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Water services regulation has been introduced to the Kenyan water sector as part of a comprehensive sector reform. The research reported in this paper analyses institutional arrangements and the legal framework for formal waler service provision and regulation in Nairobi as weil as the informal and largely unregulated water markets serving the majority of the population living In the city's many informal settlements. By tracing regulatory developments against a backdrop of steadily increasing population and high poverty levels, the paper examines the role of regulation in facilitating the early delivery of an appropriate level of service to low-income households. By 2006. regulation had only begun to address the significant gaps and ambiguities In the available baseline data and corresponding sector targets, and to include low-income consumers and their current providers into the regulatory framework, while a lack of financial viability prevented the main provider from expanding services into underserved areas. The findings highlight a continued need for institutional strengthening and good regulatory governance to drive pro-poor sector development.

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The failure of many developing countries water utilities to provide adequate services to low-income urban populations stands in marked contrast with calls for universal access to water services, often based on a concept of human rights. Much of the parallel, regulation oriented, 'universal service obligation' rhetoric not only ignores the origins and continuing evolution of the term but equally fails to consider the practical realities of achieving universality of networked urban water supply, particularly in the slums. This paper proposes a 'universal water service dynamic' which allows service obligations to evolve transparently and progressively in line with different consumer groups' preparedness to pay, relative to their perception of the benefits.