1. Association of providers of communal services in Republic of Macedonia - ADKOM
Business planning in Macedonia – process starting as a request of the Regulator
Danube Water Conference 2017, Vienna
Session on Business Planning, May 18
Mr. Jane Vrteski (ADKOM)

2. Organisation of services
Local governments are providing water and sanitation services through 68 public municipal utilities. With an average population served of 23,241, the market is more atomized than the average in the region, and is dominated by the Skopje Water company, which serves about 25% of the population. seven water-only utility companies serve an additional 17% of the population, and 45% are served by 60 smaller municipal multi-utility companies. the rest of the population has access to self-provision (12.5%).

3. The main sector challenges
a) SECURING A MULTIYEAR INVESTMENT BUDGET.
Investment needs to be significantly increased in the water sector. It is estimated that €20/capita/year in investments are needed to meet EU acquis requirements.
These investments will have to be financed by the public sector and international sources. The significant amount of these investments can be financed through international loans or donations.
b) IMPROVING THE EFFICIENCY OF SERVICE PROVIDERS
Reducing nonrevenue water and introducing the use of contemporary information and communications technology
Establishing an effective tariff system is key to ensuring the sustainability of the sector
Significant strengthening of administrative capacity, both at central and local level

4. The Reform Playing Field
National Policy Makers
Regulatory Commission
EU /
International Financing
ADKOM
Municipality
Water Economic Operators
PUC
Customers
Source: Reform in the System for Water Supply, Collection and Treatment at Local Level

5. Law on Setting of Water Service Prices
Article 11 Setting of the Water Service Tariff
PROCEDURE FOR SETTING THE PRICES FOR WATER SERVICES
Setting of the Water Service Tariff
The provider shall be obliged to prepare a request for setting of the water service tariff with proposed tariffs and the same will be provided to the Regulatory Commission :
draft Tariff Adjustment Plan, and
data and reports of the Business Plan which are obligatory for the purposes of setting of the water service tariffs
All water service providers, providing water services on territories that are bigger than equivalent inhabitants as well as that provide raw water for the supply systems, shall be obliged to commence with the application of the water service tariffs in accordance with this Law by 1st January 2018, at the latest
PROCEDURE FOR SETTING THE PRICES FOR WATER SERVICES
Article 10
Frame for Tariff Setting
(1) The tariffs for water services are determined by the Regulatory Commission for each provider of water services based on submitted plan for adjustment of tariffs for water services or regulatory tariff for water services under the terms and procedure established by this Law.
(2) In determining the tariffs for water services or regulatory tariffs for water services, the Regulatory Committee will take into account the threshold of affordability of households in the area in which the lender provides the water service.
(3) Regulatory Commission, at least once every three years, in the period of the implementation of intensive investments in infrastructure for the providing a water services, will provide a recommendation to the availability threshold on level of income per household in the country, and every seven years when there are less investments, but there are multiple operating infrastructure facilities providing the water service.
Article 11
Setting of the Water Service Tariff
(1) The provider, in order to set the tariff for the water service provided to the end consumers, and for the purposes of meeting the objectives referred to in Article 2 of this Law, shall be obliged to prepare a request for setting of the water service tariff with proposed tariffs and the same will be provided to the Regulatory Commission
(2) The provider shall accompany the request referred to in paragraph 1 of this Article with the following:
- draft Tariff Adjustment Plan, and
- data and reports of the Business Plan which are obligatory for the purposes of setting of the water service tariffs.
(3) The request referred to in paragraph (1) of this Article and the documentation referred to in paragraph (2) of this Article shall have to be submitted to the Regulatory Commission within a period of 9 months, at the latest, prior to the expiry of the validity of the decision determining the water service tariff ie the decision to establish the regulatory water service tariff
(4) The request referred to in paragraph (1) of this Article and the draft plans referred to in paragraph (2) of this Article, as well as submission of data referred to in paragraph (2) in line with 2 shall be made in accordance with the Methodology for tariffs.
(5) The draft Tariff Adjustment Plan for water services referred to in paragraph (2) of this Article (hereinafter) Plan for adjustment shall be prepared for a period of three to six years.
(6) The obligatory data and reports of the Business plan referred to in paragraph (2) in line with 2of this Article shall refer to the period for which the draft Tariff Adjustment Plan is prepared.
(7) The Request and the plans referred to in paragraph (1) of this Article shall be submitted together with the draft plan for adjustment and other dates in written and in electronic form.
(8) For the purposes of preparation of the draft plan for adjustment the provider shall be obliged to make a real assessment of the existing infrastructure used for provision of the water services, and shall obligatory present the assessment data as the basis for calculation of the expenses for capital maintenance and for the future investments.
(9) The provider shall be obliged, along with the draft Tariff Adjustment Plan, to provide data on the key success indicators with proposed objectives/targets envisaged to be met by the provider, which refer to the water service provision with realisation of the Tariff Adjustment Plan and the Business Plan.
(10) The provider shall be obliged, for the purposes of preparation of the request referred to in paragraph 1 of this Article and the submissions to the request to use accurate and credible data that are in accordance with the accounting and other documentation of the provider.
(11) The form and content of the request referred to in paragraph 1 of this Article shall be determined by the Regulatory Commission by adopting the Tariff Methodology.

6. Purpose
The Law on the Setting of Prices for Water Services, which has been adopted by the Macedonian Parliament (15th January 2016), requires, inter alia, that PCEs prepare Business Plans on a multi-annual basis and that these Plans form the basis of a Tariff Adjustment System overseen by an independent regulator.
PUCs has to submit a Tariff Application to the Regulatory Commission (RC)
New tariff will be set for 1st regulatory period
This brings the preparation of Business plans as a top priority for the PUCs providers of water services in the country.

7. The Business Planning process
Business Plan is a joint effort of PCUs and the Municipalities
Business Planning Working Group (Task Force) was established in each PCU with representatives from the PCU and LSGU
Process is supported by:
Project Reform in the System for Water Supply, Collection and Treatment at Local Level
National Reform Project
Project National Water Study
IAWD/ADKOM Capacity development for Business Planning

8. ADKOM/IAWD - Business Planning
The Managing board of ADKOM identifies as a high priority to organize capacity building workshops on business planning for the utilities which are not included in the projects.
Project: Capacity development for Business Planning (supported by IAWD)
Training in BP
Assisting six PUCs in Development of a Draft Business Plans and Tariff Adjustment Plans

9. Working methods Regional Workshops Home works
Meetings with the Working Groups
Direct assistance to PCUs in preparation of the TAP and BP
Consultative meetings among MoEPP, Local Reform Project, ERC/Central Reform Project and ADKOM

10. Business Plan steps 1. Detailed Assessment
2. Strategic priorities and development needs
8. Activity Plans
9. Organization and capacity development Plan
3. Objectives and targets
4. Demand / Services Forecast
10. Obtaining approval
5. Investment Programming
Implementation
6. Financial Forecast
Monitoring performance
7. Tariff Adjustment Plan
Source: Reform in the System for Water Supply, Collection and Treatment at Local Level

11. 10 Strategic Priorities and Development Needs
Widened scope of services: added wastewater treatment services
Measurement and control of water production and distribution, network zoning, SCADA
Increased service areas: more rural settlements
Reduction of Non Revenue Water: real + commercial loss
Asset management: focus on asset mapping and registry, increased renewal rate and Investment Planning
Source: Reform in the System for Water Supply, Collection and Treatment at Local Level

12. 10 Strategic Priorities and Development Needs
Reading, Billing and Collection: focus on customer databases, customer contracts, information and communication, reading and collection practices, enforcement
Start Cost and Profit Centre Accounting
Need for Financial Restructuring to resolve debt situation
Improving the Information Management Systems
Reorganization, restructuring and commercialization
Source: Reform in the System for Water Supply, Collection and Treatment at Local Level

13. Business planning in Macedonia –
process starting as a request of the Regulator

14. Thank you! Association of providers of communal services in the Republic of Macedonia – ADKOM