INCENTIVE-BASED IN BASIC SANITATION: THE X FACTOR AS NA INSTRUMENT TO PROMOTE EFFICIENCY.
X-Factor; Malmquist index; Basic Sanitation.
Basic sanitation should be treated not only as an infrastructure policy but also as a public health issue, crucial to human survival. When well managed, it contributes to improving the population's quality of life, reduces diseases, preserves the environment, and promotes sustainable development. In Brazil, universal access to basic sanitation is one of the country’s main structural challenges, despite progress over the past decades. The pressure for investments strains company budgets, making the use of regulatory solutions that promote efficiency crucial. In this context, the X Factor stands out as a regulatory mechanism. The trajectory of sanitation in Brazil shows the influence of political discussions. Regulation theories, such as the public interest theory and the capture theory, reaffirm the importance of agents in the environment with a natural monopoly in which basic sanitation is found. Thus, this research aims to propose and estimate a X-Factor for the sector, suitable to be incorporated into the formula for calculating tariff adjustments to account for technological advancement gains. It encompasses all Brazilian companies, through a purposive sample, covering the 27 main companies in the sector. The methodology for calculating the X-Factor of SABESP-SP will be used, which employs the Malmquist index on a sample of comparable providers, acting as a mechanism for sharing technological efficiency gains.