Investigating the Key Factors Influencing the Profitability of Romanian Public Water Supply and Sewerage Services

This paper explores the dynamics of the public water supply and sewerage service in Romania, focusing on the relationships between different operational, commercial and financial variables and their impact on the operating profit rate. The aim of the paper is to analyze the interactions, both in the short and in the long term, between these economic variables, using an advanced econometric methodology, by applying the ARDL (Autoregressive Distributed Lag) model. The analysis was carried out on a dataset of 11 annual cycles, allowing to assess the stability and dynamics of the relationships studied. The results indicate a positive correlation between water infrastructure expansion and the rate of profit, suggesting that investments in network length can contribute to the economic growth of the sector. In contrast, tariff increases showed a long-term negative impact on the profit rate, reflecting consumers' sensitivity to price changes. Efficient management of non-revenue water and damage reduction were also found to be key to improve financial performance and increase sustainability. The paper provides an in-depth understanding of market mechanisms and can support the development of more effective public policies for water resource management in the context of current socio-economic and environmental challenges.