Utility reform in Romania example in Cluj Presentation of The Regional Environmental Center for Central and Eastern Europe Christelle Kapoen May 2008

Contents 1.Romanian water sector 2.Challenges 3.Reform strategies 4.Development of C.A.S.S.A, Cluj water / wastewater utility Institutional development Pricing policies 5.Success factors

1. Romanian water sector Institutional responsibilities Ministry of Environment and Water responsible for water resource management Apele Romana, national water authority, responsible for implementation of water policies National Authority for Regulation and Tariffs is responsible for the pricing strategy in the water sector Service responsibilities Decentralized local utilities under municipal/county government

Situation in 90’s 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

2. Challenges EU accession Acquis communautaire 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 Improve cost-recovery / operational efficiency

3. Reform strategies Reform of municipal utilities Autonomous public utilities and improve operations, efficiency and cost-recovery Regionalisation where possible to improve efficiency Attract EU funds (ISPA, EU cohesion funds,..) Example: Cluj water Private sector participation Outsourcing of operations (O&M, investment etc) to improve operations, efficiency and self-sufficiency Attract private capital Example: Bucharest concession with Veolia

4. Development of C.A.S.S.A

Situation WTP WWTP Sources

Situation in Cluj in 90’s R.A.J.A.C., municipal utility Detoriated system & poor operation Lack of investment for rehabilitation and extension, especially wastewater Inefficiency: overstaffing, poor O&M management, bad debts Many surrounding villages/towns were worse off than Cluj

Objectives for development and reform Development, rehabilitation and extension of networks and systems Capacity building to transform the utility to an efficient service provider recovering costs Regionalisation: increase of scale  efficiency Meeting EU regulations and funding requirements

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)

Institutional / organisation development Establishment of Company Apa Somes Autonomy // Accountability Efficient utility operations HRM (reduce over-staffing) and HRD (staff development) Improved O&M Revision of tariff system, billing & collection Public awareness and PR Regionalisation: centralisation of utilities from Cluj, Salaj and 7 other towns Efficiency in supporting functions (finance, HRM etc) Synergies with O&M

Reform to improve cost-recovery Asset management and budgeting Tariff revision plan Charging improvement Improvement of metering: installation, calibration, Meter reading Collection rate improvement / bad debt policy

Pricing for C. Apa Somes S.A. 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

Tariff policy implementation Charging based on consumption No differentiation between consumer groups No Pro-poor policies

5. Success factors Relate investment plan with investment needs, Laws and regulations (health, environment, etc) Current systems condition Urban planning Relate investment plan with cost-recovery plan (affordability) and reform plans Design reform strategy and business plan before Capacity Building Autonomy and decision making power Organise investments very well incl. contracting and supervision with contractors (FIDIC)

Thank you