Research On The Compensation Mechanism Of Universal Water Supply Service

With the continuous development of market economy, water supply, with othernatural monopoly industrys, such as telecommunications, electricity, postal and so on,began to step the pace of market reform, gradually relaxed control and introductedcompetition mechanism. To break up monopolies, these industries are faced with Acommon practical problem-how to achieve universal service, of course, water supplyindustry is no exception. Water supply industry has been formed a diversified situation,which has state-owned enterprises, private enterprises,"three capital "enterprises andforeign joint management. Competition leads to "write-milk fat" behavior, in order topursue their own profit maximization, whether it is new water supply companies toentrants, or existing businesses, are reluctant to go to the low population density, poorprofitability of water supply of rural areas for provision universal service, and almost allthe water companies are required to raise water prices, regardless of the lives oflow-income status. In such circumstances, how to encourage water companies to betterfulfill the universal service obligations, how to compensate the companies which provideuniversal services produced in a loss, and how to design a tariff structure can not onlyensure the realization of people’s water rights, but also promote water conservation, etc.The questions need to be carefully research and gradually apply in practice. However, onlya few research literatures with universal service of water supply can be clearly available,and the available reaserch literatures mostly about national circumstances introduction orelaborate framework. Therefore, this paper attempts to apply the theory of universalservice to the water supply industry, focusing on water supply industry in universal servicecompensation mechanism.First, the introduction part of this article of this paper describes the researchbackground and research methods, the universal service of domestic and foreign researchresults were reviewed, for analysis and solution the problem of universal service provides atheoretical basis. Then paper describes the properties of the water supply industry, to definethe goal of universal service for water supply, subject and object, leads to the water supplyuniversal service compensation mechanism， which is cost compensation, pricecompensation and income compensation. Then the article analyzes the problem ofuniversal water supply service cost compensation, the principal-agent model is introducedto prove the validity, explaining the operation methods of cost compensation mechanism and the advantages and disadvantages of each method. Next, the article discusses theproblems of price and income compensation of water supply universal service, carrying outthe theoretical analysis to explain respective features of the compensation mechanisms,and try to joint price compensation mechanisms and income compensation mechanism,Beijing as an example to design a increasing block tariff program of urban residents withincome compensation, hopes to maintain the basic interests of the business and ensureresidents can afford the price of water, on the basis of universal service, promote waterconservation and protect water resources. Next, the paper propose policy recommendationsusing universal water supply service fund to promote universal service compensationmechanism running water, and briefly analyzed sources, distribution, regulatory and otherissues of universal water supply service fund. In the end, the article illustrates the researchdefect and problems still need to study.