Japan Enacts Amended Water Supply Law

December 7, 2018

Tokyo--Japan's Diet enacted Thursday a bill to amend the water supply law aimed at promoting local governments' outsourcing of water supply services to the private sector, amid concerns over possible hikes in household water costs and deterioration in tap water quality.

The House of Representatives, the lower chamber of the Diet, approved the amendment bill by a majority vote at a plenary session, with support mainly from the ruling Liberal Democratic Party and its coalition ally, Komeito. The House of Councillors, the upper chamber, passed the bill the previous day.

The Constitutional Democratic Party of Japan and other opposition parties had objected to the law revision for fear of worsening of water supply services after private companies take over them.

The revised law encourages local governments having difficulty managing the water supply business amid declining profitability and facility aging to adopt the so-called concession formula, which allows them to sell to the private sector rights to operate the services while remaining as state-licensed water suppliers.

It will be the first time for Japan to introduce the cost-cutting formula utilizing private-sector know-how. Miyagi Prefecture and the city of Hamamatsu, Shizuoka Prefecture, are considering adopting it.

However, there were overseas cases in which the concession formula had resulted in water bill spikes and worsening of water quality and the services were returned to public management.

To prevent those events from happening in Japan, the law stipulates that private companies undertaking water supply operations set rates within a range defined by ordinances and that local governments regularly monitor the operators' management and financial conditions.

Local governments are also required to obtain state approval for the water supply business transfer by having their outsourcing plans screened by the central government. On-site inspections of consigned companies will be conducted by state authorities.

Furthermore, the law allows prefectural governments to set up councils with municipal governments to promote wide-area cooperation for water business rationalization. Jiji Press