as to subsidize the poor; and (4) rationalizing the institutional framework at the national level to improve coordination in the sector. the government also supports private sector participation in the sector. service provision colombian municipalities are responsible for “ensuring that their inhabitants are given domestic services of water supply and sanitation in an efficient way by public companies”. therefore, public utilities are directly responsible for service provision, except for some special cases defined in the law, in which municipalities can offer the services directly. in rural areas and some marginal urban areas, communal water boards also offer water supply services. over the last few years, the number of companies has increased and the direct service provision by municipalities has decreased. to simplify the process of changing suppliers' ownership structure, municipal utilities were transformed into public stock corporations, which allow private sector participation without a further change of the legal status. in 2006, 53% of all suppliers were public companies, the remainder being direct municipal suppliers (15%), private companies (12%), official companies, which are companies that are not specialized in water and sanitation (13%), mixed companies (6%) and authorized organizations (1%). smaller utilities included, there are more than 1,500 water and sanitation service providers of in urban areas, and probably more than 12,000 communal organizations providing services in rural areas. the sector is characterized by a high degree of fragmentation which makes it difficult to realize economies of scale, according to a world bank study. to solve this problem, the creation of regional companies has been suggested. urban areas most colombian cities - including the three largest ones, bogota, medellin and cali - are served by public utilities. however, the private sector also plays an important role, including 125 private and 48 mixed public-private water companies in 2004 out of 1,500 urban service providers. public utilities the headquarters of empresas públicas de medellín in medellín. some of colombia's larger cities are home to well-performing public utilities, some of them providing multiple services, others being specialized in water and sanitation only. the empresas públicas de medellín or public companies of medellín, is a municipally owned multi-sector utility in charge of water supply, sanitation, solid waste management, electricity generation and distribution as well as local telecommunications in medellín and its surrounding areas. another multi-sector utility is the empresas municipales de cali (emcali), which provides fixed line local telecoms, internet, potable water, sewage and electricity services to some 600,000 clients. emcali has suffered financially due to onerous payment obligations resulting from a power purchase agreement signed in 1997 with an independent power producer, termoemcali. the capital of colombia, bogotá, is served by a water and sanitation utility, the empresa de acueducto y alcantarillado de bogotá (eaab). private sector participation cartagena private sector participation in colombia's water and sanitation sector has been much more stable than in some other latin american countries. in 2004, there were 125 private and 48 mixed public-private water companies in colombia, including large, medium and small companies. private sector involvement in the colombian water sector began in 1995 in cartagena, with support from the world bank. the most important examples are in cartagena, barranquilla, santa marta, tunja, montería, palmira, girardot, and riohacha. operators are to a large extent colombian. overall performance of utilities with private sector participation has improved, in some cases spectacularly, and some – such as barranquilla – have had impressive successes in expanding coverage to the urban poor. according to a world bank report, the key to success of private sector participation in the colombian water sector has been the development of homegrown solutions, and, at times, skillfully adapting models used elsewhere to the particular circumstances and culture of colombia. the world bank's private participation in infrastructure database shows private investment commitments in water supply and sanitation of us$940 million from 1995 to 2006 through 51 transactions, including 27 classified as concessions, 22 as management and lease contracts, and 2 as greenfield projects. small towns and peri-urban areas in some smaller towns and peri-urban areas, there are examples of successful provision of water supply and sanitation services by community organizations and regional companies, which in some cases set an example in terms of community empowerment, transparency and accountability. an example of a regional association is acuavalle s.a. esp, which provides drinking water and sanitation to 582,000 inhabitants in 33 municipalities of the valle del cauca department. it was founded as a non-profit public limited company in 1959. the shareholders of the company are the valle del cauca department, the ‘’corporación autónoma regional del valle del cauce’’ and 33 municipalities, which are served by the utility. another example, is the junta administradora del acueducto la sirena en el valle del cauca (water board la sirena) in the southwestern outskirts of cali, which manages 778 residential connections, offering continuous service to some 4,200 users. it operates a sewerage system and a wastewater treatment plant. water consumption is metered. the average monthly tariff is us$3.5 for 28m3. there is no social stratification, but special tariffs are applied to those users who consume more than 28m3. the annual cash surplus is about us$10,000 which is reinvested in preventive maintenance and in some cases in construction works. in this way, in the last 3 years a water capture facility was constructed in quebrada epaminondas, another one at melendez river was improved, and a water tank with a capacity of 220m3 was constructed. another example is the asociación acueducto de río negro de popayán, which was formed 10 years ago integrating 10 supply systems, supplying 7,000 residential connections. the association is preparing its own water treatment plant and preparing to install meters with the aid of the colombian organization asociados en desarrollo rural (adr) or associates in rural development and the united states agency for international development (usaid). rural areas coverage in rural areas is unusually low, given the level of economic development and sector development. using a broad definition of access, based on the who definition of an improved water source, access in rural areas in colombia was 71%, while it was 81% in honduras - a considerably poorer country - and 89% in ecuador, also a poorer country than colombia. in addition to the armed conflict, there are other explanations for this situation: municipalities tend to use their financial resources from the sistema general de participaciones or general participation system (law 715 of 2001) mainly in urban areas. furthermore, there is no institution or program at the national level which offers technical assistance to the 12,000 rural community organizations. law 142 of 1994 assigns that task to the departments, but these have not carried out the task in a satisfactory way so far. the 2002 inventario sanitario rural (isr) or rural sanitary register confirms that situation. only 21% of the rural community organizations were considered able to carry out maintenance and only 10% to commercially operate the service. only 32% issued bills and only 10% used metering. in 2005, the government defined guidelines for basic water supply and sanitation policy in rural areas to increase coverage and improve quality in those areas. in addition a gis study published in 2014 documented that for many rural areas the time needed to drive to water testing labs than is longer than the sample is viable. innovative approaches since 1994 colombia has pioneered many innovative approaches for basic service provision in general and for water supply and sanitation in particular. some of them were introduced at the national level, while others were initiated in one city or region. notable innovations at the national level are the introduction of two autonomous economic regulatory agencies (one, cra, to develop and fine-tune regulatory tools in the water and sanitation sector, and another one, sspd, to implement them in across all basic services) in 1994; the introduction of socio-economic strata as a basis for spatially differentiated tariffs, also in 1994; and the spatial aggregation of municipal service providers in small towns at the departmental level to benefit from economies of scale since 2006, with strong support from the national government. a notable innovation initiated by a city or a region is the creation of mixed public-private enterprises for urban water supply that has begun in 1995 in cartagena, followed by barranquilla and other northern and central cities and towns. another innovation is an association of community-based organizations (cbos) providing water supply in rural and peri-urban areas in the departments of el valle, cauca and risaralda in southwestern colombia. it began in the late 1990s with the assistance of the universidad del valle in cali in order to protect and recover source watersheds and to strengthen the cbos' capacity to administrate, operate and maintain their water systems. in addition, colombia boasts one of the oldest and largest multi-utilities in latin america, empresas públicas de medellín (epm), created in 1955. efficiency the average level of non-revenue water (physical and economic losses) in colombia in 2006 is estimated to be 49%. this level is higher than the latin american average (approximately 40%) and the regulatory goal of 30%. in the past, the national average of non-revenue water was estimated 40% in 2001, which is almost the same as in 1990. in the largest cities of the country, levels of non-revenue water are below the national average (40% in bogotá, 35% in medellín and 39% in cali). financial aspects tariffs the colombian tariff system is defined in the ley de servicios públicos or public services law from 1994. it is applied in public, mixed and private companies. the tariff system aims at reconciling the achievement of cost recovery with the protection of the poor. the basic tariff is calculated on the basis of economic costs according to a methodology defined at the national level by cra (law 287 of 2004). therefore, in principle, tariffs in different municipalities do not differ due to local government’s decisions to raise tariffs or not, but only because of the different costs of the services. the base tariff of each service provider has to be adjusted by law for different geographic areas within the city, each assumed to correspond to one socio-economic class, according to adjustment factors that are specified by law. this system of area-based tariffs is supposed to provide cross-subsidies from more affluent to poorer users. every municipality has defined geographic areas that each correspond to one of the six socio-economic classes. class 1 represents the lowest income group while class 6 stands for the highest. as per 2007, the tariff adjustment factors were the following: class tariff adjustment factor 1 30% 2 60% 3 85% 4 100% 5 120% 6 120% there are many more citizens who live in areas corresponding to classes 1–3 than those who live in the areas corresponding to classes 5 and 6. for example, in bogotá 73% of the population live in zones of classes 1–3, whereas only 10% live in zones classified as 5 and 6. consequently, the tariff system permanently causes deficits which require subsidies paid by the national government. between 1990 and 2001, the average tariff for water and sanitation in colombia increased from us$0.32/m3 to us$0.81/m3, equivalent to an increase of 153%. in 2006, the average monthly bill for residential customers was about us$6.80 for water supply and us$4.60 for sanitation services. free basic water. inspired by the human right to water, two important cities in colombia make a basic amount of water (minimo vital de agua potable) available to their poorest residents free of charge. in 2009, medellin made 2.5 cubic meters of water per month and per person - or 10 cubic meters for a family of four - available for free to all urban residents in class 1. the city wants to reach 45,000 households and has budgeted 25 billion pesos (usd 14 million) to finance free basic water and associated awareness campaigns. in february 2012 bogota also introduced 6 cubic meters of free basic water per household for households in classes 1 and 2, covering more than 1.5 million households or 39% of all households. the annual cost is estimated at 60 billion pesos (usd 33 million). investment between 1995 and 2003, us$3.4 billion (7,965 billion colombian pesos) were invested in the sector, of which 16% were financed by the private sector. since 1998, private financing increased from almost