9. Urban Water Management

Over the last 30 years, the Chilean water industry has carried out significant legal and institutional reforms to improve water and sanitation services (WSS), becoming a success example from the point of view of coverage and service quality. One of the most important reforms was the privatization of the urban WWS, so currently fully private and concessionary water companies provide WSS to 95.8% of urban customers. The reform also involved a change in the regulatory model followed to set water tariffs. It is based on the definition of a hypothetical efficient company. However, the Chilean water industry presents important challenges to address in coming years. The average percentage of non-revenue water is larger than the established for the efficient model. It reveals a problem of asymmetric information in the process to set water tariffs among the regulator and water companies. In addition, water tariffs do not integrate effectively the scarcity value of water. Further improvement of wastewater treatment systems is also a challenging issue for the Chilean water companies. As in many areas, climate change has increased the probabilities of droughts, floods and extreme turbidity events which require several adaptation strategies to be managed properly.