11

REFORMREFORM ALBANIAALBANIA WATER SUPPLY AND SEWAGE SECTOR WATER SUPPLY AND SEWAGE SECTOR

AFTER, AFTER,

THE TRANSFER PROCESS OF WATER SUPPLY AND SEWERAGE COMPANIESTHE TRANSFER PROCESS OF WATER SUPPLY AND SEWERAGE COMPANIES

TO LOCAL GOVERNMENT AUTHORITIES. TO LOCAL GOVERNMENT AUTHORITIES.

Enkelejda PATOZI,Enkelejda PATOZI,Advisor to the Albanian Prime Minister on Water Policy and IssuesAdvisor to the Albanian Prime Minister on Water Policy and Issues

TIRANA, 25 SEPTEMBER 2008TIRANA, 25 SEPTEMBER 2008

22

SELECTED PERFORMANCE INDICATORSSELECTED PERFORMANCE INDICATORS

INDICATORS (2008)AVERAGE

VALUE

Hours per day of water supply 9.7h/d

Water Quality Compliance Rate- E coli 91%

Water Quality Compliance Rate- Chlorine Residual 48%

Water coverage: 73%

Urban

85%

Rural 49%

Sewerage coverage: 43%

Urban 67%

Rural 1.4%

Non-revenue water (Produced but Not Sold) 63%

Metering of customer connections 34%

Collection rate 77%

Coverage of Direct Operating Cost -Collections 66%

Staff per 1000 water and sewerage connections 13 staff/1000c

33

WHAT DO WE IMPROVE WITH THE WHAT DO WE IMPROVE WITH THE FULFILLMENT OF THE SECTOR REFORMFULFILLMENT OF THE SECTOR REFORM? ?

Complete the process of transfer of water supply and sewerage utilities Complete the process of transfer of water supply and sewerage utilities to local government.to local government.

Establish a national strategy and program to aggregate the water Establish a national strategy and program to aggregate the water supply and sewerage utiltiy sector into fewer and larger service entities.supply and sewerage utiltiy sector into fewer and larger service entities.

Define a national policy and program for all water supply and sewerage Define a national policy and program for all water supply and sewerage utilities to become financially self-sustaining.utilities to become financially self-sustaining.

Establish a national policy for a social safety net for the provision of Establish a national policy for a social safety net for the provision of water supply and sewerage services to the poorest of the poor.water supply and sewerage services to the poorest of the poor.

Strengthen the authority of the natural monoply regulator for the water Strengthen the authority of the natural monoply regulator for the water supply and sewerage sector to ensure that water supply and sewerage supply and sewerage sector to ensure that water supply and sewerage utility tariffs are both fair to the consumer and responsive to the utility tariffs are both fair to the consumer and responsive to the revenue needs of the utilityrevenue needs of the utility..

44

ALBANIAN GOVERNMENTALBANIAN GOVERNMENT

SUCCESSFULLY COMPLETED:SUCCESSFULLY COMPLETED:

TRANSFER OF PUBLIC IMMOVABLE TRANSFER OF PUBLIC IMMOVABLE PROPERTIES OF WATER SUPPLY UTILITIES PROPERTIES OF WATER SUPPLY UTILITIES

TO TO

LOCAL GOVERNMENT UNITSLOCAL GOVERNMENT UNITS

55

TRANSFER OF PUBLIC IMMOVABLE PROPERTIES OF TRANSFER OF PUBLIC IMMOVABLE PROPERTIES OF WATER SUPPLY UTILITIES TO LOCAL GOVERNMENT WATER SUPPLY UTILITIES TO LOCAL GOVERNMENT

3 Decisions on:Transfer, Statute, Nr Members of Supervisory Councils, and oneOrder on the Guidelines for SH.A. and S.C.

ORGANIZATION STRUCTURE,

WATER SUPPLY AND SEWERAGE UTILITIES

Actual owner:Albanian Central

Government

Ministry of EconomyRepresentative of central

government = 100% shares

SUPERVISORY COUNCILS

3 members in Total, (2 ministries and 1 municipality)

DIRECTORATEWater Supply and Sewerage Utilities

ORGANIZATION STRUCTURE,

WATER SUPPLY AND SEWERAGE UTILITIES

LOCAL GOVERNMENT UNITS NEW OWNER

(Utility Service Zone)

SHAREHOLDERS ASSEMBLE

Representatives of local government units

SUPERVISORY COUNCILS

Members from utility service zone

DIRECTORATEWater Supply and Sewerage Utilities

66

COMPLETED TRANSFER ACTIONSCOMPLETED TRANSFER ACTIONS

Completed:Completed: Ministry of Economy, prepared all the Ministry of Economy, prepared all the necessary documentation for the transfer in compliance necessary documentation for the transfer in compliance with transfer Law (2001) and presented it for registration with transfer Law (2001) and presented it for registration to the National Registration Center (141 Orders 97 regis),to the National Registration Center (141 Orders 97 regis),

Completed:Completed: All balance sheets of the companies, which All balance sheets of the companies, which shares are transferred, are cleared of the debt before the shares are transferred, are cleared of the debt before the transfer of the shares to local governments take place.transfer of the shares to local governments take place.

Completed:Completed: All necessary amendments and revisions of All necessary amendments and revisions of legal documentation and the necessary guidelines as the legal documentation and the necessary guidelines as the statute of the companies, the revision of the Decision On statute of the companies, the revision of the Decision On Supervisory Councils of State Joint Stick Companies,Supervisory Councils of State Joint Stick Companies,

77

COMPLETED TRANSFER ACTIONSCOMPLETED TRANSFER ACTIONS

Completed:Completed: Ministry of Economy, completed the Ministry of Economy, completed the guidelines for the constitution of the shareholders’ guidelines for the constitution of the shareholders’ assemblies of local governments that are co-owners of assemblies of local governments that are co-owners of water supply and sewerage companies,water supply and sewerage companies,

Completed:Completed: The shares of the company are transferred The shares of the company are transferred to the relevant local governments in the same proportion to the relevant local governments in the same proportion as the population of each local government served by as the population of each local government served by the water supply and sewerage company. the water supply and sewerage company.

88

INSTITUTIONS TO IMPLEMENT THE INSTITUTIONS TO IMPLEMENT THE RECOMMENDED SECTOR IMPROVEMENTSRECOMMENDED SECTOR IMPROVEMENTS Prime Ministry,Prime Ministry,

Ministry of Public Works, Transport and Ministry of Public Works, Transport and Telecommunication, Telecommunication,

Ministry of Interior, (local government) Ministry of Interior, (local government)

Ministry of Economy Trade and Energy,Ministry of Economy Trade and Energy,

Ministry of Finance,Ministry of Finance, All Local Governments,All Local Governments, Associations, indipendent institutions, Faculty, Associations, indipendent institutions, Faculty,

etc. etc.

99

MAIN DIRECTIONSMAIN DIRECTIONS TO SUPPORT WATER REFORMTO SUPPORT WATER REFORM

Legal initiativesLegal initiatives,,

Administrative initiativesAdministrative initiatives, ,

Project and funding initiativesProject and funding initiatives..

1010

LEGAL INITIATIVESLEGAL INITIATIVES

• Improvement of the National Water Supply and Sewage Improvement of the National Water Supply and Sewage StrategyStrategy,,

• Review of the Law Concerning Water ResourcesReview of the Law Concerning Water Resources,,

• Strengthen the Water Regulatory BodyStrengthen the Water Regulatory Body,,

• ““Safety Net” to Ensure Water to the Poorest of the PoorSafety Net” to Ensure Water to the Poorest of the Poor,,

• Performance AgreementPerformance Agreement,,

• Preparation of Albanian Regulations, or Water Supply Preparation of Albanian Regulations, or Water Supply and Sewage CODEand Sewage CODE..

1111

STRENGTHEN THE WATER REGULATORY STRENGTHEN THE WATER REGULATORY ENTITYENTITY

The current verification role for the WRE is not appropriate for The current verification role for the WRE is not appropriate for Albania:Albania:

o Local governments have generally low capacity to apply the Local governments have generally low capacity to apply the tariff setting methodologytariff setting methodology, ,

o political interests may interfere with decisions that involve the political interests may interfere with decisions that involve the financial sustainability of the water and sewerage services financial sustainability of the water and sewerage services utilitiesutilities. .

o Therefore, the proposal is to resume the former Therefore, the proposal is to resume the former

competencies to the WRE by amending WRE law such that competencies to the WRE by amending WRE law such that it restores the full authority to set the tariff as independent it restores the full authority to set the tariff as independent body. body.

1212

REASSESS MANDATE OF NATIONAL REASSESS MANDATE OF NATIONAL WATER COUNCILWATER COUNCIL

NWCNWC -- National Water Council is a institution for National Water Council is a institution for integrating the activities of the different institutions integrating the activities of the different institutions toward supporting a common policy for the Water toward supporting a common policy for the Water Sector as a whole. Sector as a whole.

Revise:Revise: Integrated management of water resources as Integrated management of water resources as an important requirement stated based on the EU an important requirement stated based on the EU Water Framework Directive of October 2000 WFD. Water Framework Directive of October 2000 WFD.

Objective:Objective: NWCNWC will will implement fully the tariff structure to implement fully the tariff structure to cause financially self-sustaining and to be able to finance cause financially self-sustaining and to be able to finance and enable the functioning of the Water Basin Authoritiesand enable the functioning of the Water Basin Authorities..

1313

STRENGTHEN THE WATER REGULATORY STRENGTHEN THE WATER REGULATORY ENTITY ENTITY

o Since Albania is a relatively small country with limitation in the capacity Since Albania is a relatively small country with limitation in the capacity to staff multiple institutions of Government, strong consideration should to staff multiple institutions of Government, strong consideration should be given to merging the functions of the Water Utility Regulatory be given to merging the functions of the Water Utility Regulatory Commission with those of the Energy Regulator, since many of the skills Commission with those of the Energy Regulator, since many of the skills required are the same. required are the same. (open discussion),(open discussion),

o A strong natural monopoly regulator is necessary to monitor utility A strong natural monopoly regulator is necessary to monitor utility performance, to fairly represent the interests of both the service provider performance, to fairly represent the interests of both the service provider and the served public, and to review and approve the tariffs requested by and the served public, and to review and approve the tariffs requested by the utilitiesthe utilities, (ongoing/completed), (ongoing/completed)

o Furthermore, a strong regulatory function becomes extremely important Furthermore, a strong regulatory function becomes extremely important

in the case of future private sector participation.in the case of future private sector participation. (ongoing/completed)(ongoing/completed)

1414

ADMINISTRATIVE INITIATIVESADMINISTRATIVE INITIATIVES

• Preparation of Five-Year Preparation of Five-Year Business Plans by the Utilities,Business Plans by the Utilities,

• Program on reduction / removal Program on reduction / removal of subsidies,of subsidies,

• Toward Regionalization,Toward Regionalization,

• Investment policy based on Investment policy based on performance indicators,performance indicators,

• Water Source Protection Zones,Water Source Protection Zones,

• Manual, Project preparation Manual, Project preparation according to EU requirements.according to EU requirements.

• Benchmarking Albanian Water Program,Benchmarking Albanian Water Program,

• Implementation of Training and Implementation of Training and Certification Program in Albania,Certification Program in Albania,

• Create Conditions for Private Sector Create Conditions for Private Sector Participation in Water Service Delivery,Participation in Water Service Delivery,

• Project Priority System, Donor Project Priority System, Donor Coordination and Paris declaration,Coordination and Paris declaration,

• Full cooperation with the Albanian Water Full cooperation with the Albanian Water Supply and Sewage Association,Supply and Sewage Association,

• Engineering Students Internship Program.Engineering Students Internship Program.

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IMPROVE CHANNELING OF IMPROVE CHANNELING OF DONOR/NATIONAL TREASURY CAPITALDONOR/NATIONAL TREASURY CAPITAL

Past Experience:Past Experience: New capital investments and major management New capital investments and major management structural reforms in the water utility sector of Albania have been largely structural reforms in the water utility sector of Albania have been largely driven by the foreign donor/lender community. This because Albania had driven by the foreign donor/lender community. This because Albania had no coherent, rational, strategic project priority and capital investment plan no coherent, rational, strategic project priority and capital investment plan for the water supply and sewerage utility sector. for the water supply and sewerage utility sector.

ActuallyActually: : The Central Government is moving carefully, but aggressively, to The Central Government is moving carefully, but aggressively, to re-establish its role in defining the facility needs of the water utility sector, re-establish its role in defining the facility needs of the water utility sector, establishing a projects priority list, developing a sustainable capital establishing a projects priority list, developing a sustainable capital investment plan, channeling donor/lender funds to their best use in investment plan, channeling donor/lender funds to their best use in meeting the strategic needs of the water utility sector of Albania, as well meeting the strategic needs of the water utility sector of Albania, as well as effective monitoring of project implementation.as effective monitoring of project implementation.

o This activity of Central Government is tied to measurable performance This activity of Central Government is tied to measurable performance improvements of water utilities receiving this capitalimprovements of water utilities receiving this capital..

1616

PREPARATION OF FIVE-YEAR BUSINESS PREPARATION OF FIVE-YEAR BUSINESS PLANS BY THE UTILITIESPLANS BY THE UTILITIES

OngoingOngoing Water utilities must operate applying commercial practices that Water utilities must operate applying commercial practices that would cause them to become financially self-sustaining, and to would cause them to become financially self-sustaining, and to achieve full cost recovery from the application of appropriate achieve full cost recovery from the application of appropriate tariffs and fees for the services provided to their customers. tariffs and fees for the services provided to their customers.

Full cost recovery will include all routine operations and Full cost recovery will include all routine operations and maintenance costs, debt service, capital loan/credit repayment, maintenance costs, debt service, capital loan/credit repayment, and planned transfers to reserves for capital repair and and planned transfers to reserves for capital repair and replacement, and for new capital investment.replacement, and for new capital investment.

Water utilities will apply aggressive programs to reduce non-Water utilities will apply aggressive programs to reduce non-revenue water, eliminate illegal connections, enforce aggressive revenue water, eliminate illegal connections, enforce aggressive bill collection procedures, and implement service termination bill collection procedures, and implement service termination policies for non-payment of bills. policies for non-payment of bills.

1717

SUPPORT AGGREGATION OF UTILITIES TO SUPPORT AGGREGATION OF UTILITIES TO IMPROVE ECONOMIES OF SCALEIMPROVE ECONOMIES OF SCALE

OngoingOngoing:: The Ministry is preparing a national study and The Ministry is preparing a national study and recommendation for the aggregation (regionalization) of recommendation for the aggregation (regionalization) of all water supply and sewerage systems across Albania, all water supply and sewerage systems across Albania, considering natural water basin boundaries, being not only considering natural water basin boundaries, being not only the most logical criteria, applied throughout Western the most logical criteria, applied throughout Western Europe, but also a requirement of the EU Water Europe, but also a requirement of the EU Water Framework Directive that implies Framework Directive that implies that the integrated that the integrated management of water resources must be realized on the management of water resources must be realized on the basis of water basins. basis of water basins.

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CREATE CONDITIONS FOR PRIVATE SECTOR CREATE CONDITIONS FOR PRIVATE SECTOR PARTICIPATION IN SERVICE DELIVERYPARTICIPATION IN SERVICE DELIVERY

FactFact,, a public service that is well functioning and cost effective a public service that is well functioning and cost effective is always a better option for the public is always a better option for the public . .

FactFact, , Private sector participation is required when the public Private sector participation is required when the public sector is not efficient, because of bad management and/or sector is not efficient, because of bad management and/or because the public sector can not raise the capital necessary because the public sector can not raise the capital necessary for new infrastructure for new infrastructure . .

ButBut, , before considering PSP options, it is the task of the public before considering PSP options, it is the task of the public institutions to improve the efficiency and performance of the institutions to improve the efficiency and performance of the water and sewerage sector. water and sewerage sector.

AndAnd, , The other reason for PSP that implies capital investment The other reason for PSP that implies capital investment is clearly valid in Albania today. Albania today is in great need is clearly valid in Albania today. Albania today is in great need for new infrastructure for wastewater treatment plants. for new infrastructure for wastewater treatment plants. (Open (Open Issue)Issue)

1919

TRAINING AND CERTIFICATION INTRAINING AND CERTIFICATION IN ALBANIAALBANIA

FactFact,, It is widely accepted in the developed world It is widely accepted in the developed world that that only test-based certification will lead to only test-based certification will lead to professionalism and professionalism and performance performance improvement in the water supply and improvement in the water supply and wastewater wastewater utility sector.utility sector.

Open:Open: As a minimum, in a water utility, the lead As a minimum, in a water utility, the lead operators (or operators (or Directors of Technical Operations) Directors of Technical Operations) should be certified in should be certified in their fields (water supply their fields (water supply and and wastewater). Ideally, in wastewater). Ideally, in fully corporatized fully corporatized utilities, the overall Director of the utility utilities, the overall Director of the utility should also should also be certified as to the ability to implement be certified as to the ability to implement policies of policies of the Supervisory Board of the utility, and manage the Supervisory Board of the utility, and manage

the utility in a financially self-sustaining manner, the utility in a financially self-sustaining manner, while being in total compliance with the standard while being in total compliance with the standard of the of the Republic of Albania. Republic of Albania.

2020

MINISTRY OF INTERIORMINISTRY OF INTERIOR

• Will develop a Policy for a Social “Safety Net” Will develop a Policy for a Social “Safety Net” to Ensure Water Supply and Sewerage to Ensure Water Supply and Sewerage Services to the Poorest of the Poor Services to the Poorest of the Poor ,,

• Support Capacity Building in the Governance Support Capacity Building in the Governance of new Supervisory Boards.of new Supervisory Boards.

2121

MINISTRY OF FINANCEMINISTRY OF FINANCE

As a team,As a team,

Ministry of Finance, is working closely with the Water Ministry of Finance, is working closely with the Water Utility Regulatory Commission, the Ministry of Public Utility Regulatory Commission, the Ministry of Public Works, Transport and Telecommunications, and the Works, Transport and Telecommunications, and the Ministry of Interior, and with the final approval of the Ministry of Interior, and with the final approval of the Parliament through the national budget process, to Parliament through the national budget process, to establish a multi-year, declining, operations and establish a multi-year, declining, operations and maintenance subsidy program for each water utility with maintenance subsidy program for each water utility with such program to be captured in the transfer agreement such program to be captured in the transfer agreement signed at the time of ownership transfer of the each signed at the time of ownership transfer of the each respective water utility. respective water utility.

2222

INICIATIVA INICIATIVA TE KONTRAKTUARA TE KONTRAKTUARA PËR PËR FINANCIME DHE PROJEKTEFINANCIME DHE PROJEKTE

• Local and foreign capital investments 2000–2008,Local and foreign capital investments 2000–2008,

• Supporting the construction of the wastewater Supporting the construction of the wastewater treatment plants 2007–2010.treatment plants 2007–2010.

2323

WATER SUPPLY AND SEWERAGE INVESTMENTS,

2000 – 2008 (milliard Alb. lek)

NInvestment

(years)2000 2001 2002 2003 2004 2005 2006 2007 2008

Total Investment(lek) 3,5 5,0 4,5 5,5 5,2 5,3 5,1 4,7 7,4

1ALB budget (+tax and local costs) 1,4 1,9 2,1 1,8 2,4 2,5 2,4 2,6 3,2

2 Donors 1,9 3,1 2,5 3,6 2,8 2,9 2,6 2,1 4,2

3 Albanian D. fund 0.5 0.3 0.12 0.42 0.2 0.29 0.7 0.9 0.6

2424

CURRENT STATUS OF CURRENT STATUS OF WASTEWATER TREATMENT IN ALBANIAWASTEWATER TREATMENT IN ALBANIA

TOWN DONOR TECHNOLOGY COST POPULATION COMPL.

Kavaje KfW Trickling filter € 5 M 25,000 May 05

Durres WB/LUX/EIBConventionalPlus ConWet

€ 8,5 M 250,000 May 09

Lezhe-Shengjin

WB/LUX/EIBConstructed

wetland€ 3,2 M 42,000 Mar 09

Saranda WB/LUX/EIBConstructed

wetland€ 2,8 M 60,000 Mar 09

Vlora CARDS/EUConstructed

wetland€ 2,7 M 150,000 Dec 07

Pogradec KfWConstructed

wetland€ 5 M 54,997 Apr 08

Korca EIB/KfW  Conventional € 6.7 M 86,000   Dec 09

Tirana JICA Conventional   € 67 M 850,000 2010 

     Total € 120 M 1,6 M banore  

2525