Банкеръ Weekly

Briefs

WATER PRICES GO UPWARDS

Water prices will be going up quickly and steeply. And this statement is not a part of the negative pre-election campaign of Bulgarian politicians. The increase will be unconditional and inevitable. Otherwise, Bulgaria will enter the European tourist guides by its huge waste of drinking water and wooden dunnies. The number and size of water price hikes are yet to become known. Buy it is already certain they will be controlled. A guarantee for that is the fact that after almost five months of foot-dragging the Government stirred up at last and approved changes to the structure of the State Commission for Energy and Water Regulation (SCEWR) last week. Thus, its administration staff goes up from 87 to 118 and the six new water commissioners may hire 31 experts on water and sewage. With their assistance the commissioners should set the price of water and control its quality. By October, all the 49 water and sewage companies in the country should submit at the SCEWR business plans and proposals for the price of the service they offer. And within three months the controlling institution will approve the new prices, which will enter into effect as of the beginning of 2006.What is good in this case is that some attempt will be made to put the sector in order. Problems in it have been heaping for dozens of years and are quite serious. The main ones are purely technical - obsolete and outworn network, water rationing,lack of water treatment stations, etc. Close to nothing was done in that direction after 1989. There was never sufficient money and time, and perhaps political will, for water and sewage purposes, and it's not a secret that pretty good money could be made from water. The usual excuse of water companies are the huge losses, exceeding 60% in some places. Nevertheless, quite a number of people are employed there and they get pretty good salaries, while the losses are calculated into the end price of the service. It's to by accident that an employment at the regional water and sewage companies (and in Sofia Water as well) is among the most demanded ones. An end to the arbitrariness in the sector should be put at least theoretically with the establishment of the water regulator. Criticisms against the regulations within the branch are not scarce. The natural path of development was to adopt at first the law on water and sewage services, making provisions about the ownership of networks, the level of the service, the obligations of water companies and of consumers. Only after that a regulatory body should had been set up in order to set in order the relations and processes, Ivan Grechenliev, a member of the Management Board of the Bulgarian Association of Water Supply and Sewage said in front of the BANKER weekly. There are certainly grounds for such statements. The establishment of the regulatory body was quite delayed, and the methodology for setting the permitted level of losses has not been worked out yet. The ordinances on the quality fo water, the prices and registration of experts, have not been drafted either. A methodology for specifying the waste of water is being prepared for the first time in Bulgaria. We plan to use it for measuring the inflow of water in several spots of the water and sewage network. That will be made at the point of water consumption from the dam lakes, along the water-main, at the network's deviations to buildings, in the drains, and at the point where water enters the treatment stations, said Plamen Nikiforov, Head of the Water Supply and Sewage Department at the Ministry of Regional Development and Public Works. The length of the water-mains, the materials of which it is made, and the soil where the pipes are laid, will be taken into consideration when measuring the leaks. It's another question to what extent the submitted data will be true, as each water and sewage company will be assessing its losses by itself. The quality of the service will be estimated according to 15 indicators, among which are: continuity of water supply in the population centre, number of damages along the pipelines, level of completion of the drains, term for replying to the claims of subscribers, etc. Being guided by these two factors, the SCEWR will be setting the permitted level of losses for each water and sewage company, how much should be invested, the price of water, and it quality. The idea is to offer drinking water of almost the same quality in all Bulgarian settlements by the end of 2014. According to experts, however, that will be very hard to achieve. Normal regulation is possible only in country where the losses along the network are 20% at the most, and not more than 69% as is the case in Bulgaria. Water prices cannot but rise , as anyone who invests in the network's improvement will be trying to recover his money, Mr. Grechenliev is adamant. In other words, the SCEWR will face a very intricate rebus - the companies will have to invest in modernization and have a certain profits, but at the same time water prices should be maintained within normal boundaries. The SCEWR claims it will oblige the water companies to keep the social tolerability of the service when setting the price of water. The Regulation of Water Supply and Sewage Services Act stipulates that the price of drinkable water should not exceed 4% of the average monthly income of a household in the respective region, at a minimum monthly consumption of 2.8 cu m per capita. According to the data of the National Statistics Institute (NSI), this amount is BGN536 in Sofia. And as the average number of members in a family is 2.8, no more than 21.44 should be paid. The situation is more or less such at present, but Sofia Water has already announced its plans ro hike water from BGN0.85/cu m to BGN1.44 cu m. The other water and sewage companies in the country will also take advantage of the possibility to increase the price of water as much as possible. The more so that after the approval of their business plans they shall not be allowed to change the price of the service within at least three years. The price could be hiked only in case of a significant growth of inflation. That is why it is quite possible that on the proposal of water companies different prices are introduced for various groups of consumers - households, economic entities, and budget organisations. Another option for differentiation of the price of water will be the application of the two-level tariff (as with electricity and central heating). A set quantity will be paid at a lower price and the consumed water about that level will be calculated at a higher price.

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