Transcript Bridging Partners, Regions and Concepts…

Utility reform in Romania
example in Cluj
Presentation of
The Regional Environmental Center
for Central and Eastern Europe
Christelle Kapoen
September 2008
Contents
1. Romanian water sector
a. Challenges
b. Reform strategies
2. Utility reform in Cluj
a.
b.
c.
d.
e.
Cluj municipal utility
Reform objectives
Institutional / organisation reform
Financial reforms (cost-recovery)
Reform results
3. Success factors
www.rec.org
1. Romanian water sector
• Institutional responsibilities
• Ministry of Environment and Water responsible for
national water strategies and policies
• Apele Romana, national water authority, responsible
for implementation of water policies and monitoring
• National Authority for Regulation and Tariffs is
responsible for the pricing strategy in the water sector
• Service responsibilities
• Municipal/county governments are responsible for
service provision
• Decentralized local utilities or utility departments carry
out the services.
www.rec.org
Situation in the nineties
• Decentralization of water sector with aim to give
autonomy, but low independency
• Detoriated water system
• Especially the sewerage network and wastewater
treatment systems
• Low level of connections in rural area
• 17 % water / 3 % waste water
• Low tariffs, low collection rate, low affordability
• Lack of investments, and dependency on
national government
www.rec.org
1a. Challenges
• EU accession
• Acquis communautaire
 Rehabilitation, extension, water quality improvement and
development of wastewater systems
• Attract International funding
• EU, EBRD, WB, ..
• Commercial banks and private sector operators
• Attract investment to extend water / wastewater networks and
systems and rehabilitation of old ones
 Full cost-recovery / improve operational efficiency and
performance
www.rec.org
1b. Reform strategies
• Reform of municipal utilities
• Autonomous public utilities and improve operations,
efficiency and cost-recovery
• If possible, regionalisation, to improve investment
ability / efficiency / performance of smaller utilities
• Attract EU funds (ISPA, EU cohesion funds, ..)
• Example: Cluj water
• Private sector participation
• Reform of the utility
• Outsourcing of operations (O&M, investment etc) to
improve operations, efficiency and self-sufficiency
• Attract private capital
• Example: Bucharest concession with Veolia
www.rec.org
2. Utility reform in Cluj
www.rec.org
2a. Cluj water utility
• R.A.J.A.C. Cluj, municipal utility
• Detoriated system: high UFW, coverage
problems, no wastewater treatment
• Inefficiency: overstaffing, poor O&M, financial
problems
BUT
• Many surrounding villages and towns were worse
off than Cluj
• Cluj has done successful rehabilitation, extension
and reforms with help of EC/EBRD
www.rec.org
Utility system of Cluj
www.rec.org
2b. Objectives for development and reform
• Meeting EU regulations
• Funding available but conditional
• Development, rehabilitation and extension of
networks and systems
• Capacity building to transform the utility to an
efficient service provider recovering costs
• Regionalisation: increase of coverage and
efficiency
www.rec.org
Funds for development
• Several funds for development like EBRD, EU (ISPA,
Phare) and others
• Support from national government
• About 130 million Euro for investments
• about 19 million Euro loan EBRD (MUDP, SAMTID)
• About 17 million Euro loan EIB (ISPA)
Investments in water / wastewater infrastructure C.A.S.S.A
13.5
36.35
14
3
61.17
MUDP II
ISPA
Taxa speciala
government sources
SMATID
www.rec.org
2c. Institutional / organisation reform
Conditional to funding for rehabiliation & extension of
systems:
• Capacity Building and Organisational development:
•
•
•
•
HRM (reduce over-staffing) and HRD (staff development)
Improved O&M
Revision of tariff system, billing & collection
Public awareness and PR
• Expansion of operation from Cluj town to Cluj county
• Establishment of Somes Water Company C.A.S.S.A
• Corporatization of Cluj R.A.J.A.C.
• Autonomy // Accountability
www.rec.org
Reform phase 2: regionalisation
• Reform of C.A.S.S.A into Regional Operator (2005)
• Shareholders Cluj and Salaj counties plus other municipalities
• Replacing all previous water companies
• Make use of experience of Cluj Performance
improvement program
•
•
•
•
Connection of water supply system Cluj / Salaj and others
Harmonize and centralise support functions (finance, HRM etc)
Synergies and improvement of O&M (equipment, GIS)
Improved financial and technical performance (quality
management, monitoring & control)
www.rec.org
Institutional set-up
Cluj County Council
Salaj County Council
Councils Dej, Gherla, Huedin
Councils Zalau, Jibou, Cehul
Silvaniei, Simleul Silvaniei
Shareholders
Concession contract
ROC
C.A.S.S.A.
RAJAC Cluj SC Publiserv
SC Aquasom DejRAGCL Gherla
SC Crisul Huedin
www.rec.org
Utility systems of CASSA
www.rec.org
Utility operations CASSA
After Reforms:
• 621.000 inhabitants to be served in Cluj/Salaj counties
• Over 65.000 connections (42.000 water // 25.000
wastewater)
• 9 water supply systems (7 WTPs)
• 8 wastewater treatment systems
Future:
• One centralised system
• 100 % water coverage and 80 % wastewater services
• Increased operational and technical performance
www.rec.org
2d. Financial reform
Coincided with the organisational reform
Problems:
• Financial losses
• Problems with collection of receivables
• Declining water consumption
• No reliable data about costs of O&M, assets and
investments
• Financial agreement and targets with financers
www.rec.org
Reform to improve cost-recovery
Action plan
• Asset management and budgeting
• Inventory van valuation of asset base
• Determining cost base (depreciation, O&M needs)
• Business planning and investment planning
• Budgeting and inclusion of investments/depreciation
• Tariff revision plan
• Charging improvement
• Improvement of metering: installation, calibration, Meter reading
• Unified procedures for billing and collection
• Collection rate improvement / bad debt policy
www.rec.org
Tariff design principles
• Full Cost Recovery (including depreciation and
loan obligations)
• Implementation of “Beneficiary/Polluter pay
principle”
• No differentiation between consumer groups
• No cross-subsidisation across municipalities
• No Pro-poor policies
• Charging based on consumption
www.rec.org
Pricing of CASSA services
Recovery of costs for
• Connection (fee for making the connection)
• Water usage / wastewater collection
Bill contains several elements
•
•
•
•
•
Metered water usage
Wastewater collection (100% water)
Meteorological consumption (property size)
Special tax for investments
VAT
www.rec.org
Tariff policy implementation
Metered water usage
Wastewater collection
Meteorological collection
Special tax
VAT
Affordability
•
•
•
ct per m3
ct per m3
ct per m3
ct per m3
in %
1999
10
5
5
0.3
0%
1.5 - 2.5%
2004
21
8.5
8.5
0.6
19%
2008
38
18
18
2
19%
3-6%
Affordability based on average 120l/c/d
Actual water consumption fell from 180 l/c/d to 90 l/c/d
Bill as % of household income is thus about 4,5 %
www.rec.org
2e. Results of Reforms
• On the way to meet EU obligations and investor’s
obligations
• Reduced UFW, increased coverage and services
• Increased technical and financial performance
• Reduced inefficiency and O&M costs
• Reduced bad debts
• Increased knowledge and monitoring capacity on
technical and financial indicators
• Increased financial income
www.rec.org
3. Success factors
• Relate investment plan with investment needs,
• Laws and regulations (health, environment, etc)
• Systems condition and urban planning
• Relate investment plan with financial potential
• cost-recovery plan (affordability) and reform plans
• Design reform strategy and business plan before
Capacity Building
• Autonomy and decision making power
www.rec.org
Thank you