offices. Users may also pay at grocery stores; they charge $5 Mexican
pesos for each water bill payment.
In Laredo, the LWUD send water bills nine days after reading meters. Users have 20
days to pay, so people in Laredo have twice as much time to pay than water users in Nuevo
Laredo. Billing is organized along 165 billing routes. In contrast with the San Diego Water
Department and the El Paso Water Utility, LWUD offers payment plans for low income
users. However, delinquent users cannot make partial payments or obtain discounts on late
payment charges when paying their debts.28
In Laredo, water users have several options to pay; there are twelve payment offices in
the city, plus a mail payment deposit at the civic center building at downtown. Although
LWUD payment centers are far from downtown, this is not a problem for water users who
have cars; although 95.5 percent of homeowners have cars, 22 percent of them do not own
a car. Water users may also pay by phone with a credit card. Alternatively they may pay at
grocery stores and supermarkets; there is a charge of $1 to $1.5 dollars. As of December
2008, LWUD customers could not pay by internet.
COMAPA‐Nuevo Laredo has a complicated rate structure consisting of 43
consumption levels and six categories of users: domestic, commercial, industrial, public,
COMAPA employees, residential and retirees. Two categories include users with
subsidized water rates (COMAPA employees and public buildings usually do not pay for
water service, while retirees are subsidized). In Nuevo Laredo the rate structure includes a
wastewater collection charge equal to 40 percent of the amount billed for drinking water.
Water rates have not been adjusted since mid‐2004; although a 21 percent increase in
water rates was requested in 2005, the Board of Directors approved an 11 percent
increase, but it was not published in the official state gazette and consequently it could not
be applied. A request for an 11 percent increase was submitted again in 2008 but was
28 In person interview with Tomas M. Rodriguez, Director LWUD, Febrero 8, 2008.
50
rejected by the state water agency, which asked the utility to obtain a new approval from
its Board of Directors. 29 The financial manager of COMAPA‐Nuevo Laredo estimates that a
rate increase of at least 20 percent is needed for healthy finances.30 Under current rates,
the average water bill for metered consumption is approximately $156 pesos. A large
percentage (36 percent) of water users is unmetered; they pay a flat rate of $200 pesos. It
means that while metered users spend on average 3 percent of the local average household
income for water, unmetered users have to spend the equivalent of 4 percent. However,
water expenses are low compared to other services such as electricity, gas or telephone.
For example, the electricity bill for 400kWh is approximately $200 pesos.
In Laredo, the LWUD projects income from the minimum consumption block as a
source of debt financing; any volume above the minimum consumption block is used to
cover operations and maintenance. The rate study model for Laredo includes 14 types of
customers and projects their consumption and the financial needs of the utility. The
wastewater fee is a percentage of the amount charged for water.31 The average water bill
was $18 dollars in December of 2006. This amount was the equivalent to only 0.7 percent
of the local average household income. By comparison, the average electricity bill was $104
dollars or the equivalent of 4 percent of the local average household income. LWUD has
programmed a sustained rate increase (only for water) over 15 years. The rate increase
began with a 25 percent jump in May 2006, followed by a 10 percent the second year and 7
percent annually thereafter. The rate increase assumed a price elasticity of 3 to 5 percent.
Despite of this sharp increase, the increases in water rates has been considered adequate.
However, the wastewater rate, in the opinion of one utility officer interviewed, is still lower
than the actual costs.32 A sustained rate increase is also being considered for wastewater,
which is intended to be used to finance part of planned projects.
Nuevo Laredo reports low collection efficiency rates: approximately half of the
residential customers do not pay their water bill on time. In July 2009 COMAPA reported
29 In person interview with Jesus Valdez, COMAPA’s General Manager, February 10, 2008.
30 Meeting with the COMAPA administrative staff, February 11, 2008.
31 In person interview with Federico Flores Zertuche, Utilities Administrator of Laredo, March 14, 2008.
32 In person interview with Adrian Montemayor, former interim Director, LWUD, February 8, 2008.
51
that 38,000 (33 percent of all users) owed 78 million pesos for water services.33 Even
though the Tamaulipas State Water Act specifies that no one can be exempt from paying for
service, municipal and state agencies do not pay for water. Likewise, public buildings, such
as prisons and state and municipal offices do not pay for water. Only schools pay partially
for their water following an agreement between COMAPA and the Ministry of Public
Education (SEP), but this payment only covers part of the cost of service. One of the main
reasons COMAPA is behind is that its customer database has not been updated.34
Despite recent sustained rate increases, the LWUD of Laredo reports a collection
rate between 80 and 90 percent; the lowest of the three U.S. utilities studied. For 2007 the
average monthly percent of residential accounts which pay late for Laredo was about 10
percent. However, only approximately 5 percent of residential accounts are late two or
more months, and approximately 1.6 percent are delinquent for four or more months. Past‐
due payments are usually collected within 60 days. Of the three U.S. utilities studied the
LWUD report the highest percent of delinquent accounts.
In Nuevo Laredo the high rate of past‐due accounts is being tackled by disconnecting
service and charging a reconnection fee, which was not applied prior to September 2007.
Formally, COMAPA Nuevo Laredo charges 2.7 percent of the bill for late payment; however,
most late payers get a 100 percent of discount on late payment charges during payment
campaigns. Approximately 300 customers are now disconnected every week, which is still
a small share of the total number of delinquent accounts (33,000). The reconnection fee for
residential customers is 250 pesos.
In June of 2006, COMAPA Nuevo Laredo reported an unrecoverable debt equivalent
to six months of water and sewage billing for the whole city. The next year COMAPA
reported a slight improvement: in September 2007 delinquent accounts totaled more than
70 million pesos, which is equivalent to more than four months of billing for water and
wastewater services. A big issue for improving the collection rate is that a significant
amount of the debt is unrecoverable; approximately 56 million pesos out of 70 million
come from households who have been delinquent for a year or more (14,000 in March
33 El manana, local newspaper, July 21, 2009; accessed on July, 30, 2009
(http://www.elmanana.com.mx/notas.asp?id=132381).
34 In person interview with Sanjuana Candanosa, Financial Manager, COMAPA Nuevo Laredo, March 13, 2008.
52
2008); many uninhabited or abandoned dwelling are still billed with flat rates because
their consumption is unmetered or they have broken meters.35 Because of low collection
rates and also because of the long period during which many users remain delinquent, an
enormous debt accumulates and represents a big share of the monthly billed amount.
COMAPA started efforts to clean its database of users to eliminate unreal water
consumption and consequently unreal debts in 2008. Like the CESPT in Tijuana, an
important challenge for COMAPA Nuevo Laredo is to be able to implement effective
enforcement measures, mainly effective selective disconnection, and sustainable water
rates, which the political context has been precluding until now.
In Laredo, a strategy recently implemented by the LWUD to curb rising delinquency
rates is a late penalty fee equal to 5 percent of the amount billed or $5, whichever is higher.
The LWUD also disconnects accounts after the 15th day of the grace period. Employees in
charge of disconnection cannot accept payments; the main reason is the administrative
costs, for example for authorizing bank checks. Reconnection charges go from $35 in
weekdays, to $55 for next day reconnection, and up to $75 on weekends.36
Although the LWUD reports relatively low late payment and delinquency rates, it had more
than one million in unpaid residential bills at the end of the FY 2004‐2005, which
represented 6.8 percent of the total billed amount. Significant problems with leaks were
also reported, as well as low pressure and water losses. In fact, according to LWUD officials,
the need for funding costly maintenance is the most critical item for them. LWUD officials
expect to be able to focus on system maintenance after the explosive population growth of
the last six years subsides. In this case, a relatively high nonpayment rate is associated with
operational issues.
35 In person interview with San Juana Candanosa, COMAPA Administrator, March 13, 2008.
36 In person interview with Federico Flores Zertuche, Utilities Administrator of the City of Laredo, March 14,
2008.
53
III.4 CONCLUSIONS
Our analysis shows that many households do not pay their water bill on time for a range of
reasons: weak enforcement, lack of commercial orientation which precludes the
application of financial penalties for nonpayment, and (mostly in Mexico) the perverse
incentives of payment campaigns. Since delinquent households in Mexico face neither
effective enforcement measures nor economic incentives, it is not surprising that they do
not pay on time. In contrast, water utilities in the three U.S. cities studied generally take a
business approach to water and wastewater services, which implies that water services
must be provided with good quality and must be paid for. Viewing water services as a
business begins from the moment the service contract is signed; utilities ensure payment
for their services by requesting a deposit. An important finding of this analysis is that late
payment is tolerated even for water utilities that apparently implement a commercial
approach such as the SDWD. Many users do not pay on time and they are not penalized for
late payment.
The strong business approach applied to water services in U. S. cities that use
selective disconnection as well as late payment and reconnection charges ensures adequate
collection rates (none of the three cities we studied have collection rates below 80
percent). It is important to note that even under this commercial and financial approach
maintenance costs may not be fully met (for example in Laredo). For the three utilities
studied, a significant portion of the costs of new infrastructure are funded with grants or
bonds. In El Paso, water infrastructure has been funded with public sources, so there is less
pressure for increasing water rates.
In general, available data suggest that disconnection of residential delinquent
accounts can be effective for reducing nonpayment for water services. However a policy of
generalized disconnection is unfeasible because it would be costly and users may perceive
it as unfair. In fact, in El Paso Texas, the EPWU disconnects late accounts only after two
months because of a lack of staff. Similarly, COMAPA Nuevo Laredo can disconnect only a
small share of their delinquent accounts. Alternatively, a policy of widely publicized,
54
selective effective disconnection (for example focusing on delinquent residential accounts
with six or more overdue bills) would be less costly and more effective.
Moreover, we found that a lack of commercial orientation in water services in
Mexican cities complicates the task of water utilities; water services are considered an
entitlement rather than a service for which users have to pay. Payment campaigns that
allow substantial discounts generate perverse economic incentives for nonpayment.
By contrast with U. S. utilities, the greatest risk factor to financial sustainability for
the three Mexican water utilities we studied is their low collection rates; all of them report
a collection efficiency of around 50 percent. Only half of the users pay on time. The high
percentage of customers who do not pay for water services and, even worse, the low
likelihood of recovering delinquent accounts, calls the financial sustainability of Mexican
water utilities into question.
On the U.S. side, collection efficiency appears adequate as 80 percent or more of
customers pay on time. All three cities studied systematically cut off service to delinquent
customers. An important factor that may influence the commercial efficiency of U.S. water
utilities is that their billing and collection systems are generally more efficient than for
Mexican utilities. Furthermore, U. S. utilities try to reduce billing and collection costs; for
example the SDWD bills bi‐monthly to reduce its costs. This strategy may be appropriate
for Mexican water utilities although it tends to weaken the price signal. Another factor that
may help reduce delinquent payments in U. S. cities is that water fees are included in the
same bill as other utilities such as gas or garbage collection (e.g. Laredo). As a result, if the
utility bill is unpaid more than one service is suspended.
Our case studies also suggest that more payment options may reduce the percentage
of residential accounts with overdue bills. Likewise, accurate metering may effectively
promote payment. By contrast, that the time available to pay does not seem to be a real
limitation for households to pay for water services.
Overall, our main finding is that the local institutional context (i.e. local water laws, rules,
norms and political circumstances) matter for explaining the nonpayment of water
services. On the U.S. side, we found very specific rules and norms that constrain
discretional decisions regarding payment enforcement policies. By contrast, local Mexican
55
politicians and utilities officials have discretional powers to grant discounts or ban
disconnection. In Mexico, state water laws that ban disconnection without taking into
account payment capacity creates perverse incentives and threatens the financial
sustainability of water utilities. Furthermore, late payment and delinquency affects also the
quality of water services; as can be seen in water utilities that lack adequate maintenance
because of financial problems (for example JMAS in Juarez, COMAPA in Nuevo Laredo but
also the LWUD in Laredo). But most importantly, late payment and nonpayment of water
services result in the inefficient use of water in a region that suffers from water scarcity.
56
IV. ECONOMETRIC PROBLEMS
When we wrote this proposal, we were interested in assessing quantitatively the impact of
enforcement on household non‐payment of water services. We planned to model the
equilibrium between enforcement and non‐payment using a simultaneous equation system
and instrumental variables to tackle the joint determination of our explanatory variables.
For example, it is very likely that the number of disconnected accounts is associated with a
large nonpayment rate; likewise, higher charges are likely associated with higher
nonpayment rates. In this context, it is well known (e.g., see Wooldridge, 2006) that
ordinary least square estimators would be biased and inconsistent.
An instrumental variables (IV) estimator is an option to solve this problem,
provided it is applied to a “large enough” dataset. An appropriate IV should be uncorrelated
with the error term but highly correlated with the corresponding endogenous variable
(Greene, 2002). Originally we proposed to consider instruments: the existence of a law that
allows disconnection and the suspension of services for each state as an instrument for
disconnection, and the billing and collection annual budget for each water utility as an
instrument for effectively collected charges. Unfortunately, our case studies suggest that
several important variables, including the overdue amount, enforcement, and the
percentage of disconnect accounts are known only with considerable error, at least on the
Mexican side. This is partly due to inconsistent ways of keeping track of rebates, late fees,
and penalties. In addition, our respondents did not distinguish between disconnections for
non‐payment and disconnection for other reasons (our questionnaire also did not make
that clear enough). Although we obtained a high response rate and possibly a large enough
sample, explaining quantitatively the link between non‐payment and enforcement does not
appear possible for this problem.
57
ACKNOWLEDGEMENTS
We thank Daji Yuan, Alicia Prater, Jessica Sisco, and Rosario Perez Gauna for their valuable
research assistance. We are also grateful to the Urban Water Research Center at UC Irvine
for valuable logistical support. Finally, we thank Jorge Silva, from the North American
Development Bank, and Professor Bill Cooper at UC Irvine, from their letters of support.
58
REFERENCES
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Booysen, F. NonPayment of Services: A Problem of AbilitytoPay. The South African Journal
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Comisión Nacional del Agua. Estadísticas del Agua en México. Edición 2008, 2008.
Comisión Nacional del Agua. Situación del Subsector Agua Potable, Alcantarillado Y
Saneamiento , 2006.
Dinar, Ariel. "Political Economy of Water Pricing Reform." The Political Economy of Water
Pricing Reform. Ed. Ariel Dinar. Washington D. C.: World Bank‐ Oxford University
Press, 2000, pp. 1‐25.
Fankhauser, Samuel, and Sladjana Tepic. "Can Poor Consumers Pay for Energy and Water?
An Affordability Analysis for Transition Countries." Energy Policy , 2006.
Foundation for Water Research. Researching, Developing and Testing of Payment
Strategies for the Lower Income Groups at Four Selected Communities in order to
Manage Charges for Water Use. (Report 1202/1/03). Johannesburg, 2003:
Foundation for Water Research, http://www.Fwr.Org/Wrcsa/1202103.htm.
Gleick, P. The Human Right to Water. Water Policy, 1(5), 1999. 487‐503.
Greene, William. Econometric Analysis. Fifth Edition. Pearson Education, 2002.
Hanemann, W. Michael. "Price and Rate Structures." Urban Water Demand Management
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New York San Francisco Washington D. C.: McGraw‐Hill, Inc., 1998. 137‐69.
Harrington, Winston, and Anthony Heyes. "The Theory of Penalties: "Leverage" and
"Dealing"." The Law and Economics of the Environment. Ed. Anthony Heyes.
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Heyes, Anthony. "Making Things Stick: Enforcement and Compliance." Oxford Review of
Economic Policy 14.4, 1998, pp. 50‐63.
Kayaga, Sam, John Calvert, and Kevin Sansom. "Paying for Water Services: Effects of
Household Characteristics." Utilities Policy 11, 2003, pp. 123‐32.
Merret, Stephen. "Deconstructing Households' Willingness to‐Pay for Water in Low‐Income
Countries." Water Policy 4.2, 2002, pp. 157‐72.
59
Organization for Economic Co‐Operation and Development. Social Issues in the Provision
and Pricing of Water Services. Paris: OECD, 2003.
Organization for Economic Co‐Operation and Development. The Price of Water. Trends in
OECD Countries. Paris, 1999.
Polinsky, A. Mitchell. "The Fairness of Sanctions: Some Implications for Optimal
Enforcement Policy." American Law and Economics Review 2.2, 2000, pp. 223‐37.
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Provition of Water Services. Washington D. C.: Inter‐American Development Bank,
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Shirley, Mary M., and Claude Menard. "Cities Awash: A Synthesis of the Country Cases."
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Pergamon, 2002, pp. 1‐41.
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la Argentina. Buenos Aires: FIEL, 2001.
60
APPENDIX A: SURVEY INSTRUMENT
A1
A2
A3
A4
Thank you for taking the time to complete our survey. The purpose of this study is to better understand the
links between service quality, payment convenience, and the effectiveness of payment enforcement
policies for water services at the U.S. – Mexico Border. The information and data you provide will be used
for statistical purposes and no individual data will be published without your explicit consent. Your answers
and opinions are extremely important to the success of our research. After a preliminary section, this
survey has 3 parts, each introduced by a brief introduction. Please try to answer all of the questions. Your
help is much appreciated – please check the appropriate box on the final page of the survey (Part Three;
Question 15) if you would like to receive a copy of the survey results.
Date (month/day/year):
Water Utility name:
In case we need clarifications for some of the questions below, please indicate your
Name:
Address:
Professional title:
Phone number (starting with your area code):
Email:
Fax:
Part 1 General Information
This part asks some general questions about your water utility. If data for 2007 are not available, please
provide data for the most recent year (and indicate that year).
1 What cities/communities does your utility serve?
2 What is the total number of accounts your utility provided water services for at the end of 2007?
A5
3 For how many residential accounts did your utility provide drinking water at the end of 2007?
For how many residential accounts (if any) did your utility provide waste water services at the end of
4
2007?
5 What % of residential accounts was metered at the end of 2007?
6 What % of residential meters was working properly at the end of 2007?
7 How many employees (full time equivalent) worked in your utility at the end of 2007?
8 How many employees (full time equivalent) in your utility worked on billing/collection at the end of 2007?
9 How many technical staff (full time equivalent) worked in your utility on drinking water at the end of 2007?
10 How many gallons of water per month on average were consumed by your residential customers in 2007?
11 How and how often does your utility provide information to households about the quality of their drinking
water?
Did your utility have publicized water quality problems that required boiling water in 2007? If yes, please
12 indicate how many; otherwise, enter "none":
A6
13 Does your utility keep records of complaints from residential customers about service quality or billing?
O No.
O Yes. Please tell us how many complaints were received on average per month in 2007:
Did your utility need to implement water restrictions in 2007? If so, how long did they last and what where
14 these restrictions?
15 At the end of 2007, how many residents within your service area were not connected to water service?
Part 2 Billing and Financial Information
This part asks some questions about billing and financial information for your utility.
1 How often does your utility send water bills to residential costumers?
2 From the time bills are mailed, how much time do residential customers have to pay their water bill?
Where can residential customers pay their water bills? (please check all that applies; enter "X" in front of
3
category):
At water utility offices.
At grocery stores. If there is an extra fee, how much is it (please answer below)?
In banks. If there is an extra fee, how much is it (please answer below)?
A7
By phone. If there is an extra fee, how much is it (please answer below)?
By internet. If there is an extra fee, how much is it (please answer below)?
Other (please indicate below):
If there is an extra fee, how much is it (please answer below)?
4 How much was the average residential monthly water bill (including sewer charges) in 2007?
5 Does your utility offer special pricing for qualified low income households? If yes, please explain briefly
(otherwise enter "None"):
Does your utility offer payment plans for qualified low income households? If yes, please explain briefly
6
(otherwise enter "None"):
What percentage of the total amount of billed water for your residential accounts was not paid at the end
7 of 2007 (including penalties)?
8 What were your total operating costs in 2007?
9 What were your total revenues in 2007?
10 What was the budget of your billing/collection department in 2007?
A8
Part 3 Late and Non‐Payment Policies
We will now ask you some questions about late payment and non-payment.
1 On average, how many of your residential accounts were late in paying their water bills each month in 2007
2 Is there a financial penalty for households who pay a water bill late?
No.
Yes. Please indicate if it is a % of the water bill and specify that percentage:
Please indicate if this penalty also includes a fixed amount:
3 What percentage of late residential accounts actually pay a financial penalty? %
4 Is disconnection for non‐payment legal in your community?
No. Please skip to Question 7.
Yes.
5 On average, how many of your residential accounts were disconnected monthly for non‐payment in 2007?
6 Is there a service charge for reconnecting a residential account?
No.
Yes. How much is it?
It varies by situation.
Does your utility use measures other than disconnection (if it is allowed) to get paid for overdue water
7 bills?
No.
Yes. Please list all measures:
A9
8 Does your utility organize payment campaigns to get households to pay their overdue water bills?
No. Please skip to Question 13.
Yes.
9 Could you tell us when payment campaigns were organized in 2007 and how long they lasted?
10 Did these payment campaigns include substantial discounts?
No.
Yes. Please indicate the average discount for payment campaigns organized in 2007?
11 Who can authorize discounts?
12 What was the total amount of discounts for 2007?
13 What are the main challenges facing your water utility over the next five years?
14 Feel free to write any comments you may have about this survey:
15 Would you like to receive an email summary of our survey results?
Yes (Please make sure you provide us with your email on Page 2).
No.
Thank you for filling out our survey. Your help is much appreciated.
A10