Vila Real de Santo António council is to privatise the area’s water and sewage systems as it launches a tender process for a 30-year contract.
The municipality is seeking €47 million at current prices, updated according to inflation as the contract progresses.
Mayor Luís Gomes now is pushing for a deal that will enable the council to pay off the €60 million spent in the last 10 years by the council, with significant EC grant support, which was necessary to avoid European Commission fines for dumping sewage in the Guadiana river.
The decision to grant the concession to the private sector was taken at an extraordinary meeting of the Municipal Assembly, held on 28 December, 2015. The tender was published on the 7th of January, 2016.
The council assures its users that future water and sewage tariffs will follow the recommendations of the Regulatory Authority for Water and Waste Services.
This move makes any future take-over of water services by Águas do Algarve harder to achieve and does not therefore fit in with the overall government plan to privatise the country’s water supply companies as one coherent group.
Luís Gomes pointed out that "the financial proceeds solve the council’s debt problem and gives the council financial sustainability for years to come."
Local ratepayers have not been consulted over the move and may question why there is such a high debt level at a council where funds already have been made available to sort out the local water and sewage systems to EC minimum standards.
Another option would have been to wipe out VRSA’s water and sewage department’s debt by handing the service to Águas do Algarve where at least the council would have a say in the future management of the service as the Algarve’s councils own the majority of shares in this company.
The reliance on the Regulatory Authority for Water and Waste Services to keep pricing to an affordable level is misplaced as it can hardly be considered as a consumer champion.
Future tariff levels will have to take into account the need for company profits on an investment already paid for with EC grants and council funds.
The water and sewage rates inevitably will rise as the new concession holder aims to maximise its profit at the expense of local ratepayers.
