Water supply and sanitation in Germany

Public water supply and sanitation in Germany are responsibilities of municipalities, of which there were more than 12,000 in 2008. Smaller municipalities often associate in municipal associations to provide water and/or sanitation services. Municipalities or municipal associations in turn can delegate these responsibilities to municipal companies, private companies or public-private partnerships.

There are about 6,400 public water service providers and about 6,900 sanitation service providers in Germany.[14] With a few exceptions, water and sanitation services are typically provided by different entities in the same locality, with sanitation bills being collected by the water utility on behalf of the entity in charge of sanitation.

Among the 1,266 larger water service providers about 15 percent are municipal utilities under public law (Eigenbetriebe); 16 percent are inter-municipal utilities (Zweckverbände); 63 percent are utilities under private or mixed law either under private, public or mixed ownership.;[15] and 6 percent are water and land associations (Wasser- und Bodenverbände). Only 3.5 percent of service providers were entirely privately owned (no figures are available on companies with mixed ownership, an increasingly prevalent form of ownership).

Unlike public water supply, sanitation is considered a sovereign core responsibility (hoheitliche Kernaufgabe) of municipalities in Germany. This implies that, unlike water supply, it is exempt from VAT and corporate taxes. It also implies that companies under private law cannot directly provide sanitation services. The great majority of municipalities thus provide sanitation directly through a municipal sanitation department (Regiebetrieb). Less than 10 percent of the 6,000 sanitation providers are utilities under public law, and none are utilities under private law. However, municipalities or municipal utilities can sign operating contracts (Betreiberverträge) with private companies. Out of the 900 largest sanitation service providers, about 10 percent have signed such contracts for sewerage services and 12 percent for wastewater treatment services.

The largest privately owned public water company is Gelsenwasser AG, although 92,9% of it are still owned by various municipalities,[16] which is a multi-utility company (water, sanitation and natural gas distribution) serving 3.2 million inhabitants in North Rhine-Westphalia, under concession agreements with 39 municipalities, and many other localities throughout Germany and internationally.[17]

An example of a publicly owned large multi-utility (water, electricity generation and distribution, natural gas distribution) is the Mainova AG in Frankfurt.[18]

The Berliner Wasserbetriebe, an Institution under Public Law (Anstalt des öffentlichen Rechts), is the largest communal water service provider after its remunicipalisation in 2013,[19] serving 3.5 million people with water and 3.9 million people with sanitation services.[20]

Responsibility for policy setting in public water supply and sanitation in Germany is shared between the EU, the federal government and state governments (Länder). (For more details on the role of the Länder and municipalities see States of Germany) The EU sets the framework legislation for water quality and water resources management (see EU water policy). The organization of public water supply and sanitation, however, remains a prerogative of EU member states. The German states (Länder) play a key role in the sector by setting, among other things, the legal framework for tariff approvals. Municipalities, legally entrusted with service provision, play an indirect role in influencing policy positions related to water and sanitation through their influential municipal associations (the Deutsche Städtetag representing the largest cities and towns and the Deutscher Städte- und Gemeindebund representing smaller cities and towns).

There are no autonomous regulatory agencies for water and sanitation in Germany at the state or federal level. The recently created federal regulatory agency for network industries (Bundesnetzagentur) covers telecommunications, postal services, electricity, gas and rail. It does not cover water supply and sanitation, since it is a responsibility of the states. Water and sanitation tariffs are approved through different procedures in each state, usually by a department in the state Ministry of Economy after a review of the tariff increase request by an independent auditor. In city-states (Berlin, Hamburg, Bremen) this means that the Minister (called Senator) of Economy both requests the tariff increase in his capacity as chairman of the board of the utility and also approves it, which constitutes a conflict of interest. In the case of some private utilities, tariffs are set by a mutually agreed arbitrator based on the professional opinion of an auditor.

Drinking water quality is monitored by the public health departments of municipalities and counties (Landkreise). Environmental monitoring is largely based on self-monitoring, which has proven to be reliable, and occasional samples by environmental Ministries of the states.

Industry associations and professional associations also play an important role in self-regulating the water and sanitation sector (verbandliche Selbstverwaltung). In early 2007 there were six associations in the sector. They include two industry associations, the Association of Electricity and Water Utilities BDEW and the VKU (association of municipal utilities); two professional associations, the DWA (professional association for water and sanitation), BVGW (professional association for gas and water); and two associations specialized on sub-sectors, the ATT (working group of dam operators providing drinking water) and DBVW (association of land and water associations). In particular the two professional associations play an important role assisting in the development of technical norms and, more recently, in performance benchmarking.

A study commissioned in 2000 by the Ministry of Economy suggested to liberalize the German water sector, allowing competition similar to the telecommunications and electricity sectors.[21] The proposal met with harsh criticism, including from the Federal Environment Agency (UBA) and the associations of municipalities, which alleged that liberalization could entail setbacks for the protection of health and the environment.[22] The liberalization proposal was not further pursued. However, public-private partnerships continued to become more widespread and the trend towards the creation of private law water utilities (commercialization) continued.

In reaction to the liberalization debate the German Federal Parliament (Bundestag) passed a decision sponsored by the Green party and the Social-democrats (SPD) on sustainable water supply and sanitation (nachhaltige Wasserwirtschaft) in 2001. The decision rejected the liberalization of the water sector, but also called for the merging of smaller service providers, higher competitiveness and the general modernization of the sector, including through systematic performance benchmarking.[23] In 2005, the six professional associations signed a declaration promoting benchmarking, based on a methodology developed by the International Water Association.

Water losses in the distribution network have been estimated at only 7 percent in 2001, down from 11 percent in 1991.[24] According to a study commissioned by the BGW losses are 19 percent in England/Wales, 26 percent in France and 29 percent in Italy.[25] These would not only be the lowest water losses in the four countries, but also in the world.[26] The study states that its methodology allows for an accurate comparison, including water used to flush pipes and for firefighting. This is consistent with the International Water Association's definition of non-revenue water, which includes authorized non-metered consumption such as for flushing and firefighting.

Benchmarking has been undertaken for a long period by German utilities, but not in a comprehensive and systematic manner. In 1998 the Federal Ministry of Education and Research initiated a competition of ideas to reduce the costs of water supply together with the economic research institute RWI and 14 water utilities. It developed a set of criteria to assess strengths and weaknesses in the industry. Participating utilities say that they reduced their operating costs by about 5 percent after two to three years.[27] The professional associations DVGW and DWA have jointly established a voluntary benchmarking system, which keeps individual company data confidential. The associations consider the system as being highly successful.

By law (Kommunalabgabengesetze or Betriebsgesetze der Länder) tariffs must cover the full costs of water supply and sanitation, including capital replacement and the remuneration of equity. The various state laws do not foresee a review of the level of the efficiency of investments and operations as part of the tariff approval procedure. Some states also levy a resource charge for groundwater abstractions which is passed on by utilities to the consumers.[28] There is no such a charge for surface water abstraction, however.

Utilities also pay a wastewater discharge fee which depends on the degree of pollution of the discharged treated wastewater. The discharge fee is supposed to provide an incentive to treat water beyond what is legally required (Abwasserabgabengesetz). It accounts for about 3 percent of total sanitation costs.

In 2004 water tariffs averaged 1.81 euro per cubic meter including VAT, and sanitation tariffs averaged 2.14 euro per cubic meter.[29]

According to NUS consulting water tariffs in Germany (without sanitation) were the highest of 16 mainly OECD countries at the equivalent of US$2.25 per cubic meter, about on par with tariffs in Denmark.

However, according to a study commissioned by the German industry association BGW in 2006, the average household water bill was only 82 euro per year in Germany, lower than in France or in England and Wales, but higher than in Italy. The study shows that subsidies are more prevalent in the three comparator countries and service levels are lower. Taking into account these differences, the cost of supplying water at an equalized service level would be 84 euros in Germany, 106 euro in both France and England/Wales, and 74 euro in Italy.[25] The apparent discrepancy between higher unit tariffs and lower bills is due to the lower water consumption in Germany. Water tariffs have remained stable in real terms over the past ten years.

Comparison of annual water and sanitation bills per capita in four EU countries

Source: Metropolitan Consulting Group: Vergleich europäischer Wasser- und Abwasserpreise, 2006 [25]

Concerning sanitation, unequalized tariffs are by far the highest in Germany at 111 euro per year. Equalized costs net of subsidies are, however, highest in England and Wales with 138 euro, followed by France (122 euro), Germany (119 euro) and Italy (85 euro).

Metering is widespread in Germany and almost universal for single family homes. However, many apartments do not have their own meter, so that households living in apartments where only the consumption of the entire house is metered have little financial incentive to conserve water.