Tariff policy for water sector - OECD

Tariff policy for water sector

Romanian Water Association

Economic Workgroup

Bucharest, 2008 May 13th

Tariff policy for water sectorRomanian Water Association Economic Workgroup

Case study- Water Company Brasov

Tariff policy & Affordability

Profitability & MRD Reserve

Conclusions

Case study: Water Company Brasov, Romania

1993: Water crisis

Water system in bad condition

high losses

no meters in place

Financial problems

low tariffs barely cover the cost

collecting rate 60-70%

the investments were done by governmental funds.

Pumping station

Pumps

Sludge deposit

Water Company Brasov, Romania

1995:Performance Improvement Plan

Revenue Improvement Measures:

Tariff increases:

– initial adjustment

– in real terms with 50% every year for the first 3 years.

– fully adjustment with Inflation

Customer Debt Control

– max. 20%

Cost Control Measures– 2% every year x 5 first years


Tariff Policy

before 1995:– different tariffs for each type of consumers

– the tariffs barely cover the operational cost

1996-2005– unique tariff eliminating the cross-subsidies

– strong increase of tariff

2003– “polluters pay” principle financial resources for investments

2008- affordability principle development & sustainability

0

0,5

1

1,5

2

2,5

3

3,5

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

lei / c

m

water price domestic water price non domestic

sewerage tariff domestic sewerage tariff non domestic

water & sewerage domestic water $ sewerage nondomestic


Tariffs 1995- 2008 (19% V.A.T. included)


Water demand

20000

25000

30000

35000

40000

45000

50000

55000

60000

65000

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

'00

0 c

m

The water production decrease 2008/1995 = 63%


Water metering (water meters/ total connections)

0

10

20

30

40

50

60

70

80

90

[%]

contorizare 29 31 39 46 53 63 73 78 80 82 83 84

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


Water consumption per capita

0

50

100

150

200

250

300

350

l/cap

ita/d

ay

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


The Average Bill Value per Household

1.4

6

8.5

12.7

22.2

26

30

25.8

21.521.822.6

0.9

16.4

0

5

10

15

20

25

30

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

lei / f

am

Figure 1.2.1 Inflation1995 – 2007 *)

0

50

100

150

200

250

300

350

400

450

500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

%

Note : *) The data for 2007is an estimate


Bill value and water consumption for population

1.4

12.7

22.2

26

30

78.5

0.9

6

25.8

21.521.822.6

16.4

3.33.33.43.63.85

8.18.8

9.18.78.89

0

5

10

15

20

25

30

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

lei / f

am

cm

/pe

rs

Average invoice value per household Average montly consumption/person

Romania

Affordability (1999- 2004)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Arad Bacau Braila Cluj Constanta Bistrita

1999 2000 2002 2004

Romania

Affordability (2006)

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

Baia

Mar

e

Bra

sov

Sat

u M

are

Deva

Hune

doar

a

Dro

beta

Tr.

Sev

.

Rm

. Valce

a

Pite

sti

Galati

Buz

au

Piatra

Nea

mt

Sibiu

Tulce

a

Romania

Uncashed bills (2006)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Baia Mare Brasov Satu Mare Hunedoara Drobeta Tr.

Sev.

Rm. Valcea Pitesti Galati Piatra Neamt Sibiu Tulcea

Tariff structure (1)

Operational cost

– Row water and materials

– Energy and fuel

– Spare parts

– Salaries

– Third party services

– Financial expenses

– Income tax

– Repair and Maintenance:

emergency repairs

routine maintenance

preventive maintenance

Tariff structure (2)

Depreciation and provisions for

replacement of assets

Profit for:

– Loans repayments

– Development

Romania

Profitability for non MUDP (2006)

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Baia Mare Brasov Satu Mare Hunedoara Drobeta Tr.

Sev.

Rm. Valcea Pitesti Galati Buzau Piatra

Neamt

Sibiu Tulcea

Romania

Operational Profit for MUDP (2006)

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

Arad Bacau Brasov Constanta Iasi Oradea Tg. Mures Timisoara

Maintenance, Replacement and Development (MRD) Reserve

The Water Company

depreciation and

net profits

The County Council

profit tax

share of the net profits

Conclusions

Water infrastructure is expensive

Affordable water tariff but not for free

Water sector need for political support and professional management

Planning on a long term. Decision now.

Make profit and reinvest it !

RESULTS:

Water Tank 5000 cm

Pumps

Wastewater Treament Plant

Operational center

[email protected]

Compania Apa Brasov

13, Vlad Tepes street

500092 Brasov, Romania

Tel: +4 0744 64 84 14

Fax: +4 0268 40 86 45

Thank you !

Благодарю за внимание!

Sludge deposit

mailto:[email protected]

Tariff policy for water sector - OECD

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