Resolución 0044 — Tariff methodology for drinking water, sewerage, and hydrant services (MTAAH)

in the entirety of the text - Full Text of Norm 0044 Tariff methodology for the services of aqueduct, sewerage and hydrants (MTAAH) Full Text of minutes: 17ACDC REGULATORY AUTHORITY OF PUBLIC SERVICES (This norm was repealed by point II) of resolution N° RE-0077-JD-2023 of May 11, 2023, "Tariff methodology for the services of aqueduct, sewerage and hydrants (MTAAH)") Through agreement 10-14-2019, of the minutes of session 14-2019, held on March 12, 2019, the Board of Directors of ARESEP resolved to issue the "TARIFF METHODOLOGY FOR THE SERVICES OF AQUEDUCT, SEWERAGE AND HYDRANTS (MTAAH)", the text of which is copied below:

RESOLUTION RE-0044-JD-2019 ESCAZÚ, AT TWELVE HOURS AND TEN MINUTES ON THE TWELFTH OF MARCH, TWO THOUSAND NINETEEN TARIFF METHODOLOGY FOR THE SERVICES OF AQUEDUCT, SEWERAGE AND HYDRANTS (MTAAH).

I.That potable water services are vital for the general well-being of society and strategic for national development, making it necessary to establish a tariff instrument that allows providers of aqueduct, sewerage, and hydrant services to obtain the resources to comply with the principles of quality, quantity, timeliness, continuity, and reliability necessary for optimal provision.

II.That Article 5 of Law N° 7593 establishes that for the public services defined in that article, the Regulatory Authority shall set prices and tariffs. Among those services are those of aqueduct and sewerage and hydrants.

III.That Article 6, subsection d) of Law N° 7593, establishes as an obligation of the Regulatory Authority, "to set tariffs and prices in accordance with technical studies," as defined in Article 4, subsection a) point 2 of the Regulation to the Law of the Regulatory Authority of Public Services, Executive Decree N° 29732-MP, which establishes among the functions of Aresep: "2. To set the prices, tariffs, and fees of the public services regulated by law, with observance of the principle of service at cost (.)."

IV.That Article 29 of Law N° 7593 provides that the Regulatory Authority shall formulate and promulgate the definitions, requirements, and conditions to which the procedures for tariffs and prices of public services shall be subject.

V.That Article 30 of Law N° 7593, regarding the request for setting or changes to tariffs and prices, establishes that according to the circumstances, tariff settings shall be of an ordinary or extraordinary nature.

VI.That Article 31 of Law N° 7593 establishes that to set the tariffs and prices of public services, Aresep shall take into account the model 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. In this last case, it shall seek to promote small and medium-sized enterprises. If there is proven impossibility to apply this procedure, the particular situation of each company shall be considered. Said norm provides that the criteria of social equity, environmental sustainability, energy conservation, and economic efficiency defined in the National Development Plan, must be central elements for setting the tariffs and prices of public services. No settings that threaten the financial equilibrium of the entities providing the public service shall be permitted. Likewise, Article 31 of Law N° 7593 provides that when setting the tariffs of public services, the protection of water resources, costs, and environmental services must be contemplated.

VII.That Article 33 of Law N° 7593 establishes that in the tariff procedure, each petition regarding tariffs and prices must be duly justified, and Article 34 ibidem 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 in the corresponding resolution.

VIII.That Article 15 of Executive Decree N° 29732-MP, Regulation to the Law Regulating Public Services, provides that to set tariffs, the models shall be used, which must be approved by ARESEP, in accordance with the law.

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

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

XI.That on May 14, 2002, the "Sectoral Regulation for the Regulation of Aqueduct and Sanitary Sewerage Services," Executive Decree Nº 30413-MP-MINAE-S-MEIC, was published in La Gaceta Nº 91, Supplement N° 38, through which the definitions and general conditions under which the technical norm and the tariff methodology that will regulate the activities of the providers of public aqueduct and sanitary sewerage services and the relations between these and the Regulatory Authority of Public Services (Aresep) are established, in accordance with the provisions of the Law of the Regulatory Authority of Public Services Nº 7593 and its Regulation.

XII.That on June 24, 2008, the Law of "Declaration of the hydrant service as a public service and reform of related laws," Law Nº 8641, was published in La Gaceta Nº 121, through which it was provided that Aresep shall recognize, within the tariff structures of the aqueduct service, the costs and investments necessary for the installation, development, operation, and maintenance of the hydrants. The other matters of this service shall be regulated in accordance with the provisions of the Law of the Regulatory Authority of Public Services, Nº 7593, of August 9, 1996, and its reforms.

XIII.That on August 27, 2008, the Board of Directors of Aresep, through resolution RJD-151-2008, established the calculation mechanism for the tariff for aqueduct and sewerage services.

XIV.That on May 19, 2009, the "Regulation to the Law of Declaration of the Hydrant Service as a Public Service and Reform of Related Laws, N° 8641 of June 11, 2008," Executive Decree Nº 35206-MP-MINAE, was published in La Gaceta Nº 95, through which it was provided, among other things, that the development of the hydrant network, its installation, operation, and maintenance must have adequate tariffs, for which the Regulatory Authority of Public Services or the Office of the Comptroller General of the Republic, depending on whether the operating and administering entity of the public or private aqueduct system, shall establish the amount of the tariff for the development of that activity, which shall be included in the price structure that said entity charges its customers.

XV.That on September 12, 2013, the Regulator General, through official communication 707-RG-2013, appointed the "Autonomous Ad Hoc Commission that will be responsible for the review and, if necessary, rethinking and/or modification of the Methodology for setting prices for aqueduct services (established in their production, conveyance, and distribution stages), sewerage (established in their production, conveyance 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 irrigation in agriculture and for fish farming)."

XVI.That on September 29, 2014, the resolution of the Board of Directors of Aresep, RJD-101-2014, was published in La Gaceta Nº 186, Digital Supplement N° 50, through which the technical regulation: "Provision of Aqueduct, Sanitary Sewerage, and Hydrant Services, AR-PSAYA-2013" was approved. Reformed by the Board of Directors, through resolution N° RJD-053-2016, published in La Gaceta N° 69, Supplement N° 55.

XVII.That on February 26, 2015, the referred Ad Hoc Commission, through official communication 007-CMTA-2015, sent to the Board of Directors of Aresep the proposal for "Tariff model for the services of aqueducts, sewerage and hydrants and the program for the protection of water resources." (file OT-80-2015).

XVIII.That on March 16, 2015, the Board of Directors, through agreement 01-11-2015 of the minutes of extraordinary session 11-2015, ordered that the proposal for "Tariff model for the services of aqueducts, sewerage and hydrants and the program for the Protection of Water Resources" be submitted to the public hearing process; the same was held on May 4, 2015. (File OT-80-2015).

XIX.That on September 11, 2015, the referred Ad Hoc Commission, through official communication 11-CMTA-2015, sent to the Board of Directors the "Tariff model for the services of aqueducts, sewerage and hydrants and the program for the Protection of Water Resources." (folio 2).

XX.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 subsequently, through agreement 06-46-2015, resolved to submit the "Tariff model for the services of aqueducts, sewerage and hydrants and the program for the Protection of Water Resources" to the public hearing procedure. The foregoing, based on the official communications of the Ad Hoc Commission 011-CMTA-2015 and 009-CMTA-2015. (folio 1) (File OT-193-2015).

XXI.That on October 7, 2015, the call for public hearing was published in the official newspaper La Gaceta N° 195; and in the newspapers La Teja and La Extra, on October 8, 2015. (folios 165 to 166 and 280).

XXII. That on November 5, 2015, the public hearing was held as recorded in Minutes N° 98-2015, (folios 348 to 358)

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

XXIV.That on May 12, 2016, the Board of Directors, through agreement 03-27-2016, taken in session 27 of 2016, ordered the modification of agreement 05-26-2016 and to accept the appeal for review filed by Ms. Adriana Garrido, establishing to continue with the analysis of the proposal until the General Directorate for the Development of Regulation (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. Through official communication 425-SJD-2016 of June 2, 2016, agreement 05-26-2016 was communicated to the CDR.

XXV.That on November 24, 2017, the CDR, through official communication 349-CDR-2017, sent to the Board of Directors a proposal for "Tariff methodology for the services of aqueduct, sewerage and hydrants."

XXVI.That on March 7, 2018, the Director General of the CDR, through official communication 110-CDR-2018, sent to the Regulator General the proposed regulatory instrument "Tariff methodology for the services of aqueduct, sewerage and hydrants" based on the foundation constituted by official communication 349-CDR-2017 and taking into account the recommendations of the Office of the Regulator.

XXVII.That on March 12, 2018, the Regulator General, through official communication 215-RG-2018, sent to the Board of Directors the proposal "Tariff methodology for the services of aqueduct, sewerage and hydrants."

XXVIII.That on April 24, 2018, the Board of Directors of Aresep reviewed the proposal "Tariff methodology for the services of aqueduct, sewerage and hydrants" and through Agreement 10-26-2018, taken in ordinary session N° 26-2018, requested the CDR to incorporate the observations raised on that occasion by the members of the Board of Directors into the proposal for the Regulatory Instrument for tariff settings of the Aqueduct, Sewerage, and Hydrants service, sent through official communications 215-RG-2018 of March 12, 2018 and 110-CDR-2018 of March 7, 2018, and that the adjusted version be submitted for review at a future session, for the relevant purposes.

XXIX.That on June 14, 2018, the Board of Directors, through Agreement 05-36-2018, taken in ordinary session Nº 36, ordered that the proposal for "Tariff methodology for the services of aqueduct, sewerage and hydrants" be submitted to the public hearing process, based on what was indicated by the working group for the elaboration of the tariff methodology for the services of aqueduct, sewerage and hydrants in official communication 110-CDR-2018 and the modifications analyzed in ordinary session 26-2018 of April 24, 2018 and ordinary session 36-2018 of May 29, 2018.

XXX.That on July 6, 2018, the CDR, through official communication OF-0290-CDR-2018, requested the General Directorate of User Services (DGAU) to proceed to hold the respective public hearing (File OT-343-2015. Folios 89 to 91).

XXXI.That on July 18, 2018, the call for public hearing was published in the official newspaper La Gaceta N° 195; and on July 17, 2018 in the newspapers La Teja and Diario Extra, (folios 97 to 101).

XXXII.That on July 26, 2018, the CDR held an explanatory session on the proposal for "Tariff methodology for the services of aqueduct, sewerage and hydrant (MTAAH)", prior to the public hearing, open to the public, in order to clarify any doubts about the proposal.

XXXIII.That on August 16, 2018, the public hearing was held in the Auditorium of the Regulatory Authority of Public Services, located in Guachipelín de Escazú, San José, Oficentro Multipark, Turrubares building, and via videoconference system in the buildings of the Courts of Justice of: Limón, Heredia, Ciudad Quesada, Liberia, Puntarenas, Pérez Zeledón, and Cartago.

XXXIV.That on August 22, 2018, the DGAU, through official communication AC-0028-2018, issued Minutes N° 38-2018, corresponding to the cited public hearing.

XXXV.That on August 22, 2018, the DGAU, through official communication IN-0011-DGAU-2018, sent the Report of oppositions and support briefs, corresponding to the cited proposal for tariff methodology, which indicated that 4 positions were received from: The Office of the Ombudsman (Defensoría de los Habitantes), legal entity identification number 3-007-137653, the User Counselor (Consejero del Usuario), represented by Mr. Jorge Sanarrucia Aragón, identification number 5-0302-0917, the Costa Rican Institute of Aqueducts and Sewerage (Instituto Costarricense de Acueductos y Alcantarillados, AyA), legal entity identification number 4-000-042138, and Roberto Lacayo Bonilla, identity card number 6-0224-0595.

XXXVI.That on February 14, 2019, the CDR, through official communication OF-0047-CDR-2019, sent to the Board of Directors the analysis report of positions on the proposed regulatory instrument called "Tariff methodology for the services of aqueduct, sewerage and hydrant (MTAAH)", and the final report of the "Tariff methodology for the services of aqueduct, sewerage and hydrant (MTAAH)", which recommends to the Board of Directors the respective approval.

XXXVII. That the useful and necessary steps have been taken for the issuance of this resolution

I. That it is necessary to issue the "Tariff methodology for the services of aqueduct, sewerage and hydrant (MTAAH)."

II.That continuous regulatory improvement demands research, development, and innovation in regulation and the refinement of regulatory instruments and current regulations.

III.That the Board of Directors, in ordinary session 36-2018, took agreement 05-36-2018, in which it ordered that the proposal for "Tariff methodology for the services of aqueduct, sewerage and hydrants" be submitted to the public hearing process.

IV.That based on the whereas and considering clauses that precede, the "Tariff methodology for the services of aqueduct, sewerage and hydrants" was submitted to the public hearing procedure provided for in Article 36 of Law N° 7593.

V.That regarding the oppositions and support briefs presented at the respective public hearing, the response is official communication OF-0047-CDR-2019 of February 14, 2019.

VI.That from the document accompanying official communication OF-0047-CDR-2019 of February 14, 2019, and what was discussed in ordinary session 14-2019 held on March 12, 2019, it is appropriate to extract the following:

1. JUSTIFICATION Water services are vital for the general well-being of society and strategic for national development. The access to water services constitutes a right protected by different normative bodies and is a national priority. This section summarizes elements that allow dimensioning the importance of water services, the problems they face, and the regulatory challenges they pose.

The relative participation of regulated public services within the national GDP -at constant 1991 prices-, has increased from 11.4% in the five-year period 1993/1997 to 16.5% in the five-year period 2008/2012. In the 1993/2012 period, water and sanitation services have represented 0.3% of the national GDP. In 2013, households consumed 78.4% of the m3 billed by AyA and the 77.5% of those billed by ESPH, S.A.

The supply of potable water is an essential input for household tasks, on which the well-being of its members substantially depends. Activities such as food preparation, personal hygiene, laundry, cleaning, childcare, and care for elderly, sick, or disabled persons, are essential for the common good of the members of the family nucleus.

The availability of public services in general, and access to potable water in particular, substantially improves the productivity and well-being of families, by enabling the production of essential domestic services. Therefore, it is essential to facilitate universal access to such services by households.

Water is also a key input for the development of productive activities. In 2013, this sector consumed 17.6% of the water billed by AyA and 19.6% of that billed by ESPH, S.A., although they represent, respectively, 7.7% and 8.4% of total subscribers.

The Institutional Strategic Plan of Aresep (Plan Estratégico Institucional, PEI) for the 2017 to 2022 period establishes:

Define regulatory instruments with factual support, sensitivity analysis, scenarios, and international comparisons that promote efficiency and innovation in the provision of public services.

Ensure compliance with the provision of public services at cost, incorporating criteria of quality, costs, social equity, environmental sustainability, and productivity incentives that ensure the development and sustainability of the activities.

Therefore, this proposal is aimed at addressing what is established in the PEI, through the regulatory instrument proposed for the application of tariff settings in the water sector.

Water losses -sometimes called non-revenue water-, are composed of non-billed consumption (commercial losses) and physical losses in the infrastructure. Together, physical losses and commercial losses constitute one of the most important challenges for the management of potable water services.

It is important to point out the sustained increase in labor costs in recent years, increases that reflect a change in factor intensity. In a network infrastructure industry, such as that of aqueduct and sewerage services, an intensive investment in capital would be expected, representing a higher cost in the utilization of capital, compared to the labor costs utilized; however, the data show a capital-to-labor ratio (K/L) that has decreased in recent years; for example, for AyA, the relationship of capital cost with respect to labor cost has gone from 1.14 in 2005 to 0.48 in 2015.

The ratio of liabilities to total assets as of December 2013, was close to 10% for AyA and 29% for ESPH, S.A. This indicates that there is room for a planned and prudent use of financial leverage, in order to accelerate the investment process and avoid disproportionate increases in short-term tariffs. Leverage is also a tool to promote greater intergenerational equity, avoiding, as far as possible, that the tariffs of current generations unnecessarily subsidize the following ones.

The process of planning and executing investments has proven insufficient to cover the country's needs, so it is necessary to progressively close the gap caused by the investment backlog, both in rehabilitation or replacement of systems with advanced useful life, systems to respond to the needs of adequate service and levels similar to those observed in efficient international operators.

The efficient and effective execution of the Hydrant Program (Programa de Hidrantes, PHI) is essential to provide water in a timely and sufficient manner at the locations designated by the Benemérito Cuerpo de Bomberos de Costa Rica, thus contributing to the protection of the life and property of citizens. The estimation of the resources to execute the PHI must originate from a formal planning process based on the binding requirements of said body.

This process must be duly documented, approved by the operator, and must be timely informed to Aresep. The Regulatory Authority will grant, through the tariff, the priority and essential resources to cover the actions of operation, investment, and financing of this program, according to the applicable legal framework.

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

From the relationship between Articles 21 and 50 of the Constitution derives the right to access to water for all human beings to cover their vital needs and guarantee the right to life and to health, in a healthy environment. The consideration of water as a fundamental right was established by the Constitutional Chamber (Sala Constitucional) in its jurisprudence, doctrine that is gathered in resolution N°2014-12887, at 14:30 hours on August 8, 2014:

"The jurisprudence of the Chamber clearly recognizes the right to water as a fundamental right, such that together 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 current provision and the future sustainability of the service, avoiding that the current utilization of the resource produces an environmental risk that compromises the future existence and provision of the liquid. The Chamber has had the opportunity to pronounce itself in a forceful and detailed manner on the protection that must be granted to the national water resource, clarifying both the normative protection framework and the institutions that make up the water sector, recognizing and specifying the scope of competencies of said instances 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 Chamber, N° 2017-1591 at 9:25 hours on February 3, 2017, condenses those fundamental notes of its nature - as a right and public service - in the following terms:

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

"This Tribunal has recognized as part of Constitutional Law, the fundamental right to potable water, derived from the rights to health, life, a healthy environment, food, and decent housing, among others. In this same sense, international instruments on Human Rights applicable in Costa Rica have pronounced themselves; 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); in addition, it is enunciated in the International Conference on Population and Development in Cairo (principle 2). In the Inter-American System of Human Rights, 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, in what is relevant: "Article 11. Right to a healthy environment 1. Everyone has 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 of Protection of Human Rights, the Committee on Economic, Cultural and Social Rights of the United Nations Organization reiterated that the provision of water is a human right that, in addition to being essential for leading a healthy life, is a requirement for the realization of all other human rights. Based on this regulation, it is clear that the Costa Rican State is obligated to guarantee a potable water service in an efficient and timely manner. The Political Constitution itself implicitly collects the fundamental right of the administered to the good and efficient functioning of public services, that is, that they be provided with high standards of quality." (Judgment Nº 2000-04595 at 09:06 hours on June 2, 2000; in the 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 N°2017-1163 at 9:40 hours on January 27, 2017.

In that same sense, Article 1, subsection 1) through decree N° 30480-MINA "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," human right and must be constitutionally guaranteed." b. 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 inhabitants of the country, organizing and stimulating production and the most adequate distribution of wealth." (Articles 46 and 50 of the Political Constitution of Costa Rica).

Likewise, the General Law of Public Administration, N° 6227, a law that is of public order, whose norms and principles are criteria for interpreting the entire administrative legal order 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 it satisfies, and equality in the treatment of recipients, users, or beneficiaries." c. General regulatory powers.

b)Seek the balance between the needs of users and the interests of 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 service at cost]. 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 the State entities competent in environmental protection, when it concerns the provision of regulated services or the granting of concessions. f) Exercise, as provided in this law, the regulation of the public services defined therein." The Technical Regulation: "Provision of Aqueduct, Sanitary Sewer, and Hydrant Services (AR-PSAyA-2013)", Regulation 54-1, issued by the Autoridad Reguladora de los Servicios Públicos, in force since March 30, 2015, regulates the conditions for the provision of aqueduct, sanitary sewer, and hydrant services and the relationships between providers regulated by Aresep and the subscribers of these services; establishing the necessary regulatory measures so that these public services are provided optimally. Said regulation is applicable nationwide, for the providers of aqueduct, sanitary sewer, and hydrant services regulated by the Autoridad Reguladora de los Servicios Públicos.

d. Setting of prices and rates.

Along the same lines, Article 6 subsection d) of Law 7593 establishes as an obligation of the Autoridad Reguladora "(.) to set the rates and prices in accordance with technical studies", Likewise, Article 29 of Law 7593, provides regarding the procedures for rates and prices of public services, that "(.) the Autoridad Reguladora shall formulate and promulgate the definitions, requirements, and conditions to which the procedures for rates and prices of public services shall be subject. (.)".

e. Service at cost and financial equilibrium of the operator.

f. 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 Autoridad Reguladora must follow to set the rates for public services are derived. The cited Article 31 expressly provides for the need to urgently address issues such as "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 rates for public services. In that sense, the factors that must be considered in rate setting 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 repeatedly referred 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 hours on June 24, 2011).

g. Investment process.

The Sectoral Regulation for the Regulation of Aqueduct and Sanitary Sewer Services, approved by Decreto Ejecutivo Nº 30413-MP-MINAES-MEIC, establishes in its Article 8 that "The expansion and improvements of the service. For rate purposes, the service providers must prepare and submit to the Autoridad Reguladora a Programa de Mejora y Expansión Continua del Servicio (PMES) for each service they provide, containing in detail the concrete goals or objectives for the first 5 years... Its general objective shall be to achieve and maintain the expansion (performance) goals and the service levels established by the Autoridad Reguladora.".

The Plan Nacional de Desarrollo y de Inversión Pública (PNDIP)(*) points out as one of the problems requiring urgent attention, the construction of public infrastructure to "stimulate economic growth, establish social benefits, and promote the rational use of natural resources" (Chap. 2 and 7, PND).

(*)(Note by Sinalevi: Its denomination thus modified by subsection a) of Article 43 of the Regulation for the Implementation of Law N°10441 of March 13, 2024 and the Functioning of the Sistema Nacional de Inversión Pública, approved by decreto ejecutivo N° 45163 of August 8, 2025. Previously it stated "Plan Nacional de Desarrollo (PND)") Additionally, the Plan Nacional de Gestión del Riesgo (PNGR) for the 2016-2020 period, prepared based on the Política Nacional de Gestión del Riesgo contained in Law 8488, Ley Nacional de Emergencias y Prevención de Riesgos, according to Axis 4 of Sustainable Financial Investment, Infrastructure, and Services, dictates that the disaster risk variable be included in the rate 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.

h. 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 Law 7593). Art. 12 indicates that "Rate differences established for reasons of social order shall not constitute discrimination." For its part, the Ley Constitutiva del AyA N° 2726 promulgates in its Art. 4 that "For rate setting, criteria of social-distributive justice shall be applied, which take into account the social strata and the zone to which the subscribers belong, so that those with greater payment capacity subsidize those with lesser capacity." On the other hand, the Autoridad Reguladora must follow sectoral guidelines, issued by the Poder Ejecutivo, according to Article 1 of Law 7593, which indicates: "the Autoridad Reguladora shall not be subject to the guidelines of the Poder Ejecutivo 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 Poder Ejecutivo".

i. Hydrants.

Law N° 8641 "Declaratoria del servicio de hidrantes como servicio público y reforma de leyes conexas", provides in its Article 1, "The installation, development, operation, and maintenance of hydrants is declared a public service". In that same sense, it establishes, in its Art. 2, that "The development of the hydrant network, its installation, operation, and maintenance, shall be the responsibility of the operators of the potable water distribution systems, public or private, according to the concessioned area." Art. 3 of this law indicates that "The development of the hydrant network, its installation, operation, and maintenance must have adequate rates, for which the Autoridad Reguladora de los Servicios Públicos shall establish the amount of the rate for the development of that activity.".

In that same line, the "Reglamento a la Ley de Declaratoria del Servicio de Hidrantes como Servicio Público y Reforma de Leyes Conexas", Decreto Ejecutivo Nº 35206-MPMINAE, establishes in its Article 3, "Rates. The development of the hydrant network, its installation, operation, and maintenance must have adequate rates, for which the Autoridad Reguladora de los Servicios Públicos or the Contraloría General de la República, depending on whether it is the operating and managing entity of the public or private aqueduct system, shall establish the amount of the rate for the development of that activity, which shall be included in the price structure that that entity charges its clients.". Likewise, Decreto Ejecutivo Nº 35206-MP-MINAE provides in its numeral 23, the following: "Provisional rate setting ex officio. The Autoridad Reguladora de los Servicios Públicos or the Contraloría General de la República, depending on whether it is the operating and managing entity of the public or private aqueduct system, shall set ex officio within a period of 3 months, for the managing entities or operators of the aqueduct systems, a provisional rate to finance the installation, development, operation, and maintenance of the hydrants; while the operating entities carry out a diagnosis and prepare a program for the implementation of the law." j. Quality.

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

Every provider must provide the service on a mandatory basis and in conditions that ensure its quality, quantity, continuity, reliability, optimal provision, and equality; in a manner that guarantees its efficient provision to users in conciliation with the environment. To that end, this Sectoral Regulation adopts a technical regulation scheme based on the fulfillment of goals and objectives referring to: a) The quality of service supply, and b) The expansion and continuous improvement of the service." Art. 5, 6, 7, and 8 of this regulation establish rules related to goals, parameters, and quality indicators in the services.

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

In the same sense, the "Reglamento para la calidad del Agua Potable", Decreto Ejecutivo N° 38924-S, establishes in its articles 1, 2, and 3, the maximum permissible limits for physical, chemical, and microbiological parameters for potable water, in order to guarantee its innocuousness and the health of the population, as well as its scope of application.

Based on the regulations set forth, it is concluded that Aresep has the necessary powers to apply the regulatory instruments proposed in this methodology.

(.)"

VII.That based on the recitals and considerandos that precede, it is appropriate to: 1- Issue the "Metodología tarifaria para los servicios de acueducto, alcantarillado e hidrantes (MTAAH)" contained in official communication OF-0047-CDR-2019.

VIII.That in the ordinary session 14-2019 held on March 12, 2019, the Junta Directiva, based on official communication OF-047-CDR-2019, agrees with the character of firm, to issue this resolution, as provided.

Based on the powers conferred in the Ley de la Autoridad Reguladora de los Servicios Públicos, Law N° 7593 and its reforms, in the Ley General de la Administración Pública N° 6227, in the Reglamento a la Ley Reguladora de los Servicios Públicos, Decreto Ejecutivo N° 29732-MP, and in the Reglamento Interno de Organización y Funciones de la Autoridad Reguladora de los Servicios Públicos y su Órgano Desconcentrado.

THE JUNTA DIRECTIVA OF THE AUTORIDAD REGULADORA DE LOS SERVICIOS PÚBLICOS

I.To issue the "Metodología tarifaria para los servicios de acueducto, alcantarillado e hidrantes (MTAAH)" contained in official communication OF-0047-CDR-2019, as detailed below.

"(.)

5. TARIFF METHODOLOGY FOR AQUEDUCT, SEWER, AND HYDRANT SERVICES (MTAAH) 5.1. OBJECTIVES General objective:

To establish a tariff instrument that formalizes and allows for the improvement of the regulation of the water sector.

Specific objectives:

a. To systematize and formalize the set of methods to carry out ordinary rate settings, corresponding to aqueduct, sewer, and hydrant services, in a detailed, rigorous, and clear manner.

b. To introduce improvements and updates to the ordinary rate setting procedure, that incentivize solving the main problems identified in the sector.

c. To obtain the percentage adjustment required to compensate for the change in costs and in demand and, therefore, in total costs and investments for the period during which the new rate setting will be in effect.

5.2. SCOPE The general methodology has the following scope:

a. It applies to all ordinary rate settings for the services of: (i) aqueduct, (ii) sewer, and (iii) hydrants.

b. It applies to extraordinary rate settings for the updating of the Regulatory Canon through extraordinary procedures. In this case, only the respective section applies.

c. It applies to operators that provide aqueduct, sewer, and hydrant services, except Asociaciones Administradoras de Sistemas de Acueducto y Alcantarillado Comunales (Asadas) and municipalities.

5.3. GENERAL MODEL This tariff model delimits and specifies how to determine the percentage adjustment of annual rates in ordinary settings for the services of i) aqueduct, ii) sewer, and iii) hydrants; and in extraordinary rate settings for modification of the regulatory canon. Rates are established for a period of five years with an annual review in accordance with the provisions of the Ley de la Aresep. To determine the annual rates, the calculation of the following components is required: a) total costs and expenses, b) rédito para el desarrollo (revenue for development), c) tariff base, d) total revenues, e) volume of water to be billed, f) demand estimation.

Pursuant to Article 30 of Law 7593, operators must submit, at least once a year, an application for an ordinary study; likewise, the Autoridad Reguladora may carry out such studies ex officio in accordance with the provisions of this Law. In both cases, individual rates must be established for a period of five years with an annual review in accordance with the provisions of the Ley de la Aresep.

In setting the rates for each of the aqueduct, sewer, and hydrant services, this methodology guarantees to the operators of the regulated public service, that total revenues must be sufficient to cover the total costs necessary and associated with the regulated service, plus an amount called rédito para el desarrollo (revenue for development) and the resources necessary to cover the regulatory canon.

This methodology defines the required tariff percentage adjustment to compensate for the change in costs, in demand, and to grant the determined rédito, for the period during which the rate will be in effect. Subsequently, this adjustment will be distributed in accordance with what the IA technically determines for the different rates and blocks in accordance with the tariff structure. Therefore, the tariff structure is not established in the methodology.

To perform the necessary calculations to set the rate, information from the Regulatory Accounting must be used. While Regulatory Accounting is being implemented according to the deadlines and regulations established by Aresep, information from the Audited Financial Statements may be used.

The application of the model requires the calculation, review, debugging, and adjustment of engineering, economic, statistical, and accounting information for the initial "base" period "t-1", that is "t=0", considered in this methodology and for which real or observed values are available at the end of the calendar year prior to the first year of the study2.

2 With the exception of tariff studies that begin in the first months of the calendar year and where the real observed data as of December is not yet available, in which case the projection thereof by the Intendencia de Agua will be used, according to Article 16 of the Ley General de la Administración Pública and must incorporate the criteria used in the setting study.

The length or extension of the time series, required for the variables of the base period "t-1", are determined exogenously, so that all variables use an adequate extension for the calculation of averages or projections. Therefore, for each variable it will be defined according to the information requirements defined in each case throughout this methodology.

The base period provides the input information for the estimates and projections required for period "t" (for t=1, 2, 3, 4, and 5) corresponding to each of the 5 years where the rate will be set and is defined as the period of time for which the tariff adjustment is calculated; it begins with the calendar year "t=1" immediately following the base year "t-1".

In addition, it must be indicated that the period of validity of the rate does not necessarily have to coincide with period "t" for which the tariff adjustment is calculated; therefore, the Intendencia de Agua must determine the period of validity of these rates, according to Article 16 of the Ley General de la Administración Pública and must incorporate the criteria used in the setting study.

5.3.1. Total operating and maintenance costs and expenses (COMAiet) These are operating costs and expenses to provide service "i", of company "e" for period "t". The calculation of total costs and expenses includes the components detailed in the following formula:

Where:

COMAiet = Total operating and maintenance costs and expenses incurred by the operators to provide service or activity "i", of company "e", for period "t". These costs and expenses are composed of remuneration expenses, service costs, depreciation costs, material and supply costs, regulatory canon Aresep, and other indispensable expenses that guarantee the operator of the service the sustainability, continuity, and quality of the regulated service.

GREMiet = Remuneration expenses incurred by the operators to provide service or activity "i", of company "e", for period "t". It corresponds to the expenses incurred by the company for wages and salaries, social security contributions, and legal benefits; both operating, and administrative and commercial, necessary for the adequate development of the activity, and any other expense of this nature that is established in the Regulatory Accounting.

This expense must be projected, for which the base data starts from the last datum of period "t-1", coming from the Regulatory Accounting and is projected; based on the expected annual inflation, from the Programa Macroeconómico of the Banco Central de Costa Rica, to obtain the data for the next 5 years, finally, new justified and IA-approved additions are included.

CSERiet = Service costs incurred by the operators to provide service or activity "i", of company "e", for period "t". They correspond to operating and maintenance service costs, and administrative service costs; both concepts for: rents and rights over property, basic services, commercial services, management and support services, travel and transportation services, insurance, reinsurance and obligations, training and protocol services, maintenance and repair services, and other services. Additionally, contracted operating and maintenance services and electricity are included. And commercial services for reading, billing, collection, and customer service (both services, such as electricity and contracted services), as well as any other expense of this nature that is established in the Regulatory Accounting.

This cost must be projected, for which the base data is obtained from the analysis of behavior and historical trend over the last 5 years, according to the information validated by Aresep coming from the Regulatory Accounting and complementary information to this, that Aresep establishes, and is projected; based on the expected annual inflation, from the Programa Macroeconómico of the Banco Central de Costa Rica, to obtain the data for the next 5 years, finally, new justified and IA-approved additions are included. For the first years in which Regulatory Accounting is implemented, the historical data must be complemented with the Audited Financial Statements.

DEPiet = Depreciation cost of assets to provide service or activity "i", of company "e", for period "t". This expense also includes the depreciation of asset revaluation.

Asset depreciation tables determined by Aresep will be used, and may be based on equivalent tables from the Ministry of Finance, technical specifications from the manufacturer of the asset or similar assets internationally; regarding useful life, salvage value, and depreciation method. The information comes from the Regulatory Accounting and complementary information to this, that Aresep establishes.

This cost must be projected, for which the weighted depreciation rate will be used, constructed from the percentage composition of the depreciation, respective of the different assets. For revalued depreciation, the Composite Asset Revaluation Index is used (see formula 13).

CMSiet = Cost of materials and supplies to provide service or activity "i", of company "e", for period "t". This cost includes costs of materials and supplies, fuels and lubricants, and materials used, both operating, as well as administrative and commercial, necessary for the adequate development of the activity. Also included are the product quality costs corresponding to materials and supplies, as well as any other cost of this nature that is established in the Regulatory Accounting.

This cost must be projected, for which an analysis of behavior and historical trend over the last 5 years must be performed, according to the information validated by Aresep coming from the Regulatory Accounting and complementary information to this, that Aresep establishes. For the first years in which Regulatory Accounting is implemented, the historical data must be complemented with the Audited Financial Statements.

CAiet = Total regulatory canon of the operator of service or activity "i", of company "e", for period "t" that it pays to Aresep. The procedure for calculating the canon corresponding to each operator is determined as indicated in the "Methodology for distributing the canon (authorized by the Contraloría General de la República (CGR)) by activity among regulated companies" or the document that updates or replaces it.

OGiet = Other costs or expenses incurred by the operators, necessary to provide service or activity "i", of company "e", for period "t". It includes any cost associated with the provision of the service that is not included in the accounts described above in the variables of this formula.

i = Regulated service (aqueduct, sewer, and hydrants).

e = Company providing services regulated by Aresep.

t = Period "t" takes values for t=1, 2, 3, 4, and 5 corresponding to the period of time for which the tariff adjustment is calculated, it begins with calendar year "t=1", immediately following the base calendar year "t-1". It typically corresponds to a 5-year period.

The operator must deliver to Aresep no later than May 30 of each year, the information from the regulatory accounting and the Audited Financial Statements corresponding to the fiscal period of the immediately preceding year; through an electronic version detailing the procedure followed by the operator.

Aresep will review and validate the justification presented by the operator for each of the costs and expenses, as well as the projections and the historical analysis of each of the items included, and may establish amounts different from those proposed by the operator.

5.3.2. Rédito para el desarrollo (revenue for development) (RDiet) The rédito para el desarrollo (revenue for development) is calculated by applying the rédito for development rate to the tariff base, with the objective of providing the operator with resources that allow for a competitive return and guarantee the adequate development of the activity.

The rédito para el desarrollo (revenue for development) is calculated as follows:

Where:

RDiet = Rédito para el desarrollo (revenue for development) of service or activity "i", of company "e", for period t.

TRiet = Rédito for development rate of service or activity "i", of company "e", for period "t". It is obtained through the application of the Weighted Average Cost of Capital (WACC). The procedure for obtaining this rate is detailed in Equation 3.

BTiet = Tariff base of service or activity "i", of company "e", for period t. The tariff base is composed of the total value of the average revalued net fixed assets in operation (AFNORP). The procedure for obtaining the tariff base is detailed in Equation 6.

i = Regulated service (aqueduct, sewer, and hydrants).

e = Company providing services regulated by Aresep.

5.3.2.1. Rédito for development rate The calculation of the rédito for development rate is performed through the application of the Weighted Average Cost of Capital (WACC) as shown in the following algebraic expression:

Where:

TRiet = Rédito for development rate of service or activity "i", of company "e", for period "t".

rd = Financed capital rate. It is the cost of indebtedness of service or activity "i", of company "e", for period "t". It is an average interest rate. It is calculated by obtaining the weighted average of the sum of financial expenses for interest payments divided by total debt. These financial expenses are the product of obligations formalized through official documents, payable subscribed with financial entities. This data is obtained from the Regulatory Accounting reported by the operator and validated by Aresep.

m = Tax rate. It is assumed equal to zero (0), according to agreement 15-149-99 of the Junta Directiva of the Autoridad Reguladora (minutes of Session 149-99 of August 19, 1999) or whatever the Junta Directiva disposes at the time.

kp = Own capital rate. It is the cost of own capital contributions. For the calculation of this variable, the Capital Asset Pricing Model (CAPM) is used, see the procedure for obtaining this cost as detailed in Equation 4.

Diet = Value of the debt of service or activity "i", of company "e", for period "t". Only obligations with financial cost of service "i" are considered. This data is obtained from the Regulatory Accounting and complementary information to this, that Aresep establishes.

Kiet = Value of the company's capital corresponding to own resources or equity of service or activity "i", of company "e", for period "t". This data is obtained from the Regulatory Accounting and complementary information to this, that Aresep establishes.

Aiet = Defined as the sum of the debt and equity (Diet + Kiet) of service or activity "i", of company "e", for period "t. This data is obtained from the Regulatory Accounting and complementary information to this, that Aresep establishes.

Diet/Aiet = Percentage of the company's capital financed by debt for the service or activity "i", of the company "e", for the period "t". Only obligations with a financial cost for the service "i" are considered.

Kiet/Aiet = Percentage of the company's capital corresponding to equity for the service or activity "i", of the company "e", for the period "t". The total equity accounting account for the service "i" is considered.

i = Regulated service (acueducto, alcantarillado, hidrantes).

e = Company providing services regulated by Aresep.

t = The period "t" takes values for t=1, 2, 3, 4, and 5 corresponding to the time period for which the tariff adjustment is calculated, beginning with the calendar year "t=1", immediately following the base calendar year "t-1". It typically corresponds to a 5-year period.

Cost of Equity Contributions The CAPM is used to estimate the cost of equity (kp). This model is based on considering that changes in an asset's return are related to the risk associated with it and can be separated into two major components: risk related to the market as a whole (systemic risk) and that derived from specific investments (specific risk).

The information published by Dr. Aswath Damodaran of the University of New York, at the Internet address http://www.stern.nyu.edu/~adamodar, will be used for the CAPM calculation. The CAPM is calculated using the following procedure:

Where:

kp = Equity rate. It is the cost of equity contributions.

Rf = Risk-free rate. This corresponds to an investment alternative that has no risk for the investor. It is calculated as a simple average of the returns denominated "arithmetic average" and "geometric average" of the United States of America Treasury bonds (10-year) for the last 10 years. This data is obtained from Damodaran's website, available at the Internet address http://www.stern.nyu.edu/~adamodar.

βa = Levered beta of the investment. It is the covariance of the return of a specific asset and the market return. It is called "levered" since it has been adjusted to consider that part of the investment is financed with debt. Its calculation is performed as expressed in Equation 5.

Rm = Market risk. It is calculated as a simple average of the returns denominated "arithmetic average" and "geometric average" of the S & P 500 (10-year) of the United States of America for the last 10 years. This data is obtained from Damodaran's website, available at the Internet address http://www.stern.nyu.edu/~adamodar i = Regulated service (acueducto, alcantarillado, hidrantes).

e = Company providing services regulated by Aresep.

The levered beta refers to the part of the investment that is financed with debt and is obtained from the following formula:

Where:

βa = Levered beta of the investment.

βd = Unlevered beta. The most recent corresponding data for the unlevered beta of the sector denominated "Utility (water)" is used, available on the website:

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/Betas.html Diet/Kiet = Relationship between debt and equity. It is calculated by dividing the Value of the debt by the Value of the equity.

m = Tax rate. It is assumed to be zero (0), according to agreement 15-149-99 of the Board of Directors of the Autoridad Reguladora (minutes of Session 149-99 of August 19, 1999) or whatever the Board of Directors stipulates at that time.

i = Regulated service (acueducto, alcantarillado, hidrantes).

e = Company providing services regulated by Aresep.

In the event that Aresep determines it, other sources of information such as Bloomberg, or another similar source, may be used, provided they are reliable and rigorous sources regarding the calculation of the CAPM "kp" or data from the regulated companies.

5.3.2.2. Rate Base (Base Tarifaria) The rate base (base tarifaria) is composed of the average revalued net fixed assets in operation used for the provision of the service, as expressed in the following algebraic expression:

Where:

BTiet = Rate base (base tarifaria) for the service or activity "i", of the company "e", for the period t.

AFNORPiet = Average revalued net fixed assets in operation for the service or activity "i", of the company "e", for the period t. It is obtained as the simple arithmetic mean of a) the revalued net fixed assets in operation as of the month of December of period t-1. This data is obtained from the Regulatory Accounting that operators report to Aresep, and b) the estimated revalued net fixed assets in operation as of the month of December of period t, according to the projection made by the Intendencia. As expressed in Equation 7.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

a. Average revalued net fixed assets in operation The average revalued net fixed assets in operation is composed of obtaining the simple average between the revalued net fixed assets in operation of period t-1 and the estimated revalued net fixed assets in operation for period t, as expressed in the following algebraic expression:

Where:

AFNORPiet = Average revalued net fixed assets in operation for the service or activity "i", of the company "e", for the period t.

AFNORiet-1 = Revalued net fixed assets in operation for the service or activity "i", of the company "e", for the period t-1, as detailed in Equation 8.

AFNORiet = Estimated revalued net fixed assets in operation for the service or activity "i", of the company "e", for the period t, as detailed in Equation 9.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

t-1 = The period "t-1" corresponds to the "base" analysis period considered in the tariff-setting study, which allows, for the first base year (t=0), the use of actual or observed values at the end of the calendar year prior to the study year.

The company has the obligation to value its assets as established by current regulations (International Financial Reporting Standards (NIIF)), it must adequately disclose the form of asset valuation by the operator in the Financial Statements and inform the Intendencia de Agua, as well as proceed to make the book adjustment when applicable.

a.1. Revalued net fixed assets in operation in period t-1 The revalued net fixed assets in operation for period t-1 are calculated as follows:

Where:

AFNORiet-1 = Revalued net fixed assets in operation for the service or activity "i", of the company "e", for the period t-1.

AFCiet-1 = Total fixed assets at cost for the service or activity "i", of the company "e", for the period t-1. The value from the Regulatory Accounting is used. (Available as of December 31 prior to the study and used as the beginning balance of the following year).

AFRiet-1 = Total revalued fixed assets for the service or activity "i", of the company "e", for the period t-1. The value from the Regulatory Accounting is used. (Available as of December 31 prior to the study and used as the beginning balance of the following year).

DACiet-1 = Accumulated depreciation of the asset at cost for the service or activity "i", of the company "e", for the period t-1. The value from the latest Audited or available Financial Statement is used (The value available as of December 31 prior to the study and used as the beginning balance of the following year) or whatever the Intendencia stipulates with the Regulatory Accounting.

DARiet -1 = Accumulated depreciation of the revalued assets for the service or activity "i", of the company "e", for the period t-1. The value from the latest Audited or available Financial Statement is used (The value available as of December 31 prior to the study and used as the beginning balance of the following year) or whatever the Intendencia stipulates with the Regulatory Accounting.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

a.2. Revalued net fixed assets in operation as of the month of December of period t.

To calculate the revalued net fixed assets in operation as of the month of December of period t, proceed as follows:

Where:

AFNORiet = Revalued net fixed assets in operation for the service or activity "i", of the company "e", for the period t.

AFCiet = Total fixed assets at cost for the service or activity "i", of the company "e", for the period t, as detailed in Equation 10 AFRiet = Total revalued fixed assets for the service or activity "i", of the company "e", for the period t, as detailed in Equation 11 DCiet = Accumulated depreciation of the asset at cost, for the service or activity "i", of the company "e", for the period t, as detailed in Equation 16.

DAFRiet = Accumulated depreciation of the revalued assets for the service or activity "i", of the company "e", for the period t, as detailed in Equation 19.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

a.2.1. Fixed assets at cost for period t The fixed assets at cost are calculated as follows:

Where:

AFCiet = Total fixed assets at cost for the service or activity "i", of the company "e", for the period t. This corresponds to the fixed assets at cost in period t, plus additions of fixed assets at cost, less disposals of assets at cost during period t, plus the net total of asset transfers at cost during period t.

AAFCiet = Total additions of fixed assets at cost for the service or activity "i", of the company "e", for the period t. This corresponds to new assets and is calculated based on the operator's report regarding the investment it estimates to make for period t. The value from the Regulatory Accounting is used.

RACiet = Disposals of fixed assets at cost for the service or activity "i", of the company "e", for the period t. This corresponds to the value of the list of assets estimated to be disposed of during period t. The value from the Regulatory Accounting is used.

TACiet = Transfers of fixed assets at cost for the service or activity "i", of the company "e", for the period t. The value from the Regulatory Accounting is used.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

a.2.2. Revalued fixed assets for period t The revalued fixed assets are calculated as follows:

Where:

AFRiet = Total revalued fixed assets for the service or activity "i", of the company "e", for the period "t". This corresponds to the revalued fixed assets of period t-1 (beginning balance of the following year), less disposals of revalued assets during period t, plus the net total of transfers of revalued assets, plus the asset revaluation corresponding to period t.

RARiet = Disposals of revalued fixed assets for the service or activity "i", of the company "e", for the period t. This corresponds to the value of the list of assets estimated to be disposed of during period t. The value from the Regulatory Accounting is used.

TARiet = Transfers of revalued assets for the service or activity "i", of the company "e", for the period t. The value from the Regulatory Accounting is used.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

It typically corresponds to a 5-year period.

Asset Revaluation:

The asset revaluation for period t uses, if available, an appraisal authorized by the Aresep, following the NIIF; otherwise, it uses the revaluation index for the fixed assets from equation 13 and employs the following formula:

Where:

RAiet = Revaluation corresponding to period t, of the assets for the service or activity "i", of the company "e". This corresponds to the estimated revaluation for period t, and if available, an appraisal authorized by the Aresep, following the NIIF, will be used; otherwise, it is calculated with the formula described, using fixed assets at cost for period t-1 and revalued fixed assets for period t-1 less the disposals of assets at cost and revalued assets in period t, plus the net balance of the transfer of assets at cost and revalued assets in period t, all using the asset revaluation index.

IRt = Composite asset revaluation index. The calculation of this index must be performed according to Equation 13 AFCiet-1 = Total fixed assets at cost for the service or activity "i", of the company "e", for the period t-1. The value from the Regulatory Accounting is used. (Available as of December 31 prior to the study and used as the beginning balance of the following year).

TACiet = Transfers of fixed assets at cost for the service or activity "i", of the company "e", for the period t. The value from the Regulatory Accounting is used.

TARiet = Transfers of revalued assets for the service or activity "i", of the company "e", for the period t. The value from the Regulatory Accounting is used.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

Composite Revaluation Index for Assets:

Where:

IRt = Composite asset revaluation index.

IRL = Local asset revaluation index. The calculation of this index must be performed as expressed in the following Equation 14.

IRE = Foreign asset revaluation index. The calculation of this index must be performed as expressed in the following Equation 15.

Local Component Revaluation Index:

The Consumer Price Index (IPC) is used to perform the revaluation of the local component of assets as expressed in the following equation Where:

IRL = Local asset revaluation index.

IPCt-1 = Consumer Price Index (IPC) for Costa Rica for period t-1. This data is taken from the IPC publication released by the INEC.

IPCt = Consumer Price Index (IPC) for Costa Rica for period t. For this data, the inflation expectation published by the Banco Central de Costa Rica in its Macroeconomic Program is considered.

% CLiet = Percentage of the local component of the value of the assets for the service or activity "i", of the company "e", for the period t-1.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

Revaluation Index for Foreign-Origin Assets Where:

IRE = Foreign asset revaluation index.

IPUSAt = Consumer Price Index of the United States of America, for period t. Taken from the information published by the Department "Bureau of Labor Statistics" of the United States of America.

IPUSAt-1 = Consumer Price Index of the United States of America, for period t-1. Taken from the information published by the Department "Bureau of Labor Statistics" of the United States of America.

Tcvt-1 = Average Selling Exchange Rate (CRC/USD) for period t-1. Calculated as the daily arithmetic mean for period t-1 as published by the Banco Central de Costa Rica.

Tcvt = Selling Exchange Rate (CRC/USD). The one-year exchange rate data for period t is used, according to the exchange rate variation expectation data published by the Banco Central de Costa Rica.

%CEiet = Percentage of the foreign component of the value of the assets for the service or activity "i", of the company "e", for the period t-1.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

a.2.3. Estimation of depreciation of assets at cost for period t Where:

DCiet = Depreciation of fixed assets at cost for the service or activity "i", of the company "e", for the period t.

DACiet-1 = Accumulated depreciation of assets at cost for the service or activity "i", of the company "e", for the period t-1. The value from the latest Audited or available Financial Statement is used (The value available as of December 31 prior to the study and used as the beginning balance of the following year) or whatever the Intendencia stipulates with the Regulatory Accounting.

RDCiet = Disposals of depreciated assets at cost for the service or activity "i", of the company "e", during the period t. The asset disposal value estimated by the company and approved by Aresep is used, following the formats of the Regulatory Accounting.

TDCiet = Transfer of assets at cost, for the service or activity "i", of the company "e", during the period t. The estimated value of the asset transfer estimated by the company and approved by Aresep is used, following the formats of the Regulatory Accounting.

Depiet = Depreciation of assets at cost for the service or activity "i", of the company "e", for the period t. See Equation 17.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

Depreciation of Assets at Cost for Period t Where:

Depiet = Depreciation of assets at cost for the service or activity "i", of the company "e", for the period t.

TDACaiet = Depreciation rate for asset "a" at cost for the service or activity "i", of the company "e", for the period t. Equation 18. The depreciation tables previously approved by Aresep are used. These tables must clearly show, for each asset, the depreciation rate, the cost value, and the useful life. The procedure to establish this rate is performed as expressed in Equation 18.

AFCaiet = Value of fixed asset "a" at cost for the service or activity "i", of the company "e" for the period t. This data is obtained from the report that operators must submit to Aresep detailing the list of fixed assets in operation necessary to provide the service, with their respective value, useful life, depreciation rate, and salvage value.

a = Each asset.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

n = Total assets The depreciation rate for each asset "a" at cost is calculated as follows:

Where:

TDACaiet = Depreciation rate for asset "a" at cost for the service or activity "i", of the company "e", for the period "t".

VRACaiet = Salvage value of asset "a" at cost for the service or activity "i", of the company "e". Expressed as a percentage VUaiet = Useful life of asset "a" for the service or activity "i", of the company "e".

a = Each asset.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

a.2.4. Accumulated depreciation of revalued fixed assets for period t:

Where:

DAFRiet = Accumulated depreciation of the revalued fixed assets for the service or activity "i", of the company "e", for the period t.

DARiet-1 = Accumulated depreciation of the revalued fixed assets for the service or activity "i", of the company "e", for the period t-1. The value from the latest Audited or available Financial Statement is used (The value available as of December 31 prior to the study and used as the beginning balance of the following year) or whatever the Intendencia stipulates with the Regulatory Accounting.

RDRiet = Disposal of depreciated revalued assets for the service or activity "i", of the company "e, for the period t.

TDRiet = Transfer of depreciated revalued assets for the service or activity "i", of the company "e, for the period t.

DepRiet = Depreciation of the revalued fixed assets for the service or activity "i", of the company "e" during the period t. See Equation 20.

RevDepiet = Revaluation of the depreciation of the net additions of the revalued fixed assets in period t. See Equation 22.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

Where:

DepRiet = Depreciation of revalued fixed assets for the service or activity "i", of the company "e" during the period t.

TDARaiet = Depreciation rate of the revalued asset "a" for the service or activity "i", of the company "e", for the period t. Equation 21 . The depreciation tables previously approved by Aresep are used. These tables must clearly show, for each asset, the depreciation rate, the cost value, and the useful life.

AFRaiet = Value of revalued fixed asset "a" for the service or activity "i", of the company "e" for the period t. This data is obtained from the report that operators must submit to Aresep detailing the list of fixed assets in operation necessary to provide the service, with their respective value, useful life, depreciation rate, and salvage value. The operator must submit a semi-annual report to Aresep in March (for the period July to December immediately prior) and September of each year; covering the semester in each case.

a = Each asset.

i = Regulated service (acueducto, alcantarillado e hidrantes).

e = Company providing services regulated by Aresep.

n = Total assets The depreciation rate of each revalued asset "a" is calculated as follows:

Where:

TDARaiet = Depreciation rate of the revalued fixed asset "a" of the service or activity "i", of the company "e", for the period "t".

VRARaiet = Salvage value (valor de rescate) of the revalued fixed asset "a" of the service or activity "i", of the company "e". Expressed as a percentage.

VURaiet = Useful life (vida útil) of the revalued fixed asset "a" of the service or activity "i", of the company "e". Expressed as a percentage.

a = Each asset.

i = Regulated service (aqueduct, sewerage, and hydrants).

e = Company providing services regulated by Aresep.

t = The period "t" takes values for t=1, 2, 3, 4, and 5 corresponding to the period for which the tariff adjustment is calculated, beginning with the calendar year "t=1", immediately following the base calendar year "t-1".

Typically, it corresponds to a period of 5 years.

t-1 = The period "t-1" corresponds to the "base" period of analysis considered in the tariff-setting study and which allows, for the first base year (t=0), the use of real or observed values at the end of the calendar year prior to the year of the study.

Calculation of the revaluation of revalued depreciation Where:

RevDepiet = Revaluation of the depreciation of the net additions of revalued fixed assets in period t.

DARiet-1 = Accumulated depreciation of the revalued fixed assets of the service or activity "i", of the company "e", for the period t-1. The value from the latest audited or available Financial Statement is used (the value available as of December 31 prior to the study and used as the opening balance of the following year) or whatever the Intendancy stipulates with the Regulatory Accounting.

IRt = Composite asset revaluation index. See Equation 13.

i = Regulated service (aqueduct, sewerage, and hydrants).

e = Company providing services regulated by Aresep.

5.3.3. Total revenue (ITiet) From the sum of the total costs (COMAiet) and the return for development (rédito para el desarrollo, RDiet) that were determined to satisfy the demand projection for the period "t", that is, the period in which the calculated tariff will be in effect, the total revenue expected by the operator is determined, revenue which is considered necessary to provide the service.

ITiet = Total revenue for the service "i", of the company "e", and for the period "t". It is obtained from the sum of the total operating and maintenance costs and expenses (COMAiet) and the return for development (RDiet).

COMAiet = Total operating and maintenance costs and expenses incurred by the operators to provide the service or activity "i", of the company "e", for the period "t". These costs and expenses consist of remuneration expenses, costs for services, depreciation costs, costs for materials and supplies, the Aresep regulatory levy, and other essential expenses that ensure the operator of the service can guarantee the sustainability, continuity, and quality of the regulated service.

RDiet = Return for development of the service or activity "i", of the company "e", for the period t.

i = Regulated service (aqueduct, sewerage, and hydrants).

e = Company providing services regulated by Aresep.

5.3.3.1. Settlement of the prior period (liquidación del periodo anterior) Once the model described in this methodology has been applied for the first time, in the successive ordinary tariff settings for the aqueduct, sewerage, and hydrant services, all the estimates made for the calculation of the tariff adjustment must be reviewed and updated. This is so that the differences between the estimated values for all the variables considered in the calculation of the tariff adjustment and the real values identified during the period in which the tariff adjustment was in effect are identified.

In determining the tariff adjustment to be applied for the period "t", that is, for the period in which the tariff will come into effect, as described in this methodology, a review and update of the estimates made that determined the tariff for the period "t-1" must be carried out, so that the differences between the estimated values for the variables total expenses (CTiet-1) and total revenue (ITiet-1) and the recorded or observed values, identified during the period in which the tariff adjustment was in effect, are identified.

Thus, Aresep will take into account the deviations that arise in the tariff calculation performed through estimates, with respect to the observed and updated values; if differences arise between what was estimated and what was observed, the difference of each variable is added, affecting revenue by including it as an item called settlement of the prior period.

Likewise, for these purposes, the observed, audited, or available data presented by the operator must be justified and reasonable. These data will be reviewed, analyzed, and refined by the Regulatory Authority, which may establish a monetary value different from the one reported by the operator, for the purpose of determining its recognition. The objectives of Law 7593 must be met.

Where:

Lliet = Settlement of the period t-1. Refers to the difference between the adjusted total costs and the adjusted total revenue, of the service or activity "i", of the company "e" for the period t-1.

CTAiet-1 = Adjusted total costs and expenses. Refers to the adjustment for the differential between real expenses and estimated expenses for CTAiet-1 (Total operating and maintenance costs and expenses incurred by the operators to provide the service or activity "i", of the company "e", for the period "t").

ITAiet-1 = Adjusted total revenue. Refers to the adjustment for the differential between real revenue and estimated revenue of the service or activity "i", of the company "e" for the period t-1.

i = Regulated service (aqueduct, sewerage, and hydrants).

e = Company providing services regulated by Aresep.

a. Cost settlement The real costs and expenses that will be analyzed in said process must be coincident with those that were included in the tariffs of the tariff study for the immediately prior period (t-1).

To perform the cost settlement and determine the corresponding adjustment to be applied in period t, the estimated costs and expenses included in the calculation of the current tariff (period t) by the company "e" when providing the regulated service "i" must be compared with the real costs and expenses obtained by the regulated company in said period, according to the Audited or certified Financial Statements or the information contained in the Regulatory Accounting, as detailed below:

Where:

CRiet-1 = Total costs and expenses observed in the service "i", of the company "e", and for the period "t-1". These are the real expenses for the operation, maintenance, administration, and other expenses incurred by the operators to provide the service in period t-1 (COMAiet-1).

CEiet-1 = Total costs and expenses estimated by Aresep in the tariff setting for operation, maintenance, administration, and other expenses in the service "i", of the company "e", and for the period "t-1". This data must be taken from the tariff setting carried out by Aresep for the period "t-1".

i = Regulated service (aqueduct, sewerage, and hydrants).

e = Company providing services regulated by Aresep.

In the case of those costs and expenses that were not incorporated by the regulated company in its tariff request for period t or were excluded by the Regulatory Body as a result of its regulatory analysis, but that were carried out and executed by the company in the exercise of its functions, the company must provide all the technical information required to validate the relevance and its link to the provision of the public service, and the Regulatory Authority will assess and determine the items and amounts to be recognized in the adjustment.

b. Revenue settlement The total revenue adjustment corresponds to the difference between the observed revenue and the estimated revenue included in the calculation of the tariff for the service "i" of the company "e", for the period t-1, which is obtained as follows:

Where:

ITAiet-1 = Adjusted total revenue. Refers to the adjustment for the differential between real revenue and estimated revenue of the service or activity "i", of the company "e" for the period t-1.

ITRiet-1 = Total revenue observed that the operator received for providing the service or activity "i" of the company "e" and for the period "t-1". This data is taken from the Regulatory Accounting and the operator's reports to Aresep; with real information from the period t-1.

ITEiet-1 = Total revenue estimated by Aresep in the tariff setting for the service "i", of the company "e", and for the period "t-1". This data is taken from the tariff setting carried out by Aresep for the period "t-1".

i = Regulated service (aqueduct, sewerage, and hydrants).

e = Company providing services regulated by Aresep.

Furthermore, the settlements must comply with the analysis of the Regulatory Authority where the additions of assets will be reviewed, as a result between what was executed by the regulated company and what was projected by the Intendancy of Water (IA) in the immediately prior tariff study, and justifications for the variations of each of the amounts (differences) must be provided.

Likewise, technical justifications duly associated with the actual additions and retirements of assets, not recognized by the Intendancy in the tariff adjustment request immediately prior to the period for which the corresponding tariff settlement is being performed, must be provided. For the presentation of the technical information, the companies must use the formats requested by the IA for the tariff study.

5.3.3.2. Cost and monitoring of Investments The Investment Plan must be presented according to the asset classification format established by the Intendancy of Water and classified into micro and macro investments and the corresponding sub-classifications. Additionally, the specific annual amount for each of the proposed investments must be indicated and the consistency of the proposed Investment Plan must be justified with the National Plan for Development and Public Investment (Plan Nacional de Desarrollo y de Inversión Pública, PNDIP)(*), the Program for Continuous Improvement and Expansion of the Service (PMES); and, if relevant, with existing sectoral plans.

(*)(Note by Sinalevi: Its name thus modified by subsection a) of article 43 of the Regulation for the Implementation of Law N°10441 of March 13, 2024, and the Operation of the National System of Public Investment, approved by Decreto Ejecutivo N° 45163 of August 8, 2025. Previously, it stated "National Development Plan (PND)") The investments requested by the service provider must be justified in terms of reasonable technical and financial criteria; in addition, they must demonstrate a positive impact on the quality and continuity of the service, namely:

· The service providers must prepare and submit to the Regulatory Authority a Program for Continuous Improvement and Expansion of the Service (PMES) for each service they provide, containing in detail the specific goals or objectives for the first 5 years and in a global manner for the following two five-year periods. Its general objective will be to achieve and maintain the expansion goals (performance) and the service levels established by the Regulatory Authority, subject to the country's economic policy.

· Expansion works must be justified in relation to demand growth, resulting from evaluations of the causes of quality deficiencies or to comply with the maximization of the degree of coverage (cobertura).

· The goals in expansion and improvements will refer, at least, to the following:

a. Aqueduct and Sewerage Studies and Projects:

ü Master Development Plan.

ü Mathematical modeling of the network.

ü Study of water sources (fuentes) and alternative water sources.

ü Contamination risk of water intakes, storage, and final disposal.

ü Improvement of potable water treatment plants and wastewater treatment plants ü Participate in the protection and conservation of hydrographic basins b. Installation of micro and macro meters c. Expansion of water and sewerage networks d. Renewal of water and sewerage networks e. Rehabilitation of water networks f. Particular works g.

The reasonableness of the prices of each of the included works and the proportionality of the financing plan with respect to the contribution of own resources are also analyzed.

The investment amounts endorsed by Aresep will be the amounts of asset additions used to calculate the net fixed asset. The entirety of the assets recognized in the investments may be added in each year, if the average of the execution percentage is 100%, or according to this percentage, as described below:

a. Determination of additions The quantity of additions is calculated as the proportion of the execution percentage of the investments recognized by Aresep for period t.

In each tariff study, the companies must report the number of works built and equipment installed during the year, in order to determine the annual investment execution percentage. This being the quotient between the executed investments and those recognized by the Intendancy for that year.

For the analysis of additions, Aresep must conduct field visits to the different projects in order to verify amounts, execution, and year of approval.

The proportion of the additions corresponding to the replacement of assets being retired and the proportion for service expansion must be justified and separated in the records.

b. Determination of retirements The companies are obligated to purge the tariff base; for this purpose, they must present in each tariff study the detail of retired assets, classified by replacement, deterioration, obsolescence, transfers, or others.

Retirements must be presented for each group of assets, in the period they were retired or are foreseen to be retired, indicating the values of the asset at cost, revalued, and their respective depreciation (at cost and revalued), as well as indicating whether the retirement originated an accounting loss or gain upon its retirement and its physical location (identification of the asset prior to retirement and justifications and vouchers of the corresponding retirement or disposal, to provide traceability of the assets). This is so that Aresep can carry out the necessary supervision and control over these assets at any time, and if they do not correspond to reality, the operator will be sanctioned both in terms of the effect on the tariff base and with the corresponding fine for the non-compliance, as established in Ley 7593 in its Art. 38.

c. Special considerations in investments i) Displacements of entry into operation and capitalization of projected additions.

Additions of assets recognized by the IA in the tariff study for the period t-1, but whose operational enablement suffered delays and therefore their entry into operation and capitalization will be in another period t.

In this case, the company must update the estimated cost of the projected asset addition and, in the comparative, must indicate the difference between the previously recognized amount and the current value, a difference that must be technically justified for assessment by the Intendancy of Water.

ii)Real cost of an addition (macro-investment) greater than the cost recognized in the tariff study In the comparative format, the company must record the real costs of the addition and the recognized cost, as well as the difference that is intended to be recognized by the Regulatory Body. For this purpose, it must present the technical justifications, a cost breakdown of the projects with the corresponding cost structures, as applicable.
iii)Real cost of an addition (micro-investments) associated with operation and maintenance works and general plant greater than the cost recognized in the tariff study.

In this case, the comparative must record the cost of the system's micro-investments and general plant investments associated with continuous needs recognized as part of the tariff period t-1 and that were executed and operationally enabled in this period, and the real cost greater than the recognized one, as well as the difference. For this, it must present the report with justifications and technical and statistical information that supports the works, assets, or additional elements acquired.

In the case of the accounts or groups of assets, the companies must present the composition of the account, that is, the technical elements that compose it, to determine the reasonableness of those items that record a cost greater than the cost incorporated by the IA in the tariff setting t-1.

iv)Real cost of an addition (macro or micro-investments) associated with operation and maintenance works and general plant less than the cost recognized in the tariff study.

The items of macro or micro-investments of the system and general plant that show under-executions and the corresponding differences must be recorded, in order to perform the settlement of resources not executed in the period in which the tariff was in effect and thereby pass on to the users the revenue granted above their investment costs.

d. Design of incentives for the fulfillment of the investment plan.

The investments approved in period t-1 are recognized in the amount of the Tariff Base and the percentage of the return multiplied by this base.

In the previous subsections, the treatment of unfulfilled investments has been described, as well as their modifications in the Tariff Base of the following period.

Since these resources have already been recognized to the operator in tariffs, the unexecuted investments, once the special provisions have been taken into account, will be as available or missing from the operator, so this difference must be used in the following period.

5.3.3.3. Revenue from sales.

The total revenue expected by the operator is composed of i) revenue from the sale of the service or activity "i" to users (IViet) and ii) revenue from "other income" generated by the operators when providing the service (OTiet).

First, the expected revenue from other income must be estimated, and the difference resulting between the total revenue expected by the operator and the expected revenue from other income corresponds to the total amount of revenue from sales of the service that the operator must receive.

As expressed in the following formula, the total revenue from sales of the service to end users is obtained from the following equation:

Where:

IViet = Revenue from sales of the service or activity "i" to users, of the company "e", for the period t.

ITiet = Total revenue for the service "i", of the company "e", and for the period t. It is obtained from the sum of the total operating and maintenance costs and expenses (COMAiet) and the return for development (RDiet).

OTiet = Other income of the operator of the service or activity "i", of the company "e", for the period t. This income is estimated through a projection for which an analysis of historical behavior and trend must be performed, according to the Audited Financial Statements from the last 5 years, the available Regulatory Accounting, and the operator's reports to Aresep. It includes income from the sale of bulk water, suspension tariff (tarifa de suspensión), connection tariff (tarifa de conexión), suspension and reconnection tariff, public source tariff (tarifa por fuente pública), tariff for illicit or fraudulent connections, and any other income derived from the operation that does not correspond to revenue from sales to end users of the service.

i = Regulated service (aqueduct, sewerage, and hydrants).

e = Company providing services regulated by Aresep.

The absolute total amount of the change required in revenue from sales (ΔIViet) is the difference between the revenue from sales necessary to provide the service (IViet) and the projected annual revenue from sales, based on the tariff structure, the demand estimation, and considering the current tariffs (IVTViet), expressed as follows:

Where:

ΔIViet = Absolute change required in the total revenue from sales to provide the service or activity "i", of the company "e", and corresponding to period t.

IViet = Total revenue from sales of the service or activity "i" to users, of the company "e", for the period t. See Equation 27.

IVTViet = Total projected annual revenue from sales based on the tariff structure, the demand estimation, and considering the current tariffs established during the period "t-1" for the service or activity "i", of the company "e", and for the period "t". This revenue may be estimated and projected considering the procedure established in section 5.3.3.4.

i = Regulated service (aqueduct, sewerage, and hydrants).

e = Company providing services regulated by Aresep.

5.3.3.4. Revenue from sales of the service to users with current tariffs The revenue from sales to users is obtained by adding the results of multiplying the price for each type of tariff, by consumption block (bloque de consumo), by the total estimated volume of water to be billed associated with each type of tariff by consumption block, expressed as follows:

Where:

Pietbs = Price for each type of tariff "s" of the service or activity "i", of the company "e", for the period "t-1", by consumption block "b". The price for each type of tariff, by consumption block, corresponds to the price in colones per cubic meter indicated in the tariff schedule at the time of the tariff study.

Vietbs = Volume of water to be billed in cubic meters (m3) by type of tariff "s", by consumption block "b", of the service or activity "i", of the company "e", for the period "t". The procedure to obtain this volume of water to be billed is detailed in section 5.3.4.

b = Each consumption block k = Number of consumption blocks s = Each type of tariff category according to the tariff structure (for example, currently these are residential, business, government, preferential).

g = Number of existing tariffs according to the tariff schedule.

i = Regulated service (aqueduct, sewerage, and hydrants).

e = Company providing services regulated by Aresep.

5.3.4. Volume of water to be billed The volume of water to be billed is obtained from the demand analysis that considers the estimation, for the period in which the tariff will be in effect, of the number of subscribers by type of tariff in each of its blocks and their associated consumption. Art. 41 of the regulation to Ley 7593 establishes that every tariff-setting request must contain, among other requirements, a market study, which is fundamental for carrying out the demand estimations for each regulated service.

From the point of view of time series analysis, there is a variety of methods and techniques to make inferences or forecasts of variables with a certain future frequency, based on the identification, specification, and estimation of a specific statistical model. Therefore, the method or technique used in the projections must be justified and comply with the statistical and econometric criteria established based on science, technique, and logic; as established by the General Law of Public Administration. The market study that the operator submits to Aresep must indicate the software used, the identification of the prediction model employed, and the results obtained. All the results of the projected variables, regardless of the software, algorithm, and model used, must be presented in a common-use electronic spreadsheet format.

Aresep will review the demand estimates provided by the operator, through the use of the techniques it deems appropriate under the circumstances. As part of the analysis process of the demand estimates, and of the complementary information provided by the operator, Aresep may make the necessary adjustments to the forecasts received, based on applicable technical criteria.

For all services "i", the volume to be billed for the aqueduct service will be used, except for sewerage, which will be adjusted by the actual service coverage percentage (m3 consumed by subscribers who have sewerage service, divided by the total m3 billed by the company).

5.4. DETERMINATION OF THE PERCENTAGE OF ADJUSTMENT IN THE TARIFFS FOR THE PERIOD IN WHICH THE NEW TARIFF SETTING WILL ENTER INTO EFFECT For the determination of the percentage adjustment in the tariffs for the period in which the new tariff setting will enter into effect, the amount of the absolute change required in the total revenue from sales (ΔIViet) must be divided by the total revenue from sales of the service (IViet); consequently, this percentage adjustment in the revenue from sales must be applied to each of the tariffs in the tariff structure.

Where:

%IViet = Percentage adjustment required in the total revenue from sales for the service or activity "i", of the company "e", and corresponding to the period "t".

ΔIViet = Change required in the total revenue of the service or activity "i", of the company "e", and corresponding to the period "t". See Equation 28.

i = Regulated service (aqueduct, sewerage, and hydrants).

e = Company providing services regulated by Aresep.

t = The period "t" takes values for t=1, 2, 3, 4 and 5 corresponding to the period of time for which the tariff adjustment is calculated, beginning with the calendar year "t=1", immediately following the base calendar year "t-1". It typically corresponds to a 5-year period.

This required percentage adjustment must be distributed, in accordance with what is technically determined by the IA, among the different tariffs and blocks so that the revenues required by the operator to provide the service are achieved.

5.5. EXTRAORDINARY UPDATE OF THE REGULATORY LEVY (CANON DE REGULACIÓN) The variable (CAiet) refers to the regulatory and quality levy (canon de regulación) in force for the Aqueduct, Sewerage and Hydrants activity, which is approved by the Comptroller General of the Republic (Contraloría General de la República).

The regulatory levy (canon de regulación) must be adjusted extraordinarily when this variable changes. In doing so, the aim is to comply with the provisions established by the Comptroller General of the Republic (Contraloría General de la República) through official letters 1463 dated February 12, 2010, and DFOEED-0996 dated December 15, 2010. The latter official letter states the following:

"it is the current criterion of this Comptroller General (Contraloría General), that it is the responsibility of that Regulatory Authority (Autoridad Reguladora) to perform the pertinent calculations to adjust the tariffs of public services, adjusting to the provisions of article 30 of the Regulatory Law of Public Services No. 7593 (Ley Reguladora de los Servicios Públicos N°7593), in that it establishes that ordinary tariff setting, when contemplating variations in cost and investment factors, must be carried out ex officio by the Regulatory Authority itself. To comply with the above, that Regulatory Authority must document, formalize and implement the necessary methodologies, whose application will be subject to oversight by this supervisory body, starting from the collection that ARESEP will make of the regulatory levy (canon de regulación) corresponding to the 2012 period." The foregoing means that, as of the indicated year, once the regulatory levy (canon de regulación) is approved by the Comptroller, the prices and tariffs of ordinary public services must be adjusted ex officio. Therefore, for the present methodology, the levy (canon) will be updated extraordinarily each time the Comptroller General of the Republic (Contraloría General de la República) approves its amount and it is published in the official gazette La Gaceta, such that it will be included in the last ordinary tariff setting (fijación ordinaria) in force. This expense is the only one that is updated from the income statements in force, and a new result is thereby obtained.

In the presence of a shadow toll (peaje sombra), that is, where a donation, transfer or subsidy is assigned that adds resources for investment or operation, these will not be accounted for in the tariff and only the maintenance of what is acquired with these resources will be guaranteed.

5.6. TRANSITORY PROVISION FOR THE TREATMENT OF ASSET ADDITIONS Section 5.3.3.2 on "Cost and Monitoring of Investments" establishes the way in which the issue of asset additions will be treated. This is the general form that will be used for the treatment of asset additions in the tariff calculation; with the exception of the case of AyA, as long as resolution RJD-056-2018 is in force, which establishes that the asset addition of AyA will be carried out once the investments have been made.

5.7. ANNEXES

Variable	Description	Calculation	Formula
a	Each asset.
AAFCiet	Total of fixed asset additions at cost for the service or activity "i", of the company "e", for period t.	Corresponds to new assets and is calculated based on the operator's report regarding the investment it estimates to make for period t. The value from Regulatory Accounting (Contabilidad Regulatoria) is used.	10
AFCiet-1	Total of fixed assets at cost for the service or activity "i", of the company "e", for period t-1.	The value from Regulatory Accounting (Contabilidad Regulatoria) is used. (Available as of December 31 prior to the study and used as the initial balance of the following year).	8, 10, 12
AFCaiet	Value of fixed asset "a" at cost for the service or activity "i", of the company "e", for period t.	This data is obtained from the report that operators must submit to ARESEP detailing the list of fixed assets in operation necessary to provide the service, with their respective value, useful life, depreciation rate and salvage value.	17
AFCiet	Total of fixed assets at cost for the service or activity "i", of the company "e", for period t.	Corresponds to the fixed assets at cost at period t, plus the fixed asset additions at cost, less the asset retirements at cost during period t, plus the net total of asset transfers at cost for period t.	9, 10

Variable	Description	Calculation	Formula
AFNORiet-1	Net fixed asset in operation revalued for the service or activity "i", of the company "e", for period t-1.	See equation 8	7, 8
AFNORiet	Net fixed asset in operation revalued for the service or activity "i", of the company "e", for period t.	See equation 9	7, 9
AFNORPiet	Average net fixed asset in operation revalued for the service or activity "i", of the company "e", for period t. Obtained as the simple arithmetic mean of a) the net fixed asset in operation revalued as of December of period t-1.	This data is obtained from the Regulatory Accounting (Contabilidad Regulatoria) that operators report to ARESEP and b) the estimated net fixed asset in operation revalued as of December of period t, according to the projection made by the Intendancy.	6, 7
AFRiet-1	Total of revalued fixed assets for the service or activity "i", of the company "e", for period t-1.	The value from Regulatory Accounting (Contabilidad Regulatoria) is used. (Available as of December 31 prior to the study and used as the initial balance of the following year).	8, 11, 12
AFRaiet	Value of revalued fixed asset "a" for the service or activity "i", of the company "e", for period t.	This data is obtained from the report that operators must submit to ARESEP detailing the list of fixed assets in operation necessary to provide the service, with their respective value, useful life, depreciation rate and salvage value. The operator must submit a semi-annual report to ARESEP in March (period from July to	20

Variable	Description	Calculation	Formula
		December immediately preceding) and September of each year; covering the six-month period in each case.
AFRiet	Total of revalued fixed assets for the service or activity "i", of the company "e", for period "t".	Corresponds to the revalued fixed assets of period t-1 (initial balance of the following year), less the retirements of revalued assets during period t, plus the net total of revalued asset transfers plus the revaluation of assets corresponding to period t.	9, 11, 12
Aiet	Defined as the sum of debt and equity (Diet + Kiet) for the service or activity "i", of the company "e", for period "t".	This data is obtained from the Regulatory Accounting (Contabilidad Regulatoria) and complementary information to it, as established by ARESEP.	3
b	Each consumption block
βa	Levered beta of the investment. It is the co-variance of the profitability of a given asset and the market's profitability. It is called "levered" as it has been adjusted to consider that part of	Its calculation is performed as expressed in Equation 5.	4, 5

Variable	Description	Calculation	Formula
	the investment is financed with debt.
βd	Unleverd beta.	The most recent data corresponding to the unlevered beta of the sector called "Utility (water)" is used, available on the website: http://pages.stern.nyu.edu/ ~adamodar/New_Home_Pa ge/datafile/Betas.html	5
BTiet	Rate base for the service or activity "i", of the company "e", for period t.	The rate base is composed of the total value of the average net fixed asset in operation revalued (AFNORP).	2, 6
CAiet	Total regulatory levy (canon) of the operator for the service or activity "i", of the company "e", for period "t" paid to ARESEP.	The calculation procedure for the levy (canon) corresponding to each operator is determined as indicated in the "Methodology for distributing the levy (canon) (authorized by the Comptroller General of the Republic (CGR)) by activity among regulated companies" or the document that updates or replaces it.	1

Variable	Description	Calculation	Formula
CEiet-1	Total costs and expenses estimated by ARESEP in the tariff setting (fijación tarifaria) for the concept of operation, maintenance, administration and other expenses in service "i", of company "e" and for period "t-1". This data must be taken from the tariff setting (fijación tarifaria) carried out by ARESEP for period "t-1".	See equation 25
CMSiet	Cost of materials and supplies to provide the service or activity "i", of company "e", for period "t".	This cost comprises costs of materials and supplies, fuels and lubricants, and materials used, both operational, administrative and commercial, necessary for the proper development of the activity. Also included are the product quality costs corresponding to materials and supplies, as well as any other cost of this nature established in the Regulatory Accounting (Contabilidad Regulatoria).	1

Variable	Description	Calculation	Formula
COMAiet	Total operating and maintenance costs and expenses incurred by operators to provide the service or activity "i", of the company "e", for period "t".	These costs and expenses are composed of remuneration expenses, costs for services, depreciation costs, costs for materials and supplies, ARESEP regulatory levy (canon de regulación), and other indispensable expenses that allow the service operator to guarantee the sustainability, continuity and quality of the regulated service.	1, 23
CRiet-1	Total costs and expenses observed in service "i", of company "e" and for period "t-1". These are the real expenses for the concept of operation, maintenance, administration and other expenses incurred by operators to provide the service in period t-1 (COMAiet-1).	See equation 25	25
CSERiet	Costs for services incurred by operators to provide the service or activity "i", of company "e", for period "t".	Correspond to costs for operational and maintenance services, and costs for administrative services; both concepts for: leases and rights over property, basic services, commercial services, management and support services, travel and transportation services, insurance, reinsurance and obligations, training and protocol services, maintenance and repair services, and other	1

Variable	Description	Calculation	Formula
		services. In addition, contracted and electricity operational and maintenance services are included. And commercial services for meter reading, billing, collection and customer service (both services, such as electricity and contracted services), as well as any other expense of this nature established in the Regulatory Accounting (Contabilidad Regulatoria).
CTAiet-1	Total adjusted costs and expenses. Refers to the adjustment for the differential between real and estimated expenses for CTAiet-1 (Total operating and maintenance costs and expenses incurred by operators to provide the service or activity "i", of company "e", for period "t").	See equation 25	24, 25
DACiet-1	Accumulated depreciation of the asset at cost for the service or activity "i", of company "e", for period t-1.	The value from the last audited or available Financial Statement is used (The value available as of December 31 prior to the study and used as the initial balance of the following year) or what the Intendancy stipulates with the Regulatory Accounting (Contabilidad Regulatoria).	8, 16

Variable	Description	Calculation	Formula
DAFRiet	Accumulated depreciation of the revalued fixed assets for the service or activity "i", of company "e", for period t.	See equation 19	9,19
DARiet -1	Accumulated depreciation of the revalued assets for the service or activity "i", of company "e", for period t-1.	The value from the last audited or available Financial Statement is used (The value available as of December 31 prior to the study and used as the initial balance of the following year) or what the Intendancy stipulates with the Regulatory Accounting (Contabilidad Regulatoria).	8, 19, 22
DCiet	Depreciation of the asset at cost for the service or activity "i", of company "e", for period t.	See Equation 16.	9, 16

Variable	Description	Calculation	Formula
DEPiet	Depreciation cost of the assets to provide the service or activity "i", of company "e", for period "t". This expense also comprises the depreciation of the asset revaluation.	Asset depreciation tables determined by the Water Intendancy (Intendencia de Aguas) will be used, and it may be based on equivalent tables from the Ministry of Finance (Ministerio de Hacienda), technical specifications from the asset manufacturer or similar assets internationally; regarding useful life, salvage value and depreciation method. The information comes from the Regulatory Accounting (Contabilidad Regulatoria) and complementary information to it, as established by ARESEP. This cost must be projected, for which the weighted depreciation rate will be used, built from the percentage composition of the respective depreciation of the different assets. For the revalued depreciation, the Composite Asset Revaluation Index is used (see formula 13).	1
Depiet	Depreciation of assets at cost for the service or activity "i", of company "e", for period t.	See Equation 17.	16, 17

Variable	Description	Calculation	Formula
DepRiet	Depreciation of the revalued fixed assets for the service or activity "i", of company "e", for period t.	See Equation 20.	19, 20
Diet	Value of the debt for the service or activity "i", of company "e", for period "t".	Only obligations with a financial cost for service "i" are considered. This data is obtained from the Regulatory Accounting (Contabilidad Regulatoria) and complementary information to it, as established by ARESEP.	3
Diet/Aiet	Percentage of company capital financed with debt for the service or activity "i", of company "e", for period "t". Only obligations with a financial cost for service "i" are considered.	Only obligations with a financial cost for service "i" are considered.	3
Diet/Kiet	Debt-to-equity ratio.	Calculated by dividing the Value of debt by the Value of equity.	5
DRiet	Accumulated depreciation of the revalued assets, service or activity "i", of company "e", for period t.	As detailed in Equation 19.	9
e	Company providing services regulated by ARESEP.
g	Number of existing tariffs according to the tariff schedule.

Variable	Description	Calculation	Formula
GREMiet	Remuneration expenses incurred by operators to provide the service or activity "i", of company "e", for period "t".	Corresponds to the expenses incurred by the company for wages and salaries, social charges and legal benefits; both operational, administrative and commercial necessary for the proper development of the activity, and any other expense of this nature established in the Regulatory Accounting (Contabilidad Regulatoria).	1
i	Regulated service (aqueduct, sewerage and hydrants).
IPCt	Consumer Price Index (IPC) for Costa Rica for period t.	For this data, the inflation expectation published by the Central Bank of Costa Rica (Banco Central de Costa Rica) in its Macroeconomic Program is considered.	14
IPCt-1	Consumer Price Index (IPC) for Costa Rica for period t-1.	This data is taken from the IPC publication made by INEC.	14
IPUSAt	Consumer Price Index of the United States of America, for period t.	Taken from the information published by the Department "Bureau of Labor Statistics" of the United States of America.	15
IPUSAt-1	Consumer Price Index of the United States of America, for period t-1.	Taken from the information published by the Department "Bureau of Labor Statistics" of the	15

Variable	Description	Calculation	Formula
		United States of America.
IRE	External asset revaluation index (Índice de revaluación de activos externo).	The calculation of this index must be performed as expressed in the following Equation 15.	13, 15
IRL	Local asset revaluation index (Índice de revaluación de activos local).	See Equation 14	13, 14
IRt	Composite asset revaluation index (Índice compuesto de revaluación de activos).	See Equation 13	12, 13, 22
ITEiet-1	Total revenues estimated by ARESEP in the tariff setting (fijación tarifaria) for service "i", of company "e" and for period "t-1".	This data is taken from the tariff setting (fijación tarifaria) carried out by ARESEP for period "t-1"	26
ITiet	Total revenues for service "i", of company "e" and for period "t".	Obtained from the sum of total costs and expenses (COMAiet) and the Return for Development (Rédito para el desarrollo, RDiet)	23, 27
ITAiet-1	Total adjusted revenues. Refers to the adjustment for the differential between real and estimated revenues for the service or activity "i", of company "e" for period t-1.	See equation 26	24, 26
ITRiet-1	Total observed revenues that the operator received for providing the service or activity "i" of company "e" and for period "t-1".	This data is taken from the Regulatory Accounting (Contabilidad Regulatoria) and operator reports to ARESEP; with real information from period t-1.	26

Variable	Description	Calculation	Formula
IViet	Sales revenues from the service or activity "i" to users, of company "e", for period t.	See Equation 27	27, 28
IVTViet	Projected annual total sales revenues based on the tariff structure, the demand estimate and considering the current tariffs established in period "t-1" for the service or activity "i", of company "e" and for period "t".	See Equation 29	28, 29, 30
k	Number of consumption blocks
Kiet	Value of the company's capital corresponding to its own resources or equity for the service or activity "i", of company "e", for period "t".	This data is obtained from the Regulatory Accounting (Contabilidad Regulatoria) and complementary information to it, as established by ARESEP.	3
Kiet/Aiet	Percentage of company capital corresponding to its own resources for the service or activity "i", of company "e", for period "t".	The total equity accounting account for service "i" is considered.	3
kp	Cost of equity rate. It is the cost of equity capital contributions.	For the calculation of this variable, the Capital Asset Pricing Model (CAPM) is used, see the procedure to obtain	3, 4

Variable	Description	Calculation	Formula
		this cost as detailed in Equation 4.
Lliet	Settlement for period t-1. Refers to the sum of the total adjusted revenues and the total adjusted costs for the service or activity "i", of company "e" for period t-1.	See equation 24	24
m	Tax rate.	Assumed to be zero (0), according to agreement 15-149-99 of the Board of Directors of the Regulatory Authority (minutes of Session 149-99 of August 19, 1999) or what the Board of Directors dictates at the time.	3, 5
n	Total assets		17
OGiet	Other costs or expenses incurred by operators, necessary to provide the service or activity "i", of company "e", for period "t".	Comprises all costs associated with the provision of the service that are not included in the accounts described above in the variables of this formula.	1
OTiet	Other revenues of the operator for the service or activity "i", of company "e", for period "t".	These revenues are estimated through a projection, for which a behavior and historical trend analysis must be performed, according to the Audited Financial Statements from the last 5 years, available Regulatory Accounting (Contabilidad	27

Variable	Description	Calculation	Formula
		Regulatoria) and operator reports to ARESEP.
Pietbs	Price for each tariff type "s" of the service or activity "i", of company "e", for period "t-1", according to consumption block "b".	The price for each tariff type, according to consumption block corresponds to the price in colones per cubic meter indicated in the tariff schedule at the time of the tariff study.	29
RACiet	Retirements of the fixed asset at cost for the service or activity "i", of company "e", for period t.	Corresponds to the value of the list of assets estimated to be retired for period t. The value from Regulatory Accounting (Contabilidad Regulatoria) is used.	10
RAiet	Revaluation corresponding to period t, of the assets for the service or activity "i", of company "e".	Corresponds to the estimated revaluation for period t, and if available, an appraisal authorized by ARESEP, following IFRS, will be used; otherwise, it is calculated with the formula described for fixed assets at cost of period t-1 and revalued fixed assets of period t-1 less the retirements of assets at cost and revalued in period t, plus the net balance of the transfer of assets at cost and revalued in period t, all using the asset revaluation index.	11, 12

Variable	Description	Calculation	Formula
RARiet	Retirements of the revalued fixed asset for the service or activity "i", of company "e", for period t.	Corresponds to the value of the list of assets estimated to be retired for period t. The value from Regulatory Accounting (Contabilidad Regulatoria) is used.	11, 12
rd	Cost of debt capital rate. It is the cost of indebtedness for the service or activity "i", of company "e", for period "t". It is an average interest rate.	Calculated by obtaining the weighted average of the sum of financial expenses for interest payments over total debt. These financial expenses arise from obligations formalized through official documents, payable signed with financial entities. This data is obtained from the Regulatory Accounting (Contabilidad Regulatoria) reported by the operator and validated by ARESEP.	3
RDCiet	Retirements of depreciated assets at cost for the service or activity "i", of company "e", during period t.	The value of the asset retirement estimated by the company and approved by ARESEP is used, following the formats of the Regulatory Accounting (Contabilidad Regulatoria).	16
RDiet	Return for development (Rédito para el desarrollo) for the service or activity "i", of company "e", for period t.	See equation 2	1, 2
RDRiet	Retirement of depreciated revalued assets for the service or activity "i", of company "e", for period t.		19

Variable	Description	Calculation	Formula
RevDepiet	Revaluation of the depreciation of the net additions of revalued fixed assets in period t.	See equation 22	19
Rf	Risk-free rate. Which corresponds to an investment alternative that has no risk for the investor.	Calculated as a simple average of returns from the arithmetic mean and geometric mean of the United States of America Treasury bonds (10-year) for the last 10 years. This data is obtained from Damodaran's website, available at the Internet address http://www.stern.nyu.edu/~ adamodar	4
Rm	Market risk.	Calculated as a simple average of returns from the arithmetic mean and geometric mean of the S & P 500 (10-year) of the United States of America for the last 10 years. This data is obtained from Damodaran's website, available at the Internet address http://www.stern.nyu.edu/~ adamodar	4
s	Each type of tariff category according to the tariff structure (for example, currently they are residential (domiciliar), commercial (empresarial), government (gobierno), preferential (preferencial)).

Variable	Description	Calculation	Formula
t	The period "t" takes values for t1, 2, 3, 4 and 5 corresponding to the period of time for which the tariff adjustment is calculated, beginning with the calendar year "t1", immediately following the base calendar year "t-1". It typically corresponds to a 5-year period.
t-1	The period "t-1" corresponds to the "base" analysis period considered in the tariff setting (fijación tarifaria) study and which allows, for the first base year (t0), the use of real or observed values at the end of the calendar year prior to the study year.
TACiet	Transfers of fixed assets at cost for the service or activity "i", of company "e", for period t.	The value from Regulatory Accounting (Contabilidad Regulatoria) is used.	10, 12
TARiet	Transfers of revalued assets for the service or activity "i", of company "e", for period t.	The value from Regulatory Accounting (Contabilidad Regulatoria) is used.	11, 12
Tcvt	Selling Exchange Rate (CRC/USD).	One-year exchange rate data for period t is used, according to exchange rate variation expectation data	15

Variable	Description	Calculation	Formula
		published by the Central Bank of Costa Rica (Banco Central de Costa Rica).
Tcvt-1	Average Selling Exchange Rate (CRC/USD) for period t-1.	Calculated as the daily arithmetic mean for period t-1 published by the Central Bank of Costa Rica (Banco Central de Costa Rica).	15
TDACaiet	Depreciation rate of asset "a" for the service or activity "i", of company "e", for period t.	The depreciation tables previously approved by ARESEP are used. In these tables, the depreciation rate, the cost value and the useful life must be clearly shown for each asset. See equation 18.	17, 18
TDARaiet	Depreciation rate of revalued asset "a" for the service or activity "i", of company "e", for period t.	The depreciation tables previously approved by ARESEP are used. In these tables, the depreciation rate, the cost value and the useful life must be clearly shown for each asset. See Equation 21.	20, 21
TDRiet	Transfer of depreciated revalued assets for the service or activity "i", of company "e", for period t.		19
TDCiet	Transfer of assets at cost, for the service or activity "i", of company "e", during period t.	The estimated value of the asset transfer estimated by the company and approved by ARESEP is used, following the formats of the Regulatory Accounting (Contabilidad Regulatoria).	16

Variable	Description	Calculation	Formula
TRiet	Rate of return for development (tasa de rédito para el desarrollo) for the service or activity "i", of company "e", for period "t".	Obtained through the application of the Weighted Average Cost of Capital (WACC). See equation 3.	2
Vietbs	Volume of water to be billed in cubic meters (m3) by tariff type "s", according to consumption block "b", for the service or activity "i", of company "e", for period "t".	The procedure to obtain this volume of water to be billed is detailed in section 1.4.	29
VRACaiet	Salvage value of asset "a" at cost for the service or activity "i", of company "e". Expressed as a percentage.	See equation 18	18
VRARaiet	Salvage value of revalued fixed asset "a" for the service or activity "i", of company "e". Expressed as a percentage.		21
VUaiet	Useful life of asset "a" for the service or activity "i", of company "e". Expressed as a percentage.		18
VURaiet	Useful life of revalued fixed asset "a" for the service or activity "i", of company "e". Expressed as a percentage.		21

Variable	Description	Calculation	Formula
%CLiet	Percentage of the local component of the asset value for the service or activity "i", of company "e", for period t-1.		14
%CEiet	Percentage of the external component of the asset value for the service or activity "i", of company "e", for period t-1.		15
%IViet	Percentage adjustment required in total sales revenues for the service or activity "i", of company "e" and corresponding to period "t".	See equation 30	30
IViet	Required change in total revenues for the service or activity "i", of company "e" and corresponding to period "t".	See Equation 28	28, 30

(.)

II.To consider as a response to the natural and legal persons who presented their position at the public hearing held on August 16, 2018, what is stated in official letter OF-0047-CDR-2019 of the Dirección General Centro de Desarrollo de la Regulación, and to thank them for their valuable participation in this process.

III.To instruct the Secretaría de Junta Directiva to proceed with notifying the natural and legal persons of official letter OF-0047-CDR-2019, which contains the responses to the positions presented at the public hearing.

IV.To instruct the Secretaría de Junta Directiva to proceed with the respective publication of the "Tariff Methodology for Aqueduct, Sewer, and Hydrant Services (Metodología tarifaria para los servicios de acueducto, alcantarillado e hidrantes, MTAAH)" in the official gazette La Gaceta.

V. To instruct the Secretaría de Junta Directiva 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, the ordinary remedy of reinstatement or reconsideration may be filed against this resolution, which must be filed within three days counted from the day after notification, as well as the extraordinary remedy of review, which must be filed within the deadlines set forth in Article 354 of the aforementioned law. Both remedies 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 as of its publication in the official gazette La Gaceta.

LET IT BE PUBLISHED, NOTIFIED, AND COMMUNICATED.

Annex 1: Table of formulas used in the tariff methodology for aqueduct, sewerage and hydrant services

Annex 2: Table of variables used in the tariff methodology for aqueduct, sewerage and hydrant services.

Tariff methodology for drinking water, sewerage, and hydrant services (MTAAH)Metodología tarifaria para servicios de acueducto, alcantarillado e hidrantes (MTAAH)

XXII. That on November 5, 2015, the public hearing was held as recorded in Minutes N° 98-2015, (folios 348 to 358)

XXXVII. That the useful and necessary steps have been taken for the issuance of this resolution

I. That it is necessary to issue the "Tariff methodology for the services of aqueduct, sewerage and hydrant (MTAAH)."

Artículo 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.

Artículo 31 — of this Law establishes the parameters that Aresep must follow to set the rates for public services.

Artículo 4 — of the Sectoral Regulation for the Regulation of Aqueduct and Sanitary Sewer Services1 establishes that ".

V. To instruct the Secretaría de Junta Directiva to proceed with notifying the parties of this resolution

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

XXXVII. Que se han realizado las diligencias útiles y necesarias para el dictado de la presente resolución

I. Que es necesario dictar la "Metodología tarifaria para los servicios de acueducto, alcantarillado e hidrante (MTAAH)"

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