The Performance Assessment Framework for Economic Regulators (PAFER) was developed by the OECD to help regulators assess their own performance. The PAFER structures the drivers of performance along an input-process-output-outcome framework. This chapter applies the framework to the governance of Peru’s water and sanitation services regulator (Superintendencia Nacional de Servicios de Saneamiento – Sunass) and reviews the existing features, the opportunities and challenges faced by Sunass.
Driving Performance at Peru’s Water and Sanitation Services Regulator
The Governance of Regulators
3. Governance of Sunass
Abstract
Role and objectives
The National Superintendency of Sanitation Services (Superintendencia Nacional de Servicios de Saneamiento, Sunass) is Peru’s economic regulator for sanitation services, that includes drinking water, sewerage treatment and sanitary disposal of excreta.
The regulator was established in 1992 by Decree Law No. 25965 in tandem with major reforms to the sector that aimed to decentralise and commercialise service provision. Sunass was granted responsibility for overseeing the newly-created municipal Sanitation Service Providers (Empresas Prestadoras del Servicio de Saneamiento, EPs) that served urban areas and that were legally and financially separate from municipalities.
In December 2016, a new Framework Law for the Management and Provision of Sanitation Services (from now on: Framework Law 1280) expanded Sunass’s role and added a number of functions. Previously, the regulator was responsible for supervising sanitation services in cities with populations over 15 000 inhabitants, which in practice entailed supervising 50 EPs. Framework Law 1280 expanded the scope of the regulator’s functions to include the supervision of more than 25 000 service providers in rural areas (known as community-organised water and sanitation services boards, Junta Administradora de Servicios de Saneamiento, JASS) and 450 operators in small cities (population between 2 000 and 15 000) to ensure quality of service and financial sustainability. This is a large number of operators to supervise when compared internationally (Figure 3.1).
Figure 3.1. The number of active water operators in the water and sewerage sector supervised by water regulators
Note: This figure, originally presented in (OECD, 2015[1]) has been updated to reflect the change in category for Peru. Previously Peru was included in the category “Between 10 and 100 active water operators”.
* This designation is without prejudice to positions on status, and is in line with United Nations Security Council Resolution 1244/99 and the Advisory Opinion of the International Court of Justice on Kosovo’s declaration of independence.
Source: (OECD, 2015[1]).
Mandate and objectives
Sunass’s high-level objectives are defined in legislation. The Framework Law 1280 states that Sunass has the responsibility to “guarantee users the provision of sanitation services, in urban and rural areas, under quality conditions, in order to contribute to the health of the population and the preservation of the environment.”
Mission, vision and values
Sunass’s mission is to “set tariffs, regulate and supervise the provision of sanitation services by providers in an independent, objective and timely manner, to help citizens ensure the exercise of their rights and duties.”1 The mission statement was approved by the Board of Directors as part of the strategic plan 2020‑2023.
Sunass does not have its own vision statement but subscribes to the vision of the Presidency of the Council of Ministers (Presidencia del Consejo de Ministros, PCM) to which it is attached, in accordance with the National Center for Strategic Planning (Centro Nacional de Planeamiento Estratégico, CEPLAN) guidelines. The vision of the PCM is to be a “Ministry that promotes change, to have a modern, articulated and decentralised State, generating trust in the population and increasing competitiveness”.
The regulator’s Code of Ethics defines the institutional values as freedom, commitment, trust, cohesion, solidarity, honesty and social responsibility.
Functions and powers
Law No. 27332 (Framework Law on regulatory agencies for private investment in public utilities, Ley Marco de los Organismos Reguladores de la Inversión Privada en los Servicios Públicos, LMOR) grants all Peruvian sector regulators with functions to supervise, set tariffs, issue regulations, inspect the activity of regulated entities, as well as to solve conflicts and claims. Accordingly, Sunass has the following powers:
Regulatory (función normativa): it can dictate regulations, guidance and norms.
Tariff approval (función reguladora): it approves tariffs for the services and activities under its economic regulation.
Supervisory (función supervisora): it supervises the provision of services and evaluates the performance of the companies that provide them. It can verify the compliance of legal, contractual or technical obligations by entities, companies or supervised activities, and verify compliance with any provision, mandate or resolution issued by the regulator.
Inspections and enforcement (función fiscalizadora y sancionadora): it can impose sanctions and corrective measures on service providers for the breach of obligations derived from legal or technical regulations, as well as the obligations of the concessionaires in their respective concession contracts. It has the power to collect fines.
Claim resolution (función de solución de reclamos): it can resolve conflicts that arise between water service operators and users through administrative channels.
Conflict resolution (función de solución de controversias): it can resolve conflicts that arise between companies through administrative channels. In practice, given the lack of competition between providers in the sector, the regulator has never used this power.
In addition to its core regulatory functions, Sunass was given a number of new functions under Framework Law 1280. Sunass has until 2022 to implement the new functions (six years from the enactment of the law). Under the Framework Law 1280, the regulator:
Determines the geographical area to which utilities are responsible for delivering Water Supply and Sanitation (WSS) services (“service delivery area”).
Approves the efficient scale for the integration of service providers, i.e. it determines the viability of merging service providers to reap economies of scale to become more efficient.
Grants authorisation to municipalities to provide water and sanitation services in cases where integration with an EP is not possible.
Supervises the execution of public-private partnership (PPP) contracts linked to the provision of sanitation services.
Evaluates the EPs according to criteria established in the Framework Law and its regulations, to determine whether they are eligible for the “Transitional Support Regime” under which the Technical Organization for the Administration of Sanitation Services (Organismo Técnico de la Administración de los Servicios de Saneamiento, OTASS, the technical body under the Ministry of Housing, Construction and Sanitation, (Ministerio de Vivienda, Construcción y Saneamiento, MVCS) assumes management control of the utility.
Supervises (and sanctions) companies’ compliance with legal and technical obligations in relation to accountability, performance and good corporate governance.
Promotes Mechanisms of Rewards for Ecosystem Services (Mecanismos de Retribución por servicios Ecosistémicos, MERESE)2 by providing technical assistance to EPs on how to calculate and incorporate MERESE into the water tariffs. The regulator is also working with EPs to support the implementation of MERESE funds, exploring the various investment modalities.
An additional function, related to water resources management, was given to Sunass under Legislative Decree 1185/2015. According to this, Sunass establishes and approves the methodology, economic criteria and process for determining the fee for groundwater monitoring and management for sanitation service providers.3
In practice, Sunass also provides significant guidance and capacity development (e.g. through trainings and workshops) to service providers and parts of sub-national government (such as Municipal Technical Areas, Áreas Técnicas Municipales, ATM) that have responsibilities for overseeing service providers in rural areas. For example, the regulator provides guidance to EPs on disaster risk management and climate change adaptation, so that EPs incorporate these elements in their Optimised Masterplans.
The regulator’s functions and powers (Table 3.1) are well understood by the urban EPs, but less so by other service providers. Sunass has long-standing relationships with the 50 EPs that operate in Peru’s major urban areas, and these utilities understand the regulator’s role in terms of its regulatory functions and its responsibilities for tariff approval, supervision and sanctioning. There is a lower level of awareness of Sunass’s functions and powers among the service providers in small urban and rural areas that came under the regulator’s supervision in 2017, although Sunass states that this has been improving thanks to information campaigns that it has carried out.
The general public has little understanding of the regulator and its role. According to an Ipsos survey conducted in December 2020 among men and women between 18 and 70 years old in urban and rural areas, only 5% knew Sunass and its duties and 8% knew something about what it does. This means in total only 13% is aware of Sunass.
Furthermore, the regulator reports that it faces resistance to a number of its functions. For example, there is frequent resistance to tariff increases by users and local political leaders – and more broadly resistance to the idea of paying for water as it is perceived a human right rather than a commercial service –, and resistance to efforts to integrate service providers by the EPs, the smaller utilities and consumers.
Table 3.1. Sunass powers
Source: Information provided by Sunass, 2021.
Institutional co-ordination
Sunass operates in a complex environment alongside other public bodies at the national and sub-national levels (Table 3.2; Table 3.3).
The Framework Law 1280 defines the respective roles of ministries and other public bodies that intervene in the water and sanitation sector, including Sunass, as well as local and regional governments and service providers. Nevertheless, there appears to be overlap of actions in areas such as data collection, capacity development, and public awareness raising campaigns to promote a “culture of water” and understanding for the need to pay a tariff. Furthermore, different interpretations of Sunass’s role by actors in the sector – in particular with regards to responsibilities for ensuring the quality of drinking water – lead to problems of co-ordination. Sunass’s definition of service quality for EPs used in its benchmarking indicators does not include water quality, although the definition applied in rural areas does include water treatment (chlorination).
Co-ordination at national level
Overall, there is a mismatch between the complex legal framework for the water and sanitation sector and the capacity of Peru’s institutions to implement it (OECD, 2021[2]). Low capacity contributes to and is compounded by a lack of clarity around roles and responsibilities as mandates and perimeters of activity are not always clearly understood. There are no regular institutionalised meetings for high-level co-ordination between the regulator and other public authorities that intervene in the water and sanitation sector. Ad hoc meetings between the PCM and Sunass took place in 2020 and the early months of 2021 – framed in particular in the context of the State’s response to the COVID-19 pandemic – to discuss issues and to ascertain whether the regulator needed support from the executive. As the co-ordinating body of the executive, the PCM has brokered contacts between Sunass and relevant ministries, notably with the Ministry of Economy and Finance (Ministerio de Economía y Finanzas, MEF) on budgetary issues. The COVID-19 emergency provided the impetus for further ad hoc high-level co-ordination. For example, the MEF convened public authorities in the water sector, including the regulator, to discuss the emergency decree in response to the sanitary crisis.
There are no ongoing or periodic assessments of potential overlaps with other regulatory agencies or gaps in the regulatory framework. However, the Constitutional Tribunal has the power to determine which authority is competent in a particular matter (as stipulated in the Political Constitution of Peru and in the Code of Constitutional Procedure), and the PCM can issue technical opinions on conflicts of competence between entities of the Executive Branch.4 Competency conflict processes are not common and there has not been a case on this matter in the sector.
To aid co-ordination, Sunass has seven co-operation agreements in place with the following public bodies that commit to exchange of information, technical resources, training etc.:
National Water Agency (Autoridad Nacional del Agua, ANA)
OTASS, in the framework of the Modernisation Program with the World Bank
National Research Institute of Glacier and Mountain Ecosystem (Instituto Nacional de Investigación en Glaciares y Ecosistemas de Montaña, INAIGEM)
Ministry of Environment (Ministerio del Ambiente, MINAM)
National Service of Meteorology and Hydrology of Peru (Servicio Nacional de Meteorología e Hidrología del Perú, SENAMHI)
Energy Investment Supervisory Agency (Organismo Supervisor de la Inversión en Energía y Minería, OSINERGMIN)
Supervisory Body for Private Investment in Telecommunications (Organismo Supervisor de Inversión Privada en Telecomunicaciones, OSIPTEL).
Table 3.2. Co-ordination with other public entities at national level
Source: Information provided by Sunass, 2021.
Co-ordination at sub-national level
Sunass operates within a complex institutional landscape at the sub-national level, where a number of ministries as well as municipal and regional levels of government intervene in the sector (Table 3.3). Overlaps, duplications and grey areas in regulations and implementation are the consequences of complex relationships across national institutions and levels of governments (OECD, 2021[2]). The unstable political context also presents challenges to co-ordination at this level due to the high turnover in some institutions.
Sunass’s decentralised offices lead the co-operation at the sub-national level. Sunass has been described as an open, collaborative and dynamic partner by other public authorities and it identifies co-ordination with other institutions at the sub-national level as an important element to improve effectiveness. The regulator takes part in the Regional Sanitation Commissions, convened by regional governments, which oversee regional sanitation plans. There is also important co-ordination with municipal technical units (ATMs) that are responsible for supervision and enforcement duties until Sunass implements these functions. In particular, Sunass has been providing training to ATMs and rural service providers (JASS/Community Organisations). However, co-ordination can be hindered by the low capacity and high turnover in ATMs.
The degree to which Sunass can co-ordinate with other actors at the sub-national level is also constrained by the relatively limited reach of its decentralised offices. The number of staff and capacity means that the offices face challenges in interacting with all of the large number of municipal governments. Furthermore, while staff from regional governments and ATMs can be on site in local communities, Sunass operates remotely in many cases (e.g. giving virtual trainings) in part due to ways of working in the context of the COVID-19 pandemic, and in part due to resource constraints. Some municipalities are in very remote locations and require significant travel time to reach them. Many of them do not have access to the Internet, excluding them from participating in Sunass’s online activities.
There appears to be duplication of efforts by Sunass and other public bodies intervening at the sub-national level, e.g. training service providers, promoting the importance of chlorinated water, and carrying out a stock-taking of water and sanitation infrastructure.
Table 3.3. Co-ordination with other public entities at sub-national level.
Source: Information provided by Sunass, 2021.
International Co-operation
Sunass has several co-operation agreements in place with development partners (international donors) and non-profit organisations, to support capacity building and provide technical assistance related to the design and implementation of the MERESE payments for ecosystem services scheme. Many of these projects are implemented jointly by Sunass’s decentralised offices, while the Office of Planning, Budget and Modernisation (Oficina de Planificación, Presupuesto y Modernización, OPPM) in headquarters plays a co-ordinating role, maintaining relations with the Peruvian Ministry of Foreign Affairs (Ministerio de Relaciones Exteriores, RREE), the Peruvian Agency for International Cooperation (Agencia Peruana de Cooperación Internacional, APCI), other public entities in the sector and international bodies. In addition, it centralises the information regarding the agreements signed by Sunass in a digital tool for internal use.
At the international level, Sunass is active in regional fora and initiatives designed to promote international regulatory co-operation and co-ordination, notably the Association of Water and Sanitation Regulatory Bodies of the Americas (Asociación de Entes Reguladores de Agua y Saneamiento de las Americas, ADERASA), and RegWAS LAC (Improvement of Public Policies and Regulation of Water and Sanitation Services Program in Latin America and the Caribbean, Programa de Mejora de las Políticas Públicas y la Regulación de los Servicios de Agua y Saneamiento en América Latina y el Caribe).
Input into policy
Sunass contributes to the formulation and refinement of policies, laws and ministerial regulations by submitting non-binding opinions. During the drafting and approval of a bill, Congress may request Sunass to submit information, comments or suggestions, to which the regulator must respond. A similar situation applies in regulatory projects with infra-legal status, such as supreme decrees issued by the MVCS, to which Sunass may also submit comments.
The regulator creates multidisciplinary teams to prepare the proposed opinions, which are reviewed by Sunass’s Policy and Regulations Directorate (Dirección de Políticas y Normas, DPN) and the Director of the Office of Legal Advice (Oficina de Asesoría Jurídica, OAJ). The workload related to these tasks is deemed to be manageable.
There is no legal requirement for MVCS to request Sunass opinion, although the Single Ordered Text of the Administrative Procedures Law5 does establish that public bodies should collaborate. On occasion, PCM may convene Sunass and other stakeholders to reach agreement on regulatory texts. In practice, Sunass reports that there have been cases where relevant regulations have been issued by MVCS without prior consultation, or where the regulator has discovered the publication of relevant regulations in the Official Gazette and consequently submitted its comments to these regulations. Sunass has submitted opinions about regulations – including regulations that assign the regulator with new functions – which have not always been taken into account.
Sunass does not publish the opinions and comments it submits. Its comments to Congress are generally summarised in the opinions issued by the congressional committees, and citizens can request the opinions from Congress through the procedure of access to public information.
Sunass also provides opinions on concession contracts overseen by ProInversión, Peru’s investment promotion agency. Sunass provides opinions at two points within the investment cycle: its opinion at the “structuring” stage on a first version of the concession agreement is non-binding, while its opinion at the “transaction” stage on a final version of the concession agreement is binding on some aspects, notably regarding the modalities of the agreement related to the definition of rates, access to services, and duties of service providers. Sunass provides opinions that are regarded as technically-sound, but the different priorities of the regulator and the investment promotion agency can result in differences in opinions on contracts. It can take 2-3 rounds to obtain a favourable opinion from the regulator. ProInversión is obligated to publish all information related to projects, which includes Sunass opinions on concession contracts, on its website. In practice, not all Sunass opinions have been published.
At the international level, Sunass contributes to the negotiations of relevant international agreements, for example, the agreements to achieve Sustainable Development Goal 6 on Clean Water and Sanitation.
Strategic objectives
Strategic plan
Sunass operates within the framework of a five-year Institutional Strategic Plan (Plan Estratégico Institucional, PEI) 2020-2024 that sets out five Institutional Strategic Objectives (Objetivos Estratégicos Institucionales, OEIs) and associated goals. The OEIs are intended to contribute to the Sector Strategic Objectives of the Multiannual Sectoral Strategic Plan (Plan Estratégico Sectorial Multianual, PESEM) that are set by the PCM. Each strategic objective is linked with quantitative indicators and time-bound goals to enable the regulator to monitor the implementation of the PEI.
The strategic objectives are translated into a Multiannual Operational Plan (Plan Operativo Institucional Multianual, POI) that lists all operational activities related to the strategic objectives, to provide coherence between day-to-day activities and the overarching strategic plan. No activity can be undertaken that is not included in the POI.
The regulator has made several changes to its strategic plans in recent years:
In 2017, the Sunass Board of Directors approved PEI 2017-19, which defined the following OEIs: 1) Optimise the quality of sanitation services provided to users, 2) Contribute to equity in the sanitation services provided to users, 3) Contribute to the rational and sustainable use of water by users and providers of sanitation services, 4) Improve institutional management, and 5) Strengthen disaster risk management.
In 2019, the Board of Directors approved the PEI for 2017-2022 (in accordance with CEPLAN rules, once the PEI period is established, it can be later extended)
In 2020, a review of the PEI 2017-2022 determined it was necessary to prepare a new strategic plan.
In February 2020, the Board approved PEI 2020-23 and changed OEIs 1-3 from the previous plan to those included in Table 3.4.
In May 2021, the Board extended the PEI to cover 2020-24.
Table 3.4. Sunass’s strategic objectives, indicators and goals, PEI 2020-24
* This objective is mandatory for all public bodies, as set by CEPLAN.
Source: Information provided by Sunass, 2021.
Process for setting strategic objectives
CEPLAN establishes the process and methodology for developing the PEI. Within Sunass, the process is co-ordinated the OPPM.
Sunass’s Executive President forms the Strategic Planning Commission. The ten-member Commission is made up of senior management officials and the heads of the directorates and offices selected by the Board and is led by the Executive President who gives the general points to consider.
A wider cross-section of Sunass staff are involved in the planning process through the establishment of a technical team (20 members) designated by the Commission and through workshops. In total, around 8% of all staff are involved in the process.
The technical team prepares a proposed PEI based on the outcomes of workshops that convene senior management and staff from across the organisation, including the heads of the decentralised offices. The Commission approves the PEI document.
The PEI is sent to the PCM for review and approval. The PCM verifies that the PEI is consistent with the objectives of the sector-wide strategic plan. During the evaluation process of the PEI proposal, the OPPM interacts with the PCM to respond to any queries. To date, Sunass has always received approval from PCM without comments or requests for changes.
The PEI is sent to CEPLAN for methodological approval.
The strategic planning process concludes with the approval of the PEI by the Sunass Board of Directors, after which it is published on the regulator’s website and the Transparency Portal of Peru.
Communications
The Office of Communication and Institutional Image (OCII) was created in 2019 to elevate communications to a corporate level with a greater focus on strategic communications with all stakeholder groups to achieve the regulator’s strategic objectives. Previously the communications team had been under the Users Directorate and focused on dissemination of information to consumers. The Users Directorate continues to run educational campaigns targeted at consumers.
Sunass has run campaigns to raise awareness on the benefits of drinking treated water and designed communications approaches to support the acceptance of paying for water. The decentralised offices have staff trained in communications to support the strategy designed in the headquarters. A lack of budget however means that in practice there are few local campaigns and that people working on the campaigns are unpaid. Plans to roll out further campaigns were put on hold during the COVID-19 pandemic to focus all communication on the sanitary emergency.
Sunass recently modified its website to be more user-focused, using simple and accessible language. In addition, Sunass prepares information materials using plain language and some communication pieces are prepared in native languages.
Independence and preventing undue influence
Law No. 27332 establishes Sunass as a public and decentralised body attached to the PCM with administrative, functional, technical, economic, and financial autonomy. Sunass produces its annual work programme independently. The regulator nevertheless depends on the PCM or MEF for approval of several procedures:
Budget [MEF]
Strategic Plan (PEI) [PCM and CEPLAN]
Staff Assignment Chart (Cuadro para Asignación de Personal, CAP): the classified positions of the entity based on the current organic structure provided for in its Regulation on Organization and Functions [PCM]
Analytical Staff Budget: the budget for the specific services of permanent and temporary staff. [MEF]
Standards, except for regulations, which must undergo a regulatory quality analysis.6 [PCM]
Permission for international travel by staff. [PCM]
Input
Financial resources
Sunass is financed by a mix of government funds and fees from industry. The reform of the regulator’s mandate in 2016 changed its financing model. Previously the regulator was funded solely by fees from the utilities it regulated, collecting a maximum of 1% of annual turnover after sales and promotion taxes.7 To cover the expansion of its mandate outside of urban areas, government funds now provide the majority of the budget while the income from regulated entities represents 42% of its annual budget (Table 3.5).
Government funds are transferred directly from MEF to Sunass at the start of the calendar year in the form of budgetary credits. Utilities pay the fee to Sunass on a monthly basis (49 out of 50 providers comply with payment of fees).
Table 3.5. Sources of revenue
Source: Information provided by Sunass, 2021.
Sunass’s total budget rose to PEN 105.9 million (approximately USD 26 million) in 2020, 3.5 times larger than its budget in 2016, in line with the expansion of its duties. However, since then, the government contribution to the budget has decreased. As a result, the budget decreased by nearly 10% to PEN 95.8 million in 2021, and is expected to decrease by another 12% to PEN 84 million in 2022, driven also by an expected drop in revenues from fees. The regulator asserts that its resources are insufficient to carry out its mandate. Even before the expansion of its functions to rural areas, Sunass considered that its budget was inadequate to carry out its functions fully, as water utilities in Peru tend to be small public agencies with low business income. Although the 1% cap applies to all regulatory agencies, water sector income is vastly different from other sectors (e.g. energy and mining).
Underfinanced activities include supervision/inspection (in particular, the supervision of PPP contracts, funds and reserves and the inspection of wastewater treatment processes and water quality standards) and tariff-setting (new tariff regulation requires more frequent tariff updates and tariff-setting in small cities). The regulator signals that activities such as data collection and information management, as well as equipment, software and the maintenance of information systems are also underfinanced.
Managing financial resources
The execution of expenditure is carried out by budget period from 1 January to 31 December, based on the institutional budget approved each year following rules issued by the MEF (Table 3.6).
The budget process is co-ordinated with the MEF through a digital system. Sunass submits information via the online Integrated Administrative Financial System (Sistemas Integrados de Administración Financiera, SIAF) every day as part of Peru’s administration-wide performance based budgeting system.
Sunass carries out multi-annual budgeting as part of its strategic planning process. The OPPM oversees the preparation of the budget:
Co-ordination meetings are held with the teams in Lima and the decentralised offices to prepare the POI and the Multiannual Budget Programming and Budget Formulation.
The POI is drawn up within CEPLAN guidelines and the operational activities and physical goals are determined.
Once the POI is defined, the multi-annual budget is prepared according to budgetary regulations.
Each Sunass office/team completes a table of needs for the operational activities under their responsibility.
The table of needs is assessed by OPPM and the budget is determined.
The expected income level and the budget execution of the previous year are taken as a reference.
To ensure alignment of Sunass budget with the PEI objectives, every POI activity is aligned with a strategic objective, and related financial information is recorded.
The budget is submitted to the MEF for approval.
In the case of payroll or administrative contracting of services (Contratación Administrativa de Servicios, CAS) personnel, the MEF uses the number of positions recorded in its Software Application for the Centralized Record of Payrolls and Human Resources Data of the Public Sector (Aplicativo Informático para el Registro Centralizado de Planillas y de Datos de los Recursos Humanos, AIRHSP) as a parameter.
Table 3.6. Annual budget by area (2021)
Notes: The certification of the budget credit is an administrative procedure whose purpose is to guarantee that the budget credit will be available for the respective fiscal year, in order to authorise expenditure according to the institutional budget. The allocated percentage was obtained by averaging the Opening Institutional Budget (Presupuesto Institucional de Apertura, PIA) and the Modified Institutional Budget (Presupuesto Institucional Modificado, PIM). PIA: 88,856,348; PIM: 95,761,514.
Source: Information provided by Sunass, 2021.
The OPPM produces weekly reports on budget execution. Each month there is an opportunity to review and re-align, if necessary, the allocation of resources across different units, following the review of budget execution and compliance with the prioritisation of operational activities.
As with other public bodies under the aegis of the PCM, Sunass records all its financial operations in SIAF. Information on Sunass’s revenues and budget is available on the publicly accessible MEF portal “Transparencia Económica Peru” and updated daily. Furthermore, Sunass has progressively adhered to international quality standards for financial management and in 2020 achieved ISO certification (ISO 9001:2015).
Sunass is bound by several central government rules with regard to managing its financial resources:
The budget is approved yearly by the MEF before approval by Congress.
Staff members of Sunass are remunerated according to minimum and maximum limits fixed by Supreme Decree and endorsed by the Council of Ministers and the MEF.
The PCM has approval authority in some instances, for example, the approval of trips abroad for institutional representation.
Surplus funds from fees can be carried forward to the following year(s), while any surpluses from the government funds must return to the Treasury every year. Sunass has encountered difficulties in resource allocation due to earmarking of its different revenue streams. Government funds are intended to be used solely for Sunass’s new responsibilities in small cities and rural areas. However, some personnel carry out functions in larger urban areas as well as small cities and rural areas.
Moreover, Sunass reports that initially it encountered issues due to the allocation of the national budget, where its budget allocation was distributed through the MVCS rather than directly from MEF. Late receipt of the budget led to insufficient funds for the regulator to pay salaries, causing delayed payments and a number of labour disputes. The regulator reports that it now receives funds directly from MEF, which has improved the process.
Internal audit is assured by an Institutional Control Body (Órgano de Control Institucional, OCI) that is part of the Comptroller General of the Republic (Contraloría General de la República del Perú, CGR), the highest authority of the National Control System (Sistema Nacional de Control, SNC), who supervises, monitors and verifies the correct application of public policies and the use of resources of the state and assets. The purpose of the OCI is to oversee spending and the transparent management of resources at the regulator. The OCI is responsible for auditing all public spending, for example, by monitoring the procedures and evaluation process related to contracts, procurement and other services. The regulator assesses that scrutiny by OCI has increased in recent years.
The head of OCI is appointed by and reports to the Comptroller’s office, as officially the Comptroller’s office is represented within the regulator through the chief auditor of OCI. The head of the OCI is paid from the budget of the CGR while the other OCI staff salaries are paid with public resources from Sunass.
OCI reports are submitted to the Comptroller General and the Executive President or General Manager of Sunass. Most reports cover financial activities. Some examine Sunass operational activities (e.g. purchase of vehicles for decentralised offices or inspection of Sunass assets) or verify the supervision and inspection activities of different decentralised offices or decisions of the Administrative Tribunal for the Settlement of Sanitation Users’ Claims (Tribunal Administrativo de Solución de Reclamos de los Usuarios de los Servicios de Saneamiento, TRASS). OCI reports are available online.
Human resources
Table 3.7. Sunass staff by category, 2017-2020
Source: Information provided by Sunass, 2021.
Table 3.8. Sunass staff by department, 2020
Note: RO = resources from government budget; CAS = Administrative Service Contracting (Contratos Administrativos de Servicios), Law 1057 regime; CAP-P = Cadre for Assignment of Provisional Staff (Cuadro para Asignación de Personal Provisional), Law 728 regime.
Source: Information provided by Sunass, 2021.
Sunass’s Organisation and Duties Handbook (Manual de Organización y Funciones, MOF) and Organisational Duties Regulation (Reglamento de Organización y Funciones, ROF) outline the main functions of each position. Any changes to the ROF requires approval by the PCM via a Supreme Decree.
Staff composition
Sunass staff come from a wide range of professional and academic backgrounds, with engineers as the largest group, followed by lawyers and economists (Table 3.9). The regulator also counts on a significant number of staff with communications, management and accounting backgrounds. Anecdotal reports from Sunass suggest that a significant portion of Sunass staff have worked in other regulators. About 10% of Sunass’s functions and duties are carried out by contractors and external consultants.9
Table 3.9. Sunass staff
Note: Information as of March 2021.
Source: Information provided by Sunass, 2021.
Women are under-represented in the organisation at senior management level (Table 3.10), although women form the majority on the Board of Directors. Overall, women make up 46% of total staff and just over half of technical staff.
Table 3.10. Staff gender balance
Note: Information as of March 2021. Senior Management comprises the Board of Directors, the Executive President and General Management.
Source: Information provided by Sunass, 2021.
Looking ahead to the next ten years, the regulator has identified the need to strengthen capabilities in the areas of data management and data science, and in obtaining and managing biophysical information in the watersheds and its impact on the economic aspects of regulation, to support the regulator’s new role in the MERESE processes.
Recruitment
Sunass recruits most personnel in accordance with the rules and procedures established by the National Civil Service Authority (Autoridad Nacional del Servicio Civil, SERVIR) and the Ministry of Labour and Employment Promotion (Ministerio de Trabajo y Promoción del Empleo, MTPE). The official employment website, managed by SERVIR, publishes information on each stage of the process from selection to the final results. There are no pre-established criteria for recruitment. General Management gives the final approval on recruitment for each post.
Sunass has 18 posts that are considered “positions of trust” (puestos de confianza) that are exempt from the public merit-based competition.10 The law allows free appointment and removal for this type of personnel and the minimum requirements for the posts are defined in the Sunass job classifier. Positions of trust are designated in the CAP-P. The positions of trust are General Management, several Directors11/Head of Offices and advisors to the Executive President and General Management.
Sunass cannot hire staff at managerial level directly from a regulated entity. There is a one-year pre-employment cooling-off period. Post-employment restrictions are also in place for higher levels of staff and include a one-year cooling-off period during which these staff members cannot work for a regulated entity. Both restrictions appear in article 80 of the Supreme Decree No. 017-2001-PCM.
Remuneration and contract conditions
Sunass public servants work under two different employment regimes: Laws No. 728 and No. 1057. Fourteen per cent of staff work under labour regulations for the private sector, not commonly offered in public entities (Law No. 728 regime).12 Law No. 728 offers open-ended contracts with full benefits. The number of positions is fixed, meaning that recruitments under the Law No. 728 regime can only be made when a Law No.728 position has been vacated. Agencies under this labour regime have remuneration scales that are different from the single remuneration system. It enables highly qualified personnel in positions of responsibility to be exempt from the requirement of advancing step-by-step through an organisation’s levels of hierarchy. Directors of Offices/Departments who are recruited via public competition are under this regime.
86% of Sunass employees are hired under the Law No. 1057 regime for CAS. The CAS regime offers fewer employment benefits, such as insurance or pensions, in contrast to the 728 regime. However, Law No. 29849 established the progressive elimination of Law No. 1057, and Law No. 31131 granted labour rights to employees under this regime.
For staff that are in “positions of trust” (e.g. the General Manager, the advisers of the Executive President, certain Directors), their appointment is not subject to a term and can be terminated at any time and without reason of cause.
Sunass follows the remuneration schemes according to the two employment regimes noted above. Sunass staff is not eligible for performance-based pay. Any changes to salary bands within a specific remuneration regime require approval from the Ministry of Economy and Finance and must comply with the Law of Budget and Budgetary Balance. However, Sunass internal regulations do afford staff some additional benefits, such as a day off on a staff member’s birthday.
Sunass salaries are considered competitive when compared to salaries in regulated companies in the water and sanitation sector. However, Sunass reports that its salaries are on average lower than those in other regulators in Peru. Sunass does not keep track of salary gaps for comparable positions in the regulated sector.
Training and talent retention
Sunass has a People Development Plan (Plan de Desarrollo de las Personas, PDP) based on training needs expressed by Sunass teams and that is in line with the institutional strategic objectives. For technical work such as tariff studies, new staff take on average 2-3 years to be able to prepare a tariff study autonomously. Their skills are developed primarily through on-the-job training and support from the team.
Staff turnover appears relatively high, averaging 17% per year from 2017-2020 (Table 3.11). Several stakeholders note that Sunass turnover is however lower compared to ministries, as the regulator’s staff is more sheltered from political changes than the executive. Informal exit surveys carried out by Sunass’s HR office indicate that staff leaving Sunass tend to move to the executive, either the PCM or other ministries. Talent retention can be difficult as career progression can be slow. There is currently no strategy or guidelines for talent retention.
Table 3.11. Turnover of staff, 2017-2020
Source: Information provided by Sunass, 2021.
Performance evaluation
In 2021, Sunass introduced a performance evaluation system for the first time. The system follows the guidelines and criteria established by the SERVIR. Under these guidelines, performance appraisals are carried out by senior officers. Feedback is not sought from others apart from the staff’s supervisors/managers, such as clients or external partners. Staff are not invited to comment on the performance of their supervisors and managers on a systematic basis, although the SERVIR guidelines do allow for this possibility. The results of the first staff performance evaluation will be available at the end of 2021/early 2022.
Internal organisation and management
Headquartered in Lima, Sunass has 24 decentralised offices (Oficinas Descentralizadas, ODS), one in each region of the country except for the region of Ancash which has two ODS.
The internal structure of Sunass (Figure 3.2) is defined in its ROF, which was updated in 2019 (by Supreme Decree No.145-2019-PCM in its first section and by Presidential Resolution No. 040-2019-SUNASS-PCD in its second section) to adapt to its new functions. Any changes to the internal structure of the regulator requires approval by the PCM. In the face of reticence on the part of PCM to create new teams as reported by Sunass, the regulator has operated within these constraints and on occasion created functional teams within Directorates (i.e. at the level where Sunass can make changes).
Management
Sunass has three senior management bodies: the Board of Directors, the Executive Presidency and General Management. The role of each Senior Management body is established in the ROF.
The Board of Directors: The highest governing body of Sunass, in charge of establishing objectives, institutional policy and regulatory decision making. It interacts with the Executive President, General Management and the different administrative bodies of Sunass in the approval of initiatives or documents.
Executive President: The highest executive authority of Sunass is responsible for supervising the implementation of the decisions of the Board of Directors. They are the head of the entity and carry out the management and representation duties of Sunass. They interact with the Board of Directors, the General Management and the different administrative units of Sunass, reviewing initiatives or documents for approval by the Board of Directors. Five staff work in the Executive Presidency.
General Management: Sunass’s highest administrative authority. It is responsible for the administrative and operational management of Sunass by the internal and line administration bodies and the implementation of the decisions of the Board of Directors the Executive President. It serves as the Technical Secretariat to the Board of Directors. It interacts with the Board of Directors, the Executive President and the different bodies of Sunass, reviewing and presenting initiatives or documents for approval by the Executive President and the Board of Directors. It also oversees the different bodies under its responsibility – five Offices and six Directorates – directing and supervising the administrative and operational management of Sunass. General Management also represents Sunass in judicial proceedings. Five staff work in General Management.
In total, there are 46 managers in Sunass, across all organisational levels from the executive management level, to heads of offices/directorates, to heads of unit. The Board of General Management convenes 18 managers and aims to aid interaction and co-ordination across offices and directorates.
Figure 3.2. Sunass organisational structure
Source: Information provided by Sunass, 2021.
Teams
The description of the responsibilities of each administrative unit is established in the ROF:
The Policy and Regulations Directorate (Dirección de Políticas y Normas, DPN, 22 staff) is responsible for developing Sunass regulations (norms), carrying out regulatory impact analysis and undertaking studies and research aimed at strengthening the regulatory system.
The Tariff Regulation Directorate (Dirección de Regulación Tarifaria, DRT, 36 staff) is responsible for evaluating and proposing the rates, prices and quality of sanitation services provided by the 50 urban service providers every five years. The DRT also determines the management goals for each utility.
The Service Area Directorate (Dirección de Ámbito de la Prestación, DAP, 313 staff) is responsible for determining the areas of provision of sanitation services (both the current and potential area that EPs should serve). The team also provides technical assistance to EPs on mainstreaming disaster risk management and climate change adaptation, and advises on the estimation of MERESE that EPs propose to incorporate into tariffs. DAP also oversees the decentralised offices. DAP has been training the decentralised offices to carry out several functions (e.g. technical assistance, fieldwork needed to determine the areas of service provision).
The Supervision Directorate (Dirección de Fiscalización, DF, 45 staff) is responsible for verifying compliance with legal, contractual or technical obligations by sanitation service providers.
The Sanctions Directorate (Dirección de Sanciones, DS, 5 staff) is responsible for evaluating, determining and imposing sanctions on companies (providers of sanitation services, as well as directors and managers of companies that provide sanitation services) in the event of non‑compliance with legal and technical obligations or the decisions of Sunass. It was created in 2019 as part of the new organisational structure.
The Users Directorate (Dirección de Usuarios, DU, 33 staff) is responsible for assisting and guiding the users of sanitation services and for co-ordinating stakeholder engagement processes.
The Office of Planning, Budget and Modernisation (Oficina de Planificación, Presupuesto y Modernización, OPPM, 17 staff) is the advisory body responsible for the processes of strategic planning, budgeting, investment, modernisation, and international co-operation. It defines management indicators to monitor and evaluate institutional plans and policies. It co-ordinates budget planning, execution and evaluation. It produces the regulator’s annual report. The modernisation unit is responsible for a number of initiatives such as administrative simplification, process management, quality standards, knowledge management, continuous improvement and organisational structure. The international co-operation team is in charge of international negotiations with Sunass’s international partners to conclude agreements, projects and activities.
The Office of Legal Advice (Oficina de Asesoría Jurídica, OAJ, 9 staff) is the advisory body responsible for issuing opinions and advising on matters of a legal nature to Senior Management and to the units. It provides legal advice on regulatory issues (e.g. reviews PPP contracts in order to prepare Sunass’s institutional opinion) and also on internal affairs e.g. reviewing contracts that Sunass signs, ensuring legal conformity of the Board’s decisions, responding to Freedom of Information requests.
The Office of Communications and Institutional Image (Oficina de Comunicaciones e Imagen Institucional, OCII, 15 staff) is the advisory body responsible for strategic communications and media relations.
The Office of Administration and Finance (Oficina de Administración y Finanzas, OAF, 68 staff) is divided into five teams covering accounting, treasury, procurement, human resources and document management.
The Office of IT (Oficina de Tecnologías de Información, OTI, 24 staff) is responsible for IT infrastructure, governance, information management and co-operating with other organisations in the sector on common initiatives.
The Administrative Tribunal for the Resolution of Sanitation Service User Claims (Tribunal Administrativo de Solución de Reclamos de los Usuarios de los Servicios de Saneamiento, TRASS, 42 staff) is the autonomous technical body that exercises the decision-making function of Sunass with respect to claims of a commercial and operational nature between users and service providers. It has a Technical Secretariat in charge of providing legal and administrative technical support.
Office of Internal Audit (Órgano de Control Institucional, OCI, 4 staff) is part of the CGR, the highest authority of the SNC, who supervises, monitors and verifies the correct application of public policies and the use of resources of the State and assets. The purpose of the OCI is to oversee the spending and transparent management of resources at the regulator. The OCI is responsible for all auditing all public spending; for example, by monitoring the procedure and evaluation process related to contracts, procurement, and other services.
Decentralised offices
The 24 ODS were established in 2017. Most offices have a standard structure of eleven people: a head of office, two supervision specialists (in some offices there may be three to five supervision specialists), an environmental management officer, social manager, an economic analyst, an administrative assistant, a communications officer, two user relations officers and a driver.13 Sunass has identified that this structure may need to change given the heterogeneity of the regions and their different needs.
Sunass is pursuing a strategy of progressively decentralising functions to the ODS. As of 2021, the decentralised offices are responsible for supervision, enforcement, service delivery area determination (in co-ordination with DAP in headquarters), and user engagement. In 2022, the regulator is due to decide which other functions will be decentralised. The focus of their work has changed in the four years since they were established. Originally efforts were directed at rate regulation (calculation and application of the “household fee” in rural areas) and oversight, the offices are now more focused on inspections.
The ODS report to the DAP. While hierarchically and functionally the ODS depend on DAP, the offices also receive guidelines on how to carry out their functions from the Supervision Directorate and the Users Directorate. All communications between the ODS and headquarters are channelled through the Head of Office. Sunass is in the process of building capacity within the ODS and the offices require substantial support and guidance from the directorates in headquarters.
The 24 ODS are organised into four macro regions to help standardise administrative processes and channel requests from headquarters. Each ODS can communicate its needs directly to DAP or to their macro region. A meeting between all ODS and senior management takes place weekly. In addition, ad hoc meetings between the Directorates in headquarters discuss what is required from decentralised offices.
Process
Governing body and decision making
Sunass has a five person Board of Directors. The Board is represented on a full-time basis by the Executive President. The Executive President exerts executive and administrative functions, ensuring the implementation of Board decisions, and reports on behalf of the regulator to the PCM and MEF. The other four members of the Board exert their duties on a part-time basis. Members are remunerated about PEN 1 500 (EUR 320) per session of the Board, but extraordinary meetings are unpaid. Members may be employed by other public institutions intervening in the water sector.
Board selection
The Framework Law No. 27332 establishes the requirements for Board membership. Board members must:
be a professional with at least ten years of practice.
have recognised professional solvency and suitability, defined as at least three years of experience in an executive management position (i.e. decision-making authority in public or private companies); or five years of experience in matters within the regulatory agency's jurisdiction; and,
have completed a master's level degree in matters related to the activity within the competence of the regulatory agency.
The selection process (regulated by Supreme Decree No. 103-2012-PCM) is carried out through a public contest managed by a Selection Committee composed of the following members:
Two members proposed by the PCM, one of whom presides and has the casting vote;
One member proposed by the MEF; and,
One member proposed by the MVCS.
At the end of the evaluation stage, the Selection Committee submits to the President of the Council of Ministers the list of selected candidates (no more than three) for each member of the Board of Directors. The President of the Republic chooses among the candidates from the list presented by the PCM. If the President of the Republic disagrees with the list of selected candidates, they may request a new procedure. The selection process can be lengthy, resulting in vacant Board seats for a period of time.
The Executive President must also sit a written exam, set by the PCM and designed by a university, as part of their recruitment process.
Board members are appointed for a five-year term by the Supreme Decree signed by the President of the Republic and endorsed by the President of the Council of Ministers. Board members can present themselves for a new contest and be re-elected after their initial term is complete.
The terms of Board members are staggered: every year a Board member ceases their term and a new member is appointed. Board terms are calculated from the expiration of the mandate of the previous member, regardless of when the new member is appointed. Therefore, if a member is elected late, they will not serve the full five years but rather will complete the remaining time.
Given the part-time nature of the role, Board members may be employed elsewhere, including in other organisations that have a role in the WSS sector, although members are not allowed to work for sanitation companies (regulated entities) during their term or one year prior to taking up office.
To mitigate against potential conflicts of interest, the General Regulations of Sunass listed in the supreme decree No.017-2001-PCM, stipulate that the Board of Directors must submit a Sworn Statement of Interests at the beginning and the end of their term and each year. Furthermore, Law No. 27588 sets out prohibitions and incompatibilities of public officials, civil servants and persons rendering services to the State. The Selection Committee decides whether any conflicts of interest would prevent a candidate from taking up a Board position.
Decision-making by the Board
In accordance with the ROF, the Board has responsibility to:
set Sunass’s strategic direction (approves the strategic plan and budget)
take regulatory decisions and actions (exclusive authority of Board, no delegation of regulatory decision-making)
monitor performance
approve annual report
approve internal policies
ensure compliance with the law and with the organisation’s constitutions and policies
review appeals
appoint the members of the Dispute Settlement Tribunal (Tribunal de Solución de Controversias, TSC) and approve the members of the TRASS.
The Board meets twice a month to discuss the issues submitted for its decision. The annual operational plan sets out the number of scheduled regulatory and tariff decisions for the year ahead, which provides visibility to Board members. Nevertheless, extraordinary meetings can be called if the two monthly Board meetings are not sufficient to take decisions within prescribed deadlines (e.g. to issue an opinion on a concession contract). Extraordinary meetings are called on average every two months.
Decisions are made collectively. Members reach consensus on most decisions; very few decisions go to a vote. In the case of a tied vote, the Executive President has the casting vote. There is no differentiated mandate or division of labour between Board members. Rules governing decision-making by the Board are not codified in an operational manual or guidelines.
According to the ROF, Sunass’s General Management acts as the Technical Secretariat to the Board. All regulatory proposals and other documentation prepared for the Board by the technical directorates passes through General Management before it is presented to the Executive President and then the Board. General Management chairs ‘pre-Board’ meetings in order to settle any points of contention between the different directorates and to collect feedback from other directorates on proposals. The OAJ provides legal advice to the Board and provide comments on legal aspects on all regulatory proposals. General Management is also responsible for ensuring the correct implementation of the Board’s decisions.
The Board makes decisions based on the information prepared by Sunass directorates. The Board receives the agenda and supporting documents three days before its meetings, and no new information can be introduced during the Board meeting itself. The Board interacts with technical staff from the directorates during Board meetings, during which a representative of the technical team will present and explain the proposal. It is rare for the Board to reject a regulatory or tariff proposal. However, directorates are occasionally required to expand their reports, submit new information or evaluate additional aspects of proposals, upon request by the Board.
Board decisions are published in the official gazette (El Peruano) and on the regulator’s website. The information that the Board uses for decision-making is also disclosed on the website once the decision has been made and published. Sunass opinions on concession contracts are sometimes but not systematically published on ProInversion’s website.14
Proposals for regulatory changes are generally triggered by Sunass directorates raising concerns about specific regulations.
Regulatory quality tools
Ex ante assessments and ex post reviews
Sunass has been receiving technical assistance from the Organisation for Economic Co-operation and Development (OECD) on the implementation of Regulatory Impact Analysis (RIA) to align with international best practice that has resulted in new internal guidelines for RIA that were approved in 2021. Prior to this, the regulator’s evaluation of draft regulation relied mainly on a limited approach to cost-benefit analysis and there was no proportionality requirement to tailor the level of the assessment to the potential impacts of the new regulation. The assessment and the regulatory proposal were regularly but not systematically sent to other managers in Sunass for comment, before being presented to General Management and then the Board of Directors for approval.
Under the new internal guidelines for RIA, the DPN is responsible for conducting ex ante assessments for each regulatory proposal. Under the new system, the ex ante analysis will focus mainly on costs and benefits of proposed regulation, incorporating both quantitative and qualitative criteria. The methodology enables the regulator to consider alternatives to regulations (including no regulation) during the design of regulations.
There is currently no assigned internal unit with a responsibility to check the quality of ex ante assessments.
The regulator does not carry out ex post reviews of the regulations it issues.
Inspections and enforcement
Sunass applies different compliance and enforcement approaches depending on the type of service provider.
Legal framework
The General Administrative Procedure Law establishes the obligations and rights of the parties involved for inspections and enforcement. In addition, two further regulations establish the rights and obligations of parties involved and contain principles that guide the exercise of the oversight function:
The General Regulation on Supervision and Sanctions establishes obligations and rights of the parties involved (Provider Companies, Managers and Directors) for urban EPs.
The Regulations for the Supervision of Communal Organisations establish obligations and rights of the parties involved (Communal Organisations and Municipal Management Units) for rural areas.
The regulation for the supervision of service providers in small towns is under development.
Service providers in urban areas (EPs)
According to the Framework Law No. 1280, Sunass supervises and has the power to sanction water and sanitation service providers in urban areas. In particular, Sunass supervises:
Good corporate governance: includes compliance with the standards of the Code of Good Corporate Governance, compliance with bylaws, corporate transformation, the procedure for the appointment of general managers and directors, among others. This is a relatively new topic to be supervised (introduced via the Framework Law No. 1280).
Commercial aspects: includes the procedure for access to the service, application of the tariff structure, prices of collateral services, billing modality, the content of receipts, billing quality control, meters, closing and reopening, attention to complaints from users of sanitation services, modalities of remote attention due to the national state of emergency due to COVID-19, attention to appeals, and attention to general commercial problems.
Technical-operational aspects: inspection of wastewater treatment processes, compliance with Maximum Allowable Values (MAV) regulations for non-domestic wastewater, compliance with maintenance programmes for the sewage system (networks, collectors, pumping stations), application of pressure calculation methodology and continuity of service.
Complaints against the service providers depending on their area of competence (related to the provision of sanitation services, good corporate governance).
Control of drinking water treatment processes, operational reliability, reservoir cleaning and maintenance programme, drinking water treatment plant, sampling frequency when applicable (if the provider company already has a Quality Control Plan (Plan de Control de Calidad del Agua, PCC), the Health Authority is in charge of supervising the sampling frequency).
Compliance with management goals established in the tariff studies.
Establishment and use of the investment fund and reserves for Payment for Ecosystem Services (Pagos por Servicios Ecosistémicos, PSE), Disaster Risk Management (Gestión del Riesgo de Desastres, GRD), Adaptation to Climate Change (Medidas de Adaptación al Cambio Climático, ACC), PCC, the sanitation adequacy programme (Programa de Adecuación Sanitaria, PAS), as established in the tariff study prepared by the Tariff Regulation Directorate.
PPP contracts as established in the contract within the scope of Sunass’s jurisdiction.15
Supervision of Directors and Managers: Requirements and impediments to holding the position of Chief Executive Officer; Requirements and impediments for the performance of the position of Director; and compliance with the obligations of the Framework Law by Directors and Managers.
Service providers in rural areas
Sunass has chosen not to sanction providers in rural areas for an initial period of two years, after which this approach will be reassessed. The regulation stipulates that the supervision approach is to inspect and provide guidance and recommendations rather than sanctions. The regulator is trying to create incentives for suppliers to comply through benchmarking providers and publicising good practices among peers, and a system that recognises “efforts to improve” rather than compliance. Furthermore, roughly 50% of service providers are informal and therefore not subject Sunass’s sanctioning powers. In rural areas, Sunass supervises: access, monitoring of quality, control of the water treatment (chlorination) process, operational reliability, monitoring of the sewage disposal process, application of the methodology for calculating the household fee, collection, recording of information, closures and re-openings, as set out in the Regulation on Quality of Sanitation Service Provision.
Supervision is carried out by Sunass’s decentralised offices or the ATMs within municipal governments. ATMs report needing to visit JASS/Communal Organisations on a frequent basis due to high rates of non-compliance. For example, water is often not treated and JASS do not cut supply in cases of non-payment. Formal Communal Organisations have two years to comply with access, closures and re-openings and collection requirements. Informal Communal Organisations are issued with recommendations.
As part of the monitoring process, Sunass identifies good practices by Communal Organisations on specific themes (which since 2018 has been water treatment). These good practices are promoted in regional workshops with other communal organisations.
The process for supervising and providing guidance to providers in rural areas will be in place until May 2022, when it will be evaluated under the Regulations for the Supervision of Communal Organisations, and a decision will be taken whether to continue or not with this approach.
Service providers in small cities
Regulation for the third category of service providers – those based in small cities – was under development at the time of writing and scheduled for final approval by the end of 2021. The proposal does not suggest sanctioning providers in case of non-compliance.
Inspection planning
Sunass carried out 503 inspections of EPs in 2020, of which 111 were triggered by complaints from users about operational aspects (Table 3.12). Every complaint is followed up by the regulator. If Sunass determines that the complaint has been dealt with by the provider company, the procedure is concluded and the user is informed. If Sunass concludes that the complaint was not addressed, an inspection is triggered and the results are reported to the complainant. It can take some time for an inspection to take place after a complaint. For example, among the 111 inspections carried out in 2020 due to complaints, some of these related to complaints made in 2018 and 2019. Sunass reports that breaches are most frequently related to control of treatment processes, operational aspects and quality of billing.
ODS started carrying out inspections in response to complaints in June 2020. Prior to this, all inspections were carried out by the Supervision Directorate.
Table 3.12. Inspections, 2020
Source: Information provided by Sunass, 2021.
An Annual Inspection Plan is included as part of Sunass’s POI. Sunass considers several pieces of information and data to establish the inspection plan, including:
Providers’ performance in the previous year (management indicators on service quality in the case of EPs; ATMs assessment of the providers’ management in the case of rural providers);
Whether imposed corrective measures (for EPs) or recommendations (for providers in small cities and rural areas) from the previous year were implemented; and
(For EPs only) Complaints received and resulting actions by the EPs.
Based on this information, an analysis of strengths, opportunities and threats is carried out to identify risks. Risks are rated and the type of supervisory actions that are needed to mitigate the risks are established. Finally, the plan takes into account the assigned budget ceiling and available resources.
The ODS define their own inspections schedule which is incorporated by the Supervision Directorate into the overall proposed inspection plan that is sent to the Board for approval as part of the POI. Once the POI is approved, the annual inspection plan is approved by the General Manager.
Sunass’s ODS implement the annual inspection plan with oversight from headquarters. Each ODS has at least one supervision officer. The ODS benefit significantly from the supervision and enforcement expertise in Lima. The Supervision Directorate does not have access to the complete information on inspections held by the ODS.
Some regulated entities are still supervised directly by the Supervision Directorate in headquarters, in particular in cases where there is no need to go on site or where files were started before the ODS were set up.
The outcomes of inspections are shared with the service provider. They are not published on the Sunass website, although anybody can request to see an inspection report.
The rate of non-compliance with imposed corrections is relatively high at 60-70%. Furthermore, the COVID-19 pandemic exposed several irregularities with EPs (e.g. tariff studies not up to date, lack of investment funds) that suggest high rates of non-compliance with Sunass regulations.
The Supervision Directorate performs an ex post audit of its decisions (to verify validity) twice a year.16 Sunass does not currently review enforcement and inspection aspects during the development of new regulations.
A report by the OCI in 2020 highlighted the insufficient capacity of Sunass’s Supervision Directorate to carry out all its functions.
Operational co-ordination
A number of other authorities have inspection and enforcement responsibilities in the sector:
The Health Authority monitors drinking water quality17 (compliance with Maximum Permissible Limits, MPL) and Sunass supervises the monitoring of the water treatment process by EPs (i.e. Sunass does not monitor water quality in the distribution networks, this is done by the Health Authority).
If a company has a PCC, the Health Authority supervises the frequency of water testing; if it does not yet have a PCC, Sunass supervises the testing frequency.18 The PCC includes the parameters to be monitored, the monitoring points in the water supply systems for human consumption, and the frequency. 17 out of 50 EPs have PCCs.
Regarding wastewater treatment, Sunass supervises the monitoring of treatment processes by EPs. The DGAA in the MVCS, supervises compliance with the MPL of discharges, in line with its role at the environmental control entity of sanitation services (within the framework of Law No. 29325, Law of the National System of Environmental Assessment and Oversight).
MINAM supervises compliance with environmental quality standards in water bodies (rivers, lakes etc.).
ANA issues authorisations for wastewater discharge and drinking water treatment.
A report by the OECD in 2020 on the Environmental Evaluation and Enforcement Agency of Peru (Organismo de Evaluación y Fiscalización Ambiental – OEFA), noted a need for OEFA for strengthened co-ordination, clarity on the distribution of mandates and tasks and more systematic data sharing among institutions (OECD, 2020[3]).
Enforcement
Enforcement decisions are taken by the Enforcement Directorate, with no involvement of the Board of Directors. Regulated entities have up to 15 working days to appeal a sanction. Enforcement decisions are published on the regulator’s website.
Sunass may apply written warnings, fines and removal orders for directors and managers of utilities. The General Rules on the Supervision and Sanction of Sanitation Services Companies specifies whether a written warning or fine is applicable, depending on the type of breach. The amount of the fine varies depending on the type of provider company, the particularities of the breach and the avoided or postponed costs. The amount of the fine can be reduced by up to 50% in case of early payment and admission of wrong-doing. Fines are differentiated according to the type of provider company:
Type 1: up to 15 000 total potable water connections.
Type 2: From 15 001 to 150 000 total potable water connections.
Type 3: From 150 001 to 1 000 000 total potable water connections
Type 4: More than 1 000 000 total potable water connections.
This sanctioning regime was made more lenient during the state of emergency for the COVID-19 pandemic. If firms could show that their revenues had decreased by more than 20% then the fine was replaced with a written warning.
According to the regulator, monetary sanctions had limited success in changing the behaviour of companies. The Framework Law No. 1280 introduced the possibility to remove managers and directors, a measure that Sunass uses in cases where management does not meet legal requirements to hold their position or in case of conflict of interest.
Compliance promotion
Sunass differentiates between activities to promote compliance and activities to enforce compliance with laws or standards. Compliance promotion activities in EPs include:
Regulatory benchmarking of EPs (using indicators, identification and promotion of good practices, recognition of good practices).
Guidance sessions on the application of regulations (especially important in the context of high turnover of personnel in the EPs).
Workshops on good corporate governance supervision guidelines (representatives from the MVCS and OTASS are invited).
Monitoring EPs: verification of regulatory compliance with regulations that are not yet applicable is carried out, and recommendations are made for improvement by the EPs of possible non‑compliance. The advantage of monitoring is that it has been possible to warn of possible non‑compliances, that the EP can then correct.
Compliance promotion activities for rural providers (mostly Communal Organisations) take a similar approach, including benchmarking, identification and sharing of good practices (based on indicators and/or noted during inspections), rewards for good practice.
Engagement and transparency of engagement process
Stakeholder consultation
Engagement with regulated entities and other stakeholders is provided for under legislation. Tariff setting and any regulatory framework reforms are subject to stakeholder consultation, with different processes followed for each. Sunass does not yet carry out public consultations for tariffs in smaller urban areas (the regulatory scheme is currently being designed) or in rural areas, where communities set the household fee.
Consultation on tariffs
According to the Tariff Regulation, the EPs propose a “tariff structure” and Sunass conducts the tariff study with the final formulation of the tariff. Sunass presents EPs with a draft tariff study that includes a proposal of tariffs (rate formula and rate structures that will be applied by the EP), management goals and the investment plan of projects to be financed by tariffs for each five-year regulatory period.
Sunass submits the draft tariff study to public opinion and comment by the EP through publication in the official gazette (El Peruano), on its website and through public hearings. Sunass provides plain language summaries and presentations of the studies on its website.
Stakeholders can submit comments at least 10 days before the public hearing and up to 5 business days afterwards, by letter or email, using forms provided on the regulator’s website.
Once the draft tariff study is published and the date for the public hearing is set, a committee from the DRT, the DU and the relevant decentralised office communicate about the proposal, gather user’s feedback and try to address any initial questions.
The public hearings are open to the EP, local authorities, professional associations, user councils, the media and civil society representatives, among others. They aim to provide information on challenges in the water and sanitation services, the proposed solutions and the impact on tariffs, and to gather comments from stakeholders. Sunass advertises its public hearings through several channels, including traditional media, its website, social media, newsletters, emails and on EP websites.
As with other economic regulators in Peru, Sunass prepares a matrix that assembles stakeholders' comments, and explains how the comments were taken into account or why they were not. This comments matrix is made public in the final Tariff Study.
The final Tariff Study is published on Sunass’s website once approved by the Board, and the decision is also communicated through its decentralised offices.
Despite the public consultation processes, there remains frequent resistance to tariff increases. Rate-setting processes are sometimes disrupted by socio-political tensions. EPs do not always apply the rates that have been approved by Sunass. Furthermore, 19 out of the 50 EPs do not have up-to-date tariff studies.
Sunass has on occasion approved tariff studies that do not incorporate all required elements. For example, while regulations stipulate that EP’s masterplans should give a 30-year vision, often they only cover a five-year horizon.
Engagement in rural areas on the household fee
In rural areas, consumers pay a “household fee” (cuota familiar) that is set by the JASS. Sunass provides the methodology to calculate the household fee and has been training ATMs and JASS to implement the fee. The JASS changes every two years, which presents challenges for continuity of engagement. Rural providers appear to have low awareness and understanding of Sunass and its role.
According to Sunass regulations, the household fee must be set at a level that ensures the JASS can be self-sustaining. In general, the level of household fees set by JASS are insufficient to purchase necessary inputs (e.g. chlorine for water treatment), equipment or to employ an operator to maintain the infrastructure (as required by the regulations).
Consultation on regulations
Draft regulations are also open to comment, although the regulator does not systematically hold public hearings to seek inputs from stakeholders. In the first instance, Sunass uses public consultation to identify the problem to be solved through the regulator's intervention. Sunass then invites comments from stakeholders on regulatory proposals. All comments along with Sunass’s responses are published in the comments matrix that is available on the Sunass website.
User Councils and spaces for citizen engagement
The Users Councils (Consejo de Usuarios, CU) are presented as a mechanism for the participation of civil society interested in improving the regulation of sanitation services, and are created for all Peruvian regulators following a legal requirement in the LMOR. Sunass has five Users Councils organised by regions. The North, South, East and Centre Users Councils are intended to be made up of five to six members, however, the review revealed that in practice these councils are made up of fewer members. Members are elected for two years: one member from each region chosen from among the candidates proposed by universities, professional associations, consumer associations and/or users recognised by Indecopi, business associations and non-profit civil associations. The Lima Users Council has five members, each of whom is chosen from among the candidates proposed by each type of the aforementioned organisations. Current members come largely from academia. There is also representation from chambers of commerce and NGOs. One of the councils includes a member from a consumer protection association.
The Lima Users Council meets monthly, whereas the other users’ councils meet very rarely (once or twice during the two-year term). Although the council’s functions include carrying out events on regulatory issues and transmitting users’ queries about Sunass regulations or policies to the Board of Directors, in practice these activities are not carried out. The councils have no resources to enable them to engage with consumers or to review regulatory proposals.
Any proposals, consultations and contributions of the councils should be addressed to the Sunass Board of Directors. Opinions are non-binding. In practice, the councils very rarely submit opinions to Sunass. Any communications that are addressed to the regulator are made in writing, and are not published on the Sunass website.
Sunass also runs the “Participate, neighbour!” (¡Participa, vecino!) initiative, overseen by the Users Directorate. This offers a more informal platform for organised user groups (neighbourhood boards, building owner’s board, merchant associations, etc.) to obtain information, dialogue, generate proposals and representation on different aspects related to the provision of sanitation services. In these spaces, citizens can find answers to their questions about their rights and duties, information on the sanitation service, complaints procedure, among other topics. In addition, they can have solutions agreed with their providers to problems that may arise, such as clogs and collapses of water or sewage, interrupted sanitation works and others. “Participate, neighbour!” is also intended to be a space for citizens to propose, through their Users Councils, some regulatory improvements to the regulator, although this does not appear to be taking place as the Users Councils are not interacting directly with consumers.
Under this initiative, using virtual platforms, Sunass organises talks and workshops to provide information; micro-hearings, in which representatives of the affected users and officials of the service provider are summoned to reach agreements to solve problems; and activities with members of the Users Councils to identify problems and present regulatory proposals. Micro-hearings are intended to be a mechanism to help users and providers reach agreement prior to or as an alternative to launching an official complaint, thereby saving time and increasing the social impact. The Users Directorate monitors if companies carry out actions they committed to during the micro-hearing. Utilities are not legally obliged to participate but in general agree to take part.
To participate, users are required to contact Sunass explaining the problem that affects them and their neighbours. A representative from Sunass then contacts them to schedule a virtual meeting with the main leaders of their area. Since the start of the Participate, Neighbour! Programme in June 2020 until June 2021, 343 micro-hearings were held and 996 talks and workshops on issues of user rights, regulation of providers and access to the service have been given. As of June 2021, over 18 000 people, mostly neighbourhood leaders, have participated in these spaces. The details of each meeting (micro-hearing, workshop or talk) are published monthly on the Sunass website.
Complaints
Sunass provides users with complaint forms and guidelines on the procedure to follow on its website,19 through a phone-line staffed by teams from its decentralised offices, and via social media.
Consumers must file complaints directly with their service provider. If their complaint is rejected twice by their service provider, they may appeal before Sunass’s Claims Settlement Tribunal (TRASS). TRASS has up to 30 days in which to make its decision; on average decisions are taken within 15 days. To aid transparency, the process is digitised and complainants can track the progress of their file online.
TRASS decisions can be appealed in the judicial branch. Although the rate of appeal is very low (1%), this nevertheless represents a large number of cases (nearly 1 300 in 2020). The courts uphold TRASS decisions in over 90% of cases.
Sector insights gathered by TRASS are sometimes used to inform other areas of Sunass functions. For example, if TRASS identifies a large number of similar complaints, it will alert the Supervision and Enforcement directorates. In addition, TRASS carries out studies with consumers. One such study, requested by Board, highlighted a rise in the volume of complaints after price increases. As a result, Sunass developed guidance for providers about what to do following price increases.
In 2020, Peru’s agency for consumer protection, Indecopi, proposed to create a “one-stop shop” for consumer complaints about public services, citing the complexity of the current system, and convened sector regulators including Sunass to take part in a technical working group to oversee the scheme.
Appeals
Sunass decisions on regulations, sanctions and tariff determinations can be appealed. Sunass decisions may be challenged before the judiciary through a “contentious-administrative lawsuit” filed within three months of the notification of a decision. A judge in first instance makes a decision. This decision can be challenged, in which case the file is sent to the Superior Court, composed of three superior judges. Again, its decision can be appealed before the Supreme Court via “cassation appeal” (under certain grounds related to the non-application or incorrect application of the law), which decides through a collegiate composed of five supreme judges.
Likewise, the following constitutional processes can be initiated:
Protective actions (“Amparo”): for the violation of some constitutional rights other than personal liberty. “Amparo” actions are initiated before a judge of the first instance; if the decision is challenged, the case is referred to a Superior Court and, against the latter's decision, an appeal is filed before the Constitutional Court, which is a constitutionally autonomous entity.
Class Action (“Acción Popular”): directly against the regulatory provisions issued by Sunass and invoking violations of constitutional rights. Class Actions are initiated directly before a Superior Court, and an appeal of its decision causes the file to be referred to the Supreme Court. The Supreme Court's decision concludes the process.
“Action of Unconstitutionality” proceedings: directly against a regulation of legal rank (Law, Legislative Decree) on which a Sunass prerogative is based, invoking violations of constitutional rights. “Action of Unconstitutionality" proceedings are only heard by the Constitutional Court, which issues a decision in a sole instance.
A relatively small number of Sunass decisions on regulations, sanctions or tariff determinations are appealed each year (Table 3.13), and Sunass reports it wins nearly all appeals. Most appeals are filed by regulated entities (rather than consumer groups, for example). In the case of sanctioning decisions, cases are filed against Sunass’s General Management, as the Board does not take sanctioning decisions.
Table 3.13. Appeals against Sunass decisions on regulations, sanctions and tariff determinations
Note: Decisions refer to regulations issued, sanctions/penalties imposed and tariff determinations.
Source: Information provided by Sunass, 2021.
TRASS decisions can also be appealed before the judicial branch (see section on Complaints, above). Ninety five per cent of the judicial proceedings against Sunass are appeals of TRASS resolutions.
Output and outcome
Data collection, analysis and management
Sunass has put in place two methods for data collection on service providers depending on location.
The 50 urban service providers (EPs) submit their data directly to Sunass using a system that has been in place since 2004. The data is used to calculate the tariffs established for the providers (using economic, financial, operational and quality data) and to monitor compliance with the management goals set for service providers (using data on continuity, pressure, number of new connections, wastewater treatment, etc.).
The data required is detailed in the General Supervision and Sanction Regulations20 and the technical specifications of the required data is defined in a directive.21 The Supervision Directorate periodically reviews the requirements for the provision of performance information and data. The last review occurred in 2019. However, the inclusion of new elements, discretionary changes or changes to definitions mean that the information collected is no longer aligned with the regulation in force.
In January 2019, Framework Law 1280 was modified to give technical units within municipalities (ATMs) the responsibility of reporting information to Sunass for supervision and oversight of community organisations. As of 2021, around 80% of ATMs report performance data to the ATM web system. Additionally, as part of its supervision activities, Sunass collects primary information from Communal Organisations in the field and places it in a database, as well as verifying the information from the ATM web system, if applicable. This information serves as the basis for the benchmarking of Communal Organisations and for supervising the quality of service. The regulator faces challenges in ensuring nationwide coverage of data collection, especially in remote and difficult to access areas of the country. So far Sunass has collected data from 2 000 of the 25 000 rural service providers through its ODS and local government ATMs.
A large volume of data is collected although the format in which it is published (e.g. PDFs) and the lack of inter-operability between systems constrains potential analysis and use. The process to validate and clean data is lengthy due to the lack of automation: it can take around six months from the time that data is collected to the moment that it is published as indicators.
Furthermore, the current IT infrastructure hinders data sharing and analysis within Sunass, with staff reporting that systems can’t support multiple users working at the same time. The switch to remote working absorbed much of the capacity of the IT department in 2020, slowing progress on planned modernisation and improvement of IT systems. In addition, budget constraints limit the implementation of IT strategies, such as automation, digitalisation and the move to cloud-based systems.
Overall, data quality is poor due to inconsistency in data management practices and capacity constraints in service providers and other bodies (such as ATMs) that are required to submit data. In particular, there is a lack of reliable, standardised and timely data. Not all EPs gather the required information and those that do have different practices for managing, processing and saving data, making comparability a challenge. Furthermore, water utilities often miss deadlines for submitting information and data can be unreliable, despite being submitted as a sworn statement. For example, financial statements are not audited, but the data is compared with information sent by the EPs to the Public Accounting Office. As a result of inconsistencies in data and poor data quality, Sunass frequently has to go back to provider companies to make corrections to submitted data. Sunass also provides training to the water utility personnel responsible for processing and submitting the information; however, the high turnover of staff in water utilities means that this capacity is frequently lost and the regulator must regularly invest in training new personnel. Furthermore, it was reported during interviews that the public ownership of utilities results in politically appointed management positions.
Despite efforts, there is no integrated system of data collection and sharing between public institutions in the water and sanitation sector. Service providers and regional/local governments (e.g. ATMs) are often required to provide the same data to other public organisations in the sector. The MVCS leads the management and administration of the Water and Sanitation Information System (Sistema de Información de Agua y Saneamiento, SIAS), which is under construction at the time of writing, and its related Rural Water, Sanitation and Hygiene Information System (Sistema de Diagnóstico sobre Abastecimiento de Agua y Saneamiento en el Ámbito Rural, DATASS) platform covering rural areas, that is intended to integrate sanitation information. Separately, Sunass has developed the Data Capture and Transfer System (Sistema de Captura y Transferencia de Datos, SICAP) that collects information on management variables of the 50 EPs. The interoperability of the systems and databases is not yet effective across the board. A World Bank supported project aims to modernise and integrate datasystems on the sector across bodies, but progress to date has been slow.
The regulator’s ability to obtain data and information from other public institutions in the sector tends to rely on personal relationships, rather than institutionalised agreements. Requests to other institutions are usually made via email between the technical teams.
Monitoring and reporting on the performance of the sector
Sunass publishes a number of benchmarking reports:
Annual Regulatory Benchmarking of Service Providers (https://www.sunass.gob.pe/productos-sunas/benchmarking-regulatorio/#1597358923084-6a5c292e-d2ab)
Annual Benchmarking of Communal Organisations (https://www.sunass.gob.pe/productos-sunas/benchmarking-regulatorio/#1597510024732-47e43535-6f08)
Quarterly Express Benchmarking of Service Providers (https://www.sunass.gob.pe/prestadores/empresas-prestadoras/indicadores-de-gestion/#1600223711840-09ce8705-08d4)
Municipal Technical Area (ATM) Indicators Report (http://aplicaciones.sunass.gob.pe:8080/RegistroATM/indicadoresATM.html)
Sunass benchmarks EP performance in terms of access to services, quality of service, sustainability and governance (Table 3.14). Sunass is responsible for calculating indicators related to the service providers and contributes to the monitoring of compliance with the goals of the National Sanitation Plan through its indicators, as well as to the evaluation of compliance with the National Urban Sanitation Programme. Indicators related to the sector, such as drinking water and sewerage coverage at the national level, are calculated by the National Statistics Institute (Instituto Nacional de Estadística e Informática, INEI) through the National Survey of Budget Programs (Encuesta Nacional de Programas Presupuestales, ENAPRES) and are officially used by the MVCS.
Table 3.14. Benchmarking indicators for service providers
Source: Information provided by Sunass, 2021.
Sunass is in the process of updating the System of Indicators and Indices for the Management of Sanitation Services Providers (Sistema de Indicadores e Índices de la Gestión de los Prestadores de los Servicios de Saneamiento, SIIGEPSS) that will define performance indicators for the three different types of service providers: EPs, providers in small cities, and providers in rural areas.
The regulator’s information portal presents various dashboards and databases covering different areas of work, including:
performance indicators of rural providers;
data on % of chlorinated water from MIDIS;
data gathered by ATMs on rural providers;
estimates of the reserve funds collected for the MERESE;
data on guidance for consumers; awareness raising campaigns by the DSOs;
georeferenced data showing location of service providers and Sunass ODS, number of households with access to services (GeoSunass); and
data on coverage and continuity of service from the national statistics office.
However, many of the links are not working, although the regulator is working to resolve this problem. The data gathered by Sunass is published in several different formats, including in PDFs, xls, web pages and maps.
In 2021, Sunass launched a newsletter called “Sunass in Numbers” that presents key data on sector performance including rankings of service providers and data on sanctions and user enquiries.
Sunass is required to report on indicators other than the benchmarking of providers to several national organisations (e.g. INEI, MINAM, MVCS, PCM, INDECOPI, the Congress of the Republic, among others), as well as for international co-operation processes. Many of these are related to the Sustainable Development Goals, environmental indicators, and the volume of drinking water produced for the calculation of the national GDP.
Some data gathered by the regulator are not published due to their preliminary or confidential nature. Sunass only publishes processed data from the providers (i.e. indicators etc.), whereas the raw data collected is managed internally. Regarding data privacy, Sunass implements ISO 27001 on information security and adheres to Peru’s national law for personal data protection.
Monitoring and reporting on the performance of Sunass
At the highest level, Sunass’s strategic plan includes eight indicators that span the regulator’s five strategic objectives (Table 3.15). The indicators on “Percentage of users who value the importance of having sanitation services” and “Percentage of consumers who are willing to pay the set tariffs” have not been monitored as the sanitary situation due to the Covid-19 pandemic meant that Sunass was unable to carry out the necessary user perception surveys.
Table 3.15. Sunass performance indicators
Source: Information provided by Sunass, 2021.
Sunass links up the data on its strategic goals with financial information to monitor the cost per indicator. Monitoring is done by line management and the OPPM.
The regulator also monitors a range of indicators of organisational performance that capture aspects of efficiency, effectiveness, the quality of regulatory processes, and the direct outcomes of decisions (e.g. compliance with decisions), for example:
Number of tariff studies approved in the year
Cost per tariff study
Proportion of tariff studies that are up-to-date
The number of providers with tariff studies in force
The number of supervision and monitoring reports concluded during the year
The number of providers that comply with submitting periodic information
Index of compliance with management goals established in the tariff studies.
While Sunass is not required to so do so by law, it prepares an annual report. The last annual report was produced in 2019. The regulator also reports on its performance to a number of central government entities. For instance, it reports on the implementation of recommendations to the CGR, budget execution to the MEF; and strategic and operational plans and performance indicators to the PCM, among others.
There is no obligation to provide performance reports to Congress on a systematic basis. However, every year Sunass reports on its management, achievements and challenges to two congressional commissions: Housing and Construction; and Consumer Protection and Regulatory Agencies of Public Utilities. It also responds to information requests and enquiries from Congress on a regular basis. For example, these Commissions have summoned Sunass to make presentations on specific issues such as tariff updates or problems in the sector.
References
[2] OECD (2021), Water Governance in Peru, OECD Studies on Water, OECD Publishing, Paris, https://dx.doi.org/10.1787/568847b5-en.
[3] OECD (2020), Regulatory Enforcement and Inspections in the Environmental Sector of Peru, OECD Publishing, Paris, https://dx.doi.org/10.1787/54253639-en.
[1] OECD (2015), The Governance of Water Regulators, OECD Studies on Water, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264231092-en.
Notes
← 2. MERESE – akin to the concept of Payments for Ecosystem Services (Pagos por Servicios Ecosistémicos, PSE) – aims to mobilise funds from downstream users, through a percentage of the water tariff, to upstream providers for the conservation of water resources and the basins where they come from. Source: https://iwa-network.org/mechanisms-of-rewards-for-ecosystem-services-mrse/.
← 3. https://busquedas.elperuano.pe/normaslegales/decreto-legislativo-que-regula-el-regimen-especial-de-monito-decreto-legislativo-n-1185-1275103-1/.
← 4. As established in paragraph 97.2 of article 97 of the Single Ordered Text of the Administrative Procedure Law (approved by Supreme Decree No. 004-2019-JUS). According to Article 42(g) of the Rules of Organization and Powers of the Presidency of the Council of Ministers, approved by Supreme Decree No. 022-2017-PCM, the Secretariat of Public Management is responsible for issuing technical opinions on any conflict of functions.
← 5. Approved by Supreme Decree No. 004-2019-JUS.
← 6. The Regulatory Quality Analysis (Análisis de Calidad Regulatoria) is a tool introduced by the PCM for use by agencies to identify the administrative burden of new regulation (i.e. formalities or procedures required). Regulation: http://www.pcm.gob.pe/wp-content/uploads/2017/08/Decreto_Supremo_075-2017-PCM.pdf; Technical guidelines: http://www.pcm.gob.pe/wp-content/uploads/2017/08/ManualAC.pdf.
← 7. The contribution rate from industry is approved by the Executive through a Supreme Decree endorsed by the President of the Council of Ministers and MEF. Promotion taxes refer to the Municipal Promotion Tax as mentioned in Law No. 27332.
← 8. The support and advisory offices include OAF, OPPM, OAJ, OTI and OCII.
← 9. At the end of 2020, 10.5% of the total budget used for personnel payments at the national level was spent on external contractors/consultants.
← 10. Published in El Peruano, 3 October 2020.
← 11. Service Provision Area Directorate, Policies and Norms Directorate, and the Sanctions Directorate.
← 12. Information as of 12 March 2021.
← 13. El Peruano, 2 October 2020: Approval of the Cadre for the Assignment of Provisional Personnel – CAP Provisional of the National Superintendence of Sanitation Services (Sunass), Ministerial Resolution No. 277-2020-PCM, Lima.
← 14. E.g. The opinions on the Sanitation Services Concession Contract of the South Lima districts or on the Puerto Maldonado Wastewater Treatment Plant Concession Contract are not published.
← 15. To date, the only contract that falls under the PPP modality where Sunass has supervisory responsibilities is the concession contract for the Wastewater Treatment System of the Lake Titicaca Basin project. The contract stipulates the matters that are subject to supervision by Sunass and include contractual, legal, technical and administrative obligations in accordance with applicable laws and provisions, including the supervision of service levels.
← 16. In line with regulations DS 096-2007-PC, which regulates subsequent random auditing of administrative procedures by the State, and Board of Directors Resolution 014-2008-SUNASS-CD Directive on Subsequent Auditing of Administrative Procedures of SUNASS.
← 17. According to the Regulation of Water Quality for Human Consumption.
← 18. Based on the sampling frequency approved in Board of Directors Resolution No. 015-2012-SUNASS-CD.
← 19. Other request forms (for example, for problems not related to billing or operational issues, or requests to change a water meter, among others) are also available to download free of charge through the same website.
← 20. Under Annex 2, “Transfer of Periodic Information from the EP to SUNASS”.
← 21. Circular notice No. 178-2019/SUNASS/030, http://nube.sunass.gob.pe/index.php/s/22cqu7dusxi4eyt.