CROATIA Water Services Sector Council for Water Services

CROATIA – Water Services Sector Council for Water Services Vladimir Šimić, vice-chairman Lisabon, 8 October 2018

Population (Croatia) – 4, 17 M Surface area – 56590 sq. km. Annual turnover (in sector) – EUR 495 M Fragmented WUTs (1990 - 104, 2015 – 156, 2018 190) • apx. 8. 200 employees in WUTs • Water prices bellow 1, 8% of NDI of a household, before EU investments • Business customers – 43% higher prices than households, in average • • Water services sector (1)

• Unaccounted for water (2009 - 46% u 2009, 2017 – over 50%) • Water supply – available for 94% of inhabitants • More than 200 small unregulated water supply systems (in settlements up to 3500 inhabitants) • Waste water collection - 53% of inhabitants • Waste water treatment - 44% of inhabitants Water services sector (2)

Water utilities (190) -188 public, 2 private Cities/municipalities (555) Ministry of Environment and Energy Croatian Water – national water management agency – resources management, technical assistance and co-financing of local water and waste water projects • Council for Water Services – independent regulator • • Key players

COUNCIL FOR WATER SERVICES • 2010. under the act of Parliament (Water Act of 2009) • Independent state body • Ad hoc body (in reality) • Permanent body (under the Water Act am. of 2013), no governmental decree on organisation has been passed • Main objective – to prevent under-pricing or over-pricing where in place ( Water Management Strategy of 2008) • Proposes to Government – Water Tariff Methodology (decree of 2010) Established

• 9 councillors; to freely elect their chairman and vicechairman • 5 yr. term • appointed by the Parliament on the Governments proposal • accountable to the Parliament • reporting (annually) to the Parliament • Ministry (of Environment and Energy) – administrative and technical assistance • No. of professional staffers: 1 • Annual budget – covers monthly fees of the councillors Appointment and Composition

5 components 1. Water Tariffs (WUTs revenue; M&O) - Fixed - Full - Variable - Social 2. VAT (13%) 3. Development Charge (WUTs revenue; ND&R) 4. Water Abstraction Charge (Croatian Water’s revenue; inter alia ND&R; reallocation to local water projects ) 5. Water pollution Charge (Croatian Water’s revenue; inter alia ND&R; reallocation to local water projects ) (Bulk water prices – out of consumer’s bills) Consumer’s bills

Water tariff STEP 1 – Local regulation • water utility sets the tariff + mayor’s approval = tariff becomes effective STEP 2 – National regulation - Ex post (subsidiary) • Suspension of illegal tariff • Interim tariff Economic regulation (1)

Development charge Step 1 – Local regulation (DC- tariff) • Water utility proposal • Local council passes (or not) Step 2 – National regulation (if passed) • Regulator proposing suspension of illegal DC- tariff to the Ministry • Ministry suspends DC-tariff (or not) Step 2 – National regulation (if not passed) • Regulator to expand payment obligation to cities/municipalities not enacted DC – tariff, if DC has been paid at 50% of C/M (measured in water volume) • Regulator to level DC tariff at the service area Economic regulation (2)

Bulk water tariff Step 1 • Contract between WUTs • (if not) unilateral decision by the WUT – seller Step 2 • Dissatisfied party to start a litigation + to apply for an interim injunction Step 3 • Regulator issues (and changes) interim injunction with temporary tariff Economic regulation (3)

Water consumption Per capita - 131 litre/day , 3, 93 m 3/month Household – 2, 8 members Per household - 11 m 3/month Water price (all 5 components) • Households 2, 08 EUR/m 3 • Businesses 2, 96 EUR/m 3 Consumer’s bill • Per capita – 8, 19 EUR/month, 98, 35 EUR/year • Per household – 22, 95 EUR/month, 275, 45 EUR/year Average values

• Water Act of 2009, Government Decree of 2010 • 6 areas 1. Coverage of water services 2. Volume of water services 3. Volume of water supply (invoiced/noninvoiced, breakages, non-complying samples etc. ) 4. Quality of service 5. Costs 6. Debt and Capital • KPIs 46 (3+7+2+15+17+2) • Results Collection – YES, analysis – NO, verification - NO • Croatian Water initiative of 2014 - to reform benchmarking (new KPIs, new definitions, training for WUTs, online entries…; not accepted so far) Benchmarking

• Universal introduction of variable and fixed tariff • Universal introduction of social tariff (not more than 60% of full tariff) • Comparable cost structure • Financial stabilisation in sector profit 5, 6% -total, 0, 79 – public sector losses 0, 67 total and public sector (30% of WUTs) • 4/5 of water volume sold by 25 WUTs • all distortions occur within 1/5 of sold water Achievements

WUTs merger new service areas (190 to 38) „one utility per service area” non-profitable utilities water prices control – from „pump up” – overall costs control; from „price cap” to „revenue cap” model • water price – not to exceed 3, 6% NDI • • • Challenges

Thank you