Cost Recovery of Water and Wastewater Utilities in Serbia

Srdjan Topalović1, Aleksandar Đukić2, Zorana Naunović2

 

 

1 Freelance Consultant, Consens, Belgrade, Serbia, Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

2 University of Belgrade, Faculty of Civil Engineering, Bul. Kralja Aleksandra 73, Belgrade, Serbia; Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it , This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

Abstract

This paper provides an overview of the current state and existing documentation related to the estimate of investment and operation and maintenance costs for the water supply and sewerage sector in the Republic of Serbia needed to achieve the EU Directives requirements related to urban wastewater and drinking water. The total cost analysis for Serbia's water sector is performed by using the results of various studies. Consideration is given to the fact that the cost recovery of the existing infrastructure has not yet been achieved. The analyses of the operational and financial aspects of selected public utility companies (PUC) for water supply and sewerage in Serbia are given.

Keywords: water supply, sewerage, utilities, costs recovery, water price

 

The Present State of Water Supply and Sewerage in the Republic of Serbia

Serbia is using both surface water and groundwater for its water supply. Data obtained by the Statistical Office of the Republic of Serbia for year 2009 show that the total water abstracted for municipal water supply and for industries which use high-quality water in Serbia is in the range of 700 million m3/year, where approximately 71% comes from groundwater sources. The average water demand in Serbia is approximately 320 litres per capita per day (l/c/d), where 400 l/c/d is the demand of the urban population and 250 l/c/d is for rural areas. The total length of the public water supply network in Serbia is 37,228 663 km; some of which is very old in some areas. In 2008, it was estimated that 85% of country's population was connected to the public water supply systems. Although the overall state in the water supply sector may be assessed as satisfactory, there is a need for operational improvement of the existing systems; examples include improvements to operational reliability, water quality delivered to consumers in some parts of Serbia, reduction of water losses, etc.

Wastewater produced in Serbia in 2009 came from the following sources (data from Statistical Office of the Republic of Serbia): households (67%), industry (19%) and other sources (14%). The precise data on infiltration water volumes are not available. The total length of the public sewer network is 14,948 km. Just over half (51%) of all households are connected to the public sewer systems, while the remaining households dispose wastewater into septic tanks or directly into groundwater/watercourses.

EU legislation requires agglomerations of 2,000 inhabitants (or population equivalent - PE) and over to be connected to an appropriate wastewater treatment plant. There are 434 settlements in the Republic of Serbia above 2,000 PE, with total sewage pollution emission of approx 6.5 million PE.

At present, only 21 municipalities have operational municipal waste water treatment plants (WWTP) in the Republic of Serbia, among which some WWTP suffer from various operational problems and ailments. These problems are related to the fact that some of the WWTP have incomplete treatment systems and poor maintenance that does not allow for continual operation and lack of financial resources for operation. The percentage of treated wastewater in 2009, according to Statistical Office of the Republic of Serbia is presented in Figure 1.

 

1
Figure 1: Waste water treatment in Serbia in 2009

 

It is clear that wastewater treatment is by far the most underdeveloped sub-sector of water infrastructure in Serbia. Several municipal WWTPs are currently under construction and technical designs are being finalised for a number of municipal WWTPs.

 

Existing Data and Studies on the Development of Water Supply and Sewerage in the Republic of Serbia

The estimate of required financial resources for the development of water supply and sewerage in Serbia up to the standards required by the existing EU Directives related to water supply and wastewater management, proved to be a very demanding and difficult task. There are several reasons for this and the most important ones are insufficient and incomplete data related to the public utility companies assets and the current state of infrastructure within the public utility companies (PUCs) themselves. Several studies were prepared in the region in order to provide best estimate of the required financial resources, and they will be briefly presented and conclusions related to the calculation and practical application for the Serbian situation will be drawn.

 

Strategy for Sustainable Development of Water Supply and Sewerage Services – "Romania 2025"

This strategy was prepared in 2003 by the Romanian Water Association with the aim of determining a strategy for the medium term (2004-2007) and the long term (until 2025) for the development of sustainable water supply and sewerage services. The analyses took into account several social and political aspects that were important in the process of Romania's accession to the European Union and therefore it may serve as a guideline for Serbia as well. The strategy was based on the following fundamental objectives:

  • The decentralization of the public services and the increase of local authorities' responsibility regarding the quality of services provided to the population,
  • The extension of the centralized systems for basic services and an increase in the population's access to these services,
  • Reorganizing the social protection mechanisms for the disadvantaged segments of the population and reconsidering the price/quality ratio,
  • Promoting market economy principles and reducing monopoly,
  • Attracting private capital in financing local infrastructure investments,
  • Institutionalizing local credit and increasing its financial contributions to husbandry services,
  • Promoting measures for sustainable development and
  • Promoting social partnership and continuous training of human resources.

 

Chapter 5 of the study (Estimation of the costs related to the implementation of a medium and long-term strategy) is based on the following assumptions:

  1. The time horizon for compliance with the European Union directives is 15 years,
  2. The forecast of population growth already indicates a negative trend resulting in the decrease in the total number of inhabitants by more than 7%.

 

On the basis of these assumptions the total costs of the investments were evaluated using specific indicators, calculated as a ratio between the value of investments needed for modernization of the systems (achieving desired level of service) and the number of inhabitants. The sources of data were feasibility studies, ongoing projects, methodologies and guidelines for the assessment of costs to comply with EU norms. The Strategy "Romania 2025" assumed that all utilities had already achieved cost recovery.

In order to apply the same methodology for the calculation of required investments in Serbia, it was required to make an inflation adjustment for the Eurozone. According to the European Statistical Office, the cumulative Eurozone inflation rate for the 2003 – 2011 period was 22%, which lead to the correction of the estimated costs per capita, as shown in the following table.

 

tab1
Table 1: Investment in water and wastewater services according to the Strategy for Sustainable Development of Water Supply and Sewerage Services – “Romania 2025” and values adjusted for inflation in the period 2003-2011

 

The estimate of the total funds required to achieve the desired level of service (compliance to the EU directives) is given in the following table, where data on urban and rural population were provided from the Republic Statistical Office.

 

tab2
Table 2: Total estimated investment in water and wastewater services