WATER REGULATORY AUTHORITY ROLE OF WRA IN REGULATING AND APPROVING TARIFFS FOR WATER SUPPLY AND SEWERAGE SERVICE Avni DERVISHI , Chairman of Water Regulatory Authority WORKSHOP STRUGE, MACEDONIA 02 APRIL 2014

NEED FOR A REGULATOR The water supply service is a natural monopoly: Inadequate incentives for the operators to enhance efficiency; Risk of a poor quality service and higher prices than required; Risk of domination of the operators over the consumers. Therefore, there is a need for a regulator to act upon the parties having interests in the sector;

NEED FOR A REGULATOR What is a regulator? It is a modern form of intervention of the central government, in view of protecting the public interest; It aims to ensure a better balance between the service operators and consumers’ interest, in providing these services under a transparent process for the parties. Rregulatori Konsumatori Operatori

WHAT IS WATER REGULATORY AUTHORITY? The Water Regulatory Authority (WRA) is an independent public institution regulating the water supply and sanitation sector in Albania, established by Law No. 8102 dated 28.03.1996, for the “Regulatory framework of the water supply sector and disposal and processing of polluted waters”, as amended, in order to ensure the security and protection of public interests and to create a transparent regulatory environment.

VISION / MISSION Vision Mission A financially self-sustainable Water Supply and Sanitation sector providing high quality services but affordable for all consumers in Albania. Mission To assure all consumers in Albania that the water supply and sanitation service providers offer the best attainable quality at a fair price and in a sustainable financial manner. 4

GENERAL RULES & MANUALS REGULATORY INSTRUMENTS OF Water Regulatory Authority (WRA) GENERAL RULES & MANUALS Licensing Rules Tariff Methodology Cost Manual Business & Investment Plan Manual on Consumers’ Service SPECIFIC OBJECTIVES Performance Agreements License or Tariff Requirements Benchmarking MONITORING Performance periodic monitoring Field inspections Performance Report INFORMATION & PUBLIC PARTICIPATION Annual Performance Report Hearing sessions Sample contracts

LICENSING DCM No. 958 dated 06.05.2009, “On approval of License Categories…” and “Licensing Regulation”, approved by NRC by virtue of Decision No. 29, dated 08.12.2009. The National Regulatory Commission (NRC) is the only authority licensing all natural persons or legal entities operating in the Water Supply and Sanitation sector. License categories are as follows: Category A: Collection and distribution of water for public consumption Category B: Water processing for public consumption Category C: Collection and removal of polluted waters Category D: Processing of polluted waters The period of license validity is four (4) years.

WRA MAIN OBJECTIVE Protecting consumer interests Increasing financial sustainability of service providers The main instrument to meet this objective is the tariff approval process.

TARIFF IMPOSING METHODOLOGY Approved by NRC by decision No. 28, dated 28.09.2011 Tariff objectives Tariff structure & approved model Tariff monitoring for other services Application model Tariff approval process Analysis of tariff change proposal

TARIFF POLICY OBJECTIVES The tariffs are progressively increased until the receipts cover all costs, including the amortization and loan interests. Management efficiency The providers must show measurable progress for the improvement of technical and financial performance before WRE approves an increase of tariffs. The families with low incomes should continue to be able to meet the basic needs of consumption, spending a maximum of 5% of their incomes for the water supply and sanitation services The tariff structure should promote the preservation of resources and sustainable consumption levels. Cost coverage Affordability

Groups of tariff structures (cubic meter/month) TARIFF STRUCTURE AND APPROVED MODEL Categories of consumers Groups of tariff structures (cubic meter/month) < 4.5 4.5 to 20 20 to 30 > 30 Family 1.0* 1.0 to 3.0 1.5 to 4.0 2.5 to 6.0 Public 1.0 to 2.0 1.5 to 5.0 2.5 to 10.0 Private 2.0 to 6.0 3.0 to 12.0 The tariff structure is proposed by the operator and is approved by WRA

MONITORING TARIFFS FOR OTHER SERVICES WRA

APPLICATION MODEL Excel sheet document, where the operator introduces data: Comprehensible and easily completed by the operators; Facilitates the process of communication between the parties; Transparent for the stakeholders. Drafting a Guide on the presentation of application, based on the Business Plan WRE shall encourage the operators to draft a Business Plan. The operators who have compiled a Business Plan may apply for new tariffs not only for one year but also for a period of 2-3 years.

TARIFF APPROVAL PROCESS Hearing session in the service area (only for the large operators) Annual balance sheet and information about the subsidies received Preliminary review (within 45 days) Presentation of the application from the operator to WRE Changes or additions to the documentation submitted by the operator Delivery of WNRC decision to the operator (final deadline until March of the next year) Publication of new tariffs from the operator (30 days in advance) Delivery of WNRC opinion to the operator and local governance – 14 days for feedback from the operator Presentation to WNRC Economic Sector Analysis Preparation of proposal for the tariff change (until 30 June) according to the bas. doc. and consum. opinion. (only for large operators)

Determination of tariff structure PROPOSAL ANALYSIS FOR TARIFF CHANGE Cost analysis Deduction of unacceptable costs O&M scheduled costs O&M regulated costs Performance analysis Performance regulation Regulation of performance indicators Tariff imposed Cashed amount Average tariff Determination of tariff structure Categories of customers and consumption Tariff categories Cost analysis for WRE is a duty and challenge, so that they shall be really “reasonable and necessary” for the improvement of services to the benefit of all Albanian people.

KEY PERFORMANCE INDICATORS No Indicator Attained level Objective for the present year Difference from the objective, expressed in % 1 Water without incomes (losses) 2 Measurement level (% of metering connections) 3 Water quality 4 Supply duration (hours of service) 5 Energy efficiency 6 Staff efficiency (staff/1,000 connections) 7 Water coverage 8 Sanitation coverage Regulatory awareness 10 Additional measures 11 Cashing rate

WATER REGULATORY AUTHORITY THANK YOU!