Strategic Moves - Regional Environmental Center for Central and ...

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form of communal company, communal institution, or individual facility owned by the local government. Croatia has a long tradition of communal companies in the water sector, and any future reform should strive towards lowering their number and increasing their efficiency. No systematic reform of the water utilities has yet taken place. However, the consolidation of water utilities is envisaged in the Water Management Strategy in the period until 2015. In many cases the price of services does not reflect the real operational costs. However, full recovery of operating costs is achieved in most medium-sized and large towns. However, in most cases depreciation cannot be covered from tariff revenues. Water and wastewater services in many municipal companies, especially smaller ones, are cross-financed by other activities (REC survey 2008). To date, there have been reforms only at individual utility level. Inadequate tariff setting leads to a situation in which systems are not well maintained; facilities are old and depreciated, with some not functioning; interventions take place only at critical points; and big water losses exist. However, in the authors’ opinion the technical performance of the utilities in Croatia is better than average in the region (REC survey, 2008). According to the Law on Local Self-Government, municipalities in Kosovo (as defined under UNSCR 1244) are responsible for providing water (and/or waste) services. This responsibility is to be implemented through a service agreement signed by the municipality and the relevant regional water (or waste) company that provides services in the municipality. The water and waste sectors recently underwent a process of consolidation (restructuring) under the supervision of the Kosovo Trust Agency (KTA), whereby municipal water and waste enterprises have been merged into seven regional water and wastewater companies and seven regional waste collection companies. Municipal enterprises located in areas with Serbian majorities did not participate in this process and remain unconsolidated. Another aspect of the reform was the establishment of a legal framework for the economic regulation of the water and solid waste service providers in November 2004 (under UNMIK Regulation 2004/49). As a result, the Water and Waste Regulatory Office of Kosovo (WWRO) was established in 2004. A third step of the reform was the incorporation of the public water and waste companies. This phase was finalised in 2007 by transforming water and waste regionalised companies into joint stock companies with a clearly defined legal and financial identity, governed according to the principles of corporate governance. The ownership of these enterprises is regulated by the Law on Publicly Owned Enterprises (adopted on June 13, 2008). The privatisation was undertaken via spin-off and liquidation, and investors were invited to buy through open competitive tenders (WWRO, 2009). The KTA, which previously administrated the regional water companies, ceased operations in June 2008, since which time the ownership of the public utility companies has not been defined. The Privatisation Agency of Kosovo (PAK) has been established as the successor to the KTA. According to the Water Supply Tariff Policy, the WWRO is responsible for tariff setting and “collects performance data from the water companies, computes in- C H A P T E R 6 WAT E R A N D WA S T E U T I L I T I E S I N S E E — S TAT U S A N D R E F O R M S T R AT E G I C M O V E S 127
128 C H A P T E R 6 WAT E R A N D WA S T E U T I L I T I E S I N S E E — S TAT U S A N D R E F O R M S T R AT E G I C M O V E S dicators using these data”, and sets “targets, the fulfilment of which is annually monitored” (WWRO, 2009). Thus far, the WWRO has carried out two tariff-setting processes for one-year tariffs (2006/2007 and 2007/2008), although there are plans to set tariffs for a period of three years. During 2008, a positive trend could be observed in the performance of the seven regional water companies (WWRO, 2009). However, two critical problems stand out: the low rate of payment collection, at 57 percent 12 (World Bank, 2006); and the lack of cost recovery for operations. Operating costs are barely covered by revenues, which makes the budget situation in the water utilities very tight. The new tariffs designed by the WWRO and the above-mentioned WWRO project for the performance monitoring of water companies are improving the situation. However, for capital investments, grants and affordable loans are needed. Estimated Uf W is 59 percent; the bill collection rate is estimated at 43 percent; and there are on average seven staff per 1,000 connections. Service providers are only just meeting their direct operation costs and there is no capacity for the financing of capital investments, including capital maintenance. In order to achieve compliance with EU standards and to satisfy the current supply and demand imbalance, cash revenue has to increase considerably, either by increasing collection efficiency or by raising tariffs, or by a combination of the two (REC survey, 2008). Currently most water PUCs in the former Yugoslav Republic of Macedonia are poorly organised and suffer from poor operational capacities. Tariffs are generally too low, resulting in insufficient resources for capital maintenance let alone infrastructure investment. Low tariffs, combined with the lack of will to reform PUCs, result in insufficient capacity to implement EU-compliant wastewater treatment. According to the 2008 REC survey, the national average Uf W is up to 60 percent. A survey by the World Bank (2006) estimates the national average payment collection rate at between 50 and 60 percent, while in urban areas it averages 75 percent. Households seem better at bill payment than industrial customers. The collection of payments has improved recently, due to more stringent efforts such as warnings to non-paying customers, court procedures, and, in some cases, disconnection from the network. According to the current rules, the municipality nominates two-thirds of the members of the PUC management board, as well as the director. Such a structure can lead to heavy political interference in the day-to-day management of the municipal enterprise. Tariff setting is guided more by political ambition than financial rationale and the desire for financial sustainability. Operating costs are therefore rarely covered by tariff revenues. Several projects supported by IFIs and bilateral donors are preparing the country for reforms in the water sector. The government strategies outline specific tasks for the water service. A minimum service standard will be established for calculating the costs of services, raising the level of grants and developing an effective fiscal equalisation. As mentioned above, Kf W introduced a benchmarking approach before funding water supply projects in utilities. Within this programme, Kf W also introduced a quality management approach with help from an institutional
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The Priority Environmental Investme
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About the REC The Regional Environm
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4 C O N T E N T S Chapter 3 Challen
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6 A B B R E V I AT I O N S S T R AT
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8 A B B R E V I AT I O N S S T R AT
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10 S T R AT E G I C M O V E S
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12 Foreword from the Regional Envir
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14 A U T H O R S A N D A C K N O W
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16 A U T H O R S A N D A C K N O W
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20 E X E C U T I V E S U M M A R Y
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32 I N T R O D U C T I O N S T R AT
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40 C H A P T E R 1 T H E R O L E O
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48 C H A P T E R 2 S TAT U S O F E
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58 C H A P T E R 3 C H A L L E N G
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72 C H A P T E R 4 E C O N O M I C
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74 C H A P T E R 4 E C O N O M I C
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178 C H A P T E R 7 F I N A N C I N
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190 C H A P T E R 8 P R I O R I T I
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206 C H A P T E R 9 T H E WAY F O R
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214 A N N E X E S A N N E X 1 Bosni
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216 A N N E X E S A N N E X 1 The f
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218 A N N E X E S A N N E X 2 Annex
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220 A N N E X E S A N N E X 3 Croat
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222 A N N E X E S A N N E X 4 S T R
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224 A N N E X E S A N N E X 5 Annex
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226 A N N E X E S A N N E X 5 Alban
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228 A N N E X E S A N N E X 5 Bosni
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234 A N N E X E S A N N E X 5 Kosov
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236 A N N E X E S A N N E X 5 Kosov
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238 A N N E X E S A N N E X 5 The f
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240 A N N E X E S A N N E X 5 Monte
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242 A N N E X E S A N N E X 5 Serbi
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244 A N N E X E S A N N E X 5 Serbi
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246 A N N E X E S S T R AT E G I C
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THE REGIONAL ENVIRONMENTAL CENTER F
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