1 REFORM ALBANIA WATER SUPPLY AND SEWAGE SECTOR AFTER, THE TRANSFER PROCESS OF WATER SUPPLY AND SEWERAGE COMPANIES TO LOCAL GOVERNMENT AUTHORITIES. Enkelejda PATOZI, Advisor to the Albanian Prime Minister on Water Policy and Issues TIRANA, 25 SEPTEMBER 2008

2 SELECTED PERFORMANCE INDICATORS INDICATORS (2008) AVERAGE VALUE Hours per day of water supply9.7h/d Water Quality Compliance Rate- E coli91% Water Quality Compliance Rate- Chlorine Residual48% Water coverage:73% Urban85% Rural49% Sewerage coverage:43% Urban67% Rural1.4% Non-revenue water (Produced but Not Sold)63% Metering of customer connections34% Collection rate77% Coverage of Direct Operating Cost -Collections66% Staff per 1000 water and sewerage connections13 staff/1000c

3 WHAT DO WE IMPROVE WITH THE FULFILLMENT OF THE SECTOR REFORM?  Complete the process of transfer of water supply and sewerage utilities to local government.  Establish a national strategy and program to aggregate the water supply and sewerage utiltiy sector into fewer and larger service entities.  Define a national policy and program for all water supply and sewerage utilities to become financially self-sustaining.  Establish a national policy for a social safety net for the provision of water supply and sewerage services to the poorest of the poor.  Strengthen the authority of the natural monoply regulator for the water supply and sewerage sector to ensure that water supply and sewerage utility tariffs are both fair to the consumer and responsive to the revenue needs of the utility.

4 ALBANIAN GOVERNMENT SUCCESSFULLY COMPLETED: TRANSFER OF PUBLIC IMMOVABLE PROPERTIES OF WATER SUPPLY UTILITIES TO LOCAL GOVERNMENT UNITS

5 TRANSFER OF PUBLIC IMMOVABLE PROPERTIES OF WATER SUPPLY UTILITIES TO LOCAL GOVERNMENT 3 Decisions on: Transfer, Statute, Nr Members of Supervisory Councils, and one Order on the Guidelines for SH.A. and S.C. ORGANIZATION STRUCTURE, WATER SUPPLY AND SEWERAGE UTILITIES Actual owner: Albanian Central Government Ministry of Economy Representative of central government = 100% shares SUPERVISORY COUNCILS 3 members in Total, (2 ministries and 1 municipality) DIRECTORATE Water 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 DIRECTORATE Water Supply and Sewerage Utilities

6 COMPLETED TRANSFER ACTIONS  Completed: Ministry of Economy, prepared all the necessary documentation for the transfer in compliance with transfer Law (2001) and presented it for registration to the National Registration Center (141 Orders 97 regis),  Completed: All balance sheets of the companies, which shares are transferred, are cleared of the debt before the transfer of the shares to local governments take place.  Completed: All necessary amendments and revisions of legal documentation and the necessary guidelines as the statute of the companies, the revision of the Decision On Supervisory Councils of State Joint Stick Companies,

7 COMPLETED TRANSFER ACTIONS  Completed: Ministry of Economy, completed the guidelines for the constitution of the shareholders’ assemblies of local governments that are co-owners of water supply and sewerage companies,  Completed: The shares of the company are transferred to the relevant local governments in the same proportion as the population of each local government served by the water supply and sewerage company.

8 INSTITUTIONS TO IMPLEMENT THE RECOMMENDED SECTOR IMPROVEMENTS  Prime Ministry,  Ministry of Public Works, Transport and Telecommunication,  Ministry of Interior, (local government)  Ministry of Economy Trade and Energy,  Ministry of Finance,  All Local Governments,  Associations, indipendent institutions, Faculty, etc.

9 MAIN DIRECTIONS TO SUPPORT WATER REFORM  Legal initiatives,  Administrative initiatives,  Project and funding initiatives.

10 LEGAL INITIATIVES Improvement of the National Water Supply and Sewage Strategy, Improvement of the National Water Supply and Sewage Strategy, Review of the Law Concerning Water Resources, Review of the Law Concerning Water Resources, Strengthen the Water Regulatory Body, Strengthen the Water Regulatory Body, “Safety Net” to Ensure Water to the Poorest of the Poor, “Safety Net” to Ensure Water to the Poorest of the Poor, Performance Agreement, Performance Agreement, Preparation of Albanian Regulations, or Water Supply and Sewage CODE. Preparation of Albanian Regulations, or Water Supply and Sewage CODE.

11 STRENGTHEN THE WATER REGULATORY ENTITY The current verification role for the WRE is not appropriate for Albania: o Local governments have generally low capacity to apply the tariff setting methodology, o political interests may interfere with decisions that involve the financial sustainability of the water and sewerage services utilities. o Therefore, the proposal is to resume the former competencies to the WRE by amending WRE law such that it restores the full authority to set the tariff as independent body.

12 REASSESS MANDATE OF NATIONAL WATER COUNCIL NWC - National Water Council is a institution for integrating the activities of the different institutions toward supporting a common policy for the Water Sector as a whole. Revise: Integrated management of water resources as an important requirement stated based on the EU Water Framework Directive of October 2000 WFD. Objective: NWC will implement fully the tariff structure to cause financially self-sustaining and to be able to finance and enable the functioning of the Water Basin Authorities.

13 STRENGTHEN THE WATER REGULATORY ENTITY STRENGTHEN THE WATER REGULATORY ENTITY o Since Albania is a relatively small country with limitation in the capacity to staff multiple institutions of Government, strong consideration should be given to merging the functions of the Water Utility Regulatory Commission with those of the Energy Regulator, since many of the skills required are the same. (open discussion), o A strong natural monopoly regulator is necessary to monitor utility performance, to fairly represent the interests of both the service provider and the served public, and to review and approve the tariffs requested by the utilities, (ongoing/completed) o Furthermore, a strong regulatory function becomes extremely important in the case of future private sector participation. (ongoing/completed)

14 ADMINISTRATIVE INITIATIVES Preparation of Five-Year Business Plans by the Utilities, Preparation of Five-Year Business Plans by the Utilities, Program on reduction / removal of subsidies, Program on reduction / removal of subsidies, Toward Regionalization, Toward Regionalization, Investment policy based on performance indicators, Investment policy based on performance indicators, Water Source Protection Zones, Water Source Protection Zones, Manual, Project preparation according to EU requirements. Manual, Project preparation according to EU requirements. Benchmarking Albanian Water Program, Benchmarking Albanian Water Program, Implementation of Training and Certification Program in Albania, Implementation of Training and Certification Program in Albania, Create Conditions for Private Sector Participation in Water Service Delivery, Create Conditions for Private Sector Participation in Water Service Delivery, Project Priority System, Donor Coordination and Paris declaration, Project Priority System, Donor Coordination and Paris declaration, Full cooperation with the Albanian Water Supply and Sewage Association, Full cooperation with the Albanian Water Supply and Sewage Association, Engineering Students Internship Program. Engineering Students Internship Program.

15 IMPROVE CHANNELING OF DONOR/NATIONAL TREASURY CAPITAL Past Experience: New capital investments and major management structural reforms in the water utility sector of Albania have been largely driven by the foreign donor/lender community. This because Albania had no coherent, rational, strategic project priority and capital investment plan for the water supply and sewerage utility sector. Actually: The Central Government is moving carefully, but aggressively, to re-establish its role in defining the facility needs of the water utility sector, establishing a projects priority list, developing a sustainable capital investment plan, channeling donor/lender funds to their best use in meeting the strategic needs of the water utility sector of Albania, as well as effective monitoring of project implementation. o This activity of Central Government is tied to measurable performance improvements of water utilities receiving this capital.

16 PREPARATION OF FIVE-YEAR BUSINESS PLANS BY THE UTILITIES Ongoing Water utilities must operate applying commercial practices that would cause them to become financially self-sustaining, and to achieve full cost recovery from the application of appropriate tariffs and fees for the services provided to their customers. Full cost recovery will include all routine operations and maintenance costs, debt service, capital loan/credit repayment, and planned transfers to reserves for capital repair and replacement, and for new capital investment. Water utilities will apply aggressive programs to reduce non- revenue water, eliminate illegal connections, enforce aggressive bill collection procedures, and implement service termination policies for non-payment of bills.

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

18 CREATE CONDITIONS FOR PRIVATE SECTOR PARTICIPATION IN SERVICE DELIVERY Fact, a public service that is well functioning and cost effective is always a better option for the public. Fact, Private sector participation is required when the public sector is not efficient, because of bad management and/or because the public sector can not raise the capital necessary for new infrastructure. But, before considering PSP options, it is the task of the public institutions to improve the efficiency and performance of the water and sewerage sector. And, The other reason for PSP that implies capital investment is clearly valid in Albania today. Albania today is in great need for new infrastructure for wastewater treatment plants. (Open Issue)

19 TRAINING AND CERTIFICATION IN ALBANIA Fact, It is widely accepted in the developed world that only test-based certification will lead to professionalism and performance improvement in the water supply and wastewater utility sector. Open: As a minimum, in a water utility, the lead operators (or Directors of Technical Operations) should be certified in their fields (water supply and wastewater). Ideally, in fully corporatized utilities, the overall Director of the utility should also be certified as to the ability to implement policies of the Supervisory Board of the utility, and manage the utility in a financially self-sustaining manner, while being in total compliance with the standard of the Republic of Albania.

20 MINISTRY OF INTERIOR Will develop a Policy for a Social “Safety Net” to Ensure Water Supply and Sewerage Services to the Poorest of the Poor, Will develop a Policy for a Social “Safety Net” to Ensure Water Supply and Sewerage Services to the Poorest of the Poor, Support Capacity Building in the Governance of new Supervisory Boards. Support Capacity Building in the Governance of new Supervisory Boards.

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

22 INICIATIVA TE KONTRAKTUARA PËR FINANCIME DHE PROJEKTE Local and foreign capital investments 2000–2008, Local and foreign capital investments 2000–2008, Supporting the construction of the wastewater treatment plants 2007–2010. Supporting the construction of the wastewater treatment plants 2007–2010.

23 WATER SUPPLY AND SEWERAGE INVESTMENTS, 2000 – 2008 (milliard Alb. lek) N Investment (years) Total Investment (lek ) 3,55,04,55,55,25,35,14,77,4 1 ALB budget (+tax and local costs) 1,41,92,11,82,42,52,42,63,2 2Donors 1,93,12,53,62,82,92,62,14,2 3Albanian D. fund

24 CURRENT STATUS OF WASTEWATER TREATMENT IN ALBANIA TOWNDONORTECHNOLOGYCOSTPOPULATIONCOMPL. KavajeKfWTrickling filter€ 5 M25,000May 05 DurresWB/LUX/EIB Conventional Plus ConWet € 8,5 M250,000May 09 Lezhe- Shengjin WB/LUX/EIB Constructed wetland € 3,2 M42,000Mar 09 SarandaWB/LUX/EIB Constructed wetland € 2,8 M60,000Mar 09 VloraCARDS/EU Constructed wetland € 2,7 M150,000Dec 07 PogradecKfW Constructed wetland € 5 M54,997Apr 08 KorcaEIB/KfW Conventional€ 6.7 M86,000 Dec 09 TiranaJICAConventional € 67 M850, Total€ 120 M1,6 M banore

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