EU Water Law

(D) Pricing of water

The Court of Justice of the European Union decided that the WFD’s provisions, which define the notion of “water services” but not that of “services”, do not make it immediately clear whether the EU legislature intended to make any service relating to each of the activities contemplated subject to the principle of recovery of costs, or only those services associated with the supply of water at all stages of that activity, as well as those associated with waste-water treatment. According to the CJEU, the measures for the recovery of the costs for water services “are one of the instruments available to the Member States for qualitative management of water in order to achieve rational water use.” As a result, while the various activities in question, such as abstraction or impoundment, “may have an impact on the state of bodies of water and are therefore liable to undermine the achievement of the objectives pursued by that Directive, it cannot be inferred from that, that in any event the absence of pricing for such activities will necessarily jeopardise the attainment of those objectives.”

Nor that, as a result, all of these activities must necessarily be subject to the principle of cost recovery (Case C-525/12 Commission v Germany, para. 57). This finding of the CJEU reveals in a quite strong manner the flexible character of the internalisation principle with respect to the costs of water services in current EU water legislation. Indeed, measures pertaining to recovery of the cost of water services are in some way akin to soft law obligations since the CJEU explains that they “are one of the instruments available to the Member States for qualitative management of water in order to achieve rational water use” (Case C-525/12, para. 55). The reason why it is so is that the existing conditions and requirements pertaining to water in the EU “call for specific solutions” so that the EU legislature intended “that diversity of solutions be taken into account in the planning and implementation of measures aimed at ecologically variable protection and use of water in river basins and that decisions be taken at the level as close as possible to the place of use or degradation of water” (Case C-525/12, para. 52).

Thus, without prejudice to the importance of water-pricing policies and the polluter-pays principle, “priority must be given to actions coming within the jurisdiction of the Member States, in drawing-up action programmes adapted to local and regional conditions” (Case C-525/12, para. 52). In the same way, while water-pricing policies provide adequate incentives for users to use water resources efficiently, the methods to reach that objective are left to the discretion of the Member States and it is common practice in the Member States that the price of water services is composed of a fixed component and a variable component (Case C-686/15 Vodoopskrba i odvodnja d.o.o. v Željka Klafuric, para. 25).

As an additional flexibility, Member States may depart from that “principle” of price fixing of water use by taking account of the social, environmental and economic effects of the recovery as well as the geographic and climatic conditions of the region or regions affected. However, such a variation is not required and the Water Framework Directive states this expressly (Article 9(4)), thus avoiding that the question of a breach in the user's equality be raised, a question that might prove difficult to deal with in certain Member States.