Water Services Industry Performance Report 2009 - · PDF fileWater Services Industry Performance Report 2009 CONFIDENTIAL . ... (BEM) , Institution of ... (IEM) and Board of

Water Services IndustryPerformance Report

2009(An Abridged Version)

SURUHANJAYA PERKHIDMATAN AIR NEGARA

Introduction

The main objective of the Water Services Industry Act 2006 (WSIA 2006 or Act 655) is to establish a

licensing and regulatory framework for regulatory intervention to promote the national policy objectives

for the water services as determined by the Government. One of the national policy objectives is to

establish a transparent and integrated structure that delivers effective and efficient service to the

consumers. Many initiatives have been taken to realize this objective including the restructuring of the

state water supply industry and migrating to the new licensing regime under WSIA 2006.

The reform of the water services requires a new model that can transform the industry into a long term

sustainable operating model. The transformation promotes an asset light model designed to ensure

improvements in service delivery towards economic sustainability. The report will assess the industry for

2009 based on the following key areas namely Physical Performance; Financial Performance; Licensing,

Enforcement and Restructuring; Environment, Health and Quality Standards; and Consumer Affairs.

Water Supply Services

a. Physical Performance

Service Coverage

The average water supply services coverage for Peninsular Malaysia, Federal Territory of Labuan,

Sabah and Sarawak is as shown in the table below:

State

2008 2009

Avg. Population Served (%) Avg. Population Served (%)

Urban Rural Average Urban Rural Average

Peninsular Malaysia and FT of Labuan 96.1 91.5 93.8 96.4 92.4 94.4

Sabah 99.0 52.0 76.0 99.0 52.3 76.3

Sarawak 99.0 56.5 78.0 99.5 61.5 86.2

National 96.5 85.3 90.9 96.8 86.5 91.6

For rural areas, continuous efforts are being undertaken by the Federal Government through

KementerianKemajuanLuar Bandar dan Wilayah (KKLW) to improve the coverage to these areas.

Copyright of Suruhanjaya Perkhidmatan Air Negara pg :1 Water Services Industry Performance Report 2009 CONFIDENTIAL


Water Consumption

The total volume of water consumption increased slightly by 1% from 2.67 billion m3 in 2008 to 2.70

billion m3 in 2009 due to higher non‐domestic demand which increased by 4% from 908 million m3 in

2008 to 945 million m3 in 2009 while domestic consumption decreased marginally by 0.1% from 1.753

billion m3 in 2008 to 1.752 billion m3 in 2009. The change in consumption profile is mainly due to:

i. new demand;

ii. re‐categorization of Government sector consumption from Domestic to Non‐Domestic in

Johor, Melaka and Negeri Sembilan; and

iii. adjustments or changes in data extraction/measurement parameters by operators in Pahang

and Perlis.

Average domestic consumption for Malaysia in 2009 is 202 lcd

compared to 205 lcd in 2008, which is high in comparison with

others, such as Singapore and Hong Kong.

Country/City lcd

Malaysia

Peninsular Malaysia & FT

Labuan

202

221

Singapore 156

Hong Kong 187

Seoul 205

Non Revenue Water (NRW)

Water losses, referred to as Non Revenue Water (NRW), are

calculated by comparing production volume with metered

consumption. The national average NRW reduced marginally

from 36.93% in 2008 to 36.63% in 2009. Generally, NRW of

most states showed improvements of between 0.02% and 2%

in 2009.

NRW 2008 (%)

2009 (%)

National 36.93 36.63

Pen. Malaysia & FT Labuan

36.21 36.29



The 2009 NRW performance of states that have migrated to the new licensing regime are all on track

except for Melaka as shown below:

State/Operator 2009 Target as per

Business Plan (%)

Achievement as at end 2009

(%)

Comments

Johor/SAJH 32.20 31.95

Melaka/SAMB 29.00 29.71 Expected to achieve the business plan target at the end of the 1st operating period in 2012

N. Sembilan/SAINS 50.00 49.16

Note: As at September 2010, NRW for Melaka is 25.28 %, Johor 29.56 % and Negeri Sembilan 42.57%.

b. Financial Performance

Revenue

Total revenue (Semenanjung Malaysia and WP Labuan) increased slightly from RM3.44 billion in 2008

to RM3.46 billion in 2009. Since there were no tariff reviews in 2009, the improvement in tariff

revenue was directly related to a 4% increase in natural demand as well as reduction in commercial

losses.

Item Unit 2008 2009 Difference

(%)

Total Revenue RM Billion 3.44 3.46 0.7

‐ Tariff Revenue RM Billion 3.11 3.19 2.6

‐ Non Tariff Revenue RM Billion 0.33 0.27 (17.2)

Average Realized Tariff RM/m3 0.98 1.01 3.0

Operating Expenditure

In 2009, the total cost incurred by the water supply service sector in Semenanjung Malaysia and WP

Labuan increased by 4%, from RM3.30 billion in 2008 to RM3.43 billion in 2009. The main factor for

the increase in overall cost is mainly attributed to the increase in electricity tariff of 14% in 2006 and

26% in 2008. Energy cost formed a high proportion of water treatment cost at an average of 56%.



In addition to higher electricity tariff, there are still many old and inefficient treatment plants that are

in operation resulting in higher consumption of electricity and costs of operations.

Item 2008

(RM billion) 2009

(RM billion) Change (%)

Total Cost 3.30 3.43 4.0

‐ Operating Cost 2.06 2.22 8.0

‐ Non Operating Cost 1.24 1.21 (2.7)

Capital Expenditure

Continuous capital expenditure (Capex) is required to develop better infrastructure in order to

improve the quality of water supply services. Table below shows the amount of Capex that has been

spent and allocated as at end of 2009.

Item Agency/Program Category Amount

(RM million)

1 PAAB ‐ 101

2 Ninth Malaysia Plan (RMK – 9) (allocation between 2006‐2009)

Loan 4,179

Grant 1,785



Sewerage Services a. Physical Performance

Service Coverage

According to the report on the Progress on Sanitation and Drinking‐Water by the World Health

Organization ‐ UNICEF Joint Monitoring Program for Water Supply and Sanitation (JMP), 96% of

Malaysia’s population has access to sanitation. The profile of Malaysia’s sewerage services is as per

table below :

Sewerage Systems 2008 2009

No. Population

Equivalent (PE) No.

Population Equivalent (PE)

Connected Services

Public Sewage Treatment Plant 5,233 17,515,294 5,616 18,963,691

Private Sewage Treatment Plant 1,903 2,350,560 2,083 2,500,974

Septic Tank & Pour Flush

Communal Septic Tank 4,363 639,019 4,373 638,593

Individual Septic Tank 1,176,469 5,882,343 1,286,897 6,434,483

Pour Flush 1,019,953 5,099,766 1,103,923 5,519,616 Others Regional Plant 74 6,220,134 76 5,107499

Network Pumping Station 687 ‐ 781 ‐

Length of Sewer Network (km) 13,539 ‐ 14,728 ‐

b. Financial Performance (confined only to IWK)

Revenue

Total sewerage revenue for IWK (including government subsidy) increased by 28% from RM568

million in 2008 to RM726 million in 2009. Tariff revenue from the commercial sector, which is the

largest contributor, increased by 21% or RM29.9 million from RM139 million in 2008 to RM169

million in 2009.

Item 2008

(RM million) 2009

(RM million) % Increase

Total Revenue 568 726 28

‐ Tariff Revenue 375 435 16

‐ Non Tariff Revenue* 193 286 48

* including Government Subsidy of RM150 million (2008) and RM250 million (2009)



Operating Expenditure

Operating costs increased over the years due to increases in the number of sewage treatment plants,

length of sewer network, higher requirements of effluent compliance, health & safety compliance

and preventive maintenance as the plants grow older. The higher operating expenditure totaling

RM534 million, representing a 5% increase over the previous year was mainly due to the increase in

energy costs which formed a major component of total operating costs (about 28%) for the running

of the sewage treatment plants.

Item 2008

(RM million) 2009

(RM million) % Increase

Total Cost 549 584 6

‐ Operating Cost 507 534 5

‐ Non Operating Cost 46.8 50.2 7

Capital Expenditure

IWK’s capital expenditure is being funded by 2 sources i.e.:

Item Agency/Program Amount

(RM million)

1 IWKfunds 34.4

2 RMK – 9 (allocation between 2006‐2009)

3,322



Licensing, Enforcement and Restructuring

Licensing Regime

a. Applicable Tariff for the Water Supply Services

In 2009, there were no tariff reviews for both water supply and sewerage services. The national

average water tariff for domestic and non‐domestic consumption is as in the table below:

Item Category RM/m3

1 Domestic (for the first 35m3 of consumption)

0.65

2 Non – Domestic (for the first 500m3 of consumption)

1.50

b. Migration to New Licensing Regime Permits

Section 50 Act 655 provides that a person intends to carry out works related to water supply or

sewerage system must obtain a permit from the Commission. At the end of December 2009, the

number of permits issued is as follows:

Permit Category 2008* 2009

A1 870 885

A2 1,765 2,426

B 75 67

C1 116 58

C2 94 80

C3 205 245

C4 150 375

D 654 478

E 49 18

Total 3,978 4,632

*Restated



Individual Licence

Section 4 Act 655 provides that operators/owners of public water supply and sewerage systems must

obtain an individual licence. As at 31 December 2009, four (4) individual licences were issued as

follows:

NO. LICENSEE TYPE OF LICENCE SCOPE OF LICENCE LICENCE PERIOD

1 Pengurusan Aset Air

Berhad (PAAB) Facility

To own public water supply system or any part of the

system

11 August 2009 to 10 August 2012

2 Syarikat Air Negeri Sembilan Sdn Bhd

(SAINS) Service

To undertake, provide or make available water

supply services in Negeri Sembilan

1 January 2009 to 31 December 2011

3 SAJ Holdings Sdn Bhd

(SAJH) Service

To undertake, provide or make available water supply services in Johor

1 July 2009 to 30 June 2012

4 Syarikat Air Melaka Berhad (SAMB)

Service To undertake, provide or make available water

supply services in Melaka

1 November 2009 to 31 October 2012

Class License

Section 20 Act 655 requires operators/owners of private water supply/sewerage system to hold a

class licence. As at end of December 2009, the number of notices of registration for class licences is

as follows:

TYPE OF SYSTEM CATEGORY OF CLASS

LICENCE 2008 2009 TOTAL

Water Supply System Facility 6 29 35

Service 6 29 35

Sewerage System Facility 17 162 179

Service 16 162 178

TOTAL 45 382 427



Authorization to Operate

Authorization to operate is given under Section 188, 189, 190 and 191 Act 655.

No CATEGORY WATER SUPPLY

SERVICES SEWERAGE SERVICES

TOTAL

1 Authorization to Agencies/Departments/Water Boards/Water Authorities

5 Nil 5

2 Authorization to Local Authorities for Sewerage Services

Nil 4 4

3 Authorization to Licenced Operators Under State Water Supply Enactment

2 Nil 2

4 Authorization to Concessionaires Under Section 191

11 1 12

Qualified Persons

In 2009, a total of 1,556 applications from professional engineers and architects were approved

bringing the total number of Qualified Persons (QP) recognized by SPAN to 1,970. The processing of

the QP applications was carried out through a QP Committee comprising SPAN, Association of

Consulting Engineers (ACEM), Board of Engineers Malaysia (BEM), Institution of Engineers Malaysia

(IEM) and Board of Architects Malaysia (BAM).

Certifying Agencies

SPAN has appointed 12 water supply operators in all states and two sewerage services operators

(IWK and Majari Services Sdn Bhd) as Certifying Agencies to ensure that quality, performance and

works comply with the specifications and standards.



Enforcement & Resolution of Complaints

Enforcement is carried out in pursuant to complaints received from operators, consumers, media and

other stakeholders. Enforcement activities entail investigating cases of suspected non compliance

matters in accordance with the enforcement procedures and protocols provided under Act 655.

Since January 2008 to December 2009, 75 investigation papers under the Act 655 have been opened, out

of which three (3) offenders have been have been successfully convicted and the rest are in various

stages of investigation and prosecution. There were 42 cases handed over by Jabatan Kawal Selia

Selangor in 2008, out of which 16 were resolved in 2008, while in 2009, three (3) offenders were

sentenced by the court, three (3) were withdrawn due to insufficient evidence and seven (7) are still

under prosecution process.

Complaints received and resolved are as in the table below:

No Category Total Solved Unsolved

1 Water Complaints 274 242 32

2 Sewerage Complaints 140 117 23

Total 414 359 55

Progress of the Restructuring of Water Supply Services Industry

Negeri Sembilan, Melaka and Johor completed its restructuring exercise and migrated to the new

licensing regime in 2009. A three (3) year individual licence has been issued to these operators namely

Syarikat Air Negeri Sembilan Sdn Bhd (SAINS), SAJ Holdings Sdn Bhd (SAJH) and Syarikat Air Melaka

Berhad (SAMB). Progress in the other states is in various stages of negotiations.



Environment, Health and Quality Standards

Level of Services and Quality Standards

a. Treated Water Quality

Treated Water Quality compliance for the 11 States and Federal Territories for the year 2009 showed

that compliance for some parameters can vary a little with the dry and wet season and occurrence of

water supply disruptions. However, the overall compliance remained good and was within the

targets of samples passing the tests set by the National Drinking Water Standards by the Ministry of

Health (MOH). According to the water quality surveillance conducted by the Ministry of health (MOH)

for 2009, the average percentage of compliance for the five (5) parameters under Quality Assurance

Program (QAP) for states in Peninsular Malaysia and FT Labuan is as below:

Parameter % Of Compliance % Target No Of Samples

i. E‐Coli 99.7 99.6 76,408

ii. Residual Chlorine 97.7 97.7 76,933

iii. Combined E Coli & Residual Chlorine

99.9 99.8 79,495

iv. Turbidity 96.7 98.0 79,602

v. Aluminum 91.7 89.8 16,114

b. Environmental Performance Index (EPI) The Global EPI 2010 report (based on 2009 data), a joint venture research between Yale Centre of

Law and Policy, Yale University and Centre for International Earth Science Information Network

(CIESIN) Columbia University, reported that Malaysia has shown a remarkable performance in both

indices for Access to Water Services and Access to Sanitation Services as per table below:

No. Item Score Ranking

1 Overall EPI Score 65.0 54th over 163 countries worldwide 10th over 27 Asia Pacific Countries

2 Percentage of Access to Water 98.3% 46th over 163 countries worldwide



No. Item Score Ranking

3 Percentage of Access to Sanitation 93.3% 54th over 163 countries worldwide

c. Effluent Compliance

Sewerage operators’ performance with respect to the environment is measured against the effluent

compliance percentile. An overall summary of effluent sampling for year 2008 and 2009 is as shown

in the table below:

Item No. of STPs

2008 No. of STPs

2009

SS BOD COD SS BOD COD

Total Sample 5,045 4,741 4,245 3,340 5,347 4,999 4,577 3,530

Compliance (%) 94% 84% 66% 93% 86% 66%

Note: SS (Suspended Solids), BOD (Biological Oxygen Demand), COD (Chemical Oxygen Demand)

d. Registration of Suppliers of Products, Devices and Installation for Water Services

The registration of suppliers is based on the evaluation by a working committee

comprising representatives from system operators and certification bodies. In 2009, SPAN received a

total of 400 applications from suppliers of products, devices, installation for water services, out of

which 297 were approved, 99 rejected and 4 put on hold. The total number of suppliers registered

with SPAN for various types of products is 270. In the same period, SPAN also received 226

registration applications for various products and systems from 104 suppliers, out of which 74 were

issued with registration certificates.

e. Research, Development and Innovation

SPAN has also taken initiatives to promote Research, Development and Innovation (RDI) in improving

and enhancing the management of water supply and sewerage services in Malaysia. A workshop was

organized in October 2009 to obtain views and feedback from stakeholders on the strategic direction

of RDI that SPAN should adopt. The workshop identified a few RDI projects to be given due priority

i.e. application of chemical‐less treatment technology, reclamation and recycling water supply and



sewerage, best management practice in managing plant residue, water demand management and

promotion of Water Safety Plans in Malaysia.

Consumer Affairs

a. Forum Air Malaysia

In order to enable and promote direct involvement of the public towards service delivery and

consumer satisfaction, Forum Air Malaysia was established under the Section 14 (1) Societies Act

1966 and recognized by SPAN under Section 69 and 70 of WSIA 2006. The activities of Forum Air in

2009 include the following:

• launching of the Bukit Larut campaign together with FOMCA to monitor activities related to

water catchment areas;

• provision of feedback on the drafting of the Water Rules and Fees and Charges Regulations

whereby its inputs covered both technical and consumer issues;

• provision of feedback and comments on the proposed tariff review by SAJH in October 2009;

and

• dissemination of consumer inputs pertaining to Consumer Standards.

b. Consumer Standards

Section 68 of WSIA 2006 allows the Commission to prepare Consumer Standards which shall include

procedures to reasonably meet consumer requirements, handling of consumer complaints and

disputes and protect consumer information. For this purpose consultations were held with Forum Air

Malaysia and all water and sewerage operators on the preparation of the Consumer Standards. The

Consumer Standards will take the form of rules which is being drafted and is expected to be

completed by end of 2010. The Consumer Standards will enable licensees to prepare their own

consumer codes and will address issues including the following:

• provision of information to consumers regarding services, rates and performance.

• minimum service levels and quality of service to be provided

• customer charging, billing, collection and credit practices. Copyright of Suruhanjaya Perkhidmatan Air Negara pg :13 Water Services Industry Performance Report 2009 CONFIDENTIAL


Enhancing Regulatory Framework

a. Key Performance Indicators (KPI)

SPAN has established a performance regulatory framework to measure and evaluate the

performance of operators through Key Performance Indicators (KPIs) for water services and

sewerage services licensees. The KPIs will cover non‐revenue water, service coverage, water quality

and pressure, managing complaints and response time taken to rectify the problems, cost monitoring

and environmental compliance. Regular monitoring meetings were held with licensees where

assessment and evaluation of performance output was carried out based on comparative analysis of

reports and information on all principal aspects of the operators’ businesses.

b. Rules and regulation

The regulatory powers and functions of SPAN will be enhanced with the introduction of relevant

subsidiary legislation. In 2009, the following rules and regulations were drafted after consulting and

taking into consideration feedback from relevant ministries, operators, REHDA, NGOs, Forum Air

Malaysia, Consumer Associations, State Legal Advisors and Attorney General’s Chambers:

• Water Services Industry (Water Supply Services Rates) (States) Regulations

• Water Services Industry (Water Reticulation and Plumbing) Rules

• Water Services Industry (Water Services Fees and Charges) Regulations

• Water Services Industry (Form and Substance of Agreement between Consumer and the

Water Distribution Licensee for Supply of Water) Rules

• Water Services Industry (Form and Substance of Agreement between Consumer and the

Sewerage Services Licensee for Sewerage Services) Rules




Conclusion

Since the operationalization of WSIA 2006 on 1 January 2008, the industry has shown some positive

impact especially in operations and service delivery. It is expected that more positive outcomes will be

demonstrated when all operators migrate to the new licensing regime under WSIA 2006 and being

regulated by SPAN. Initiatives started in 2008 and 2009 will be continued and focus will be given to the

following areas:

• Enhancement of regulatory regime through new rules and regulations.

• Completion of the restructuring of the water supply industry for the remaining states of Perlis,

Kedah, Kelantan, Terengganu, Pahang, Perak, Penang, Selangor and FT Labuan.

• Closer monitoring of those operators who have migrated to the licensing regime and addressing

issues.

• Continuous audit on Certifying Agencies who are registered as agencies responsible to certify

development plans of water supply and sewerage systems.

• Registration of suppliers of products, equipment and installations to ensure high quality materials

and systems.

• Development of plumbers and contractors.

• Auditing of class licensees.

• Completion of handing over of problematic water supply and sewerage systems.

• Ensuring consumers’ complaints are monitored and resolved effectively.

• Further engagement with Forum Air Malaysia to ensure protection of consumer interest.

Documents

Water Services Industry Performance Report 2009 - · PDF fileWater Services Industry Performance Report 2009 CONFIDENTIAL . ... (BEM) , Institution of ... (IEM) and Board of