September 2004
ASSESSMENT AND DEVELOPMENT OF
MUNICIPAL WATER AND WASTEWATER
TARIFFS AND EFFLUENT CHARGES IN
THE DANUBE RIVER BASIN.
Volume 2: Country-Specific Issues and
Proposed Tariff and Charge Reforms:
Slovak Republic National Profile
AUTHORS
Danka Thalmeinerová
TARIFFS AND CHARGES VOLUME 2
PREFACE
The Danube Regional Project (DRP) consists of several components and numerous
activities, one of which was "Assessment and Development of Municipal Water and
Wastewater Tariffs and Effluent Charges in the Danube River Basin" (A grouping of
activities 1.6 and 1.7 of Project Component 1). This work often took the shorthand
name "Tariffs and Effluent Charges Project" and Phase I of this work was undertaken
by a team of country, regional, and international consultants. Phase I of the
UNDP/GEF DRP ended in mid-2004 and many of the results of Phase I the Tariffs and
Effluent Charges Project are reported in two volumes.
Volume 1 is entitled An Overview of Tariff and Effluent Charge Reform Issues and
Proposals. Volume 1 builds on all other project outputs. It reviews the methodology
and tools developed and applied by the Project team; introduces some of the
economic theory and international experience germane to design and performance of
tariffs and charges; describes general conditions, tariff regimes, and effluent
charges currently applicable to municipal water and wastewater systems in the
region; and describes and develops in a structured way a initial series of tariff,
effluent charge and related institutional reform proposals.
Volume 2 is entitled Country-Specific Issues and Proposed Tariff and Charge
Reforms. It consists of country reports for each of the seven countries examined
most extensively by our project. Each country report, in turn, consists of three
documents: a case study, a national profile, and a brief introduction and summary
document. The principle author(s) of the seven country reports were the country
consultants of the Project Team.
The authors of the Volume 2 components prepared these documents in 2003 and
early 2004. The documents are as up to date as the authors could make them,
usually including some discussion of anticipated changes or legislation under
development. Still, the reader should be advised that an extended review process
may have meant that new data are now available and some of the institutional detail
pertaining to a specific country or case study community may now be out of date.
All documents in electronic version Volume 1 and Volume 2 - may be read or
printed from the DRP web site (www.undp-drp.org), from the page Activities /
Policies / Tariffs and Charges / Final Reports Phase 1.
TARIFFS AND CHARGES VOLUME 2
We want to thank the authors of these country-specific documents for their
professional care and personal devotion to the Tariffs and Effluent Charges Project.
It has been a pleasure to work with, and learn from, them throughout the course of
the Project.
One purpose of the Tariffs and Effluent Charges Project was to promote a structured
discussion that would encourage further consideration, testing, and adoption of
various tariff and effluent charge reform proposals. As leaders and coordinators of
the Project, the interested reader is welcome to contact either of us with questions
or suggestions regarding the discussion and proposals included in either volume of
the Project reports. We will forward questions or issues better addressed by the
authors of these country-specific documents directly to them.
Glenn Morris: glennmorris@bellsouth.net
András Kis: kis.andras@makk.zpok.hu
TARIFFS AND CHARGES VOLUME 2
National Profile of Municipal Water and Wastewater Management in the Slovak Republic
3
Table of Content
1 Introduction .................................................................................................................................... 5
1.1 Overview................................................................................................................................ 5
1.2
Overview of the Origins and Status of the Municipal Water and Wastewater Industry ........ 5
1.3 Future
Directions ................................................................................................................... 6
2
Legal and Institutional Setting........................................................................................................ 7
2.1
National Laws and Regulations Governing Provision of Municipal Water and Wastewater
Service 7
2.1.1 Common
Provision ............................................................................................................ 7
2.1.2 Self
Service........................................................................................................................ 9
2.2 Management
Units ................................................................................................................. 9
2.2.1 Administrative Units.......................................................................................................... 9
2.2.2 Operating
Units.................................................................................................................. 9
2.3 Service Users ....................................................................................................................... 11
2.4 Regulatory
Units .................................................................................................................. 11
2.4.1 Environmental
Regulation............................................................................................... 11
2.4.2 Economic
Regulation ...................................................................................................... 12
3
Production Quantity and Quality .................................................................................................. 14
3.1
Water Production, Distribution and Consumption............................................................... 14
3.2 Water
Processing/Cleaning/Disinfection ............................................................................. 15
3.3
Wastewater Production, Collection and Discharge.............................................................. 15
4 Economic
Data ............................................................................................................................. 17
4.1 Tariffs................................................................................................................................... 17
4.2 Sales ..................................................................................................................................... 18
4.3 Effluent
Charges .................................................................................................................. 18
4.4 Grants
and Transfers ............................................................................................................ 19
5
Infrastructure of Municipal Water and Wastewater Services ....................................................... 21
5.1
Production and Processing of Municipal Water .................................................................. 21
5.2
Collection, Processing and Discharge of Municipal Wastewater ........................................ 21
6 Management
Units........................................................................................................................ 22
6.1
Types and Number of Management Units ........................................................................... 22
6.1.1 Trends in Formation and Consolidation of the MUs ....................................................... 22
6.1.2 Lines
of Business............................................................................................................. 22
6.2
MU Service Areas and Service Provided............................................................................. 23
6.3
Population Served by the MUs ............................................................................................ 23
6.4 Special
Obligations .............................................................................................................. 24
6.5 Financial
Conditions ............................................................................................................ 24
7 Regulatory
Units........................................................................................................................... 25
7.1
National, Basin and Local Planning and Permitting ............................................................ 25
7.2
Economic Regulations and Limitations ............................................................................... 26
7.3
Environmental Regulations and Restrictions....................................................................... 26
8 Service
Users ................................................................................................................................ 27
8.1 MU
Customers ..................................................................................................................... 27
8.2 Self-Supply
Users ................................................................................................................ 27
9 Policy
Issues ................................................................................................................................. 28
9.1
Legal and Institutional Issues............................................................................................... 28
9.2 Tariffs
Structure ................................................................................................................... 29
9.3 Effluent
Charges .................................................................................................................. 30
10 References .................................................................................................................................... 33
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UNDP/GEF Danube Regional Project
Abbreviations
BOD
Biological oxygen demand
HH Households
ICPDR
International Commission for the Protection of the Danube River
MoE
Ministry of Environment
MU
Management unit
NRO
National Office for Regulation of Network Sectors
SEF
Slovak Environmental Fund
SWME
Slovak Water Management Enterprise
VAT
Value added tax
W&WW services
Water and wastewater services
WFD
Water Framework Directive
WW utility
Water Works utility
WWTP
Wastewater treatment plant
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National Profile of Municipal Water and Wastewater Management in the Slovak Republic
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1 Introduction
This report is, first of all, a compilation of information and data that describing the institutions and
conditions that shape and characterize the provision of municipal water and wastewater service in
Slovakia. The purpose of this compilation is to provide background and inspiration for proposals to
reform both the current system of water and wastewater tariffs and effluent charges and coincident
proposals to adjust or modify the legal and regulatory system within which these tariffs and effluent
charges function in Slovakia. Indeed, some chapters include brief analyses suggesting such reforms
and Chapter 9 concludes this report with preliminary proposals for reforms in the institutional setting
and design of these tariffs and charges. The aim of these proposals is to improve the management of
water and wastewater resources used in the municipalities of Slovakia generally and, including
protection of water resources from nutrient loading and toxic substance originating from municipal
systems.
1.1 Overview
The territory of Slovakia covers 49,034 km2. The country is divided into 8 regions and 79 districts.
Within this broader administrative division there are 2,883 municipalities. Slovakia has a population
of around 5.4 million and a population density 109.9 inhabitants per km2. Slovakia is a rural country of
small settlements, the urban population is 56% concentrated in a few larger cities.
Slovakia is a country in economic transition. In 2000 the GDP reached 887.2 bill. SK (constant
prices). The average unemployment rate in 2002 was 19.6%. The rate of inflation increased
dramatically in 1999, when large portion of the price reform of public services was introduced
(including water services). In May 2004, Slovakia became a member of the EU.
1.2 Overview of the Origins and Status of the Municipal Water and
Wastewater Industry
Management of water resources did not undertake any economic restructuring the political changes
after 1989. The Government has had the responsibility to regulate, develop, and provide water services
to all users, such as households, industry and agriculture. However, several administrative changes
impacted also the economic development of water infrastructure and water and wastewater ( W&WW)
services provisions.
With respect to infrastructure development, the W&WW services were funded directly by the
Government (through the Ministry of Forest and Water Management). These services were provided
for both inhabitants and industry (industrial activities were also in state hands).
Water industry was not privatized and W&WW services were still provided by the state-own water
works (WW) utilities, even though the Act on Municipalities (from 1990) delegated the public
services (among W&WW services) to municipalities. The economic recession brought several
problems in water infrastructure development:
- Changes in management, investment policies, and house-keeping performance of other industrial
sectors were not the case in the water industry as this sector did not experience any restructuring
- State contributions to investment in W&WW systems decreased (stopped) and state budgetary
assistance was directed toward the recovery of operating costs
- Accounts receivable of water operators both direct and secondary debts - increased
- Metering of households brought decreases in water consumption and W&WW utilities were not
prepared to for the consequent loss in revenues.
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UNDP/GEF Danube Regional Project
1.3 Future Directions
In 1997 the Government decided on the decentralization of W&WW services and a transfer of assets
to the municipal level. Unfortunately, the process was politically hampered and several times
postponed. The final decision on the decentralization was taken in 2003. The year 2003 is a critical
year and it is important for the reader of this report to realize following issues:
- the Act on Water Supply and Sewerage Utilities was adopted in 2002 and implementation began
in 2003
- the Water Act was adopted in 2003, will be implemented from 2003 and there is a plan to amend
the Water Act in 2004 (to meet the compliance with the EU Water Framework Directive)
- decentralization (transfer of state owned W&WW utilities to municipal water companies) will be
completed by the end of 2003 and the municipal water companies will be allowed to enter public
private partnerships
- decentralization with former state administration responsibilities (also in other sectors, such as
education, health care, urban planning, waste management) being transferred into municipal level
and the decentralization will be completed by 2004 (public policy reform)
- during 2003, all valid water discharge permits are being revised by environmental authorities and
new permits (taking into account stricter pollution limits) are being issued
- the Government adopted the Regulation on Provisions of Water Services and it was implemented
in 2003. Before this period, the water prices for households were limited by the resolution
(decision) of the Ministry of Finance and prices for other clients were individually negotiated
between operators and clients. From 2003, the prices for households are regulated based upon the
justified economic costs of service provisions. The National Office for Regulation of Network
Services has the decision making power to decide on the maximum allowable price both for
households and other clients. The National Office annually issues decisions about the maximum
prices and tariffs to each individual supplier of W&WW services.
- based upon the Directive Specific Implementation Plan to meet the EU requirements (MoE, 2001),
the Government has committed to develop an investment strategy to construct the water
infrastructure. As a part of the strategy, the financial plan to absorb EU funds and to prioritize
investment projects is supposed to be outlined. The strategy is to be finalized by 2004.
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National Profile of Municipal Water and Wastewater Management in the Slovak Republic
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2 Legal and Institutional Setting
2.1 National Laws and Regulations Governing Provision of Municipal
Water and Wastewater Service
2.1.1 Common Provision
Main water services related legislation is as follows:
- Water Act 184/2003 was adopted recently and transposed the EU water-related legislation (except
of several provisions of WFD). According to the Water Act, each agglomeration larger that 2000
person-equivalent (pe) should be connected to a sewerage system and wastewater should be
treated prior to discharge to the recipient water body. For agglomerations larger than 10 000 pe,
adequate treatment that removes nutrients should be provided. The Water Act defines the time
schedule to meet the obligation to construct sewage systems with the adequate treatment. That is
the year 2010 for large agglomerations (more than 10 000 pe) and 2015 for small agglomerations
(from 2 000 10 000 pe)1.
According to Water Act, each withdrawal of water and each discharge of wastewater are subject
of permit. There is a Regulation 491/2002 on permissible levels of pollution discharges and
ambient quality standards of receiving waters.
Also, according to the 2003 Water Act, every discharge of wastewater into the recipient is subject
to an effluent charge. The details are provided in the Regulation 35/1979 on Pollution Charges.
This regulation was adopted in 1979 (with a small amendment in 1989) thus does not address
neither incentive nor revenue raising functions of pollution charge. In general, the pollution
charge depends on the quantity and quality of discharged wastewater. Five polluting substances
are currently subject of payment (BOD5, insoluble substances, crude oil substances, acidity or
alkalinity, dissolved inorganic salts). Water experts now discuss a proposal of a new effluent
charge regulation, no consensus was found yet.
- Act 442/2002 on Water Supply and Sewerage Utilities establishes basic conditions for
organization and provision of service. The Act regulates the establishment, development and
operation of public water works. According to the Act, the owner and operator could be any
physical or legal person that receives a license to own or operate the system. Services are provided
by operators and revenues from these services go directly to operator or owner of facility. The
maximum permissible tariff for W&WW service is set by the National Office for Regulation of
Network Sectors and applies nationwide.
- Act 514/2001 on Human Health Care that sets hygienic requirements for the drinking water
supply. The Act also provides for the inspection of drinking water operators with respect to
meeting the hygienic limits of drinking water provided to inhabitants.
1 Although the Water Act refers to "agglomeration" as requested and defined by the EU directive, further in the paragraphs,
the obligation to connect inhabitants to sewerage and WWT systems is given to the "administration unit" - municipality. This
might have "investment constraint" consequences because it could happen that few or several municipalities smaller than 2
000 pe will not be on "priority list" for the infrastructure development even thought they do not fit into the
"agglomeration" classification of the EU. Currently, there is a research project conducted by the Water Research Institute
that should consolidate "appropriate agglomerations" that would support the investment decisions with respect to the
construction of water infrastructure. Unfortunately, the research is in delay to prepare Slovakia for decent investment
projects for EU structural funds.
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UNDP/GEF Danube Regional Project
2.1.1.1 Service Area
Service area is defined primarily by five W&WW utilities that administer W&WW services to
inhabitants and industries. These five large units were (till 2003) subdivided into smaller "odstepne
zavody" that were typically connected to district town as follows:
- Bratislava W&WW utility
- West Slovakian W&WW utility and its 11 small units (Bratislava-vidiek, Dunajska Streda,
Galanta, Komarno, Levice, Nitra, Nove Zamky, Senica, Topolcany, Trencin, Trnava)
- North Slovakian W&WW utilities and its 7 small units (Cadca, Dolny Kubin, Liptovsky Mikulas,
Martin, Povazska Bystrica, Zilina, Ruzomberok)
- Middle Slovakian W&WW utilities and its 7 small units (Banska Bystrica, Lucenec, Prievidza,
Rimavska Sobota, Velky Krtis, Zvolen, Ziar nad Hronom)
- East Slovakian W&WW utilities and its 12 small units (Bardejov, Humenne, Kosice, Poprad,
Presov, Revuca, Spisska Nova Ves, Stara Lubovna, Svidnik, Trebisov, Vranov nad Toplou).
In addition to state-owned W&WW utilities, some municipalities individually built and operated so
called "municipal water systems". The legal basis for the establishment of municipal water system is
given in the Act on Municipalities (of 1990).
Service areas are in general defined by
- the size of state owned W&WW utilities that coped, in general, with the borders of administrative
districts, and
- limits of municipalities that established own W&WW systems.
Service areas have grown for several reasons, among which the availability of financial resources was
the most important.
2.1.1.2 Conditions of Service
Conditions of services provided by operators are specified and defined in the Act on Water Supply and
Sewerage Utilities. The customers should be served 24 hours a day with water quality that meets
required hygienic standards. Customers must pay the invoice for the water received and wastewater
discharged by/into the operator's facility.
2.1.1.3 Reporting Requirements
W&WW utilities operators are obliged to submit several reports that involve:
- cash flow
- annual reports on services provided
- annual reports on general operation and performance of the facility(ies)
- annual environmental report that include emissions and quantity of discharged wastewater,
amount of withdrawn water
- annual report on pollution charges to be paid (based upon both the decision and the actual
discharge).
These reports are submitted to responsible authorities and are accessible to the public. Aggregated
statistical data are published by National Statistical Office (on scale of services provided), by the
Ministry of Soil Management (on operation, subsidies, revenue and expenditures), and by the Ministry
of Environment (on emissions).
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National Profile of Municipal Water and Wastewater Management in the Slovak Republic
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2.1.1.4 Ownership of infrastructure
According to the Act on Water Supply and Sewerage Utilities, the owner and operator could be any
physical or legal person that receives a license to own or operate the system. As the result of the
transformation of water service provisions, municipalities are obliged to establish Municipal water
companies (as successor companies of old W&WW utilities) where the involvement of private sector
is not regulated. Currently, in Slovakia, there are municipal water companies that either provide
services as public entities or contract public/private entities for limited period (from 10-25 years).
2.1.2 Self Service
Households that are not connected to the public water infrastructure use water from individual wells.
These wells are equipped with single pumps and the quality of water is not monitored. The share of
inhabitants supplied by water from individual wells is 15%. The individual withdrawal is not
regulated. Households' self-service in the case of wastewater disposal is significant, representing 45%.
The wastewater is disposed in individual septic tanks. Households using individual holder tanks are
subject of random inspection with respect to regular emptying of septic tanks.
In order to make picture complete, the self-service user might be also an industry. Industry that
withdraws water for industrial processes from own sources and discharge wastewater after the
treatment at own WWTPs. Each user of water (more than 10 l/min or 4 800 m3/year or 400m3/month)
and dischargers into the recipient must have a permit. Besides receiving a permit, self-serving entities
must pay withdrawal charges and effluent charges.
2.2 Management Units
2.2.1 Administrative Units
Basic administration units are municipalities. According to the Act on Municipalities (1990),
municipalities are responsible for the supplying their inhabitants with drinking water and provision of
sewerage and treatment services. There are 2883 municipalities with the status of "town" or "village"2.
2.2.2 Operating Units
In the past, the W&WW services were the responsibility of state-owned water and wastewater
(W&WW utilities). These are still the operating units but a decentralization process is in progress and
should have been completed by the end of 2003.
The state ownership means that planning, development, monitoring and budgeting was done by the
Ministry of Soil Management. There were 5 W&WW utilities subdivided into "odsepne zavody - OZ"
(daughter or smaller units without budgetary, development and planning autonomy) (totally 47). Sizes
of OZ varied and usually were attached to a specific town or service area (see 2.2.1). The operation
unit thus involved a physically integral unit of drinking water supply and distribution and collecting
wastewater and treatment.
The revised system of operating units is not finalized, as the decentralization of 5 W&WW utilities is
not completed yet. According to the Resolution of the Government (in June 2001), no more than 7 (!)
2 Villages are small units with the simple administrative and economic activities and towns are larger units usually providing
public services to several surrounding villages.
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UNDP/GEF Danube Regional Project
municipal joint stock water management companies can be created. There is an exception to this rule,
as 4 water companies were established prior to the final decision on decentralization. These
"grandfathered" exceptions are:
- The City of Trencin. The owner of the W&WW infrastructure is a company wholly owned by the
City. The company that has a contract to operate the system is owned by a private investor - Suez
Lyonnaise des Eaux-ONDEO (50.1%), and several municipalities (49.9%). The operating
company was established in 1998 and was granted by a 20-year contract by the municipality.
- The City of Ruzomberok. In 1999 a concession to provide W&WW services was granted to the
Slovak Cellulose & Paper Company. This occurred because the company was willing to accept
municipal wastewaters to be treated in its facilities.
- The City of Komarno. In 1997 the City established a wholly city-owned and city-operated
municipal water company KOMVaK, a.s.
- The City of Hlohovec. In 1998 the Hlohovec city established a municipal joint stock company
Dubovany Water and Sewage Company, s.r.o.
The process of decentralization is as follows:
- Property formally owned by the W&WW utilities is presently under the supervision of the
National Property Fund
- Municipalities enter into negotiations with each other and W&WW utilities to establish municipal
water companies3
- National Property Fund transfers assets and obligations to these newly created municipal water
companies
- Once the property is transferred into the municipal water companies, these water companies can,
in principle, form joint ventures with private companies or sell the assets to them. The later
possibility was not tested yet.
By September 2003, following W&WW utilities have been cancelled (terminated) and new municipal
water companies have been established:
- Bratislava (former Bratislava W&WW utility)
- Nitra Water Company (former West-Slovakian W&WW utility)
- Trnava Water Company (former West-Slovakian W&WW utility)
- East-Slovakian Water Company (former East-Slovakian W&WW utility)
- Podtatranska Water Company (former East-Slovakian W&WW utility)
- Middle-Slovakian Water Company (former Middle-Slovakian W&WW utility)
- North-Slovakian Water Company (former North-Slovakian W&WW utility).
In addition to the large W&WW utilities and the larger municipal systems described above, some
municipalities constructed (so they are owners) and they operate W&WW services facilities. They
began de-facto operation after 1989, when a cut in the central government budget for water and
wastewater investments created a financial and service crisis situation. In 2001 such towns and
3 According to the Resolution of the Ministry of Soil Management, these companies must be publicly owned and ownership
shares are divided according to the population size of each municipality regardless of the scope (extent) of w&ww services
currently provided.
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National Profile of Municipal Water and Wastewater Management in the Slovak Republic
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villages served 4.8% of Slovak inhabitants served by a central water supply and 3.2% of Slovak
inhabitant served by a central sewage collection and treatment systems.4
2.3 Service Users
In general, the following classes of water users are distinguished:
- households
- large industrial plants
- small industrial plants
- commercial and institutional bodies.
The classification of users (consumers) is based on
- the magnitude of water consumption and wastewater production,
- the type of wastewater pollution discharged to public sewer system and pretreatment (if any) used.
W&WW operators have separate contracts with each user connected to public water supply and sewer
system. The quality and quantity of wastewater discharged to public sewer system is regularly
monitored by W&WW operator and by user with frequency related to wastewater flow rate and level
of wastewater pollution discharged.
The consent contract between user and operator usually sets the following limit values:
- withdrawal in m3/year
- discharge in m3/year,
- concentration average for particular pollution parameters in mg/l,
- maximum concentration and total mass limit in t/year.
This division is made also due to the different tariff rates of services. There are different tariff rates for
"Households" and for "Others Users" (industries, and commercial and institutional units). This
division is important because different ways of establishing and regulating tariff rates for W&WW
services apply to these two classes of water users. Household consumers are inhabitants, but also, this
group includes some "Other" entities that provide public services, such as kindergartens, schools,
hospitals, social and reeducation centers.
2.4 Regulatory Units
2.4.1 Environmental Regulation
The Ministry of Environment is the responsible for the setting and enforcement of water-related and
other environmental regulations. It also coordinates the activities of its water related institutions, such
4 It is not clear if these municipal water utilities have to enter into newly established municipal water companies because they
are located in newly designed service areas. Positions differ; those municipalities that developed the facilities purely from
own sources, work in "profit", and do not have technical problems in operation of w&ww services are reluctant to hand over
(surrender) their assets into a large units with few shares.
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UNDP/GEF Danube Regional Project
as Slovak Hydro-meteorological Institute (and from July 2003 also the Water Research Institute). The
MoE supervises 8 Regional and 79 District offices responsible for the issuing permits to withdraw and
pollute waters. These offices also give a permit for construction of facilities (such as water networks,
sewer systems, pumping stations, water treatment and wastewater treatment plants)5. There are 5 local
water inspectorates that report to the MoE. These inspectorates have the power to impose fines for
violation of environmental legislation and regulations.
The Ministry of Health Care is the responsible for setting and enforcing hygienic limits of drinking
water. The same pollutants as required by the EU Drinking Water Directive are regulated, with the
main division to obligatory and recommended parameters. Through its 37 hygienic institutes (so called
State Health Institutes), monitoring and compliance with the hygienic limits of drinking water is
conducted6. Each drinking water operator has an obligation to regularly report on the production and
quality of drinking water that is provided to the water system7. The Act on Health Care was amended
in 2001 to require that drinking water quality be measured at the point of consumption, as required by
the EU.
2.4.2 Economic Regulation
Formerly (till 2002), economic regulation was conducted by the Ministry of Finance that:
- regulated tariffs of W&WW services for Households. Rates were gradually increased from 1990
but still do not cover the full operating costs of operators8. It is necessary to mention, that tariffs
for Others were not regulated and were individually negotiated between provider and client.
- provided budgets for the state-owned entities (those under the central government, such as
W&WW utilities, SWME, Water construction company); municipalities are excluded as they
receive annual budget based upon the size and number of population that includes an
"infrastructure development budget". The state budget allocation in recent years gradually
decreased.
- provided non-investment subsidies to recover the costs of W&WW service providers. The state
subsidies gradually decreased and stopped in 2001.
From 2003 the National Office for Regulation of Network Sectors (Act 276/2001) was established to
monitor and regulate water tariffs based upon the "justified" costs of each individual operator. Each
provider of W&WW services must apply for the permit to charge "inhabitants and other" clients in a
given year and the National Office issues a decision (that is publicly available) for each individual
provider.
According to Act on Water and Sewerage System, anybody could provide W&WW services. Thus,
the National Office regulates
- Maximum tariffs for Households and Other Users provided by large municipal operators
- Maximum tariffs for Households and Other Users provided by small municipal operators
- Maximum tariffs for Households and Other Users provided by any W&WW service operators
The maximum tariff for Households is defined as the maximum tariffs in the previous year multiplied
by the coefficient 1.35 for drinking water and 1.30 for wastewater. This maximum tariff cannot be
exceeded regardless of the production costs of the supplier. Above-mentioned coefficients will be
5 It should be noted, that District and Regional offices (so called "general state administration") are established and budgeted by the
Ministry of Interior. The Ministry of the Environment has a "supervision" role of the environmental departments of regional and district
offices but has limited power to manage and control daily task assignments and their execution.
6 Due to financial constraints, the regular monitoring of hygienic limits is done randomly or is targeted based on cases arousing suspicion,
recent non-compliance or epidemic situations. Institutes also monitors bathing waters.
7 Reports are not available for the public due to several ,,technical" problems of processing and interpreting of data received.
8 The level of rates was constant until 1990 (the price of drinking water was 1.74 SK/m3 and price of sewage water was 1.31
SK/m3). In 2002, the price of drinking water was 11,50 Sk/m3 and price of sewage water was 7,50 SK/m3.
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National Profile of Municipal Water and Wastewater Management in the Slovak Republic
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applied until the maximum tariffs of "Households" and "Other Users" are equal. There is a plan to
reach the same tariff for both groups of consumers by 2005.
The National Office also classifies the "Others" grouped with "Households" to whom the maximum
tariff is being charged; these are for example diagnostic centers, orphans, student hostels and
dormitories, old people's homes. These "similar-to-household" consumers are specified in the decision
for each individual supplier.
The National Office directly regulates maximum tariff for "Other Users". The steps are as follows:
- Average tariff of an operator is calculated based upon a complex formula. This formula includes
"economically justified cost" (production cost) of operators, cost-plus-contract "profit" and
correction coefficient of discount rate. There is a detailed list of those items that are eligible and
non-eligible to be included into economically justified costs.
- The total cost of operator minus income from "Households and Others" (regulated prices) will
create the tariff for "Other User" clients.
Basic rule is that the tariffs are designed to cover the operation costs of W&WW operator but
discriminates against "Other Users" in favor of "Households and Other" consumers. Peculiar situation
is when the operator has a high share of households where the maximum tariff is given (previous-year-
price multiplied by 1.35 or 1.30) and the rest of the production cost must be reallocated among other
clients (big cake of cost is divided among "Households and Others" and "Other Users" artificially and
is based upon a "social affordability" of Households). It is not clear, what the basis for the maximum
tariff was in the past. The coefficients are also "arithmetically" design to meet the same price of both
groups in 2005.
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UNDP/GEF Danube Regional Project
3 Production Quantity and Quality
3.1 Water Production, Distribution and Consumption
Water for drinking water purposes is produced mainly from ground water sources (more than 83%).
The production of water in m3 and its trend is shown at the Table 1. The ratio between produced and
invoiced water represents water losses (28.5%) and technological water (2.3%) (data of year 2001).
Table 1
Drinking Water Production, Sales, Losses, and Household Consumption in 1999-
2001
Parameter
Unit 1999 2000 2001
Water produced, of which
mill m3 402.5 391.7 367.2
from ground water sources
mill. m3 336.0 323.6 304.2
Water invoiced, of which
mill.m3 286.5 275.1 260.5
for households
mill.m3 185.9 181.6 172.2
Losses and unaccounted water, of which
mill.m3 116.3 117.0 107.2
Losses in pipelines
mill.m3 96.8
94.7
104.7
Specific water consumption in households
l/inh.day
126.9
123.5
117.1
Source: Green report 2002
Development of the population connected to a drinking water supply system is shown in Table 2.
Drinking water is consumed by Households and Other Users in a share of 66:34 (year 2001).
Table 2
Population Connected to Public Drinking Water Supply, the Development in
1990-2001
%
of
population
connected 1990 1995 1998 1999 2000 2001
Under municipal operation
2.2
3.1
4.1
4.3
4.5
4.3
Under W&WW utilities operation
73
76.3
77.7
74.5
74.6
74.9
Under
other
operation*
0
0
0
3.8 3.8 3.9
Total
75.2
79.4
81.8
82.6 82.9 83.6
Source: Green Report, 2002
* "under other operation" represents a newly established entities (for example Trencin) as mentioned in the
chapter 2.2.2.
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National Profile of Municipal Water and Wastewater Management in the Slovak Republic
15
The household-specific consumption has a decreasing trend. This is thought to be caused by:
- an increase of water prices, and
- installment of meters at final consumer points.
Approximately 80-90% of the households' consumed water is metered. There are cases where this is
technically impossible or meters were not installed yet. For those households where there are no water
meters, there are two systems of charging for service:
- the charge is calculated based upon the total consumption from the water meter at the outlet of the
operator that is divided by number of people living in the household, or
- the charge is estimated based upon the number of persons in households, usually 40 m3 per
persons per year.
There is not a significant increase of water-saving devices. The specific household consumption varies
within different regions in Slovakia. For example, in Bratislava, it was 182 l/p/day, while in other
regions less than 80 l/p/day. The average specific households water consumption was 123 l/p/day in
2001. This difference in the consumption should be investigated.
Drinking water is distributed directly to households either living in individual houses or in block of
flats. In the latter case, the owner of the block of flats is responsible for the technical status of the
pipes. This means that any leakage, corrosion of pipes or other failures should be corrected by the
owner of the block of flats. The data on drinking water distribution are listed in Table 1.
3.2 Water Processing/Cleaning/Disinfection
The processing and cleaning the water supply is conducted in the first or second stage of water supply
treatment. Technical and technological requirements of the cleaning and disinfection are stated in the
permit that operator obtains for his operation. Hygienic authorities inspect the enforcement of the
permit. There are only cases of violation (failure in disinfection) as almost all facilities are equipped
by automatic dose system of disinfectant. In case of extraordinary situation (after flooding), the owner
of facility (municipality) must ensure an alternative source of drinking water.
3.3 Wastewater Production, Collection and Discharge
Development of public sewer systems is not as advanced as the water supply network. 54.3% of the
population is connected to sewerage and this has not increased significantly over the last several years.
The main users of sewerage are households and provide for 57.5% of the wastewater. The rest is for
"Others Users " represented by industry, commercial and institutional, and administrative bodies.
Almost all municipal wastewater entering WWTPs is treated by mechanical and biological treatment
(96.4%).
The level of treatment and performance of treatment facilities differ, ceteris paribus. According to the
Approximation Strategy (2001, DANCEE-MoE), there is a need to upgrade more than 200 WWTPs
and construct more than 300 WWTP in order to meet the EU Directive on municipal treatment of
wastewater. Data on wastewater treated and discharged into the recipient water bodies are shown in
Table 3.
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UNDP/GEF Danube Regional Project
Table 3
Wastewater Production, Treatment and Discharge in 1999-2001
Parameter Unit
1999
2000
2001
Length of sewer network
Km
5 166
5 220
5 266
Wastewater discharged, of which
Mill.m3 252.1 240.3 231.1
Sanitary wastewaters Mill.m3 143.0 137.2 132.9
Industrial and other wastewater Mill.m3 109.1 103.1 98.2
Source: Green Report, 2002
Development of the population connected to wastewater treatment plants is shown in Table 4.
Table 4
Population Connected to WWTPs (Development in 1990 2001)
%
of
population
connected 1990 1995 1998 1999 2000 2001
Under municipal operation
1.3
1.4
2.4
2.5
2.6
2.9
Under W&WW utilities operation
49.4
51.1
51.6
48.7
49.0
49.1
Under
other
operation*
0
0
0
3.1 3.1 3.2
Total
50.7
52.5
54.0
54.3 54.7 55.2
Source: Green Report, 2002
* same as in Table 2
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4 Economic Data
4.1 Tariffs
Tariffs were set up for Households by the Ministry of Finance till 2002. The setting of tariff did not
involve any examination of the specific production costs of operators. Tariffs for "Households" were
identical through the whole country and all operators charged the same maximum permitted price per
m3. The household bill is calculated on volumetric consumption of water (price multiply by volume of
delivered water).
Tariffs for services to "Other User" clients were negotiated individually between the operator and the
client. Many times it was the only way to recover the loss of "Household" clients. The parties to the
negotiation of the tariffs were on the one hand the enterprise, and on the other - the operator of the
W&WW services. The central Government did not influence these negotiations, but these negotiations
could be strongly influenced by a market power and organization of the negotiating parties. Usually,
the W&WW utility would set up the tariff in the whole district to which they provided the service.
However, there were certain cases where the W&WW utilities set up different tariffs for ,,small" and
,,big" "Other User" clients.
Beginning in 2003, the National Office for Regulation of Network Sectors monitors and regulates
water tariffs. Currently, the prices are not identical and might differ from region to region depending
on operator production costs.
W&WW tariffs are subject to VAT (that was 6% in 1998, 10% by 2003 and 14% from 2003, 19%
from January 2004).
Table 5 and
Table 6 show the development of tariffs for drinking water and wastewater for
households and average for other clients.
Table 5
Regulated Tariffs, Average Tariffs and Average Cost for Drinking Water Supply
in 1998-2001
Parameter in SK/m3
1998 1999 2000 2001
Tariff for households (without VAT)
5.66
7.26
8.36
10.08
Average tariff for others (without VAT)
15.98
16.26
17.20
18.36
Average costs of operators
10.45
10.80
12.36
13.76
Source: Green Report, 2002
Operators themselves, based upon the reporting requirements, report on costs. The operators former
W&WW utilities are (were) not audited, as they are operating units belonging to the Ministry of Soil
Management that takes the responsibility for supervision and budgeting. Thus, these operators are
obliged to report on costs and revenues according rules applied for any public institution. Newly
created operators will report to Municipal Boards and Municipal Councils (no more information
available now).
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UNDP/GEF Danube Regional Project
Table 6
Regulated Tariffs, Average Tariffs and Average Cost for Wastewater Collection
and Treatment in 1998 2001
Parameter in SK/m3
1998 1999 2000 2001
Price for households (without VAT)
3.77
3.77
5.54
6.65
Average price for others (without VAT)
11.36
13.19
14.37
15.16
Average costs of operators
6.44
7.49
8.50
9.49
Source: Green Report 2002
4.2 Sales
Sales of W&WW services are shown in Table 7 (data from 2002 are not available).
Table 7
Sales of Water Services in 2001
Parameter
Sale in mill. m3
Share of services %
Income (mill. SK)
Households
Others
Drinking water
260.52
66.1
33.9
3 358
Wastewater
231.15
57.5
42.5
2 373
Source: Green Report, 2002
4.3 Effluent Charges
According to the Water Act (2003), the polluter is obliged to treat wastewater according to the state-
of-art technologies (that is secondary treatment at the minimum). The Water Act also requires treating
wastewater to meet the emission limits. Therefore, there are cases that the polluter had to add a tertiary
step in order to meet the standards.
According to Regulation on Pollution Charges (from 1979), each polluter must pay a water effluent
charge. These charges are governed by a permit system and are levied based on self-monitoring by
polluters (effluent quantities and concentrations reported by the polluters). The amount of charge
depends upon the quantity of pollutants in the wastewater and on the quantity of the receiving waters.
Base effluent charges are levied on 5 basic pollutants. Additional effluent charge penalties of up to
200% of the base rate may be levied to reflect a high level of damage to receiving waters. According
to the law, these additional charges must be paid from after-tax profits. The charge rates are not
adjusted to inflation.
Effluent charges are collected by SWME and were a funding source of the Slovak Environmental
Fund. From 2001, the State Funds have been cancelled and the revenues go into the general state
budget. The current and proposed computation algorithms for the effluent charge is in the Table 8. The
income of the SEF from water effluent charges and water penalties is shown at Table 9 (data are
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National Profile of Municipal Water and Wastewater Management in the Slovak Republic
19
available till 2000, as the SEF was cancelled and from 2001, the water effluent charges and penalties
are the income of the state budget. The statistic is not kept specifically on the water charges).
Table 8
Structure of Effluent Charges in Sk/unit
Parameter
1979-2003
Proposal of 2003
BOD5
21.5 * Z 0.8265 (in thous. SK)
12 SK/kg
Insoluble substances
2.34 * Z 0.7514 (in thous. SK)
2,40 SK/kg
Crude oil substances
1.00 3.00 SK/m3
Alkalinity or acidity
135 SK/kmolle
Dissolved inorganic salts
120 600 SK/t
0,50 SK/kg
Non-polar extractable substances
-
2 SK/kg
Nanorg
14 SK/kg
Ptotal
90 SK/kg
Cyanides total
2 800 SK/kg
Z- amount of pollution in tons per year
Source: working document of the MoE for the development of water pollution charges, 2001
Table 9
Revenue for the SEF from Water Effluent Charges in mill SK
Parameter
1997 1998 1999 2000
Water
effluent
charge
194.8 215.1 198.5 197
Water
effluent
penalties
6.2 4.7 6.7 6.0
Source: Report of the SEF, 2001
4.4 Grants and Transfers
Grants and transfers come from
- State budget
- Water Fund (cancelled in 2001 the revenue and distribution of grant is under the ministry of Soil
Management)
- Environmental Fund (cancelled in 2001, the revenue and distribution of grants is under the
Ministry of Environment)
Grants are according to Slovak classification divided into "investments" and "non-investments"
grants. "Investment grants" mean grants for the development of infrastructure (construction of water
supply networks, WWTPs, sewer systems, irrigation facilities). "Non-investment grants" are transfers
to recover production cost of operators; however, they also include R&D, monitoring, and planning
activities. Table 10 shows state grants for two main water units: river basin enterprises (SWME) and
W&WW utilities. The grants have decreasing trend.
In the past (not shown in the Table 10), substantial non-investment grants were provided for W&WW
utilities to cover "costs of provision of tasks in public interest", or in other words to recover the
production costs associated with household service users due to the limitation of the maximum
allowable price. In recent years, non-investment subsidies were not allocated to W&WW utilities. This
was due to state budget constrains rather then to correct the distortion in household tariffs. Also, there
might be an explanation that the Government did not budget the W&WW utilities from 1996 due to
planned decentralization (and possible privatization). In practice, it took more than 5 years for the final
20
UNDP/GEF Danube Regional Project
decision on transfer: the Government let the W&WW utilities "dry out" and allowed the assets to
depreciate (and lose value) before the completing the transfer to municipalities. ).
Table 10
Grants to Water Operators in mill. SK in 2001
Grants (mill. SK) to/from
Type
SWME
WW utilities
Investment 214.2
650.4
State budget
Non-investment 134.3
-
Investment
-
28.3
Water Fund
Non-investment 150.0
-
Investment
-
7.5
Environmental Fund
Non-investment -
-
Source: Green Report, 2002
Cross-subsidies
There are several cross-subsidies situations:
- Cross-subsidies among different units of W&WW utilities, Providing subsidies to operators
where the economic (and geographical and environmental) conditions are extremely unfavorable
(and costly) for the operating unit (OZ) resulting in a financial loss. In areas where operators
provided drinking water supply and sewerage services make a profit, that profit is reallocated
among unprofitable OZ to attain a balanced budget in each of the units. Due to transformation of
W&WW utilities enterprises this practice will end, and the water prices will increase more in those
regions where the cost of providing W&WW services is very high.
- Cross-subsidies exist between two basic services drinking water supply and sewerage; while the
first service is an unprofitable activity, it must be subsidized by the second one.
- Cross-subsidies exist among "Households" and "Other Users"; due to the maximum allowable
price for households, re-allocation of the revenues from Other Users is used to offset loses from
"Household" tariffs that are less than the cost of providing that service..
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National Profile of Municipal Water and Wastewater Management in the Slovak Republic
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5 Infrastructure of Municipal Water and Wastewater Services
5.1 Production and Processing of Municipal Water
The public water supply services 82.6 % of the population. There do exist different regional levels of
water supply, e.g. Bratislava, Prievidza, Martin, Banska Bystrica with the highest supply rate of 94 %
and a worse situation in the rural areas in eastern and southern Slovakia, with a supply rate of
approximately 50 % (Vranov nad Toplou, Sabinov, Bytca, Kosice-okolie). Drinking water is produced
from ground water sources (more than 80%) and from surface water. There is a decreasing trend in the
consumption of drinking water that might cause operational problems in the production and
distribution systems. Typical drinking water supply system consists of well, distribution system (main
and network pipes), treatment facility (one-stage or two stage), pumping system, water reservoirs. A
typical problem with the drinking water supply is a high percentage of losses in distribution (on
average more than 25%).
5.2 Collection, Processing and Discharge of Municipal Wastewater
The sewer systems and wastewater treatment plants are behind the overall development of Slovakia's
economy and society. Only 55% of inhabitants are connected to a sewer system. There are 205
municipal wastewater treatment plants (as of December 2000) that treat municipal (in most cases
municipal and industrial) waters of which:
3.8 % of wastewater is discharged only after the mechanical treatment
96.2 % of wastewater is discharged after mechanical and biological treatment.
There are cases when a biological nutrient removal step is already installed in existing WWTPs.
however, most of WWTPs are obsolete and will require both upgrade and modernization to achieve
higher levels of nutrient pollution reduction, including nutrient removal.
According to the EU Urban Wastewater Directive, agglomerations larger than 2000 pe must be
connected to sewer and wastewater treatment systems. Currently, it is reported that only 12 WWTPs
currently meet the EU obligations and would not need any change. There are 290 municipalities in the
category of 2000 - 5000 pe without any WWTPs in place. According to estimates in a DANCEE
MoE study, the number and type of WWTP to be constructed or upgraded are as follows:
- 287 new plants with technology to remove organic pollution with the complete nitrification
- 3 new plants with the technology to remove organic pollution with an enhanced biological
removal of Ntot and Ptot (by chemical or biological methods)
- 243 existing plants that need an upgrade that will include complete nitrification and/or nutrient
removal.
The changes in technologies, new connections and upgrade will result in increased generation of
sludge. In 2000, 98 920 tons of dry sludge was produced of which more than 40% was disposed by
land filling and the rest was applied on agricultural (or forestry) land.
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UNDP/GEF Danube Regional Project
6 Management Units
6.1 Types and Number of Management Units
Types and basic features on the administrative and management arrangements were described in the
chapter 2.2.
In the early part of the 90s, W&WW services were 100% operated by the state-owned W&WW
utilities although according to the Act on Municipalities (1990), these tasks were given to
municipalities (which mandated W&WW utilities to operate W&WW services). In a few cases
municipalities mobilized financial sources to construct and operate W&WW services.
6.1.1 Trends in Formation and Consolidation of the MUs
Process of decentralization of W&WW services was launched in 1996. That was a period of dramatic
situations, and several conflicts and problems attended the decentralization process:
- The Ministry of Finance regulated the maximum prices applied to municipal consumers (thus, the
transformed W&WW services operators would operate in a distorted market)
- The Ministry of Soil Management lacked the capacity to process and approve transformation
projects received from applicants. In addition, the application process was without feedback to
those who prepared transformation projects.
- The Act on Water Works Utilities was for a long time pending the approval in the Government,
thus it was not clear what rules (type of ownership, concession, lease, full divestment) would be
applied to new operators of water services
- Municipalities without water infrastructure in place were excluded from the transformation
- Municipalities (agglomerations of concentrated industries), where water supply and sewerage
services resulted in the profit, were not willing to join W&WW companies with other
municipalities in the region that had money-losing systems
- Transformation projects were to be prepared by the W&WW utilities and the cost to develop the
project was borne by these state-owned companies
- Transformation process was based upon a voluntary approach without a final schedule
- Municipalities were reluctant to receive facilities under construction due to a lack of finances, as
the Government did not allocate resources for completion
- In addition, municipalities were reluctant to take over the services due to unclear future
development in tax, price, insurance and depreciation policies.
According to the new Water Works Utilities Act (2002), any physical or legal person could be owner
and/or operator of water services.
6.1.2 Lines of Business
WW utilities are purely W&WW service providers, and do not engage in any other business lines.
They might probably provide some commercial services, for example activities related to civic and
mechanical works, laboratory analyses, consultancy services. These activities are not mandatory and
are provided in individual cases. It is not allowed to include these costs of providing these commercial
services into the production costs for calculation of maximum prices.
Danka Thalmeinerová, Slovakia
National Profile of Municipal Water and Wastewater Management in the Slovak Republic
23
6.2 MU Service Areas and Service Provided
W&WW services were (till 2002) provided by 5 W&WW utilities that were subdivided into 47 small
operation units (odstepne zavody - OZ). These W&WW utilities are being decentralized (transferred)
into municipal water companies. The decentralization of state-owned W&WW utilities were scheduled
to be completed at the end of 2003 but it is not yet possible to precisely describe the service areas.
For example, original East Slovakian W&WW utility is being split into two water companies: East
Slovakian Water Company and Podtatranska Water Company. Both are a successor of the state-owned
W&WW utility.
The West W&WW utilities are spilt already into 3 successors` municipal water companies.
Municipalities that are serviced by these companies have shares based upon the size of their
population. The general rule is that responsibilities and costs (investment and operating) will fall into
new municipal water companies that will be allowed to enter public-private partnerships. However,
the service monopoly in the service area of any given company will persist.
In addition, a few water companies have been established in the period of 19961998, when the
process of decentralization was launched.
6.3 Population Served by the MUs
In 2001, about 83.6 % of the population is provided with drinking water, but only 55.2 % of the
population is connected to the public sewage system. The common problem is that there are
differences in connection of inhabitants depending on the region. While in Bratislava, the connection
(both to drinking water and sewer system) reaches almost 100%, there are regions of low (less than
20%) of connections.
24
UNDP/GEF Danube Regional Project
6.4 Special Obligations
Payment discipline of household accounts is very high. There are exceptional cases, where
households' consumers did not pay the bill and the W&WW utility for limited period stopped
providing water services. A more sensitive situation occurs in the case of the unpaid water and
wastewater bill of schools, hospitals and other public institutions. According to the statistic record of
the Ministry of Soil Management, in 2001 the unpaid claims of W&WW utilities reached 2 158 mill.
SK due to the insolvency of clients. As a consequence, these operation units end up with debts. The
Table 11 shows claims and debts of W&WW utilities and SWME.
Table 11
Claims and Debts (mill SK) in 2000, 2001
Parameter
Year
WW utilities
SWME
Accounts receivable
2000 2054.5 1137.3
2001
2158.5
1120.7
Accounts receivable past due 2000
1088.2
679.7
2001
1175.9
718.9
Debts of operator
2000
926.6
299.9
2001
1103.1
287.8
Debts of operator past due
2000
374.7
92.2
2001 288.1
85.7
Source: Green Report, 2002
6.5 Financial Conditions
W&WW utilities keep accounts. Some are publicly available.
In the past financial plans were developed at the level of big regional W&WW utilities and
investments were undertaken based upon the decision and capacities of the Ministry of Soil
Management (and the Government). In general, it is reported that deep under-financing of water sector
brought the W&WW services to its critical situation. Project preparation and planning was not
realistic and usually ended up with the "wish list" of never implemented projects.
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National Profile of Municipal Water and Wastewater Management in the Slovak Republic
25
7 Regulatory Units
7.1 National, Basin and Local Planning and Permitting
National planning of development of water infrastructure is under the Ministry of Soil Management. It
developed Water Management Policy till 2005 (Koncepcia vodohospodarskej politiky do roku 2005).
According to this plan, the following estimates are provided:
- Investment Programme for the development of public drinking water supply system 6.95 bill. SK
that includes an increase the level of water supply from 82.6 % to 85 % of the Slovak population
by 2005.
- Investment Programme for the development of sewage network and treatment 36 billion SK by
2005 of which 2.9 bill. Sk is needed to complete the construction and upgrade of existing sewage
systems and WWTPs. It is planned that the connection rate will be 57% of population by 2005.
At the national level, planning is limited to "annual" budgeting, and the support for future investments
(with respect to the commitment to meet the EU directives) is only politically declared. Existing
national plans lack the concrete steps and mechanisms how and from what sources will these
expenditures be financed (the Water Management Policy refers to ISPA, Phare and other EU funds,
commercial loans, municipal budgets, and support of the Government in a very general sense).
Recently, the Strategy on the Implementation of EU Water Framework Directive was adopted
(December 2003), that refers to the implementation of new requirements related to the transposition of
the EU Water Framework Directive. It does not deal with investment plans to provide W&WW
services.
At regional (river basin) level, there is so called Master plan that is revised biannually. It focuses more
on the description of the situation rather than planning. No links are made to national or local planning
documents.
Besides national planning, municipalities themselves establish development plans that include all
public infrastructure. Approximately half of the municipalities have detailed engineering plans to
construct wastewater facilities; few of them have already been constructed.
Municipalities usually requested the financing from the Slovak Environmental Fund (it was cancelled
in 2001 and grants are available from the Ministry of Environment). Actually, they saw the SEF grants
as the only source of water infrastructure financing. Several reasons were cited:
- the SEF allocated grants: that means free of interest or principle payments
- the SEF did not requested any "detailed" economic analysis (assessment) of the project
- the SEF did not analyzed any "environmental improvements" of implemented project
- the SEF did not requested co-financing from other sources.
The allocation of grants was not coordinated with the pre-accession funds that focused on large
infrastructure projects. The SEF allocations were politically popular as they dealt with small-scale
water projects. Table 12 shows the allocation of grants to water infrastructure projects.
Table 12
SEF Expenditures in mill SK (1996 2002)
Parameter
1996 1997 1998 1999 2000 2001 2002
Water supply
221.9
189.3
263.7
0
153.5
160.5
186.5
Sewage and treatment
398.2
326.9
408.1
2.5
547.7
635.1
847.0
Other water projects
29.7
16.9
33.3
16.9
-
-
-
Source: SEF report, 2003
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UNDP/GEF Danube Regional Project
At the level of W&WW service operators, there is not a clear picture how to prioritize the future
investments. Financial demands clearly exceed internal capabilities of operators and range from
recovery of water losses, reconstruction of facilities that are obsolete, new investments to meet stricter
environmental limits, and new connection of inhabitants to public W&WW services.
7.2 Economic Regulations and Limitations
Economic regulation is from 2003 at the National Office for Regulation of Network Sectors (NRO).
Each provider of W&WW services (more than 50 inhabitants or daily water production more than 10
m3) must apply for the permit to charge "households" and "other service users" in a given year. The
NRO issues the decision for each individual provider that is available to the public (details on
regulation and setting the maximum tariffs are described in the Chapter
2.4.). The NRO was
established originally for the regulation of natural monopolies (such as electricity, gas), and embraced
the water services when the decentralization of state own water companies was launched. While in the
case of regulation of electricity and gas tariffs the Office has a mandate to issue the penalty (in case of
violation of the decisions granted by the Office) this is not a case for the water services. Therefore, the
NRO as it is designed currently, has very symbolic functions over the regulation of water services.
7.3 Environmental Regulations and Restrictions
The Water Act (2003) requires each discharger to treat water prior to the discharge to the surface or
ground waters. The implementing regulations set emission limits and effluent charges. The details are
described at the Chapter 2.4. The Water Act transposed all water related directives of the EU including
the Directive on Urban Wastewater Treatment that requires all municipal treatment plants to install the
secondary treatment step at minimum. This requires heavy investments and it is anticipated that
majority of environmental financial support from the EU funds will be spent for the (re)construction of
WWTPs in Slovakia.
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National Profile of Municipal Water and Wastewater Management in the Slovak Republic
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8 Service Users
8.1 MU Customers
MU customers are households (approximately 60 % of drinking water and 50% of wastewater
services) and industries. Operators in general differentiate between large industries (conducting heavy
industrial activities) and small industries (small enterprises and commercial agencies that have similar
to household wastewater production) due to different tariffs applied. Also, there are other service users
similar to household entities; such as student hostels, orphanages, retirement houses; for which the
regulated household tariffs apply. It should be noted, that this group with "lower" water tariff can not
conduct any commercial activity that would generate a profit.
8.2 Self-Supply Users
Self suppliers consists of households mainly in rural areas, although there are few in cities with more
than 10 000 inhabitants without sewage systems so they have to "self-supply" sewerage services. This
is not the case for drinking water supply; all inhabitants of the larger communities are served.
15% of the population obtains drinking water from personal wells. There is no monitoring of the
quality or quantity of these withdrawals.
Many households are not connected to sewage system - 44% of households dispose wastewater in
septic systems. Most are holding tanks and the content is regularly (minimum once per year) removed
and taken to wastewater treatment plant. Municipal office might undertake inspection to assure that
the holding tank was emptied by an authorized sewerage collection truck. No record would prove that
the municipalities conduct the inspection.
If the self-service user would like to discharge the wastewater into soil, they need to have a permit
from the district environmental office. However, direct discharge without the pretreatment is not
allowed. There is no information on how many users built individual small treatment facilities.
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UNDP/GEF Danube Regional Project
9 Policy Issues
The principle of costs recovery for water services is expressed in the Water Framework Directive.
Specifically, the Directive requires ensuring that the price charged for services related to water reflects
the true economic costs of providing the service. Current water tariffs and pollution charges are not
determined on the basis of cost-recovery. This has a historical roots ranging from legal, institutional
and technical reasons.
Inherited problems:
- Past central budget allocations were for construction and equipment. This provided an incentive
to over-design (substitute fixed capital for operating expenses like labor and materials).
- Budget allocation based on political influence provided as much as (more than?) needed and led to
an unbalanced portfolio of plant and equipment in the various communities. A physical legacy but
a behavioral legacy as well.
- Lack of management skills due to limited training and experience. Current MU staff never before
had responsibility to do investment and tariff planning for the system.
9.1 Legal and Institutional Issues
Transformation (and privatization) allows for provision and responsibility of water services at local
(municipal) level. This is a good signal that the central government will have a "regulatory" rather
than "provider" function.
From 2003, the transformed W&WW service companies are being established and municipal water
companies provide W&WW services to several municipalities. Municipalities (by the decision of
Municipal Boards) might delegate maintenance and operation to a municipal or private company.
Also, it might be the case that municipal boards could decide to sell bonds to a private company (this
option has not been tested, yet). Except few cases, there is not any experience on what will be, in
practice, the relationship between municipal boards and operators. On one hand, municipalities
welcome transformation of assets as they increase the total assets of municipalities. On the other hand,
municipalities are reluctant to take over the responsibilities as they declare that the Government did
not allocate any financial sources to maintain existing facilities. The main problem is that the
allocation of shares was done based upon the size of municipality, regardless of the actual service
provided. Also, those municipalities that did not have any service received the shares in newly
established municipal water companies. An additional problem is that those municipalities that
operated their own water services are under the pressure to give up the operation and transfer the
assets into a large municipal water company.
There are several other problems:
- Municipal authorities are not trained to make contracts and to deal with private companies
- Municipalities are not ready to plan new investments due to the lack of expertise and will rely on
operators` proposals
- Municipalities do not have a tradition of, or practice in, working in partnership with each other.
They usually regard each other as economic competitors and this is amplified by the fact that
representatives of different and competing national political parties are often in charge of
municipal affairs.
- Municipalities are not aware of environmental requirements, as they were not part of legislative
process of EU accession.
Till now, municipalities and municipal governments have been "passive" players in the transformation
process. Old W&WW utilities were turned into municipal water companies without any assessment
Danka Thalmeinerová, Slovakia
National Profile of Municipal Water and Wastewater Management in the Slovak Republic
29
and review of their economic portfolio and performance. Anticipated problems will come when new
investments should be done and clearly, municipalities are not prepared to make informed and
experienced decisions.
Proposal to resolve problems:
- establish a clear (unambiguous) responsibility of Municipal Boards
- develop clear contracting conditions between municipalities and operators
- establish transparent organization structure of operators and management
9.2 Tariffs Structure
In the past, the tariffs for Households were limited and uniformly applied by the Resolution of the
Ministry of Finance. Other user's tariffs were set by negotiations conducted between the operator and
commercial customer. This resulted in several problems:
- production costs of operators exceeded the maximum prices of households. Operators used their
market power (as monopoly suppliers of municipal water) to negotiate higher tariffs with other
customers so that total costs were balanced.
- production costs of operators in technical or hydrological unfavorable localities exceeded total
costs and were balanced by cross subsidies of other localities served by the state-owned regional
water company.
- production costs for drinking water supply were cross subsidized by the revenues from wastewater
treatment services
- annual governmental subsidies did not encourage the economic efficiency of operators or improve
the water infrastructure. Now the central government is itself short of resources and annual
assistance (subsidies) has declined and practically stopped.
Currently, the National Office of Regulation of Network Sectors has regulatory oversight over gas,
electricity, and water utilities. It has a regulatory task to establish tariffs for both Households and
Other Users. However, distortion between Households and Other Users still persists. In some localities
(service areas where the share of Household users is higher than Other Users) the difference between
water prices for Households and Other Users is magnified in order to cover costs..
The water tariff structure is based on volumetric tariff system without any "fixed" or "connection"
charge. Recently, new clients are obliged to pay a "one-time" installation charge.
The response of users is to reduce or save water consumption that is provided by the public operators
and, in extreme cases, to switch water sources and wastewater services (withdrawal of water
individual wells or surface water, construction of own WWTPs). Pollution load of users (those using
public water services) is not specifically addressed in the final calculation of the tariffs. Their
pollution load probably should be considered and there are a few examples, where the W&WW
operator designed tariffs for Other Users based upon the pollution entering the public WWTP.
The operator does not have substantial incentive to reduce internal operation costs. The main reasons
are:
- Households tariffs are indexed and calculated based upon the previous year basis regardless of
production costs and the rest of production cost must be recovered from Other Users
- Tariffs (both for drinking water and sewage water) are calculated in a way that a final tariff
includes 10 15% net revenue of the water company. Improved effectiveness (and thus reduction
of operation costs) would lead to a decrease of this accounting profit since it is calculated as a
percentage of cost. This discourages cost control at the MWWU.
- Violation of the decision granted by the National Regulatory Office is not a subject of penalty.
30
UNDP/GEF Danube Regional Project
The simple computer models dealing with economic assessment (already developed at ICPDR, OECD
and other international programs) exist and would be in benefit of operators (and the National
Regulatory Office). However, these models are not tested at operator levels at the scale that would
give a better understanding to efficiency options. It is important to make a clear transparency of the
cost-income structure of the operator. In other words, many international projects resulted in
development of models to assess tariffs, charges. But results were never tested in a real water
companies. Operators are obliged to break down cost items for accounting purposes, but never for
internal use to see the structure of costs and revenues or to model different scenarios (for example for
the future investments).
In addition to regular annual increases in prices, households are faced to an increase of the VAT that is
attached to the water price. The VAT increased from 10 to 14% (from 2004 it will be 19%) over the
last 5 years.
Proposal to resolve the problem:
- removal of indexing of Households tariffs and application of actual production costs at each
MWWU as the basis for tariffs for service users that are households.
- Shift the NRO function to economic regulation of natural monopolies rather than calculation of
maximum Household and Other User tariffs.
9.3 Effluent Charges
As described above, the effluent charges have neither incentive nor revenue raising functions. In
addition, formulas used for the calculation of pollution load are designed to produce more (probably
diluted) wastewater rather than increase the efficiency of treatment. Plans to amend the Regulation on
Effluent Charges (that dates from 1979) have been delayed. There is an attempt by a few research
institutes to investigate the impact of pollution abatement cost and pollution charge per unit.
Two dimensions of effluent charges might be considered:
- Effluent charges paid by W&WW operators are too low to produce an effective incentive for the
W&WW operator to invest into abatement technologies. New, more stringent emission limits
however may help encourage W&WW operators to reduce pollution loads.
- Effluent charge to be paid by industry using W&WW service; in general, the tariff of wastewater
does not address the specific pollution load. The industry is obliged to pre-treat wastewaters prior
to the discharge into the public sewage system to meet the requirements of Sewage Order. This is
signed between operator and the industry and might be inspected by the environmental authority.
There are some cases that specific industry pollution (for example food and chemical industries
that discharge pollution that might upset the operation of the public WWTP) is considered when
the tariff is negotiated. However, the main driving force to increase the tariff of industry users is to
recover the deficit caused by limited tariffs of Household users.
Proposal to resolve the problems:
- effluent charge should address two aspects:
o pollution load of discharged wastewater
o efficiency of treatment
- in setting wastewater tariffs, operators of W&WW services should incorporate pollution load from
industrial clients based upon the quality of pollution (in the case that operation costs are higher
due to an upset of public WWTP, for example caused by bulking sludge as a result of starchy
waters from a food industry, etc.)
- enforcement of effluent charges should be improved. There should not be so much latitude for
interpretation of the Regulation, allowing for reductions in the calculated final effluent charge
- there might be an incentive to delay effluent charge in the case of investment that leads to the
reduction of final pollution load.
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National Profile of Municipal Water and Wastewater Management in the Slovak Republic
31
- Collection of effluent charges should be documented and reported to the public.
Efficiency of the policy proposal should be tested at the national level. It is suggested to open a public
discussion with respect to issues of efficiency, equity and benefits commensurate with the costs. The
following table highlights the important advantages and limitations of the strategy proposals.
National Profile of Municipal Water and Wastewater Management in the Slovak Republic
32
Strategy Name
Strategy description
Comments/Concerns
Establish a clear (unambiguous)
responsibility of Municipal Boards
Revision of legal
Develop clear contracting conditions
Training of municipal representatives
and institutional
between municipalities and operators
needed
arrangement
Establish transparent organization structure
of operators and management
Revisiting the role of National Office for
Regulation of Network Sectors
Examination of individual constituents of
costs and tariffs
Introduction of
Clear description of cost items including
Time consuming legislative process
regulation over
depreciation and future savings
monopolies
Removal of indexing HH tariffs
Needs to improve enforcement
Independent auditing
Allow for increasing/decreasing block tariffs
Informing the public about future rising
costs
Increase costs in a short-term
Examination of individual constituents of
Unwillingness of operator to introduce a cost
costs and tariffs
center with the argument of an additional
burden to "reporting" requirements
Introduction of
Examination of two-part tariff structure
cost center
Unwillingness of municipal boards to be
Clear description of cost items including
involved in examination with the argument
depreciation and future savings
of highly specialized issue to deal with at
Development and use of costing models
political level
High willingness of industry to participate
Examination of unit cost of pollution
reduction
Allow for payment holidays in case of
Needs to improve enforcement and
mitigation investments
Revision of
monitoring of polluters
pollution charges
Allow for increasing/decreasing tariff
Transaction costs with respect to monitoring
depending on input pollution load (mainly
and public assess
valid for industry)
Public assess to information on pollution
charges
National Profile of Municipal Water and Wastewater Management in the Slovak Republic
33
10 References
Green reports, 2000, 2001, 2002 of the Ministry of Agriculture, www.mpsr.sk
State of the Environment, 2002, Ministry of Environment, www.sazp.sk
Directive Specific Implementation Plan of the Directive 271/91/EEC, Ministry of Environment, 2001
(developed within the program of DANCEE)
Web page of National Office of Regulation of Network Services, www.urso.sk
Report on Water Management Investment and Operation in 2000, the Water Research Institute, 2001
Slovak Environmental Fund Report, 2001, www.enviro.gov.sk
Water management strategy till 2005 (Koncepcia vodohospodarskej politiky do roku 2005), Ministry
of Soil Management, 1997
Document Outline