enforcement and nonpayment of water services an analysis of utilities at the usmexico border

8/8/2019 Enforcement and nonpayment of water services An analysis of utilities at the USMexico border

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Report to UC MEXUS CONACYT

Enforcementandnon-paymentofwaterservices

Ananalysis

of

utilities

at

the

US

-Mexico

border.

Ismael AguilarBenitez1 and JeanDaniel Saphores2

DRAFT

September 20, 2009

1 Associate Researcher/Professor, El Colegio de la Frontera Norte, Tcnicos 277 ColoniaTecnolgico Monterrey, Nuevo Len, Mxico; Email: [email protected] Associate Professor, Civil and Environmental Engineering, Economics, and Planning, Policy andDesign, University of California, Irvine 92697, USA. Phone: (949) 824 7334; Email:[email protected].


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CONTENTS

I. Project Overview .................................................................................................................................................................. 1II. Survey of Water Utilities ................................................................................................................................................. 3

II.1 Survey overview .......................................................................................................................................................... 3II.2 General information about our respondents................................................................................................... 5

II.2.1 Utility size .............................................................................................................................................................. 5II.2.2 Metering and water use ................................................................................................................................... 9II.2.3 Information, water quality and customer service .............................................................................. 11

II.3 Billing and financial information ........................................................................................................................ 14II.4 Late and nonpayment policies ........................................................................................................................... 20II.5 Challenges ahead ....................................................................................................................................................... 24

III. Case Studies....................................................................................................................................................................... 26III.1 Legal and Institutional contexts for Mexican and U.S. Water Utilities .............................................. 26

III.1.1 Legal and Institutional context at the Federal level in Mexico .................................................... 26III.1.2 Legal context for water services in Baja California, Chihuahua and Tamaulipas................. 27III.1.3 Legal and Institutional context at the Federal level in The United States ............................... 30III.1.4 Legal context for water services in California and Texas ............................................................... 31

III.2 General characteristics of the water utilities analyzed in this study ................................................. 33III.2.1 Mexican water utilities ................................................................................................................................. 33III.2.2 U. S. water utilities .......................................................................................................................................... 36

III.3 Nonpayment for water services in border twin cities ............................................................................. 39III.3.1 CESPT, Tijuana SDWD, San Diego ......................................................................................................... 40III.3.2 JMAS, Ciudad Juarez EPWU, El Paso .................................................................................................... 45III.3.3 COMAPA Nuevo Laredo LWUD, Laredo ............................................................................................... 49

III.4 Conclusions ................................................................................................................................................................ 54


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IV. Econometric problems.................................................................................................................................................. 57Acknowledgements .............................................................................................................................................................. 58References ................................................................................................................................................................................ 59Appendix A: Survey Instrument ..................................................................................................................................... A1

Table of Tables

Table 1. Survey response rate ........................................................................................................................................... 4Table 2. Summary of reported challenges facing border water utilities. ....................................................... 25

Table of Figures

Figure 1. Map of the Study Area ........................................................................................................................................ 2Figure 2. Location of Respondents. .................................................................................................................................. 4Figure 3. Distribution of the total number of accounts served for our respondents .................................. 5Figure 4. Distribution of the number of residential accounts served. ............................................................... 6Figure 5. Total number of residential waste water accounts served. ................................................................ 6Figure 6. Total number of accounts per employee. ................................................................................................... 7Figure 7. Total number of accounts per billing/collection staff. .......................................................................... 8Figure 8. Total number of accounts per technical staff ........................................................................................... 8Figure 9. Percentage of metered residential accounts. ............................................................................................ 9Figure 10. Percentage of working residential meters ........................................................................................... 10Figure 11. Average monthly residential water consumption by account. ..................................................... 11Figure 12. Publicized water quality problems that required boiling water. ................................................ 12Figure 13. Water restrictions during the 200708 fiscal year. ........................................................................... 13Figure 14. Frequency of monthly customer complaints........................................................................................ 14Figure 15. Time to pay a residential water bill ......................................................................................................... 15


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Figure 16. Payment methods available (other than utility offices) .................................................................. 16Figure 17. Number of payment methods (other than the utilitys offices) .................................................... 16Figure 18. Average monthly water bill (in 2005 US dollars). .............................................................................. 17Figure 19. Payment for qualified low income households. .................................................................................. 17Figure 20. Percentage of total unpaid residential water bills at the end of 2007. ...................................... 18Figure 21. Billing and collection costs per account (in 2005 US dollars). ...................................................... 19Figure 22. Percentage of late residential payers. ..................................................................................................... 20Figure 23. Reconnection charge (in $2005). .............................................................................................................. 21Figure 24. Percentage of households who pay their late payment penalty. ................................................. 21Figure 25. Percentage of residential accounts disconnect every month. ....................................................... 23


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I.PROJECTOVERVIEW

In many Mexican cities, widespread nonpayment of water services affects the financial

health of water utilities. This impacts the delivery of water services, affects environmental

quality through inadequate waste water treatment, and hurts poor households who are not

connected to municipal water systems because they need to buy their water from

expensive vendors. By contrast, nonpayment does not seem to be a problem on the US

side of the border. In this project, we analyze the link between nonpayment and

enforcement. We conduct an institutional analysis of twin cities along the border (San

Diego / Tijuana, El Paso / Ciudad Juarez, and Laredo / Nuevo Laredo) and we explain why

an econometric analysis of the data collected by surveying selected water utilities along the

border ran into major problems. This work helps us shed some light on strategies to curbnonpayment and on appropriate ways to increase available funds for financing much

needed water infrastructure at the border.

The MexicoU.S. border region spans 3,300 kilometers from the Golf de Mexico to

the Pacific Ocean. On the Mexican side this region includes six states (Baja California,

Sonora, Chihuahua, Coahuila, Nuevo Leon and Tamaulipas) and more than 200

municipalities, with 16 million inhabitants (CONAGUA, 2008). The border region is

characterized by water scarcity and a high population growth rate.

The geographical area of interest for this study was defined by the area of influence

of the North American Development Bank (Nadbank). It includes Mexican municipalities

within 300 kilometers of the MexicoU.S. border and U.S. water utilities within 100

kilometers in the U.S. Figure 1 shows a map of our study area. Water utilities located in this

area can apply for certification to the Border Environmental Cooperation Commission

(BECC) and may apply for funding from the North America Development Bank. This is

important because the availability of water infrastructure funding may affect enforcement

policies; border utilities therefore enjoy a situation different than utilities located inside

each country.


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For our survey, we initially relied on a contact list provided by NadBank and on lists

organized by the National Association of Water Utilities (ANEAS) directory; using the

internet, we updated the information as of August 2008.

Figure1.MapoftheStudyArea


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II.SURVEYOFWATERUTILITIES

II.1SURVEY OVERVIEW

Our survey instrument includes a transmittal letter, a questionnaire, and two letters of

support: the first one is from Jorge Silva, who provides technical assistance and coordinates

training for the North American Development Bank; and the second letter is from Professor

William Cooper, who directs the Urban Water Research Center at the University of

California at Irvine. We also tried to get a letter of support from the American Water Works

Association (AWWA), but we were unsuccessful as the AWWA was concerned about survey

fatigue for its members.

To test our survey instrument we conducted a pilot test of five Mexican water utilities

during July 2008. Following suggestions from these utilities, the length of the original questionnaire

was slightly reduced and some terms were clarified. This questionnaire is organized in three

sections: the first section focuses on general characteristics of each water utility, the second section

asks for billing and payment collection data, and the final section concentrates on policies for

dealing with nonpayment and late payment behavior. A copy of the survey instrument is

provided in Appendix A.

This survey was conducted between August 2008 and April 2009 by email, mail, fax,

and by phone for followup questions. Administering the survey took a long time for

several reasons: 1) we were trying hard to have a high response rate; 2) we did not always

have the right contact person; 3) answering all questions typically required the input from

several utility staff; and 4) we had problems with student turnover on the US side of the

study. Because our respondents were often very busy (especially in smaller utilities), we

often had to remind them several times to complete our survey.

In the end, our efforts paid off because we obtained a response rate that is slightly

over 54 percent, which is far better than the response rates typically obtained by the

AWWA. Our breakdown of our responses by state and country is provided in Table 1. Moreover,

the geographical area covered by our survey is shown on Figure 2.


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Table1. Surveyresponserate

Country State Numberofutilitiestargeted

Numberofrespondents

Responserate

United States Arizona 13 6 46.2%

California 21 14 66.7%

New Mexico 3 2 66.7%

Texas 18 11 61.1%

Summary 55 33 60.0%

Mexico Baja California 4 4 100.0%

Chihuahua 26 14 53.9%

Coahuila 8 6 75.0%

Sonora 19 6 31.6%

Tamaulipas 11 4 36.4%

Summary 68 34 50.0%

Globalsummary 123 67 54.5%

Figure2.LocationofRespondents.


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II.2GENERAL INFORMATION ABOUT OUR RESPONDENTS

In this section, we summarize information about the general characteristics of the water

utilities that returned a filled questionnaire.

II.2.1UTILITYSIZE

After inquiring about cities served, the first three survey questions were designed to

characterize the size of water utilities participating in our survey.

Figure3.Distributionofthetotalnumberofaccountsservedforourrespondents

From Figure 3, we see that 40 out of 67 respondents are small to medium size (less than

20,000 accounts), with a slightly larger representation of U.S. utilities in that category (22

out of 40). By contrast, there are more large Mexican water utilities (9 versus only 2 in the

US). A similar pattern is present for the number of residential accounts (Figure 4). Figure

5 shows the distribution of utilities by the number of residential waste water accounts. As

for Figures 3 and 4, we note that our respondents exhibit a lot of size diversity.


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Figure4.Distributionofthenumberofresidentialaccountsserved.

Figure5.Totalnumberofresidentialwastewateraccountsserved.


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Another way to consider size is to consider the number of employees working for a utility.

The number of staff, however, may also reflect the relative cost of labor to capital,

especially when comparing cities across the border, or the presence of political jobs. It is

therefore of interest to represent the number of accounts per employee (see Figure 6); we

see that the distribution of accounts per employee tends to be lower for Mexican water

utilities, with a mode around 200 to 300 accounts per employees. By contrast, the

observed range for U.S. border utilities is much larger; it reflects the presence of small

water systems (which need a core number of staff people no matter how small they are)

but also the better efficiency of larger water utilities that can handle many more accounts

per staff. The number of accounts per staff assigned to billing and collection suggests a

better efficiency in U.S. water utilities (Figure 7). Several reasons may explain this

situation. First, information technology may be much more readily available north of the

border; second, labor may be relatively cheaper than capital in Mexico;

Figure6.Totalnumberofaccountsperemployee.


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Figure7.Totalnumberofaccountsperbilling/collectionstaff.

Figure8.Totalnumberofaccountspertechnicalstaff


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and third, more staff may be needed in Mexico in order to organize payment campaigns

(we will come back to this question when we analyze the third part of our survey). By

contrast, water utilities north of the border tend to have more technical staff than their

southern counterpart. This is reflected in Figure 8, which shows a lower mode for U.S.

utilities (500 to 999 accounts for technical staff) compared to double that amount for

Mexican border water utilities. This suggests that Mexican border water utilities may be

bloated with administrative staff while they are insufficiently staffed with technical people

who can take care of the infrastructure.

II.2.2

METERING

AND

WATER

USE

Metering and the percentage of working meters help make users responsible for their

water use through information and the price signal; they give an indication of how well a

utility is run, but it may also indicate insufficient spending.

Figure9.Percentageofmeteredresidentialaccounts.


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Figure 9 shows the distribution of the percentage of metered residential accounts. A look

at the data reveals that only two U.S. border water utilities are less than 100 percent

metered (although their coverage is 90 and 95 percent respectively). By contrast, 8

Mexican border water utilities have meters installed on less than half of their residential

accounts: three each are in Chihuahua and Sonora, and two are located in Coahuila. In

Mexico, the state of Baja California, which is served by only 4 regional water utilities,

appears to do best for metering: in three of its utilities, residential metering exceeds 98

percent and the fourth one has 85 percent coverage.

Figure10. Percentageofworkingresidentialmeters

The effectiveness of metering is conditional on how well meters work, however. Figure 10

suggests that a number of Mexican border water utilities have a high number of defective

meters (four have less than half of their meters working properly), which may be partly

related to the relative lack of technical staff suggested by Figure 8. By contrast, all but two


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U.S. border water utilities (and these two, the percentage of working meters is 88 and 90

percent respectively) have at least 91 percent of their meters working properly.

Figure11.Averagemonthlyresidentialwaterconsumptionbyaccount.

Defective metering is likely to remove an incentive for households to conserve water and toworsen an already tense situation for a number of Mexican border water utilities. Figure

11 shows, however, that U.S. border residents tend to consume a lot more water per

account than their Mexican counterparts. Several factors may explain this situation,

including wealth (which impacts the number of waterusing appliances and the ownership

of pools) and land ownership (as outdoor water use could reach half of residential

consumption along the border).

II.2.3INFORMATION,WATERQUALITYANDCUSTOMERSERVICE

Providing information about water quality and tracking consumer complaints is an integral

part of good management for a utility; it is an essential component of trust building

between a water utility and the public it serves. Providing useful information to


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households is also expensive and time consuming, however. In the United States, the

Federal Safe Drinking Water Act (SDWA) requires utilities to produce annual Consumer

Confidence Reports that provide information about the source of a communitys water, its

constituents, and sources of contaminants. All U.S. border water utilities who answered

our survey are providing this information, although three utilities did not answer this

question. Most of these utilities appear to just meet these requirements, although a few

utilities go further and provide data every six months or after each violation, in addition to

the annual requirement (one utility each). A number of utilities publicize this information

on their website or through educational programs.

The situation is more complex south of the border, where eight water utilities (24

percent) provide no water quality information to the public, while others use a variety of

ways to communicate with their customers: eight utilities rely on the press or the radio,

five (15 percent) had extensive outreach programs with visits to schools and workplaces,

and four (12 percent) provide water quality information through water bills. Five utilities

did not specify how they provide information, and four utilities skipped this question.

Figure12. Publicizedwaterqualityproblemsthatrequiredboilingwater.


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Withholding information will likely not erode public confidence about water quality

and households may then purchase expensive bottled water or sodas. Unfortunately, five

border Mexican water utilities (15 percent) had publicized water quality problems that

required boiling water during the 200708 fiscal year.

Water quantity is also an issue along the border, especially on the Mexican side. As

shown on Figure 13, five Mexican water utilities (15 percent) had to implement water

restrictions during the 200708 fiscal year, and one (3 percent) had to do the same on the

U.S. side. The situation is likely worse south of the border partly because of the financial

situation of Mexican water utilities (which is linked to nonpayment of water bills but also

to the underdevelopment of bond markets in Mexico) that prevents them from investing in

infrastructure although it is urgently needed to cope with the population boom in border

cities.

Figure13.

Water

restrictions

during

the

2007

-08

fiscal

year.

Another measure of service quality is how customer complaints are tracked and handled.

Given the general statistics above, one may expect U.S. water utilities to do a better job at

tracking customer complaints to control how they were handled. Surprisingly, this is not


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the case. As shown on Figure 14, a staggering 50 percent (16 out of 32; one U.S. utility did

not answer this question) of U.S. border water utilities do not track customer complaints,

versus only 33 percent (11 out of 33; one Mexican utility ignored this question) south of

the borders. As expected, we note that Mexican border water utilities tend to receive more

customer complaints, which is hardly surprising given the difficulties they encounter (see

the statistics on water restrictions and water quality above), but some Mexican border

water utilities are doing quite well (with 4 utilities experiencing fewer than one complaint

per 1,000 account per month and one experiencing fewer than one in 10,000 accounts.

Figure14.Frequencyofmonthlycustomercomplaints.

II.3BILLING AND FINANCIAL INFORMATION

The second part of our survey includes ten questions dealing with financial issues.

First, we inquired about billing frequency; this is important because more frequent

billing gives households an opportunity to adapt their water use to the price signal but also

to detect leaks; more frequent billing also provides income more frequently to a water


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utility but it may be costly. All Mexican border water utilities and 25 (76 percent) out of 33

U.S. border water utilities bill their residential customers monthly; the exception is 8 (24

percent) US border water utilities that send bills every other month.

From Figure 15, we see that the time allowed to pay a water bill varies widely in the

U.S. (from 10 to 50 days), but even more in Mexico (from a low of 3 days to a high of 60

days). Almost half (48 percent) of the US border water utilities allow 20 to 21 days; in

Mexico, by contrast, approximately 29 percent of border water utilities give their

residential customers 2 weeks to pay, and the same proportion gives them 4 weeks.

In Mexico and even more so in the US, water utilities tend to offer a wide variety of

payment options. From Figure 16, we see that Mexican border water utilities tend to offer

physical locations such as grocery stores and bank, whereas US border water utilities rely

more on the phone and the internet. On both side of the border, utilities offer a number of

payment options (Figure 17); with the exception of 8 water utilities, Mexican border water

utilities tend to offer almost as many payment options as their northern counterparts.

Figure15.Timetopayaresidentialwaterbill


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Figure16.Paymentmethodsavailable(otherthanutilityoffices)

Figure17.Numberofpaymentmethods(otherthantheutilitysoffices)


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Figure18.Averagemonthlywaterbill(in2005USdollars).

Figure19.Paymentforqualifiedlowincomehouseholds.


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A look at Figure 18 shows the average monthly water bill is larger in the U.S. than in

Mexico; this reflects that U.S. border households consume on average more water than

their Mexican counterparts, and also that water is more expensive in the U.S. The median

value of an average monthly water bill among our respondents is $10.80 for Mexico and

$53.00 for the US. Given than the US Gross Domestic Product per capita is roughly 3.2

times larger than the Mexican one, U.S. border residents spend a larger proportion of their

monthly income on water.

As shown in Figure 19, however, Mexican border water utilities appear much more

willing to offer special pricing to qualified low income households (31 of 34 utilities ) than

in the U.S. (2 out of 33 utilities). Likewise, Mexican border water utilities are quite willing

to offer payment plans to qualified low income households (29 out of 34 ), although their

northern counterparts are showing more flexibility there (7 out of 33 U.S. utilities). This

need for flexibility in Mexico probably reflects a different attitude towards water (seen as a

different good) but also the reality of dealing with chronic nonpayment problems.

Figure20.Percentageoftotalunpaidresidentialwaterbillsattheendof2007.


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Figure21.Billingandcollectioncostsperaccount(in2005USdollars).

In spite of these payment policies, Mexican border water utilities are suffering from

a high percentage of nonpayment of their water bills (see Figure 20). Among our

respondents, the median percentage of total unpaid bills at the end of 2007 reached astaggering 35 percent in Mexico (it ranged from a low of 3 percent to a high of 89 percent);

by contrast, on the American side, the median percentage of total unpaid bills was a much

more viable 5 percent, with a low of 0.1 percent and a high of 17 percent.

Unfortunately, questions about total operating costs and total revenues may have

been misunderstood by a number of water utilities, so we are not presenting these results

yet. Indeed, a number of utilities (especially on the U.S. side) reported operating costs an

order of magnitude larger than revenues, which suggests that they included capital costs.

The distribution of billing and collection costs per account is shown on Figure 21.

For Mexican border water utilities, we distinguish two groups: a low cost group, with an

annual billing/collection cost per account comprised between $10 and $19, and a high cost

group of 6 utilities with billing/collection costs in excess of $100 per year. Data for the


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latter are plausible if they include the high costs of organizing payment campaigns; this will

be checked. For US border water utilities, we observe a mode in the $30 to $49 range, with

a few low cost utilities and a handful of high cost one. We also note that over 30 percent of

our respondents did not provide information about billing/collection costs. Several

reasons may explain this situation: 1) smaller utilities may not have a separate

billing/collection department; 2) billing/collection may be part of another department

(e.g., the finance department) so there is no separate budget; or 3) this information may be

politically sensitive so it is not provided.

II.4LATE AND NONPAYMENT POLICIES

Another focus of our survey was to understand late and nonpayment policies; the purposeof the third part of our survey is to collect information about these issues.

Figure22.Percentageoflateresidentialpayers.


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Figure23.Reconnectioncharge(in$2005).

Figure24.Percentageofhouseholdswhopaytheirlatepaymentpenalty.


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Our first question inquired about the percentage of residential accounts that were

late in paying their water bills. Figure 22 shows that the numbers varied greatly. For 36

percent of US border utilities, fewer than 10 percent of residential accounts were late; the

largest percentage was 42 percent. On the Mexican side, however, over 40 percent (14) of

utilities saw at least 40 percent of their residential bills paid late, if they were paid at all. In

fact, the largest percentage of late bills is a staggering 70 percent.

This difference between the US and Mexico may appear surprising given that the

percentage of border water utilities that imposes a financial penalty for late payers is

higher in Mexico (91 percent; 31/34) than in the US (79 percent; 26 out of 33).

Mexican border water utilities also impose reconnection charges, although the

amount they charge is typically between $1 and $10 (Figure 23). On the US side, the

median reconnection charge is between $20 and $30, but one water utility surprisingly

does not charge any reconnection fee.

Figure 24 sheds some light on the lack of deterrence effect of late charges: we see

that in general fewer than half of households pay their latepayment penalties. Our field

work reveals that these are often negotiated away during payment campaign designed to

entice nonpayers or latepayers to settle their accounts.

One way to motivate nonpayers (or latepayers) is to disconnect them.

Disconnection is of course legal in the U.S., and for 28 of the 34 (82 percent) Mexican

border water utilities that answered our survey; note, however, that it is considered

controversial there. Disconnection appears to be used by Mexican border water utilities

even more than by their US counterparts, but to no avail (see Figure 25); it is even used by

2 of the utilities that reported it was not legal to do so.


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Figure25.Percentageofresidentialaccountsdisconnecteverymonth.

Utilities in both Mexico (65 percent) and in the U.S. (57 percent) also rely on other

measures apart from disconnection to promote payment for water services. These other

measures include repeated visits by utility representatives (9 cases), administrativeprocedure leading to seizure of personal effects (7 cases), publicizing the names of people

who dont pay (2 cases), or pressure decrease. In the US, water utilities resort to placing

liens on the property of households who dont pay, using collection agencies, or trying to

work out payment arrangements.

Most Mexican border water utilities (29 out of 34, or 85 percent) but only one US

border water utility also organized payment campaigns to try to foster payment. The

duration of these campaigns varied considerably, from one day to most of the year. They

included substantial discounts (the reported median value is 35 percent) for 26 of the 29

Mexican border water utilities that organized them. These discounts were authorized at

the local level or at the state level. For the former, discounts were granted either by the

board of directors, the general manager, the president of the utility, or the treasurer. At the


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state level, discounts were authorized either by the executive or the legislative branches.

The reported total value of the discounts varies greatly and we do not believe that it is very

reliable as we know from our fieldwork that some utilities do not keep good track of the

discounts granted to latepayers.

II.5CHALLENGES AHEAD

Our last question asked our respondents to list the main challenges facing their utility over

the next five year. We received a variety of answers; they are summarized in Table 2.

On the Mexican side, the main concern is by far improving payment collection (12

mentions); this would provide Mexican border water utilities with much needed resources

to address their second biggest concern, which is to expand their infrastructure, both fordrinking water and for wastewater, and to increase their physical efficiency; the latter

would also enable them to reduce leaks. The third main concern, which is related, is to find

new water sources, to promote water conservation, and to expand coverage; this includes

providing service 24 hours a day, which was mentioned twice. Other concerns include the

cost of energy used for pumping and water treatment. In addition, a couple of utilities

would like to clarify water law and are concerned about politics; we are surprised this was

not mentioned more often as our field work suggests that water utilities are often involved

in political battles. Overall, answers suggest that Mexican border water utilities are aware

of their problems and would like to improve service and address pressing issues, but they

cannot do so partly because of their inability to get paid for their services.

On the U.S. side, by far the main concern is how to finance and build new

infrastructure, both for drinking water and for wastewater (15 mentions jointly). This is

followed by finding new sources of water and general concerns about the economic

situation, as many residents recently lost their jobs and/or their houses. The economic

crisis also made it difficult for utilities to increase their rates as the cost of wholesale water

is increasing and new water quality regulations require additional investments. In

addition, utilities are concerned about water conservation and about managing the

drought; a couple of utilities are also having trouble finding qualified staff.


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In summary, the top three concerns about the future are: 1) financing and building

new water infrastructure; 2) finding new sources and promoting water conservation; and

3) on the Mexican side, increasing collection efficiency.

Table2.Summaryofreportedchallengesfacingborderwaterutilities.

Challenge Mexico U.S. Total

Infrastructure

Drinking water infrastructure 7 11 18

Wastewater infrastructure 4 4 8

Improve physical efficiency 4 1 5

Supplyanddemand

Find new water sources/Population growth 6 7 13

Dealing with the drought 0 3 3

Managing water demand/water conservation 3 5 8

Extend temporal/spatial coverage 3 0 3

Financialissues

Financial situation/economic situation (general) 0 7 7

Increase water or sewer rates 1 3 4

Nonpayment/Late payment; increasing collection 12 0 12

Cost of wholesale water/new sources 0 4 4

Cost of energy; energy efficiency 4 0 4

Better billing/water measurement technology 2 1 3

Becoming more efficient 4 0 4

Legal/regulatoryissues

Change water law 2 0 2

Politics 1 1 2

Regulatory changes for water quality 0 5 5

Customerservice

Improving service 3 0 3

Miscellaneous

Finding staff for water conservation 0 2 2

Note: Most water utilities had more than one major concern about the next five years.


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III.CASESTUDIES

III.1LEGAL AND INSTITUTIONAL CONTEXTS FOR MEXICAN AND U.S.WATER UTILITIES

The most common way to penalize for nonpayment of a public service is suspending or

cancelling service. For example, disconnection is a common measure for nonpayment of

electricity or gas services. Unlike for electricity, disconnection of water services for

enforcing payment is common in U.S. cities but uncommon in Mexico where disconnection

policies depend on political aspects (e.g. political campaigns, governors and mayors

political affiliation) and the institutional context (i.e. states water law). By contrast,

payment campaigns are common for promoting payment for water services Mexican water

utilities but they are not used in the U.S. (they are not necessary). Therefore, it is important

to know the institutional contexts defined mainly by the federal and states water

institutions and laws to understand the different possibilities of enforcement. In this

section we briefly summarize the main aspects of legal and institutional frameworks for

water services in Mexico and in the U.S.A. Because in both countries water laws and codes

are approved and enforced at the state and local levels, we summarize here some of the

main characteristics of the legal and institutional contexts for three Mexican municipalities

and their three counterparts in the U. S.

III.1.1LEGALANDINSTITUTIONAL CONTEXTATTHEFEDERALLEVELINMEXICOUntil the 1980s, water in Mexico was managed through a centralized institutional

arrangement. In 1983, a decentralization process began and the responsibility for

managing urban services, including water, was transferred to the municipalities. Consistent

with this new framework, in April 2004 the National Water Law was amended. Since then,

the stakeholders involved in managing this resource are:

The federal water agency, Comision Nacional del Agua (CONAGUA); The basin organizations, at the regional level; The respective governments and water agencies, at the state level; and


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The municipalities and utilities.At the federal level, CONAGUA was established as a decentralized, autonomous agency

of the Mexican Ministry of Environmental and Natural Resources (SERMARNAT). Through

CONAGUA, the Executive branch of the federal government exercises powers of authority

over waterrelated matters. It is the highest technical, regulatory and advisory agency in

the country for the comprehensive management of water and its inherent common good.

Although urban water systems in Mexico were decentralized in 1983, two federal agencies

(CONAGUA and SSA, the Secretara de Salubridad y Asistencia) still regulate water systems

by setting official standards for water services and the quality of water for human

consumption. However, the responsibility for enforcing these standards is not clearly

defined; they are expected to be enforced by SSA, State Governments and CONAGUA

according to their corresponding spheres of authority.

The next level in water management is basin organizations, which are specialized

legal and administrative technical units answering directly to the head of CONAGUA, with

regional jurisdiction over basins, as set forth in the law and regulations, and with a specific

budget and resources as set by CONAGUA.

The third level in the administration of water resources, states and state water

agencies, is responsible for duties such as developing and monitoring state programs,

executing agreements, and establishing cooperative agreements when needed.

The last level in the management of water resources in Mexico is the municipalities,

with federal regulations, state legislation and local statutes. Article 115 of the Constitution

establishes the provision of municipal public services, which sets forth, inter alia, that:

Municipalities will be responsible for the following public services and functions: I.

Drinking water and wastewater collection, treatment and disposal.

III.1.2LEGALCONTEXTFORWATERSERVICESINBAJACALIFORNIA,CHIHUAHUAAND

TAMAULIPAS

In Baja California there is only one type of organization for the supply of water services.

The formal organizations for providing water services are state organisms called state


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commission for public services (Comision Estatal de Servicios Publicos). These

commissions are ruled by a states administrative council. This council set the operational

rules and approves annual budgets. The states governor is the chair of the council and all

the managers are appointed by him. Water rates and increases are authorized by the Baja

California State Congress.

The law that rules water services in Baja California is obsolete (Ley que reglamenta

el servicio de agua potable en el estado de Baja California); it was approved in 1969. This

law has been amended two times, in 1999 article 95 was amended to allow sanctions for

illegal connections. In 2003 article 17, which states the rules for late payment of water

services, was amended to allow sanctions for industrial users. However, this article states

clearly that residential users, schools and public hospital are banned from services

suspension and disconnection.

In Chihuahua, a state Central Water and Wastewater Board (Junta Central de Agua y

Saneamiento del Estado de Chihuahua) administers both urban (Junta Municipal de Agua y

Saneamiento, JMAS) and rural (Juntas Rurales de Agua y Saneamiento, JRAS) water boards.

The Central Board is governed by a Council, the president and the members of this council

are state officials appointed by the governor, although they also invite federal officials. The

Central Board approves annual budgets, rate structures and rate increases. Additionally

they provide training and technical assistance.

The municipal water boards of Chihuahua are formally decentralized from the state

government and are governed by an administrative council; however rates, budget and

infrastructure plan must be authorized by the Central Board.

In Chihuahua there is not a state water law, the legal framework for water services

is provided by different articles of the state Constitution (Constitucin Poltica del Estado

Libre y Soberano del Estado de Chihuahua); the environmental state law (Ley de Equilibrio

Ecolgico y Proteccin al Ambiente del Estado de Chihuahua), the law for state bodies (Leyde Entidades Paraestatales del Estado de Chihuahua) and state codes (Cdigo

Administrativo del Estado de Chihuahua y del Cdigo Fiscal del Estado de Chihuahua y el

Cdigo Municipal para el Estado de Chihuahua). The municipal code for the state of

Chihuahua (Articulo 1595) allows late payment charges for water services, however


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disconnection is not mentioned in any law nor code. There is a proposal for a Chihuahua

Water Law in the state Congress since 2006, but it has been not discussed for approval.

In Tamaulipas there are two types of organizations for the supply of water services:

municipal councils (Comisiones Municipales de Agua Potable y Alcantarillado, COMAPA)

and water and wastewater boards (Junta de Agua y Drenaje, JAD). Most municipalities have

adopted a decentralized legal model (COMAPA), and Matamoros is the only municipality

that remains centralized as a board (JAD). There is no significant difference in the way they

are administrated since both have a manager and are governed by administrative councils.

As usual in border water utilities, the chair of the council is the mayor of each municipality.

The COMAPAs and JADs councils include municipal officers and state officers. Water rate

structures and raises are authorized by the Tamaulipas congress (Ley Estatal del Agua,

article 25).

The Tamaulipas water law (TWL) was approved in 2006 (Ley de Aguas del Estado

de Tamaulipas). The TWL rules municipal water utilities but it says little about

performance or quality of service. For example, although Article 138 broadly references

water quality, it does not state clearly who should set standards or enforce them. The TWL

also refers to public participation (Article 18, paragraph XIII and Articles 40 and 41), but

water users have no role in the decisionmaking process because representatives are

typically appointed by politicians or captured by various interest groups rather than

elected by customers. Articles 151 and 195 of this law allow for temporary suspension of

service for delinquent users but they do not set rules for disconnection. It only states

suspension of services as a possibility; delinquent users may be penalized.

In general in the three Mexican states we study here, state water laws do not set an

adequate legal framework for the enforcement of payment for water services.

Responsibilities and rights are not explicitly stated (for example regarding quality of water

and who is able to approve discounts or exceptions). More specifically, in Baja Californiadisconnection is simply banned; in Chihuahua disconnection is not even mentioned

because there is no specific law for water or water services, and in Tamaulipas the

suspension of water services is only a possibility, but there are no clear rules on legal

disconnection of service due to nonpayment. In summary, the legal context for the


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enforcement of water services payment do not differ significantly among the three states

analyzed in this study. It seems reasonable to expect that, as a result of those inadequate

legal contexts water utilities would weakly enforce payment for water services. In general

water services in the Mexican cities studied are considered an entitlement rather than a

service for which users have to pay.

III.1.3LEGALANDINSTITUTIONAL CONTEXTATTHEFEDERALLEVELINTHEUNITEDSTATES

Water in the United States is regulated by the U.S. constitution and the U.S. Environmental

Protection Agency (EPA). However, the states have the primary authority and

responsibility for the allocation and management of water resources within their

boundaries. The U.S. federal government basically overseas service standards, while stateand local governments are responsible for establishing other types of relevant provisions.

Water quality and the levels suitable for human consumption are regulated by the EPA. One

important aspect is that in the United States, the 1996 Amendments to the Safe Water

Drinking Act recognize the right to public information about water quality, so that water

systems serving the same people all year round must provide annual consumer confidence

reports on the source and quality of their tap water.

In the USA, responsibility for adequate, safe and reliable water services ultimately

rests with state and local agencies (National Research Council, 2002). The local

government in U.S. cities is defined as a councilmanager form of government. The city's

powers are exercised by an elected city council.3 City councils are responsible for setting

policy, approving annual budgets, setting tax rates, buying and selling property,

establishing the city's administrative departments, holding public meetings, adopting city

ordinances, and establishing city services. Most cities have a Utilities department that is in

charge of water management, although some cities also have created authorities for

managing their water resources, and others have long term contracts with private firms for

the provision of water services and infrastructure management.

3 Hereinafter, "the Council."


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In the United States, because the legal regulatory framework is so concrete, there is

relatively little room for bad practices.

III.1.4LEGALCONTEXTFORWATERSERVICESINCALIFORNIAANDTEXASIn this subsection, we review briefly the legal context in California and Texas, which are the

two U.S. states where our case studies are located. We also summarize relevant aspects of

water regulations in San Diego, Laredo, and El Paso.

California

All waters in California are the property of the state and water rights are user rights. 4

Californias water law is contained in the California Code of Regulations, Title 23(http://www.calregs.com).

Several agencies regulate water in California. The State Water Board is responsible

for water rights and water quality at the state level. The Department of Water Resources is

responsible for the planning of the use of water and for developing rules and regulations.

Moreover, the California Department of Public Health, through the Drinking Water

Program (DWP) regulates public water systems. Among other functions, the DWP certifies

drinking water treatment. Additionally, the California Environmental Quality Act (CEQA)

requires state and local agencies to identify environmental impacts of their actions. CEQA

includes the requirement of developing a water supply assessment.

Let us now focus on San Diego. Chapter 6 of the San Diego Municipal Code contains

specific regulations for water services.5 One important section for this work is Division 5 of

article 7, which focuses on water rates and charges. It requires guarantee deposits from all

applicants equivalent to the estimated amount payable for two billing periods, except for

single family dwellings and applicants with at least one other active water account

provided they have no prior record of delinquency for water service (67.0221). Water

bills are considered past due 16 days after the statement date of the water bill. Users are

4 Web page of the National Science and Technology Center of the Bureau of Land Management; California

water rights fact sheet (http://www.blm.gov/nstc/WaterLaws/california.html) accessed on June 25th, 2009.5 See San Diego municipal code available at: http://docs.sandiego.gov/municode/MuniCodeChapter06/


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charged interest for each day their payment is overdue. If the user becomes delinquent (16

days after the statement) and continues delinquency for a period of 45 calendar days, the

Department discontinues water services until all water bills, including, charges, deposits,

fees and interest, are paid (67.0223).

The Independent Rates Oversight Committee (IROC) oversees SDWD rates; it serves

as an official advisory body to the Mayor and City Council on policy issues related to

services provided by the public utilities departments, including Water and Metropolitan

Wastewater Departments.

Texas

In Texas, the state constitution is the main legal instrument governing water at the state

level. Although it also contains some water services regulations, most of them are in the

Texas Water Code and the Texas Administrative Code. The Texas Commission on

Environmental Quality (TCEQ) sets water standards and reporting requirements for public

water supply in the state and it is responsible for enforcing these rules. Title 30 of the

Texas Administrative Code (30 TAC) includes detailed standards and norms for water

sources, minimum pressures and water treatments. Water systems are subject to periodic

inspection and they must submit information to TCEQ. Moreover, rule 290.271 mandates

public water systems to submit annual reports with clear water quality information. Lastly,

the local government level is basically governed by the municipal code of each city.

The municipal code for El Paso, Texas, includes ordinances for water services in

Title 15, chapter 15.12, which authorizes the Public Service Board (PSB) to promulgate

rules and regulations on all subjects relevant to the operation of the citys water services.

Section IX of the PSB Rules and Regulations estates that the utility has the right to

discontinue service and to apply costumers water service guarantee or deposits to

amounts owed the utility for nonpayment.Likewise, the municipal code of ordinances of Laredo, Texas includes specific rules

for water services in Section II of Chapter 31 (titled utilities). Article II sets rules on use

restrictions, water conservation, and rates and charges. Importantly for this work, section

31141.1. sets the requirement of security deposits from all customers. This deposit is


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refundable. The amount deposited by residential users depends on the size of the meter,

starting at $100 for a threequarterinch meter and increasing to $800 for a four inch meter

inside city limits. Residential users 65 years or older who have an unsatisfactory credit

history with the city may apply for a reduced $30 dollars deposit. If a user is convicted of

three (3) or more distinct rule violations the utility is authorized to discontinue water

service. Services can be restored only upon payment of a reconnection charge established

of ten dollar, and any other costs incurred by the city utilities in discontinuing service.

Municipal codes, specific utility rules and regulations regulate almost all aspects of

water services in U. S. cities. Regulations cover everything from technical issues to types of

penalties and user fees, as well as emergency plans. They are much more specific than

similar ordinances in Mexico. The commercial orientation of water services in the U. S. is

highlighted when municipal codes refer to users as consumers or customers. This

creates a client service orientation where users consciously assume the duty of paying for

water services. This duty is backed up by security deposits from all users, with exceptions

specified in municipal codes.

Paradoxically, although water services in all three cities studied in the U.S. are

managed by their municipal government, they enjoy relative financial autonomy. One

important factor in understanding the greater autonomy in designing and approving rates

is that city council and utilities boards meetings in both California and Texas are open to

the public; this mechanism provides customers with information about possible rate

increases and collects customer feedback before any action is taken. Let us now look more

indepth at the water utilities analyzed for our case studies, starting with the Mexican side.

III.2GENERAL CHARACTERISTICS OF THE WATER UTILITIES ANALYZED IN THIS STUDY

III.2.1MEXICANWATERUTILITIES

South of the border, we analyzed three water utilities: one in Baja California (the CESPT), one in

Chihuahua (JDAS in Ciudad Juarez) and the last one in Tamaulipas (COMAPA in Nuevo Laredo).


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Parque Morelos. The long term goal is to substitute 20 percent of the water from the Rio

Colorado, which is very costly, with treated water.7

CiudadJuarez,Chihuahua(JDAS)

Ciudad Juarez is located at the north of the state of Chihuahua, Mexico. To the north, Ciudad

Juarez is bordered by its so called sister city, El Paso, Texas. Both cities belong to a region

known as the Paso del Norte. In 2005, Ciudad Juarez population was 1.3 million people

(Conteo Nacional de Poblacion, 2005, INEGI) with a 2020 forecast of 1.6 million. Its

population has grown annually by approximately 4.6 percent from 1990 to 2005.

The Junta Municipal de Agua y Saneamiento (JMAS) is the agency charged with

providing water and sanitation services to the population of Ciudad Juarez. It relies on the

Hueco Bolson for the citys drinking water supply. This water source is shared with El Paso,

Texas. The JMAS system pumps water from 142 wells, which is chlorinated for human

consumption. There are two wastewater treatment plants in Ciudad Juarez; both are

managed by a private company, Degremont. As of December 2008, JMAS supplies water to

372,483 accounts; 96 percent of these accounts are residential and ~3.7 percent are

commercial.

JMAS is formally decentralized from the state government and is governed by an

administrative council; however rates, budget and infrastructure plan must be authorized

by the Central Water and Wastewater Board (Junta Central de Agua y Saneamiento del

Estado de Chihuahua). It is worth noting that in an eight years period, the JMAS of Ciudad

Juarez was managed by five different persons (19992001; 20012002; 2002; 20022004;

20042007); in only one year (2002) JMAS had three different managers. In the Mexican

political context this implies a high politicization of water services.

Nuevo

Laredo,

Tamaulipas

(COMAPA)

The city of Nuevo Laredo is located in the northern region of the state of Tamaulipas and

borders the United States and the state of Nuevo Leon to the north. Nuevo Laredo is

virtually flat, with no major elevations or depressions. According to the 2005 Population

7 Inperson interview with Hernando Duran, CESPT Director, March 9, 2009


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and Housing Census, it has a population of 355,827 inhabitants.

The only source of water for urban use in Nuevo Laredo is the Rio Grande River,

which also serves as the boundary between Mexico and the United States. This river has

two natural spillways, the Coyote stream to the south of Alazanas, and smaller streams to

the west, such as Laguito, Estero Reventado, Abandonado, Sandra, Ortillo, Carrizo, Aguas

Negras, El Gobierno, Ramireo and Cedena, from which water is also pumped.8

The citys first water system was built in 1926. Currently, the decentralized entity

responsible for providing water and sewer services in Nuevo Laredo is the local water

utility, Comisin Municipal de Agua Potable y Alcantarillado (COMAPANuevo Laredo),

established as such in 2002. As of September 2007, COMAPANuevo Laredo provides

service to a total of 107,609 users, who are mostly residential users (95 percent).

Commercial users represent only 4.8 percent; while industrial users rank third (0.2

percent). Total water consumption in 2007 was 661,877,304 gallons.

COMAPANuevo Laredo has two water treatment plants: the Central and

Southeastern plants, as well as three wastewater treatment plants: the International

Wastewater Treatment Plant (IWWTP), the ORADEL WWTP and the Land Reserve WWTP.

Nuevo Laredo ordinances call for the establishment of a board of directors, composed of

the mayor and representatives of the town council and advisory council, a district delegate,

state and municipal officials, and a representative of the state water agency.

III.2.2U.S.WATERUTILITIES

North of the border, we analyzed three water utilities: one in California (the San Diego

Water Department (SDWD)), and two in Texas (the El Paso Water Utility (EPWU) and the

Laredo Water Utility Department (LWUD)).

SanDiegoWaterDepartment(SDWD)

San Diego is located at the southwest of California and borders at the south with Tijuana,

Mexico. In 2008 its population of 3,001,071 made San Diego the third largest city in the

8 http://nuevolaredo.gob.mx/ciudad/datosgenerales.shtml


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state. The City of San Diego entered the municipal water supply business in 1901 when the

City bought the water system from a private company. In 2009, the City of San Diego Water

Department served more than 1.3 million people populating more than 200 square miles of

developed land. In addition to three water treatment plants, San Diego maintains and

operates more than 3,302 miles of water lines, 49 water pump plants. SDWD delivers more

than 200 million gallons of water per day serving over 1.3 million customers in four cities:

San Diego, Del Mar, Imperial Beach and Coronado.

The City of San Diego operates two water reclamation plants: North City and South

Bay. These plants treat wastewater to a level that is approved for irrigation, manufacturing

and other nonpotable purposes. The North City Plant has a treatment capacity of 30

million gallons (mgd) a day and the South Bay Plant can treat 15 mgd. Recycled water gives

San Diego a dependable, locally controlled resource (see

www.sandiego.gov/water/recycled/index.shtml). However, these plants operate way

under capacity (~6.25 mgd at tertiary level; also some at secondary level)

On average, San Diego must import nearly 90 percent of its water from other areas,

specifically northern California and the Colorado River. San Diego and other local water

distributors formed the San Diego County Water Authority for the express purpose of

purchasing Colorado River water from the Metropolitan Water District of Southern

California and conveying it to San Diego County.

During inperson interviews SDWD officials mentioned that securing water sources

for the long run was one of the main challenges facing their utility. They are looking at

groundwater in Tijuana basin as one option. Unlike for Tijuana, desalination is not viable

economically for San Diego. Like Tijuana, SDWS wants to increase its use of recycled water

and improve water conservation. A plan was created to decrease the percentage of

imported water over the long run: by 2030, local supply (runoff) should cover 12 percent

of needs and conservation/reuse should provide another 19 percent. The SDWDimplemented a water conservation program in 2009; this program includes conservation

rebates for water saving devices (inperson meetings, March 10, 2009).


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ElPasoWaterUtility(EPWU)

El Paso is the county seat of El Paso County, Texas; it is the sixthlargest city in Texas with a

population of 606,913 in 2006 (www.ci.elpaso.tx.us), which is projected to reach 767,750

by year 2020. The average population growth rate for the last ten years was 2.5 percent

(www.census.gov/census2000/states/tx.html, Turner et al, 2003: 195).

El Paso has four separate utilities: water, wastewater, stormwater, and reclaimed

water. The Public Service Board (PSB) was established May 22, 1952, by City Ordinance No.

752 to completely manage and operate the water and wastewater system for the City of El

Paso. The Public Service Board includes the Mayor and four citizens appointed for four

years. EPWU has had a very stable leadership: Edmund G. "Ed" Archuleta has been manager

of the El Paso Water Utilities Public Service Board since January 1989.9

EPWU provides water services inside and outside city limits; however, bonds place

restrictions on what can be done outside of city limits. El Paso depends on both

groundwater and surface water. The Hueco Bolson began to be used for drinking water

purposes during the first decade of the 20th century (Turner et al, 2003: 200).The Hueco

Bolson continues to provide a significant portion of El Pasos water supply. In 2003, EPWU

had 69 wells in the Hueco Bolson and 19 wells in the Bolson de la Mesilla. Approximately

55 percent of El Pasos water supply is groundwater and 45 percent from surface water. El

Paso shares some aquifers with Juarez; some are saline. EPWU operates two water

treatment plants fed by the Rio Grande/ Rio Bravo (Turner et al, 2003: 200204).

As of December 2007, EPWU supplied water services to 195,089 accounts, 82

percent of which were residential accounts. Almost all residential accounts are metered

(99.2 percent).

Currently, EPWU is evaluating the importation of groundwater from West Texas

Counties, and the cost of desalinating additional water in el Paso County.10

9 See the El Paso Water utility web page: http://www.epwu.org/about/leadership.html10 2009 Strategic Plan, available at http://www.epwu.org/public_info/2009_strategic_plan.pdf


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LaredoWaterUtilityDepartment(LWUD)

The city of Laredo is located in Webb County in the state of Texas, on the banks of the Rio

Grande River. It borders the Mexican states of Tamaulipas and Nuevo Leon to the south.

Laredo is the largest city in the county, covering an area of 88.44 square miles. Its

population in 2005 was 207,787.11

The main source of water for Laredo is the Rio Grande River, from which

approximately 45 million gallons/day is pumped. Water and sewer services are currently

provided by the city government through its Utilities Department.12 This city is the only

one in the study that has previous experience with a private operator. In 2002, it entered

into a fiveyear agreement with the United Water company; however, this arrangement

only worked until mid2005, when control was returned to the local government. The

Utilities Department of the City of Laredo has a customer base of 51,043 accounts, with 91

percent residential users and 9 percent commercial users.

Laredo has two water treatment plants; Jefferson and Colombia, with a join capacity

of 66 million gallons/day, as well as three wastewater treatment plants (North, South Side

and Zacate).

In Laredo, the Water Utilities Department (LWUD) is developing a fiveyear plan, the

ComprehensiveWaterandSewerPlan to address infrastructure issues. The last plan the

utility had was the Wastewater Master Plan developed in 1996. LWUD plans to invest

around $300 million over five years, in both water and wastewater projects. Its main

infrastructure projects include: construction of a new water plant; expansion and

rehabilitation of the Jefferson Water Treatment Plant; construction of two new wastewater

plants and expansion of the current wastewater treatment plants.

III.3NONPAYMENT FOR WATER SERVICES IN BORDER TWIN CITIES

In this section we focus on the analysis of the nonpayment phenomenon for the three pairs

of cities of the study. The previous section indicated key differences in the legal and

11 U.S. Census Bureau, www.census.gov.12 Web page of the Laredo utilities department : http://www.ci.laredo.tx.us/Utilities05/about.htm.


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institutional context within Mexican and U.S. water utilities. Here we address specific

aspects that have been identified in the literature as factors that might influence payment

behavior. Specifically we analyze differences in the billing and collection process, rate

structures and affordability of water bills, collection efficiency, policies and strategies for

the enforcement of water services payment and finally the impact of nonpayment on the

financial situation of the water utilities.

III.3.1CESPT,TIJUANASDWD,SANDIEGO

The commercial area of the CESPT in Tijuana has 380 employees. They are organized in six

departments, including a billing and collection department that employs 200 workers.13

The CESPT bills its customers monthly. Starting in 1997, the CESPT has been utilizing anautomatic billing process, which they call onsite billing. CESPT is the only one of the three

Mexican utilities to use this billing process. It works as follows: after a meter has been read,

the bill is printed on site (using a teller automatic device (ATP) and a portable printer) and

delivered immediately. This onsite billing process gives two additional days for customers

to pay their water bill. Onsite billing is feasible because approximately 96 percent of

residential accounts are effectively metered. Note that approximately 3,000 residential

accounts are still unmetered; they are charged a flat rate.

According to CESPT officials, the number of billing complaints decreased as a result

of onsite billing (on average less than 50 billing complaints per month for more than

48,000 accounts) mainly because the ATP reduces human billing errors. Indeed, it is linked

with the CESPT consumption database and it flags readings that differ significantly from an

accounts average water consumption. Once users receive their bill they have 20 days to

pay. After this period CESPT sends a reminder; the billing system generates an automatic

cutoff notice if an account owes more than $500 Mexican pesos. Therefore, delinquency is

based on the amount owed rather than time. Personnel shortages are an obstacle for

13 Most data and information for the CESPT in this section was collected through inperson interviews with

Jose Rodriguez, of the commercial section and the commercial area staff, March 9, 2008.


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installing flow reduction devices for delinquent accounts; the billing area has 200

employees for approximately 2,500 delinquent accounts per month.14

The CESPT provides several options for paying water bills; it has nine offices

distributed throughout the city and two automatic payment machines. Customers can also

pay at banks, local grocery stores, and supermarkets. They can also make payments by

internet. Two mobile payment offices give another payment option for poorer areas in the

city. Grocery stores charge $5 Mexican pesos for water bill payments, but other options are

free. However, grocery stores Oxxo are the most common places to pay water bills as there

are around 150 Oxxos stores distributed along Tijuana and Rosarito.

The San Diego Water Department (SDWD) has a small staff when compared with

CESPT; 36 employees work in its customer service area and twelve employees working in

billing and collections tasks. Water services in San Diego are fully metered; a typical single

family domestic customer has a 3/4inch meter (although some larger homes may have a

1inch meter). The SDWD submit water bill bimonthly. From 2003 to March 2008, the

Water Department issued monthly bills, with every other bill based on a scheduled

estimate of usage and charges. However, customers complained about receiving bills based

on estimates because the SDWD had not enough meter readers. Then, the SDWD returned

to bimonthly billing, separating the city in two halves; half of the Citys meters are read on

oddnumbered months and the other half during evennumbered months. Bimonthly

billing eliminates scheduled estimates. Besides, bimonthly billing saves the Water and

Metropolitan Wastewater Departments $630,000 in printing and mailing costs each year. 15

Customers have 15 calendar days to pay their water bill. If it is not paid on time the

SDWD sends a reminder on day 25 and a shutoff notice on day 38. Users can be late without

being delinquent during a 23 days period but they have to pay interest for each day they

are late. In practice, people have 45 days to pay; actual shutoff takes place between days

45 and 51. On day 75, the SDWD close an account and refer it to the Treasurer's Office.16

14 Inperson interview with Hugo Martinez, responsible of the Billing section, CESPT, March 9, 200815 Inperson interview with Michael Bresnahan, Deputy Director Customer Support Division, SDWD; March

10, 2008. See also the SDWD web page: http://www.sandiego.gov/water/rates/billing.shtml.16 For details of the payment process see the LWUD web page ww.sandiego.gov/water/rates/timeline.shtml.


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The SDWD offers several payment options: by mail, by internet, at two city locations

(water department, Civic Center Plaza building), at one business Location, and at seven USA

checks cashing places. Most users pay their water bills by mail (~57 percent), the next

more frequent option is banks (18 percent of all accounts); 8 percent pay by direct debit,

which is the cheapest option; 7.5 percent of all accounts use the Electronic Bill Presentment

and Payment (EBPP) system (available only to residential users); few people pay in person

at the SDWD offices.17

Let us now compare water rates. CESPT water rates have twelve water consumption

blocks for water services; the first block includes the first five cubic meters of water

consumption and the highest block is for water consumption from 61 to 200,000 cubic

meters. The average rate is $15 Mexican pesos (equivalent to 1.1 U.S. dollars in July 2009).

In fact, CESPTs water rates for Tijuana and Rosarito are considered among the most

expensive in Mexico. However, the share of average household monthly income spent in

water services by Tijuana households is only 0.97 percent. To put this number in context,

the maximum share proposed to ensure affordability is 2.5 percent in a developed country

(the U.S.) and 5 percent for Asian developing countries (Fankhauser and Tepic, 2006).

Water rates are updated regularly (every six months; the last update was in July 2009). The

Director of the CESPT considers that the rate structure is adequate for cost recovery.18 It is

worth noting that since March 2003 residential rates are tax free but taxes apply to

commercial and industrial water uses. Additionally, water consumption is free for retirees

who consume up to 25 cubic meters; they also get a 50 percent discount for up to 40 cubic

meters.

On the U.S. side, the SDWD calculate water bills as a combination of a monthly

meterbased fee and the amount of water used. For billing purposes, the Water Department

measures water in hundreds of cubic feet or HCF. Each HCF equals 748.05 gallons. Bi

monthly charges for a typical singlefamily include: a base fee ($33.04); the first 14 HCFbilled at $2.795 per HCF; the next 14 HCF used billed at $3.032per HCF; and each HCF used

17 InPerson interview with SDWD staff, March 10, 2009; also see

www.sandiego.gov/water/rates/where.shtml18 Inperson interview, Hernando Duran, CESPT Director March 9, 2009.


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above the first 28 HCF is billed at $3.404 per HCF. The total bill for multifamily domestic

customers is a combination of the monthly meterbased fee (which is based on the size of

the meter) and the amount of water used. These customers pay $3.032 per HCF. 19 On

average the share of average household monthly income spent in water services by San

Diegos households is 1.7 percent, which is considered affordable.

During inperson interview, SDWD officials stated that they offer no discount and no

payment plan for poor households (as instructed by City Council); however, the SDWD

website suggests otherwise.20 According to their Web Page, the SDWD can grant extensions

under limited conditions that include: health and safety, legal negotiations, or in case of

negative impacts on other ratepayers. The SDWD can also defer payments for up to 12

months.

In Tijuana, the CESPT usually reports a commercial efficiency indicator to the federal

water agency (CONAGUA). This indicator measures the billed amount that is effectively

collected; at the end of 2007 they report a 82 percent commercial efficiency. Some

international funding sources required CESPT to reach a 78 percent commercial efficiency

as a requirement to get loans. However, if collection efficiency is measured as the percent

of compliant users, then the average percent of users who do not pay on time increases to

53 percent, i.e., five out of ten users do not pay on time monthly. According to CESPT

officials, one factor that explains this outstanding number of late payers is that current

legal framework that obstructs service disconnection for residential users. In Baja

California, the state water law allows only for flow reduction. Furthermore, article 162

states that residential users must sign their cutoff notice and admit water consumption

before implementing disconnection, which is undoable. In addition, the state government

issues each year an edict called cero recargos by which all late payment charges for

delinquent accounts are waived. This edict is valid from April to December, which means

that most of the year charges are not applied.21

Payment behavior is different by type ofwater users in Tijuana. About 60 percent of delinquent accounts are residential accounts

19 The detailed meter base fee can be consulted on: http://www.sandiego.gov/water/rates/rates.shtml.20 See the SDWD Web Site: www.sandiego.gov/water/rates/procedures.shtml.21 Inperson interview with Jose Rodriguez director of the commercial department and billing and collection

staff, march 9, 2008


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and approximately 29 percent are government buildings; only 10 percent are commercial

or industrial users. This show how the legal context affects payment of water services;

most commercial and industrial users pay their water bills because otherwise they get

disconnected.

By contrast, in San Diego the SDWD collects almost everything that is billed.

However, the SDWD do not report the monthly number of users who could be classified as

late payers or delinquent. In fact they did not answer the corresponding questions in our

survey. However, in our inperson interview SDWD officials told us that most people pay by

the due date; 76 percent of accounts pay before day 25 and almost 99 percent pay prior to

the shutoff date. Only estimated 1 percent of residential accounts get disconnected but

approximately 24 percent are late payers.

On the Mexican side, the CESPT implemented in January 2008 a Collection Program

following an important increase in late payment rates at the end of 2007; the latter was

probably associated with the international crisis that affected the Mexican economy. This

program includes: 1) cleaning the users database (dropping abandoned and uninhabited

houses); 2) dropping households with debts below $500 Mexican pesos; and 3) dropping

houses whose meter is inside because flow reduction cannot be implemented. The CESPT

intensified flow reduction and the delivery of cut off notices (approximately 47,000 in

January 2008); although CESPT is not authorized to disconnect, this warning works well

with late users.22 As a result of this strategy the collection rate was double the average rate

during January and February.23 Another strategy implemented by the CESPT to promote

payment is based on economic incentives. Regular users who remain punctual for at least

four months get a 15 percent discount in their water bills. Also, regular users may pay six

months of their water use in advance and get an 8 percent discount. If regulars users decide

to pay one year of water use in advance they get a 10 percent discount. Payments are due

in January and estimated water consumption is based on past consumption.In 2008, uncollected billed for the CESPT amounted to $600 million pesos (equivalent

to about $4.5 million dollars using a 13.5 pesos/dollar rate). This is the equivalent to the

22 Inperson interview with Gustavo Hernandez and Jose Rodriguez, CESPT, March 9, 2008.23 inperson interview with Hernando Duran, CESPT Director, March 9, 2008.


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billed amount for three months of water services for the whole cities of Tijuana and

Rosarito or 27 percent of the utilitys annual budget. A third of this debt is unrecoverable

because delinquent users are the government or abandoned houses. The annual

recoverable rate is 57 percent of the debt but the equivalent to the recovered amount is

again uncollected during the next year because of the annual edict of discounts for

delinquent users, which creates a vicious circle that promotes late payment.

In San Diego, since the SDWD collects almost everything it bills, such enforcement

strategies are not needed besides disconnection after the 38 th day. It is worth noting that

the SDWD does not penalize late payment, only users who get disconnected; these users

have to pay a $30 dollars meter shutoff meter fee and $25 for restoring their service.

The SDWD typically write off ~$250,000 out of $450,000,000, or 0.056 percent of the

billed amount. This represents people who move without paying or who go bankrupt.

Therefore, while nonpayment clearly affects the financial viability of the CESPT, it is clearly

not the case for the SDWD.

III.3.2JMAS,CIUDADJUAREZEPWU,ELPASO

In Ciudad Juarez, the JMAS billing and collection department had 306 employees at the end

of 2007. Water bills were sent monthly. Water users have 20 days from the day of the

meter reading to the due date to pay their bill. Although JMAS officials refused to interview

with us, it is very likely that meter reading and billing takes several days so the time

available to pay is shorter than 20 days.24 Water users in Ciudad Juarez can pay at three

types of locations: JMAS offices, banks and grocery stores. Grocery stores charge $5

Mexican pesos for their service.

In El Paso, the EPWU also has monthly billing; however, the EPWU employs only 20

meter readers, who like the CESPT in Tijuana and the SDWD in San Diego, have automatic

24 Although we requested and had a formal meeting with JMAS officials on September 22, 200

enforcement and nonpayment of water services an analysis of utilities at the usmexico border

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