Dr. Ivaylo Kaschiev, EWRC: The separation of the regulator into energy and water will lead to serious risks for the water and sanitation sector

The regional ministry is the principal of the water supply companies, which is an obvious conflict of interest and deprives the regulatory body of its independence, added Kaschiev in an interview with BTA

Industry / Bulgaria
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An improvement is seen in the indicators measuring the quality of drinking water in small water supply areas, in the pressure in water supply systems, in the energy efficiency of water supply, in the level of coverage with wastewater treatment. Dr. Ivaylo Kaschiev - director of the Water Supply and Sewerage Services Directorate at the Commission for Energy and Water Regulation (EWRC) commented on this in an interview for BTA.

At the same time, a deterioration of some indicators was recorded: water losses, accidents in the water supply network, rehabilitation of the water supply network, condition of water meters at building deviations and others. He added that EWRC's expectations are that the Ministry of Regional Development and Public Works and "Bulgarian Water and Sewerage Holding" will familiarize themselves with the commission's reports and take appropriate corrective measures regarding the organization and management of the water supply companies.

Dr. Kaschiev pointed out that the idea of dividing the regulator into energy and water, proposed in the draft Law on Water Supply and Sewerage, together with the proposed significant reduction and limitation of the functions of the water regulator, is not justified. According to him, this is not supported by analysis and will lead to serious risks for the water and sanitation sector.

EWRC is an independent regulatory body whose powers provide for registering the accounts of water and sanitation companies, but not to influence the way the companies are managed. The expectations are that MRDPW and "Bulgarian Plumbing Holding" will familiarize themselves with our reports and take appropriate corrective measures regarding the organization and management of the companies. Unfortunately, so far our communication with them has been largely one-way - we inform them about how the companies owned and managed by them have done, but we do not receive feedback on the measures taken to achieve better results, Kaschiev emphasized.

The Commission amends the approved prices of plumbing services in strict accordance with the regulations and cannot afford to deviate from them. One of the main tasks of the regulator is to provide predictability for the water and sanitation sector. The Commission approves with a decision the business plan and the prices for the entire 5-year period, so that both the water supply operators and the consumers are clear about the set goals (levels of quality indicators, investments, etc.) and the prices that will be applied. Since the approved prices were developed without taking into account projected inflation, according to the regulations, the Commission has the obligation to amend the officially approved prices every year, taking into account the actual accumulated inflation and making corrections with specific coefficients.

The legislation has clearly regulated what specific coefficients apply in each year of the regulatory period. For example, when amending the approved prices for 2022, two coefficients were applied that took into account the implementation of approved investments and the achievement of performance indicators in the period 2020-2021 (the last two years of the previous regulatory period). These coefficients will be applied again after the first three years of the new regulatory period 2022-2026, because Waterworks operators must be able to make up for backlogs from previous periods.

This year, for the first time, we will apply a completely new coefficient, which will take into account the actually spent funds for electricity, Kaschiev told BTA. This will be done by deducting the electricity compensations received from the state for the past 2022, excluding the period of the moratorium on prices, but the achieved levels of the extremely important indicators of water losses and energy efficiency will also be taken into account. The new coefficient will be applied annually and thus it becomes another tool to stimulate the implementation of these indicators and to increase the efficiency of companies.

The reported high inflation during the period from the approval of the business plans to the present inevitably leads to an increase in the approved prices, when applying the legally defined formula.

EWRC does not determine the policy in the water supply sector, but applies the current legislation. The policy in the sector is determined by the Council of Ministers and implemented by the Ministry of Internal Affairs and Communications. There was an approved Strategy for the development of the water and sanitation sector for the period 2014-2023, proposed by the Ministry of Water Resources and Energy and approved by the government. To date, the Commission has not submitted a report on its implementation and it is not clear which of the objectives have been met, which have not and what is the reason for this. A draft of a new 10-year strategy, which is required by the Water Act, has not been presented to the Commission, so we do not have clarity about the vision of the body that should implement the policy in the sector.

To date, three drafts of the Law on Water Supply and Sewerage have been published – in 2020, 2022 and 2023. On each of them, EWRC prepared and adopted opinions, which are publicly available on the website of the regulator. In the Annual Report on the Water and Sewerage Sector, the opinion adopted by the Commission on the project, which was submitted to public discussion in 2022, is presented in a synthesized form. We have argued that the idea of dividing the regulator - into energy and water, together with the proposed significant reduction and limiting the functions of the water regulator is not justified, is not supported by analyzes and will lead to serious risks for the water supply sector, Kaschiev believes. It is envisaged that the new commission will no longer regulate the quality of plumbing services, approve business plans, and not tie the prices of plumbing services to quality indicators and business plan forecasts. From the draft law proposed in 2022-2023, it is clear that the new water commission will have only one function - to approve the prices proposed by the companies, and that according to an ordinance prepared by the Ministry of Water Resources and Energy. I would like to draw attention to the fact that the regional ministry is the principal of the water supply companies, which is an obvious conflict of interest and deprives the regulatory body of its independence, Kaschiev believes.

With regard to another new draft Law on Water and Sewerage, despite the fact that both the former and the current minister publicly indicated that EWRC representatives would be included in the working group under this law and changes to the legislation would be discussed in advance, this did not happen, he explained the specialist. After the draft law is published for public discussion, the Commission will familiarize itself with it and present its opinion, which will again be publicly available on the EWRC website, he added in conclusion.

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