The document provides recommendations and an action plan to improve utility pricing policies and practices in Serbia. It finds that utility prices often do not fully cover costs, tariff setting is inconsistent with regulations, and collection rates are low. It recommends developing a pricing methodology tool, guidance on long-term tariff policies, improved templates for justifying price changes, enhanced PUC monitoring systems, and measures to increase revenues and improve communication with customers. The action plan includes piloting these recommendations, conducting awareness campaigns, and developing social profiles to better target subsidies.

1. DRAFT
Service Price Tariff Policies and
Communication Modalities
_________________________________________________________________________________________________________
Prepared by:
BojanGajić
RafalStanek

2. TABLE OF CONTENTS
1 Introduction ..................................................................................................................................1
2 Recommendations and Action Plan................................................................................................2
2.1 Main recommendations.............................................................................................................................................2
2.2 Communication modalities ......................................................................................................................................4
2.3 Action plan.......................................................................................................................................................................8
3 Overview of legislation that regulates utility service pricing policy in Serbia ...............................13
3.1 Law onCommunalServices......................................................................................................................................13
3.2 Law on Public Companies.......................................................................................................................................17
3.3 Lawon Consumer Protection.................................................................................................................................20
3.4 Regulation on Energy Protected Consumeror Vulnerable Heat Consumer......................................23
3.5 Regulation on Determing the Highetsandthe LowestAvarage Pricesof Heat During the
Season2012/2013......................................................................................................................................................25
3.6 Conclusions....................................................................................................................................................................28
4 Conclusions from the poll dedicated to Public Utility Companies' pricing communication ...........30
4.1 Debt collection rate....................................................................................................................................................33
4.2 Individual examples in Serbian PUCs ................................................................................................................35
4.2.1 PUC "Higijena" Pančevo...............................................................................................................................35
4.2.2 PUC "Gradska toplana" Niš.........................................................................................................................36
5 Conclusions from Ministry's questionnaires on pricing of utility services....................................40
6 Service price levels in Serbia, related to actual cost......................................................................41
6.1 Annual business plans..............................................................................................................................................41
6.2 Annual financial reports..........................................................................................................................................42
6.3 Tariff change requests..............................................................................................................................................42
6.4 Surveys............................................................................................................................................................................42
7 Very brief historical overview of communal service pricing policy leading to the current state ...43
7.1 Price fluctuationsof basicutilityservicesfrom 2006-2012 andtheirimpactoncostsofliving............
.............................................................................................................................................................................................43
8 Brief summary of similar activities previously conductedby national or international
organizations in Serbia.......................................................................................................................................................46
9 General comparison of communal service prices levels................................................................48
9.1 Water and wastewater.............................................................................................................................................48
9.2 District heating ............................................................................................................................................................50
9.3 Solid waste.....................................................................................................................................................................52
9.4 Conclusions....................................................................................................................................................................54
10 International experience on regulation of communal services (pricing).......................................55
10.1 Principles of tariff setting........................................................................................................................................55
10.2 Functions of tariffs.....................................................................................................................................................57
10.3 Cost coverage and tariff calculation formulas................................................................................................59
10.4 Affordability..................................................................................................................................................................64

3. 10.5 Utility responsibility..................................................................................................................................................66
10.6 Customer database.....................................................................................................................................................68
10.7 Cost basis for user charges.....................................................................................................................................68
10.7.1 Solid waste management tariffs...............................................................................................................68
10.7.2 Water and wastewater tariffs...................................................................................................................74
10.7.3 District heating tariffs...................................................................................................................................75
10.8 Price Regulation..........................................................................................................................................................75
10.9 Capacity of local governments and utilities ....................................................................................................77
10.10 Communication between local governments and utilities ..................................................................77
10.11 Communication with customers and customer service management ...........................................78
11 Drawbacks in current communal services pricing policy .............................................................79
11.1 Awareness on actual costs......................................................................................................................................79
11.2 Analysis of maintenance costs..............................................................................................................................80
11.3 Benchmarking..............................................................................................................................................................80
11.4 Tariff structure.............................................................................................................................................................80
11.4.1 Water and wastewater.................................................................................................................................80
11.4.2 Heating................................................................................................................................................................80
11.4.3 Solid waste.........................................................................................................................................................81
11.5 Social function of tariff.............................................................................................................................................81
11.6 Regulation on national level ..................................................................................................................................81
11.7 Reflecting collection rate.........................................................................................................................................81
11.8 Bills collected by third organization ..................................................................................................................82
11.9 Incentives for customers and improvement of collection rate...............................................................82
11.10 Communication with customers .....................................................................................................................82
11.11 Communications LSG and support from LSG.............................................................................................83
11.12 Gender aspects in the utility service pricing..............................................................................................83
11.12.1 Gender Aspects of use of utility services..............................................................................................84
11.12.2 Availability of utilities..................................................................................................................................84
12 Review of options for service pricing...........................................................................................86
12.1 Solid waste tariffs.......................................................................................................................................................87
12.2 Water and wastewater tariffs................................................................................................................................88
12.3 Heating tariffs...............................................................................................................................................................88
12.4 Capacity needs .............................................................................................................................................................88
12.5 Conclusions....................................................................................................................................................................89
13 Draft templates for price request .................................................................................................90
13.1 Introduction..................................................................................................................................................................90
13.2 Water and wastewater.............................................................................................................................................91
13.3 District heating .........................................................................................................................................................100
13.4 Solid waste..................................................................................................................................................................110

4. List of tables
Table 1. Collection rates in Serbia [%]..................................................................................................................................30
Table 2. Uncollected receivables of the PUCs.....................................................................................................................33
Table 3. The level of payment collection services of waste disposal at 31.12.2013 .........................................35
Table 4. The collection rate services of waste disposal PUC "Higijena" Pančevo for the period of
01.01.2013-31.12.2013 on day 20.01.2014........................................................................................................................35
Table 5. Structure of Households with collection rates of waste disposal service from PUC "Higijena"
Pančevo for the period of 01.01.2013 - 31.12.2013 on day 20.01.2014................................................................36
Table 6. Structure of consumers from Commercial sector with collection rates of waste disposal service
from PUC "Higijena" Pančevo for the period of 01.01.2013 - 31.12.2013 on day 20.01.2014.....................36
Table 7. Structure of consumers with uncollected receivables from the Commercial sector of PUC
"Gradska toplana" Niš on the day 03.06.2014...................................................................................................................36
Table 8. Structure of the debtors of PUC "Gradska toplana" Niš on the day 03.06.2014. taking into
account the height of the debt ..................................................................................................................................................37
Table 9. 20 largest debtors of the PUC "Gradska toplana" Niš from the commercial sector on the day
03.06.2014.........................................................................................................................................................................................38
Table 10. Breakdown of 20 largest debtors of the PUC "Gradska toplana" Niš from the household sector
on the day 03.06.2014..................................................................................................................................................................39
Table 11. Indicator of price needed to the current price [#] ..................................................................................40
Table 12. Price levels in Serbia in 2006, 2009 and 2012 [EUR, % of average salary]......................................44
Table 13. Comparison of prices for water and wastewater and annual fee paid by households of 2.6
persons, consuming 120 lcd [EUR].........................................................................................................................................48
Table 14.Comparison of prices for district heating and annual fee paid by customer consuming 140
kWh/m2 for apartment of 60m2 [EUR]...............................................................................................................................50
Table 15.Comparison of prices for solid waste collection and annual fee paid by customer having a bin
of 120 l removed weekly, or having 60m2 of apartment or family of 2.6 persons [EUR].............................52
Table 16. Components of full cost recovery calculation................................................................................................63
Table 17. Coping strategies, including exclusion, self-disconnection, and non-payment, poorest quintile
................................................................................................................................................................................................................65
List of figures
Figure 1. Incentives for customers who are paying bills in short notice ...............................................................31
Figure 2. LSG help in collection of unpaid bills by budget users ...............................................................................33

5. List of abbreviations
Abbreviation Description
BLS Building level substation
EUR/€ Euro
KOMDEL Business Association of Public Utility Companies
kWh Kilowatt hour, unit of energy equal to 103watt hours or 3.6 MJ
lcd Litres per capita per day
LSG Local Self-Government
MJ Mega-joule (106 Joules)
PUC Public Utility Company
RSD Serbia Dinar
SALAR Swedish Association of Local Authorities and Regions
SCTM/SKGO Standing Conference of Towns and Municipalities
SIDA Swedish International Development Cooperation Agency

6. 1
1 Introduction
Standing Conference of Towns and Municipalities - National Association of Local Authorities in
Serbia (SCTM) and Swedish Association of Local Authorities and Regions (SALAR) through its
subsidiary SKL International are currently implementing SIDA financed programme entitled
“Support to Local Governments in Serbia in the EU integration process”.
The programme purpose is to strengthen the capacity of Serbian localgovernment to respond to EU
accession requirements through enhanced effectiveness of SCTM to support members’ interests
and development. The programme includes the followingcomponents:
 EU accession of Serbia and its implications forthe locallevel of government
 Environmental protection
 Gender equality at local level
 LG regulatory frameworkfor more favourable business environment
 SCTM capacity building
Within the scope of thematic partnerships, Programme is tackling topic of service pricing at the
local level and especially in fields relevant to cluster cooperation.
Assignment of Expert Team in a first phase was to give overview of situation surrounding service
prices at the local level in Serbia in order for SCTM to further define its position on the topic and in
a second phase, based on previous findings, propose appropriate steps (action plan) for
operationalization of service pricing adjustments. This report is an outcome the assignment.

7. 2
2 Recommendations andAction Plan
2.1 Main recommendations
LSGs and PUCs in Serbia have many short and long-term capacity development needs in order to be
able to implement properly calculated tariffsthat reflectthe principles of cost recovery.
This reports reviews various aspects of the utility pricing. Section 3 overviews the legislation that
regulates utility service pricing policy in Serbia. Competence of utility services falls completely
under LSGs. They are the ones who are establishing the public utility companies, entrusting the
performing of utility services and eventually taking care of utility services operations by themselves
(in smaller LSGs1). The public utility companies are representing the long hand of LSGs who are
monitoring the operations of public utility companies, obliged to give the consent to every
important decision made by PUCs and controlling the level of utility prices.
Practically not always LSGs and PUCs are fully complying with different regulations regarding
utility services. For example, problems are with tariffs setting (shall be one price for all customers
and price shall cover costs of services). Another example is that PUCs are not meeting the obligation
to separate accounting of incomes and expenses devoted to particular service.
Section 4 and 5 draws conclusions from two questionnaires related to utility pricing. One was
organized in co-operation with KOMDEL and second one is Ministry of regional development and
local self-government questionnaire on pricing of utility services. Ministry’s questionnaire focus on
utility pricing and operating costs coverage by utility tariffs. It shows that the biggest need for the
price raising would be in the sector of sewage, and the prices that needs the least raising would be
in district heating. The KOMDEL’s questionnaire was much wider and covered not only utility
pricing abut also other aspects of PUCs activities. From the questionnaire it is visible that collection
rates for communal services in Serbia are alarming. On the other hand PUCs and LSGs are doing
nothing or very little to improve collection rate. For example, 80% of utility companies don't have
1 Smaller LSGs in Serbia, when faced with a problem that they don't have PUCs set in place for taking care of utility
services, are contracting companies to deal with utility services, or Land Directorate (often called “Direkcija”) as
part of LSGs. The Law on communal services however, recognizes the possibility that utility services cou ld be
performed directly by LSGs.

8. 3
any incentives for the customers who are paying for their bills in a short notice. Only a bit more
than a half of PUCs does have the organized service for the complaints and just more than quarter
of them have the call service, few of them both.
Special attention was put on collection rate. As there is no comprehensive information on collection
rate, individual examples of Serbian PUCs were presented. It could be concluded that both
households and institutional customers have debts. From the review it is evident that in 30 cities
we have a bit weaker collection rates forhouseholds, but collection rates levels are very different
from municipality to municipality. Looking into the structure of institutional debtors, we can see
that the large part of uncollected receivables is among public institutions (owned by LSG or by the
state). Often Local Government represents the largest debtor, as they are directly or indirectly
responsible for the debts of their units (including schools and kindergartens).
Section 6 presents the service price levels in Serbia, related to actual cost. The major source of the
information was Ministry’s questionnaire mentioned above. It shows that price levels in Serbia are
between 50% and 80% of actual costs.
Section 7 presents historical overview of communal service pricing policy leading to the current
state. It concludes that even the price levels were raised in last years, if we observe prices in
relation to the average salary we see that only for district heating it was increase, while for other
services prices decreased. This subject is continued in section 8 by providing comparison of
communal service prices levels in other countries and in Serbia. Again as a good indicator to
compare prices a monthly fee for household/net salary is provided. We can observe that while for
heating Serbian prices are among the highest, for other services (water and sewage, solid waste
collection) are far lower than not only in Western Europe but also in surrounding Balkan countries
and other countries in Central and Eastern Europe. Thus for district heating, rather measures
related to energy efficiency shall be promoted, especially those that are simple and cost-effective:
installation of thermostatic valves and payment for energy consumed instead of m2 of heated
space. Regarding water and wastewater and solid waste tariffs, the full cost recovery tariff shall be
promoted because according to estimates of household affordability, households have some
capacity to pay for tariff increases.
Section 10 presents international experience on regulation of communal services (pricing) and
Section 11 presents drawbacks in current communal services pricing policy while Section 12
summarizes review of options for service pricing. From last three sections we can draw the most
urgent capacity development needs that PUCs and LSGs in Serbia shall perform in order to improve
the situation. In particular, this includes enhancement of the cost separation capacities, better
presentation of tariff request, preparation of long term tariff policy, integration of customer
databases, introduction of stronger enforcement mechanisms, implementing national and local
public information and awareness campaigns, and revenue enhancement.
In the short-term, it is recommended that a pricing methodology and implementation tool be
developed and disseminated to LSGs, their PUCs and relevant associations. The pricing
methodology shall enable PUCs to clearly divide costs among different services and be able to
calculate the proper tariff. Once the tool is disseminated, guidance on tariff policy for LSGs,
including communication to citizens and city officials, should be provided. The tariff policy,
approved by city assembly, shall give a long term and stable framework for utility pricing.
One of the key documents is the tariff change request (Justification of the Decision on changing of
utility service prices). So far this document, prepared by PUCs, usually provides vague information
for LSGs and for citizens. What is the most important it does not provide clear information what is
the need for tariff in order to cover costs. Instead, PUCs focus on inflation/price increase indices.
There are several reasons for that and one is lack of implementation of pricing methodology. Thus a
next step shall be to improve templates for the justification of decisions on changing utility service
prices.

9. 4
At the same time, PUCs need assistance in their monitoring and reporting systems through the
introduction of standards for annual business plans and other reporting. Municipalities, on the
other hand, require guidance and recommendations on measures to increase revenues. This should
be done on a pilot basis, with dissemination of results to other municipalities.
As the collection rate is very low and also, what was observed in this report the low collection rate
is not correlated with high utility prices (see Section 4), the revenue enhancement measures shall
be implemented. Revenue enhancement includes many different actions and through review and
piloting of Serbian and international experience, the catalogue of best measures can be prepared
and disseminated. This shall also include development of customer’s social cards/profiles. Social
profiles will help LSG to subsidise vulnerable groups of citizens instead of keeping general prices
low.
Local and national awareness campaigns should be conducted. As a first step, selected LSGs should
be supported on how to communicate tariffs to citizens. However this shall include also other
aspects of good communication between LSGs, PUCs and citizens/customers related to the
communal utility services. This action shall also include development of minimum service
standards criteria which shall be communicated to citizens. The results of these local campaigns
should then be disseminated at the national level.
Finally, customer services need to be upgraded, not only to enable the implementation of software
for customer services, but also to take advantage of revenue enhancement activities in LSGs (such
as, improving taxpayer registration).
2.2 Communication modalities
This chapter presents proposal forcommunication modalities between main actors involvedin
pricing forcommunal services. The main actors are following:
# Institution Note
1 SKGO Standing Conference of Towns and Municipalities
2 PUCs Public Utility Companies
3 LSG Local Self Government
4 Association1 Business Association "ToplaneSrbije"
5 Association2 Waterworksand Sewage Association
6 Association3 Business Association of Public Utility Companies “KOMDEL”
7 Association4 Serbian Chamber of Commerce
8 Citizens Individual customers, customers associations
9 Ministry 1 Ministry of Public Administration and Local Self-government
10 Ministry 2 Ministry of Agriculture and Environment
11 Ministry 3 Ministry of Mining and Energy
12 Ministry 4 Ministry of Construction, Transport and Infrastructure
13 Ministry 5 Ministry of Trade, Tourism and Telecommunications
14 Donors EC Delegation, SIDA, SDC, USAID, KfW,EBRD, EIB,other bilateral

10. 5
The communication modalities are outlined on the followingchart and and in the accompanying
table:
# From To Communication modality
1 SKGO LSG  Set of trainings;
 Development of guidelines;
 Pilotinglocal tariff policy, tariff request template, revenue enhancement,
local awareness campaigns and measures to improve customers service
 Dissemination of results;
 Communicating in preparation of the new reporting standards;
2 SKGO PUCs  Set of trainings;
 Development of guidelines;
 Piloting local tariff policy, tariff request template, revenue enhancement,
local awareness campaigns and measures to improve customers service
 Dissemination of results;
 Communicating in preparation of the new reporting standards;
3 SKGO Association  Participation in set of trainings;
 Participation in development of guidelines;
 Participation in piloting;
 Participation in dissemination of results;

11. 6
4 Association SKGO  Provides feedback on proposed tools both within its structure as well as
from member PUCs;
 Provides support to organize (co-organize) selected training modules on:
- Tariff methodology
- Templates on Justificationof theDecisionon changingof utility serviceprices
5 Ministry PUCs  Prepares templates for reporting:
- Performance indicators;
- Annual and semi-annual reports;
- Justification of the Decisionon changing of utility service prices;
- Development of minimum service standards criteria;
6 PUCs Ministry Prepares reports, including Performance Indicators
7 Association PUCs  Trainings for PUCs on tariff methodology and revenue enhancement
measures;
 Request data for benchmarking;
8 PUCs Association  Prepares benchmarking reports;
 Feedback on methodology and templates;
9 PUC LSG  Prepares and deliver annual and semi-annual reports, quarterly or monthly
reports on LSG request;
 Support preparation of the local tariff policy;
 Prepares Justification of the Decision on changing of utility service prices;
10 LSG PUC  Approves tariffs;
 Approves investment plans;
 Request for annual and semi-annual reports, performance indicators;
business plans and investment plans;
 Support in awareness campaign;
 Support in revenue enhancement by:
- Analysis of debt structure
- Putting pressure on PUC management to increase revenues, through
incentive schemes for management
- Providing measures which supports quick and regular payment (prize for
citizens / organizations / businesses who pays quickly: tickets, free or
reduced entrance fee for LSG events, other)
- Synchronize database of debtors with PUCs, review of the database each
time when LSG communicates with customer and making pressure when
found in the database
11 PUC Citizens  Customer relation database, including gender information;
 Awareness campaigns on saving of water/energy/waste,
 Awareness campaigns on tariff change and what citizens pays for
 Awareness campaigns on investment plans
12 LSG Citizens  Awareness campaigns on saving of water/energy/waste,
 Awareness campaigns on tariff change and what citizens pays for
 Awareness campaigns on investment plans
 Customers social cards/profiles and subsidies to vulnerable citizens
13 SKGO Ministry  Provides support to prepare templates on Justification of the Decision on
changing of utility service prices and trainings of the Ministry on tariff
calculation;
 Provides support to prepare reporting standards;
14 LSG SKGO  Participation in piloting;
 Feedback on tariff policy;
 Feedback on templates on Justification of the Decision on changing of utility
service prices;
 Feedback on reporting standards;
15 PUC SKGO  Participation in piloting;
 Feedback on tariff policy;
 Feedback on templates on Justification of the Decision on changing of utility
service prices;
 Feedback on reporting standards;
16 Ministry SKGO  Feedback on templates on Justification of the Decision on changing of utility
service prices;
 Feedback on reporting standards;

12. 7
Set of Trainings includesfollowing modules (each training module is targeting a different
institution):
 pricing methodology already developed by SCTM ;
 tariff request template (Justification of the Decision on changing of utility service prices – see
Section 12 and proposed templates in Section 13);
 local tariff policies;
 reporting standards;
Development of Guidelines includes following modules (each module is targeting a different
institution):
 development of local tariff policy;
 tariff request template (Justification of the Decision on changing of utility service prices);
 measures to increase revenues;
 local awareness campaigns;
 measures to improve customers service;
Development of Guidelines includes following steps:
 description of the relevant process, emphasizing steps which shall be performed;
 collection of Serbian and/or European best practices;
 consultation with relevant stakeholders;
 at the end guidelines are supplemented with relevant 3-5 case studies;
Pilotingincludes following modules (each module is targeting a different institution):
 development of local tariff policy;
 tariff request template (Justification of the Decision on changing of utility service prices);
 measures to increase revenues;
 local awareness campaigns;
 measures to improve customers service;
Piloting includes following steps:
 Selection of about LSGs/PUCs for piloting;
 Technical assistance (support)to selected LSG on developing the measure, using the developed
guideline;
 Preparation of case studies on how measures have been implemented and what are results;
Dissemination of Results includes following modules:
 development of local tariff policy;
 measures to increase revenues;
 local awareness campaigns;
 measures to improve customers service;
 new reporting standards
Dissemination of Results on national level includes following steps:
 Consultation with relevant stakeholders;
 Adjustment of templates taking into account lessons learnt during piloting and consultation
process;
 Printing the guidance;
 Organization of the conference and workshops for disseminating lessons learnt;
 Dissemination of the guidance directly to LSGs and through SKGO web page;

13. 8
2.3 Action plan
The action plan presents the possible involvement of SKGO and other actors in supporting Serbian LSGs and PUCs in enhancing the communal services.
# Actions Sub-actions Steps
Feedback
needed
Timing
[months]
Main
responsibility
Other
actors
involved
0 Positionpaper for SKGO
Objective: To understand why SKGO is
undertaking actions on enhancing
pricing policies
Preparation of the position paper
for SKGO
2 SKGO
1 Implementation of existing pricing
methodology/tool
Objective: To improve PUCs ability to
allocate costs to different communal
services and then to calculate unit
costs of that services
Dissemination of the tool Trainings for representatives of interested LSGs,
their PUCs and relevant Associations on
implementation of tariff methodology
6 SKGO
Further promotion of the tool during other SKGO
activities (conferences,workshops)
2 Tariff policy
Objective: LSG are able to prepare and
approve effective tariff policy
document ion the local level. Tariff
policy is a strategy that defines
direction of development of local
tariffs for communal services.
Preparation of guidance for LSGs
for understanding the tariff
policy and set of
recommendations for setting up a
local tariff policy.
Developing the guidance which will help LSG to
better understand:
- methods for tariff calculation and tariff
influence on PUCs performance
- how PUC shall response on cost change;
- elements of good LSG tariff policy;
- examples of LSG tariff policy for different
sectors;
6
(finalize
before the
end of
2014)
SKGO
Piloting the development of local
tariff policy in selected LSGs with
support to communicate a tariff
policy to citizens and tocity
officials (city council)
Selection of about 6 LSG for piloting From LSGs
Support of selected LSG on developing tariff policy From
selected
LSGs, PUCs
Approval of developed tariff policy by LSG
assembles
Assembly of
selected LSGs
Support of LSGs in communicating the tariff policy
to citizens
Preparation of at least 3 case studies of tariff
policy for different sectors
Adjustment of guidance taking into account
lessons learnt during piloting
3 case studies are a part of the guidance
Dissemination of the guidance Printing the guidance
Organization of the workshop for disseminating
lessons learnt from piloting and dissemination of
the guidance during the workshop
Workshop
participants
(LSGs)
Dissemination of the guidance directly to LSGs and
through SKGO web page

14. 9
3 Introduction of new template for
Justification of the Decisionon
changing of utility serviceprices
Objective: A template will be used by
PUCs to clearly communicate a need
for tariff change to LSG. A new
template will replace current system
of ad hoc tariff requests which are
usually vaguely prepared.
Piloting of new template for
Justification of the Decision on
changing of utility service prices in
selected PUC/municipalities
Development of the new template for Justification
of the Decision on changing of utility service prices
for 3 sectors
PUC
associations
12
(piloting
during the
first
quarter of
2015)
SKGO Ministry,
LSGs, PUCs
Selection of about 6-10 LSG/PUCs for piloting From LSGs
Work with PUCs to prepare tariff change request
using the templates
From
selected
LSGs, PUCs
Workshops for LSG representatives (members of
city council and assembly, department responsible
for communalservices) to understand the new
tariff change request
LSG
representativ
es
LSGs approvalof a new tariffs using the templates
Support of LSGs in communicating the tariff policy
to citizens
Preparation of at least 5 case studies
Collection of opinions on
template
Organization of a conference where templates are
presented and participants asked for their
opinions.
5 case studies are presented
Participants: LSGs, PUCs, Ministry
Workshop
participants
(LSGs, PUC
associations,
Ministry)
Adjusting templates Adjusting templates to reflect collected opinions
Presentation of results to the
Ministry
Working meeting with the Ministry to present
templates and take into account their opinion
Ministry
Adjusting templates
Preparation of guideline Preparation of guideline to help LSGs and PUCs
implement new templates
PUC
associations
Implementation of template as
Ministerial order
Ministry
4 Enhancement of PUC’s
monitoring/reportingsystem
Objective: To strengthen capacity of
LSG and Ministry to oversight PUCs.
This includes development of a new
reporting standards which shall
contain easy to analyse information
(including performance indicators)
instead of long text descriptions.
Preparation of the newreporting
standards
Development of the new reporting standards for:
- annualbusiness plans of PUCs;
- annualand semi-annualreports of PUCs;
- PUCs performance indicators for reporting
to LSG and Ministry
12
(year 2015)
SKGO Ministry,
LSGs, PUCs
Definition of information flow (PUC,LSG, citizens,
Ministry)
Presentation of results to the
Ministry and LSGs
Organization of a workshop where proposal for
newreporting standards are presented and
participants asked for their opinions.
Participants: LSGs, PUC associations, Ministry
Workshop
participants
(LSGs, PUC
associations,
Ministry)
Adjusting the reporting standards according to the
collected opinions
Implementation on Ministerial
level
Definition of newreporting standards Ministry
Implementation on PUC
associations level
Implementation of benchmarking using the
performance indicators
PUC
associations

15. 10
Dissemination of the new
reporting standards
Trainings for LSG to understand
- annualbusiness plans of PUCs;
- annualand semi-annualreports of PUCs;
- PUCs performance indicators;
Trainings for PUCs in preparation of:
- annualbusiness plans;
- annualand semi-annualreports;
- performance indicators;
5 Revenue enhancement
Objective: To strengthen capacity of
LSG and PUCs to collect revenues. The
collection of revenues for communal
services is currently alarming.
Piloting with selected
municipalities measures to
increase revenues
Selection of about 6 LSGs willing to pilot revenue
enhancement
LSGs 18 SKGO SKGO,
PUCs, LSGs
Collection of Serbian and European best practices
for revenues enhancement
LSGs/PUCs
(consultant
work)
Support to PUCs in proper calculation of collection
rate
Workshops in each LSGs to select the best
measures for revenue enhancement (Serbian and
European best practices are presented)
Implementation with LSG and their PUCs selected
revenue enhancement measures
Development by each LSG a model for
preparation of customers social cards/profiles
Each LSG subsidise vulnerable groups of citizens
using social cards/profiles
Measuring the impact of the measures for
collection rate
Preparing at least 3 case studies
Preparation of guidelines and
lessons learned from piloting
revenue enhancement
The guidelines shallpresent Serbian and
European best practices for revenues
enhancement and results from piloting
Dissemination of revenue
enhancement measures
Organization of the conference presenting the
guidelines and case studies
LSGs
Dissemination of the guidance directly to LSGs and
through SKGO web page
6 Local awareness campaigns
Objective: To support LSG and PUCs to
raise customers’ awareness regarding
the importance of communal services,
service standards, efficient use of
communal services, needs for
investments and to build a good
atmosphere to pay fees.
Support to selected LSGs to
communicate on communal
services to citizens and citizens’
associations.
Preparation of the guideline on local awareness
campaigns (measures to be implemented, rules for
implementation) - what am I paying for? How are
tariffs determined? How is my bill calculated?
Why is the tariff increase necessary? Where are
we compared to other municipalities?.
18 PUCs LSGs, SKGO
Selection of about 6 LSGs willing to pilot local
awareness campaigns
LSGs
Workshop with each LSG and PUCs to select 2-3
measures for awareness campaigns
Support to each LSG to perform local awareness
campaigns.

16. 11
Campaigns should be targeting the customers the
most, and scope of campaigns should be: 1.
awareness on the importance of tariffs and what
are tariffs made of; 2. measures to be taken by the
customers in order to decrease the amounts of
using of communal services, and very important 3.
awareness on the importance, and also on the
necessary steps needed toorganize the work of
multi- family dwellings associations.
Focus on the composition of male and female
representatives in the multi-family dwellings
Development of minimum service standards
criteria which will be communicated to citizens
Preparing at least 3 case studies
Preparation of guideline Preparation of guideline to help LSGs and PUCs
implement local awareness campaigns and how to
develop minimum service standards
Dissemination of results on
national level
Organization of the workshop for disseminating
lessons learnt from piloting local awareness
campaigns and dissemination of case studies
during the workshop
Workshop
participants
(LSGs, PUC
associations,
Ministry)
Dissemination of the case studies directly to LSGs
and through SKGO web page and PUC associations
7 Promoting enhanced customer
service
Objective: To support PUCs and LSGs
to improve customer service by
making contacts with customers more
effective.
Piloting with selected PUCs
measures to improve customers
service
Selection of about 6 LSGs and their PUCs willing to
pilot measures to improve customers service
LSGs 24 SKGO
Collection of Serbian and European best practices
for measures to improve customers service (this
may include establishing the customers service
departments,better collection and analysis of
customers complains including gender
information, enhancement of customers database,
CRM software, one-stop-shops, new ways to pay
bill)
LSGs/PUCs
(consultant
work)
Workshops in each PUC to select the best
measures to improve customers service
Implementation PUCs (and LSG) selected
measures to improve customers service
Preparing at least 3 case studies
Dissemination of results on
national level
Organization of the workshop for disseminating
lessons learnt from piloting enhanced customers
service
Workshop
participants
(LSGs, PUC
associations,
Ministry)
Dissemination of the case studies directly to LSGs
and through SKGO web page and PUC associations

17. 12
Proposedsequenceoftheactionplan
Action
2014 2015 2016
3 4 1 2 3 4 1 2 3 4
Position paper forSKGO X
Implementation of existing pricing
methodology/tool
X X
Tariff policy
Introduction of new template for Justificationof
the Decision on changing of utility service prices
X X X X
Enhancement of PUC’s monitoring/reporting
system
X X X X
Revenue enhancement X X X X X X
Local awareness campaigns X X X X X X
Promoting enhanced customer service X X X X X X X X

18. 13
3 Overviewof legislationthat regulates utility service pricing policy
in Serbia
Legal framework that covers utility services in Serbia is represented by, in a first place, Law on
Utility services, and secondly in the legal acts that are covering area of every single utility
service.
However, the legislation that regulates utility service pricing policy, in addition to before
mentioned is also a part of legislation that defines operations of public companies and customer
protection.
The most important legal act covering this area is, of course, The Law on utility services.
In the material that follows we will look closer to the most important parts of this law from the
utility service pricing policy perspective.
3.1 LAW ON COMMUNALSERVICES
Article 13
(1) Thelocal governmentAssemblydetermines the way of performing utility services through
adopting ordinances, as well as general and specific rights and obligations of utility services
operatorsandserviceusersin theirterritory, includingthe methodofpaymentof the utility service
price, the way of control of use and payment of utility services and authorities of utility service
operators while acting in the control and measures that controllers are authorized to undertake.
(2) Thelocal governmentAssembly's Ordinance, which defines general and specific rights and
obligations of the utility service operators and users, is directly applicable to all contractual
relations between utility service operators and the users as general conditions of business.
(3) If the local governmentAssembly'sOrdinance ontheperformingof utility services does not
deals with conclusion details of the single contracts between the operator and the user of utility
services, it is considered that contractual relationship on the provision of utility services has
started by initiating the use of utility services, i.e. with the beginning of the provision of utility

19. 14
service in accordance with the regulations which closer defines the performance of these utility
services.
(4) Responsibilities of utility service users, including payment of utility service prices, are
becoming obligatory the moment of beginning of the provision of utility service, even if utility
service is provided contrary to regulations covering the utility services.
It is very clear here that local authorities are responsible for all of the aspects related to the
utility services at their territories. Having said that they are the one who are defining pricing
policy related to the utility services.
Local authority, also, by adopting its ordinance, defines the relations of utility companies with
their customers, at the same time their citizens.
The relation between the customers and utility companies starts with a moment of start of
provision of utility service, and this is, from utility company's point of view very important fact.
Since there is a great number of customers today who are not willing to pay for the utility
services, and they are trying to back this up with a fact that in most cases there is no contract
signed between customers and utility service operators, having underlined in the Law that
relation between the two of them starts from the start of service provision, really helps utility
companies to have the customers obliged to fulfil their commitments, paying for the service in
the first place.
Article 22
(1) If the utility service operatorperformssome otheractivityin addition tothoseentrusted to
him, he is obliged to performaccounting in a way that separatelystates all incomes
andexpensesrelated to theperformance ofentrustedutility services.
It is very common in Serbian utility companies that they are performing not only several of
utility services at the same time, but also they are performing even other services in parallel
with utility services, such as trading, maintenance, construction works, projecting...
All of this makes very hard for them to develop a clear overview of actual costs related to one of
the utility services separately, which would have to be a first step in calculating the actual price
of utility services.
Sources of funds for the performance and development of utility services
Article 24
(1) Fundingfor the performanceanddevelopmentofutilityservices are providedfrom:
1) Revenuesfromsalesofutility services;
2 ) Revenuesfromutility fees;
3 ) Revenuesfromconcessionfees for performingofutility services;
4) Revenuesfromlocalgovernments budget;
5 ) Earmarkedfundsfrom otherlevels of government;
6 ) Other sourcesin accordancewith the law.
(2) If the enduser of utility servicescan bedetermined,theseservices are primarilyfunded
from theprices of utility services,andif enduserof utility services cannot bedetermined,theyare
financed fromthe budgetof the localgovernment,i.e.utility fees.
Since we are focusing on 4 utility services (water supply, waste management, sewage and
district heating), and all of them are the utility services where the end users can be determined,
our main focus will be on the funding from the prices of utility services.

20. 15
The principles for determining the cost of utility services
Article 25
(1) Prices of utility servicesaredeterminedbasedonthe followingprinciples:
1) the implementationoftheprinciple "consumerpays";
2) the implementationoftheprinciple "polluterpays";
3) the sufficiency of prices to cover operatingexpenses;
4) complianceof the prices of utility services with the principleof accessibility;
5) no differencesin prices betweendifferentcategories ofconsumers,unless the
distinctionis basedonthe different costs of provisionofutility services.
(2) If different methodsofcalculation areappliedfor different categories ofusers of utility
services,it will betaken into account that theprice will be in proportionwithcosts of providing
theseservices.
(3) A localgovernment,inthe process of controlof provisionofutility servicemaydetermine
andcharge a different levelof price in caseof using utilityservices in a mannerthat is inconsistent
with the regulationsthatare regulatingtheseutility services.
(4) Thecost of utility servicescan bepaid in advance.
Developed Methodology is strictly based on these 5 principles.
The elements for determining prices of utility services
Article 26
(1) Theelementsfor determiningprices of utilityservices are:
1) operatingexpensesreportedinthefinancialbooks and reports;
2) expensesfortheconstruction andreconstructionof publicutility infrastructure
andfor procurementof equipment,accordingto the adoptedplansandprograms
of utility servicesoperator withconsentof local government;
3) utility serviceoperatorprofit.
(2) Funds that are earmarked for financing the reconstruction and construction of utility
infrastructure are reported separately and may be used only for these purposes.
(3) A local government is required to monitor movements of utility prices, particularly the
compliance of the utility service prices with principles established by this Law.
These elements are the most important part but at the same time the ones who are crucial in a
process of determining and approving the utility service prices.
As it is very common case in Serbian utility companies to provide more than one services,
financial books and reports often does not clearly show the distinction of expenses. At the same
time, often there is case when it is not completely clear if investment costs are made with a
consent of local government or not, which also makes even more difficult for utility company to
determine the right price. Profit is almost never included in a price structure.
Changing of utility service prices
Article 28
(1) Utility service operatoradoptsthedecisiononchangingof utilityservice prices.
(2) Localgovernmentgivesconsentonthe decisiononchangingof utility serviceprices
definedin Article 2 Paragraph3 items 1) to 8) of this Law,except for the transportofthe mortal
remainsof the deceased.

21. 16
(3) Togetherwiththe applicationforapprovalreferredto in paragraph2 of this Article, the
utility servicesoperatorsubmitsto thecompetentauthorityof the localgovernmentajustification,
which particularlycontainsthe reasonsforthe changeandthe detailedstructure of theproposed
rates.
(4) A localgovernmentpublishesarequestforapprovalof the decisiononchanging ofutility
serviceprices, with ajustification, onthe notice boardatthe headquarters ofthe localgovernment,
as wellas in electronicform via theInternet,at least 15days beforemaking a decisiononthe
approval.
(5) By the localgovernmentAssembly's Ordinanceonthemannerof performingofutility
services,referredto in paragraph2of this article, orby Agreementonentrustingofutility service
operation,theconditionscanbe regulated,underwhich changes ofutility service prices can enter
into force beforetheapprovalof thecompetentauthorityof the localgovernment,withthe
obligationofthe utilityservicesoperatorto make up for the differenceto the users of utility
servicesif the competentauthorityof the local governmentrefuses to approveanincreasein
prices.
(7) By the localgovernmentAssembly's Ordinanceonthemannerof performingofutility
services or byAgreementonentrustingof utility service operation,thewayof utility serviceprice
changesat the initiativeof the localgovernmentcanbe regulated.
(8) By the localgovernmentAssembly's Ordinance onthemannerof performingofutility
services or byAgreementonentrustingof utility serviceoperation,the responsibility,ortherights
andobligationsofthe partiesin the eventwhenthe utility serviceprices, thatare not subjectto
approval,arenotset in accordancewith the methodologysetforthinthe Agreementonentrusting,
maybe regulated.
The mechanism of giving consent from local authority on the utility company's decision made a
huge problem in the recent time in Serbia. Having local authority, who are primarily focusing on
a social issues, usually results in not giving a consent to the utility company's decisions on the
rising of the utility service prices. Doing so, utility companies were faced with insufficient levels
of revenues in order to cover the operation expenses.
As the mechanism is the same as it was, having a methodology for determining the prices of
utility services, represents a successful tool for utility companies to easily persuade the local
authorities about the necessity of the price increasing.
Having the obligation of publishing of the request for the rising of the price, this represents the
first way of communicating the price rising with the consumers.
Subsidizing certain categories of utility service users
Article 29
(1) A local government may establish categories of utility service users who are paying
subsidized utility service prices, as well as amount of subsidies for each category.
(2) A local government is required to submit a list of those utility service users to the utility
serviceoperator,aswellas to compensatesubsidizedpartofthe cost to the utility serviceoperator.
(3) By the Agreement on entrusting of utility service operation, a subsidized amount of the
price for certain categoriesthat is notcompensatedto the utility serviceoperatorcouldbe defined.
The successful subsidizing of certain categories could significantly help in price adoption
process, as the pressure that comes from socially vulnerable groups could be drastically
decreased.

22. 17
Funds for the construction of utility infrastructure
Article 30
(1) The construction of utility infrastructure is financed from:
1) income from leasing, or the use of utility infrastructure and other assets relating
to utility services in public ownership;
2) part of the fee for the right to provide utility services;
3) part of theutility service prices dedicatedfor depreciation of assets for
performance of utility services;
4) the budget of the local government;
5) means of the utility services operator;
6) the funds raised by issuing long-term securities
values (municipal bonds);
7) loans and other forms of indebtedness;
8) transfers from other levels of government;
9) grants;
10) other sources determined by special regulations.
(2) The fee for leasing or usage of assets for providing utility services that are in the public
propertycannotbe lowerthanthe amountof depreciationforassets that arethe subject of charge.
(3) The funds referred to in paragraph 1 point 1) of this article represent the income of the
budget of the local government and are used through the budget fund for utility infrastructure
dedicatedto constructionandmaintenanceof utility facilities,establishedbythe local government
unit in accordance with the law regulating the budget system.
(4) When securingtransferof funds from other levels of government for construction of utility
infrastructure, it is taken into account whether the principles contained in this law are respected,
and in particular whether the price of utility services cover the cost of utilities
associated costs, as well as if service is performed on the principle of efficiency which includes
economies of scale, or association of local governments in all cases where it is economically
justified.
The important thing to underline here is that the part of the utility service prices dedicated for
depreciation of assets for performance of utility services is rarely, if ever, spent for the
construction of the infrastructure. The main reason for this is of course the fact that the price
level is usually insufficient to cover the costs of operations, and depreciation is always the first
place to look for covering operation costs.
The Law on public companies also tackles a few important points related to utility services,
especially about the very basic relations between the public companies and their founder, the
local authority.
3.2 LAW ON PUBLIC COMPANIES
The distribution ofprofit and wayof covering financial losses
Article 49
(1) SupervisoryBoardof a public company makes a decision ondistribution of profitswith
approval of the company's founder.
(2) By the decision referred toin paragraph 1 of thisarticle,partof funds fromprofitis directed
tothefounderandpaid into the accountspecified forthe payment of publicincome.

23. 18
(3) SupervisoryBoard of the Publiccompany makes a decision onhow to cover the
financiallosseswith the approvalof the company's founder.
Having in mind the decisions on distribution of profit and covering financial losses, makes the
accurate price calculation even more important.
13 Relation to the company's founder
13.1. Business program
Article 50
(1) Improvementoftheoperationanddevelopmentofa public company, as well as dependent
company,is basedonthelong-termandmedium-termworkand development plan,adopted by the
Supervisory Board of a public company or competent authority of a dependentcompany.
(2) Foreach calendaryear, a public company and its dependent company founded by a public
company,areadoptingtheannual business program(hereinafter:the program) and submitting it
to the founder for approval, the latest by the 1st of December of the current year for the following
year.
(3) The program is considered adopted when it is approved by the founder .
(4) Public company that uses or intends to use any form of budgetary support (grants,
guaranteesandotherfinancial assistance) is requiredto proposeaspecialprogramwhichincludes
programofusing thissupportwith time-limited and measurable dynamics of increasing efficiency
andinternal changesthat willbring a public company in a position to be able to operates without
these forms of support or to reduce them.
(5) Theprogramincludes, particularly: the planned sources of revenue, and expenditure lines
defined by purpose; plan of distribution of public company's profit, or plan of covering of the
financial losses of a public company; elements for comprehensive overview of the price policy of
products and services, wages and employment in the company, or dependent company, which are
determined in accordance with the policies of the projected increase of wages in public sector,
determinedbythe Governmentfortheyear for whichthe plan is adopted;the criteria for the use of
aid funds, sports activities, propaganda and promotion activities; as well as criteria for
determining the reimbursement for the work of the Presidentand members of the supervisory
board.
(6) The adopted program of public companies founded by autonomous province or local self-
government, as well as of dependent companies founded by the public company, must contain all
the elements defined in the paragraph 4 of this Article, and shall be submitted to the Ministry
established for the area of that public company's activity (hereinafter: line Ministry), to the
Ministry responsible for trade, to the Ministry in charge of Labour, to the Ministry responsible for
Finance and to the Ministry responsible for local government affairs.
As the price is determined by operating expenses reported in the financial books and reports
(Law on utility services Art. 26), both, the public company and the local authority, must be very
careful when preparing and approving annual business programs, as practically the price of
utility service is set the moment the annual business programs are adopted by local authority.
After business program adoption, only the simple calculation is needed to determine the price
level.
Ensuring of the protection of public interest
Article 60
(1) In orderto ensuretheprotectionof public interestin a public company,the Government,or
the competent authority of the autonomous province or local self-government gives consent to:

24. 19
1) the statute;
2) provision of guarantees, sureties, guarantees, pledges and other collaterals for
business activities that are not within the framework of services of general
interest;
3) tariff (decision on prices, tariff system, etc.) unless other law does not provide
that the consent should be given by another state authority;
4) manage (acquisition and disposal) of assets in public ownership that were
transferred to the ownership of a public company, of the greater the value, which
are relatedto the direct operationalactivities of common interest and identified in
the Founding act;
5) the act on the general conditions for the supply of goods or services;
6) the investment of capital;
7) the changes in status;
8) the act on theassessmentofthe capitaland presentingof the capital in shares,
as well as to the program and the decision on ownership transformation;
9) other decisions, in accordance with the law that defines the operation of activities
of common interest and founding act.
(2) The proposal for the approval referred to in paragraph 1 of this Article comes from
responsible ministry or the executive authority of the autonomous province or local self-
government.
Here again it is clear that mechanism for implementation of price for utility service has to pass
through the mechanism of ensuring the consent from the local authority on the price level.
Article 61
(1) Realization of common interest in other forms of organization that are performing
activities of common interest, in accordance with this Law, is provided with the approval of the
Government or the competent authority of the autonomous province or local self-government to:
1) the statute;
2) tariff (decision on prices, tariff system, etc.) unless other law does not provide
that the consent should be given by another state authority;
3) other decisions, in accordance with the law that defines the operation of activities
of common interest and founding act.
(2) The proposal for the approval referred to in paragraph 1 of this Article comes from
responsible ministry or the executive authority of the autonomous province or local self-
government.
(3) The provisions of paragraph 1 of this Article shall apply to entrepreneurs who are
performing activities of common interest.
This article is dealing with a specific case, when it is not the utility company the one that
operates with utility service. Apart from utility company, the most usual utility service operator
is the local authority itself.
Nevertheless the decision on prices has to pass the same way of approving.
The Law on consumer protection practically sets the basis for the communication between the
retailers and consumers. Also it pays a special attention to services of common interest as all of
utility services are contained in them.

25. 20
3.3 LAW ON CONSUMER PROTECTION
Definitions of terms
Article 5
(1) Certain terms used herein shall have the following meanings:
...
28) service of common economic interest is aservicewhose quality, conditions of
providing, i.e.prices, are regulated and controlled by the state bodyorother
holder ofpublicauthority, especially, because of the highvalue ofthe initial
investment, the limitedresources necessaryforits implementation, sustainable
development, social solidarityandneed forbalanced regional development, all in
order to meet thecommon public interest(electronic communication, the supply
ofelectricity and gas, utility services, and similar)
...
The point 28) of the Article 5, practically sets the utility services in the scope of the Law on
consumer protection.
Electricity, gas, district heatingandwater
Article 10
(1) Retailer that offers oradvertisesperformance ofacontinuoussupply of electricity, gas,
district heatingorwaterthroughpipelines has the obligation to clearly state in its offeror
advertisement:
1) price per unit of consumedelectricityorcentral heating, includingtaxes and
charges;
2) price per unitof consumed water or gas, includingtaxesand charges.
(2) Retailer has the obligation to clearly state, except unit pricereferred to in paragraph1 of
thisarticle, the prices thatare not calculated per consumed measured unit, includingthe price
paidfor theconnection to the distributionnetwork.
The very basic way, that cannot be avoided, in communication between the utility company and
their consumers is, of course, the bill issued by utility company.
The customers must have a clear insight on what are they paying for! They must not be anyway
puzzled by the bill they receive, as they could easily feel deceived, which later leads to their
dissatisfaction, constant complains, and even refusing to pay for the service.
Access to services of common economic interest
Article 83
(1) The consumer has the right to regularand uninterrupted supply of services of common
economicinterest of adequate quality at an affordable price.
(2) In the process of connectingconsumersto the distribution network, the retailer is obliged
to:
1) actpublicly;
2) avoid discrimination ofconsumers;
3) calculate the price according tothe actual costs of services provided.

26. 21
As it is earlier stated in the Law on communal services, all the consumers have the same rights
regarding provision of utility services. That also applies to the price they are paying for the
service.
Obligation of notification before the conclusion of the contract
Article 87
(1) Besides of notifying referred to in Article 16 of this law, retailer of services of common
economic interest has the obligation to notify the consumer, before the conclusion of the contract
on the provision of services of common interest about:
1) the right to provide the service of common economic interest of a certain quality
by the affordable price to the consumer;
2) the tariffs which covers a fee for connection to the network, the types of fees for
the use and maintenance if the retailer offers maintenance services, which
lists all of the standard discounts to the consumer is entitled to and special
tariff rates, or elements, as well as the determined deadline for connection to the
distribution network;
3) the way of accessing to the current tariffs and maintenance prices;
4) the right of consumers to change providers of services of common economic
interest without compensation;
5) the way of exercising the rights of compensation or refund of the amount paid, if
the service provided does not correspond to the quality agreed by the contract.
The first time that retailer and consumer officially communicate is through signing the contract.
that is why it is very important to have the contract that is easy to understand from any of
consumers, especially notifying all their rights in any case of misunderstanding.
Other obligations of notification
Article 88
(1) Theretailerisobligedtoinformconsumersaboutpricechangesat least one monthbefore the
implementation ofthe changedprice, unlessa special lawprovides otherwise.
(2) The retailer isobliged to publicly and timelyinform theconsumersabout the
plannedamendmentof the tariff systemandthe general conditionsof the contract.
Above mentioned Article 28 of Law on utility services defines the 15 days deadline before the
adoption of the price change when the local authority has to publish the request at the notifying
board.
At the same time the retailer is obliged to inform consumers about price changes one month
before the implementation.
This looks a bit unclear, as the utility company and local authority are notifying the public about
the price changes even though at the time of notifying they don't know for sure if the change of
prices will be adopted.
Anyway, from the consumers perspective it is very convenient that they have enough time to
react to the news of possible price changes. At the same time as utility company is now aware of
the reaction from the consumers, they have to prepare very clear and understandable request
for the change of the price.

27. 22
The rightof termination
Article 89
(1) The consumerhas the rightto unilaterally terminate thecontract for the provisionof
services of commoneconomic interestif the consumerdoes not agreewith the change
inpricesortariffsandchanges ofgeneral conditionsof the contract mentioned in the retailer's
notification.
(2) The consumeris required topay the amountfor services that herendered prior tothe
unilateraltermination of the contract.
Local authorities have the obligation to enable accessibility to utility services to all of their
citizens. Because of that, utility companies, which represents a tool for enabling the
accessibility, are almost always organized as a monopolists at the market of utility services.
Having that in mind, giving a possibility to customers for stopping provision of utility service,
when they don't have any other utility service operator could create a real problems in
operations of utility services.
What will consumer who does not like the new price of waste collection do when he doesn't
want to use the service anymore? Is he going to stop to generate the waste? Or will he stop using
sewage if he is unsatisfied with the price of water treatment? It is similar with other utility
services.
These questions are the reason why the utility companies, local authorities too, are trying not to
underline this Article when communicating about the consumers rights. Usually unsatisfied
consumers are asking to be disconnected, or not covered by the waste collection and not to
terminate the contract and this gives some space to the utility companies to deal with them in
favour of companies.
Right to change the service provider
Article 90
(1) Theretaileris obligedto allowtheconsumerconclusionofthecontractwith anotherretailer
whoprovides servicesof common economic interestof the same typewithout having to payfees
andcharges.
(2) The term in which theretailer is obliged toallowthe consumerconclusion of the
contractreferred to in paragraph1 of thisarticle cannotbe longer thanone monthfrom the dateof
notificationoftheretailerabout the consumer's intent, unlessa specific lawdefinessomething else.
(3) If acontract for the provisionofservicesofcommoneconomicinterestis concludedat certain
timelimit, the expiry datemust be indicatedoneach single invoice.
As it is said before, in almost all of the cases, the utility companies are monopolists at the area
they provide the service, so the utilization of this Article is not really possible at the moment.
Specificationof the bill
Article 91
(1) The retailer isobliged to deliver bills for servicesof common economic
interestwithoutdelayand intermsthat allowsthe consumer tomonitorrealized spending and his
indebtednessfor the billingperiodof up toone month.

28. 23
(2) Theretailerisobliged to quote in the bill for servicesof common economicinterest all ofthe
elements in order toallow consumersto:
1) checkand monitor theamountof itsindebtedness;
2) havean insight intocurrent consumptionin order to checkthe totalspending
bythe quality ofthe providedservices.
(3) The retailer isobliged to deliver to the consumersthedetailed specification ofthe account
attheir request, free of charge.
(4) Servicesthat areprovidedto consumersat no chargecannot be listedin the bill.
Besides the elements of the bill defined in the Article 10 of this Law, it is very important that the
customer must have in the bill the insight on what is the amount of his indebtedness.
Contact-lineand complaints
Article 92
(1) Retailerswho areprovidingservicesofcommoneconomicinterestareobligedtoestablishan
easily accessibleandfreecontact-linesto support consumersin relation tothe connection ofthe
distribution network, quality and useof services of commoneconomic interest.
In the finalstep in the communication between utility companies and consumers, the Law gives
a chance to the utility companies to drastically improve their relation with the consumers
through setting up contact lines.
Having in mind that, out of this four utility services, district heating represents the utility service
which has the biggest impact on the consumer's budget, national government has adopted part
of secondary legal framework.
Because of the strong financial impact from district heating (also electricity supply) on the
consumers a regulation on energy protected consumer, or vulnerable heat consumer was
adopted.
This regulation sets up the conditions the consumers need to meet for reducing their energy
bills, and also the method of calculating the reduction rate.
The adoption of this regulation should really help local authorities to more easily approve the
requests from utility companies on the changes of the prices of utility services, as the most
vulnerable social groups should be met by the provisions of this regulation.
3.4 REGULATION ON ENERGYPROTECTEDCONSUMER, OR VULNERABLE
HEAT CONSUMER
Article 1
(1) Thisregulationlaysdowncriteria,methodof protection,terms, conditions and procedures
for determining the status of an energy protected consumer and vulnerable heat consumer
(hereinafter: vulnerable consumers) which is produced and sold by energy subject who is by
Founding act or the act on entrusting of service operation obliged with heat production for tariff
consumers,heat distribution and management of the distribution system and heat supply of tariff
consumers (hereinafter: district heating company), source and way of providing funds for the
delivery of certain amounts of electricity, natural gas and heat under special conditions and the
way of keeping records of energy protected consumers and vulnerable consumers.

29. 24
Article 2
(1) Energy protected consumer, orvulnerable consumer, in termsof this regulationis a
household(individual,family), livinginadwellingwithonemeasuringpointatwhichtheconsumption
ofelectricityornatural gas is measured or the heat issupplied.
Article 3
(1) Thecriteriafor gainingthe statusoftheenergyprotectedconsumer, orvulnerableconsumer
include:
1) the total monthlyhousehold income;
2) the numberof household members;
3) property status.
Article 4
(1) Requirements for obtaining the status of an energy protected consumer or the
vulnerableconsumer are recorded total monthly income of:
1) up to 13.222,00 RSD for households with one family member;
2) up to 19.251,00 RSD for households with two or three family members;
3) up to 25.276,00 RSD for households with four or five family members;
4) up to 31.786,00 RSD for households with six or more family members.
(2) Total monthly household income defined in paragraph 1 of this Article shall be adjusted
twice a year, as follows: on 1st of April and on 1st of October of the current year, taking into
account the consumer price index over the past six months, according to the data of the National
Bureau of Statistics.
(3) Adjusted the amount referred to in paragraph 2 of this Article shall be determined by the
Minister in charge of energy, with an act which is published in the "Official Gazette of the Republic
of Serbia".
(4) In addition to the income referred to in paragraph 1 of this Article, the requirements for
acquiring the status of an energy protected consumer or the vulnerable consumer is lack of other
living space, except living space that meets the needs of the household in accordance with the law
regulating social protection.
Article 9
(1) Energy protected consumer or vulnerable consumer acquires the right to reduce monthly
obligations for a certain amount of electricity or natural gas, or heat per m2 of living space as
follows:
1) for electricity, for all months:
(1) for households with one member in the amount of 120 kWh per month;
(2) for households with two or three members in the amount of 160 kWh per
month;
(3) for households with four or five members in the amount of 200 kWh per
month;
(4) for households with six members and more in the amount of 250 kWh per
month,
2) for natural gas, for the months of January, February, March, October, November
and December:
(1) for households with one member in the amount of 35 m³ per month;

30. 25
(2) for householdswith two or three members in the amount of 45 m³ per
month;
(3) for households with four or five members in the amount of 60 m³ per
month;
(4) for households with six or more members in the amount of 75 m³ per
month,
3) for heat, for the months of October, November, December, January, February
and March:
(1) for households with one member in the amount of 25 m2 per month;
(2) for households with two or three members in the amount of 35 m2 per
month;
(3) for households with four or five members in the amount of 45 m2 per
month ;
(4) for households with six or more members in the amount of 55 m2 per
month.
(2) Reduction of monthly liabilities is shown by the reduction of the base of a electricity
monthlybillfor the amountdeterminedbymultiplyingtheamountreferred to in paragraph1 item
1) of this Article, with higher daily rates of the green zone for the consumers from the category
"wide consumption" with two-tariff measurements increased by 10 %, from the price list of public
electricity supplier CC "EPS Supply", Belgrade, to which the Council of the Energy Agency of the
Republic of Serbia gave consent, and is in the implementation from 1st of October of current year.
(3) Reduction of monthly liabilities is shown by the reduction of the base of a natural gas
monthlybillfor the amountdetermined bymultiplyingtheamountreferred to in paragraph1 item
2) of this Article, with the tariff "energy" for consumers in the household group, supplied by
"Srbijagas" increased by 5 % from the price list for natural gas for the public supply of PC
"Srbijagas", Novi Sad, to which the Council of the Energy Agency of the Republic of Serbia gave
consent and is in the implementation from 1st of October of current year.
(4) Reduction of monthly liabilities is shown by the reduction of the base of a district heating
monthlybillfor the amountdetermined by multiplying the number of m2 referred to in paragraph
1 item 3) of this Article, with 60,00 RSD/m2.
(5) The amount determined in accordance with the provisions of paragraphs 2 and 3 of this
Article shall apply until 30th of September of the following year.
Having in mind the large differences in the price levels between different district heating
companies in Serbia, but also having in mind the bad shape of district heating networks, which
were the most vulnerable to the policy of utility service prices restriction, as they needed the
highest investments, Regulation on determining the highest and lowest average prices of heat
were adopted for the heating season 2012/13, and after that for 2013/14.
This regulation really represents the first step in regulating the methodology for setting up the
utility service prices.
It takes into account the real expenses from utility company when calculating two way tariffs,
for fixed and for the variable costs.
3.5 REGULATION ON DETERMING THE HIGHEST AND THE LOWEST
AVERAGE PRICES OF HEAT DURING THE SEASON2012/2013
Article 1
(1) Thisregulationdefinesthewayofdeterminingthe highest andlowestaveragepriceof heat in
the heatingseason2012/2013,whichisproducedandsoldbyenergysubject who is by Foundingact
or the act on entrusting of service operation obliged with heat production for tariff purchasers,

31. 26
heat distribution and management of the distribution system and heat supply of tariff purchasers
(hereinafter: district heating company).
(2) Priceof heat energyunder this Regulationshall be establishedif theenergy source for heat
production is naturalgas, crude oil, heating oil, coal andbiomass.
Article 2
(1) Thisregulationdoesnotapplyto thecalculationofthepriceofheatenergyfordistrictheating
companies which are purchasing itfromother producers.
(2) If the price for heat energy for district heating companiesreferred to in Article1 of this
regulationisdeterminedon the basis ofthe tariff systemfor heat supplyingissuedinaccordancewith
the provisionsof the Energy Law, pricedetermined in accordancewiththis act is applicable.
Article 3
(1) The highest average price of thermal energy (Cq, max), by which the district heating
company sells heat to certain categories of customers may be different, but their averaged value,
calculated accordingto theshare of the heated surface area of particular categories of customers,
shouldnotbe higherthanthe highestaveragepricedeterminedin accordancewith this regulation.
Ratio of prices for certain categories of customers must be between 1:1,5.
(2) Thecompetentauthorityof a localgovernmentmayestablishcategories ofheat customers
who are paying subsidized price of heat, and the amount of subsidy for each category, in
accordance with the law.
(3) Thecompetentauthorityof a local government can make a decision on the conditions and
methodof subsidizingthecostof introducingthemeasuringinstruments onthe place of delivery of
heat energy, and then the individual measuring at the flats.
(4) The highest average price of heat, without the value added tax shall be established on the
basis of the eligible costs of production and distribution of heat, distribution system management
and heat supply.
Article 4
(1) Thehighestaveragepriceis calculated as the sum of the eligible fixed (Tf) and reasonable
variable costs (Tv) of district heating company:
Cq, max = (Tf + Tv x q)/n [RSD/m2]
wherein :
q = 140 kWh/m2- annual energy consumption by 1m2 heating space;
n - number of months during which the heat energy is charged (n = 12), if the heat is
charged evenly over the 12 months of the year).
(2) Eligible fixed costs (Tf ) are eligible costs on a yearly level that are not changing with the
change of volume of production and they include:
1) materials for investment and ongoing maintenance,
2) the cost of maintenance,
3) other materials,
4) wages, salaries and other personnel expenses,
5) depreciation,
6) the cost of capital,
7) commissions and banking services,
8) insurance,
9) taxes, fees and dues,
10) other fixed costs of heating.
(3) Eligible variable costs (Tv) are eligible on a yearly level, the amount of which depends on
the volume of production and they include:
1) the cost of fuel and energy,

32. 27
2) the cost of electricity used in the production process,
3) the cost of water and water treatment.
Article 5
(1) The maximum amount ofthe eligiblefixed costsreferred to in Article4paragraph 2of this
regulation,(Tf) canamountupto 360.00 RSDper m2 of heating surface annually fordistrict heating
companiesthatdo notmaintainthesecondaryheatinginstallations,or380.00RSDperm2 of heating
surface annually fordistrict heating companiesthat maintainthese installations.
(2) Increasingtheeligiblefixedcostscannotbe higher thanthe amount of projected inflationfor
the given year.
Article 6
(1) The maximum amountof eligiblevariable costsreferred to in Article4paragraph 3of this
regulation,(Tv) of 1kWh of supplied heatis determined by theexpression:
Tv = 3600 Cgor / (Hd x ηi x ηm) [RSD/kWh]
wherein:
Hd - Lowerheating valueof fuel according to the actual structureof used energy
sources;
Cgor - Unit costs of fuelaccording to the actualstructure of used energy sources;
ηi - The level of efficiencyof the productionplant accordingto the actualstructure of
energy mix;
ηm - The level of efficiency of the distribution network.
(2) The lowest calculated value of the level of efficiency of the production plant that uses:
1) gas as energy amounts ηi = 0,85,
2) crude oil or fuel oil as energy amounts ηi = 0,82,
3) coal or biomass as energy amounts ηi = 0,70.
(3) The lowest calculated value of the level of efficiency of the distribution network of:
1) capacity up to 20 MW amounts ηm = 0,92,
2) capacity from 21 to 80 MW amounts ηm = 0,90,
3) capacity from 81 to 250 MW amounts ηm = 0,88,
4) capacity from 251 MW and above amounts ηm = 0,85.
Article 7
(1) Thelowestaverage priceis equalto the maximumamount ofeligiblevariablecostsreferred
to in Article6 of this regulation.
Article 8
(1) The prices of energy fuel used in heating plants are determined by approved regulated
prices in accordance with the law and most favourable prices on the market, and they are used as
an input for calculation of the highest and the lowest heat prices.
Article 9
(1) Changing, or harmonization of the production heat prices can be carried out in case of
increase of the total price of energy of more than 3%, and necessarily in case of decrease of more
than 5%.
Apart from the national legal regulations dealing with utility services, every local authority
regulates its own separate local legal framework dealing with utility service prices.

33. 28
One of the more interesting is the case of the City of Leskovac, where the city Council adopted
the decision approving the new prices for district heating, but at the same time subsidizing
almost 2/3 of the price from the City budget for all of the households.
DECISION of the city Council of the City of Leskovac
1
We are giving the approval to the decision of the Board of Public Utility Company "Toplana" in
Leskovac, No. 4704/4 from 07.12.2012, on the increase of prices of production and distribution of
heat complied with the regulation of the Government of the Republic of Serbia, which are:
1.a. Residential customers
- Households 91,52 RSD/m2, or 98,84 RSD/m2 incl. VAT
1.b. Commercial customers
- The first category 91,52 RSD/m2, or 98,84 RSD/m2 incl. VAT
- The second category 120,00RSD/m2, or 129,60 RSD/m2 incl. VAT
- The third category 137,28RSD/m2, or 148,26 RSD/m2 incl. VAT
2
Thecompetentauthoritybodyof localself-governmentshallsubsidizeheatingcosts forhouseholds
with 30,00 RSD per m2, so that the new prices amount to 61,52 RSD per m2, and 66,44 RSD per m2
incl. VAT.
3.6 Conclusions
To underline here the most important conclusions, we need to remind that the competence of
utility services falls completely under LSGs. They are the ones who are establishing the public
utility companies, entrusting the performing of utility services and eventually taking care of
utility services operations by themselves (in smaller LSGs). The public utility companies are
representing the long hand of LSGs who are monitoring the operations of public utility
companies, obliged to give the consent to every important decision made by PUCs and
controlling the level of utility prices.
The responsibility of not meeting a law on utility services, having in mind previously concluded,
falls on PUCs, because they are the one who are obliged to implement the law, but at the same
extent to LSGs, as they are monitoring work of PUCs and doing so, they are allowing them to act
comfortable regarding implementation of the law. This can be easily recognized as PUCs are not
meeting the law obligation to separately perform the accounting of incomes and expenses
devoted to every single service, but also not all principles for determining the price are
completely met, and especially the 5th that determines the obligation that all categories of
consumers are having the same price for utility services. Of course, the LSGs are not fully
complying with the law when monitoring of these regulations.
As said earlier, LSG gives an approval on decision on price changes, but for a years back, when
making the final decision, LSGs are taking in into account social issues and because of that, they
often don't give a consent. Doing so, LSGs are putting PUCs in a position where they cannot
cover all of the expenses by their incomes because of the insufficient price of utility services. At
the end this reflects to the PUC operations, and particularly to the investments in infrastructure
which are very low or does not exist.
Even though the Law on consumers protection recognizes the necessity of signing the contracts
between the consumers and utility companies, they don't exist in reality. The PUCs are using the
provision of the Law on consumers protection identifying the obligatory relation between the
consumers and PUCs starting the moment when consumer starts receiving the utility service,

34. 29
but also the moment the consumer starts paying bills for the receiving of the services he
undoubtedly acknowledges the conditions of PUCs whatever they look like.
Termination of contracts, or more appropriate for the municipal services in Serbia, termination
of the obligatory relationship, relationship that starts the moment of the start of providing of
service, as contracts practically don't exist, could potentially cause a significant problem in
utility operations. The Law on consumers protection does not recognize the specificity of the
utility services, and treats them as all other services when considering the customers' right to
terminate the service contract at any time they feel unsatisfied. By terminating the contract, the
customers don't have the obligation of paying for the service, which leads to cancelation of the
service provision by the utility company. Having consumers dropping out of the system of utility
services separately, already makes a problem, as this implies that customer is disposing (or not
disposing at all) his waste the way that is contrary from the organized waste management
(probably even against the regulation on power), or not having water supply for his needs, or
being disconnected from the sewage or district heating network causing unpredictable results,
especially when consumer is living in collective housing. At the end, in case of having a great
number of customers terminating their contracts, at the moment when they don't have any
other operator of the utility service at the market, could result in the total destruction of the
utility service system and networks which have been constructed for providing the service to all
of people covered by the area of the service, now oversized and ineffective because of the
insufficient number of customers connected.
Even though the obligation of setting up a contact line for complaints and information is
obligation set by the law, from the data obtained from the questionnaires dedicated to the PUCs
pricing communication it could be concluded that 30% of PUCs have organized call service for
complaints and information. This is the area that must be significantly improved in the next
period.
The national authorities are trying to help LSGs in order to make them easier in determining a
realistic levels of utility service prices. Because of that they have adopted aRegulation on energy
protected consumer, or vulnerable heat consumer which represents the first step towards
taking into account the social component when billing for utility services, and not keeping low
level of prices for keeping the social order as it was done for a decades before. Implementation
of this regulation must be in paired with creation of so called social cards which should
determine the real picture of the socially most vulnerable customers.
At the same time, having in mind that the bills for district heating are representing the biggest
burden to the consumer's budgets, but also having in mind that the prices for district heating
are varying a lot between the different LSGs, Ministry of energy, for two years in a row, is
delivering to LSGs a Regulation on maximum and minimum prices of district heating. By
adopting this regulation, Ministry really pushes DH companies and LSGs to adopt a methodology
for determining prices, as LSGs that have adopted these methodologies are not obliged to
implement Ministry's regulation.

35. 30
4 Conclusions from the poll dedicated to Public Utility Companies'
pricing communication
In order to get more insight on a pricing communication, a poll was organized and aimed at
Public Utility Companies.
As a first step, a questionnaire was developed taking into account suggestions from KOMDEL
(Association of utility companies in Serbia), but also from SCTM gender experts.
This questionnaire was then distributed to utility companies with a strong assistance from
KOMDEL, and now we have the results of utility companies responses on distributed
questionnaires.
A group of 20 utility companies responded to the questionnaires. 7 of them coming from sector
of district heating, 8 of them from water supply and sewage, and 5 of them from waste
collecting. These 20 companies represented the large, medium and small size municipalities
from all parts of Serbia and they provided service to 381.833 individual customers (131.055
sewage customers are already included in a total number as all of them are also connected to
the water supply network), and to 27.715 companies (1.635 sewage customers already
included).
This sample leads us to the conclusion that the analysis of the poll results will show us an
overview of all of Utility Service Companies in Serbia from the 4 utility services that are
processed here.
The next Table shows the collection rates in total, but also for the every one of separate utility
services:
Table1. CollectionratesinSerbia[%]
Utility service
District
Heating
Water
supply
Sewage
Waste
collection
TOTAL
Collection rate on 31st
of December 2013 (%)
85.77 72.25 69.25 72.98 75.11
Collection rate for the
bills from 2013 on 31st
of January 2014 (%)
85.28 68.90 63.73 76.37 72.74

36. 31
Such a low levels of collection rates are leading to a conclusion that many Utility Companies are
facing difficulties in their budget operations which are primarily reflected in the lack of
investments and inadequate maintenance of the equipment and infrastructure.
The table shows that we have the worst situation at sewage services, and at the same time the
situation is most favourable in the service of district heating, even though district heating is the
service that burdens family incomes the most.
13 other questions were mostly focused at the pricing policy of utility companies and current
state of information services and communication with customers.
Questionnaires showed that more than a half of examined companies are issuing bills for every
single service they provide, even though, in most cases at the same time there exists an
organized separate company that bills utility services. This is specifically emphasized in district
heating where we have a great majority of these cases. There are even a few of cases where
there are a part of customers with bills issued for the every single service separated, and the
other part who's bills are issued by separate company who are issuing a joint bills for several
utility services.
80% of utility companies don't have any incentives for the customers who are paying for their
bills in a short notice. The 20% of companies who does have the incentives, here they have a
discount of 5 to 10% for the bills for the customers who are paying for the bills at the short
notice, are mostly coming from the district heating sector (all of them with 5% discount), and
only one coming from water supply and sewage sector (with 10% discount) (see the graph).
Figure 1. Incentives for customers who are paying bills in short notice
We can also conclude that utility companies are using all of the suggested solutions
(appealingthrough the local media, highlighting theamount of the debtfrom the previous
periodon the newbill, periodicallysending letterstoCourt procedure,suing irregularpayers)
when consumers don't pay for their bills.
0
2
4
6
8
10
12
14
16
18
utility companies without
incentives
utility companies with discounts
Are there any incentives for customerswho
are paying bills inshort notice?
district heating (5%) water supply/sewage (10%) waste collection

37. 32
More than a half of companies does have the organized service for the complaints and just more
than quarter of them have the call service, few of them both.
There are 60% of utility companies that have noofficialrecord of individual complaints, butthey
react toeach individualcomplaint. 40% of other hasregisteredcomplaints at level of 2,6% of the
total of their customers. The biggest percentage of complaints is registered in district heating
sector (6%), then water supply and sewage (2,2%), and then waste collection (1,2%). Again, one
of the biggest reasons for a high percentage in district heating lies in the fact that district
heating bills takes the biggest stake of the family incomes, and because of that consumers are
acting very cautious and expecting the highest level of service quality from it.
Almost at the same extent the consumers are complaining on the bill calculating mistakes and
on the quality of service!
Only one of the all tested utility companies has the records with information on how many
women and men separately are making the complaints. The data from this utility company
(coming from the sector of water supply and sewage) shows that 40,4% of customers
complaining are male and 59,6% are female.
75% of utility companies don't have any surveys or else in order to measure the satisfaction of
the customers. Surveys of the rest of 25% of utility companies are not really comparable, but
those delivered shows a very high levels of satisfactory of customers.
Majority of the utility companies (75%) are delivering bills by regular mail and by their own
collector service at the same time. At the same time there are 15% of utility companies that are
delivering them only through their collector service, and 10% only by mail. Also 10% of
companies are using services of other company in charge for the billing of utility services, but
only for the part of their customers.
The bills could be paid at the company's desk and in banks and post offices at the same time for
almost all of utility companies. 40% of companies have a collector service, and bills could be
paid to the collectors.
Communication with the customers is usually performed, besides communication through
delivering bills, with occasional announcements and notices (75% of utility companies).
However, 25% of utility companies are using almost exclusively communication through bills.