progress of the water reform in bulgaria Ministry of Regional Development and Public Works progress of the water reform in bulgaria 3 May 2018

Content Background Current problems Proposed solutions

Timeline Yet: Still struggling with investments 2009 –ownership, Associations 2014 – strategy for the development of the sector 2015 regional master plans 2015 – taxation, regulation 2016 new regulatory requirements 2018 strategy for financing the sector ??? The Water and sanitation Act Yet: Still struggling with investments Not all current prices approved Still struggling with operations

Water and sanitation reform Strategic goals (Strategy 2014-2023) Compliance The sector meets national/EU requirement Sustainability Environmentally sound, financially and technically viable Affordability Services are of the necessary quality but affordable to consumers Efficiency Efficiency of operations in line with best international practices policy regulation Institutional framework

Compliance; Quality of service; Access; Renewal. INFRASTRUCTURE Compliance; Quality of service; Access; Renewal. Little progress since 2014; Increasing requirements; New challenges.

OPERATORS Fragmented – 52 companies ranging from a few thousand to 1,3 million consumers; Different ownership - 29 state or mixes / 22 municipal / 1 concession; Different physical and economic condition.

ASSOCIATIONS Territorial coverage following the operator’s services (2009 decision); Ex-lege structure with unclear legislative status; Veto rights on all decisions by the representative of the state and extremely distorted voting power of the municipalities; Lack of planning capacity;

Publically owned (Municipal or State) infrastructure ASSET management Publically owned (Municipal or State) infrastructure Should be responsible to finance, ensure the condition of the infrastructure and quality of service, assign the management of the assets. Could be the owners directly or an entity they delegate to; In our case – delegated to the Association of the owners, but lack of understanding of their responsibility own, do not fill empowerment, lack of capacity to plan the development, political considerations interfere in investment decisions; Asset Owner Should be responsible for the strategic (construction of new infrastructure) and technical (maintenance and renewal) management; In our case - where does responsibility for these decisions lay? From technical point of view it should be with the operator, yet very often projects prepared and investment decisions taken by the owners alone despite the delegation of maintenance. Asset Manager The physical delivery, should be under the control of the operator, implemented by him directly or outsourced; In our case assets are delivered either by the operator (maintenance and renewal mainly), or contracted by the operator, or contracted by the owner – chaos. Asset Delivery

Institutional framework Clarify investment decision process: owners set quality and infrastructure condition requirements, operational issues to be left to the technical people; Balanced voting and empowerment of owners to take decisions coupled with continuous capacity building measures; Clarify and limit responsibility for asset delivery to only one party – the operator; Regulate ownership issues in specific cases; Simplify asset management procedures.

Regulation Current approach Mix up of regulator’s functions and regulation by the owners of contractual obligation Regulates “the how”; All changes in prices need to be requested, lack of procedural economy; Sets requirements and controls their fulfillment. Proposed approach Sector specific regulation; Establishes clear distinction between the functions of the regulator and the owners; Focus on “the what” – goals and results; Automatic price review mechanisms, setting reference pricing within which no approval required; Needs to play an active role in improving operators’ performance –methodology development on crucial topics, benchmarking.

Policy Strategic vision and planning, based on realistic goals for service coverage and quality, accounting for technical capabilities and cost efficiency of achieving them; Adequate financing – predictable investment resources, based on adequate tariff and taxation policy; Consumer protection, information and participation; Consistent data and their analysis, on the basis of which managerial and investment decisions are formed Continuous efforts to improve service quality and operational efficiency, fostering innovation, research and capacity building Facilitate public private partnerships, technology and know-how transfer, international cooperation and exchange of experience.

Financing Expected results: Protection of vulnerable groups Full cost recovering pricing, incl. renewals, compliance, coverage objectives; Predictable financial flows - fixed price component; Solidarity fee – to be accumulated on national level; Revenue to attract commercial funding (operator level) Flexibility for poor quality of service Create a specific FUND Expected results: synergistic effect of different sources of funding; unification of funding rules to prevent artificial competition between different sources; support for the implementation of the WSS policy; ensuring sustainable and predictable source of investment funds; further mobilization concessional and private capital. Compliance investments; Energy and resource efficiency; Innovation and development activities; Improving the operations efficiency; Capacity building; Watershed protection; Collaboration with upstream water users, etc.

Water and sanitation reform Policy which sets the principles, objectives, and resources to achieve them and than monitors and evaluates performance and progress Institutional Framework which is based on clear separation of functions and responsibility, establishes a simple yet accountable governance and asset management model, taking into account the functions and capabilities of the different actors based and allows for private participation Result oriented Regulation ensuring that quality of service and investment goals are met at affordable price without introducing excessive reporting requirements

Ministry of Regional Development and Public Works Thank you for your attention! Malina Kroumova Deputy Minister of Regional Development and Public Works mkroumova@mrrb.governmet.bg