Joint workshop on Enhancing efficiency and sustainability of Water Supply and Sanitation presentation - Vladimir Šimić, Croatian water services sector reform, Croatia

1. CROATIAN WATER SERVICES SECTOR
REFORM
Vladimir Šimić
Council for Water
Services
chair
15 June 2021

2. Water services sector - key facts
• 159 water service providers (WSP)
• turnover 543 million EUR /year
• 245 mio m3 water delivered
• NRW - bellow 50% in average
• average water consumption - 132 l/person/day
• public water supply available for 94% of the pop.; 86 %
connected
• all public supply - metered
• over 200 small unregulated self-providers without adequate
water quality control
• 53 % of inhabitants connected to public sewage
• 44 % of sewage water – treated
• Every step of the way controlled by local govt (planning,
investments, tariffs, development charge)

3. On the road to reform
UP TO 2019
• WSPs – purged from other business activities
• development charge – revenue of WSPs
• Maintenance and investment planning – shareholder’s meeting
(not local councils)
• Tariff approval – mayor (not local councils)
• Water infrastructure owned by WSPs (below 3% still directly
owned by cities/municipalities)
• universal introduction of fixed tariff
• universal introduction of social tariff (for variable water supply
tariff)
WATER SERVICES ACT of 2019 – to institute a reform

4. Reform – key objectives and tools
KEY OBJECTIVES
• future AFFORDABILITY of water services (up to 3% NDHI)
• WSPs self-sustainaibility
• Projects implementation ability
KEY TOOLS (inst.)
• Mandatory establishment of SERVICE AREAS – SA (Govt Decree)
• Delivery of 1,8 mio m3 per annum
• „One WSP per SA”
• Appointing the largest WSP in SA as taking over company - TOC (Govt Decree)
• Merger (annexation) of WSPs with TOC
• All decision making (planning, investments, tariffs) transferred to WSPs bodies (i.e. shareholders
meeting)
• Licencing of merged WSPs

5. Expected outcome (inst.)
• aprox. 40 WSP
• Entirely owned by (all) local governments
• Infrastructure directly owned entirely by WSPs
• Local govt - excluded from „day to day” operation
• WSPs operations (profit retention, debt limits, regulatory accounting)

6. Licencing
 temporary licence (GC+SCS)
 permanent licence (GC+SCS +SCE)
general
conditions (GC)
special
conditions for
starting the
services’
provision (SCS)
- a company (Ltd or Plc)
- sole shareholdes -LGs in the SA
- registered for water services (and additional
services permitted by the law)
- number and qualifications of key employees
special
conditions for
efficient
provision of
services (SCE)
- ability to manage NRW, DWTP and WWTP
- accidents reaction ability
- consumer complaint board
- achieving other KPIs

7. New decision making
 Current state: „one director – one mayor”
 Reform: Democratisation of decision making *No majorization by big shareholders! *No obstruction of small
shareholders!
A. Double majority (majority by shares + majority of shareholders)
• Business planning (operation, maintenance, investments, etc) and reporting
• Water tariffs
• Development Charge
• General Terms of Water Services Provision
• Water zoning
• Sewage collection and discharge
• Director’s appointment
B. Majority by shares = in all other matters

8. Water prices
• Water prices – 2,14 EUR/m3
households, 3,57 EUR/m3
business customers
• business customers pay on
average 60% more than
households
• water prices - 1.38% NDHI, in
average
• only partial control of supplier
costs

9. Water tariffs and costs – tools and outcomes
KEY TOOLS
• local regulation
• ex post national regulation with repealing
and interim decision making powers
• National regulator (VVU – Council for Water Services)
to become a permanent body
• Mandatory public consultation on tariffs
• Regulatory period (4 years - water tariffs, development charge and business planning)
EXPECTED OUTCOME
• Gradual leveling of water tariffs (as a rule)
• Social tariff – extended to fixed tariff, variable sewage collection and treatment
• Introducing a new tariff models: block tariff…
• „Water pays for water” (water price entirely to cover OPEX; multiple sources, including water price to
cover CAPEX)