Ministry of Climate Sends Plan to Reduce Regional Inequality in Water Services for Consultation

The Ministry of Climate has submitted for consultation a draft proposal to amend the Public Water Supply and Sewerage Act. The aim of the changes is to ensure reliable, high-quality, and reasonably priced water services throughout Estonia. From the perspective of the EIC, modernising water service infrastructure is essential to maintaining consistent drinking water and wastewater treatment quality and operational reliability across the country. Therefore, we support the Ministry of Climate’s steps to improve the implementation of investments in the water sector. 

Currently, the price and quality of water services in Estonia depend on where a person lives. There are more than 120 water service providers in Estonia, but only around 20 of them are sufficiently large and capable of ensuring high-quality services at a reasonable price in the long term. Smaller companies often struggle to make the necessary investments, resulting in uneven service quality and crisis resilience across regions, while prices may vary more than a factor of two. 

“Every person must have confidence that clean water flows from the tap at a reasonable price, whether they live in Tallinn or Põlva. This is regional policy in its most practical form. If we do not act now, regional disparities will grow even greater in the coming years. Prices will rise rapidly precisely in areas where people’s incomes are lower, and service quality may also decline. Our goal is to reduce this inequality and keep price increases under control,” said Minister of Infrastructure Kuldar Leis. 

The regulation of water service pricing will become clearer and more long-term in nature. In the future, water companies will plan investments several years ahead, and implementation will be monitored regularly. This will help avoid situations where prices rise sharply or investments are postponed. 

As a new measure, the legislation will introduce a public benchmarking analysis of water companies’ performance indicators, a common practice in many countries. Experience has shown that such comparisons have a positive impact on the operational efficiency of water companies and the transparency of pricing, as people are able to compare performance in their region with that of others. 

“The planned legislative amendments will bring more transparent water service pricing and help consumers better understand the different aspects of price formation. The new regulation will give water companies greater motivation to operate more efficiently and innovatively, as the benefits gained from efficiency improvements will remain an incentive for the companies themselves. Consolidated water companies will be better financed, and service quality for consumers will improve,” explained Evelin Pärn-Lee, Director General of the Estonian Competition Authority. 

She changes will allow smaller water companies to merge with larger ones in order to share costs and plan investments with a longer-term perspective. The state will support mergers and infrastructure upgrades to avoid sharp price increases and keep water services affordable for residents. According to the draft proposal, water bills should not exceed 2% of a household member’s net income. To achieve this, incentives will be created for water companies to take over smaller service areas. The state will support merger-related costs and initial investments. 

Special attention will also be given to the crisis resilience of water services. Currently, people’s preparedness in crisis situations depends on where they live and on local government requirements. The amendments will establish more uniform quality and continuity requirements for all public water service providers, as well as an obligation to prepare risk analyses and crisis plans. If a person receives water through a public water supply system, they must have confidence that the service will continue to function during a crisis. 

Investments will be phased in gradually so that consumers do not face sharp increases in water prices. The state will support mergers and infrastructure modernisation, with the objective of ensuring that water services remain affordable throughout Estonia in the future as well. 

The draft legislation is planned to be submitted to the government in autumn 2026. The amendments are expected to enter into force in 2027 and will be implemented gradually until 2035. 

Press Release of the Estonian Ministry of Climate 30.04.2026