Why is having a rating system important for utilities in water management?

In an interview, Pritha Hariram introduced a tool that the IWA developed called AquaRating — and the benefits that utilities can gain when they work with this kind of rating system. Rating systems can help utilities to identify capacity gaps to better serve customers and set themselves up for potential risks or shocks to water supply and wastewater systems. This blog post looks more closely at existing rating systems for utilities to better understand why they are helpful and what kinds of benefits they can provide to utilities.

Introducing AquaRating

The International Water Association (IWA) has created a performance management system/tool in collaboration with the Inter-American Development Bank (IDB), called AquaRating. How is a rating system like this important for utilities in water management and how is it being used so far?

“This tool helps a utility to assess how it is performing across all its operational areas,” explains Pritha Hariram, IWA program manager for the water and sanitation services program. “That is, not just its service delivery, but also its governance structure, its human resource capacity, its finances, and so on.”

While other performance management systems, such as ISO, are in place, and used in the water sector — many utilities are ISO-accredited, and some countries are also, says Hariram — AquaRating is an assessment tool purely for water and wastewater services.

As an example, Hariram says that the “IWA and the Millennium Challenge Corporation in Sierra Leone have used AquaRating for one of the utilities there and it will serve as the basis for how they develop their utility improvement plan that MCC will be funding and implementing.”

Influencing investments with robust, evidence-based data

Organisations and funders can use a rating system like AquaRating to determine where they should make their investments, based on concrete, standardised data that is independently validated. This is exactly what the Asian Development Bank is doing, applying AquaRating across utilities that are fund recipients.

“AquaRating is not just a tool for self-assessment or for consultancy vendors to tick boxes. It’s independently validated as well and sometimes utilities also ask to be audited and go right through to certification. Then, they can see exactly how they are performing and where they may need to improve — using donor funds.

“The tool provides realistic information that can help a utility navigate a path to improvement, and after working through a development and implementation and improvement plan they will use AquaRating again to test their progress.”

When municipalities and utilities adopt rating systems they are likely more able to get funding, as they are showing a commitment to best practices and credit-worthiness. Rating systems such as AquaRating allow utilities to reduce risk and “give financiers some confidence that the entities they are investing in or supporting financially are on a trajectory that matches the vision of better water and wastewater management,” says Hariram.

The International Benchmarking Network for utilities

The World Bank-funded International Benchmarking Network is another service providing comparative information in the water sector, and echoes the thought that data makes utilities better.

“Inter-utility performance comparison is needed in the water and sanitation sector because the sector offers limited scope for direct competition. Firms operating in competitive markets are under constant pressure to outperform each other.

Water utilities are often sheltered from this pressure, and it frequently shows: some utilities are on a sustained improvement track, but many others keep falling further behind best practice. This matters, because a well-run water utility is essential to people’s lives. Only the most efficient, financially viable utilities are able to respond to urban growth, connect the poor, and improve wastewater disposal practices.

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