metadata: authors: 0: author: Kariuki,Rosemary Mukami
1: author: Schwartz,Jordan Z.
count: World
docna: 0: docna: Small-scale private service providers of
            water supply and electricity : a review of incidence,
            structure, pricing, and operating characteristics
docty: Policy Research Working Paper
subtopic: Energy Policies & Economics,Water and Human Health,Hydrology,Water Supply and Sanitation Economics,Small Private Water Supply Providers,Energy Demand,Energy and Environment,Energy and Mining,Transport Services,Town Water Supply and Sanitation
teratopic: Water Supply and Sanitation,Water Resources,Infrastructure Economics and Finance
abstracts: cdata!: This paper summarizes the key findings
            and conclusions of a literature review of small-scale
            private service providers (SPSPs) of water supply and
            electricity conducted over a six-month period in 2003. It
            draws on more than 400 documents-including journals,
            articles, reports, case studies and project reports-which
            have been disaggregated and referenced in a publicly
            available database.  SPSPs appear most prevalent in
            countries with low coverage levels, ineffective public
            utilities that provide inadequate or partial services, and
            remote, difficult-to-access regions. SPSPs are especially
            prevalent in post-conflict countries and others with weak or
            failed states. Of the countries for which evidence of SPSPs
            was available, at least half fall into this category. SPSP
            provision of networked services appears to be significantly
            higher for electricity than for water supply. Most SPSPs
            identified through the literature are single-purpose
            entities established for the express purpose of delivering
            water supply or electricity. SPSPs take a variety of
            organizational forms, both for-profit and non-profit. As
            such, they are established for a variety of reasons,
            including: to meet consumer demand, respond to crises, or as
            part of larger business ventures. The technology used may
            extend upstream from distribution services to the means for
            producing or generating water supply or electricity, so
            capital needs vary accordingly. The majority of SPSPs have
            fewer than 50 employees and usually fewer than 10. A lack of
            affordable financing is a constraint for most SPSPs, which
            fund investments mainly through their own earnings and
            savings, loans from friends and family, and money borrowed
            from formal and informal lenders.
repnme: repnme: Small-scale private service providers of
            water supply and electricity : a review of incidence,
            structure, pricing, and operating characteristics
display_title: Small-scale private service
            providers of water supply and electricity : a review of
            incidence, structure, pricing, and operating characteristics
listing_relative_url: /research/2005/10/6304735/small-scale-private-service-providers-water-supply-electricity-review-incidence-structure-pricing-operating-characteristics
topicv3: Water m1326522 137,Energy and Extractives m1326595 507,Transport m1326661 135,Water Supply m1326961 138,Power and Electricity Sector m1327094 515
publishtoextweb_dt: 2010-07-01T00:00:00Z
historic_topic: Water Supply and Sanitation,Water Resources,Infrastructure Economics and Finance
no_of_pages: 38
author_keys: 0: author_key: 93605
1: author_key: 167071
model_extractions: WPS3727 Small-Scale Private Service Providers of Water Supply and Electricity

# _A Review of Incidence, Structure, Pricing and Operating Characteristics_

Mukami Kariuki Jordan Schwartz World Bank - Energy and Water Department Bank Netherlands Water Partnership Public-Private Infrastructure Advisory Facility

## World Bank Policy Research Working Paper 3727, October 2005

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Policy Research Working Papers are available online at http://econ.worldbank.org._ 1
# **Foreword**

Small-scale providers of water supply and electricity have long been an important part of service delivery, particularly in peri-urban, rural and remote regions and in countries with failed public utilities. Of the various forms of small-scale provision, community and government-based systems have received the most attention from donors, analysts, and the public. Indeed, most government, donor and NGO programs now provide funding to community-based organizations, particularly in rural areas and remote regions.

In contrast to these small scale _community and government_ service providers, small-scale _private_ service providers (SPSPs) have only recently gained acceptability as a viable alternative for developing and managing small-scale water supply and electricity services. Many governments and donors considered community based arrangements a more appropriate match for the “social” objectives they aimed to achieve – particularly in those areas where monopoly utilities are responsible for service delivery<sup>1</sup> . As a result, SPSPs are often viewed as “temporary”— although many have been in operation for over 20 years; “rent-seekers”— that take advantage of unreliable public services so as to gouge their customers, and “poor quality”— providing a service that does not meet technical and water quality standards.

In recent years, national programs, policies and global forums have started to pay more attention to these providers. Many practitioners now acknowledge the potential role of SPSPs in developing and managing private water supply and electricity systems and in advancing local private sector development.<sup>2</sup> They recognize that many communities would go unserved if not for SPSPs and that working with these providers to establish measures to improve their quality, efficiency and affordability, and to leverage their capacity in order to expand service coverage will be of more benefit to consumers than continuing to ignore them.

Several leading bilateral and multilateral agencies, including the UK’s Department for International Development and the Inter-American and Asian Development Banks, are currently undertaking activities to study, encourage, and support the role of SPSPs in financing, developing and delivering water supply and electricity services. Given this trend, and to build on and advance this research and advocacy work, the World Bank, the Public-Private Infrastructure Advisory Facility (PPIAF) and Bank-Netherlands Water Partnership (BNWP) launched an initiative to synthesize lessons learned over the past decade, and draw common conclusions as a foundation for strengthening support for SPSP activity at the country level.

This exercise was conducted as a preparatory first phase of what has become known as the Policy Framework and Global Mapping Initiative (PFGMI), a global initiative to

> 1 Water providers were virtually all small scale until the Fabian movement led to nationalizations in the 1920’s.  Historic literature describes the process of  small scale providers growing during the 18th century in Europe into large scale providers, and through mergers, takeovers etc. becoming very powerful so that the fear of monopolies seems to have led to nationalization -in several countries such as England.

> 2 The World Bank Group’s Program for Water Supply and Sanitation, 2004.

2
improve knowledge and understanding of SPSPs in water supply and electricity. In addition to the literature review described in this report, Phase I of the PFGMI assessed the scope and scale of SPSPs worldwide and prepared a proposal for a more detailed study of specific issues, to be carried out in a second phase.

This report is based on work by a team comprising Mukami Kariuki, Jordan Schwartz, Johannes Exel, Carlos Linares, Roohi Abdullah, Anna Rachael and Shelly Hahn. The document was peer reviewed by Tova Maria Solo, Antonio Estache and Clarissa Brocklehurst and revised and edited by Mary Morrison.

3
# **Executive Summary**

This document summarizes the key findings and conclusions of a literature review of small-scale private service providers of water supply and electricity (SPSPs) conducted over a six-month period in 2003. It draws on more than 400 documents - including journals, articles, reports, case studies and project reports - which have been disaggregated and referenced in a publicly available database.<sup>3</sup> It defines key terms and proposes a common typology for classifying the different kinds of SPSPs according to two key parameters: (i) relationship to source of water or electricity (whether dependent or independent), and (ii) type of technology employed. Parallel categorization systems are developed for water and electricity<sup>4</sup> .

The information obtained through the literature review is partial as it reflects only those countries, locations or cases for which documented evidence of SPSPs has been prepared (and found, as much of the work is unpublished and therefore difficult to access). Despite the limitations in consistency and comprehensiveness of the information available, approximately 7000 electricity SPSPs (not including battery recharging businesses) were found to be operating in 32 countries and 10,000 water SPSPs were identified in 49 countries. Given the scarcity of documented information on SPSPs, this sample is likely to represent a portion of the total population of SPSPs.

SPSPs appear most prevalent in countries with low coverage levels, ineffective public utilities that provide inadequate or partial services and remote, difficult-to-access regions. SPSPs are especially prevalent in post-conflict countries, and others with weak or failed states. Of the countries for which evidence of SPSPs was available, at least half fall into this category. SPSP provision of networked services appears to be significantly higher for electricity than for water supply **.** Most SPSPs identified through the literature are single-purpose entities established for the express purpose of delivering water supply or electricity. SPSPs take a variety of organizational forms, both for-profit and non-profit. As such, they are established for a variety of reasons including: to meet consumer demand, respond to crises or as part of larger business ventures. The technology employed may extend upstream from distribution services to the means for producing or generating water supply or electricity, so capital needs vary accordingly. The vast majority of SPSPs have fewer than 50 employees and usually fewer than 10. A lack of affordable financing is a constraint for most SPSPs, who fund investments mainly through their own earnings and savings, loans from friends and family, and money borrowed from formal and informal lenders.

> 3 This database is currently under design and will be available through the World Banks Rapid Response Unit (www.rru.worldbank.org)

> 4 This document addresses other key characteristics such as legality, formality and organizational form. However, from the literature review it was evident that there was a lot of overlap among these characteristics and the relevance of organizational type was often not elaborated on.  The authors therefore opted to treat these aspects qualitatively.

4
# **Table of Contents**

|1. INTRODUCTION 6|
|---|
|1.1 Why Focus on Small-scale Private Service Providers?................................................ 6|
|1.2 Aim and structure of this report.................................................................................... 9|
|2. TOWARDS A COMMON DEFINITION OF SPSPs<br>10|
|2.1 Defining the “private” in SPSP................................................................................... 10|
|2.2 Scale: SPSPs as Micro, Small and Medium Enterprises (MSMEs)........................... 10|
|2.3 Classifying SPSPs....................................................................................................... 11|
|3. ASSESSING THE SCOPE AND SCALE OF SPSP ACTIVITY 16|
|3.1 Summary of Literature Review: Water Supply SPSPs............................................. 18|
|3.2 Summary of Literature Review: Electricity SPSPs .................................................. 19|
|4. KEY PATTERNS AND TRENDS AMONG SPSPS<br>20|
|4.1 Organization................................................................................................................ 20|
|4.2 Technology ................................................................................................................. 21|
|4.3 Staffing........................................................................................................................ 22|
|4.4 Customer service and marketing................................................................................. 23|
|4.5 Financing..................................................................................................................... 23|
|4.6 Pricing, Sales and Earnings......................................................................................... 24|
|4.6.1. Unit Price Analysis ................................................................................................. 25|
|5. CONCLUSIONS 28|

|Annex 1:|Mapping the location and incidence of Water Supply and Electricity<br>Providers|
|---|---|
|Annex 2.|Percentage of Population/Households Served By Water Supply SPSPs --<br>As Reported In Literature|
|Annex 3.|Number of Customers Identified in Literature as Served by Water Supply<br>SPSPs|
|Annex 4.|Number of Customers Identified in Literature as Served by Electricity<br>SPSPs|
|Annex 5.|Typology of Water Supply SPSPs|
|Annex 6.|Defining Small-scale Service Providers|

5
# **1. INTRODUCTION**

# **1.1 Why Focus on Small-scale Private Service Providers?**

In communities where national, regional or municipal utilities are not providing sufficient or reliable electricity or water services, households depend instead on a wide variety of local providers. These providers finance, develop and manage systems, ranging in sophistication from water tankers and diesel generator dealers to stand-alone networks and power grids. Organizationally, they encompass community groups, village administrations and private entrepreneurs. And while a portion of them receive some form of public funds from governments, donors and NGOs, many are privately financed by business people, financial intermediaries and users.

This report focuses on those small-scale _private_ service providers (SPSPs) that have contributed to the extension of water supply and electricity services at their own initiative and with resources mobilized largely from private sources. SPSPs often bear regulatory and political risk, in complex and remote locations that may also present commercial risk.

SPSPs have traditionally played three basic roles: “gap filler” in countries with high coverage levels but low service quality (measured by the number of days or hours within which services are available); “pioneer”--developing and operating systems in areas where there is no public service but there is customer demand; and “subconcessionaire”--buying water or electricity in bulk from the utility and selling it on to customers. In addition, SPSPs are increasingly assuming the function of “manager” of small public systems in need of improved efficiency.

An analysis of the scope, scale, constraints and roles of SPSPs is important because:

- **_They are significant service providers in many countries, particularly in periurban, rural and remote regions, and may be the only viable operators for the foreseeable future_ .** SPSPs are estimated to reach as much as half the population in some countries, particularly in post-conflict situations and other cases of weak or failed states. Overall, it is estimated that up to a quarter of the urban population in Latin America and nearly half of urban dwellers in Africa rely on SPSPs for at least a portion of their water supply. In low-coverage countries, or poor regions in higher coverage countries, SPSPs can play an important role in service provision, compensating for - or supplementing - the limited financial and human resources of the public sector.

- **_The local private sector currently accounts for over 85 percent of all private sector investment in water security_**<sup>**_5_**</sup> **_and the potential for private financing of small-scale waster supply is significant._** The local private sector has demonstrated its ability and interest in the development and management of water supplies even in remote or difficult locations that are unattractive to formal providers. Despite unclear legal or operational status and sub-optimal financing

> 5 _Towards Water Security:  A Framework for Action_ , Global Water Partnership,  2000.

6
arrangements (primarily from the informal market) these providers have made significant investments in water supply and electricity systems. Establishing a clear policy and regulatory framework for SPSPs could free up scarce public financing for less attractive segments of the market and reduce costs, thereby improving prices for consumers.

- **_Counting and expanding existing SPSP activity may help governments reach the coverage targets set out under the Millennium Development Goals (MDGs)._** Because SPSP activity is often considered temporary or informal, it is often not counted towards coverage targets<sup>6</sup> .  Recognizing and supporting SPSPs  may be a practical way for governments to reach service coverage objectives more quickly. As decentralized options are increasingly accepted as an integral part of service delivery by governments and decision makers, particularly in remote regions that are isolated from utility networks, policies that formalize or promote SPSP activity are increasingly important for creating a favorable business environment for SPSPs; encouraging increased private sector investment; and improving the terms and conditions of service for consumers.

- **_Small-scale providers have the potential to become local private operators in small towns, and over time, in medium and large towns._** With growing recognition of their role in water supply and electricity services, SPSPs in a number of countries are evolving from owner-operators of privately funded systems to developer-operators of formal systems in small towns or multi-village areas (for example in Paraguay and Uganda).  While SPSPs’ prior experience in the informal sector may not adequately prepare them for formal bidding processes (which are more familiar to contracting  and consulting teams), recent experiences in several countries demonstrate that with the right support and consortiumbuilding SPSPs can become an important channel for the development of local private sector capacity for water supply and electricity service.

- **_The possibilities for provision on a larger scale have diminished throughout the developing world, as both governments and the private sector have scaled back major infrastructure investments (see Chart 1)._** While small entrepreneurs are unlikely to take on the responsibility for massive rehabilitation or expansion projects in large metropolitan areas, SPSPs can help fill the growing gap in private financing of infrastructure by serving marginal urban communities, periurban areas, and outlying and rural communities.  These are often the most costly clients to serve for large investors, the last to receive connections and the targets of controversial universal service obligations imposed upon private investors and concessionaires.

> 6 Improved water source (percent of population with access).  Access to an improved water source refers to the percentage of the population with reasonable access to an adequate amount of water from an improved source, such as a household connection, public standpipe, borehole, protected well or spring, and rainwater collection. Unimproved sources include vendors, tanker trucks, and unprotected wells and springs. Reasonable access is defined as the availability of at least 20 liters a person a day from a source within one kilometer of the dwelling

7
Despite these potential advantages, many governments and practitioners have paid insufficient attention to SPSPs, preventing effective planning and policy making for their engagement in longer-term water and electricity provision. This is because: i) SPSPs have been viewed as just a temporary or stopgap solution; ii) both electricity and water supply are seen by many as natural monopoly sectors - for policy makers it has simply been easier to deal with a small number of large enterprises - national providers or municipal providers – than to regulate a market of SPSPs;; (iii) water supply in particular is often considered a public good, social good or free good, and therefore not appropriate for private provision; (iv) global technical standards sometimes do not recognize SPSPs’ modes of service. (For example, the Joint Monitoring Program of the World Health Organization does not consider water tankers and vendors as sources of safe water supply.)

**Chart 1:  Total Investment in Large Private Electricity and Water Projects, 1993-2003**

<!-- Start of picture text --> 45,000<br>40,000<br>Electricity<br>35,000<br>Water & Sewerage<br>30,000<br>25,000<br>20,000<br>15,000<br>10,000<br>5,000<br>0<br>1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003<br>US$ million<br><!-- End of picture text --> Finally, while sound and consistent data are needed for informed decision-making (e.g., to justify policy decisions, enable monitoring and facilitate benchmarking), this information has often been lacking. Since the 1970s, SPSP activity has been documented, although on a limited basis (for example G. White, 1977, D. Whittington 1988). However, much of the evidence collected is anecdotal and based on scant or incomplete data (for one location or city, one type of SPSP, or with scarce data or details regarding SPSP characteristics or business). To date only a handful of projects has focused on documenting the scope and scale of SPSP activity, although the number of projects and programs with SPSP components has increased. These focus on knowledge generation— raising the profile of small scale providers; reform of regulatory and business environments—recognition of existing SPSPs; and transaction design, improved contracts, access to financing—stimulating the entry of local SPSPs in development or management of services.

8
# **1.2 Aim and Structure of this Report**

This report therefore aims to clarify what is known about water and electricity SPSPs. It:

- **Describes the common features of SPSPs.** In particular, it discusses what being private and small-scale involves, and draws lessons from the more abundant literature on micro, small and medium sized enterprises sector.  It looks at what is relevant across sectors in understanding the role of policy, the business environment, micro-finance and regulation.

- **Proposes a common typology for describing and classifying different types of SPSPs.** Given the spontaneous and informal manner in which most SPSP activity arises there are many definitions of SPSPs have evolved.  This document attempts to classify SPSPs into broad categories that are common across countries. The typology is intended to enable a better understanding of the characteristics of different SPSPs in order to allow for the design of appropriate solutions.

- **Assesses the scale, scope and current state of knowledge of SPSPs.** Using existing data sources, it is not possible to estimate the scale of SPSP provision with a high degree of accuracy.  Because the information collected to date is motivated first by the observation and study of SPSPs, and therefore limited to a specific location or type of SPSP, extrapolating across countries and regions is difficult.  The incidence and importance of SPSPs beyond the scope of the current literature can only be inferred from the observations and could not be estimated with a high degree of confidence until broader analyses is conducted. This phase of the Global Mapping Initiative thus provides numbers on the scale and scope of SPSP activity as currently observed within the context of the cumulative studies identified through the literature review.

- **Compares patterns and trends in small-scale water supply and electricity services.** As there are many lessons to be learned across infrastructure sectors, and from a comparison of water supply and electricity in particular, the study reviews lessons learned in each sector as a useful basis for further analysis and sector development. Six key parameters are discussed: organization, technology, staffing, financing, sales, and customer services.

9
# **2. TOWARD A COMMON DEFINITION OF SPSPs**

There are no standard definitions to describe and classify small-scale providers, largely due to their informal or improvised nature. Terms and phrases have been applied inconsistently in the literature, generating further confusion (see Box 1). For example, with respect to small-scale water providers, the term “vendor” is used in numerous, often contradictory ways. “Vendor” can describe service providers that deliver water to their customers, or more broadly describe any actor selling water, including households selling from their yard connections. The emergence of new hybrid arrangements has only complicated matters. Thus the literature review

## **Box 1. The Definition of Terms:**

**Understanding “Independent” Providers**

A review of the literature on SPSPs reveals at least three contradictory ways of using the term “independent”:

- In some literature, “independent” denotes the organizational status of the entity, suggesting simply that an “independent” provider is not institutionally tied to a larger utility.

- In other sources, “independent” refers to financial autonomy and thus refers to any private provider under the assumption that they are not receiving public financing or other major forms of subsidy.

- Because the above definitions overlap with other organizational and financial definitions, this study recommends that the term “independent” should only describe providers who are physically de-linked from larger utilities, that is, those who produce (and sell) their own sources of energy or water.

highlighted the importance of clearly defining and categorizing SPSPs, to better understand them and shape programs of support and supervision for them.

# **2.1 Defining the “Private” in SPSP**

The following key features distinguish private SPSPs from other small-scale providers of water supply or electricity.<sup>7</sup> SPSPs are established:

- at the initiative of a private owner or operator, which may be either a for-profit or non-profit organization;

- with a significant share of capital financing (25 percent or more) provided or borrowed by the private entity; and

- on a commercial basis (although they may be unprofitable or have non-profit status).

# **2.2  Scale: SPSPs as Micro, Small and Medium Enterprises (MSMEs)**

SPSPs are assumed to serve fewer than 50,000 people each or 5,000 customers in small settlements, whether urban, peri-urban or rural.

The literature on smaller private businesses in all sectors, broadly known as Micros, Small and Medium-Sized Entities (MSMEs), can provide some interesting insights for SPSPs, which are the MSMEs of the water supply and electricity sectors. SPSPs generally share the following characteristics with MSMEs operating in other market

> 7 This definition deliberately excludes wholly owned public systems (whether funded by government, a donor or NGO) that do not have significant risk taken by the private entity (e.g. management contracts for existing small towns, local government systems or utility standpipes).

10
segments (e.g. telecommunications, textiles, food processing or transport services). The literature shows that SPSPs typically:

- use private capital to develop their business;

- conduct their business in a constrained regulatory environment

- face excessive political interference and/or corruption;

- face difficulties in obtaining financing and

- have limited access to industry, financial, technical and managerial knowledge and information.

Within the MSME category, The World Bank Group defines micro or small enterprises as those with fewer than 50 employees, total assets of up to $3 million or total sales of up to $3 million. This definition was used to guide the review of literature on SPSPs, taking into account a distinctive feature of the water supply and electricity sector: low levels of direct employment. Small-scale water and electricity companies generally have fewer staff than other businesses of equal turnover or asset value, such as manufacturing or value-added agricultural businesses. A well functioning utility may have a staff-toconnection ratio of 4:1000 or below. At this ratio, an SPSP might serve a community of 25,000 people (assuming 5,000 household connections) with only 20 staff. Productivity benefits of these providers are indirect—albeit considerable. Electricity provision allows for home-based work and evening study while household water supply provides improved health benefits and considerable time savings, particularly for women and children who are often responsible for water collection. Understanding MSME linkages is also important for policy and regulatory reforms in favor of SPSPs. For example, initiatives to establish microfinance or credit institutions, simplify business licensing procedures, provide for tax incentives or offer training and capacity building programs intended for small business in general could have residual benefits for SPSPs - provided that they are formally recognized or eligible.

# **2.3 Classifying SPSPs**

All SPSPs found in the literature review have some common characteristics around which they can be grouped. Based on the literature review it was considered important to characterize SPSPs along two main axes: relationship to their source of energy or raw water; and type of technology employed (see Table 1).

11
**Table 1. Overview of Source and Technology Related Parameters**

||**Independent**<br>(Develop own source)|**Dependent**<br>(Source supplied by larger<br>utility)|
|---|---|---|
|**Grid or Network**|Integrated<br>production/generation with<br>transmission/distribution|Purchasing water or<br>electricity and on-selling<br>through mini-grid/network|
|**Point Source**|Own source, fixed location<br>vendor|Connected to utility fixed<br>location vendor|
|**Mobile**<br>**Distributors**|Own source, mobile vendor|Purchase from utility<br>mobile vendor|

The following are fuller explanations of these two key parameters.

# • **_Relationship to Source:  Independent and Dependent_**

- SPSPs can be divided into two broad categories:  (i) those with their own, independent source of water supply or electricity—such as a well or borehole, diesel generator or small hydro plant; and (ii) those that are dependent on a formal public utility for the supply of water or electricity. The nature of policy, legislative and regulatory frameworks for SPSPs varies according to the source of water or energy involved.  For the former group, key regulatory issues may include ground water abstraction, electricity generation and distribution, water quality and public health standards.  For the latter, contract terms with the supplying utility, including tariff and connection charges, fee structures and licensing procedures are of more relevance.

# _Technology or system:  Networks/grids, Point Sources and Mobile Distributors_

Three general categories have been defined to cover the technology of the servicedelivery system: (i) networks or grids, through which water supply or electricity is delivered via a fixed system by the SPSP right to a customer, such as a household or point source; (ii) point sources—kiosks, standpipes or dealerships to which customers travel to purchase water (by the container) or electricity (battery charging); and (iii) mobile distributors, such as tankers, solar panels, and diesel generator distributors who deliver to the client through non-fixed channels.

Within the framework described above, a classification system (see Tables 2 and 3) has been derived for water-supply SPSPs. In addition to the Source and Technology parameters, information from the literature is synthesized wherever possible into organizational parameters for both water and electricity providers as defined below: 12
- **_Organization:  Profit Motive and Legal Status_**

- The organizational characteristics of the entity that owns and operates the system or source of water supply are more difficult to define because of the wide variation in legal frameworks under which they are established.  The salient organizational characteristics of SPSPs are the strength of profit motive and their legal status.  Most SPSPs are either non-profit entities which benefit (by virtue of their status) from grant funding or they are profit-seeking businesses that rely on private sources of financing. By status, the range of SPSPs includes sole proprietorships and family businesses; user associations and voluntary membership organizations; community-based organizations; and informal sector enterprises.

The remainder of the report uses the definitions provided above as a basis for analysis.

13
# **Table 2: Categorizing Water Supply SPSPs**

|**Features, by**<br>**technology**|**Dependent**|**Independent**|
|---|---|---|
||**i****_) Piped Network_**|**_s_**|
|System|Operator buys water in bulk from utility<br>and develops distribution sub-networks<br>connected directly to households,<br>institutions andpublic kiosks standposts|Operator develops own water sources<br>(wells or boreholes) and connects<br>network to households and other users.|
|Organization|Private company or individual,<br>community organization or<br>neighborhood association|Sole proprietor, cooperative, private land<br>and housing developer, water user<br>association, community-based<br>organization.|
|Regulatory<br>Issues|Contract with utility, business license,<br>customer agreements, bulk rates,<br>customer tariffs|Groundwater abstraction permits, title<br>deeds, resale permits/licenses, water<br>quality testing, business licenses, rights<br>to own infrastructure and/or to lay<br>networks inpublic rights of way|
||**ii****_) Point Source_**|**_s_**|
|System|Kiosk or stand post connected to the<br>utility network (could be household<br>supply); buying water in bulk - at a<br>special tariff - or at household tariff.|Water point linked to own source (well<br>or borehole, underground or above-<br>ground storage tank) installed privately<br>and operated on a for-profit basis. Water<br>maybepurchased from a tanker.|
|Organization|Individual, enterprise, self-help group|Neighborhood association, micro-<br>enterprise, community based<br>organizations|
|Regulatory<br>Issues|Contract with utility, license/permit,<br>customer tariff, bulk purchase price,<br>performance incentives|Groundwater abstraction permit, license,<br>tariff structure, water quality testing|
||**iii****_) Mobile Distribu_**|**_tors_**|
|System|Tankers or truckers obtain water in bulk<br>from the utility (or municipal supply)<br>and deliver it directly to the customer,<br>including public utility water storage<br>tanks, communal cisterns, or individual<br>households and institutions|Tankers, truckers or carters develop<br>source or obtain water from a private<br>well for distribution to households;<br>public utility water storage tanks,<br>communal cisterns, or institutions|
|Organization|Sole proprietor, tanker association,<br>lessee, informal sector|Sole proprietor, tanker association,<br>lessee, informal sector|
|Regulatory<br>Issues|transport license, business license,<br>tanker cleanliness, bulk rate, utility<br>contract, customer tariff|Transport license, business license, water<br>quality, abstraction permit,|

A parallel classification system was also derived for electricity SPSPs: 14
# **Table 3:  Defining Electricity SPSPs**

|**Features, by**<br>**technology**|**Dependent**|**Independent**|
|---|---|---|
||**i****_) Distribution Netw_**|**_ork/Grid_**|
|System|Purchase electricity in bulk from main<br>utility and sells it on kWh or fixed basis<br>to clients connected to a distribution<br>network installed by the SPSP. May<br>operate in the utility service area, or<br>extend services beyond these boundaries.|Generate own electricity and distributes to<br>customers through own local network.<br>Electricity is sold on a kWh or at a fixed<br>rate.|
|Organization|Concessionaires, licensees,<br>cooperatives, enterprises, corporations|Concessionaires, licensees,<br>cooperatives, enterprises, corporations,<br>community-based organizations|
|Regulatory<br>Issues|Power purchase agreement, consumer<br>agreements|License or permit, tariff structure,<br>technical and service standards, hydro|
|||rights for mini hydros ?|
|**ii****_) Point Sour_**|**_ce_**||
|System|Purchases electricity in bulk from main<br>utility, operates battery-charging station<br>at which customers pay to periodically<br>recharge batteries|Generate own electricity for charging<br>station; sells electricity on basis of<br>charged battery|
|Organization|Enterprises|Enterprises<br>Community based organizations|
|Regulatory<br>Issues|Power purchase agreement; if<br>commercial to commercial, minimal<br>regulatory concerns||
||**iii****_) Mobile Distrib_**|**_utors_**|
|System|Electricity supplied through a standalone<br>system installed at the customer’s<br>home/compound – diesel generator or<br>solar system. SPSP operates as agent for<br>utility, leasing or renting systems on<br>agreed terms - fee and/or commission|SPSP sells home based systems over the<br>counter on a cash or credit basis;<br>or leases/rents these systems to clients|
|Organization|Enterprises (Energy service companies)|Enterprises (Dealers, Energy service<br>companies)|
|Regulatory<br>Issues|Agents contract/agreement, customer<br>agreements|Licence, Legal framework – sidestepping<br>exclusivity arrangements of utility|

15
# **3. ASSESSING THE SCOPE AND SCALE OF SPSP ACTIVITY**

Over 400 documents were reviewed in detail, covering small-scale providers of water supply and/or electricity in 49 countries (see Table 3)<sup>8</sup> . Documentation on SPSPs in these countries covered at least 100 different locations. Several studies included evidence from more than one country, and some countries were the focus of several studies. But most works examined a specific location or a subset of actors within a location, such as a particular community in a city.

The literature identifies around 7,000 electricity SPSPs and 10,000 water supply SPSPs in the 49 countries considered. Given the scarcity of documented information on SPSPs, this sample is likely to represent only a fraction of the total population of SPSPs. However, because research conducted for the underlying documents was usually motivated by the observation of specific one or more type of SPSP, it is difficult to extrapolate across countries or regions from the available research. In addition, because of the broad range of SPSPs represented in the literature, it is impossible to estimate coverage levels from SPSP totals even for those countries covered by the existing research. Some SPSPs (e.g. handcart vendors) serve a small number of customers, others (e.g. grids) may serve as many as 1000 connections each. Finally, while there are strong indications from the literature that the scope and scale of SPSP activity has increased over the past decade, it is unclear how much of this apparent increase is based on better reporting or documentation of SPSP activity, rather than actual increases in activity.

Despite these shortcomings, when the existing literature is viewed in its entirety, there is a compelling story that emerges about the incidence of these providers in lower income countries and their importance to basic service provision for the poor. Table 4 provides a synopsis of the documented incidence of SPSPs by region.

The literature suggests that SPSPs are most prevalent in areas with (i) low coverage levels, (where the gap between served and under-served or un-served customers is large and stable or growing); (ii) ineffective public utilities – where customers may receive water or electricity services for only a few hours a day or week; (iii) remote regions that are difficult to access through conventional means. They are especially prevalent in low income and conflict-affected countries. Of the 49 countries for which evidence was available, about one-half fall into the category of conflict-affected. One example is Cambodia, where small-scale private electricity providers serve as much of the population as the national power utility (see Box 2) Although small-scale private water provision can take various forms, SPSP provision of _networked_ services appears to be significantly higher for electricity than for water supply. This may be due to several factors including:

> 8 For several countries although no documentation of SPSPs was identified, anecdotal evidence of SPSP activity was provided.

16
- The lower levels of capital investment required to purchase a small generator and string up wires than to produce, treat, store, pump and pipe water.

- The competitive nature of basic water provision.  As opposed to electricity, all households have some access to water—however polluted or difficult to access— since it is a basic ingredient to life.  As a result, piped water providers are often competing against free surface water, community wells or aggressive mobile vendors.

- Public policy that highlights the nature of water supply as a public and social good.  As a result many small systems are community-based and may not operate on a commercial basis.

Despite scale and scope economies that could be derived from bundling business activities between water and electricity supply (e.g., customer billing, meter reading, business management and electricity purchases for pumping), very few SPSPs provide both services. Still, several SPSPs engage in other business activities that relate to their sector, such as irrigation services provided by private water suppliers and agricultural equipment being sold by dealers of solar panels.

**Table 4.  Documented SPSP Activity by Region**

|**East Asia**<br>**and the**<br>**Pacific (8)**<br>|**South Asia**<br>**(5)**<br>|**Africa (22)**<br>**Both Water and E**<br>|**Middle**<br>**East and**<br>**North**<br>**Africa (3)**<br>**nergy**<br>|**Eastern**<br>**Europe and**<br>**Central**<br>**Asia (3)**|**Latin America**<br>**and The**<br>**Caribbean (12)**<br>|
|---|---|---|---|---|---|
|Cambodia<br>Indonesia<br>Lao PDR<br>Philippines|Bangladesh<br>India, Nepal<br>Pakistan<br>Sri Lanka|Cote d’Ivoire, Senegal,<br>Somalia, South Africa,<br>Tanzania, Uganda, Ethiopia,<br>Ghana, Kenya, Mali,<br>Mozambique|Morocco<br>Yemen||Argentina,<br>Bolivia, Peru,<br>Guatemala<br>Honduras<br>Nicaragua|
|||<br>**Water Only**<br>|<br>||<br>|
|Mongolia<br>Thailand<br>Vietnam||Angola, Benin, Burkina<br>Faso, Democratic Republic<br>of Congo*, Guinea,|Jordan|Uzbekistan*<br>Kyrgyztan*<br>Albania*|Colombia,<br>Ecuador, Haiti,<br>El Salvador,|
|||Mauritania, Niger, Nigeria,<br>Sudan, Zambia<br>**Energy Only**|||Paraguay|
|China||Zimbabwe|||Dom. Rep|

Note: * = based on anecdotal evidence.

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## **Box 2.  Rural Electricity Enterprises in Cambodia**

The 1993 UN-supervised elections marked Cambodia’s return to democracy and relative peace. Decades of conflict and neglect had shattered the country’s infrastructure, but the new government lacked the resources to thoroughly rebuild. An estimated 600 to 1,000 SPSPs sprang up mostly between 1993 and 1997 to distribute electricity in the countryside. These enterprises now serve about half of all households that receive electricity. They have the following characteristics:

- Most are sole proprietorships. The typical entrepreneur has a high school education and a few (11 percent) have additional technical training. Most technical information is obtained through equipment manufacturers. The average number of full-time employees per SPSP is three, with a similar number working on a part-time basis.

- All SPSPs use diesel generator sets with an average installed capacity of about 100 kW and one to three kilometers in 100mm, three-phase distribution conductors. Most of the systems have energy losses between 20 and 30 percent.

- The estimated average cost of producing 1 kWh is around US$0.34, of which 85 percent is for fuel. The average price for one kWh is roughly US$0.51 with three quarters of SPSPs charging between US$0.40 and US$0.70. About 80 percent of them make a profit.

- The estimated average original value of assets per SPSP is about US$21,000.

- Around half of SPSPs borrow money short-term at a monthly interest rate of one to two percent. Roughly 40 percent of debt financing comes from family members.

- They have an average of 200 clients, of which households make up 94 percent.

- Electricity services are provided for about 4 hours per day on average.

- Most customers are billed from meter readings and pay monthly. Customers are responsible for purchasing electric meters.

[references 7, 118, 147, 151]

# **3.1  Summary of Literature Review:  Water Supply SPSPs**

In the water sector, literature from 44 countries with SPSPs was identified and reviewed. Half the examples cited were in cities or towns, with the remainder in rural villages or other communities. Tens of thousands of providers, mostly "point source" systems or vendors, had been documented. The nature of water SPSPs varies regionally, but corresponds closely to the level of coverage and quality of service in a given country. In Latin America and the Caribbean, where urban coverage is high, SPSPs more frequently take the form of piped water systems, mainly peri-urban, small town and rural; in South Asia, SPSPs seem to focus on gap-filling activities with many tankers operating in various cities. As would be expected, across all regions, low income countries had a larger presence of SPSPs, particularly point sources and mobile distributors (e.g. Haiti, Burkina Faso, Bangladesh).

The existing documentation, though abundant, is strongly oriented toward opinion and advice, and is frequently based on case studies rather than data collection. Much of the work that has been carried out in this regard is based on the initial work on small scale providers carried out by the Water and Sanitation Program in Africa, East Asia and Latin America. No literature on SPSPs was found for the Europe Central Asia region or large 18
countries such as Brazil, Mexico, China and Russia and there were only a few documents on the subject from the Middle East North Africa or South Asia. It is unclear whether the lack of literature in these regions is due to lack of importance of SPSPs or a result of low priority accorded by sector practitioners.

# **3.2  Summary of Literature Review:  Electricity SPSPs**

For electricity, literature from 32 countries with SPSPs was reviewed, with a focus on dealers of solar panels and other household electricity generating equipment as well as networked services.<sup>9</sup> The level of SPSP activity is high in 15 of these countries, primarily in rural areas and small settlements. Data on micro-power systems show that the total number of such systems in developing countries has more than doubled over the past decade. This gradual expansion took place over a period in which public investment in power was declining and private funding for large-scale investments was inconsistent. An estimated 10-50 million clients are served by the 7,000 SPSPs currently operating in the electricity sector<sup>10</sup> . About 85 percent of these are in Asia. In Africa, the Middle East and Latin America the number of SPSPs identified in each region was less than 500. In Latin America and the Caribbean, SPSP activity, particularly in large countries such as Brazil, was focused largely in remote regions of the country and provided only a small fraction of electricity service. In Africa, SPSP activity was largely limited by access to financial markets, high transaction costs, and the monopolistic rights granted to national utilities. That said, a few post-conflict countries such as Mozambique demonstrated a notable incidence of SPSPs. The maps in Annex 1 shows countries which were found to have significant levels of SPSP activity in water supply and electricity according to available literature.

> 9 For the purposes of this study, literature on battery recharging businesses, categorized as “point source” systems in the typology, was not reviewed.  This level of service is not considered comparable to delivered electricity or that available from diesel and photo-voltaic home-based systems.

> 10 As in the water supply sector overall numbers of small-scale providers, including community and public systems would be much higher.  In China alone there could be 40,000 such systems, of which SPSPs comprise an estimated 1,000.

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# **4. KEY PATTERNS AND TRENDS AMONG SPSPs**

This section describes the key patterns and trends that emerged from the literature analysis, employing the classification system developed above. Six key business elements were considered: organization, technology, staffing, financing, sales, and customer services.

# **4.1 Organization**

Most SPSPs identified through the literature are single-purpose entities established to deliver water or supply electricity. Only a small number serve multiple functions and those that do rarely cover both water and electricity. SPSPs are established for a variety of reasons including: (i) meeting consumer demand (e.g. individuals asked to provide access to water supply or electricity for a fee by their neighbors or communities); (ii) responding to a crisis (e.g. neighborhood associations formed to develop an alternative to failing public systems); or (iii) as part of a larger business venture such as estate/housing developer, landlord or photo-voltaic dealer (see Table 5). Depending on their purpose, origin and ownership structure, SPSPs may either be informal or formal and if formal operate as a for-profit or non-profit organization.

**Table 5. Typical Organizational Forms of SPSPs**

- **<u><mark>Water Electricity</mark></u>**

- • Due to their larger investment requirements, **Piped** • **Grids or networked systems** may take a number of **Network Operators (PNOs)** are more likely to have organizational forms.  And while many such systems some form of legal status, although this varies by are owned by user associations, a growing number are country.  Smaller networks (5 to 50 connections) are managed by private individuals. **Non-profit** SPSPs are typically owned by an individual who may have started typically more formal user or community-based as a private borehole owner, gradually connecting the organizations, such as associations, cooperatives, neighbors; larger systems often are owned by user societies, and specialized NGOs providing networked associations established expressly for the purpose of services. developing a network for members’ use (20 to 500 • The literature review did not include **point source** connections). **or battery charging systems** which were even less

- • **Point sources** (kiosks) may hold simple licenses or researched than the other systems<sup>11</sup> . (This category permits for abstracting ground water, or operating will be omitted in the tables below.) kiosks Dependent ones may be licensed by the utility • Because they require more sophisticated leasing and involved - many work in areas where the utility is financing schemes, **home-based systems** are unable to lay water lines (e.g. illegal or unplanned distributed by for-profit organizations such as dealers. settlements).  Others remain informal because of legal **Profit-seeking** SPSPs are more likely to include or administrative constraints rather than by choice. dealers of PV and diesel generators, sole

- • **Mobile distributors** , such as tankers, trucks proprietorships, companies and corporations.

- **Mobile distributors** , such as tankers, trucks

- transport water to their customers.  They are often owned by sole proprietors who may have a small fleet of vehicles. They may have transport licenses but often do not have permits to sell water.

> 11 **Point Source or battery charging systems:** The electricity sector equivalent to water kiosks may be considered the battery recharging business.  These stations are generally connected to a power company and, for a fixed fee, recharge 12 volt car batteries that are used in homes to power small appliances.  The literature reviewed as part of this study did not include battery recharging businesses.

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The legal form these organizations take is largely driven by national policy, legislative frameworks and history. For example, SPSPs in countries with a tradition of cooperatives in other sectors, such as Kenya, Colombia and Bangladesh tend to be predominantly cooperatives. A large number of SPSPs that are registered as non-profit organizations— such as cooperatives, neighborhood associations, community groups, and societies— provide network services. Most of the SPSPs that are informal are individual entrepreneurs or family businesses. Many water SPSPs are members of SPSP associations (e.g. Kenya, Pakistan, Ghana), which serve a number of functions including sinking common or shared boreholes, purchase bulk water from utilities, and lobby for improvements in terms and conditions of service. For SPSPs operating on a formal basis, operating constraints (e.g., access to finance) are often closely linked to organizational status: for example fully private ventures rely on equity and informal borrowing while non-profit SPSPs may have access to grant funding to augment their own resources; similarly the legal form of the organization may also limit SPSP operations – a study on small scale providers in Kenya noted that the rights of small providers (e.g. to operate a bank account) varied according to the legislation (e.g. Societies Act, Cooperative Act) they operated under.

# **4.2 Technology**

The range of technology used by SPSPs is as varied as the types of SPSPs documented above (see Table 6). Some SPSPs are only engaged in the supply of services, while others are also involved in production. The technology employed may extend upstream from delivering a service to the customer to the means for producing or generating water supply or electricity, in the case of independent SPSPs. Such providers bear additional equipment costs related to generating or producing, as well as for storage or water treatment, as appropriate, compared with dependent SPSPs. SPSPs are known, and often criticized, for applying technological standards that may not conform to national norms. A key reason cited in the literature is the rigid nature and high costs implied by existing norms and the need to match services to the affordability levels. SPSPs are also known to have introduced innovation in improving cost effectiveness of service delivery, however, to date this has not been well documented or studied.

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## **Table 6. Technology Employed by SPSPs**

- **<mark>Water Electricity</mark>**

- • **Piped Network Operators (PNOs)** : Most piped • **Grids or Networked systems:** Electricity is networks have a similar set of components, but capital typically produced by second-hand, high speed diesel investment costs varied widely because of network generators with distribution wires connecting 50-300 length, number of connections and other technical households.  Households may or may not be metered. inputs required.  SPSPs establishing piped networks Service is often offered only during "peak" demand were more likely to rely on professional design and periods--sometimes as little as 3 to 5 hours per day--as engineering inputs (e.g. to drill a borehole or lay a a result of lack of base load, high operating costs piped network.) (fuel) and low average off-peak demand.  Where

- • **Point sources** ranged in complexity from a simple networks are powered by run-of-river or hydro wheels, connection to a standpost/kiosk and tap, to a borehole capacity of wattage may be low (100 to 1000 kW with tank, pipe and tap.  Many were found in peridepending upon river head) but service is constant urban or unplanned settlements with unclear tenure. except during seasonal river lows or flooding periods. Inappropriate planning and technical standards had led • **Home based:** The electricity sector equivalent to to haphazard layout and/or the use of sub-optimal mobile water vendors is the sales or leasing business technology. servicing home and businesses which depend on self-

- • **Mobile distributors** Across all countries studied, generation units.  These are often individual high speed water tankers in use by SPSPs typically had a holding diesel generators, or simple photovoltaic (solar panel) capacity of nine cubic meters.  Many had been systems.

- **Mobile distributors** Across all countries studied,

- water tankers in use by SPSPs typically had a holding capacity of nine cubic meters.  Many had been purchased second-hand and may have transported other goods in the past.

# **4.3 Staffing**

Most SPSPs have flat structures with less than two layers between management and the client. Many owner/managers know their clients and are therefore considered more responsive by consumers. Most SPSPs reviwed in the literature had fewer than 50 employees— the majority of the reports for which employment patterns were detailed indicated that there were fewer than 10 employees (see Table 7). However, despite their small scale, SPSPs can play an important role in job creation. Data on water-supply vending activity in five cities (Port-au-Prince in Haiti, Dakar in Senegal, Nouakchott in Mauritania, Kayes in Mali and Bobo Diaulasso in Burkina Faso), indicates that the number of people employed in vending activities represents two to four per thousand people, or 1 to 3 percent of regular jobs in those cities [Water and Sanitation Program, 2000].

## **Table 7. Typical Staffing Profile  of SPSPs**

- **<u><mark>Water Electricity</mark></u>**

- • The number of staff  typically employed by SPSPs • **Grids or networked systems:** The Cambodia Rural involved in water supply ranges from two to four Energy Enterprise survey is one of the few pieces of employees, for **PNOs** serving fewer than 800 research that has sampled staffing questions for households.  The owner is typically the manager and electricity SPSPs.  There, the average number of fulleither relies on family members or employs a handful time employees per SPSP was found to be three, with a of additional staff on a full- or part-time basis to assist similar number working on a part-time basis. with specialized tasks.  For systems with under 100 • Dealers of **home-based systems** typically had two customers, staff-to-connection ratios are not a useful or three employees, with a high school degree or less, measure of efficiency. one operations manager who is often also the owner, a

- • **Point sources** (kiosks) were often operated by a technical personal and sometimes a person responsible single individual, perhaps supported by family for bill collection and relationships with the clients. An members. additional two to three people work on a part-time

- • Staff reported for **mobile distributors** shows a basis often to support in bill collection or helping with consistent pattern of tankers staffing each truck with a maintenance or the expansion of the system.

- Staff reported for **mobile distributors** shows a

- consistent pattern of tankers staffing each truck with a driver and assistant.

- For small systems,

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# **4.4 Customer Service and Marketing**

As with all private sector operators, customer service and marketing play an important role in the operations of SPSPs (see Table 8). The literature often indicates a preference among consumers for SPSP services, which they perceived (at the time of study) to be more accessible and reliable (delivered water on demand) than the formal utility, even when more expensive. As their services are tailored to specific niche markets, SPSPs are therefore more responsive to customer demand. They also offer terms that are more appropriate to their customers. Many do not require proof of legal residence, such as title deeds or rental agreements, in order to provide services and some offer credit facilities and flexible payment terms for connections and monthly tariffs. As most SPSPs operate on a small scale and in peri-urban rural and remote locations where people tend to know each other, customer service and relations are a priority and many business transactions take place on a trust basis, with credit arrangements being provided to some clients.

**Table 8. Customer Service and Marketing Arrangements for SPSPs**

|**Water **|**Electricity**|
|---|---|
|•<br>**PNOs’**billing and collection practices are often<br>similar to those of other utilities: monthly accounts on<br>the basis of fixed charges or meter readings. However<br>many small PNOs offer personalized services, tailoring<br>payment schedules to individual requirements or<br>extending<br>credit<br>facilities.<br>These<br>specialized<br>arrangements also cover other costs such as connection<br>or membership fees, which may be paid over extended<br>periods of up to 24 months.<br>•<br>Most<br>**point**<br>**source**<br>systems<br>and<br>**mobile**<br>**distributors**charge on a volumetric basis at the point<br>of sale— per jerrican, tanker load or storage container.<br>The literature also revealed a wide range of payment<br>mechanisms including weekly and monthly billing<br>dependingon customerpreference.|•<br>**Grid or Networked systems**: Some SPSPs sell<br>electricity on a metered basis directly to customers and<br>charge customers on a monthly or daily basis; others<br>charge on the basis of number of light bulbs.<br>•<br>**Home Based Systems**: Maintaining good customer<br>relations is particularly important where credit or<br>leasing arrangements are offered and prompt after-sale<br>service is essential for ensuring that monthly lease fees<br>are paid.|

# **4.5 Financing**

Investment requirements vary widely depending on the nature and extent of the system installed, but access to affordable financing was a constraint for most SPSPs surveyed (see Table 9). The majority tap a combination of three sources: their own earnings and savings, loans from friends and family, and money borrowed from formal and informal lenders. Informal money lenders appear to be a key source of financing, even though monthly interest rates are often as high as 5 percent per month. Electricity SPSPs appear to have greater access to commercial sources such as micro-finance institutions and commercial and development banks— non-profit or community based SPSPs are often eligible for grant funding provided by NGOs and international donors.

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## **Table 9. Typical Financing Requirements of SPSPs**

|**Water**|**Electricity**|
|---|---|
|•<br>Total establishment costs for**PNOs**range from<br>US$100 per connection to US$300 per connection,<br>depending upon ease of access to raw water, ability to<br>pay of customer base, degrees of competition from<br>other network providers and other sources of water,<br>dispersion of households being targeted, cost of capital<br>and duration of borrowing tenors, and pumping and<br>storage investment needs. These costs may be<br>recovered<br>through<br>membership<br>fees,<br>upfront<br>connection charges, connection costs spread out over<br>an agreed payment period or may be folded into tariffs.<br>•<br>**Point sources**(kiosks) Investment requirements for<br>point source networks also vary. This cost, which<br>ranges from US$ 100 to US$ 2,000, is primarily<br>determined by distance to the source, and for<br>independent systems could also include the cost of<br>developing a water source.<br>•<br>**Mobile distributors:**The average investment cost<br>for a second-hand water tanker is US$10,000-15,000,<br>while new ones cost more.|•<br>SPSP<br>investment<br>requirements<br>ranged<br>from<br>US$1,000 to a few million dollars. For larger<br>investments, commercial lenders’ loan terms are often<br>difficult to meet: monthly interest rates can range from<br>1 percent to 3 percent, for a period of a year to two<br>years. Non-commercial lenders may charge 5 percent<br>per month interest rates.<br>•<br>Financing instruments include: co-financing grants,<br>output-based subsidies, soft loans, guarantees for debt<br>financing, subsidies, and equity contributions from<br>different sources (beneficiaries, investors, etc). For<br>user-based systems, contributions to capital investment<br>may also be made in the form of cash, labor or local<br>materials.|

# **4.6 Pricing, Sales and Earnings**

Data on pricing, sales and earnings was not provided consistently and information was generally limited to prices of goods (e.g. solar panels) and water and electricity services (see Table 10). More information on prices was available for water supply than for electricity (water data from 93 points of reference in 47 countries was collected and analyzed, as presented in Chart 2 below) Data on profits was scarce, and the reliability of this, particularly for informal SPSPs, was difficult to ascertain. The most accurate information on sales was available from tankers and kiosks as it was easier to track sales for these over a given period through observation.

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## **Table 10. Pricing, Sales and Earnings of SPSPs**

|**Water **|**Electricity**|
|---|---|
|•<br>Across the various types of SPSPs, average prices<br>were fairly consistent across countries although the<br>range of prices charged varied widely— determined by<br>local conditions.<br>•<br>**PNO**’s unit prices ($0.17/m<sup>3</sup>to $0.86/m<sup>3</sup>) compare<br>favorably with utility prices ($0.02/m<sup>3</sup>to $0.79/m<sup>3</sup>).<br>The prices offered by private piped networks are on<br>average 1.5 times those of public utilities, despite<br>higher levels of public subsidies provided to public<br>utilities.|•<br>Electricity SPSPs offer several alternative products,<br>each with a different pricing strategy.<br>•<br>**Grids or networked systems**Electricity from a<br>mini-grid goes from 7cUS$/kWh, when capital costs<br>are co-financed through grants, to cUS$92/kWh for<br>full commercial operations. Electricity sold per<br>appliance ranges from S$5 to US$15 per month<br>depending on the number and kind of appliances. In<br>some communities where the primary use is domestic,<br>a flat rate per month is applied.|
|•<br>**Mobile distributors**: unit prices ranged from<br>$0.17/m<sup>3</sup>to $11.00/ m<sup>3</sup>for vendor-carters, within the<br>category of mobile distributors (MDs). The findings<br>support observations in the literature that water from a<br>mobile distributor may cost as much as 10 times that<br>from apiped supply<sup>12</sup>.|•<br>Individual**home-based systems**such as solar<br>panels range from US$200 to US$500 for sufficient<br>electricity for a few light points up to a mixture of a<br>small television, radio and several lights or other<br>appliances.|

This following section analyses unit prices, price differentials and connection charges<sup>13</sup> .

# **4.6.1. Unit Price Analysis**

The unit price of water per cubic meter was analyzed based on data from 47 countries and 93 locations according to the typology presented earlier in this report. The analysis showed wide variation in the prices offered by the type of small scale private service provider (SPSP) at global level. Unit prices charged by PNOs ($0.17/m<sup>3</sup> to $0.86/ m<sup>3</sup> ) were notably similar to those of formal utilities ($0.02/m<sup>3</sup> to $0.79/ m<sup>3</sup> )— for which data was presented as a benchmark. Despite the fact that many of the formal utilities in the 47 countries for which literature was reviewed, provide highly subsidized services, which may not account for full costs, prices charged by PNOs did not differ greatly<sup>14</sup> .

> 12 As concluded by a study in Manila, Philippines, the poor pay more for water and consume less, however, average prices/m3 reveals that SPSPs do not charge excessive prices. The poor depend more on intermediaries, which appears to have an upward effect on prices. [190] Sohoni, Neera Kuckreja. 2003. Draft. How effective are small-scale independent providers in serving the poor? Experience from the Philippines. Water and Sanitation Program, Department of the Interior and Local Government, and AusAID.

13 The unit price analysis converts the rates obtained from the literature (typically per cubic meter or liter) and converts these rates to US dollars ($) for each type of SPSPs. Price Differential analysis uses the cost price and compares it to the selling price. And lastly, the Connection Charge is the cost the customers/households pay to connect to the Utility or the Private Network Operator (PNO).

14 The unit price of public utility water may only be a fraction of the total cost to society of the provision of the service since tariffs rarely cover capital costs and often fail to cover operations and maintenance. Through budgetary operating subsidies and debt obligations, taxpayers pay the remainder. By contrast, the tariffs of private network operators generally cover all costs, including the amortized capital investments required to build the networks.

25
**Chart 2: Price of Water by Type of Service Provider**

<!-- Start of picture text --> $11.00<br>$10.00<br>Public Privat e<br>$8.00<br>Piped Unit ized<br>$6.32<br>$6.00<br>$4.00<br>$3.60<br>Based on data from 47 countries<br>Average<br>and 93 locations based on the<br>literature review<br>St d. Deviat ion<br>$2.00<br>$0.79 $0.86 $0.76<br>$0.34 $0.45<br>$0.00 $0.02 $0.17<br>Public Utilities Private Netw orks Point-source Vendors Tanker Trucks Carters<br>Mobile Distributors<br><!-- End of picture text --> Chart 2 above indicates that price of water increases as economies of scale in production and sales decrease. Likewise, as unit size or volume of sales decrease, prices go up. Carters, which have the smallest sales volume, charge the highest unit price per m<sup>3</sup> of water— as much as $11.00/ m<sup>3</sup> or more. Thus, the ability of the service provider to amortize capital costs as well as operating inefficiencies (such as fuel, bribes and salaries) over larger volumes is the key to improving affordability.

On average, water from piped network operators (PNO) costs 1.5 times more than that from a formal utility, whereas, water from a point source (PS) costs, on average, up to 4.5 times the utility and, finally, water from the mobile distributors (MD) can costs up to 12 times more than the utility. Taking into account the role of local conditions in establishing prices, this information provides a useful baseline. Further study of factors influencing SPSP prices by geographic location and understanding how these factors contribute towards such pricing is necessary.

The range of prices by geographic location, as seen in the Chart 3 below, also confirms that local conditions play a key role in determining prices. Factors like: distance from the source, seasonal fluctuations in water availability, economic conditions, physical terrain, 26
and other such extraneous factors may significantly contribute to the final price/m3 at the local level. Evidence, suggests that presence of Private Network Operators (PNOs) in Africa (AFR) and South Asia SAR) regions to be limited, as data was not available or cases were not documented. Active presence of PNOs was found in East Asia and Pacific (EAP), and Latin American and Caribbean (LAC) regions. Point Sources (PS) were less prevalent in Latin American and Caribbean (LAC) and East Asia and Pacific (EAP). Mobile Distributors (MDs) were prevalent in all regions which displayed SPSP presence.

**Chart 3: Average Price of Different Service Provider Based on Regions**

<!-- Start of picture text --> $5.00<br>$4.50<br>$4.00<br>$3.50 A FR<br>EAP<br>$3.00<br>ECA<br>$2.50<br>LAC<br>$2.00<br>SAR<br>$1.50<br>MENA<br>$1.00<br>$0.50<br>$-<br>Utility PNOs PSs Vendors - Vendors -<br>Tankers Carters<br>Mobile Distributors<br>US$ per Cubic Meter<br><!-- End of picture text --> It is interesting to note, that the lowest per cubic meter prices for all categories of providers were observed in East Asia Pacific (EAP) region. PNOs were at $ 0.37/m<sup>3</sup> , PSs at $ 1.02/m<sup>3</sup> , and MDs at $ 2.18/m<sup>3</sup> , these values were also lower than the overall average seen in Chart 3 above. Price is determined by the market, the number of actor involved, the competition in the sector that keeps prices at the lower level and SPSPs outreach.

This analysis provides insight into the trends of price variations globally and regionally for different small-scale private service providers (SPSPs). Furthermore, it provides a benchmark to think about a particular provision based on region and its prevalence. This analysis also lends toward the need to think about the extraneous factors globally/regionally that contribute toward escalating and de-escalating the price per cubic meter.

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# **5.  CONCLUSIONS**

The literature illustrates the extent and nature of small-scale private service provision of water supply and electricity services, providing rich examples that demonstrate the complexity and diversity of SPSPs, but also highlighting the limited extent of information on SPSPs – thus making it difficult to draw broad conclusions on SPSPs. Further analytical study is required to deepen current knowledge of SPSPs and to determine how best to go about the development of the water supply and electricity sectors in those countries in which SPSPs currently play an important role and are expected to continue to do so for some time to come. Where it is determined that SPSP services are essential to expanding service coverage to unserved communities, governments should strive to adapt and improve sector norms to accommodate them. However, as sector reforms take effect and the option of extending formal (public utility) services to all consumers at more affordable rates becomes possible, governments will need to work with SPSPs to develop an exit strategy that takes into consideration lost opportunity (investments and earnings) to 28
<!-- Start of picture text --> WATER SUPPLY SPSP's!<br>PERCENTAGE OF HOUSEHOLDS RELYING ON SPSP's - DOCUMENTED<br>iSPSP C 0 -10%HH: Gs sPsP's Documented - HH Coverage NA ——— \jpepantionat Baundanes<br>GY 11 - 30% [ Anecdotal Information on SPSP's<br><!-- End of picture text --> <!-- Start of picture text --> HN 3) - 50% [ | No Data Available. excueenen ae<br>Ee 51 - 100% =i Developed Countries (OECD and Non-OECD); “Forwre: looutions documentedpresence: databasefoounty; Region, <i}<br><!-- End of picture text -->

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<!-- Start of picture text --> ELECTRICITY SPSP's!<br>PERCENTAGE OF HOUSEHOLDS RELYING ON SPSP's - DOCUMENTED<br>Energy SSF Cloval SSF Cloval Cloval a [ | No Data Data Available —— |nternational Boundaries<br>HERE ssp Incidence Low [ | Developed Countries (OECD and Non-OECD)<br><!-- End of picture text -->

<!-- Start of picture text --> Energy SSF Cloval SSF Cloval Cloval a [ | No Data Data Available —— |nternational Boundaries<br>HERE ssp Incidence Low [ | Developed Countries (OECD and Non-OECD)<br>[I psp incidence MEDIUM - e _— sins<br>| . urce: presence: se<br>SPSP Incidence HIGH “For locations documented (country, region, city)<br>ee EFS. _ Re aoe we<br>f i GAD Fikes ~ 5 ~ re ed pict pt J wa {><br>Zi<br>Ip cigs i ~ = ye - 1 \e@e) bn ‘ —<br>é ' ie ae Ms i ? ‘ Ea Be =o<br>y e<br>3]=[| tmThis mopandrwas producedolen ramon od oyjgn Unitobraof The WorldBank. =uy & al S6<br>|& Sameexdonomen or accepine oftch bovndones eS : | :aS<br><!-- End of picture text -->
Annex 2. Coverage by water supply SPSPs, as reported in literature

|**Regions and Locations**<br>|**Population / Households served (%)**|**Reference**|
|---|---|---|
|**_Africa_**|||
|Benin, Cotonou|69|[13]|
|Burkina Faso, Bobo Diaulasso|33|[148]|
|Niangologo<br>|68<br>|[148]<br>|
|Ouagadougou<br>|49<br>|[223]<br>|
|Ivory Coast, Abidjan|35|[223]|
|Boundiali|50|[119]|
|Ghana, Kumasi|32|[81]|
|Guinea, Conakry|66|[13]|
|Kenya, Nairobi<br>|60<br>|[223]<br>|
|Mandera|90|[119]|
|Ukunda|45|[81]|
|Mali, Kayes<br>|69<br>|[148]<br>|
|Bamako|63|[21]|
|Mauritania, Nouakchott|51|[13]|
|Niger, Guidan Rouondji|40|[119]|
|Nigeria, Onitsha|95|[81]|
|Ibi|40|[119]|
|Dankida<br>|15<br>|[119]<br>|
|Senegal, Dakar|21|[148]|
|Diourbel<br>|90<br>|[119]<br>|
|Sudan, Khartoum<br>|80|[81]|
|Somalia, Ali Matan|10|[119]|
|Tanzania, Dar es Salaam|56|[223]|
|Newala|25|[81]|
|Uganda, Kampala|30|[223]|
|Kasangati|25|[81]|
|**_Latin America & Caribbean_**|||
|Argentina, Cordoba|15 - 20|[2]|
|Bolivia, Santa Cruz|100|[2]|
|Colombia, Barranquilla|20 - 25|[2]|
|Guatemala, Guatemala|32|[2]|
|Haiti, Port-au-Prince|70|[76]|
|Honduras, Tegucigalpa|30|[65]|
|Paraguay, Asuncion|30|[2]|
|Peru,Lima|26 - 30|[2]|
|**_East Asia and Pacific_**|||
|Cambodia, Ky Cham<br>|50<br>|[119]<br>|
|Indonesia, Jakarta|44|[25]|
|Surabaya<br>|27<br>|[ 119]<br>|
|Philippines, Manila|30|[89]|
|Cebu<br>|36<br>|[25]<br>|
|Ormoc|10|[119]|
|Thailand, Sawee|10|[119]|
|Vietnam,Ho Chi Minh|19|[25]|
|**_South Asia_**|||
|Mongolia, Ulaanbaatar|5|[25]|
|Nepal, Kathmadu|5 - 7|[25 - 346]|
|Pakistan, Karachi|40 - 50|[19]|
|India , Delhi|6 - 47|[346 - 3]|
|Bangladesh,Dhaka|14|[25]|

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# Annex 3. Number Of Customers Identified in Literature as Served by Water SPSPs

## **As Reported in Literature Reviewed for all Regions (By location for all types of SPSPs)**

||**Country**|**City**|**Number**<br>**of**<br>**Households**|**Number**<br>**of**<br>**Households Served by**<br>**SPSPs**|**Reference**|
|---|---|---|---|---|---|
|1|Argentina|Cordoba|220,000|38,200|[2]|
|2|Benin|Cotonou|130,000|60,000|[217]|
|3|Bolivia|Santa Cruz|188,000|100,000|[2]|
|4|Colombia|Urban|N/A|197,000|[2]|
|5|Ghana|Accra|171,800|125,000|[215]|
|6|Guatemala|Guatemala|200,000|78,500|[2]|
|7|Haiti|Port-au-Prince|198,000|60,000|[76]|
|8|Honduras|Tegucigalpa|107,800|16,000|[75]|
|9|Indonesia|Jakarta|1,660,000|1,280,000|[83]|
|10|Sudan|Khartoum|260,000|60,000|[187]|
|11|Mauritania|Nouakchott|N/A|20,000|[217]|
|12|Paraguay|Asuncion|109,200|50,000|[2]|
|13|Peru|Lima|1,120,000|360,000|[2]|
|14|Philippines|Manila|1,600,000|625,000|[33]|
|15|Tanzania|Dares Salaam|260,000|180,000|[224]|
||**Total Numbe**|**r Reported**||**3,249,700**||

City population is divided by 5 to obtain number of households 32
# Annex 4. Number Of Customers Identified in Literature as Served by Electricity SPSPs

||**Wor**|**ldwide estim**|**ate of SPSPs a**|**nd number of cl**|**ients served**||
|---|---|---|---|---|---|---|
|**Country**|**Number of**|**Average**|**Number of**|**Total households**|**SPSPs as part of**|**Significance on electricity**|
||**SPSPs**<br>[-]|<br>**clients per**<br>**SPSP**<br>[-]|**clients**<br>million|**electrified**<br>million|<br>**total electrification**<br>%|<br>**access in country**<br>high/medium/small|
|**SOUTH ASIA**|||||||
|Bangladesh|67|44,776|3.00|5.3|56%|high|
|Nepal|250|250|0.06|0.7|9%|medium|
|Sri Lanka|200|400|0.08|2.4|3%|medium|
|India|1,800|350|0.63|87.4|1%|small|
|Pakistan|20|300|0.01|14.6|0%|small|
|_Sub total_|_2,337_|_9,215_|_3.78_|_110.4_|_3%_||
|**EAST ASIA/CHINA**|||||||
|Philippines|119|44,538|5.30|13.2|40%|high|
|Cambodia|600|200|0.12|0.4|32%|high|
|Laos|125|200|0.03|0.2|13%|medium|
|Indonesia|2,000|200|0.40|22.5|2%|small|
|China|1,000|300|0.30|249.0|0%|small|
|_Sub total_|_3,844_|_9,088_|_6.15_|_285.3_|_2%_||
|**AFRICA**|||||||
|Kenya|20|5,000|0.10|0.5|21%|high|
|Mali|100|300|0.03|0.2|15%|high|
|Somalia|100|200|0.02|0.2|12%|high|
|Mozambique|10|1,000|0.01|0.3|4%|medium|
|Ethiopia|100|200|0.02|0.6|3%|medium|
|Uganda|5|500|0.00|0.2|1%|medium|
|Zimbabwe|30|300|0.01|1.0|1%|small|
|Cote d'Ivoire|3|10|0.00|1.6|0%|small|
|Ghana|3|10|0.00|1.7|0%|small|
|Senegal|3|10|0.00|0.6|0%|small|
|South Africa|10|1,000|0.01|5.7|0%|small|
|Tanzania|5|300|0.00|0.7|0%|small|
|_Sub total_|_389_|_736_|_0.20_|_13.2_|_2%_||
|**MIDDLE EAST/NORT**|**H AFRICA**||||||
|Yemen|300|200|0.06|1.5|4%|medium|
|Morocco|100|200|0.02|4.1|0%|small|
|_Sub total_|_400_|_200_|_0.08_|_5.6_|_1%_||
|**LATIN AMERICA**|||||||
|Bolivia|80|300|0.02|1.0|2%|medium|
|Nicaragua|10|1,000|0.01|0.5|2%|medium|
|Dominican Rep|15|1,000|0.02|1.1|1%|small|
|<br>Honduras|10|1,000|0.01|0.7|1%|small|
|Peru|35|1,000|0.04|3.8|1%|small|
|Argentina|10|1,000|0.01|7.0|0%|small|
|Brazil|100|300|0.03|34.2|0%|small|
|Guatamala|10|500|0.01|1.5|0%|small|
|_Sub total_|_270_|_763_|_0.14_|_49.9_|_0%_||
|**ECA**|**_-_**|**_-_**|-|-|||
|**Total**|**7,240**||**10.35**|**464.3**|**2%**||

**Note:** countries listed have been selected after literature review - list might change after field surveys

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Annex 5. Page 1: Typology of Water Supply SPSPs **Categories and Subcategories**

# **1. Private Piped Network Operators (PNOs)**

**1.1 Independent networks 1.2  Dependent networks** 1.1.1 Private for profit piped network operators that 1.2.1 Private for profit piped develop their own water sources (wells or boreholes), and network operators in partnership (or serve households (and other users) by means of small under contractual arrangement) with networks of pipes with house connections. Includes water utilities. Includes subregistered / licensed operators in Guatemala City [136]; concessions  bulk water purchases in and unregistered / unlicensed operators in Asuncion, Marinilla, Colombia [4] Manila, Paraguay [2]; Kampala, Uganda [217]; and Cebu City, Philippines [12], and Banteay Philippines [346]. Meanchey, Cambodia [181]. 1.1.2 Cooperative-built, owned and managed for profit 1.2.2 Neighborhood or community piped networks serving households, regulated / licensed, not-for-profit piped network with independent water sources, in Santa Cruz, Bolivia operators in partnership (or under [135], and Santo Tomas, Philippines [12]. contractual arrangement) with water utilities. Includes concessionaires of small systems and bulk water 1.1.3 Private land and housing developers and purchases from utility in Manila, homeowners associations operating their own private for Philippines [12]; profit piped networks serving households with independent sources of water in Cordoba, Argentina [133], Guatemala City [136]; and Manila, Philippines [24]. 1.1.4 Water user associations (WUAs), water committees, water boards, or community-based not-for-profit systems managing piped networks, unregulated, with independent water source. These include self-investment and shared investment in the case of donor-supported systems in rural areas of El Salvador [233], and Itagua, Paraguay [4]. 1.1.5 Small-scale community owned and operated (multisector) irrigation systems that also supply domestic water in rural areas in Guatemala [138].

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# **Annex 5 page 2: Typology of SPSPs Categories and subcategories (continued)**

## **2. Private Point Sources (Kiosks)**

|**2.1 Independent Kiosks**|**2.2 Dependent Kiosks**|
|---|---|
|2.1.1<br>Micro-enterprise,<br>neighborhood<br>or<br>cooperative associations who develop and<br>operate their own water points for-profit, in<br>Kampala, Uganda [217] and Gitaru, Kenya<br>[98].|2.2.1<br>Private<br>and<br>neighborhood<br>based<br>associations who develop and operate a water<br>kiosk (or tap) via network extensions, licensed<br>or unlicensed and purchase in bulk (or with<br>household tariff) from utility in Nairobi<br>(Kibera), Kenya [217- 16].|
|2.1.2 Private owner-operated and for-profit<br>baths with independent source of water in<br>Lima, Peru [65].<br>2.1.3 Private well or borehole owner-operators,<br>that sell bulk water to public or private mobile<br>vendors in Lima, Peru [134], and Karachi,<br>Pakistan [19] (where well, pump and tank<br>systems are called “hydrants”).|2.2.2 Private or community developed and<br>operated public baths that use utility/municipal<br>water sources. Includes franchisers of public<br>bathing facilities in Delhi, India [205].<br>**2.3 Dependent Resellers.**<br>Residential and institutional for-profit resellers<br>(through garden hose or garden faucet).<br>Includes individual vending of utility water<br>from domestic faucet/tap, elevated tank or<br>cistern in Port-au-Prince, Haiti [76], Jakarta<br>Indonesia [83]; Abidjan, Ivory Coast [217]; and<br>Cartagena, Colombia [107].|

Note: Cases referenced are for illustration purposes only. They do not represent the universe of these types of providers. Utility owned and built kiosks / standpipes, such as those in Dakar, Senegal [11] and Burkina Faso [217] are not included by definition of SPSPs.

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# **Annex 5 page 3: Typology of SPSPs Categories and subcategories (continued)**

**3. Private Mobile Distributors (PMDs) 3.1 Independent Tanker Trucks 3.3 Dependent Tanker Trucks** Private for-profit and independent truckers that 3.2.1 For-profit private trucks that buy water in bulk purchase water from private wells or unimproved / from utilities or government / municipal sources. untreated sources (springs, rivers, and lakes). These are for-profit, registered / licensed / regulated Includes licensed/registered and nontank trucks that distribute water to public utility licensed/registered tanker-trucks of up to 9m3 water storage tanks, communal cisterns, or capacity, trucks carrying several 55 gallon barrels individual households and institutions in Chennai, and other load-bearing vehicles. Tank trucks may India [126], and Teshie, Ghana [118]. distribute water to public utility water storage tanks, communal cisterns, individual households, or institutions in Lima, Peru [134], and Kathmandu, Nepal [183] **3.2 Independent Carters 3.4 Dependent Carters** 3.2.1 Carters and other for-profit street vendors and 3.4.1 For-profit carters, street vendors and other water carriers who obtain water from wells and water carriers who purchase water from tankers boreholes, and unimproved / untreated sources and/or kiosks and deliver water by the can (typically (springs, rivers, and lakes) and deliver water by the 20 liters) via non-mechanized means. These can via non-mechanized means to households in operators may or may not be the owner of the Greater Khartoum and Port Sudan, Sudan [187]; and vehicle/equipment used to distribute water, many Nairobi, Mombasa and Kakamega [154 – 182]. vendors rent carts on a daily basis in Dar es Salaam, Tanzania [224, 217], Port-au-Prince, Haiti [76], and 3.2.2 Bottlers and vendors of purified/bottled water Dakar, Senegal [11]. selling UV purified river water in Manila, Philippines [190], Shanghai, China [346], or borehole water in Dhaka, Bangladesh [16]. 3.4.2 Bottlers and vendors of tap water (in plastic bags or bottles) in Nairobi Kenya [16], and Kano, Nigeria.

This analysis excludes not-for profit public utility-owned trucks that provide water to neighborhoods (free of charge) drawn from utilities or government / municipal sources, and natural sources (untreated water). Tank trucks may distribute water to public utility storage tanks, communal cisterns, individual households or institutions in Delhi, India [178], and Lima Peru [134]. Anecdotal evidence suggests that these “moonlight” selling water to households without control of government authorities.

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# **Annex 6:  Defining Small-Scale Service Providers**

As noted in the introductory section, the phrase Small-Scale Private Service Providers (SPSPs) is one subset of a larger category of Small-scale Service Providers (SSPs), that includes both private and public owned and/or managed small-scale systems. Given the wide range of Small-scale Service Providers operating in the water supply and electricity sectors, the focus of this SPSP study was limited to Type 1 and Type 2 (private – entrepreneurs and user associations) SSPs as described below. There is some recent evidence that SPSPs are starting to play a key role in the development and management of Type 3 (public – local government) systems (Uganda and Paraguay). And in future, they could play an important role in managing Type 4 (public - community ) systems, although this may be more complex to organize until their legal status is made and their financial records are strengthened.

||**Private Sector SS**<br>**(SPSPs)**<br>|**Ps**<br>||**Public Sector SSPs**<br>|
|---|---|---|---|---|
|**KEY**<br>**FEATURES**|**TYPE 1:**<br>**Individual/**<br>**entrepreneur**<br>establishes a water<br>supply or<br>electricity service<br>which is managed<br>as a business/on a<br>commercial basis<br>(e.g. entrepreneur –<br>aguateros)|**TYPE 2:**<br>**User association**<br>**or self help**<br>**group**.<br>Established on<br>initiative of the<br>users, but not<br>always managed<br>on a commercial<br>basis. (e.g.<br>Society/self help<br>group)|**TYPE 3:**<br>**Local**<br>**Government**<br>**scheme**initiated<br>by government and<br>funded by<br>government and<br>donors. Managed<br>on a commercial<br>basis (e.g. small<br>town water<br>system).*|**TYPE 4:**<br>**Community based**<br>**scheme**initiated by<br>Government with<br>donor support. 100<br>percent financing<br>externally sourced.<br>Not managed on<br>commercial basis<br>(e.g. community<br>based gravity<br>scheme.*|
|**Water**: Piped<br>Network<br>**Electricity:**<br>Grid|Primary focus of<br>SPSP initiative|Secondary focus<br>of SPSP<br>initiative. **|||
|**Water**:<br>Point Source or<br>Kiosk<br>**Energy:**Battery<br>Recharging|Primary focus of<br>SPSP initiative.<br>Documented for<br>water supply only|Secondary focus<br>of SPSP<br>initiative. **|||
|**Water**:<br>Mobile Distributor<br>**Energy:**Home<br>based systems|Primary focus of<br>SPSP initiative|Secondary focus<br>of SPSP<br>initiative. **|||

* Excluded from SPSP study because of public ownership and/or extent of grant financing.   SPSPs could play a  future role in developing and/or managing these systems.

37
- ** Sources of financing/financial management practices could not be accurately ascertained from the literature review.

**_<u>wb268448 L:\Jordan\FINAL PAPER -Phase I Report SPSPs August 2005.doc 09/12/2005 2:11:00 PM</u>_**

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