97240 DANUBE WATER PROGRAM Water and Wastewater Services in the Danube Region Slovakia Country Note A State of the Sector | May 2015 danube-water-program.org | danubis.org CZECH REPUBLIC UKRAINE DANUBE SLOVAKIA DANUBE AUSTRIA MOLDOVA DANUBE HUNGARY SLOVENIA CROATIA ROMANIA DANUBE DANUBE BOSNIA AND HERZEGOVINA SERBIA BULGARIA MONTENEGRO KOSOVO Key Water and Sanitation Sector Challenges MACEDONIA X Ensuring the affordability of water tariffs in the future. Tariffs are expected to increase in the coming years, since €290 million of annual investments are planned until 2022. With potential water and sanitation expenditure representing more than 3% of the average income of the bottom 40% of the population (Authors’ elaboration), the affordability of water tariffs will have to be carefully monitored in the future. X Improving the availability of structured, reliable, and comprehensive data about the sector’s situation. In the absence of a regulator-sanctioned data collection, there are presently no structured and comprehensive information giving a clear picture of the sector. As a result, utility managers cannot assess whether their operation is at par with good practices. Addressing this challenge would help the sector move ahead. X Improving the cost recovery level of services. Tariffs cover operation and maintenance costs but not capital expenditure. Within the context of important investment needs, improving the cost recovery level may be required, since EU cohesion funds and national subsidies may not cover all capital funding needs through 2022. Further resources On water services in the Danube Region X A regional report analyzing the State of Sector in the region, as well as detailed country notes for 15 additional countries, are available at SoS.danubis.org X Detailed utility performance data are accessible, if available, at www.danubis.org/eng/utility-database On water services in Slovakia The following documents are recommended for further reading; the documents, and more, are available at www.danubis.org/eng/country-resources/slovakia X MINZP. 2007-2014. State of the Environment Reports of the Slovak Republic 2005-2012. Bratislava: Ministry of Environment of the Slovak Republic. X —. 2015. Ministry of Environment of the Slovak Republic: Enviroportal - Indicators for Water Services. http://www1.enviroportal.sk/indikatory/kategoria.php?kategoria=203. X URSO. 2014. Report on Fulfilment of Quality Standards 2013. Bratislava: Regulatory Office for Network Services. Acknowledgments. This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, ts Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on part of The World Bank concerning legal status of any territory or the endorsement or acceptance of such boundaries. This note has been prepared by Miroslav Klos, local consu tant, with the support of Maria Salvetti, consultant, based on the data collection by Miroslav Klos. It is part of a regional State of the Sector review led by David Michaud, World Bank, under the Danube Water Program financed by the Austrian Ministry of Finance, whose support is gratefully acknowledged. The authors welcome comments and can be contacted through David Michaud (dmichaud@worldbank.org). Rights and Permissions. The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. DANUBE WATER PROGRAM WATER SNAPSHOT Sources for all numbers in the snapshot are provided in full in the body of this country page; a complete description of the methodology is provided in the State of the Sector Regional Report, at SoS.danubis.org. Access to services: Danube Danube Value Year best average practice average, bottom 40% and poor 100% Context for Services 80% GDP per capita, PPP [current 26,114 2013 16,902 n.a. 60% international $] Population [M. inh] 5.414 2013 8.451 n.a. 40% Poverty headcount ratio [$2.50 0.67 2011 1.65 n.a. 20% a day [PPP] [% of pop]] Local government units 2,883 2014 1,987 n.a. Piped supply Flush toilet [municipalities] Slovakia Danube average Danube best For which, average size [inh] 1,878 2013 4,253 n.a. Total renewable water 2008– 9,199 7,070 n.a. availability [m3/cap/year] 2012 Sector Structure Organization of Services Self provision 13% 400 village Number of formal water administration 17 2012 661 n.a. service providers 5% Average population served 277,074 2013 9,496 n.a. 4 municipal companies 10 Water services law? Yes mixed-capital 2% companies Single line ministry? Yes [Ministry of Environment] 60% Regulatory agency? Yes [URSO] 3 privately -owned Utility performance indicators companies No publicly available? 20% Major ongoing reforms? No Access to Services Sustainability Assessment Access to piped water (%) 100 2012 83 100 Financing Piped water Access Access to flush toilet (%) 97 2012 79 99 Investment Flush toilet Wastewater Performance of Services Affordabil ty treatment coverage Service continuity [hours/day] 24 2013 20 24 Operating Customer Nonrevenue water [m3/km/d] 9 2012 35 5 cost ratio satisfaction Water utility performance index 84 n.a. 69 94 [WUPI] Non revenue Continu ty water of service Financing of Services Staffing level Wastewater Operating cost coverage 1.01 2013 0 96 1.49 compliance Collection ratio Efficiency Quality Average residential tariff [€/m3] 2.29 2012 1.32 n.a. Slovakia Danube average Danube best practice Share of potential WSS expen- 2.3 2012 2.6 n.a. Based on normalized indicators, closer to the border is better ditures over average income [%] Average annual investment Sector Danube Danube best Value 42 n.a. 23 n.a. Sustainability Average practice [€/cap/year] Assessment 82 64 96 State of Sector | Slovakia Country Note | 1 DANUBE WATER PROGRAM Context for Services EU MS Danube Danube Indicator Year Source Value average average best Socioeconomic Situation Population [M. inhabitants] 2013 World Bank 2015 5.414 8.481 8.451 n.a. Population growth 1990- World Bank 2015 0.09 -0.26 -0.37 n.a. [compound growth rate 1990 – 2013] [%] 2013 Share of urban population [%] 2013 World Bank 2015 54 63 63 n.a. GDP per capita, PPP [current international $] 2013 World Bank 2015 26,114 24,535 16,902 n.a. Poverty headcount ratio 2011 World Bank 2015 0.67 1.86 1.65 n.a. [$2.50 a day [PPP] [% of pop]] Administrative Organization No. of local government units [municipalities] 2014 MinV 2015 2,883 2,335 1,987 n.a. Av. size of local government units [inhabitants] 2013 Authors’ elab. 1,878 3,632 4,253 n.a. Water Resources 2008- FAO Aquastat Total renewable water availability [m3/cap/year] 9,199 10,142 7,070 n.a. 2012 2015 Annual freshwater withdrawals, domestic 2013 World Bank 2015 47 38 26 n.a. [% of total withdrawal] Share of surface water as drinking water source 2014 ICPDR 2015 17 16 31 n.a. Economy. Since the establishment of the Slovak Republic in January 1993, the country has undergone a transition from a centrally planned economy to a free market economy. The Slovak Republic is considered a high-income country. It has been an EU Member State since 2004, and adopted the euro currency at the beginning of 2009. The country has 5.4 million inhabitants according to the 2011 census, 54% of whom live in urban settings. The country is densely populated, with 110 inhabitants/km2. Economic growth is 2.5%, but the unemployment rate is relatively high (around 13%), and around 14% of the population lives below the poverty line (with 0.67% living on $2.50/day). The Roma population is generally considered a vulnerable minority, but the official estimate (2% according to the 2011 census) remains far below their real number (which is as high as 8%) (World Bank 2015). Governance. The Slovak Republic is a unitary state with a presidential, parliamentary, and governmental system. The country is divided into 8 regions, 79 districts, and 2,883 municipalities. Regions are the highest administrative units and are self-governing. Municipalities are the lowest territorial units (one or several villages). The self-governing municipalities are responsible for provision of water and sanitation services. (MinV 2015) Water resources. The Slovak Republic is a landlocked country, a particularity of which is that almost all its water flows out of its territory toward neighboring countries. About 96% of the water flow via the Danube and its tributaries to the Black Sea and 4% via the Wisla River over Poland to the Baltic Sea. Renewable water sources depend entirely on precipitation. According to the water balance, on average over the last 4 years, 340.47 Mm3 of groundwater and 275.46 Mm3 of surface water have been abstracted each year. The average volume of renewable water resources (internal river flows and groundwater from rainfall) is 9,199 m3/capita/year (FAO Aquastat 2015). The government has approved an adaptation strategy to tackle the adverse impacts of climate change, and has developed indicators of drought and water scarcity, risk maps, and drought management plans. Moreover, the entire country is declared a “sensitive area” in the sense of the EU Water Framework Directive (WFD) (MINZP 2014b). Water supply sources. Water for drinking purposes comes predominantly from groundwater sources (83%) (ICPDR 2015). Watercourse and water resources management is based on hydrologic basins. Water resources management is fully in compliance with the global trend as to Integrated Water Resources Management. Principles of water management are contained in the “Water Plan,” which integrates plans for the Wisla and the Danube basins. Any surface water or groundwater abstractor must obtain a permit from the water authorities. Payments and charges 2 | The Danube Water Program | WB & IAWD DANUBE WATER PROGRAM for surface water extraction, including the payment mechanism, are determined by law. Any entity discharging wastewater into surface water or groundwater must obtain a permit from the water authorities. Compliance with permit conditions is monitored by the river basin manager or the water authority that issued the relevant permit under the supervision of the Slovak Environmental Inspectorate. These institutions are entitled to impose sanctions in case of noncompliance. Organization of Services EU MS Danube Danube Indicator Year Source Value average average best Number of formal water service providers 2012 Expert estimate 17 1,060 661 n.a. Average population served [inhabitants] 2012 Authors’ elab. 277,074 6,643 9,496 n.a. Dominant service provider type Mixed capital companies Service scope Water, wastewater Ownership Municipalities Geographic scope One to a few municipalities Water services law? Yes Single line ministry? Yes [Ministry of Environment] Regulatory agency? Yes [URSO] Utility performance indicators publicly available? No National utility association? Yes [AVS for water and wastewater] Private sector participation Yes, serving 23% of the population Service provision. Municipalities as asset owners are Figure 1: Water services provider responsible for water services provision. The most dominant types and market shares model is the mixed-capital operating company in which Se f provision municipalities own the majority of shares. The Fund of National Property of the Slovak Republic or utilities themselves can 13% 400 village be shareholders, but their shares represent 2% to 9% of the administration capital. Those entities own the service assets. Ten mixed capital 5% companies provide services to 60% of the population. Only 3 4 municipal privately owned companies (separate model) provide service companies 10 mixed-cap tal to 20% of the population, on the basis of long-term concession 2% companies contracts. Another 4 purely municipal companies render services 60% to 2% of the population, and 400 village administrations provide 3 privately -owned water to 5% of inhabitants living in rural areas. The remaining companies inhabitants rely on self-provision (13%). All utilities provide both 20% water and wastewater services (Figure 1). The private sector is represented in a separate model by the multinational groups Source: Expert estimate. Veolia and Suez Environment (Expert estimate). Policy-making and sector institutions. The sector is controlled at the national level. As shown in Figure 2, local service providers are regulated and controlled by three national-level actors with a clear line ministry: X The Ministry of Environment (MoE), which is the line ministry responsible for water sector policy and water management. It is specifically in charge of water resources management, river basin management, flood protection, water quality and quantity preservation, and water supply and sanitation. X The Ministry of Health (through the Public Health Authority), which, in cooperation with MoE, is responsible for drinking water quality control. State of Sector | Slovakia Country Note | 3 DANUBE WATER PROGRAM X The Regulatory Office for Network Industries (URSO), which is responsible for pricing policy, price regulation, and protection of end-consumers. It sets price to ensure investment return for business entities. It also establishes the provision conditions of network services, including service quality standards. Figure 2: Water services sector organization National P Ministry National R Regulatory of R Institute of level Office R Environment Public Health Regulates and Sector policy, water resources management, river basin management, Controls drinking controls tar ffs flood protection, water qual ty and quant ty preservation water quality Regional level Mixed operational model I P Municipalities Regional water/sewer company R - regulation Local Owns, governs Consents to tariffs S P - policies level I - investments Concession model S - service provision I Municipalities Own, govern S Municipal water/sewer company Consent to tariffs Finance investments Source: Authors’ elaboration. Capacity and training. Water and wastewater utilities implement continuous staff training programs. Utilities organize staff capacity building as an integral part of human resource management and policies. International groups (Veolia, Suez) involved in the Slovak water sector also play an important role in developing staff training for all levels of managers through well-established human resources principles. Some utilities cooperate with universities on studies and pilot projects. The Association of Water Companies (AVS), created in 2004, provides technical and economic advisory services to its members, as well as knowledge exchange activities (workshops, conferences, journal). It also organizes training targeted at water sector professionals. Slovak utilities are generally considered stable employers, and technical staff turnover is relatively low. Municipal political cycles sometimes influence top-level manager turnover. Economic regulation. The water sector has been regulated by a national Slovak Waters regulatory authority, the Regulatory Office for Network Industries, since Severoslovenské vodárne a kanalizacie, 2001. The office also regulates the electricity, gas, and heat sectors. The a.s. is a joint-stock company. Regulatory Office does not answer to state authorities, and performs its Municipalities from the region own and duties impartially and independently. The regulator determines the regulated control the water company. This is an price through either (a) direct determination of a fixed price, (b) direct example of a functional and successful determination of a maximal price, (c) definition of a mechanism for fixed price model of the ownership and operation of calculation, (d) definition of a mechanism for maximal fixed price calculation, infrastructure. The company has a long- (e) definition of economically justified costs and reasonable profit, or (f) the term recovery plan for infrastructure, use of market measures (e.g., auctions). The regulator proceeds according providing open and transparent to the regulatory strategy over the regulation period. Tariffs are determined information to its shareholders and according to a price-cap methodology for a regulatory period of 5 years customers, while implementing (currently 2012–16). The regulator also establishes and monitors service numerous projects financed by EU standards, and imposes compensation payments to customers in case of funds. http://www.sevak.sk/. noncompliance with the defined standards. Ongoing or planned reforms. The water and sanitation sector is a stable and mature sector for which no major legislative change is expected. The sector should, however, be indirectly affected by the transposition into Slovak law of the new EU legislation (the new Procurement Directives) and implementation of the Operational Program for Environment. 4 | The Danube Water Program | WB & IAWD DANUBE WATER PROGRAM Access to Services EU MS Danube Danube Indicator Year Source Value average average best Water Supply Piped supply – average [%] 2012 Authors’ elab. 100 91 83 100 Piped supply – bottom 40% [%] 2012 Authors’ elab. 100 85 76 100 Piped supply – below $2.50/day [PPP] [%] 2012 Authors’ elab. 100 77 61 100 Including from public supply – average [%] 2012 MINZP 2014b 87 83 74 99 Sanitation and Sewerage Flush toilet – average [%] 2012 Authors’ elab. 97 83 79 99 Flush toilet – bottom 40% [%] 2012 Authors’ elab. 94 74 70 98 Flush toilet – below $2.50/day [PPP] [%] 2012 Authors’ elab. 66 63 54 100 Including with sewer – average [%] 2012 MINZP 2014b 62 67 66 94 Wastewater Treatment Connected to wastewater treatment plant [%] 2012 MINZP 2014b 62 62 45 95 Service coverage. The Slovak Republic enjoys full access to water and sanitation services. According to national statistics, 87% of the population is connected to public water systems. The rest of the population uses their own wells. Around 62% of the population is connected to public sewerage systems (MINZP 2014b). Equity of access to services. All populations have access to water regardless of their social or ethnic status. Indeed, 100% of the poorest share of the population (living on less than $2.50/day) has access to a piped water supply. However, only 66% has access access to flush toilets (Figure 3). In some regions of the Slovak Republic, segregated Roma communities have access to public water and sanitation facilities. 100% Figure 3: Access to Total 97% water and sanitation: 90% total population, 80% bottom 40% of the Bottom 40% population and poor 70% 94% Source: Authors’ elaboration and MINZP 2014b. 60% Total, bottom 40%, 50% poor Poor 100% 87% 66% 62% 62% 40% 30% 20% 10% 0% Piped water Public supply Flush toilet Sewer Wastewater treatment State of Sector | Slovakia Country Note | 5 DANUBE WATER PROGRAM Service infrastructure. Technical and operational conditions of assets are considered satisfactory with regard to the reliability and quality of service provided by utilities. There are 255 WWTPs for municipalities over 2,000 population equivalent (PE), and 241 of these facilities comply with EU Urban Wastewater Treatment Directive requirements (MINZP 2014a). All 95 large water supply zones (above 5,000 inhabitants or more than 1,000m3/day) and the associated water treatment plants meet the EU Drinking Water Directive. The reliability of water pipelines is high in terms of continuity of supplies. However, long-term efforts should generally be put into renewal of infrastructure to achieve sustainability of services together with full cost recovery. Value Value Year Source Water Wastewater Number of treatment plants n.a. 631 2012 MINZP 2014b Length of network [km] 29,088 11,655 2012 Stat SR 2015 Average connections per km of network 30 36 2012 Stat SR 2015 Performance of Services Service Quality EU MS Danube Danube Indicator Year Source Value average average best Residential water consumption [liters/capita/day] 2012 MINZP 2013 81 113 122 n.a. Water supply continuity [hours/day] 2013 IBNet 2015 24 24 20 24 Drinking water quality [% of samples in full 2012 MINZP 2014b 99 96 93 99.9 compliance] Wastewater treatment quality [% of samples in full 2013 Eurostat 2014 99 79 79 100 BOD5 compliance] Sewer blockages [number/km/year] 2013 IBNet 2015 02 3.0 5.0 0.2 Customer satisfaction [% of population satisfied 2013 Gallup 2013 82 78 63 95 with services] Quality of service. The quality of water and wastewater services in the Slovak Republic is generally very high. Water supply is continuous 24/7, with necessary water pressure, and collection of sewage is also continuous (IBNet 2015). Drinking-water quality is fully in compliance with national and European standards, and only 0.65% of samples exceeded maximal limit values (MINZP 2014b). No EU derogation has been granted. The quality of wastewater discharged is monitored and independently measured by authorities, and penalties are levied whenever effluent limits are not met. In some cases when operation management contracts have been concluded, a set of performance indicators, including quality monitoring, have to be reported on by the operator. However, customers are not publicly informed about those indicators, nor are they displayed on the utility website. Customer satisfaction. The satisfaction of the population with the service provided in their city (as per a Gallup Poll) is correspondingly high at 82% (Gallup 2013). This number is significantly higher than in most countries of the region. Customer satisfaction surveys are not carried out at the national level, but regional and large municipal water companies do use customer satisfaction surveys and publish the results on their websites. Websites viewed for this note showed overall customer satisfaction and a proactive customer approach. 6 | The Danube Water Program | WB & IAWD DANUBE WATER PROGRAM Efficiency of Services EU MS Danube Danube Indicator Year Source Value average average best Nonrevenue water [%] 2012 MINZP 2013 32 34 35 16 Nonrevenue water [m3/km/day] 2012 MINZP 2013 9 14 35 5 Staff productivity [water and wastewater] [number of 2013 IBNet 2015 7.7 8.7 9.6 2.0 employees/1,000 connections] Staff productivity [water and wastewater] [number of 2013 IBNet 2015 1.2 1.0 1.7 0.4 employees/1,000 inh. served] Billing collection rate [cash income/billed revenue] [%] 2012 IBNet 2015 116 102 98 116 Metering level [metered connections/connections] [%] 2012 MINZP 2013 100 96 84 100 Water Utility Performance Index [WUPI] n.a. Authors’ elab. 84 80 69 94 Overall efficiency. Overall efficiency of Slovak utilities is relatively high, but some remaining issues need to be addressed. The volume of nonrevenue water is still high (32%) compared to the situation in Central Europe (MINZP 2013). This can be explained by an improvement in the accuracy of measurement and/or by a significant number of illegal connections. Utilities tend to reach higher levels of commercial and financial performance compared to technical and operational performance, since the latter are directly linked to the infrastructure state. It also seems that indicators related to status of infrastructure are a bit worse than the usual commercial and financial performance indicators of utilities. Staff productivity per 1,000 connections (7.7) is above international best practice (IBNet 2015). Recent trends. IBNet has shown both positive and negative efficiency trends in recent years. The collection ratio shows a steady increase during 2005-2012, rising to 116% in 2012. Slovak utilities faced negative factors that pushed them to be more efficient. For instance, average water consumption dropped over the last 10 years from 115 l/capita/day to 81 l/capita/day at the national level, with lowest consumptions reaching 70 l/cap/day (MINZP 2013). This consumption decrease is mainly due to a tariff increase within a context of full metering (Figure 4). Figure 4: Evolution of nonrevenue water and collection ratio 130% 40 120% 35 Collection ratio (%) 110% 35 100% 25 90% 20 80% 15 70% 10 60% 5 50% 0 2005 2006 2007 2008 2010 2011 2012 2000 2002 2004 2006 2008 2010 2012 Sources: CZSO 2015 and IBNet 2015. NRW [%] NRW [m /km/day] 3 State of Sector | Slovakia Country Note | 7 DANUBE WATER PROGRAM Financing of Services Sector Financing EU MS Danube Danube Indicator Year Source Value average average best Sources of Financing Overall sector financing [€/capita/year] Authors’ elab. 100 101 62 n.a. Overall sector financing [share of GDP] [%] Authors’ elab. 0.51 0.55 0.45 n.a. Percentage of service cost financed from tariffs Authors’ elab. 59 65 67 n.a. Percentage of service cost financed from taxes Authors’ elab. 6 10 13 n.a. Percentage of service cost financed from Authors’ elab. 36 25 20 n.a. transfers Service Expenditure Average annual investment [share of overall Authors’ elab. 42 42 38 n.a. sector financing] [%] Average annual investment [€/capita/year] Authors’ elab. 42 42 23 n.a. Estimated investment needed to achieve targets 2014-2022 Expert estimate 53 65 43 n.a. [€/capita/year] Of which, share of wastewater management [%] Authors’ elab. 58 64 61 n.a. Overall sector financing. Tariffs are the only Figure 5: Overall utility sector financing, 2012 funding source that cover O&M costs in the water sector. There is no subsidy scheme 100% Transfers or additional taxes or fees financing utilities 90% 36% to cover their O&M costs. Tariffs, including detailed tariff structure, are regulated, and 80% Taxes (national) Investment only “economically justifiable costs” are 70% 6% 42% to be taken into account in setting tariffs. Depreciation costs of the existing assets 60% are the funding sources for infrastrcuture 50% renewal investment. EU cohesion funds and other national subsidies are used only for new 40% Tar ffs (utility) infrastructure investment. Water discharge 59% 30% and abstraction fees and taxes collected by O&M the Slovak Environmental Fund are used to 20% 58% subsidize water and wastewater projects, 10% but historically only for small municipalities (Figure 5 and Figure 6). 0% Financing Spending Source: Authors’ elaboration. 8 | The Danube Water Program | WB & IAWD DANUBE WATER PROGRAM Figure 6: Main sources of funding of water & wastewater services Loan repayments (funded by national taxes) EU funds IFI loans State Budget SVP – Slovak Water management Enterprise Transfer Environmental fund Surface National water taxes extraction Subsidies Fee Water and wastewater Rent paid in concession model utilities Tariff Consumers and polluters Local taxes Local govrnment budget Groundwater extraction Fee Source: Authors’ elaboration. Investment needs. The Slovak Republic has already Slovak Waters complied with the EU directive for water, and is expected Bratislavská vodárenská spoločnosť, a.s. (BVS) is a to do so for the wastewater directive. The Slovak Republic joint-stock company. Bratislava and the surrounding should fulfil in due time all Urban Waste Water Directive municipalities are shareholders in the company, requirements, since all WWTPs over 2,000 p.e. should be in which operates the water infrastructure. In 2007, compliance by 2015. Commitments under the Drinking Water the company established a new business model Directive have already been achieved. Investment strategy will by creating a subsidiary to penetrate new markets. address WFD obligations and objectives from the National Infra Services, a joint-stock company in which BVS Concept of Water Management policy, to ensure a smooth owns 51% of the equity (360 employees) provides supply to residents and other customers of safe and good- maintenance, repairs, and construction of networks quality drinking water and effective sewage disposal, as well for BVS while trying to successfully expand its as sustainable services through reliable infrastructure based activities portfolio to establish new business on socially affordable tariffs with minimal support from public relationships. In 2009, another subsidiary was finance. It is estimated that around €53 per inhabitant per established, BIONERGY (also a joint-stock company) year until 2022 would be necessary to achieve the National which is specialized in high-quality processing of Strategy objectives (Expert estimate). sludge and biological waste. http://www.bvsas.sk/ Investments. The infrastructure investment rate is relatively high. Around €42 per person has been invested every year (Author’ elaboration). The main objective of the investments is to meet European/Slovak standards mainly for wastewater collection systems and wastewater treatment plants (about 58% from total investment value) (Authors’ elaboration). Tariffs are the basic funding source for investments, supplemented by the EU Cohesion Fund and international loans. Subsidies from the Slovak Environmental Fund are minor compared to EU funds. Infrastructure owners co-finance projects using traditional commercial loans, but only in justified cases in order to optimize available means and investment priorities. The rate of investment over previous years has remained relatively stable, except in 2010, when EU subsidies dipped to one-quarter of the 2009 level (Figure 7). State of Sector | Slovakia Country Note | 9 DANUBE WATER PROGRAM Figure 7: Evolution of investments levels, sources, and uses 350 300 250 Investment (M€) 200 150 100 50 0 2008 2009 2010 2011 2012 International National Tariffs Water Wastewater Source: Authors’ elaboration. Cost Recovery and Affordability EU MS Danube Danube Indicator Year Source Value average average best Cost Recovery Average residential tariff 2012 MINZP 2013 2.29 2.18 1.32 n.a. [incl. water and wastewater] [€/m3] Operation and maintenance unit cost [€/m3] Authors’ elab. 2.27 1.77 1 20 n.a. Operating cost coverage 2013 IBNet 2015 1.01 1.10 0.96 1.49 [billed revenue/operating expense] Affordability Share of potential WSS expenditures over 2012 Authors’ elab. 2.3 3.1 2.6 n.a. average income [%] Share of potential WSS expenditures over 2012 Authors’ elab. 3.6 4.7 3.8 n.a. bottom 40% income [%] Share of households with potential WSS 2012 Authors’ elab. 4.8 24.7 14.1 n.a. expenditures above 5% of average income [%] Cost recovery. According to regulations in force in the water sector, all operational expenditure shall be covered by tariff revenues, and no national or subnational transfers are recorded. The Slovak Republic is making efforts to move toward full cost recovery for water supply and sanitation, as required by Article 9 of the WFD. Since 2008, all water consumers pay a unique water tariff, and there are no longer cross-subsidies between domestic and industrial consumers. Tariffs. The average residential tariff is €2.29/m3, which is among the highest in the region. Tariffs are increased by decision of the Regulatory Office based on proposals submitted by utilities. Between 2004 and 2012, tariffs increased by 168% (average yearly inflation of 3%), and the national average residential tariff is €2.29/m3, including the VAT (Figure 8). Regional differences exist, and dispersion of tariffs are statistically as high as €1/m3. The VAT rate of 20%, which is applied for water and sanitation services, is among the highest in Europe. Tariffs are still expected to increase in the coming years, since efforts will have to be made to fulfil Slovak commitments toward EU requirements, and to ensure water and sanitation facilities renewal. 10 | The Danube Water Program | WB & IAWD DANUBE WATER PROGRAM Affordability. The potential affordability of water services remained within an acceptable range of 2.3% of family income in 2012. Moreover, households in the bottom 40% potentially spend more than 3.5% of their income on water and sanitation expenditure (Authors’ elaboration). The economic regulatory framework in force in the water sector does not define any formal subsidy scheme to address affordability issues. Figure 8: Evolution of average tariff (absolute and share of potential expenditure in income) 3% 5% 2.5% 4% 3.6% Average tariff (€/m3) 2% 3% 1.5% 2.3% 2% 1% 1% 0.5% Residental 0% 0% 2007 2008 2009 2010 2011 2012 2013 Average Bottom 40% Sources: MZe 2014 and authors’ elaboration. Water Sector Sustainability and Main Challenges In order to evaluate and reflect the sustainability of services in the region, an overall sector sustainability assessment was done, taking into account four main dimensions: access to services, quality of services, efficiency of services, and financing of services. Each of these dimensions is measured through three simple and objective indicators. For each indicator, best practice values are established by looking at the best performers in the region, and countries closest to those best performers are deemed to have a more mature sector. A more complete description of the methodology to assess sector sustainability is included in the Annex of the State of the Sector Regional Report from the Danube Water Program. The outcomes of this assessment for the Slovak Republic water sector are displayed in Figure 9, which also Financing Piped water Access Figure 11: Sector Sustainability Assessment, Slovakia Investment Flush toilet Source: Authors’ elaboration. Wastewater treatment Affordability coverage Operating Customer cost ratio satisfaction Non revenue Continu ty water of service Slovakia Staffing level Wastewater Danube average compliance Efficiency Collection ratio Quality Danube best practice State of Sector | Slovakia Country Note | 11 DANUBE WATER PROGRAM shows average and best practices in the Danube region. The country sector sustainability score is 82, which is far above the Danube average sustainability score of 64, and among the best practices in the region. The assessment shows that, on average, the country performs well in terms of continuity of service, access to piped water and flush toilets, wastewater compliance, staffing level, nonrevenue water, and collection ratio. The main deficiencies of the Slovak water sector identified through the sector sustainability assessment are the level of investment, the operating cost ratio and the wastewater treatment coverage. The main sector challenges are: X Ensuring the affordability of water tariffs in the future. Tariffs are expected to increase in the coming years, since efforts will have to be made to fulfil Slovak commitments toward EU requirements, and to ensure water and sanitation facilities renewal. The investments planned until 2022 amount to €290 million per year. With water and sanitation expenditure representing more than 3% of the average income of the bottom 40% of the population, the affordability of water tariffs will have to be carefully monitored in the future. X Improving the availability of structured, reliable and comprehensive data about the sector’s situation. In the absence of regulator-sanctioned data collection, there are presently no structured and comprehensive information giving a clear picture of the sector. As a result, utility managers cannot assess whether their operation is at par with good practices. Without reliable sector financing information, policy makers lack a key instrument to promote sustainable services, and sector planners, in the absence of consistent data about access to services, cannot ensure that limited public funds go to the most cost-efficient and cost-beneficial projects. Addressing this challenge would help the sector move ahead. X Improving the cost recovery level of services. Tariffs cover operation and maintenance costs but not capital expenditure. Within a context of important investment needs, improving the cost recovery level may be required since EU Cohesion Funds and national subsidies may not cover all capital funding needs through 2022. Sources X Eurostat. 2014. European Commission Directorate- X MINZP. 2013. Water Management in the Slovak Republic General Eurostat: Statistics Explained - Water in 2012. Bratislava: Ministry of Environment of the Statistics. Accessed 2015. http://ec.europa.eu/ Slovak Republic. eurostat/statistics-explained/index.php/Water_ X —. 2014a. Situation Report on the Disposal of Municipal statistics. Waste Water and Sewage Sludge in the Slovak Republic X FAO Aquastat. 2015. Food and Agriculture Organization 2011-2012. Bratislava: Ministry of Environment of the of the United Nations - AQUASTAT Database. Accessed Slovak Republic. 2015. http://www.fao.org/nr/water/aquastat/data/ X —. 2014b. State of the Environment Report of the Slovak query/index.html?lang=en. Republic 2012. Bratislava: Ministry of Environment of X Gallup. 2013. World Poll. Accessed 2015. http://www. the Slovak Republic. gallup.com/services/170945/world-poll.aspx. X Stat SR. 2015. Statistical Office of the Slovak Republic. X IBNet. 2015. The International Benchmarking Network Accessed 2015. http://slovak.statistics.sk. for Water and Sanitation Utilities. Accessed 2015. http:// X World Bank. 2015. World Development Indicators. www.ib-net.org. Accessed 2015. http://databank.worldbank.org/data/ X ICPDR. 2015. International Commission for the views/reports/tableview.aspx. Protection of the Danube River. Accessed 2015. http:// www.icpdr.org. X MinV. 2015. Ministry of Interior of the Slovak Republic: Public Administration. Accessed 2015. http://www. minv.sk/?registre-evidencie-zoznamy-informacie-o- registracii. 12 | The Danube Water Program | WB & IAWD Slovakia Country Note The World Bank / IAWD Danube Water Program supports smart policies, strong utilities, and sustainable water and wastewater services in the Danube Region by partnering with regional, national, and local stakeholders, promoting an informed policy dialogue around the sector’s challenges and strengthening the technical and managerial capacity of the sector’s utilities and institutions. DANUBE WATER PROGRAM www.danube-water-program.org | www.danubis.org | SoS.danubis.org office@danube-water-program.org