Economic regulators play an important role in ensuring the affordability, quality and accessibility of essential services, such as water and sanitation. The stakes are high: regulators’ actions affect outcomes for consumers and can have major social and environmental implications. Exogenous shocks, such as the COVID-19 pandemic, make balancing these outcomes even more challenging. Economic regulators are expected to provide stability for markets and investors, and to design regulations that protect the public interest without impeding innovation. Good governance is essential to ensure the effectiveness of the regulator and support better outcomes, especially in times of change.

Over the past decade, Peru has placed water security high on its political agenda, but wider governance challenges have jeopardised policy continuity and delivery. Recent political and social turmoil have had an impact on the effective implementation of public policies, including water and sanitation. This report applies the OECD Performance Assessment Framework for Economic Regulators (PAFER) to Peru’s economic regulator for water and sanitation services (Superintendencia Nacional de Servicios de Saneamiento, Sunass), upon invitation of the regulator.

The PAFER review finds that Sunass is a technically sound and ambitious regulator that is making strides to improve regulatory practices and deliver on an expanded mandate. The regulator operates in a challenging context that complicates the urgent task of increasing access to safe drinking water and sanitation services. The review recommends that Sunass communicate proactively on risks and expectations, and expand its regulatory toolkit to promote behavioural change. To do so, Sunass needs to consolidate its institutional transformation, update its identity and culture, and strengthen external collaboration and co-ordination across its regional offices as well as with key actors in the sector.

The OECD has developed the PAFER framework to support regulators in assessing and strengthening their organisational performance and governance structures. The framework, based on the OECD Best Practice Principles on the Governance of Regulators, analyses regulators’ internal and external governance, including their organisational structures, behaviour, accountability, processes, reporting and performance management, as well as role clarity, relationships, distribution of powers and responsibilities with other government and non-government stakeholders.

This report builds on existing OECD work on the water sector in Peru, notably the two-year Water Governance Policy Dialogue in Peru led by the OECD Centre for Entrepreneurship, SMEs, Regions and Cities (CFE) that culminated in the publication Water Governance in Peru in March 2021.

This report is part of the OECD work programme on the governance of regulators and regulatory policy, led by the OECD Network of Economic Regulators and the OECD Regulatory Policy Committee, with the support of the Regulatory Policy Division of the OECD Directorate of Public Governance. The Directorate’s mission is to help government at all levels design and implement strategic, evidence-based and innovative policies that support sustainable economic and social development. The report was presented to the OECD Network of Economic Regulators for comments and approval at its 17th meeting in November 2021 and declassified by written procedure by the Regulatory Policy Committee on 4 January 2022. It was prepared for publication by the Secretariat.

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