The opportunity for growth therefore exists, and the private water companies are trying hard to increase the number of users or the extent of their service area. Another important factor that has an influence on the industry is that the infrastructure for the metering and distribution of water in public and private companies differs, even when they are both operating in the same territory and under the same circumstances.
The 100,000 commercial and industrial (C&I) customers in Mexico provide 75% of utility revenue. There is also an intermediate group whose numbers are growing, and whose consumption is increasing. Residential customers make up the great majority of consumers, but they represent only a small portion of the income of the water utility companies.
Approximately twelve years ago, the City of Mexico was divided into four equal parts, and water supply was let as a concession to four international companies – Vivendi, Lyonnaise des Eaux, Severn Trent, and Northwest Water – with co-investment from local groups AMSA, SAPSA, IASA and TECSA. Since then there have been significant changes in this panorama, and today the major players are Ondeo and CIMA (previously Vivendi) with smaller utilities like Aguas de Barcelona and GUTSA making up the balance.
In addition there are more than 2,400 municipal water providers in Mexico, and all of these are state run. Larger utilities offer services in the 40-50 big cities, as well as in about 15 cities that are regarded as operating under special conditions, and the rest are small water utility companies. In most cases the water companies work very closely with the municipality to which they belong.
There are two regulators of the water utility companies: the Comisión Nacional del Agua (CNA) and the Sistema de Aguas of the City of Mexico. The CNA regulates at a national level, and is also in charge of the production and transportation of water on a national level. The Sistema de Aguas only operates in the capital city of the country.
In addition to controlling the water utilities so that they operate under established norms, the role of the regulators is to:
- Regulate the modus operandi of the water utilities
- Evaluate new technologies
- Provide project funding
- Approve or reject new projects.
Who are today’s players in the water supply market? To start with there are the two regulators that we have mentioned. Then an important role is played by local and foreign banking institutions which supply the funding for suitable infrastructure programmes. There are the utilities, both public and private, and finally the meter suppliers. Meter manufacturers and the sellers of meter reading systems are usually closely associated, and there are also the providers of IT systems such as CIS. Finally there are the vendors of other types of equipment and infrastructure.
Both volumetric and speed meters are installed in Mexico – the choice depends on the quality of the water. Vendors with the greatest number of meters in the field are Neptune, Elster, Badger and Cicasa.
How are the meters read? It is important to state first that there are good number of companies that still read meters using paper and pencil. This is a reality in Mexico.
Then there are companies that use portable terminals, or handhelds, for the gathering of meter data. And at the end of the meter reading chain there are a few utilities that have already started to use remote reading systems. AMR is becoming more and more popular; the general conditions of insecurity in some parts of the country have driven customers to ask that their meters be read from a remote location, to avoid the presence of strangers in the streets. Some companies have responded by investigating and installing modern systems of remote water meter reading.
The billing systems used in Mexico are for the most part linked to the municipal database system or the client database system. More sophisticated CIS programs also exist, and there has been an increase in the number of modifications made to original systems in order to better serve the needs of both the utilities and their customers.
We have already seen that only half of the households in Mexico have meters. The remainder are on fixed rates, or simply do not have a piped service at all. The state utilities have a strong service orientation, believing that they exist to provide tap water to their customers. Unfortunately the provision of services such as water and electricity can acquire a political flavour, and there have thus been mixed results in the efforts by state utilities to increase the number of customers with access to clean water.
No discussion about the world of water would be complete without examining the income of water companies. We know some fundamental facts – for example, that the water companies can only bill a portion of their real costs; that water tariffs vary significantly around the country; and that the water reserves are in the south of Mexico, while the majority of the consumption is in the north of the country.
There are also some problems in the collection of revenue. Unfortunately, there is a deeply rooted belief that people have a right to water simply because they are citizens and they live in Mexico. This has lead to a culture of non-payment developing among some communities, who believe it is not necessary to pay for the water they use. The result is that utilities lose revenue – and even today the country’s laws do not necessarily support the water company. All this creates a vicious circle, and is eventually perceived as bad service.
A discussion about the water industry in Mexico would not be complete without examining some of the issues that are of major concern today. The first is to ask if the private companies are really doing good business. Not long ago the ten-year concession contract that had been let in the City of Mexico expired – and all the same companies asked for their contracts be extended for a further five years. This shows that it is profitable to run a private water company in Mexico.
LOOKING TO THE FUTURE
Another important issue is that the regulators are going to allow the private companies greater freedom of action. Over the last ten years we have seen a greater movement on the part of the authorities towards encouraging the participation of private companies in the world of water.
What will the future bring? I think there will be many positive things happening in Mexico’s water industry. First, there is going to be an enormous growth in the client base. Then we are going to face very interesting challenges in the production and transportation of potable water. There will also be more opportunities for water operators, as well as a growing need for meters and a system of measurement. And all this will increase the viability of doing business in the water sector in Mexico.