Energy Regulatory Commission of the Republic of Macedonia Implementation and regulation of the public water supply and urban waste water management in Macedonia, current situation and challenges faced by regulator Energy Regulatory Commission of the Republic of Macedonia

Establishment Established with the Energy law in 2002, as independent body, operational since 2003 According to the amendments in the Energy Law from 2016 the Commission comprises: Seven (7) members of the Commission (President and 6 members)

ENERGY REGULATORY COMMISSION OF THE REPUBLIC OF MACEDONIA MEMBER VICE PRESIDENT PRESIDENT MEMBER MEMBER Technical secretary Internal auditor P R O F E SS I O N A L D E P A R T M E N T S ELECTRICITY HEAD OF DEPARTMENT DEPUTY HEAD OF DEPARTMENT ADVISOR ASSOCIATE NATUARL GAS, OIL AND OIL DERIVATES AND DISTRICT HEATING ECONOMICS LEGAL MONITORING OF ENERGY MARKETS ADMINISTRATIVE, FINANCIAL AND GENERAL ISSUES ADVISOR FOR ADMINISTRATIVE AND LEGAL ISSUES ADVISOR FOR FINANCIAL AND ACCOUNTING ISSUES ASSOCIATE FOR ARCHIVE DRIVER BUFFET WORKER CLEANER INFORMATION TECHNOLOGY AND STATISTICS HEAD OF DEPARTMENT DEPUTY HEAD OF DEPARTMENT ADVISOR – PROGRAMMER ADVISOR FOR SYSTEM ADMINISTRATION AND DATABASE ASSOCIATE - SYSTEM ANALYST

Competencies electricity; natural gas; oil and oil derivatives, blends of liquid fuels from fossil origin that are used for transport, with bio fuels; district heating; and water services

Water sector stakeholders Ministry of Environment and Physical Planning State environmental Inspectorate Energy and water Regulatory Commission ADKOM Association of Providers of Utility services to Macedonia

Non-governmental and unprofitable organization, Represent the public service enterprises at the central government, Recognized and desirable partner in the field of communal services, A center of knowledge and experience for the public communal enterprises, Promoter of the joint cooperation in supporting sustainable local and regional development in an inclusive way. On daily base ADKOM follows all activities into legal regulation for PCU inform them and organize appropriate workshops.

REGULATION: LAW ON SETTING THE PRICES FOR WATER SERVICES - JANUARY 2016 METHODOLOGY FOR THE SETTING OF WATER SERVICE TARIFFS – May 2017 RULEBOOK ON THE MANNER AND PROCEDURE FOR SETTING OF WATER SERVICE TARIFFS AND OF THE REGULATORY TARIFF FOR WATER SERVICES – May 2017

REGULATION OF WATER SERVICE PRICES Until now: MUNUCIPALITY price regulation UTILITIES New way of price determination: ENERGY REGULATORY COMMISION price regulation UTILITIES

Water services: supply with raw water envisaged for water supplying of the population supply with drinking water or water supplying urban wastewater collection and drainage wastewater treatment

Implementation Process

Water service provides > 10.000 equivalent inhabitants provide raw water < 10.000 equivalent 76 APPLICATION to ERC from 38 UTILITIES – 15 September 2017 Decision for establishing the tariffs for water services by ERC – 21 November 2017 (raw water) and 24 November 2017 (>10.000) Approved by municipality/government 150 days of days of date of publishing of publishing of the decision in the Official Gazette of the Republic of Macedonia APPLICATION (above 60) to ERC from 37 UTILITIES – 15 September 2018 Decision for establishing the tariffs for water services by ERC – October 2018 Approved by municipality/government 150 days of days of date of publishing of publishing of the decision in the Official Gazette of the Republic of Macedonia

Water service provides Implementation begins.... 1st January 2018 1st January 2019 Providing water services on territories that are bigger that 10.000 equivalent inhabitants as well as that provide raw water for the supply systems Providing water services on territories that are smaller that 10.000 equivalent inhabitants as well as that provide raw water for the supply systems

Decision for establishing the tariffs for water services by ERC for water services provider on territories that are bigger that 10.000 equivalent inhabitants and for raw water

METHODOLOGY FOR THE SETTING OF WATER SERVICE TARIFFS ERC ERC MIN Revenue MAX Revenue Service Provider Managerial Board Decision Municipal Council or Government Approval

METHODOLOGY FOR THE SETTING OF WATER SERVICE TARIFFS MIN REVENUE = operating costs + depreciation of own fixed assets + the price of long term debts of enterprises MAX REVENUE = operating costs + amortization of own fixed assets + depreciation of free of charge fixed assets + liquidity fixed assets + return on regulated fixed assets. "Affordability threshold" 3% - shall mean the upper limit expressed in percentages of financial affordability of water services calculated on level of Macedonia in which the price of water services is not higher than a specific percentage of the average total income per household in the specific service area

Comparison of the existing average tariffs and average minimum tariffs approved by ERC

DETECTED PROBLEMS AND NEXT CHALLENGE ISSUING DECISIONS SIMULTANEOUSLY FOR SUPPLY WITH RAW WATER ENVISAGED FOR WATER SUPPLYING OF THE POPULATION AND SUPPLY WITH DRINKING WATER OR WATER SUPPLYING PROMULGATION OF DECISSION BY SERVICE PROVIDER MANAGERIAL BOARD AND APPROVEMENT BY MUNICIPAL COUNCIL OR GOVERNMENT HUMAN RESOURSES The challenge currently (status of October 2018) facing the ERC is to analyse the applications of the second group of utilities providing water services on territories that are smaller that 10.000 equivalent inhabitants , engage with the PUC’s where appropriate and decide on the appropriate tariff determination in accordance with laid down procedures and timescales. Completion and development of IT platform including PUC detailed database/benchmarking facility Development of reporting requirements