Resolución 0213 — Tariff methodology for the protection of water resources

in the entirety of the text - Complete Text of Standard 0213 Tariff methodology for the protection of water resources PUBLIC SERVICES REGULATORY AUTHORITY RESOLUTION RE-0213-JD-2018 ESCAZÚ, AT ELEVEN HOURS AND THIRTY MINUTES ON THE FOURTH OF DECEMBER TWO THOUSAND EIGHTEEN TARIFF METHODOLOGY FOR THE PROTECTION OF WATER RESOURCES (MTPRH).

FILE OT-193-2015 (Thus reformed the previous file number by resolution No. RE-0085-JD-2019 of April 23, 2019)

I.That drinking water services are vital for the general welfare of society and strategic for national development, making it necessary to establish a tariff instrument that allows water service operators to generate income to carry out projects aimed at the protection of water resources, as a natural extension of the water service.

II.That Article 5 of Law No. 7593 establishes that for the public services defined in that article, the Regulatory Authority shall set prices and tariffs. Among those services are water supply and sewerage and hydrants.

III.That Article 6, subsection d) of Law No. 7593 establishes as an obligation of the Regulatory Authority "to set tariffs and prices in accordance with technical studies".

IV.That Article 29 of Law No. 7593 provides that the Regulatory Authority shall formulate and promulgate the definitions, requirements, and conditions to which public service tariff and price proceedings shall be subject.

V.That Article 31 of Law No. 7593 establishes that to set tariffs, the model structures for each public service or the particular situation of each company must be taken into account. Said norm provides that the criteria of social equity, environmental sustainability, energy conservation, and economic efficiency defined in the National Development Plan shall be central elements for setting public service tariffs and prices. Settings that threaten the financial balance of the public service providers shall not be permitted. Likewise, Article 31 of Law No. 7593 provides that when setting public service tariffs, the protection of water resources, costs, and environmental services must be contemplated.

VI.That Article 33 of Law No. 7593 establishes that in the tariff procedure, each petition regarding tariffs and prices must be duly justified, and Article 34 ibid, provides that the tariffs and prices set by ARESEP shall govern from the moment of their publication in the Official Gazette La Gaceta or from the moment indicated by the corresponding resolution.

VII.That Article 15 of Decree No. 29732-MP, Regulation to the Regulatory Law of Public Services, provides that to set tariffs, models shall be used, which must be approved by ARESEP, in accordance with the law.

VIII.That Article 6, subsection 16) of the Internal Regulation of Organization and Functions of the Public Services Regulatory Authority and its Deconcentrated Body (RIOF), establishes that the Board of Directors of ARESEP has the competence to approve regulatory methodologies.

IX.That Article 21, subsection 3 of the RIOF, provides that the General Directorate of the Regulatory Development Center is responsible for the "(.) review of the validity and competitiveness of the models that are being applied by Aresep to regulate public services".

X.That there currently exists a water tariff for the Empresa de Servicios Públicos de Heredia. On March 1, 2004, resolution of the Regulador General RRG-3326-2004 was published in La Gaceta No. 42, through which, among other things, the current tariff schedule for the water tariff for the Empresa de Servicios Públicos de Heredia, S.A. was established.

XI.That on April 12, 2013, through resolution RIA-002-2013 of March 22, 2013, published in Gaceta No. 70, Alcance No. 65; the Intendencia de Agua, among other things, set an adjustment in the Water Tariff for the Empresa de Servicios Públicos de Heredia. Water Tariff effective as of April 13, 2013.

XII. That ARESEP is currently in a process of formalizing and designing methodologies in all regulated sectors

XIII.That on May 14, 2002, the "Sectoral Regulation for the Regulation of Water Supply and Sanitary Sewerage Services", Decreto Ejecutivo No. 30413-MP-MINAE-S-MEIC, was published in Gaceta No. 91, Alcance 38, through which the definitions and general conditions under which the technical standard and the tariff methodology that will regulate the activities of the providers of public water supply and sanitary sewerage services and the relations between them and the Regulatory Authority are established; in accordance with the provisions of the Law of the Public Services Regulatory Authority No. 7593 and its Regulation, Decreto Ejecutivo No. 29732-MP.

XIV.That on June 12, 2002, the Regulation that "Determines the principles that will govern the national policy on water resource management, and must be incorporated into the work plans of the relevant public institutions", Decreto Ejecutivo No. 30480-MINAE, was published in Gaceta No. 112, through which it was ordered that the principles that will govern the national policy on water resource management, and must be incorporated, as applicable, into the work plans of the relevant public institutions, among which, it indicated that access to drinking water constitutes an inalienable human right and must be constitutionally guaranteed; that water management and above all the rules of access to this resource must be governed by a principle of equity and social and intergenerational solidarity; that the use of water must be carried out using the best possible infrastructure and technology so as to avoid its waste and contamination, that water resources and the forces derived from them are strategic assets of the country.

XV.That on September 12, 2013, the Regulador General, through official letter 707-RG-2013, appointed the "Autonomous Ad Hoc Commission that will be in charge of the review and, if necessary, rethinking and/or modification of the Methodology for setting prices for water supply services (established in their production, transmission, and distribution stages), sewerage services (established in their production, transmission, and distribution stages), environmental management (water tariff for the protection of aquifers and sources in general), hydrant service, and water service for productive activities (for agricultural irrigation and for fish farming)."

XVI.That on February 26, 2015, the referred Ad Hoc Commission, through official letter 007-CMTA-2015, sent to the Board of Directors of the Regulatory Authority the proposal for the "Tariff model for water supply, sewerage and hydrant services and the water resource protection program", (file OT-80-2015).

XVII.That on March 16, 2015, the Board of Directors, through agreement 01-11-2015 of the minutes of extraordinary session 11-2015, ordered the proposal for the "Tariff model for water supply, sewerage and hydrant services and the Water Resource Protection Program" to be submitted to the public hearing process; which was held on May 4, 2015. (file OT-80-2015).

XVIII.That on September 11, 2015, the indicated Ad Hoc Commission, through official letter 11-CMTA-2015, sent to the Board of Directors the "Tariff model for water supply, sewerage and hydrant services and the Water Resource Protection Program". (folio 2).

XIX.That on September 21, 2015, the Board of Directors, through agreement 05-46-2015 of the minutes of extraordinary session 46-2015, resolved the closure of file OT-80-2015 and immediately thereafter, through agreement 06-46-2015, resolved to submit the "Tariff model for water supply, sewerage and hydrant services and the Water Resource Protection Program" to the public hearing procedure. Based on what was indicated by the Ad Hoc Commission in official letters 011-CMTA-2015 and 009-CMTA-2015. (folio 1 of file OT-193-2015).

XX.That on October 7, 2015, the call for a public hearing was published in the official newspaper La Gaceta No. 195, and in the newspapers La Teja and Diario Extra, on October 8, 2015. (folios 165 to 166 and 280).

XXI. That on November 5, 2015, the public hearing was held as recorded in Minutes No. 98-2015, (folios 348 to 358)

XXII.That on January 29, 2016, the Ad Hoc Commission, through official letter 013-CMTA-2016, sent to the Board of Directors the Response Report to oppositions from the public hearing held on November 5 and the adjusted model proposal according to the analysis of the positions on the model submitted to the public hearing.

XXIII.That on May 12, 2016, the Board of Directors, through agreement 03-27-2016, ordered the modification of agreement 05-26-2016 and to accept the appeal for review filed by Mrs. Adriana Garrido, establishing the continuation of the analysis of the proposal until the CDR carries out a comprehensive review of the proposal, and verifies the incorporation of the observations raised by the director, and the adjusted version is submitted to the Board of Directors at a future opportunity, and through official letter 425-SJD-2016 of June 2, 2016, the CDR is notified of agreement 05-26-2016.

XXIV.That on November 24, 2017, the CDR, through official letter 349-CDR-2017, in compliance with agreement 05-26-2016, sent to the Board of Directors a proposal for the "Tariff methodology for water supply, sewerage, and hydrant services."

XXV.That on November 24, 2017, the CDR, through official letter 350-CDR-2017, in compliance with agreement 05-26-2016, sent to the Board of Directors a proposal for the "Tariff methodology for the protection of water resources."

XXVI. That on December 7, 2017, the Regulador General, through official letter 989-RG 2017,

sent to the Board of Directors the proposal for the "Tariff methodology for the protection of water resources."

XXVII.That on December 12, 2017, in Ordinary Session No. 67-2017, through agreement 09-67-2017, the Board of Directors resolved unanimously: "To acknowledge receipt of the presentation by the Regulatory Development Center regarding the proposal for the Tariff Methodology for the Protection of Water Resources, sent through official letters 989-RG-2017 of December 7, 2017 and 350-CDR-2017 of November 24, 2017, so that the observations raised by the members of the Board of Directors at this time are taken into consideration, and incorporated into a new proposal, for the pertinent purposes."

XXVIII.That on February 8, 2018, the CDR, through official letter 44-CDR-2018, sent to the Board of Directors a new proposal for the "Tariff methodology for the protection of water resources" in response to the indicated agreement 09-67-2017 of the Board of Directors.

XXIX.That on February 9, 2018, the Regulador General, through official letter 116-RG-2018, sent to the Board of Directors the proposal for the Regulatory instrument "Tariff methodology for the protection of water resources", which contains the observations raised in ordinary session 67-2017 of December 12, 2017, agreement 09-67-2017.

XXX.That on February 13, 2018, in Ordinary Session No. 08-2018, through agreement 07-08-2018, the Board of Directors resolved: "To continue, in a future session, with the analysis of the proposal for the Regulatory instrument "Tariff methodology for the protection of water resources", sent through official letter RG-116-2018, so that the observations raised at this time are included".

XXXI.That on February 21, 2018, the CDR organized an Analysis Workshop to present the scope of the proposal for the "Tariff methodology for the protection of water resources" in order to create a space for analysis and socialization of the methodology proposal. There was participation from sixty representatives of seventeen different organizations, namely: twenty representatives of the Asociaciones Administradoras del Sistema de Acueducto y Alcantarillado (ASADA) and Federations of ASADAS, one representative of the Fundación AVINA; five representatives of the Instituto Costarricense de Acueductos y Alcantarillados (AyA); two representatives of the Centro de Derecho Ambiental y de los Recursos Naturales (Cedarena); one representative of the Colegio Federado de Ingenieros y de Arquitectos de Costa Rica (CFIA); one representative of the Centro Internacional de Política Económica para el Desarrollo Sostenible (CINPE); one representative of Consumidores de Costa Rica (Concori); four representatives of the Empresa de Servicios Públicos de Heredia S.A. (ESPH); one representative of the Fondo Nacional de Financiamiento Forestal (Fonafifo); one representative of the Fundación Fundecooperación para el Desarrollo Sostenible; three representatives of the Universidad de Costa Rica (UCR); one representative of the Cooperación Técnica Alemana (GIZ); three representatives of the Instituto de Fomento y Asesoría Municipal (IFAM); one representative of the Instituto Meteorológico Nacional de Costa Rica (IMN); one representative of the Junta Administrativa del Servicio Eléctrico Municipal de Cartago (JASEC) and fourteen officials of Aresep.

In the indicated Workshop, it was suggested: i) that the administrative costs and unexecuted resources was considered positive, iii) the mechanisms for control, selection, and prioritization of projects were considered important. In prioritization, it was not recommended that the criteria be exhaustive, based on the experience of the water tariff of the ESPH, iv) it was not considered that a maximum amount should be established in the tariff, since it should be based on needs. At the application level, the participants stated that: i) the guides are considered good and sufficient, other documents are not considered necessary. ii) that greater socialization of the guides is required at the Asadas level, iii) Regarding the baseline, it is considered that it should be detailed better who is responsible for establishing it. Finally, at the operator management level i) the ESPH does not consider difficulties in gathering the information required in the proposal, ii) in the case of AyA, they express an impossibility in the accounting system to make cost structure changes mid-period. Therefore, a one-year transitional period would better suit their current situation.

XXXII.That on June 1, 2018, the CDR, through official letter 211-CDR-2018, sent to the Board of Directors the proposal for the "Tariff methodology for the protection of water resources", which takes into account what was indicated in ordinary session 08-2018 of February 13, 2018, agreement 07-08-2018.

XXXIII.That on June 5, 2018, in Ordinary Session No. 37-2018, through agreement 04-37-2018, the Board of Directors resolved: "1 To submit to the public hearing procedure the "Proposal for Regulatory Instrument: Tariff methodology for the protection of water resources", based on the modifications presented by the General Directorate of the Regulatory Development Center to official letter 211-CDR-2018 of June 1, 2018, indicated in Considerando II, in order to better substantiate the proposal recommended for submission to the public hearing process, the text of which is transcribed below: (.Proposal.). 2 To instruct the Documentary Management Department to incorporate this resolution into file OT-193-2015 for the respective procedure. 3 To instruct the General Directorate of User Services to proceed to publish the call for a public hearing in widely circulated newspapers and in the official gazette La Gaceta. 4 To instruct the General Directorate of the Regulatory Development Center, so that once the public hearing procedure has been carried out, it proceeds to process the respective file, including the analysis of positions and the preparation of the final proposal for the methodology, and proceeds to send it to the Board of Directors."

XXXIV.That on July 23, 2018, the CDR held an explanatory session on the proposal for the "Tariff methodology for the protection of water resources", prior to the public hearing, open to the public, in order to clarify any doubts about the proposal.

XXXV.That on August 14, 2018, the DGAU held the public hearing, in person in the Auditorium of the Public Services Regulatory Authority, located in Guachipelín de Escazú, San José, Oficentro Multipark, Turrubares building, and via videoconference system in the Courts of Justice of the centers of: Limón, Heredia, Ciudad Quesada, Liberia, Puntarenas, Pérez Zeledón, and Cartago, in which the CDR presented the Proposal for regulatory instrument: "Tariff methodology for the protection of water resources".

XXXVI.That on August 24, 2018, the DGAU issued the report on positions from the public hearing, through official letter IN-0015-DGAU-2018 and in accordance with Law 7593, article 36, and in Decree 29732-MP, articles 50 to 56, the respective positions were received.

XXXVII.That on October 29, 2018, the CDR, through official letter OF-535-CDR-2018, sent to the Board of Directors the analysis report on positions regarding the Proposal for regulatory instrument "Tariff methodology for the protection of water resources" and the final report on the "Tariff methodology for the protection of water resources" where it recommends the respective approval to the Board of Directors.

I. That it is necessary to issue a tariff methodology for the protection of water resources

II.That in ordinary session No. 37-2018 of June 5, 2018, the General Directorate of the Regulatory Development Center presented a series of modifications to official letter 211-CDR-2018 of June 1, 2018, in order to better substantiate the proposal recommended for submission to the public hearing process.

III.That the Board of Directors, in ordinary session 37-2018, adopted agreement 04-37-2018 to submit the proposal for the "Tariff methodology for the protection of water resources" to the public hearing procedure.

IV.That based on the foregoing whereases and considering whereases, it is appropriate to submit to the public hearing procedure provided for in Article 36 of Law 7593; the "Proposal for Regulatory Instrument: Tariff methodology for the protection of water resources", as ordered.

V.That regarding the oppositions and coadyuvancias presented at the respective public hearing, the response is provided in official letter OF-535-CDR-2018 of October 29, 2018.

VI.That from official letter OF-535-CDR-2018 of October 29, 2018, it is appropriate to extract the following regarding the technical and legal justification of the proposed tariff methodology:

JUSTIFICATION Drinking water services are vital for the general welfare of society and strategic for national development. Access to water service constitutes a right protected by different regulatory bodies and is a national priority. Therefore, the protection of the supply sources of water resources is conceived as a natural extension of the water service that guarantees its sustainability.

This section summarizes elements that allow for gauging the importance of protecting water resources.

1.1 Sustainability problems of the drinking water service. For some years now, a high vulnerability of the aquifers used for the supply of the water service has been observed, caused mainly by the waste generated by the intensification of agricultural, livestock, and tourist activities, population increase, urban and industrial growth, which pressures demand and impacts the supply of water resources, through intense contamination processes and the lag in the construction of storage, transmission, and distribution infrastructure for water1.

1Water Agenda of Costa Rica (2013), Pg. 20 Mainly in the dry season and in certain areas of the country, the population is affected by a decrease in the availability of the resource, and given the scarcity of the resource coupled with the lack of infrastructure, rationing has had to be resorted to. It is necessary to change this trend, for which specific activities to protect the sources and reduce their vulnerability need to be developed.

This situation has worsened in more recent years due to the impact of climate change on the rainfall regime, causing longer periods of drought and more intense rainfall periods that actually cause floods affecting the aquifers and the infrastructure of the water service. Hence, the activities for the protection of water resources are also considered as adaptation measures against the effects of climate change, since they protect not only the sources but also the infrastructure.

shall be central elements for setting tariffs..." In this sense, said Article 31 expressly highlights the need to urgently address issues such as the protection of water resources and the development of priority infrastructure.

1.3 Challenges established in the ARESEP Institutional Strategic Plan.

In the Institutional Strategic Plan of ARESEP (PEI) for the period 2017/2022, the commitment is established to incorporate into the regulatory policy instruments that incorporate environmental sustainability criteria, which, as in this case, contribute to the sustainability and continuity of the drinking water service.

This proposal responds to what is established in the PEI, as it is a tariff instrument that seeks the environmental sustainability of the drinking water service and contemplates the mechanisms for auditing the use of tariff resources that allow for verifying the proper use of resources and assessing the impact achieved in solving the user's needs.

I. LEGAL FRAMEWORK

This section summarizes the legal framework on which this methodology is based.

a. General regulatory powers of ARESEP. Article 4 of Law 7593 indicates, among others, the following objectives of ARESEP: "a) Harmonize the interests of consumers, users, and providers of the public services defined in this law and those defined in the future. b) Seek a balance between the needs of the users and the interests of the public service providers. c) Ensure that public services are provided in accordance with the provisions of subsection b) of Article 3 of this law [Principle of cost-of-service]. d) Formulate and ensure compliance with the requirements of quality, quantity, timeliness, continuity, and reliability necessary to optimally provide the public services subject to its authority e) Cooperate with State entities competent in environmental protection, when it involves the provision of regulated services or the granting of concessions. f) Exercise, in accordance with the provisions of this law, the regulation of the public services defined therein." b. Setting of prices and tariffs.

Along the same lines, Article 6, subsection d) of Law 7593 establishes as an obligation of the Regulatory Authority "(.) to set tariffs and prices in accordance with technical studies".

Likewise, Article 29 of Law 7593 provides with respect to the procedures for public service tariffs and prices, that "(.) the Regulatory Authority shall formulate and promulgate the definitions, requirements, and conditions to which the procedures for public service tariffs and prices shall be subject. (.)".

c. Cost-of-service and financial balance of the operator.

d. Promotion of efficiency.

In accordance with Articles 5 and 25 of Law 7593, Aresep must ensure that the requirements of quality, quantity, timeliness, and reliability necessary to optimally provide public services are met.

From Article 31 of the cited Law, the parameters that this Regulatory Authority must follow to set public service tariffs are derived. The cited Article 31 expressly provides that when setting public service tariffs, the following aspects and criteria must be contemplated, when applicable: "c) The protection of water resources (.)". That is, subjection to the model productive structures for each public service, according to the development of knowledge, technology, the possibilities of the service, the activity in question, and the size of the providing companies. On the other hand, the criteria of equity, environmental sustainability, energy conservation, and economic efficiency must be central elements for setting public service tariffs. In that sense, the factors that must be considered in setting tariffs are vital not only for the optimal provision of the service but also for the sustainable development of the country.

In that sense, the Sala Constitucional has referred on repeated occasions to the guiding principles of public services, indicating that they must be applied at all times and without exception; since the good and efficient functioning of public services constitutes a legal obligation for officials and a fundamental right of users. (Sentencia 2011 008326, issued at 11:54 a.m. on June 24, 2011).

e. Investment process.

The Sectoral Regulation for the Regulation of Water Supply and Sanitary Sewerage Services, approved by Decreto Ejecutivo No. 30413-MP-MINAE-S-MEIC, establishes in its Article 8 that "The expansion and improvements of the service. For tariff purposes, the service providers must elaborate and present before the Regulatory Authority a Program for Continuous Improvement and Expansion of Service (PMES) for each service they provide, containing in detail the concrete goals or objectives for the first 5 years... Its general objective will be to achieve and maintain the expansion goals (performance) and the service levels established by the Regulatory Authority.".

The National Development and Public Investment Plan (PNDIP)(*) indicates as one of the problems requiring urgent attention, the construction of public infrastructure to "stimulate economic growth, establish social benefits, and foster the rational use of natural resources" (Chapters 2 and 7, PND).

(*)(Note from Sinalevi: Its name was thus modified by subsection a) of Article 43 of the Regulation for the Implementation of Law No. 10441 of March 13, 2024, and the Operation of the National Public Investment System, approved by Decreto Ejecutivo No. 45163 of August 8, 2025. Previously, it was referred to as "Plan Nacional de Desarrollo (PND)") Additionally, the National Risk Management Plan (PNGR) for the period 2016-2020, elaborated based on the National Risk Management Policy contained in Law 8488, National Law on Emergencies and Risk Prevention, according to Axis 4 of Sustainable Financial Investment, Infrastructure, and Services, dictates that the disaster risk variable be included in the tariff model for public services, as a means of financing works that ensure their protection and recovery, a goal to be met during the year 2017.

f. Subsidies.

The setting of rates and prices by ARESEP is subject to criteria of social equity and non-discrimination (Articles 12, 14 subsection h, and 31 of Ley 7593). Article 12 indicates that ".Tariff differences established for reasons of social order shall not constitute discrimination." For its part, the Constitutive Law of AyA No. 2726 enacts in its Article 4 that "For the setting of rates, criteria of distributive social justice shall be applied, which take into account the social strata and the zone to which the subscribers belong, so that those with greater ability to pay subsidize those with less ability." On the other hand, the Regulatory Authority must follow sectoral guidelines issued by the Executive Branch, according to article 1 of Ley 7593, which indicates: "the Regulatory Authority shall not be subject to the guidelines of the Executive Branch in the fulfillment of the powers granted to it in this Law; however, it shall be subject to the Plan nacional de desarrollo, the corresponding sectoral plans, and the sectoral policies issued by the Executive Branch." g. Protection of the water resource.

The regulation of public services related to the protection and conservation of the water resource stems from articles 46 and 50 of the Political Constitution of Costa Rica, which indicate that "Consumers and users have the right to the protection of their health, environment..." and that "Every person has the right to a healthy and ecologically balanced environment."

h. Quality.

ARESEP must ensure compliance by the providers with the quality, quantity, timeliness, and reliability requirements necessary to optimally provide public services. (Articles 4 subsection d), 5, and 25 of Ley 7593).

2Approved by Decreto Nº 30413-MP-MINAE-S-MEIC of 05/14/2002.

i. The fundamental right of access to potable water.

From the relationship between constitutional articles 21 and 50 derives the right of access to water for all human beings to cover their vital needs and guarantee the right to life and health, in a healthy environment. The consideration of water as a fundamental right was established by the Sala Constitucional in its jurisprudence, a doctrine that is collected in resolution no. 2014-12887, of 2:30 p.m. on August 8, 2014:

"The jurisprudence of the Sala is clear in recognizing the right to water as a fundamental right, such that along with the realization of serious efforts for its provision to the population, there exists the duty of public institutions to make responsible and prudent use of the available water resource. The foregoing entails the need to acquire certainty of the water susceptible to exploitation -availability- guaranteeing its present provision and the future sustainability of the service, preventing the current utilization of the resource from producing an environmental risk that compromises the existence and future supply of the liquid. The Sala has had the opportunity to rule in a forceful and detailed manner on the protection that must be granted to the national water resource, clarifying both the regulatory framework for protection and the institutions that make up the water sector, recognizing and specifying the scope of competencies of said entities and the transcendence of their actions in matters of granting, utilization, and protection of water." (The underlining is not from the original).

Along the same lines, the recent judgment of the same Sala, No. 2017-1591 of 9:25 a.m. on February 3, 2017, condenses those fundamental notes of its nature - as a right and a public service - in the following terms:

"III.- On the fundamental right of access to potable water. In this regard, this Sala has stated:

"This Tribunal has recognized as part of the Constitution's Law, the fundamental Right to potable water, derived from the rights to health, life, a healthy environment, food, and decent housing, among others. International instruments on Human Rights applicable in Costa Rica have pronounced in this same sense; thus, it appears explicitly in the Convention on the Elimination of All Forms of Discrimination against Women (article 14) and the Convention on the Rights of the Child (article 24); furthermore, it is enunciated in the International Conference on Population and Development in Cairo (principle 2). In the Inter-American Human Rights System, Costa Rica is particularly obligated in this matter by the provisions of article 11.1 of the Additional Protocol to the American Convention on Human Rights in the Area of Economic, Social and Cultural Rights ("Protocol of San Salvador" of 1988), which provides as relevant: "Article 11. Right to a healthy environment 1. Everyone shall have the right to live in a healthy environment and to have access to basic public services." On the other hand, within the framework of the Universal System for the Protection of Human Rights, the Committee on Economic, Cultural and Social Rights of the United Nations reiterated that the provision of water is a human right which, besides being essential for leading a healthy life, is a prerequisite for the realization of all other human rights. Based on this regulation, it is clear that the Costa Rican State is obligated to guarantee an efficient and timely potable water service. The Political Constitution itself implicitly includes the fundamental right of the administered to the good and efficient functioning of public services, that is, that they be provided with high-quality standards." (Judgment No. 2000-04595 at 09:06 a.m. on June 2, 2000; in an identical sense see, among many others, judgments No. 2014-14669, No. 2015-6424 and No. 2015-7340). (The underlining is not from the original). See in the same sense, resolution no. 2017-1163 of 9:40 a.m. on January 27, 2017.

In that same sense, article 1 subsection 1) by means of decree No. 30480-MINAE "Determines the principles that will govern the national policy on water resource management, and must be incorporated into the work plans of the relevant public institutions", expressly establishes the following: "1. Access to potable water constitutes an inalienable human right and must be constitutionally guaranteed." j. Best interest of the user.

"Consumers and users have the right to the protection of their health, environment, safety, and economic interests; to receive adequate and truthful information; to freedom of choice, and to equitable treatment...". "The State shall procure the greatest well-being for all the inhabitants of the country, organizing and stimulating production and the most adequate distribution of wealth." (Articles 46 and 50, Political Constitution of Costa Rica).

Likewise, the Ley General de la Administración Pública, No. 6227, a law that is of public order, whose norms and principles are criteria for the interpretation of the entire administrative legal system of the country, provides in its article 4, the following: "The activity of public entities must be subject as a whole to the fundamental principles of public service, to ensure its continuity, its efficiency, its adaptation to any change in the legal regime or in the social need they satisfy, and equality in the treatment of the recipients, users, or beneficiaries. Based on the foregoing regulations, it is concluded that ARESEP has the necessary powers to apply the regulatory instruments proposed in this methodology."

VII.That in ordinary session 70-2018 of December 4, 2018; the Board of Directors of the Autoridad Reguladora de los Servicios Públicos, agrees with final character, to issue this resolution.

Based on the powers conferred in Ley No. 7593 and its reforms, in the Ley General de la Administración Pública No. 6227, in Decreto Ejecutivo No. 29732-MP, which is the Reglamento to Ley No. 7593, and in the Reglamento Interno de Organización y Funciones of the Autoridad Reguladora de los Servicios Públicos and its Deconcentrated Body.

THE BOARD OF DIRECTORS OF THE REGULATORY AUTHORITY OF PUBLIC SERVICES

I.To issue the "Tariff Methodology for the Protection of the Water Resource (Metodología tarifaria para la protección del recurso hídrico, MTPRH)", contained in official communication OF-535-CDR-2018, as detailed below: TARIFF METHODOLOGY FOR THE PROTECTION OF THE WATER RESOURCE (MTPRH).

(Note from Sinalevi: This methodology was partially reformed and its text reproduced in its entirety by resolution No. RE-0098-JD-2023 of October 4, 2023, published in Alcance Digital No. 207 to La Gaceta No. 195 of October 23, 2023, and is transcribed below:)

TABLE OF CONTENTS III OBJECTIVES ...................................................................................... ....................... 14 1. General Objective ................................................................................ ..................... 14 2. Specific Objectives............................................................................ .................. 14 IV SCOPE ......................................................................................... ....................... 14 V GENERAL METHODOLOGY..................................................................................... 15 1. Total Operating, Administrative, and Commercial Costs and Expenses (CTet) .............. 16 2. Resources for Project Financing (RFet) ................................................ 19 2.1. Debt Service .......................................................................................... 20 3. Total Revenues ................................................................................ ...................... 21 3.1. Sales Revenues ............................................................................................ 23 4. Identification of Variation or Adjustment in Rates .................................................... 24 5. Service Sales Revenues to Users at Current Rates........................ 25 6. Determination of the Percentage of Adjustment in Rates for the Period in which the new tariff setting will take effect ................................................................................ 27 6.1. Determination of the Required Adjustment in Absolute Terms ................................ 27 6.2. Determination of the Required Percentage Adjustment .................................................. 28 7. Adjustment Model for Applying Liquidations ...................................................... 29 7.1. Cost Liquidation ......................................................................................... 31 7.2. Liquidation of Resources for Project Financing............................... 32 7.3. Revenue Liquidation ...................................................................................... 33 VI OTHER GENERAL PROVISIONS ................................................................. 34 III OBJECTIVES 1. General Objective To establish a tariff methodology that defines the conditions under which providers of the aqueduct service can generate the revenues allowing them to cover the costs necessary to carry out projects aimed at the protection of the water resource.

2. Specific Objectives a. To promote projects to improve the availability, sustainability, and quality of water in the water resource supply sources of the public service providers' aqueducts.

b. To contribute to the mitigation of impact and adaptation to climate change on the water resource supply sources through the application of this regulatory instrument.

IV SCOPE The methodology has the following scope:

a. It applies to all ordinary tariff settings for the protection of the water resource, whether in requests from service providers or in ex officio actions by the Regulatory Authority.

b. It applies to providers regulated by Aresep that provide aqueduct services throughout the national territory; it does not consider municipalities.

c. It applies to the current tariff structure of the aqueduct service, and therefore does not contemplate changes to said structure.

V GENERAL METHODOLOGY This tariff methodology delimits and specifies how to determine the rates for the execution of projects for the protection of the water resource, and the tariff adjustments that correspond in the liquidation process of the execution of said projects. These projects have a determined time period for their execution, which will be directly linked to the obtaining of resources through the rates approved by the Regulatory Authority. The rates will be set ordinarily for a project execution period of five years; during that period, the set rates will be in effect for twelve months.

The rates will be reviewed annually ex officio by the IA in ordinary form, with the aim of liquidating each year the execution of said projects in accordance with the provisions of Ley No. 7593 of Aresep. In accordance with article 30 of Ley No. 7593, the Regulatory Authority may carry out ordinary studies ex officio in accordance with the provisions of said Law, without being subject to any type of periodicity. In the case of the operators, the Law establishes the obligation to submit a request for an ordinary study at least once a year. In both cases, individual rates must be established for each of the years of execution of the projects for the protection of the water resource.

In setting the rates for the protection of the water resource, this methodology allows for the financing of projects designed by the provider and endorsed by the Regulatory Authority. Therefore, the total revenues corresponding to the rate for the protection of the water resource will be sufficient to allow providers to cover the total costs and the resources for the financing corresponding to the respective associated projects during their execution.

To establish the rate for the protection of the water resource, the information for the quantification of costs, expenses, and investments detailed according to the items associated with each project to be executed will be used, as defined in the accounting accounts established in the current Contabilidad Regulatoria, information that must correspond to a five-year planning horizon for the execution of said projects (five-year plan).

The following is established as required information that providers must submit to Aresep to request a tariff study for the concept of protection of the water resource:

i)A five-year plan detailing the project(s) to be carried out with the resources collected under this rate, and the impact these projects will have on their supply (quantity of water offered and/or its quality), the justification for carrying out these projects, the prioritization of the execution of these projects, the cost breakdown of each of the projects, as well as the other requirements that Aresep establishes.
ii)The investment projects presented in the five-year plan must establish clear objectives oriented towards the protection of the water resource; have a baseline that serves as a starting reference for measuring the impact on the quantity and/or quality of water, on the recovery of the water resource, and/or adaptation to climate change. If the projects do not have a baseline, the project will begin with its elaboration. Likewise, those projects must propose mechanisms for monitoring the projected results that allow for follow-up and periodic evaluation of the impact obtained.

Additionally, the coherence of the projects with the objectives of the Plan Nacional de Desarrollo y de Inversión Pública (PNDIP)(*) and, where relevant, with the objectives of the existing sectoral plans must be justified.

(*)(Note from Sinalevi: Its name thus modified by subsection a) of article 43 of the Reglamento para la Implementación de la Ley N°10441 of March 13, 2024 and the Functioning of the Sistema Nacional de Inversión Pública, approved by decreto ejecutivo No. 45163 of August 8, 2025. Previously it indicated "Plan Nacional de Desarrollo (PND)") To present the information required by Aresep, the provider will take as a reference the documents or procedures that the IA develops for these purposes, which will include the criteria for the identification, categorization, and selection of projects to be financed with the resources from the rate for water protection, as well as the minimum information allowing for the quantification of the costs, expenses, and investments associated with each project.

The provider must keep individualized accounting records and issue specific reports on the costs incurred, investments made, and financing obtained specifically for the execution of projects for the protection of the water resource (protección del recurso hídrico, PRH), in accordance with what is required in the current Contabilidad Regulatoria resolutions applicable to the provider and the service. As appropriate, once the audited or certified Financial Statements are received, and homologated with the Contabilidad Regulatoria, the IA will proceed ex officio to carry out a review and liquidation process of the cost and expense items observed with respect to those approved in the cost and expense structure of the tariff study that defined the current rates for the period(s) to be liquidated.

1. Total Operating, Administrative, and Commercial Costs and Expenses (CTet) These are the operating, administrative, and commercial costs and expenses to execute projects for the protection of the water resource of provider "e" for the period "t".

The calculation includes the following components detailed in the following equation:

𝑪𝑻𝒆𝒕 = 𝑮𝑹𝑬𝑴𝒆𝒕 + 𝑪𝑺𝑬𝑹𝒆𝒕 + 𝑫𝑬𝑷𝒆𝒕 + 𝑪𝑴𝑺𝒆𝒕 + 𝑶𝑮𝒆𝒕 Equation 1 Where:

CTet = Total operating, administrative, and commercial costs and expenses incurred by provider "e", for period "t" to execute projects for the protection of the water resource. These costs and expenses consist of remuneration expenses, costs for services, depreciation costs, costs for materials and supplies, and other expenses to execute projects for the protection of the water resource that contribute to improving the sustainability, continuity, and quality of the service.

GREMet = Remuneration expenses incurred by provider "e", for period "t" to execute projects for the protection of the water resource. Corresponds to the expenses incurred by the service provider for wages and salaries, social contributions, and legal benefits necessary for the adequate development of the activity, both for operational personnel and for those in charge of the administrative and commercial tasks corresponding to the projects for the protection of the water resource. This expense must be budgeted when proposing the project, must be specific and include amounts and breakdowns by types of work required in the project, as well as the period in which they will be necessary. This expense must be estimated using the information and level of detail of the current Contabilidad Regulatoria, the associated regulatory forms and templates, and the respective regulatory guidelines established by Aresep.

CSERet = Costs for services incurred by provider "e", for period "t" to execute projects for the protection of the water resource, as well as the corresponding administrative and commercial costs.

Corresponds to costs for inputs required for the execution of projects that are contracted or acquired with third parties. This cost must be estimated using the information and level of detail of the current Contabilidad Regulatoria, the associated regulatory forms and templates, and the respective regulatory guidelines established by Aresep.

DEPet = Depreciation cost of the assets incurred by provider "e", for period "t" to execute projects for the protection of the water resource. This cost must be estimated using the information and level of detail of the current Contabilidad Regulatoria, the associated regulatory forms and templates, and the respective regulatory guidelines established by Aresep. To perform the tariff setting, Aresep must review the monetary value of the net fixed assets presented by the provider.

Aresep may also establish asset depreciation tables, whether useful life or the depreciation method to be used, when it technically considers it must be different from what the provider presented. It may be based on equivalent tables from the Ministry of Finance, technical specifications from the asset manufacturer regarding useful life and salvage value, or similar assets in the country or internationally.

CMSet = Cost for materials and supplies incurred by provider "e", for period "t" to execute projects for the protection of the water resource, as well as the corresponding administrative and commercial costs. This cost includes the allocations intended for the acquisition of all kinds of inputs required for the performance of administrative and productive activities. This cost must be estimated using the information and level of detail of the current Contabilidad Regulatoria, the associated regulatory forms and templates, and the respective regulatory guidelines established by Aresep.

OGet = Other costs or expenses incurred by provider "e", for period "t" to execute projects for the protection of the water resource, as well as the corresponding administrative and commercial costs. It includes any operating expense associated with the project to protect the water resource that is not included in the items described above in the variables of this equation. This cost or expense must be estimated using the information and level of detail of the current Contabilidad Regulatoria, the associated regulatory forms and templates, and the respective regulatory guidelines established by Aresep.

e = Provider of the public service regulated by Aresep.

t = Corresponds to the period "t" of twelve calendar months for which the rate is calculated. Periods t=1,2,3,4, and 5 correspond to each of the five years for which the rate for the protection of the water resource is calculated within the five-year period in which the projects will be executed. The twelve calendar months shall be understood as January through December; with the exception of t=1 which, in some applications of the methodology, may contemplate a period that begins after the first calendar day of January, but always ending on the last calendar day of December. The base period will be represented by variable t=0, which provides the input information for the estimates or projections of costs and expenses, financing resources, and revenues in the tariff study; this period does not necessarily correspond to twelve months or the information of a complete fiscal period contained in the audited or certified Financial Statements, as appropriate.

Aresep will review and validate the justification presented by the provider for each of the costs of the projects presented. For all the above information, the information and level of detail of the current Contabilidad Regulatoria will be used for the projects proposed to be executed with the rate for the protection of the water resource. In cases where a liquidation is applicable, the information from the Contabilidad Regulatoria validated by the IA corresponding to the latest available Financial Statement will be used.

2 Resources for Project Financing (RFet) The resources for project financing are calculated by adding the funds allocated to finance projects from the rate and/or through debt for project financing, thus also recognizing in the rate the cost of servicing the debt obligations. This component is assigned with the objective of providing the provider with resources to ensure the adequate development of the activity.

The resources for financing for project development are calculated as follows:

𝑹𝑭𝒆𝒕 = 𝑪𝑰𝑵𝑽𝒆𝒕 + 𝑺𝑫𝒆𝒕 Equation 2 Where:

RFet = Resources to finance the execution of the projects for the protection of the water resource of provider "e", for period "t". These resources consist of the sum of the estimated investments with own resources and the debt service.

CINVet = Estimated disbursement of investments with own resources to execute projects for the protection of the water resource of provider "e" for period "t". The cost of the projects must be explicit and justified by the service provider, based on reasonable technical and financial criteria according to the univocal rules of science or technique.

SDet = Cost of the debt service to execute projects for the protection of the water resource of provider "e", for period "t". The procedure to obtain this cost is detailed in section 2.1.

e = Provider of the public service regulated by Aresep.

2.1 Debt Service The debt service is calculated as follows:

𝑺𝑫𝒆𝒕 = 𝑨𝑷𝒆𝒕 + 𝑮𝑭𝒆𝒕 ? 𝑰𝑭𝒆𝒕 Equation 3 Where:

SDet = Cost of the debt service to execute the projects for the protection of the water resource of provider "e" for period "t". This cost consists of the sum of the principal amortization plus financial expenses minus financial income.

APet = Principal amortization of the debts, required to comply with the financing contracts for the projects for the protection of the water resource of provider "e" for period "t". This cost can be estimated using financing quotes from financial entities or loan contracts established with financial entities, or the information and level of detail of the current Contabilidad Regulatoria, the associated regulatory forms and templates, and the respective regulatory guidelines established by Aresep.

GFet = Financial expenses required to meet the financing obligations for the projects for the protection of the water resource of provider "e" for period "t". Includes interest, bank commissions, and other items related to the financial commitments of the provider in the projects for the protection of the water resource. This cost can be estimated using financing quotes from financial entities or loan contracts established with financial entities, or must be estimated using the information and level of detail of the current Contabilidad Regulatoria, the associated regulatory forms and templates, and the respective regulatory guidelines established by Aresep.

IFet = Financial income (ingresos financieros) for executing projects for the protection of the water resource of provider "e" for period "t". It includes interest and other items related to placing available resources in financial entities regulated by the Superintendencia General de Entidades Financieras (SUGEF), because the resources for water resource protection projects are not executed immediately. This income must be estimated using the information and level of detail of the current regulatory accounting, the associated regulatory forms and templates, and the respective regulatory guidelines established by Aresep.

e = Provider of the public service regulated by Aresep.

t = Corresponds to period "t" of twelve calendar months for which the tariff is calculated. Periods t=1,2,3,4 and 5 correspond to each of the five years for which the tariff for water resource protection is calculated within the five-year period in which the projects will be executed. The twelve calendar months shall be understood as January to December; with the exception of t=1 which, in some applications of the methodology, may contemplate a period that begins after the first calendar day of January, but always ending on the last calendar day of December. The base period will be represented by the variable t=0, which provides the input information for the estimates or projections of costs and expenses, financing resources, and income in the tariff study; this period does not necessarily correspond to twelve months or the information of a complete fiscal period contained in the audited or certified Financial Statements, as applicable.

3 Total income The sum of the total costs and expenses (CTet) and resources for project financing (RFet) plus the amount resulting from the settlement (liquidación) process (LIe), which were estimated for the execution of the projects for the protection of the water resource for period "t", for the period in which the tariff will be in effect, determine the total income expected by the provider.

𝑰𝑻𝒆𝒕 = 𝑪𝑻𝒆𝒕 + 𝑹𝑭𝒆𝒕 + 𝑳𝑰𝒆 Equation 4 Where:

ITet = Total income for the development of projects for the protection of the water resource of provider "e" for period "t". It is obtained from the sum of the total costs and expenses (CTet) and the resources for financing (RFet), both for the development of projects for the protection of the water resource, to which, when applicable, the result of the settlement of the previous period or periods (LIe) is added.

CTet = Total operating, administrative, and commercial costs and expenses incurred by provider "e", for period "t", to execute projects for the protection of the water resource. These costs and expenses are composed of personnel expenses (gastos por remuneraciones), costs for services, depreciation costs, costs for materials and supplies, and other expenses to execute projects for the protection of the water resource; which contribute to improving the sustainability, continuity, and quality of the service.

RFet = Resources to finance the execution of the projects for the protection of the water resource of provider "e", for period "t". These resources are composed of the sum of the estimated investments with own resources and debt service.

LIe = Settlement of provider "e" for the period(s). The settlement will be carried out, at most, considering the last two available fiscal years of the audited or certified Financial Statements, as applicable, and homologated with Regulatory Accounting. It refers to the difference between the adjusted total costs and expenses plus the resources for project financing with respect to the adjusted total income of provider "e" for the period(s) under settlement. For those providers that do not have approved tariffs for the execution of projects for the protection of the water resource, the term LIe of Equation 4 will have a value of zero, since the execution of projects has not begun and a settlement does not apply; on the contrary, when a provider has approved tariffs, the indicated term will have a value other than zero that will correspond to the result of applying the settlement procedure detailed in section 0.

e = Provider of the public service regulated by Aresep.

3.1 Income from sales The total income expected by the provider is obtained from the charging of the tariff (sales) for the protection of the water resource to users (IVet), as expressed in the following equation.

𝑰𝑻𝒆𝒕 = 𝑰𝑽𝒆𝒕 Equation 5 Where:

ITet = Total income for the development of projects for the protection of the water resource of provider "e" and for period "t". It is obtained from the sum of the total costs and expenses (CTet) and the financing resources (RFet), both for the development of projects for the protection of the water resource, to which, when applicable, the result of the settlement of the previous period or periods (LIe) is added.

IVet = Income of provider "e" for period "t", from charging the tariff to users for the protection of the water resource. The income from charging the tariff for the protection of the water resource, at equilibrium, must be equal to the estimated total income corresponding to the sum of the total costs and expenses (CTet), and the financing resources for the development of projects for the protection of the water resource (RFet).

e = Provider of the public service regulated by Aresep.

4 Identification of variation or adjustment in tariffs Once the total amount of income necessary for the service provider to execute the projects for the protection of the water resource is known, the tariff required to generate that income is established, using the tariff structure, the demand estimate, and considering the current tariffs. In order to identify if a variation or adjustment in tariffs is required, 3 scenarios could arise:

- That the income required by the provider is equal to the total income projected at current tariffs; in this case, no adjustment in tariffs is required, and the same current tariffs must be maintained. - That the income required by the provider is greater than the total income projected at current tariffs; in this case, an increase in current tariffs is required until they equal the required income. - That the income required by the provider is less than the total income projected at current tariffs; in this case, a decrease in current tariffs is required until they equal the required income.

The absolute total amount of the change required in income from charging the tariff (?IVet) is the difference between the income from charging the tariff (sales) necessary to provide the service (IVet) and the projected annual income from charging the tariff (sales), based on the tariff structure, the demand estimate, and considering the current tariffs (IVTVet), expressed as follows:

?𝑰𝑽𝒆𝒕 = 𝑰𝑽𝒆𝒕 ? 𝑰𝑽𝑻𝑽𝒆𝒕 Equation 6 Where:

?IVet = Absolute change required in the total income from charging the tariff of provider "e" and for period "t".

IVet = Income of provider "e" for period "t", from charging the tariff to users for the protection of the water resource.

These incomes may be estimated and projected considering the procedure established in section 0, see Equation 7.

e = Provider of the public service regulated by Aresep.

5 Income from sales of the service to users with current tariffs This income is obtained by summing the results of multiplying each tariff category according to consumption block, by the estimated total volume of water to bill associated with that tariff, expressed as follows:

Where:

Tetsb = Current tariff in colones per cubic meter (m3) for consumption block "b" of user category "s" of provider "e", for period "t". The tariff according to consumption block and user category corresponds to the value indicated in the current tariff schedule at the time of the tariff study.

Vetsb = Volume of water to bill (projected) in cubic meters (m3) for consumption block "b" of user category "s" of provider "e", for period "t". The projection is estimated from the data provided by the provider of the most updated aqueduct service demand.

e = Provider of the public service regulated by Aresep.

s = User category according to the current tariff structure. For example, currently residential (domiciliar), business (empresarial), government (gobierno), preferential (preferencial).

m = Number of user categories according to the current tariff structure.

b = Consumption block according to the current tariff structure.

k = Number of consumption blocks according to the current tariff structure.

6 Determination of the percentage of adjustment in tariffs for the period in which the new tariff setting will take effect For the determination of the percentage adjustment in tariffs for the period in which the new tariff setting will take effect, the following three steps will be applied:

i. The absolute amount of the additional resources required is calculated (?IVet, Equation 6).

ii. The required adjustment percentage is determined by dividing the result of the previous equation by the total income from charges (sales) at current tariffs (IVTVet, Equation 7).

iii. This percentage is distributed among the current tariffs according to the defined tariff structure, to guarantee the attainment of the necessary total income.

6.1 Determination of the required adjustment in absolute terms ?𝑨𝒆𝒕 = 𝑰𝑻𝒆𝒕 ? 𝑰𝑽𝑻𝑽𝒆𝒕 Equation 8 Where:

?Aet = Change required in absolute terms in the total income of provider "e", for period "t", in which the tariffs would be in effect.

IVTVet = Total income projected for provider "e" for period "t", from charging the tariff to users for the protection of the water resource, based on the current tariff structure and the demand estimate. These incomes may be estimated and projected considering the procedure established in section 0, see Equation 7.

e = Provider of the public service regulated by Aresep.

6.2 Determination of the required percentage adjustment Where:

%IVet = Percentage adjustment required in the total income of provider "e" for period "t".

?Aet = Change required in absolute terms in the total income of provider "e", for period "t" in which the tariffs would be in effect.

e = Provider of the public service regulated by Aresep.

7 Adjustment model for applying settlements This settlement process may be carried out ex officio by the IA or at the request of a party by the service provider.

In the event it is carried out ex officio by the IA, it will commence once the information from the audited or certified Financial Statements corresponding to the period(s) to be settled is available, and which is consistent with the provisions of the chart of accounts of Regulatory Accounting, within the established deadlines for its receipt. The IA must request the opening of the tariff-setting file with all the necessary information, including the preliminary report with the analysis and validation of the information from the aforementioned Financial Statements that are available.

For its part, the service provider requesting a settlement must submit the corresponding justification using the information from the audited or certified Financial Statements, according to the provisions of the regulatory accounting chart of accounts, within the established deadlines for its receipt.

The settlement consists of identifying the differences between the estimated values for costs and expenses, project financing resources, and income that were considered in the calculation of the ordinary tariff adjustment based on the information from the base period, and the actual or observed values identified during the period(s) in which the tariffs were in effect.

Given that the settlement process compares all the items included in the tariff study and their corresponding observed values in the Financial Statements for the period(s) under settlement, said review contemplates cost and investment factors (in the terms indicated in Article 30 of Law N°7593), which are beyond the external variables to the administration of the service provider. Due to this, the tariff reviews resulting from applying the settlement process must be submitted to the public hearing process defined in Article 36 of Law N°7593.

In determining the settlement adjustment to be applied for the period(s) to be settled, a review, adjustment, and update of the estimates made that determined the tariff for the periods to be settled must be carried out, in such a way that the differences are identified between the estimated values for all variables related to the operating, administrative, and commercial costs and expenses (CTet), the financing resources (RFet), and the total income (ITet) with respect to the values recorded in the audited or certified Financial Statements, as applicable, during the fiscal period(s) in which the tariffs were in effect. The settlement amount must maintain the sign obtained in Equation 10, that is, a positive amount will add greater income, while a negative amount implies reducing the income to compensate for the settlement.

In this way, Aresep will take into account the deviations that originate in the tariff calculation carried out through estimates, with respect to the actual or observed values recorded in the audited or certified Financial Statements, as applicable, as a result of the provider's management and duly justified. If present, the difference of each of the variables may be incorporated by adjusting the tariff within the execution period of the projects for the protection of the water resource, in the following period, or a combination of both (within the period under execution and the next). The settlement will be carried out, at most, considering the last two available fiscal years of the audited or certified Financial Statements, as applicable, and homologated with Regulatory Accounting.

Likewise, for these purposes, the data presented by the provider must be audited and homologated through the provisions of Regulatory Accounting, except for the Asadas, which, depending on the case, may be audited or certified. These data will be reviewed, analyzed, and refined by the Regulatory Authority, where a monetary value different from that reported by the provider may be established, with the purpose of determining its recognition for the fulfillment of the objectives established in Law N° 7593.

𝑳𝑰𝒆 = (𝑪𝑻𝑨𝒆 + 𝑹𝑭𝑨𝒆) ? 𝑰𝑻𝑨𝒆 Equation 10 Where:

CTAe = Adjusted total costs and expenses of provider "e" for the period(s) to be settled for all related variables. It refers to the adjustment for the differential of observed expenses and estimated expenses for the period(s), with CTAe, corresponding to the total operating, administrative, and commercial costs and expenses incurred by provider "e" in the period(s) under settlement.

RFAe = Adjusted resources to finance the execution of the projects of provider "e" for the period(s) to be settled for all related variables. It refers to the adjustment for the differential of what was observed and estimated for the period(s), with RFAe, corresponding to the resources for project financing incurred by provider "e" in the period(s) under settlement.

ITAe = Adjusted total income of provider "e" for the period(s) to be settled for all related variables. It refers to the adjustment for the differential of the observed income and the estimated income of provider "e" in the period(s) under settlement.

e = Provider of the public service regulated by Aresep.

7.1 Settlement of costs The items of observed costs and expenses that will be analyzed in said process must coincide with those approved in the cost and expense structure of the tariff study that defined the tariffs in effect during the period(s) to be settled.

To carry out the settlement of costs and expenses and determine the corresponding adjustment, the estimated costs and expenses included in the calculation of the current tariff (period(s) to be settled) by Aresep for provider "e" must be contrasted with the observed costs and expenses incurred by the regulated service provider in said period(s), according to the audited or certified Financial Statements, as applicable, and homologated with Regulatory Accounting, as detailed below:

𝑪𝑻𝑨𝒆 = 𝑪𝑹𝒆 ? 𝑪𝑻𝒆 Equation 11 Where:

CTAe = Adjusted total costs and expenses of provider "e" for the period(s) to be settled for the related variables. It refers to the adjustment for the differential of observed expenses and estimated expenses for the period(s), with CTAe, corresponding to the total operating, administrative, and commercial costs and expenses incurred by provider "e" in the period(s) under settlement.

CRe = Total observed costs and expenses of provider "e" for the period(s) to be settled. These are the total observed costs and expenses for the operation, administration, and commercialization concepts reconciled with the audited or certified Financial Statements, as applicable, and homologated with Regulatory Accounting, incurred by provider "e" in the period(s) under settlement.

CTe = Total costs and expenses estimated by Aresep in the tariff setting for provider "e" in the period(s) to be settled. These are the total estimated costs and expenses for the operation, administration, and commercialization concepts included in the tariff setting carried out by Aresep for provider "e" for the period(s) under settlement.

e = Provider of the public service regulated by Aresep.

In the case of those costs and expenses that were not incorporated by the service provider in its tariff request for the period(s) under settlement or were excluded by the Regulatory Entity as a result of its regulatory analysis, but which were carried out and executed by the provider in the exercise of its functions, it must provide all the technical information required to validate the relevance of the cost and its link to the provision of the public service, so that the Regulatory Authority proceeds to assess and determine the items and amounts to be recognized in the adjustment.

7.2 Settlement of resources for project financing The observed resources for project financing that will be analyzed in said process must coincide with those approved in the tariff study that defined the tariffs in effect during the period(s) to be settled.

To carry out the calculation of the settlement of financing resources and determine the corresponding adjustment, the estimated resources included in the calculation of the current tariff (period(s) to be settled) by Aresep for provider "e" must be contrasted with the resources obtained by the regulated service provider in said period(s), according to the audited or certified Financial Statements, as applicable, and homologated with Regulatory Accounting, as detailed below:

𝑹𝑭𝑨𝒆 = 𝑹𝑭𝑹𝒆 ? 𝑹𝑭𝒆 Equation 12 Where:

RFRe = Resources observed in the project financing of provider "e" for the period(s) to be settled. These are the values of the resources reconciled with the audited or certified Financial Statements, as applicable, and homologated with Regulatory Accounting, incurred by provider "e" in the period(s) under settlement.

RFe = Resources estimated for project financing by Aresep in the tariff setting of provider "e" in the period(s) to be settled. These are the values of the resources included in the tariff setting carried out by Aresep for provider "e" for the period(s) under settlement.

e = Provider of the public service regulated by Aresep.

The settlements must comply with the analysis of the Regulatory Authority where depreciation, additions, and retirements of assets will be reviewed, if applicable, the foregoing as a result between what was executed by the service provider and what was projected by the IA in the tariff study. In cases where the provider submits a tariff review request that includes settlement, it must deliver the justifications for the variations of each of the amounts (differences).

Similarly, if applicable, the technical justifications duly associated with the observed depreciation, additions, and retirements of assets not recognized by the IA in the tariff adjustment request in the period(s) for which the corresponding tariff settlement is carried out must be delivered. For the submission of technical information, providers must use the formats requested by the IA, both for Regulatory Accounting and for the tariff study.

7.3 Settlement of income The total income adjustment corresponds to the difference between the observed income and the estimated income included in the calculation of the tariff of provider "e", for the period(s) under settlement, which is obtained as follows:

𝑰𝑻𝑨𝒆 = 𝑰𝑻𝑹𝒆 ? 𝑰𝑻𝒆 Equation 13 Where:

ITAe = Adjusted total revenues for the provider "e" for the settlement period(s) for all related variables. This refers to the adjustment for the differential between observed and estimated revenues of the provider "e" in the settlement period(s).

ITRe = Observed total revenues for the provider "e" for the settlement period(s). These revenues are obtained from the audited or certified Financial Statements, as applicable, and reconciled with the Regulatory Accounting, received by the provider "e" for the settlement period(s).

ITe = Total revenues estimated by Aresep in the tariff setting for provider "e" and for the settlement period(s). These revenues are those included in the tariff setting carried out by Aresep for provider "e" for the settlement period(s).

e = Provider of the public service regulated by Aresep.

VI OTHER GENERAL PROVISIONS If the provider receives a donation, transfer, or subsidy that adds resources for investment or operation, those donations will not be accounted for the purposes of recognition in the tariffs; only the operating and maintenance costs of what was acquired with these resources will be recognized.

ANNEXES Table 1 Formulas used in the tariff methodology for water resource protection.

| N° | Equation | Description | | --- | --- | --- | | 1 | 𝑪𝑻𝒆𝒕 = 𝑮𝑹𝑬𝑴𝒆𝒕 + 𝑪𝑺𝑬𝑹𝒆𝒕 + 𝑫𝑬𝑷𝒆𝒕 + 𝑪𝑴𝑺𝒆𝒕 + 𝑶𝑮𝒆𝒕 | Total operating, administrative, and commercial costs and expenses incurred by provider "e", for period "t" to execute projects for water resource protection. | | 2 | 𝑹𝑭𝒆𝒕 = 𝑪𝑰𝑵𝑽𝒆𝒕 + 𝑺𝑫𝒆𝒕 | Resources to finance the execution of projects for water resource protection for provider "e", for period "t". | | 3 | 𝑺𝑫𝒆𝒕 = 𝑨𝑷𝒆𝒕 + 𝑮𝑭𝒆𝒕 ? 𝑰𝑭𝒆𝒕 | Cost of debt service to execute projects for water resource protection for provider "e" for period "t". | | 4 | 𝑰𝑻𝒆𝒕 = 𝑪𝑻𝒆𝒕 + 𝑹𝑭𝒆𝒕 + 𝑳𝑰𝒆 | Total revenues for the development of projects for water resource protection for provider "e" for period "t". | | 5 | 𝑰𝑻𝒆𝒕 = 𝑰𝑽𝒆𝒕 | Total revenues for the development of projects for water resource protection for provider "e" and for period "t". | | N° | Equation | Description | | 6 | ?𝑰𝑽𝒆𝒕 = 𝑰𝑽𝒆𝒕 ?𝑰𝑽𝑻𝑽𝒆𝒕 | Absolute change required in the total revenues from tariff charges for provider "e" and for period "t". | | 7 | 𝒌 𝒎 𝑰𝑽𝑻𝑽𝒆𝒕 = ? ?(𝑻𝒆𝒕𝒔𝒃 ? 𝑽𝒆𝒕𝒔𝒃) 𝒃=𝟏 𝒔=𝟏 | Projected total revenues for provider "e" for period "t", from charging users the tariff for water resource protection, based on the current tariff structure. | | 8 | ?𝑨𝒆𝒕 = 𝑰𝑻𝒆𝒕 ? 𝑰𝑽𝑻𝑽𝒆𝒕 | Required change in absolute terms in the total revenues of provider "e", for the period "t", in which the tariffs would be in effect. | | 9 | ?𝑨𝒆𝒕 %𝑰𝑽𝒆𝒕 = 𝑰𝑽𝑻𝑽 ? 𝟏𝟎𝟎 𝒆𝒕 | Required percentage adjustment in the total revenues of provider "e" for period "t". | | 10 | 𝑳𝑰𝒆 = (𝑪𝑻𝑨𝒆 + 𝑹𝑭𝑨𝒆) ? 𝑰𝑻𝑨𝒆 | Settlement for provider "e" for the period(s). | | 11 | 𝑪𝑻𝑨𝒆 = 𝑪𝑹𝒆 ? 𝑪𝑬𝒆 | Adjusted total costs and expenses for provider "e" for the settlement period(s) for all related variables. | | 12 | 𝑹𝑭𝑨𝒆 = 𝑹𝑭𝑹𝒆 ? 𝑹𝑭𝒆 | Adjusted total revenues for provider "e" for the settlement period(s) for all related variables. | | 13 | 𝑰𝑻𝑨𝒆 = 𝑰𝑻𝑹𝒆 ? 𝑰𝑻𝒆 | Adjusted total revenues for provider "e" for the settlement period(s) for all related variables. | Table 2 Variables used in the tariff methodology for water resource protection.

| Variable | Description | | --- | --- | | %IVet | Required percentage adjustment in the total revenues of provider "e" for period "t". | | ?Aet | Required change in the total revenues of provider "e", for period "t" in which the tariffs would be in effect. | | ?IVet | Required absolute change in the total revenues from tariff charges for provider "e" and for the period "t". | | APet | Amortization of principal on debts, required to fulfill the financing contracts for water resource protection projects for provider "e" for period "t". | | b | Consumption block according to the current tariff structure. | | Variable | Description | | --- | --- | | CINVet | Estimated disbursement of investments with own resources to execute projects for water resource protection for provider "e" for the period "t". | | CMSet | Cost for materials and supplies incurred by provider "e", for the period "t" to execute projects for water resource protection, as well as the corresponding administrative and commercial costs. | | CRe | Observed total costs and expenses for provider "e" for the settlement period(s). | | CSERet | Costs for services incurred by provider "e", for period "t" to execute projects for water resource protection, as well as the corresponding administrative and commercial costs. | | CTAe | Adjusted total costs and variables. | | CTet | Total operating, administrative, and commercial costs and expenses incurred by provider "e", for period "t" to execute projects for water resource protection. | | CTe | Total costs and expenses estimated by Aresep in the tariff setting for provider "e" in the settlement period(s). | | DEPet | Depreciation cost of the assets, incurred by provider "e", for period "t" to execute projects for water resource protection. | | e | Provider of the public service regulated by Aresep. | | GFet | Financial protection projects for provider "e" for period "t". | | GREMet | Remuneration protection. | | IFet | Financial revenues to execute projects for water resource protection for provider "e" for period "t". | | ITAe | Adjusted total revenues for provider "e" for the settlement period(s) for all related variables. | | ITet | Total revenues for the development of projects for water resource protection for provider "e" and for period "t". | | ITe | Total revenues estimated by Aresep in the tariff setting for provider "e" and for the settlement period(s). | | ITRe | Observed total revenues for provider "e" for the settlement period(s). | | IVet | Revenues for provider "e" for period "t", from charging users the tariff for water resource protection. | | IVTVet | Projected total revenues for provider "e" for period "t", from charging users the tariff for water resource protection, based on the current tariff structure. | | k | Number of consumption blocks according to the current tariff structure. | | LIe | Settlement for provider "e" for the period(s). | | m | Number of user categories according to the current tariff structure. | | OGet | Other costs or expenses incurred by provider "e", for period "t" to execute projects for water resource protection, as well as the corresponding administrative and commercial costs. | | RFAe | Adjusted project financing resources for provider "e" for the settlement period(s) for all related variables. | | RFet | Financing resources to execute projects for water resource protection for provider "e", for period "t". | | Variable | Description | | --- | --- | | RFe | Financing resources for projects estimated by Aresep in the tariff setting for provider "e" in the period(s). | | RFRe | Observed financing resources for projects for provider "e" and for the settlement period(s). | | s | User category according to the current tariff structure. | | SDet | Cost of debt service to execute projects for water resource protection for provider "e" for period "t". | | t | Corresponds to period "t" of twelve calendar months for which the tariff is calculated. | | Tetsb | Current tariff in colones per cubic meter (m3) for consumption block "b" of user category "s" for provider "e", for period "t". | | Vetsb | Volume of water to be billed (projected) in cubic meters (m3) for consumption block "b" of user category "s" for provider "e", for period "t". |

II.Instruct the Board of Directors Secretariat to proceed with notifying the interested parties of the official letter containing the responses to the oppositions filed in the public hearing.

III.Instruct the Board of Directors Secretariat to proceed with the respective publication of this methodology in the Official Gazette La Gaceta.

IV. Instruct the Board of Directors Secretariat to proceed with notifying the parties of this resolution

In compliance with the provisions of Article 245 of the Ley General de la Administración Pública, against this resolution, the ordinary motion for reversal or reconsideration may be filed, which must be submitted within three days counting from the day following notification, and the extraordinary motion for review, which must be submitted within the deadlines set forth in Article 354 of the aforementioned law. Both motions must be filed before the Board of Directors of the Autoridad Reguladora de los Servicios Públicos, which is responsible for resolving them.

It takes effect upon its publication in the official newspaper La Gaceta.

Tariff methodology for the protection of water resourcesMetodología tarifaria para la protección del recurso hídrico

XII. That ARESEP is currently in a process of formalizing and designing methodologies in all regulated sectors

XXI. That on November 5, 2015, the public hearing was held as recorded in Minutes No. 98-2015, (folios 348 to 358)

XXVI. That on December 7, 2017, the Regulador General, through official letter 989-RG 2017,

I. That it is necessary to issue a tariff methodology for the protection of water resources

Artículo 31 — of Law 7593 establishes that "The criteria of social equity, environmental sustainability, energy conservation, and economic efficiency.

I. LEGAL FRAMEWORK

Artículo 31 — of this Law establishes the parameters that ARESEP must follow to set public service tariffs.

IV. Instruct the Board of Directors Secretariat to proceed with notifying the parties of this resolution

XXI. Que el 5 de noviembre de 2015, se celebró la audiencia pública según consta en el Acta N ° 98-2015, (folios 348 al 358)

XXVI. Que el 7 de diciembre de 2017, el Regulador General, mediante el oficio 989-RG 2017,

I. Que es necesario dictar una metodología tarifaria para la protección del recurso hídrico

I. MARCO LEGAL

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