The enactment of a new version of the Sanitation Executive Order took place in the transition between governments at the federal level later this year. The first version of the Executive Order lost its effectiveness due to the expiration of the time limit without timely approval of its conversion into law. Despite the difficulties in approval by the Legislature, the new Executive Order replicates the previous text with some relevant changes. The news reveals a reinforcement of the private participation in the sector and in the initiative of the Federal Government in providing financial and technical support to states and municipalities for basic sanitation projects.

The period for the mechanism to enter into force for competitiveness between private initiative and state companies has passed from three years to one year. Therefore, the period for the state companies to adapt to the reality has been reduced. Further, regulatory agencies must contribute to the submission of projects of delegation of public utilities to the manifestation of interest of the private initiative, which must precede any concession contracts to state companies without a tender offer, according to the new version of the Executive Order.

The Executive Order detailed the conditions for publicity of public calls to solicit interested parties from the private initiative and extended the deadline for submission of proposals. Municipalities of the same region may adhere to the call and act jointly. In this case, the Executive Order  stresses the possibility that these municipalities may benefit from resources from the support fund for the structuring and development of concessions and PPPS (Law No. 13,529/2017).

The possibility of charging a fee or tariff for the divisible services of solid waste management on invoices for water supply and sewage consumption, provided for in the previous MP, was extended to the invoices of other public services in the new version of the text. On the one hand, the extension of this aspect will make legal arrangements that burden less the Public Power more viable and its capacity for indebtedness with PPP projects; on the other hand, it may mitigate the risks of default by users, thus reducing the cost of providing services.

The measurement of rates and tariffs in the urban sanitation and solid waste management sector may adopt as criteria consumption of water and frequency of collection, as well as the requirements already provided for, namely: appropriate disposal of the waste collected, income level of the population served, characteristics of the division and area, and weight and average volume collected per inhabitant or domicile.

In order to improve regulatory provisions, the inclusion in the contractual instrument of progressive and gradual targets for expanding services, reducing losses in the distribution of treated water, quality, efficiency, and rational use of water, energy, and other natural resources became a condition for the validation of contracts for the delegation of sanitation services to state and private companies.

The search for greater centralization of the regulatory function also inspired a new rule in the Executive Order, with the Federal Government being expected to define minimum potable water parameters. In turn, it will remain the responsibility of the regulator established by the authority over the services to define the maximum loss limits in the distribution of treated water.

The authorities over the services will be required to allocate resources deriving from onerous grants to funds that may be set aside to fund expanded access, such that they may only be used for another purpose after the achievement of certain goals. In the previous version, the earmarking of funds arising from onerous grants to such funds was a mere option.

Among the most important changes, there are those that demonstrate that the Federal Government will offer incentives, financial support, and aid in the structuring of projects in the basic sanitation sector, revealed mainly in the changes introduced by the new Executive Order  to Law No. 13,299/17. On the first aspect, the Federal Government may grant budgetary, tax, or credit benefits or incentives as a counterpart for the achievement of previously established operational performance targets.

In addition, the fund provided for in Law No. 13,529/2017, which will have the participation of the Federal Government, previously had legal authorization only to support the structuring and development of concessions and PPPs. Now it will also have as an objective support for the execution of infrastructure works and the planning and management of urban development actions, with priority on basic sanitation actions.

The role played by the basic sanitation sector is evident in the section of the Executive Order  that states that funds allocated to technical assistance related to these services must be segregated from the others and cannot be used for other purposes of the fund. As detailed in the Executive Order , among actions aimed at basic sanitation, the assistance from the aforementioned fund will target the preparation of studies, sector plans and engineering projects, drafting and review of basic sanitation plans, and evaluation, accreditation, and project management and infrastructure works.

In addition, the participation of the Federal Government in the fund, previously restricted to a maximum of R$ 180 million, becomes unlimited. Further, assistance to entities by the fund will no longer have preferences: mandatory allocation of up to 40% of the fund's resources to projects in the North, Northeast, and Midwest regions has been removed.

In addition, the Executive Order  delegated the provision of rules for financial support to the fund’s bylaws and updated the resources that may make up the assets of the fund, therein adding (i) donations of any nature, including other federative entities, other countries, international and multilateral organizations; (ii) reimbursement of amounts spent by the managing agent and subsidies arising from the contracting of the services financed; (iii) funds derived from the sale of assets and rights, or from publications, technical material, data, and information; and (iv) other funds defined by law.

Thus, the new Executive Order improves the regulatory framework of basic sanitation, thus strengthening the search for solutions for the relentless need for technical and financial support to most service authorities, as well as the urgency of private participation in the sector to meet the goals of expanded access to services.