SABESP TARIFF ADJUSTMENT

Transcription

1 TECHNICAL NOTE N T / F / / SABESP TARIFF ADJUSTMENT 2013 October

2 1 OBJECTIVE 3 2 LEGAL AND INSTITUTIONAL CONTEXT OF REGULATING THE SANITATION SECTOR IN THE STATE OF SÃO PAULO LEGAL AND INSTITUTIONAL CONTEXT OF THE ADJUSTMENT 4 3 THE 2013 ADJUSTMENT JUSTIFICATIONS RELATED TO THE 2013 ADJUSTMENT IRT CALCULATION METHODOLOGY FOR COMPENSATORY ALTERATIONS IN THE 2013 ADJUSTMENT CALCULATION OF REVENUE GAIN DERIVING FROM REPOSITIONING INDEX CALCULATION OF REVENUE LOSS DERIVING FROM ARSESP S DELAY TO APPROVE THE ADJUSTMENT _ CALCULATION OF IRT APPLICATION OF ADJUSTMENT 14 4 ATTACHMENTS 15 2

3 TECHNICAL NOTE SABESP TARIFF ADJUSTMENT OBJECTIVE To establish the foundation to define the tariff adjustment of water and sewage services rendered by Sabesp in the municipalities operated (except for the municipalities of Lins, Magda and Glicério) and permissionaires related to the 2013/2014 period, to take effect in the bills issued as of November 11, LEGAL AND INSTITUTIONAL CONTEXT OF REGULATING THE SANITATION SECTOR IN THE STATE OF SÃO PAULO The Federal Law 11,445 of January 5,2007, which defines Brazil s basic sanitation guidelines, sets forth in its Article 11 (caput and item III), which are contractual validity conditions aiming the rendering of basic sanitation public utility services, the existence of regulation rules providing for the means to comply with these guidelines, including the designation of a regulation and oversight entity. These rules among other things shall provide for sustainability conditions and the economic and financial breakeven of services rendered, under an efficiency regime, including: a) The collection system and the composition of fees and tariffs; b) Fees and tariffs adjustment and revision system; and c) The subsidy policy. The Brazilian National Sanitation Law also sets forth in its Article 22, the following objectives to regulate the sanitation services: a) Establish standards and rules for an appropriate rendering of services and users satisfaction (item I); b) Ensure the fulfillment of the conditions and targets established (item II); c) Prevent and repress the abuse of economic power, except for the authority of the bodies composing Brazil s national antitrust system (item III); d) Define tariffs ensuring both the economic and financial breakeven of contracts, such as reasonable tariffs, by means of mechanisms prompting efficiency and effectiveness of services that allow the social appropriation of productivity gains. (item IV) ARSESP, the Sanitation and Energy Regulatory Agency of the State of São Paulo, is an independent governmental agency linked to the Energy Department of the State of São Paulo, created by Supplementary Law 1,025 of December 7, 2007, regulated by Decree 52,455 of December 7, 2007, in order to regulate, control and oversee, within the scope of the State, the pipeline gas and basic sanitation services. 3

4 These state laws, enacted pursuant to the sanitation sector federal laws, establish that, once preserved the municipal scope of authority and prerogatives, ARSESP may execute the regulation, control and oversight duties delegated thereto by other states of the federation, especially as to basic sanitation public utility services under the local government s responsibility. Besides operating in the metropolitan regions, ARSESP also has the authority to regulate and oversee the municipal services when these activities are delegated thereto through cooperation agreements executed with the State Government, by means of the appropriate State Department and the local government. Until September 2013, ARSESP officially received the delegation to regulate and oversee the rendering of sanitation services in 268 municipalities of the State of São Paulo serviced by SABESP. All municipalities signed program a contract with SABESP and a cooperation agreement with the state government, wherein they delegate the regulation of water and sewage services to ARSESP, duly supported by legislative authorization and subsequently published in the State Official Gazette. 2.1 LEGAL AND INSTITUTIONAL CONTEXT OF THE ADJUSTMENT Referring to the tariff nature aspects, both federal and state laws set forth the principles, guidelines and rules to guide the tariff revision and adjustment processes of basic sanitation services, among them, we point out the following: The Federal Law 11,445/07 sets forth, especially in Articles 23, 37 and 38 that: a) The regulatory entity will issue rules related to the regime, structure, tariff levels and subsidies, as well as the procedures and terms for their establishment, adjustment and revision (Article 23, item IV). b) Basic sanitation public utility services tariff adjustments will be made observing the minimum interval of twelve (12) months, according to legal, regulatory and contractual rules (Article 37). c) Tariff revisions will comprise the re-evaluation of services rendering conditions and tariffs practiced and may be periodical, aiming the distribution of productivity gains with users and the re-evaluation of market conditions (Article 38, item I). d) Tariff mechanisms prompting efficiency may be created, including productivity factors, which may be defined based on the sector's other companies indexes (Paragraphs 2 and 3 of Article 38). The State Supplementary Law 1,025/07 confers authority to ARSESP, whether originally, or by means of municipal delegation, to conduct the tariff regulation of basic sanitation services (item IV, Articles 10 and 11). 4

5 In addition, cooperation agreements and program contracts signed up to date between SABESP and municipalities provide for the application of the Tariff Adjustment Index IRT, based on the concessionaire s cost variation or another index to replace it, duly approved by the regulatory agency. By force of Articles 11 and 47 of the Supplementary Law nº 1,025/07, this same guidance also applies to the municipalities operated by Sabesp which still have not signed an agreement with the state government and program contract with Sabesp, but delegated to the state government the regulation of services by means of agreements executed prior to the Federal Law 11,107/05, until these municipalities are in conformity with the provisions of the sector s new legal framework. Water and sewage services tariffs will take into account the differences and peculiarities of their services, the diversities of the geographic areas or regions and will also observe the following categories: i) residential; ii) commercial; iii) industrial; iv) public; and, v) others, as provided for by Article 4 and the following of ARSESP Resolution n 106/09. Lastly, pursuant to the federal laws, tariffs will be periodically adjusted within the minimum interval of 12 months, through indexes reflecting the evolution of concessionaire s costs, so that to recover its value in real terms (Article 37 of Law 11,445/2007). 3 THE 2013 ADJUSTMENT Sabesp's first tariff revision - RTS has been in progress at ARSESP since March 2011, which according to the preliminary schedule should have been concluded on August 10, According to the schedule originally estimated, the tariff level resulting from revision would have been authorized on such date (August 10, 2012) at restated prices, which would replace the annual adjustment estimated for Then, the new tariff cycle would start and the first annual adjustment, according to the new rules would take place in the following year, i.e., August 10, However, due to problems, mainly related to Sabesp s generation of data and information, a conclusion on RTS did not occur on the date estimated, thus, ARSESP authorized to apply the usual 2012 adjustment (Resolution nº 353 of August 9, 2012), as well as presented a new schedule to carry on the revision, which, after other postponements, the date of August 10, 2013 was defined for its conclusion. It is worth mentioning that, even with these postponements, the duration of tariff cycle, over which rules and values defined in RTS would apply, was maintained in the period originally defined, i.e., from August 11, 2012 to August 10, This means that when revision is concluded, its results shall apply retroactively to August 11, 2012 (cycle inception). 5

6 Since problems persist, mainly those related to ARSESP s validation of Asset Base submitted by SABESP, the deadline of August 10, 2013 to conclude RTS also could not be met. The new date to conclude RTS relies on SABESP defining the period necessary to remedy the issues raised by Arsesp concerning the validation of Asset Base. Such another delay raised a discussion on the need and opportunity to apply the 2013 adjustment. This issue, by SABESP s initiative, was submitted for analysis of PGE legal advisors, who after consultation with ARSESP, were favorable to the adjustment by means of the opinion CJ/ARSESP 212/2013, endorsed by the Deputy State Attorney s Office General Consultancy Department. The content of the conclusion and endorsement by the Deputy State Attorney's Office is transcribed below: In order to avoid indexes overlap, ARSESP proposed a methodology that would annul the economic effects of cumulating adjustment and revision within same year. Without disregarding the transition already operated for the second tariff cycle, the Statement GPG-CEF n.59/2013 issued resolved on the feasibility of adjustment subject to a more detailed justification, especially under the economic viewpoint, with a view to removing doubts about the accumulation of indexes or criteria adopted in the partial revision authorized by Resolution 406/2013 in relation to those to be applied in the next adjustment, allowing to clearly evidence the adherence of this procedure to the aforementioned normative rule. Therefore, we also suggest that the Regulatory Agency may properly disclose the administrative proceeding referring to the adjustment pleaded, disseminating the special methodology intended to apply and the neutrality of its economic effects in relation to the tariff repositioning already authorized, in order to confer to the users and the regulated company, the exceptionality and the temporality of proceeding, with a view to disrupting future expectations of reiterating the proceeding. Due to same fundamentals (advertising and legal security) considering that the application of adjustment in the exceptional manner pleaded herein requires different methodology, and ARSESP shall check (and justify) the need of submitting this special methodology to a public hearing, pursuant to the Supplementary Law n. 1025/2007, Article 5. Thus, I endorse the content of Statement GPG-CEF n. 59/2013 and Opinion CJ/ARSESP n.212/2013, which resolved on the legal feasibility of exceptional adjustment proposed in these records, observing the recommendations mentioned in both procedural documents. 6

7 During consultation process, in view of chances of tariff revision postponement for 2014, ARSESP was favorable to the adjustment, and due to questioning and recommendations included in the aforementioned PGE opinion, the justifications are presented below. 3.1 JUSTIFICATIONS RELATED TO THE 2013 ADJUSTMENT Water and sewage tariff regulatory management, as enacted by Brazilian National Sanitation Law (Law 11,445/2007) is conducted by using two different mechanisms, but supplementary: the tariff revision and adjustment. The tariff revision defines the methodology, values, rules and procedures to be adopted in the following tariff cycle. Among them, we include the methodology and criteria to calculate and apply the annual tariff adjustment. The methodology detailed for RTS was defined by ARSESP in the Technical Note Nº RTS/01/2012, after consultation/public hearing process where three public hearings were held (in the cities of São José dos Campos, Lins and São Paulo). According to this methodology, the Tariff Revision establishes for the cycle inception, the initial tariff level for the Maximum Average Tariff authorized (P0) to ensure the concessionaire s economic and financial breakeven during cycle. The tariff adjustment is the mechanism defined by regulatory agency, within the context of revision to yearly adjust this P0 over the cycle. This adjustment aims at yearly recovering the inflationary losses seen in tariffs, as well as transfer to users the annual productivity gain established by regulatory agency (X Factor) as the concessionaire s efficiency minimum target to be achieved every year of the tariff cycle. According to this process, the annual adjustment should not occur in the initial year of new tariff cycle, as the Initial Maximum Tariff (P0) established by revision already includes the price adjustment that would be produced thereby. On November 7, 2012, by means of ARSESP Resolution nº 373, the revision conclusion was postponed to August 10, This same resolution introduced an intermediary stage (1 st stage) wherein the application of a preliminary P0 would be authorized, calculated from an estimated Asset Base, and the final P0 with a definitive Asset Base would be published on the RTS date of conclusion. After a public consultation process which culminated with a public hearing held on January 15, 2013, this intermediary stage was materialized through ARSESP Resolution nº 406 of March 22, 2013, which resulted in applying a Tariff Repositioning Index of % levied on services rendered as of this date. The schedule in force indicated a conclusion on RTS on August 10, 2013, with publication of final P0 and related adjusted Tariff Table based on inflation indexes until July 2013, which would exempt the 2013 adjustment. In view of problems related to ARSESP s validation of Asset Base submitted by SABESP, the revision has been once more postponed and current scenario points to its conclusion only in Thus, taking into account that the reference date to publish the annual adjustment is August 10, the immediate granting of 2013 tariff adjustment is 7

8 justified in order to preserve the company s economic and financial breakeven in the short term, without risk of reversal or new change in tariffs, within a very near term, in view of Revision conclusion. Nevertheless, ARSESP understands, that in order to avoid the accumulation of effects deriving from the partial revision and adjustment, all the financial impacts with users shall be neutralized, due to anticipated revision (1 st stage), with the application of said Tariff Repositioning Index of %. With this procedure, all additional revenue that the concessionaire earned due to this 1 st stage of revision will return to the users in the following tariff year and tariffs currently in force will be adjusted only by residual inflation not yet incorporated thereinto. It is also worth mentioning that with the conclusion of tariff revision in 2014, the definitive Initial Maximum Average Tariff (P0) will be established for the tariff cycle, retroactively applied to its inception, i.e., August 11, Note that even if final results of Tariff Revision are submitted to a new consultation/public hearing process, the contributions received will be duly deliberated and justified by the Agency when determining final results. Hence, the resulting index for this 2013 adjustment, still will be preliminary, due to the fact that with Revision conclusion and its retroactive application to the cycle inception, tariff compensatory adjustments will have to be defined at the end of RTS, so that to ensure the maintenance of initial conditions for the concessionaire s economic and financial breakeven established for the tariff cycle as a whole (between August 11, 2012 and August 10, 2016). These adjustments aim at neutralizing, within the tariff cycle context, the effects caused by both revision anticipation/delay (partial and final revision) and delay to authorize this 2013 adjustment. Thus, revenue differences deriving from tariff level to be approved on the date of revision conclusion (final P0), in relation to the levels effectively practiced by concessionaire as of the cycle inception, will be offset in the years following the conclusion on RTS, by means of compensatory adjustment to the final P0 authorized and, accordingly, tariffs to take effect during the tariff cycle s remaining period. Thus, within the scope of tariff cycle, on the one hand, users rights and interests are preserved, and on the other hand, the concessionaire's economic and financial breakeven under the terms established in the Tariff Revision. Concurrently, ARSESP does not consider necessary to submit this adjustment to a specific public hearing or consultation process, since, despite the exceptionality of calculation, the methodology already approved in RTS was applied, after being submitted to a process of three public hearings. In addition, adjustments made due to a partial revision and delay in adjustment (see item 3.3) aim at keeping the entirety of calculation methodology for tariff level approved for the new cycle. Finally, we need to consider the preliminary nature of this present adjustment, since it will be calculated again upon revision conclusion, giving rise to a new adjustment in the tariff level for the cycle s remaining period, in light of RTS final results, which will be 8

9 previously submitted to a new public hearing process. Thus, ARSESP considers that all revision-related decisions and adjustments practiced up to date will be fully supported by public consultations and hearings held, or to be held, within SABESP s Tariff Revision process. 3.2 IRT CALCULATION METHODOLOGY FOR 2013 During the Tariff Revision process in progress, the regulation regime approved by ARSESP through the Methodological Technical Note (RTS/01/2012) provides for a mechanism of regulation by maximum prices with efficiency factor (or X Factor) which aims at transferring to the users part of efficiency gains achieved by the company. The maximum price defined for the cycle inception (P0) will be yearly adjusted considering: i) The monetary restatement factor, based on the evolution of consumer price index (IPC), which avoids tariffs inflationary erosion; ii) The efficiency factor (X Factor) that transfers part of the productivity gains earned by the Company to users through an actual annual reduction established by regulatory agency and applied as of the first adjustment of new tariff cycle (August 2013); iii) An adjustment factor for quality variations (FAQ), destined to preserve the quality standards of services rendered to users. This factor will have the calculation methodology developed over the cycle and its implementation will occur in the second half of such cycle, preceded by an experimental phase. Hence, the annual adjustment/readjustment of Maximum Price (Pt) will be determined yearly according to the following formula: Where: Pt = ( 1 + IPC - X ). Pt-1 - FAQt 9

10 Maximum Average Tariff (Maximum Price) to be applied during year t of tariff cycle IPC t = Percentage variation of Consumer Index Price applied over the last 12 months (the price index adopted is IPCA-IBGE). Efficiency percentage to be transferred to the users when each year t of tariff cycle starts, as of the second one. Maximum Average Tariff (Maximum Price) of previous tariff year, the initial value of which will be the P 0 Adjustment Factor by Quality, denominated in R$/m 3 billed In order to apply this adjustment factor, as defined by approved methodology, the price index to be adopted will be the Extended Consumer Price Index (IPCA-IBGE). The Efficiency Factor (X Factor) will be determined based on the methodology approved in the Tariff Revision and the Quality Factor (FAQ), as this is a novelty to which still there is no a consolidated methodology, it will be implemented over the tariff cycle, according to the rules and methodology to be defined and after a phase of tests. ARSESP understands that, despite SABESP s Tariff Revision (RTS) has not been concluded yet, the Calculation Methodology for IRT is already duly approved and shall be applied in the 2013 adjustment, as this is the first adjustment of the new tariff cycle. In addition, upon conclusion on RTS, the application of a new methodology and results will retroact to the cycle inception, which will include a new calculation of the adjustment under consideration. Hence, the immediate application of a new methodology will contribute to minimize the adjustments to be made in the future. 3.3 COMPENSATORY ALTERATIONS IN THE 2013 ADJUSTMENT As aforementioned, according to the Tariff Revision original schedule, the new tariff level would be applied as of August 11, 2012 and the first annual adjustment according to the new rules would take place on August 11, In view of delays occurred, the revision shall be concluded only in early 2014, but its effects will retroact to the original date, i.e., August 10, 2013 (cycle inception) and for this reason, the 2013 adjustment (first of new cycle), has been determined based on the IRT new calculation methodology already approved and taking into account the following requirements: i) that the new tariff cycle, to which criteria and values established in revision shall apply, prevails as defined in RTS, i.e., from August 11, 2012 to August 10,2016; ii) that the methodology detailed to calculate the tariff revision, approved by ARSESP through the Technical Note RTS/01/2012, defines a new annual tariff adjustment criterion, based on the adjustment of tariffs by IPCA, less the efficiency factor (X Factor) ; 1 10

11 iii) that despite the final value of such X Factor is only known upon conclusion of tariff revision, a preliminary percentage of 0,4297% was applied to calculate this 2013 adjustment, which corresponds to an equal sharing between the company and users from productivity gains established by regulatory agency for the tariff cycle. These gains were preliminarily estimated at % p.a. and are mentioned in the NT RTS/01/2013 which defined the preliminary P0. iv) that the Quality Adjustment Factor will not be applied in the 2013 adjustment; 1 FAQ Quality Adjustment Factor will not be considered in the first annual adjustment. 11

12 v) that the application, both of tariff level and annual adjustment criteria established by revision upon its conclusion will retroact to the cycle inception (August 11, 2012); vi) that, due to the lack of quorum in ARSESP s Executive Board, it was not possible to authorize the tariff adjustment on its Reference Date (August 11, 2013) and that it shall be applied with a three-month delay (November 11, 2013); vii) that all financial effects produced by the partial implementation of Tariff Revision (IRep=2,3509%) and due to delay in authorizing the adjustment shall be reverted when calculating the IRT; viii) that this adjustment is preliminary, since the revision is still in progress and revenue differences seen since August 11, 2012 (cycle inception), in relation to the final tariff level to be established upon conclusion of RTS, will be offset during remaining cycle, so that to ensure the concessionaire s economic and financial breakeven in the cycle period as a whole. Therefore, the calculation of Tariff Adjustment Index to be applied, based on the new defined methodology and approved in the tariff revision process considered the variation of IPCA-IBGE in the 12 months preceding the Adjustment Reference Date (July 2012-July 2013), totaling %, less the X Factor of %, which resulted in %, and also considered the following compensatory adjustments: a) (Geometric) discount of the Repositioning Index of % already incorporated into Tariff Table effective by force of ARSESP Resolution nº 406/2013; b) Discount of revenue earned by concessionaire, due to the application of this Repositioning Index referring to the period from its application (March 22, 2013) until the Adjustment Reference Date (August 10, 2013). The calculation of amount to be deducted is stated in item hereinbelow; c) Increased revenue loss due to referred 92-day delay when adjustment is applied. The calculation of corresponding amount is explained in item hereinafter. The calculation of Tariff Adjustment Indexes both for Reference Date and for Application Date authorized is stated in item CALCULATION OF REVENUE GAIN DERIVING FROM REPOSITIONING INDEX The revenue gain earned by the Company was calculated from demand figures (billed volumes) and tariff levels established in the 1 st Stage of Tariff Revision 2, in the tariff cycle 1 st year, due to the application of Tariff Repositioning Index of % over tariffs practiced with effectiveness as of March 22, The result is seen in the Table 1 below. 2 See Technical Note Nº RTS/01/2013, which establishes the preliminary P 0 of Tariff Revision and the Tariff Repositioning Index of % applied over SABESP s tariffs on March 22,

13 We can see that the revenue gain already earned by concessionaire since the application date of referred Repositioning Index (March 22, 2013) until the last day of 1 st year of new tariff cycle (August 10, 2013), according to Tariff Revision data, corresponds to R$84,312,000 or 142 days of revenue. Table 1: Revenue Gains due to the 1 st Stage of Tariff Revision Year/Period Nº of Days in the Period (1) Total Billed Volume (1000 m3) (1) Average Tariff (R$/m3) Revenue WITH anticipation of % (R$ thousand) Revenue WITHOUT anticipation of % (R$ thousand) Difference due to anticipation of % ,622, ,727,507 1 st Year of Tariff Cycle: From 8/10/2012 to 8/9/2013 a) Aug11/12-Dec31/ ,419, ,509,357 3,509,357 0 b) Jan1/13-Mar21/ , ,020,460 2,020,460 0 c) Mar22/13-Aug10/ ,450, ,670,628 3,586,316 84,312 Total 1 st Year of Cycle: 365 3,686, ,200,445 9,116,133 84,312 Note: 1) Annual tariff and volume data of Tariff Revision and distribution by period of 1 st year of Cycle proportional to the number of days. 2) Repositioning index applied on March 22, 2013 = % (ARSESP Resolution nº 406/2013) CALCULATION OF REVENUE LOSS DERIVING FROM ARSESP S DELAY TO APPROVE THE ADJUSTMENT Considering that the recovery of minimum quorum necessary for ARSESP s Executive Board resolutions only occurred on October 23, 2013, the authorization and publication of SABESP tariff adjustments referring to 2013 only could be materialized approximately three months after the Reference Date, i.e., on November 11, This fact imposes the need of a second adjustment, in the opposite direction, which consists of offsetting the concessionaire s revenue loss due to delay in applying the adjustment. This difference corresponds to the increase in revenue that would have occurred in the period between the reference date of adjustment (August 11, 2013) and the effective date of its application (November 11, 2013), if it had been applied on the reference date. The delay was of 92 days and the revenue loss is given by the difference between revenues of the 92-day period of delay calculated WITH and WITHOUT the % adjustment that would have been applied on the Reference Date (August 11, 2013). This Revenue Loss resulted in R$59,604 thousand3. 3 Revenue Loss = 2013 Volume * (Days of Delay/365) * Average Tariff(ba) * IRT(rd) = 3,727,507 * (92/365) * * % = R$59,604,000. Where: ba = before adjustment; rd = reference date. 13

14 3.4 CALCULATION OF IRT The Tariff Adjustment Index IRT of SABESP to be applied over services rendered as of November 11, 2013, was calculated taking into account the methodology, the requirements and compensatory adjustments mentioned above. Table 2 below shows the calculation statement of IRTs adjusted for the Reference Date (August 11) and for the Date of Application (November 11,2013) considering all due adjustments. Table 2: IRT to be applied over services rendered as of November 11, 2013 Breakdown Reference Date Adjustment Date Aug 11,2013 Nov 11, Revenue of 1 st year of cycle with tariffs - cycle inception (ARSESP Resolution 353/2012) 9,116,133 9,116,133 2-Tariff adjustment: preliminary P 0 on March 22, 2013 (repositioning index) % % 3-Revenue 1 st year of cycle with current tariffs (ARSESP Resolution 406/2013) 9,330,445 9,330,445 4-Tariff Adjustment Index on Reference Date: IRT = IPCA - X % % 4.1- IPCA Variation: Jul2013/Jul % % 4.1-Efficiency Factor (X Factor) % % 5-Revenue of 1 st year of cycle with adjusted tariffs (IPCA-X) 9,648,607 9,648,607 6-Compensatory adjustments to revenue -84,312-24, Revenue anticipated by preliminary P 0 (Repositioning Index=2.35%) 6.2-Revenue loss due to delay in adjustment (92 days) -84, ,312 59,604 7-Adjusted revenue of 1 st year of cycle (after adjustments) 9,564,295 9,623,899 Adjusted tariff adjustment index - IRT: (7)/(3) % % 1) Delay in adjustment: 92 days 2) X Factor=> 0,4297% We can see, as shown in Table 2, that the Adjusted Tariff Adjustment Index (IRTa) that would have been applied on the Reference Date (August 11, 2013) would be %. For application over services rendered as of November 11, 2013, i.e., 92 days thereafter, this amount increases to %. 3.5 APPLICATION OF ADJUSTMENT The adjustment percentage (3.1451%) was applied on a straight-line basis over current tariffs, with rounding in the second decimal, resulting in the authorized tariff amounts shown in the tables of the following attachments. 14

15 4 ATTACHMENTS 15

16 Attachment 1 METROPOLITAN EXECUTIVE BOARD - GT-M MC, ML (includes the municipality of Guararema), MO, MN (except for the municipalities of: Bragança Paulista, Joanópolis, Nazaré Paulista, Pedra Bela, Pinhalzinho, Piracaia, Socorro and Vargem) and MS. RESIDENTIAL COMMERCIAL / INDUSTRIAL / PUBLIC Social Tariff Commercial / Industrial / Public without contract 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 30 R$/m³ to 50 R$/m³ to 50 R$/m³ Above 50 R$/m³ above 50 R$/m³ Shantytown Tariff Commercial: social welfare entities 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 30 R$/m³ to 50 R$/m³ to 50 R$/m³ above 50 R$/m³ above 50 R$/m³ Normal Tariff Public with contract Tariff 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 50 R$/m³ to 50 R$/m³ above 50 R$/m³ above 50 R$/m³ OTHER SERVICES Tariff Water Sewage Tank Car: Third parties R$/m³ Tank Car: SABESP R$/m³ Permissionaires R$/1000m³ 1, METROPOLITAN EXECUTIVE BOARD: GT-MN MN only for municipalities in the region of Bragança Paulista (Bragança Paulista, Joanópolis, Nazaré Paulista, Pedra Bela, Pinhalzinho, Piracaia, Socorro and Vargem) RESIDENTIAL COMMERCIAL / INDUSTRIAL / PUBLIC Social Tariff Commercial Normal / Industrial / Public without contract 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 30 R$/m³ to 50 R$/m³ to 50 R$/m³ Above 50 R$/m³ above 50 R$/m³ Normal Tariff Commercial / Social Welfare Entities 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 50 R$/m³ to 50 R$/m³ above 50 R$/m³ above 50 R$/m³ OTHER SERVICES Tariff Public with contract Tariff Water Sewage Consumption levels (m³) Water Sewage Tank Car: third parties R$/m³ to 10 R$/month Tank Car: SABESP R$/m³ to 20 R$/m³ Permissionaires R$/1000m³ 1, to 50 R$/m³ above 50 R$/m³

17 Attachment 2 REGIONAL SYSTEMS EXECUTIVE BOARD: GT-RS and RN Municipalities of Santos Coast Region and North Coast RESIDENTIAL COMMERCIAL / INDUSTRIAL / PUBLIC Social Tarif Commercial Normal / Industrial / Public without contract 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 30 R$/m³ to 50 R$/m³ to 50 R$/m³ Above 50 R$/m³ above 50 R$/m³ Normal Tarif Commercial /Social welfare entities 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 50 R$/m³ to 50 R$/m³ above 50 R$/m³ above 50 R$/m³ Other Services Tarif Public with contract Tariff Water Sewage Consumption levels (m³) Water Sewage Tank Car: third parties R$/m³ to 10 R$/month Tank Car: SABESP R$/m³ to 20 R$/m³ Boats and Ships 21 to 50 R$/m³ Santos coast region-rs R$/m³ above 50 R$/m³ North coast-rn R$/m³ REGIONAL SYSTEMS EXECUTIVE BOARD: GT-Registro RR (except for municipalities of Apiaí, Barra do Chapéu, Itaóca, Itapirapuã Paulista and Ribeira) RESIDENTIAL COMMERCIAL / INDUSTRIAL / PUBLIC Social Tariff Commercial Normal / Industrial / Public without contract 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 30 R$/m³ to 50 R$/m³ to 50 R$/m³ Above 50 R$/m³ above 50 R$/m³ Normal Tariff Commercial / Social welfare entities 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 50 R$/m³ to 50 R$/m³ above 50 R$/m³ above 50 R$/m³ OTHER SERVICES Tariff Public with contract Tariff Water Sewage Consumption levels (m³) Water Sewage Tank Car: third parties R$/m³ to 10 R$/month Tank Car: SABESP R$/m³ to 20 R$/m³ Boats and ships 21 to 50 R$/m³ Santos coast region-rs R$/m³ above 50 R$/m³ North coast-rn R$/m³

18 Attachment 3 REGIONAL SYSTEMS EXECUTIVE BOARD: GT-Inland RA, RB, RG (except for Itapira), RJJ, RM, RR (for municipalities of: Apiaí, Barra do Chapéu, Itaóca, Itapirapuã Paulista and Ribeira) and RT (except for municipality of Lins) RESIDENTIAL COMMERCIAL / INDUSTRIAL / PUBLIC Social Tariff Commercial Normal / Industrial / Public without contract 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 30 R$/m³ to 50 R$/m³ to 50 R$/m³ Above 50 R$/m³ above 50 R$/m³ Normal Tariff Commercial / Social welfare entities 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 50 R$/m³ to 50 R$/m³ above 50 R$/m³ above 50 R$/m³ OTHER SERVICES Tariff Public with contract Tariff Water Sewage Consumption levels (m³) Water Sewage Tank Car: Third parties R$/m³ to 10 R$/month Tank Car: SABESP R$/m³ to 20 R$/m³ to 50 R$/m³ above 50 R$/m³ REGIONAL SYSTEMS EXECUTIVE BOARD: Paraiba Valley (RV) RV (except for municipality of Guararema where tariff practiced comes from RMSP-ML) RESIDENTIAL COMMERCIAL / INDUSTRIAL / PUBLIC Social Tariff Commercial Normal / Industrial / Public without contract 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 30 R$/m³ to 50 R$/m³ to 50 R$/m³ Above 50 R$/m³ above 50 R$/m³ Normal Tariff Commercial / Social welfare entities 0 to 10 R$/month to 10 R$/month to 20 R$/m³ to 20 R$/m³ to 50 R$/m³ to 50 R$/m³ above 50 R$/m³ above 50 R$/m³ OTHER SERVICES Tariff Public with contract Tariff Water Sewage Consumption levels (m³) Water Sewage Tank Car: Third parties R$/m³ to 10 R$/month Tank Car: SABESP R$/m³ to 20 R$/m³ to 50 R$/m³ above 50 R$/m³

19 Attachment 4 RB: Municipalities of Adamantina and Pirapozinho Commercial Special Consumption levels (m³) Water Sewage 0 to 10 R$/month to 20 R$/m³ to 50 R$/m³ above 50 R$/m³ Note: For other categories, tariffs of Attachment III shall apply REGIONAL SYSTEMS EXECUTIVE BOARD RB: Municipality of Presidente Prudente Residential Special Consumption levels (m³) Water Sewage 0 to 10 R$/month to 20 R$/m³ to 50 R$/m³ above 50 R$/m³ Commercial Special Consumption levels (m³) Water Sewage 0 to 10 R$/month to 20 R$/m³ to 50 R$/m³ above 50 R$/m³ Note: For other categories, tariffs of Attachment III shall apply 19

20 Attachment 5 METROPOLITAN EXECUTIVE BOARD Water supply at wholesale and sewage treatment for permissionaire municipalities of the São Paulo metropolitan region Effective Tariff at R$/1000 m³ Municipality Water at Wholesale Sewage Treatment Diadema 1, Guarulhos 1, Mauá 1, Mogi das Cruzes 1, Santo André 1, São Caetano do Sul 1,