Compared to other counties Bavarian municipal water suppliers are very decentralized in small units. As a consequence there are a large number of pricing strategies, ranging from small one-man-concerns with no obvious strategy to large municipal concerns with well thought-out four-year planes. This study examines the consequences of the municipal companies not calculating their prices with an eye to sustainability leading to economic efficiency.

1. Bachelor - Thesis
Project :
Recalculation of the drinking water service charges in Memmingen town
Calculation period from 2009 to 2012
Sustainable pricing of municipal water suppliers in Bavaria
Summary
Thomas Junger
STEINBEIS-HOCHSCHULE BERLIN

2. Bachelor of Arts
Year 2006 / 2009
Project:
Recalculation of the drinking water service charges in Memmingen town
Calculation period from 2009 to 2012
Thesis:
Sustainable pricing of municipal water suppliers in Bavaria
Fellow:
Thomas Junger
Number of matriculation
1017 - 0024
Project period:
25.04.2007 to 13.10.2008
SHB-Examiner 1:
Dr. Axel Lamprecht, Business School Memmingen
SHB-Examiner 2:
Dipl. Ing. Marcus Geske, Stadtwerke Memmingen

3. Seite 1
Summary
Compared to other counties Bavarian municipal water suppliers are very decentralized
in small units. As a consequence there are a large number of pricing strategies, rang-
ing from small one-man-concerns with no obvious strategy to large municipal concerns
with well thought-out four-year planes. This study examines the consequences of the
municipal companies not calculating their prices with an eye to sustainability leading to
economic efficiency.
The public outcry in the media has prompted this study into the legality of the pricing
structures. Media attention is at present focused on the pricing authorities in Hessen
legal moves to force Hessen water suppliers to lower their price by potentially 30 per-
cent. The public also demands transparency in service pricing. Private water suppliers
see this as an opportunity to make a general attack on municipal water suppliers; there
view is that the municipal suppliers are inefficient and therefore overpriced.
Costing transparency would satisfy all authorities’ demands for sustainable business
management. This should be done with an acknowledged benchmark system for mu-
nicipal water suppliers. Initially federal authorities contemplated introducing a compul-
sory benchmark system; this however would have highlighted many deficits in private
management. To avoid this, a voluntary system was introduced by private supplier’s
authorities. Concurrently the state was contemplating centralising the supply structure
resulting in the potential demise of smaller less efficient suppliers.
The suppliers concerned in the study are governed by Bavarian public law. The study
has referenced the findings of the latest “Qualitäts- u. Effizienzuntersuchung der kom-
munalen Wasserversorgung in Bayern (EffWB 2008)”, of the “Landesamt für Umwelt”
relating to the structure of 2405 Bavarian water companies supplying more than 1000
cbm per year and also those of the „Wasserwerksnachbarschaftsstage“ of the
„Landkreis Unterallgäu“.
The study explains the relationship between the suppliers intentions and three basic
governing factors namely what they can do, must do and want to do and how these
intentions can be integrated into sustainability. To anticipate risks which may compro-
mise the company it must first establish its direction. Critical risks for municipal water
suppliers are lack of continuity of investment, increase in quality standards and falling
demand. Guarding against these risks has a knock on effect in costs and therefore in
pricing.

4. Seite 2
Knowledge of the workout-steps outlined in one chapter in the project would allow even
a small company to achieve sustainable pricing and efficiency. A combination of a final
certification a good benchmark rating can help to assure a prosperous future with ac-
ceptance of pricing and good public image.
These circumstances have forced the municipal suppliers in Bavaria to take action.
They must be able to anticipate and counter any criticisms. Municipal suppliers in Ba-
varia who deny the principle of sustainability in pricing combined with the changes in
the framework of the law can no longer relay on their natural monopolies and therefore
their very existence is threatened.
The criticisms of the media regarding Water Company pricing, which was the cause of
the study, cannot in fact be levelled against Bavarian suppliers. In all probability most
of the smaller suppliers if they applied the principles of sustainability and cost recovery
would in fact have to put their prices up. Any regulation forcing prices down to eliminate
illegal profit skimming would perhaps only apply to single companies.