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Utility reform in Romania example in Cluj. Presentation of The Regional Environmental Center for Central and Eastern Europe. Christelle Kapoen September 2008. Contents. Romanian water sector Challenges Reform strategies Utility reform in Cluj Cluj municipal utility Reform objectives - PowerPoint PPT Presentation
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Utility reform in Romaniaexample in Cluj
Presentation of The Regional Environmental Center
for Central and Eastern Europe
Christelle KapoenSeptember 2008
www.rec.org
Contents1. Romanian water sector
a. Challengesb. Reform strategies
2. Utility reform in Cluja. Cluj municipal utilityb. Reform objectivesc. Institutional / organisation reform d. Financial reforms (cost-recovery)e. 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 problemsBUT• 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
36.35
61.17
3
14
13.5
MUDP II
ISPA
Taxa speciala
government sources
SMATID
www.rec.org
2c. Institutional / organisation reformConditional 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
SC PubliservRAGCL GherlaSC Aquasom Dej
Institutional set-up
ROCC.A.S.S.A.
RAJAC Cluj
SC Crisul Huedin
Cluj County CouncilSalaj County Council
Councils Dej, Gherla, HuedinCouncils Zalau, Jibou, Cehul Silvaniei, Simleul Silvaniei
Shareholders
Concession contract
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 systemsFuture:• One centralised system• 100 % water coverage and 80 % wastewater
services• Increased operational and technical performance
www.rec.org
2d. Financial reformCoincided 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-recoveryAction 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 servicesRecovery 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
• 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 %
1999 2004 2008Metered water usage ct per m3 10 21 38Wastewater collection ct per m3 5 8.5 18Meteorological collection ct per m3 5 8.5 18Special tax ct per m3 0.3 0.6 2VAT in % 0% 19% 19%Affordability 1.5 - 2.5% 3 - 6 %
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
Thank you