Regulation of Public Utilities under Asymmetric Information: The Case of Municipal Water Supply in France

Abstract

In France, contrary to other sectors such as electricity and telecommunications, the policy decision-makers have not yet included recent recommendations from contract theory in setting up regulation systems and authorities for water utilities. Environmental regulation for water quality is one of the attributions of the Water Agencies created in 1964, that control for industrial and local community pollution of water through a system of effluent emission taxes and pollution abatement subsidies. The legislative trend on environment since the early 1990s is clearly characterized by more and more stringent regulation on effluent emissions and on privately or publicly-owned abatement units. Yet public authorities do not exist that may set up rules based on economic principles that should be enforced by private companies in charge of water public services.