The Water Sector in Germany

The German water sector is still an exception area in terms of competition law. In contrast to other network industries like electricity or telecommunication almost no competition takes place in the German water supply, which is to a high degree organized in decentralized, small scaled, regional monopolies. Water management competence in Germany is clearly located at the municipal level, which admittedly restricts international competitiveness. Compared to other countries, the German water sector is very fragmented and small-scaled. In the 1990ies there was a controversial debate on liberalization and privatization of German water supply. During the period 1997 – 2005 significant structural changes took place with respect to the organizational forms of water management. Public utilities that were organized as municipal departments in former times were transferred into more independent organizations: Now in the water supply sector the municipal enterprise and public-private partnership (PPP) models dominate and within the wastewater sector semi-autonomous municipal agencies and inter-municipal agencies/water management associations are prevailing. However, even if the legal form of companies was changed from public law to private law, the municipalities remained the owners of the new firms under private law by holding a majority. In Germany, privatisation of the water supply is neither linked with direct competition between municipal institutions for the market nor with an obligatory yardstick competition. However, the water supply companies are in a “quasi competition” as three out of four companies raise public charges in accordance with the Municipal Charges Law. Here, attention is to be paid to the principles of cost-covering and equivalence. The remaining quarter of the providers raises payments under private law and is subordinate to the anti-trust control of abusive practices. The anti-trust price control is oriented to the comparative market concepts and accepts price differences between providers on the strength of clearly defined criteria only. An important advantage of the structures in the German water supply is that the strong communal anchoring of the German providers ensures a high degree of political involvement. This system enjoys strong acceptance amongst the population because of the high quality of drinking water and the moderate prices for water and wastewater services.