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

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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