WB: Water prices must increase to meet costs

TIRANA, Oct. 25 – With operating revenues covering only 68 percent of costs, water supply and sewerage companies definitely need to raise their drinking water prices to improve their efficiency. The recommendation is made in the latest World Bank report called “Decentralization and Service Delivery in Albania: Governance in the Water Sector.” Data show subsidies cover 20 percent of costs while the remaining 12 percent amortization costs remain uncovered. The deficit is leading to failure to maintain assets or increasing company debts. A comparative analysis in the report covering the 2006-2009 period shows the Regulatory Entity (WRE) approved an average of 11 percent increases in water tariffs for 30 companies serving 83 percent of the country’s population, while their total costs rose by 262 percent. The reports explains the difference between tariffs and costs with WRE’s hesitation to approve price increases because of being politically criticized and but also applications for modest price increases by municipal or communal councils for political reasons. Data suggest the WRE approves requests for price increases which have first been passed by respective municipal councils. The bill collection rate, remains low at 78.3 percent but there are also exception such as the southeastern city of Korca where the rate is at 97 percent. Overstaff in water supply and sewerage companies is another issue with 13.6 people per 1,000 connections compared to 4 employees per 1,000 connections under the EU standard. Political patronage and the complexity of water supply systems are the main explanations to the situation. The report notes that the companies’ performance remains unsatisfactory, partly because of the complex drafting and implementation of the institutional framework managing the sector. Water companies fail to provide access to 10 percent of consumers in urban areas and 42 percent of consumers in rural areas with the average water access being 11 hours a day. The decentralization process, initiated in September 2007 has failed to improve the efficiency of these companies. Currently the shares of the Tirana and Durres water companies have not been transferred yet to the local municipalities which refuse sharing stakes with small local government units. Albania has 58 water supply and sewerage companies of which 55 have already turned into joint stock companies owned by local government units. The legal framework for the water supply and sewerage service remains incomplete with lack of criteria when the central government must intervene if local government units are unable or unwilling to assume their responsibly, notes the report. Widespread illegal connections to the water supply grid and lack of water meters for 50 percent of the population also contribute to the low collection rate. The report also notes that the subsidy system needs to be reformed supporting consumers with low revenues and not serving as a stimulus for negative performance covering the company’s operating costs. The World Bank also recommends using an energy efficiency program to audit electricity use, make possible the installation of water meters and replace electro-mechanical equipment considering the rising trend in electricity prices. The World Bank also recommends using an energy efficiency program to audit electricity use, make possible the installation of water meters and replace electro-mechanical equipment considering the rising trend in electricity prices. According to the World Bank, Albania is better off in water resources than many developing countries, but not for all yet. Data show Albania is endowed with an estimated 8,600 m3 per capita per year in water resources – an enviable position from the vantage point of many countries. Current utilization rate is estimated at only 6% annually. The country has relatively high access to water in urban municipalities at 90%, but much lower access to piped water connections in rural municipalities at 58%. Water prices for household consumers in Tirana are currently at 33 lek/m3. State institutions will pay 110 lek/m3, up from 75 lek while private companies 120 lek/m3. Special customers, which include companies producing alcoholic beverages and refreshment and swimming pool owners will pay 140 lek/m3. Water prices for bakeries have remained unchanged at 95 lek/m3.