São Paulo state to restructure regulatory agencies

São Paulo state lawmakers approved a sweeping bill to restructure regulatory agencies, a move set to affect the extensive PPP and concessions portfolio.

"The bill includes the modernization of transport agency Artesp and the public services regulatory agency Arsesp, in addition to the creation of the new water agency, SP Águas, which will replace the current department of water and electricity (Daee)," a press release said.

The bill only needs to be signed into law by governor Tarcísio de Freitas.

The executive secretary of the state’s investment partnerships office, André Isper Rodrigues Barnabé, said the government seeks to strengthen governance through the regulation of decision-making processes.

“Our proposal establishes rules that guarantee technical, administrative and financial autonomy for agencies, in addition to linking them to long-term planning, with objective goals and control of results,” he said in the release.

Under the proposed rules, Artesp will regulate road, airport, waterway and metro-rail infrastructure and services, in addition to intercity public transport. It will also oversee infrastructure associated with public transport services, such as state-owned roads and terminals.

The bill comes as De Freitas is accelerating concession processes and PPPs.

"São Paulo is already the state with the most projects developed in the area of passenger transport on rails, and in the coming years it will likely be the state in Brazil with the highest number of PPPs and concession contracts offered in the segment," Joubert Flores, president of local passenger transport association ANPTrilhos, told BNamericas.

“De Freitas is positioning himself as an efficient public administrator and this is part of his focus to be a potential candidate for the presidency of Brazil in the 2026 elections. With the PPPs and concessions agenda advancing in the largest state in the country, this will serve as a flag for his potential candidacy for the presidency,” André Pereira César, a political analyst at Hold Consultoria, told BNamericas.

Before becoming governor, De Freitas served as infrastructure minister between 2019 and 2022, during the Jair Bolsonaro administration. He is considered an opponent of President Luiz Inácio Lula da Silva.

Meanwhile, Arsesp will continue to regulate, monitor and control piped gas services, basic sanitation and the generation, transmission and distribution of electrical energy.

WATER

São Paulo state’s water sector is changing amid the recent privatization of state firm Sabesp, the country's largest utility.

This change is also affecting regulator Daee, which would become SP Águas and monitor water use for public supply, industry, agriculture, commerce, energy and mining.

"The new agency will play an important role in water security in the state, monitoring and regulating related activities, including flood control and providing technical support to municipalities; in addition to actions to combat climate change, control over the withdrawal of water from surface and underground sources, and the efficient use of water," the release said.

The agency will rely on own revenue sources and its directors will have defined mandates. It will follow general transparency and governance standards, which include carrying out public consultations and regulatory impact studies.

Like Artesp and Arsesp, the new agency will also be led by a CEO and four directors.