Arnsburger Str. 64, Frankfurt, Germany Tel , Fax Internet: April 05, 2006 Establishment and Development of a National Water and Sanitation Regulatory Authority Regulatory Organizational Structures Presentation to the Review Commission

1 Dr. Thomas Schiller  Option 1: NWSA is not an appropriate institution to be responsible for regulation  Is envisioned by the cabinet resolution 237 –However conflict of interest as long as NWSA is engaged in service provision –Difficult to change the Institution’s existing corporate identity  Option 2: Independent regulator outside MWE is best practice  International best practice –However decision by Parliament is required, which is a lengthy process  Option 3: Regulator within MWE is a weak option  Can be implemented quickly through ministerial decision –However no own legal personality and no independence at all  Option 4: Regional / Local Regulator lead to high operational inefficiency in Yemen  Can be structured according to best practice –In a relatively small country it produces high operational inefficiencies There should be no conflict of interest and wide independence

2 Dr. Thomas Schiller Phasing in approach towards best practice is recommended Water & Wastewater Regulatory Authority National Water & Wastewater Regulator Cabinet or Presidential Decree Semi-IndependentIndependent Law approved by Parliament  Would have own legal personality  Would have own revenues  Would report to the Minister and the Service Committee of the Parliament  Dependence would be reduced to the appointment of the Director General and head of Directorates

3 Dr. Thomas Schiller  Selection of Director General and Heads of Directorates: » Nomination by Minister for Water and Environment appointment by Cabinet » Candidates would be identified through public advertisement. Ministry will be supported by international recruitment consultant At first the Regulator is a Authority under the umbrella of MWE MWE NWRA GARWSP NWSA LC EPA  Semi-Independent Water & Wastewater Regulatory Authority Minister Water & Wastewater Regulatory Authority Water & Wastewater Regulatory Authority

4 Dr. Thomas Schiller Then the Regulator Commission becomes an independent Organization Parliament Services Committee or Office of the President National Water & Wastewater Regulator Parliament or President  Appointment of Director General and Heads of Directorates: Nomination by Prime Minister and appointment by President or Parliament

5 Dr. Thomas Schiller A non-political Regulatory Council takes the decisions  Director General General Services General Services  Directorate Asset and Tariff Evaluation  Directorate Service Quality Comparative Competition and Benchmarking  Directorate Communication and Customer Relation  Legal Advisor  Regulatory Council Water & Wastewater Regulatory Authority - WWRA

6 Dr. Thomas Schiller External members increase transparency of decisions  Chair: Director General  Director Asset Evaluation and Tariffs  Director Comparative Competition and Benchmarking  Director Communication and Customer Relation  Representative of Chamber of Commerce  Representative of Yemen Standardization, Metrology and Quality Control Organization - YSMQCO External Members Composition of WWRA Regulatory Council

7 Dr. Thomas Schiller WWRA does Asset and Tariff Evaluation  Director General General Services General Services  Directorate Asset and Tariff Evaluation  Directorate Service Quality Comparative Competition and Benchmarking  Directorate Communication and Customer Relation  Legal Advisor Water & Wastewater Regulatory Authority - WWRA  Regulatory Council

8 Dr. Thomas Schiller WWRA will have the power to approve or reject utility tariffs  Function » Assess financial viability » Evaluate investment requirements » Revise Tariffs » Consider transparent subsidy schemes in the framework of Government’s social policy » Develop milestones for asset and tariff development  Required Staff (5) » Director: either Engineer or Economist » 1 Planning Engineer » 1 Economist / Financial Analyst » 2 support staff  Directorate: Asset and Tariff Evaluation  The directorate will develop and update a financial model for each utility.  The directorate will give an evaluation of the financial viability on a yearly basis.  The directorate will prepare the material for the decision taking of the Regulatory Council.

9 Dr. Thomas Schiller Service Quality, Comparative Competition and Benchmarking  Director General General Services General Services  Directorate Asset and Tariff Evaluation  Directorate Service Quality Comparative Competition and Benchmarking  Directorate Communication and Customer Relation  Legal Advisor Water & Wastewater Regulatory Authority - WWRA  Regulatory Council

10 Dr. Thomas Schiller WWRA will enact Economic Regulation  Function » Evaluate service performance » Enhance competition » Harmonization of relevant technical, operational and financial rules and regulations » Auditing of drinking water quality tests » Auditing of wastewater analysis » Develop milestones standards and benchmarks  Required Staff (8) » Director: either Engineer or Economist » 1 Operations Engineer » 1 Environmental Engineer » 1 Economist » 4 support staff  Directorate: Service Quality, Comparative Competition and Benchmarking  The directorate will define, collect and process performance relevant data.  The directorate will compare performance data among utilities and prepare respective reports.  The directorate will develop benchmarks to be decided upon by the Regulatory Council.  The directorate will design auditing procedures. Field work will be outsourced.

11 Dr. Thomas Schiller Communication and Customer Relations is paramount  Director General General Services General Services  Directorate Asset and Tariff Evaluation  Directorate Service Quality Comparative Competition and Benchmarking  Directorate Communication and Customer Relation  Legal Advisor Water & Wastewater Regulatory Authority - WWRA  Regulatory Council

12 Dr. Thomas Schiller WWRA seeks transparency and follows a consultative approach  Function » Publishing regular information on WWRA » Publishing regular information on utility performance » Liaise with utilities (“Utility Advisory Committee”) » Liaise with MWE, NWRA, EPA,YSMQCO (“Regulator Coordination Committee”) » Liaise with MoLA and Local Council Service Committees » Liaise with Parliamentary Service Committee  Required Staff (5) » Director: Economist (Marketing) » 1 Journalist » 1 Publishing / Designing Expert » 2 support staff  Directorate: Communication and Customer Relations  The directorate will organize the external communication

13 Dr. Thomas Schiller General Services  Director General General Services General Services  Director Asset and Tariff Evaluation  Director Service Quality Comparative Competition and Benchmarking  Director Communication and Customer Relation  Legal Advisor Water & Wastewater Regulatory Authority - WWRA  Regulatory Council

14 Dr. Thomas Schiller Lean administration  Function » Manage WWRA’s human resources » Manage WWRA’s finances » Provide office logistic » Manage IT support  Required Staff (7) » Director: Administrator » 1 Accountant » 1 IT Expert » 4 support staff  General Services  General Services will provide the administrative infrastructure

15 Dr. Thomas Schiller Service Provider have to Finance WWRA  WWRA will have its own budget  In the beginning it is proposed to share the yearly cost among the regulated organizations as a lump sum according to the financial strength of each organization.  Later a more sophisticated system can be developed

16 Dr. Thomas Schiller A Structure of Formal Interfaces  Director General General Services General Services  Directorate Asset and Tariff Evaluation  Directorate Service Quality Comparative Competition and Benchmarking  Directorate Communication and Customer Relation  Legal Advisor  Regulatory Council Water & Wastewater Regulatory Authority - WWRA  Regulator Coordination Committee  Utility Advisory Committee  Customer Service “Window”

17 Dr. Thomas Schiller Existing regulation and standardization bodies have to coordinate  Regulator Coordination Committee  Function » Development of standards » Report about the institution’s monitoring work » Address specific regulatory problems from each institution’s perspective with the aim to define common positions » Coordinate enforcement mechanisms  Members » WWRA: Drinking water treatment and distribution and wastewater collection and treatment regulation » NWRA: Water resources regulation » EPA: Environmental protection regulation » YSMQCO: National norms and standards regulation  Can convene on different levels: Head of Organizations or Head of Departments

18 Dr. Thomas Schiller A Structure of Formal Interfaces  Director General General Services General Services  Directorate Asset and Tariff Evaluation  Directorate Service Quality Comparative Competition and Benchmarking  Directorate Communication and Customer Relation  Legal Advisor Water & Wastewater Regulatory Authority - WWRA  Regulator Coordination Committee  Utility Advisory Committee  Customer Service “Window”  Regulatory Council

19 Dr. Thomas Schiller Communication with and among the utilities  Utility advisory Committee:  Function » Harmonization of procedures » Implementation of standards » Discussion of performance benchmarks » Discussion of tariff policies » Other issues of common interest  Members » NWSA » Autonomous NWSA Branches » LCs, » Autonomous Branches of LCs,  Can convene on different levels: Head of Organizations or Head of Departments  For specific issues, such as water quality, also other organizations can be invited: Tanker Service Association, Purification Plants, Small private network operators

20 Dr. Thomas Schiller A Structure of Formal Interfaces  Director General General Services General Services  Directorate Asset and Tariff Evaluation  Directorate Service Quality Comparative Competition and Benchmarking  Directorate Communication and Customer Relation  Legal Advisor Water & Wastewater Regulatory Authority - WWRA  Regulator Coordination Committee  Utility Advisory Committee  Customer Service “Window”  Regulatory Council

21 Dr. Thomas Schiller WWRA will seek feedback of customers (customer protection)  Customer Service “Window”  Function » Allow customer representatives to enter in structured communication with WWRA » Allow WWRA to actively seek direct feedback from customer representatives  Target Group » All kind of formalized or non-formalized customer organizations or customer representatives  WWRA will monitor customer satisfaction

22 Dr. Thomas Schiller Thank you very much for your attention!