There is no competition in water supply services and the price is approved by the Competition Authority. A water undertaking is a company in a very strong monopoly position that owns important means. In terms of legislation, the water network is somewhat similar to the electricity network, where the construction of a parallel network is not reasonable and there are only very few examples of competing pipelines. In addition, the water undertaking is appointed by the local government in its territory. Water supply and sewerage can be considered the oldest monopoly and it can be assumed that such monopoly status will be retained in the distant future.
From 2022 all water undertakings will be subject to price regulation by the Competition Authority. Before amendment to the law that entered into force at the end of 2021, 60 companies were regulated by the authority. In 2022 more than ten undertakings serving rural municipalities were added (to which smaller undertakings, including ones serving development areas, will be added). Unlike the energy sector, the vast majority of undertakings are publicly owned. The exception is AS Tallinna Vesi, which is listed on the stock exchange, though the majority shareholder is still the city of Tallinn with 55.06%.
In the years 2020–2022 under the leadership of the Ministry of the Environment and in cooperation with other government agencies, including experts from the Estonian Competition Authority, the European Commission and the OECD, a project was carried out to assess the sustainability of Estonian water services. As a result, the OECD prepared for Estonia a water services analysis and future action plan (https://read.oecdilibrary.org/environment/towards-sustainable-water-services-in-estonia_b82d71c6- en#page1). In the action plan, several recommendations were given to Estonia to ensure the sustainability of water economy at the national level, several of which concerned, among other things, the currently valid price regulation implemented by the Competition Authority. The main ones provided for making the review of water service prices periodic, developing incentives to speed up the implementation of water undertaking consolidation plans and increase the efficiency of operations, and developing and publicising a framework for evaluating the performance of water undertakings, which would guide water undertakings to use more efficient and effective approaches in ensuring water service.
Among other things, the OECD took the position in the recommendations that in order to ensure the affordability of the water service price, it is reasonable for the Competition Authority to continue the calculation of the capital cost component in the water service price on the current basis, applying, if necessary and on a company-basis, a different than usual asset amortization period, the criteria of which are published in the methodology to ensure clarity and transparency.