Compulsory Combination of Major Estonian Water Firms: Ministry's Precondition for Water Sector transformation
Water Service Reform Through 2035: A Peek into Estonia's Plans
In Estonia, the Ministry of Climate has crafted a strategic blueprint for revolutionizing water services, setting the stage for a more streamlined water sector by 2035. This transformation focuses on merging the majority of existing service providers to eliminate fragmentation.
Karin Kroon, the head of the water department at the Ministry of Climate, shares concerns about the inequitable quality and pricing of water services in Estonia. With approximately 130 service providers, the prices of water and sewerage services vary significantly across the country, leading to initiative stagnation and hindering business expansion in high-priced regions.
However, the primary issue at hand is the potential for price jumps of up to five times in the coming years, necessitated to maintain service quality in many areas. This area-specific price discrepancy affects business development negatively.
An evaluation of the data suggests that the optimal solution for Estonia would be to have up to four strong regional water companies. In reality, a more achievable goal is to reduce the number of water providers to a maximum of 20 by 2035.
The sector requires an estimated €2 billion in investments by 2035. These funds will primarily be garnered from water tariffs, with little to no additional support from the EU anticipated.
To tackle this challenge, a research project spanning almost two years was carried out with the backing of the European Commission's structural reform support program and the Technical Support Instrument (TSI). Domestic and international experts collaborated on this project.
One of the central findings of the analysis is that monthly water and wastewater service costs, based on average consumption, should not exceed 2% of the net income of a resident in the lowest-income county in the future. This cap would translate to roughly €7.50 per cubic meter, given current income levels.
The reform will unfold in stages, initiating with the establishment of a legal framework. This will be followed by cooperation with municipalities and water companies, culminating in an evaluation of the resilience of the revamped system. The process is spearheaded by the Ministry of Climate, with the Competition Authority and the Environmental Investment Center as collaborators. Essential legislative adjustments must be enacted by 2026, and all strategic moves must be completed by 2035.
The water sector reform is also one of the objectives outlined in the government's coalition agreement for 2025-2027. A steering group has been constituted to expedite the project, with work already underway.
While comprehensive, publicly-available details regarding the number of regional water companies, total investment requirements, and price cap projections by 2035 are currently lacking, there are ongoing discussions and reforms in other parts of Europe that serve as a valuable context for Estonia's initiative.
The strategic blueprint for Estonia's water service reform, led by the Ministry of Climate, includes analyzing the need for up to four regional water companies to provide equitable and affordable service, with prices based on net income not exceeding 2% in the lowest-income county, a finding from the research project. The business environment in Estonia could benefit from this reform as the number of water providers is projected to reduce to a maximum of 20 by 2035, potentially reducing the disparity in water and sewerage prices across the country.
