Waters of Montenegro No. 2

Bolje Sestre - over the last 25 years the largest regional water supply project built in the Mediterranean and Southeast Europe.

BOLJE SESTRE WATER SOURCE

30 eminent international experts for karst areas have chosen to place Bolje Sestre water source on the World Karst Aquifer Map (WOKAM) of 150 most important karst springs, within the framework of the Worldwide Hydrogeological Mapping and Assessment Programme (WHYMAP).

IMPRESSUM PROFESSIONAL JOURNAL WATERS OF MONTENEGRO No. 2 I 22. march 2018.

PUBLISHERS: JP Regional Water Supply of the Montenegrin Coast, Budva Public Enterprise for Coastal Zone Management of Montenegro FOR THE PUBLISHERS: Goran Jevrić; Predrag Jelušić CO-EDITORS OF NO. 2: 1. Vladimir Taušanović 2. Aleksandar Krstić 3. Predrag Bjelobrković EDITORIAL BOARD: 1. Goran Jevrić, Director, Public Enterprise for Regional Water Supply of the Montenegrin Coast, Budva 2. Predrag Jelušić, Director, Public Enterprise for Coastal Zone Management of Montenegro, Budva 3. Prof. Dr Mićko Radulović, Full Professor, Faculty of Civil Engineering, University of Montenegro, Podgorica 4. Vladimir Taušanović, First Vice President of the Board of Directors, International Association of Water Supply Companies in the Danube River Catchment Area, Vienna, Austria 5. Prof. Dr Zoran Stevanović, Full Professor, Faculty of Mining and Geology, University of Belgrade, Belgrade 6. Academician Petar Vukoslavčević, Montenegrin Academy of Sciences and Arts, Podgorica 7. Stjepan Gabrić, Senior Environmental Infrastructure Specialist, the World Bank, Zagreb 8. Phillip Weller, Programme Coordinator IAWD, Vienna, Austria 9. Prof. Dr Zoran Veljović, Dean, Faculty of Electrical Engineering, University of Montenegro, Podgorica 10. Prof. Dr Mira Vukčević, Dean, Faculty of Metallurgy and Technology, University of Montenegro, Podgorica 11. Prof. Dr Igor Vušanović, Dean, Faculty of Mechanical Engineering, University of Montenegro, Podgorica 12. Prof. Dr Srđa Aleksić, Dean, Faculty of Civil Engineering, University of Montenegro, Podgorica 13. Prof. Dr Goran Sekulić, Full Professor, Faculty of Civil Engineering, University of Montenegro, Podgorica 14. Dragana Bjelobrković, Head, Utility Services Regulation Department, Regulatory Agency for Energy, Podgorica 15. Damir Gutić, Acting Director, Water Directorate, Podgorica 16. Dr Boban Mugoša, Director, Institute for Public Health, Podgorica 17. Vladimir Šimić, Member, Council for Water Services of the Republic of Croatia, Zagreb 18. Aleksandar Krstić, Project Manager, International Association of Water Supply Companies in the Danube River Catchment Area, Belgrade 19. Predrag Bjelobrković, Public Enterprise for Regional Water Supply of the Montenegrin Coast, Budva 20. Marijana Zenović, Public Enterprise for Regional Water Supply of the Montenegrin Coast, Budva 21. Ivan Špadijer, Public Enterprise for Regional Water Supply of the Montenegrin Coast, Budva LANGUAGE EDITORS: Snježana Avramović , Vesna Radunović (English language) DESIGN: Ana Đurković PHOTOGRAPHY: TO Žabljak, NTO, Public Enterprise for Coastal Zone Management, Dejan Kalezić, Freepic PRINTING BY: Golbi Ltd. COPIES: 1000

KONTAKT: THE EDITORIAL BOARD WOULD LIKE TO THANK NUMEROUS ASSOCIATES AND FRIENDS WHO PARTICIPATED IN THE CONCEPT DESIGN AND PREPARATION OF THIS PUBLICATION.

CIP - Каталогизација у публикацији Национална библиотека Црне Горе, Цетиње ISSN 2337-0084 = Vode Crne Gore COBISS.CG-ID 35241488

CONTENTS:

no. 2

MILUTIN SIMOVIĆ, MSc Deputy Prime Minister of the Government of Montenegro & Minister of Agriculture and Rural Development: EU water legislation and its implementation in Montenegro page 6 PREDRAG JELUŠIĆ, director of Public Enterprise for Coastal Zone Management of Montenegro Partnerstvo sa Regionalnim vodovodom page 8 PHILIP WELLER, Programme Coordinator IAWD from Vienna: Achieving improvement in water management and water utility services through regional cooperation

page 12

WORLD BANK: A state of the sector of water and wastewater services in the Danube region

page 16

WORLD BANK: Joining forces for better services?

page 20

RADOSLAV RALEVIĆ, EBRD banker: Regional water supply system as one of the Bank’s most successful projects in the region

page 24

HELMUT BLOECH, independent consultant and lecturer: Challenges and opportunities for Montenegro

page 26

WORLD BANK: Montenegro country note

page 30

ANDREA MANGANO, Hydraulic Engineer RENATO CONTI, senior counsel to business corporations Why the reform of water and wastewater services is urgent in the coastal region of Montenegro

page 36

VLADIMIR ŠIMIĆ, Senior Coordinator for EU Law in HRVATSKE VODE (Croatian Waters): Reform for the sake of reform or reform with a goal page 40

CONTACT: www.regionalnivodovod.me I vode.crnegore@regionalnivodovod.me I phone: +382(0) 33 451 921; +382(0) 33 451 460 I fax: +382(0) 33 451 937

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ANTONIO MASSARUTTO, DIES, University of Udine: Economic regulation of water and sanitation in Italy

page 44

LORENZO BARDELLI, Independent Regulatory Authority for Electricity Gas and Water (AEEGSI) The strange case of water regulation in Italy

page 46

PROF. DR MIĆKO RADULOVIĆ, PROF. DR ZORAN STEVANOVIĆ, MILAN RADULOVIĆ, GORAN JEVRIĆ: Protection of karst water sources in Montenegro

page 50

PROF. DR ZORAN STEVANOVIĆ: Challenges of water intake in the karst

page 52

PETER DANE, managing director of the EBC foundation: Learning from International Best Practices

page 58

PEER OVERGAARD PEDERSEN, ANDERS LYNGGAARD-JENSEN, FLEMMING HUSUM: Obtaining 150% electricity self-sufficiency at a wastewater treatment plant page 62 DR ALEKSANDAR ŠOTIĆ: Systemic approach to system management and system condition measuring system

page 64

ACTIVITIES OF THE REGIONAL WATER SUPPLY COMPANY: - Signing of the Memorandum of Understanding in Educational Cooperation between Regional Water Supply and University Donja Gorica

page 68

- EBRD Director for Central and South-East Europe of Charlotte Ryhe visiting Regional Water Supply

page 70

- EBRD Deputy Director for Infrastructure Lyn O’Grady visiting Regional Water Supply

page 72

- Bolje Sestre among 150 most important karst springs in the world under UNESCO and the International Association of Hydrogeologists

page 74

- Cooperation in the implementation of environmental management system between the Regional Water Supply and the Faculty of Mechanical Engineering, University of Montenegro page 76 - Public Enterprise for Regional Water Supply of the Montenegrin Coast (PEW) and Public Enterprise for the Coastal Zone Management signedthe Memorandum of Cooperation and the Co-editor Agreement of professional journal Waters of Montenegro

page 78

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Montenegro falls into

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4%

of the world’s territory with the highest average outflow.

Goran Jevrić Director of the Public Enterprise for Regional Water Supply of the Montenegrin Coast, Budva

Dear colleagues, Dear readers, The second issue of the professional publication VODE CRNE GORE (Waters of Montenegro) is in front of you. After a great reception of the first issue that was published in 2017 on the Day of the Regional Water Supply Company, 29 September, we particularly endeavoured not to let you down with respect to expected quality of the readings in it, but also with respect to, we believe, your curiosity regarding the direction in which this publication will move on, after the first issue...

As you are aware, number one issue was dedicated to the regional water supply system for the Montenegrin Coast as a TRANSFORMING PROJECT for Montenegro, with the wish to give our contribution to the marking of the tenth anniversary of the strategic decision and an absolutely reaffirmed vision of the Government of Montenegro to build a regional water supply system as a project of national importance for the growth the quality of life of citizens on the Montenegrin coast, and in order to create necessary environment for the accelerated growth of tourist industry, and consequently of the

entire economy of the country. In this context, it is important to remember that Bolje Sestre water abstraction structure is the largest regional water supply project built in the Mediterranean and Southeast Europe over the last 25 years, and that 30 eminent international experts for karst areas have chosen to place Bolje Sestre water source, which supplies high-quality drinking water of A1 class to​​ the Montenegrin coast, on the World Karst Aquifer Map (WOKAM) of 150 most important karst springs, within the framework of the Worldwide Hydrogeological Mapping and Assessment Programme (WHYMAP). The WOKAM project was established in 2012 by UNESCO and the International Association of Hydrogeologists (IAH) in order to enable sustainable global management of the most important water resources in the world.

Number two issue, thanks to its co-editors Vladimir Tausanović, Aleksandar Krstić and Predrag Bjelobrković, as well as eminent experts from the EU countries, the region and Montenegro, as authors of papers, is spreading thematically to various aspects of water uses, i.e. integrated access to water as a unique resource.

Due to its unique properties, water has been and

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BOLJE SESTRE WATER SOURCE

still is the subject of studying of various sciences: meteorology, hydrology, medicine, biology, ecology… However, despite (or due to) the strong development of science and technology, in the recent years our “Blue Planet” is facing a decline in and a growing vulnerability of water resources, whether we are talking about available quantities and quality of drinking water, water for food production, forestry, energy generation or about the quality of water in our seas, oceans, rivers or lakes. That is why establishing appropriate standards, protection and rules in the utilization of water resources is of critical importance for the future of mankind.

The second issue of the publication VODE CRNE GORE is therefore coming exactly on the World Water Day, 22 March, which we will mark this year in Žabljak, also in memory of 1991, when Montenegro adopted a Declaration in Žabljak proclaiming itself the first Ecological State in the world, as a sign of Montenegro’s vision of the importance of preserving the environment and nature as a whole.

Protecting and preserving water resources, providing availability and quality of drinking water and preserving the quality of seawater, are the key conditions for sustainability of the entire economic system of Montenegro, both from the aspect of hydropower resources and the fact that from year to year Montenegro becomes increasingly prestigious global tourist destination.

As much as 95.3 %of watercourses in Montenegro are formed within its territory.

“Montenegro, as hardly any other state in Europe, possesses exceptional water wealth, but our treatment of water as a very valuable and free gift of nature is often questionable. Bearing this in mind, we strive to direct the editorial concept of the journal VODE CRNE GORE to deal with various topics that will reflect numerous aspects of Montenegro’s water resources management in the context of regional, European and world experiences, ranging from technical, technological, ecological, to socio-economic ones, and to make it available to a wider range of professionals as well as lay public.” This is a quotation from the foreword to the first issue which absolutely deserves to be repeated, because these were the premises on which we have established an important partnership with the Public Enterprise for the Coastal Zone Management (Morsko Dobro) from Budva in the creation of the concept of future contents of Waters of Montenegro.

Therefore, on behalf of the editorial board of the professional journal Waters of Montenegro, the Public Enterprise for the Regional Water Supply of the Montenegrin Coast and the Public Enterprise for Coastal Zone Management, let me thank the co-editors, experts and officials, our proven friends from a number of renowned institutions and international organizations who, by their papers and expert suggestions, have decisively contributed to making this journal continue to fulfil its mission in an extremely comprehensive and above all high quality way.

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Milutin Simović, MSc Deputy Prime Minister of the Government of Montenegro & Minister of Agriculture and Rural Development

EU water legislation and its implementation in Montenegro “Only what is rare is valuable; and water, which is the best of all things, is also the cheapest“ ( Plato, 427-347 B.C. ) Water resource management implies an obligation to enact laws and implement them in the interests of sustainable use of water resources. Montenegro, as a candidate country for full membership in the European Union, must meet most of the obligations from Chapter 27 - The environment, before membership. The water sector, as part of Chapter 27, is the most demanding and most complex one with regard to the preservation of good water status and the bringing of water to good status in parts where it is disturbed.

The document that regulates water management is the Water Framework Directive. The Water Framework Directive (2000/60/EC) is a basic legal act in the field of water management at the EU level.

Starting from the primary objective of the Water Framework Directive “to ensure good water status”, this Directive regulates all water management mo-

dalities. The Water Framework Directive was adopted by the European Parliament and the Council of the European Union on 23 October 2000. The Directive came into force on 22 December 2000.

The key objectives of the EU policy contained in the Water Directive are: - Comprehensive water protection – which means the protection of all waters by applying the principle of integrated water resource management: surface waters, groundwater, mixed waters and coastal waters.

- Integrated river basin management - implies coordinated river basin management with established monitoring (monitoring of chemical and biological characteristics of waters as well as quantitative characteristics of waters). Even in the case of cross-border flows, it is necessary to establish coordinated monitoring and information exchange at the cro-

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ss-border river basin level.

- Proper pricing – by applying the polluter pays principle, the user pays and full cost recovery - Public involvement - represents regular information, consultation and transparency.

By adopting the Law on Amendments to the Law on Waters in 2015, Montenegro has made a significant step forward in the transposition of EU legislation in the field of water quality, primarily the Water Framework Directive, with about 95% of the Directive being transposed.

With an average outflow of 44 l/s/km2, Montenegro falls into 4% of the world’s territory with the highest average outflow. According to its water balance, Montenegro is at the very top of Europe. Bearing in mind the fact that as much as 95.3% of the watercourses are formed on the territory of Montenegro, it can be said that water is the largest natural resource of Montenegro. About 2/3 of the territory

of Montenegro belongs to the karst of Southeastern Dinarides. Karstic terrains provide a large number of sources of different capacity. The favourable geographical position and hydro-ecological conditions, the existence of a large number of sources with very good chemical and biological parameters, environmentally untouched and protected territory guarantying water quality, confirm the richness of Montenegro in drinking water.

The main feature of the hydrography of Montenegro is the existence of two approximately equal catchment areas: the Adriatic (about 47.5% of the area of Montenegro) and the Danube catchment (about 52.5% of the area of Montenegro). Significant rivers of the Danube catchment (according to the new Law on Waters, OGM 48/15) are: the Piva, the Tara, the Cehotina, the Lim and the Ibar Rivers. The most important watercourses of the Adriatic basin are: the Moraca, the Zeta, the Crnojevica and the Cijevna Rivers, which gravitate towards the Skadar Lake from which the Bojana River flows into the Adriatic Sea. The Ministry of Agriculture and Rural Development, as the line ministry for the area of water management, works with full capacity to improve the water monitoring and the overall water status, as well as to ensure the implementation of the EU Water Framework Directive. Preparation of the Adriatic and Danube River Basin Management Plans is under way, and they will define the ecological and chemical status of surface and groundwater, as well as the establishment of the Water Information System (WIS).

I invite you to return, for a moment, between 2,365 and 2,445 years back into the past and truly accept the message of Plato, convinced that it has the same meaning in the present time:

THE DANUBE AND ADRIATIC CATCHMENTS

“ALL WE NEED TO DO IS MAKE OUR PLANET REMAIN BLUE”.

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Predrag Jelušić director of Public Enterprise for Coastal Zone Management of Montenegro

Partnership with Regional Water Supply Today, as a prerequisite for an efficient management of the coastal zone, we also see the operation of the Regional water supply system regulating the system for improving the conditions for water supply of all six coastal municipalities from Ulcinj to Herceg Novi. In the last 10 years, adequate water supply of the Montenegrin coast has contributed to the significant improvement of the quality of life of the population as well as the comfort of an increasing number of tourists and visitors.

Thus, the value of the professional journal Waters of Montenegro motivated us to become partners with the Regional Water Supply.

The role of the Public Enterprise for Coastal Zone Management of Montenegro, through its responsibility in monitoring the sea water quality and preserving the entire biodiversity of this part of the Adriatic, caring for torrent streams in the coastal zone that contribute to the replenishment and preservation of Montenegrin beaches, and creating preconditions for the quality use of the bathing

infrastructure – is an inevitable topic when talking about a precious natural resource - water.

It is also an important segment and an integral part of the projects and programs that we are implementing to improve the standards of the entire coastal zone.

Since 2003, the Montenegro’s Public Enterprise for Coastal Zone Management has been a general sponsor and, together with the NGO ECOM, an organizer of the prestigious international program “Blue Flag”, which is assigned to beaches and marinas on an annual basis. The Blue Flag program promotes high standards in four areas: quality of sea water, services and safety on beaches, environmental standards as well as education and information on ecological values. To be assigned a Blue Flag, 32 prescribed criteria have to be met, including permanent and high quality water supply, as the basis for the provision of tourist services and the use of beach infrastructure. Today, 25 Montenegrin beaches and one marina (Marina Bar) have Blue Flags, while in 2018 we expect this number to exceed 30.

The quality of sea water at the Montenegrin beach-

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es is monitored by the Public Enterprise in cooperation with the Institute of Marine Biology of Kotor, every season from May to October in fifteen-day intervals at 100 locations along the Montenegrin coast. The results so far indicate that the sea water is of extremely high sanitary quality - K1 class in 90% of the bathing areas, and the tourists and swimmers may find daily information and updated data on the sanitary quality of sea water on Montenegrin beaches on the website of the Public Enterprise for Coastal Zone Management (www.morskodobro.com).

In addition to these data, from 2017 the same website offers a possibility to monitor in real time the air temperature, the sea temperature and salinity thanking to “smart buoys” that the Public Enterprise set up in Bar, Budva and Kotor. This project was designed and made in Montenegro, through the cooperation of the company Amplitudo d.o.o. from Podgorica, BIO ICT Institute and the School of Electrical Engineering from Podgorica.

Through the cooperation of Public Enterprise for Coastal Zone Management with the School of Civil Engineering, Architecture and Geodesy, of the University of Split, the Baseline Studies for the Revitalization of the Mogren, Przno, Petrovac and Sutomore Beaches were completed at the beginning of the year. On the basis of previous geological and hydrological studies of the areas concerned, the Baseline Studies offer conceptual solutions for the protection of these four beaches from erosion as well as applicable models of their natural nourishment and survival. One of the offered beach preservation models is the detailed rehabilitation and re-direction of torrent streams and waters that infiltrate the material and replenish the sandy and gravel beaches.

Through cooperation with the Faculty of Maritime Studies from Kotor, Public Enterprise for Coastal Zone Management has conducted a Study of Nat-

ural Conditions for the Formation of Nautical Anchorages (buoy mooring) in the Tivat and Budva Bays. The Public Enterprise, as the orderer of this study, had the intention to examine the prerequisites for the formation of nautical anchorages on the busiest locations in the Budva and Tivat bays, based on comprehensive bathymetric, meteorological and other researches, with the aim of better organization of up to 50-m vessels anchoring.

Our intention is to present these and many other topics related to the activities of Public Enterprise for Coastal Zone Management through the next issues of “The Waters of Montenegro” to the professional, but also to the lay public, as models of continuous improvement in managing the coast, aquatorium and saline water resources.

Through mutual cooperation with all relevant institutions, among which the Regional Water Supply Company for the Montenegrin Coast has a key role, we are continuing to work on providing the conditions for the development of the entire tourist industry of the Montenegrin coast.

The results so far indicate that the sea water is of extremely high sanitary quality K1 class in 90% of the bathing areas.

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Only

1%

of drinking water is easily accessible to people.

Water covers about 71 percent of the surface of our planet, but only two and a half percent of all water resources is drinking water.

WATERS OF MONTENEGRO NO. 2

COVER STORY:

A vision for sustainable water and wastewater management in Southeast Europe - A state of the sector and the reform challenges

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The Danube Region is the most international river basin in the world. Nineteen countries, including Montenegro.

Philip Weller Programme Coordinator IAWD from Vienna

ACHIEVING IMPROVEMENT IN WATER MANAGEMENT AND WATER UTILITY SERVICE THROUGH REGIONAL COOPERATION Philip Weller is an environmental planner by training and since July 2013 has been serving as the Danube Water Program Coordinator for the International Association of Water Supply Companies in the Danube River Catchment Area (IAWD), administering and managing a joint project together with the World Bank aimed at improving and supporting the efficiency of Danube region water supply and waste water companies. Philip previously served for 10 years as the Executive Secretary of the (ICPDR) International Commission for the Protection of the Danube River. The ICPDR is the forum for the 14 major Danube countries and the European Commission to implement the commitments they have made under the Danube River Protection Convention. Philip has worked for the World Wide Fund for Nature (WWF) as Danube Carpathian Program Director and has also managed successful consulting businesses in both Canada and Austria and has done numerous assignments for governments and international organizations. Philip is author of three books on environmental topics including ‘Freshwater Seas, an environmental history of the Great Lakes of North America’.

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The Danube region is the most international river basin in the world. The nineteen countries, including Montenegro, which make up the region are bound together by water – the Danube and its many tributaries.

River Basin Management Plans , the compliance with the Urban Wastewater Treatment Directive is one of the most significant and expensive obligations required under EU law. For countries joining the EU in the early wave of Accession (Hungary, Slovakia, or Slovenia) this commitment to provide strict wastewater treatment proved to be one of the greatest challenges.

Joining the EU has both obligations and benefits and the costs of meeting the obligations for water pollution control have necessitated the building of waste water treatment facilities that previously did not exist or were ineffective. This construction has taken place at a rapid rate in the new member countries. Fortunately, funding is available from the EU to support this process of badly needed waste water management. The challenge of building this infrastructure is significant and requires both engineering capacity and water sector reform to ensure the long-term sustainability of the infrastructure and the funding necessary to maintain it. For the potential new member countries to the EU the lessons learned from countries such as Croatia, Slovenia, Bulgaria and Romania are helpful in understanding

As is well known, the region has historically been divided between east and west by the iron curtain.

In recent years, however, important initiatives and developments have brought the countries of the region closer together and created new opportunities for cooperation – including cooperation in water management. Central in the drive to strengthening the cooperation around water in the region has been the expansion to the east and south of the EU. The main EU legislation related to water is the EU Water Framework Directive. It is one of the most progressive pieces of legislation on water worldwide and encourages the management and protection if water based not on national or political boundaries but on natural geographical and hydrological formations, the river basins. The countries, which share the Danube basin, must cooperate, if they are to fulfil the obligations of the Directive (for EU member states a must). The Directive also supports the notion of the MAY 2017 VIENNA full cost pricing of water services.

MEETING OF THE ASSOCIATION IAWD DURING WHICH THE REGIONAL WATER SUPPLY WAS In recent years, the EU has slowly SELECTED AS A FULL-TIME MEMBER moved further to the Eastern Europe and has taken on new member states, which have fully adopted the EU laws. Other candidate countries such as Serbia, Montenegro or Macedonia are all working towards setting up and legal and institutional framework for joining the EU. This accession process has important implications for water services and water management.

In addition to the preparation of

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16 and preparing for the challenges ahead.

Fortunately, there are institutions and arrangements at the regional level that are supporting this knowledge sharing and cooperation in improving water services and management. The International Commission for the Protection of the Danube River (created based on the Danube River Protection Convention) has been one of the key institutions supporting exchange and cooperative action in water. Similarly, the Sava Commission, formed to unite the countries of the Sava, in river basin management combining water protection and service with economic development has played an important role.

Since 1993, the International Association of Water Supply Companies in the Danube River Catchment Area (IAWD) is another important player in the region (www.iawd.at). Founded short after the fall of the iron curtain, IAWD’ s premier goal is to act a s the voice of water utilities in the region. After the successful delivery of the IWA World Water Congress in Vienna in 2008, the year 2013 marked the beginning of a new era for IAWD and the water sector in the Danube region. A major capacity building program fostering knowledge exchange and strengthening the capacity development in the region’s water sector was launched – The Danube Water Program. The program jointly managed by the World Bank and IAWD and funded by the Ministry of Finance of Austria has operated under the slogan of Smart Policies, Strong Utilities and Sustainable Services and has brought together people from water utilities, local governments, regulatory and national policy and government representatives to share experience and strengthen the sector.

One of the key forums for this exchange has been the annual Danube Water Conference which has been held for the past five years in Vienna, Austria and involved since then more than 700 key experts from different types of organizations involved in wa-

ter sector. Furthermore, almost 100 specific events and workshops supported by the Danube Water Program have also taken place throughout the region including a recent workshop on Waste Water Management in the Danube river basin organized in Bucharest involving representatives from nearly every Danube country (further information on this event can be found at www.danube-water-program. org/pages/events/2017/ww-workshop-icpdr.php).

One of the important tasks of the program has been to ensure that sound and up-to-date information about water services is available. At the end of 2015 a State of the Sector report was prepared documenting the condition of water resources and water services in the countries of the region (sos.danubis. org). Nowhere else in the world has such a comprehensive regional assessment been undertaken. An updated version of the report including three additional focus notes on (i) WSS service delivery in rural areas , (ii) Utility cost efficiency frontier and (iii) Gender balance in WSS utilities and jobs will be released end of this year. The State of the Sector combined with very positive work the ICPDR has done to create a River Basin Management plan through cooperative actions of all Danube countries has meant that the information base about the region’s water sector has improved significantly.

A central activity of the Danube Water Program has been the substantial effort to encourage water utilities to collect information about their operations and to compare this with other utilities as a basis for learning about how they can improve.

Under the framework of the Utility Benchmarking Program specific Hubs have been set up based on language to share and compare information about utility performance from over 60 utilities that have joined the program. In 2018, the program has been expanded to create a Danube Hub that is comparing some of the larger utilities throughout the region and providing opportunities for them to dis-

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cuss and share information about improving their service (www.d-leap.org/d-leap/the-danube-hub).

The work on Benchmarking has also allowed the utilities to more easily provide data to national governments that have helped them with tariff setting and planning the management of water services. The collection of performance data of a water utility is the basis to improve its performance on those areas where the data shows that improvement is possible. In order to support this, IAWD together with national water utility associations in the region and supported by the Danube Water Program have initiated the Danube Learning Partnership (D-LeaP), which is a regional, integrated and sustainable capacity building initiative to provide a comprehensive curriculum to the staff of water and wastewater utilities located in the region (www.d-leap.org).

The idea for D-LeaP was born through the IAWD Roundtable, a discussion forum for national water utility associations in the region, The Roundtable members felt the strong need to offer capacity building for utilities in topics such as Energy Efficiency, Asset Management and Commercial Efficiency. Because most of the countries of the region are relatively small, it was agreed to prepare a set of capacity building programs that are developed at regional level and delivered at national level by water utility associations and local partners (the Hubs) in national language Utilities participating in the programs are expected to pay for their participation thereby ensuring the resources to maintain the program.

This unique transboundary initiative of water utility associations, provides hundreds of utilities in the region access i to well-structured and efficient training programs to improve their service delivery.

One of the key challenges in the region is to ensure that the funds generated from tariffs are sufficient

FIGURE 1: D-LEAP PROGRAMS

to maintain and improve service. By reducing costs through the implementation of energy efficiency measures or sound asset management as well as increasing revenues by improving the commercial fficiency, utilities can be strengthened to effectively meet the new challenges.

In addition to the program of IAWD focused on water utility improvement another large regional initiative, RCDN supported by the Swiss and German Government, is trying to strengthen the cooperation between the owners of water services (municipalities) and the water utilities. The project focused on the Western Balkans is another of the important initiatives focusing on cross-border and cross-sectoral cooperation in water management.

The future of the water sector including good river basin management and sustainable water service delivery are dependent on continued strengthening of the types of cooperations listed above. Only through sharing and learning from one another in this very diverse region can water resources be protected and the necessary services of water supply and waste water management be provided.

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A STATE OF THE SECTOR Water and Wastewater Services in the Danube Region

This work is a product of the staff of the World Bank, with external contributions. This report was prepared by a team led by David Michaud and comprised of Stjepan Gabric, Kirsten Hommann, and Anastasia Shegay. David Michaud is the Practice Manager for Water in Europe, Central America and Haiti at the World Bank’s Water Global Practice. In his current position, he oversees the World Bank’s water portfolio and staff in those regions.

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State of the Sector was prepared under Danube Water Program, as it flagship study. The Danube Water Program began in May 2013 with the intention to support policy dialogue and capacity development to achieve Smart Policies, Strong Utilities, and Sustainable Services in the water supply and wastewater sector in the Danube Region. The program jointly run by the World Bank and IAWD, the International Association of Water Supply Companies in the Danube Catchment Area, was created with funding from the Government of Austria.

The State of the Sector report analyzes the progress and challenges of 16 countries in the Danube watershed in delivering sustainable water and wastewater services to all, while meeting the Europe-

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an Union environmental acquis communautaire.

After putting the services that are being delivered into context, the report analyzes the organization of services in the region and the level of access to services, that is, how well countries are doing in terms of providing access to water and wastewater services for the entire population. It then looks at the performance of the sector, including the quality of services provided and customer satisfaction with it. It also draws a picture of the efficiency of services, including whether they reflect accepted good practices. Finally, it analyzes the financing of services, looking at whether the financing of operation, maintenance, and investments is secured and affordable. The report is complemented by 16 country notes available at SoS.danubis.org.

COUNTRIES COVERED IN THE REGIONAL STATE OF THE SECTOR REPORT SOURCE:AUTHORS’ ELABORATIONS

While provision of these services in most countries remains a responsibility of local governments, policy trends in this area in the context of EU accession increasingly lead to greater regulatory and institutional oversight by the central government, which points to the need for clear accountability mechanisms.

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The year 2013 marked the beginning of a new era for IAWD and the water sector in the Danube region. A major capacity building program fostering knowledge exchange and strengthening the capacity development in the region’s water sector was launched - the Danube Water Program.

The report draws largely from existing public data sources at the national and regional level, and consolidates them into a coherent, regional narrative and analysis. The methods of analysis include horizontal comparisons among countries at a given point in time and trends within the countries or the region over a given period of time. Given shortcomings in the availability and comparability of data across 16 countries, the report seeks to encourage and inform a policy dialogue around sector challenges rather than provide a definitive set of policy recommendations.

Most of the Danube catchment area has shared a common trajectory over the last 30 years, and the development of water and sanitation services has broadly followed a similar process of transformation—one driven mainly by two major politico-economic processes—the fall of communism and European Union (EU) integration.

Despite different challenges, the region can still build on a few important opportunities. Recent

history has shown that the water and wastewater sector is open to change, and if those governments, considering reforms in around a third of the countries, base their efforts on solid analyses, they can continue to build positive momentum for the sector. EU integration continues to present a tremendous policy and financing opportunity for many countries; the widespread adoption of formal regulatory frameworks and utility corporatization reforms can help promote greater accountability; and despite managerial shortcomings, the sector has a strong technical workforce. The report also shows the need for further work to be done in response to some of the challenges identified and where the current information available was too limited to draw clear conclusions. Examples for further analyses include developing models to provide sustainable services in areas beyond the reach of public utilities, addressing potential affordability challenges through well-targeted subsidies, and/or improving the financing and institutional framework for wastewater treatments in those countries with no or limited prior experience.

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A STATE OF THE SECTOR - WATER AND WATEWATER SERVICES IN THE DANUBE REGION AVAILABLE AT: www.sos.danubis.org/eng/download

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JOINING FORCES FOR BETTER SERVICES? - When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together

This work is a product of the staff of the World Bank, with external contributions. This report was prepared by a team led

by David Michaud and comprised of Maria Salvetti, Carlos Diaz, Gustavo Ferro, Michael Klien, Berenice Flores, and Stjepan Gabric. David Michaud is the Practice Manager for Water in Europe, Central America and Haiti at the World Bank’s Water Global Practice. In his current position, he oversees the World Bank’s water portfolio and staff in those regions.

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INTRODUCTION The recently adopted Sustainable Development Goals (SDGs) set an ambitious agenda of providing universal access by 2030 to safely managed water supply and sanitation (WSS) services. Policy makers and sector practitioners know that the SDGs will be achieved only if service providers can provide better services at a lower cost. Yet, in the last decades, policy approaches to structuring service delivery at the right level have been conflicting: some countries have chosen to consolidate service provision centrally, hoping for greater professionalism and economies of scale, whereas others have chosen to decentralize and empower local governments in the hope that more local accountability would provide strong incentives for good services.

To reconcile those two apparently contrary trends, an increasing number of countries and local governments are turning, with varying degrees of success, to the aggregation of local utility companies.

Making utilities work together has been regarded as an opportunity to improve the cost efficiency and performance of service providers, thus making them more sustainable. There is ample empirical evidence in the literature on the existence of economies of scale in the WSS industry, at least up to a certain level. Furthermore, it seems that large utilities tend to operate at a lower unit cost and perform better than smaller ones. For instance, Abbot and Cohen (2009) found that significant economies of scale exist in the WSS industry. More recently, in a study analyzing the performance of WSS utilities in Africa, Van Den Berg and Danilenko (2015) found that size matters in achieving good performance. Two recent analyses based on IB-Net data for utilities in the Danube region (Klien and Michaud 2016) and in the Latin American and the Caribbean Region (Diaz and Flores 2015) showed lower unit costs for larger utility companies. These

studies compare utilities serving cities of different sizes. It is not clear when the same scale effects are achieved by grouping a number of noncontiguous providers into a single, larger, provider. Many utility companies and countries embarking on such an aggregation processes have found that those benefits do not always materialize in practice and that the accompanying processes are arduous and fraught with political challenges.

A GLOBAL STUDY ON THE AGGREGATION OF WATER SUPPLY AND SANITATION UTILITIES This global study was initiated to provide evidence-based guidance to policy makers and practitioners regarding when, why, and how water and sanitation utilities can work together (“aggregate”) to successfully deliver specific policy outcomes, such as better services or lower costs. This work does not advocate for or against aggregations but rather presents and reviews global evidence, analyzes specific aggregation case studies, and identifies the key characteristics that successful aggregations have in common, depending on their purpose and the context in which they occur. Acknowledging that it is challenging to make “before aggregation” and “after aggregation” cost comparisons because the levels of service are changing, this work focuses on proposing recommendations for successful aggregation, shaping lessons learned into a checklist of key questions to ask, and pointing out key decision points. The recommendations are based on evidence and observed experiences rather than theoretical considerations and sometimes run counter to conventional wisdom on aggregation practices.

This study consists of a review of literature and an analysis of both qualitative and quantitative evidence—including a statistical analysis based on IB-Net data covering 1,306 utilities from more than 140 countries; a review of global aggregation trends,

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24 collecting data for 111 countries; and 14 case studies from seven countries, providing a deep dive narrative of aggregation experiences.

AGGREGATION TYPOLOGY Expanding on the work done in World Bank (2005), this report postulates that the design of a successful aggregation should consider both the intended purpose and the context in which it takes place, and characterizes the design of an aggregation as a function of its scope, scale, process, and governance. This report defines a successful aggregation as one in which the aggregated service provider performs significantly better than the previously disaggregated entities with regard to the intended purpose, without unacceptable deterioration of other performance dimensions (figure ES.1)

UNDERSTANDING WHY SUCCESS DOES NOT ALWAYS MATERIALIZE There can be many reasons why an aggregation is not successful. Despite the potential for economies of scale, one-off or long-term transaction costs can prevent these economies from appearing. Aggregation also has possible drawbacks, such as a loss in accountability and political reluctance, which may hamper the process, blocking it before it takes off or damaging it after launch. Clustering service areas increases the distance between the service provider and the end user. Salaries of employees in the agglomerated unit may be adjusted to reflect those of the highest-paying utility, which increases operating costs without necessarily creating equivalent efficiency gains. Lack of political will in aggregation reforms can arise when local authorities perceive such reforms as threats to their sovereignty.

Aggregations also make organizations more complex because the numbers of systems, employees, and processes can increase substantially. In addition, utility ownership — in the sense of the allocation of decision and control rights — tends to become more opaque. Instead of a single owner, several municipalities or regional entities share ownership or sign a lease agreement with a utility.

Such fragmentation of control and decision rights can produce significant transaction costs.

In summary, although serving a larger number of customers has organizational advantages in the production process — which can materialize as economies of scale in lower unit costs or improved performance — greater size also implies higher transaction costs. This being said, it is important to bear in mind that the outcome of a given aggregation should be measured primarily against its original purpose, which might or might not involve economic efficiency. In some cases, it might be necessary to accept a permanent transaction cost or change in cost structure in return for an important externality; for example, a cross-subsidy between low- and high-cost service areas or an environmental benefit.

In spite of the overall high level of accessibility of these services in the Danube basin region and focus on waste water collection and management, there are still around 22.5 million people without access to water from public water supply in their homes, and 28 million people without flush toilet in the household.

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26

Radoslav Ralević EBRD banker

REGIONAL WATER SUPPLY SYSTEM as one of the Bank’s most successful projects in the region

Radoslav Ralevic is a banker in the EBRD office in Podgorica, and the leader of the Regional Water Supply Funding Project. During the eleven years in the EBRD, Radoslav has led a dozen private enterprise funding projects with a total value of over 30 million euros and eight projects in the public sector with a total value of over 15 million euros. Mr. Ralevic completed his MA in Public Administration and Public Finance at the University of Pennsylvania, Philadelphia.

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Starting from the fact that tourism is the main sector in Montenegro, providing safe and uninterrupted water supply for the coastal region was of strategic importance for the country, and in the period from 2006 to 2010 the European Bank for Reconstruction and Development (EBRD) provided four tranches of a loan for the construction of the regional water supply system in the total amount of 18 million euros. The regional water supply project was also in line with the Bank’s business policy in the area of local infrastructure and environmental protection, which stated: “the ability of a country to provide efficient infrastructure and services at the local level is an important factor for the development of the private sector economy.” In addition to funding, the Bank provided a consultant to support the project implementation, Scott Wilson Ltd from the UK. The consultant has successfully completed his assignment comprising FIDIC contract management, expert supervision of works, programming and monitoring of progress and counselling and training of the financial department of the project implementation unit in the area of accounting and project reporting (implementation of IAS and IFRS), as well as financial reporting on the project, cash flow forecasts and payment procedures in accordance with the procedures and requirements of the EBRD. On behalf of the team of the Bank that worked on the project, I can confirm that the cooperation with the Regional water supply company management team was at an extremely high level.

Eight years after the last tranche, it can well be said that it is one of the best Bank-financed projects, not only in the country but in the region. Namely, in addition to providing sufficient quantities of water to all coastal municipalities, which is a prerequisite for the development of any tourism in this area, the regional water supply project fulfilled almost all conditions related to the improved impact on the

transition, which is a necessary item in the EBRD projects.

Regional water supply system has already become one of the most efficient state-owned enterprises with ever-increasing financial results. The company improves its financial indicators from year to year, such as profitability, financial debt to EBITDA (profit before interest, taxes and depreciation), current ratio and others. The existing management of the Regional Water Supply Company managed to fully recover the financial situation through a significant increase in the quantities supplied by local waterworks, efficient control of its costs, and the refinancing of the non-hedged dollar loan provided by the Abu Dhabi Development Fund. If the trend of improving the financial situation continues, the Company could borrow in the future without government guarantees.

In addition to financial support, in 2016 and 2017, the EBRD provided technical support for the reform of the water supply sector on the Montenegrin coast. If the proposals of the consultant and the efforts of the Company’s management are applied, I believe that the efficiency of the entire sector, and the availability and quality of water supply on a significant part of the coast will be significantly improved. Accordingly, the EBRD is ready, in cooperation with Regional Water Supply Company and the Government of Montenegro, to consider further financing of the development of the water supply network on the Montenegrin coast.

Smaller, less complex aggregations and aggregations of companies that have already served a number of cities have more chances to make cost savings.

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28 Helmut Bloech independent consultant and lecturer

EU water legislation within chapter 27 of EU legislation

CHALLENGES AND OPPORTUNITIES FOR MONTENEGRO Helmut Bloech was born in Vienna, Austria.

University education: Vienna Technical University, Vienna School of Business; MSc 1971 (Chemical Engineering), PhD 1973 Professional career: 1971-1973: Scientific work at Vienna Technical University.

1974-1994: Government of Lower Austria (spatial planning, environment and water management). 1994-2011: European Commission, Directorate General Environment: responsible for development and implementation of EU water policy and legislation, including Water Framework Directive and Directives on waste water treatment, drinking water, bathing water and flood risk management.

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MONTENEGRO ACCESSION PROCESS PRINCIPLES AND STATE OF PLAY

EU environmental acquis which needs to be fully implemented by the date of accession, including directives on impact assessment, public participation in decision-making, and access to information on environmental matters; Waste legislation - management of municipal, industrial and hazardous waste presenting significant challenges. In the past, certain transition periods have been enshrined in Accession Treaties to allow for additional time after accession, not least for the necessary upgrading of management systems and considerable investment in landfills; Water legislation - major investments required in particular for waste water collection and treatment systems, and to a minor extent for achieving drinking water quality standards.

However, similar to many national legislative frameworks, not all water-related legislation in listed under chapter 27 (environment): As an example, legislation on phosphorus-free detergents (crucial for combating eutrophication of rivers, lakes, and regional seas) is part of chapter 1 (free movement of goods).

Forthcoming accession negotiations on water legislation: gaps to close on legal transposition; plausible plans for implementation; and transition periods within the Accession Treaty.

1. Montenegro accession process - principles and state of play Principles of the accession process The ‘acquis’ is the body of common rights and obligations that is binding on all the EU member states.

It is constantly evolving and comprises: - the content, principles, and political objectives of the Treaties; - legislation adopted pursuant to the Treaties, and the case law of the Court of Justice; - declarations and resolutions adopted by the Union; - instruments under the Common Foreign and Security Policy; and - international agreements concluded by the Union and those entered into by the Member States among themselves within the sphere of the Union’s activities.

Candidate countries have to accept the acquis before they can join the EU and make it part of their own national legislation and practice. Adoption and implementation of the acquis are the basis of the accession negotiations.

The last enlargement negotiations leading to the accessions of 2004 (Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia), 2007 (Bulgaria and Romania) and 2013 (Croatia) have demonstrated that in the process of aligning with the EU environmental acquis, a number of environmental sectors and issues can be problematic in terms of resources needed and modes of implementation. Those with a specific water-relevance include: Horizontal legislation - a cross-sectoral part of the

STATE OF PLAY OF THE ACCESSION PROCESS Following Montenegro’s application for EU membership and the EU Council’s decision of opening negotiations in December 2011, negotiations started in June 2012. As of December 2017, such negotiations have already covered 30 out of a total of 35 chapter required; - three of these 30 chapters have already been provisionally finalised: chapter 25 (science and research), chapter 26 (education and culture), and chapter 30 (external relations), - Negotiations on five chapters (including environment and climate change, which covers the water sector still have to start, pending assessment of progress made in preparation.

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30 Looking at water legislation under chapter 27 (environment and climate change), negotiations between Montenegro and the European Commission have not yet been opened, with the Montenegrin Negotiating Position currently being finalised (source: Montenegrin Ministry of European Affairs; European Commission, January 2018).

The European Commission regularly reports on progress of accession negotiations, which presents an assessment of the state of play for the candidate country, describes achievements since the last report, and sets out guidelines on reform priorities.

Forthcoming accession negotiations on water legislation: Gaps to close on legal transposition; plausible plans for implementation; and transition periods within the Accession Treaty.

Looking at the documents available through the Montenegrin Ministries for European Affairs and Sustainable Development and Tourism, there appears to be a high level of preparedness in terms of data as well as cost assessments and gap analyses.

To recall, the latest Commission Report on Montenegro of November 2016 concluded that “the level of alignment on water quality is limited”.

Gaps identified within the draft National Strategy are: on the one hand gaps in legal transposition, meaning in converting European legislation into Montenegrin legislation, andon the other hand gaps in practical implementation.

Given the level of awareness and knowledge within the Montenegrin Ministries, closing the gaps in legal transposition should be possible within a reasonable time frame, thus paving the way to have one crucial precondition for closing chapter 27 on ‘water’ complied with. As regards practical implementation measures, two distinctly different challenges arise:

27 CHAPTERS: NEGOTIATION OPENED & ONGOING 5 CHAPTERS: NEGOTIATION NOT YET OPENED 3 CHAPTERS: PROVISIONALLY FINALISED

- Firstly, setting up administrative structures and monitoring systems, and enhancing capacities e.g. for adequate operation and maintenance of existing and future infrastructure such as water supply and waste water systems; and - Secondly, planning and construction of largescale infrastructure to address e.g. the gap between currently 60% coverage in waste water collection and 15% in waste water treatment, and the Strategy targets of 33 to 95% by 2025 and 80 to 95% by 2035 (% figures depending on the size of the municipalities).

The logical consequence, not least in line with the Accession Treaties for the countries which joined the EU in 2004, 2007 and 2013, will be the negotiation of transition periods and deadlines. To be considered in this context for guidance are the precedents both for the original countries adopting the Urban Waste Water Treatment Directive (point 1), and for consecutive enlargements of the Union (points 2 to 5): 1. When the EU of (then) 12 Member States adopted the Urban Waste Water Treatment Directive, it

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decided on staged implementation deadlines for having the waste water collection and treatment infrastructure operational, linked to the size of the ‘agglomerations’ and the characteristics of the affected waters: 7½ years (31.12.1998) for compliance for agglomerations >10000 population equivalents discharging into the catchment of sensitive areas; 9½ years (31.12.2000) for compliance for agglomerations >15000 population equivalents discharging in waters outside the catchment of sensitive areas; 14½ years (31.12.2005) for compliance for all other agglomerations within the scope of the Directive.

2. Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia joined the EU in 2004 received staged transition periods not exceeding 31.12.2015.

3. Bulgaria and Romania (accession 2007) received staged transition periods until 2015, in the case of small agglomerations in RO until 2018.

4. Croatia (accession 2013) received staged transition periods until 2023.

5. Mayotte (now department of France, EU law applies as from 1.1.2014) received staged transition periods until 2027, with the implementation programme due by 2014, i.e. the date of application of EU law.

Similar considerations on transition periods for major infrastructure apply to the Drinking Water Directive within already existing water supply zones, e.g. exchanging lead pipes in public supply systems to ensure the required low level of lead in drinking water (10 micrograms per litre), upgrading the level of necessary treatment etc.

Precedents to be considered as guidance both for the original countries adopting the two Drinking Water Directive , and for consecutive enlargements of the Union are: 1. When the EU adopted its first Drinking Water Directive in 1980, a deadline of 5 years was set

In addition to financial support, in 2016 and 2017, the EBRD also provided technical support for the reform of water supply sector on the Montenegrin coast.

for complying with all provisions. For the second Drinking Water Directive in 1998, again a deadline of 5 years was set to comply with newly introduced provisions; in the case of the drastically lowered parametric value for lead, the staged deadline was set at 5 and 15 years respectively. Both Directive allowed an option for extending the deadline for a maximum of 3 years in the case of exceptional circumstances, subject to formal Commission assessment under Comitology procedure.

2. Estonia, Hungary, Latvia and Malta joined the EU in 2004 and received staged transition periods for certain parameters and certain groups of water supplies, not exceeding 31.12.2013.

3. Romania joined the EU in 2007 and received staged transition periods for certain parameters and certain groups of water supplies, not exceeding 31.12.2015.

4. Croatia joined the EU in 2013 and received staged transition periods for certain parameters and certain groups of water supplies, not exceeding 31.12.2019.

CONCLUSION Given the awareness and knowledge within the Montenegrin Ministries with preparatory work already done or outlined for the near future, is appears plausible to set on track the path for a successful conclusion of the accession process.

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Water and Wastewater Services in the Danube Region

MONTENEGRO COUNTRY NOTE This work is a product of the staff of the World Bank, with external contributions. This report was prepared by a team led by David Michaud and comprised of Stjepan Gabric, Kirsten Hommann, and Anastasia Shegay. David Michaud is the Practice Manager for Water in Europe, Central America and Haiti at the World Bank’s Water Global Practice. In his current position, he oversees the World Bank’s water portfolio and staff in those regions.

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KEY WATER AND SANITATION SECTOR CHALLENGES - Financing investments to upgrade the water and wastewater sector infrastructure. The second phase of the national Master Plan Implementation requires infrastructure investments for both water and sanitation in order to comply with eu directives by 2030. Those investments are estimated at around â‚Ź640 million over the next 15 years, or nearly double the current level of investment.

- Improving the efficiency and cost-effectiveness of water utilities. Efficiency and performance of water utilities are a challenge that will require addressing issues such as overstaffing and excessive non-revenue water levels.

- Implementing sound cost recovery principles.

Water utilities do not generate sufficient revenues to ensure proper maintenance and sustainability

of infrastructure. To reverse this trend and address this issue, tariffs may need to be reviewed according to sound cost recovery principles.

CONTEXT FOR SERVICES ECONOMY: Montenegro has a developing economy with important regional disparities. Its 0.6M inhabitants are mainly located in the central and southern parts of the country. The Montenegrin economy is characterized by low labor productivity, import dependence, high unemployment, and undeveloped financial institutions and capital markets. The average GDP per capita of US$14,318 PPP re ects this overall situation. Montenegro also shows significant local disparities in level of development. The northern part of the country has a higher rate of unemployment and a lower income per capita than the central and coastal areas (CIA 2015). Roma (1%) and

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34 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: www.SoS.danubis.org.

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Egyptians (0.3%) are the most vulnerable marginalized minorities (Monstat 2011). Since December 2010, Montenegro has been an official candidate for EU membership.

GOVERNANCE: Public administration is organized at the national and municipal levels. Montenegro is a parliamentary republic with 23 municipalities and no administrative regions. Local self-governments perform activities such as local development planning and program implementation, and provision of local public utility services including water and wastewater services (Gov. ME 2011).

WATER RESOURCES: Montenegro has sufficient water resources, but they are unevenly distributed across the country. Ninety- five percent of Montenegrin watercourses are formed within the country (i.e., both the sources and a major part of the

drainage basins occur within national boundaries).

This minimizes cross-border impacts on Montenegrin waters, but also engenders responsibility for the quality and distribution of water, which then follows into neighbouring countries. Rainfall in Montenegro is characterized by high variability in both time and space. The country has goodquality groundwater and surface water, but these resources are unevenly distributed throughout the country. Karst areas in the central and western parts are arid, whereas the northern mountainous area is richer in raw water.

About half the country belongs to the Danube catchment and the other half to the Adriatic catchment.

Flood water potentially threatens 24,500 hectares of farmland and urban areas. central and northern parts of the country were hit by large floods in 1963, 1979, 1999, and 2000, causing power outages, landslides, and damage to water and wastewater

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36 infrastructure, resulting in serious drinking water shortages (ICPDR 2010). Concerning long-term climate variations, the yield of water sources will be reduced, and some springs will dry up or experience intermittent ow. As a result, accumulations used for industrial and commercial purposes will decrease, as will hydropower generation, resulting in an increase in electricity imports. The southern parts of the country are likely to be most vulnerable to climate change (Gov. ME 2010). However, no specific strategies have been implemented to address this likelihood.

WATER SUPPLY SOURCES: Public water utilities use groundwater to produce drinking water. In 2012, 114Mm3 of water were abstracted for public water supply, 90% of which came from groundwater.

Industrial facilities use raw water, approximately two-thirds of which comes from surface water and one-third from groundwater. Prevailing pollutants

are mainly the result of wastewater from point sources. Industrial wastewater treatment is performed in only a few industrial plants, and there are only four municipal wastewater treatment plants for the whole country. In coastal areas, wastewater is discharged directly into the sea (ICPDR 2010).

ORGANIZATION OF SERVICES SERVICE PROVISION: Municipalities provide water and wastewater services to their population. Local governments are responsible for water and wastewater services and provide them through 22 public utility companies. Fifteen municipal utilities that provide only water and sanitation services cover urban areas representing 50% of the population.

Six municipal multi-utility companies supply mostly small municipalities (18% of the population)

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(Figure 1). One regional water company owned by the central state has been specifically created to supply water to coastal municipalities (8% of the population). With an average population served of 21,466, the Montenegrin water sector appears fragmented compared to other Danube countries.

Policy-making and sector institutions. The sector is controlled and regulated at the national level by several ministries, with one clear line ministry. As shown in Figure 2, local water and wastewater service providers are regulated and controlled by five national institutions.

The Ministry of Agriculture and Rural Development is the line ministry responsible and competent for proposing and implementing water policy, and for the adoption of planning documents and normative acts. The Water Directorate has jurisdiction to enforce laws, and to prepare technical bases for regulations, plans, and programs adopted by the government and the Ministry of Agriculture and Rural Development (MPR 2015).

FIGURE 2: WATER SERVICES SECTOR ORGANIZATION SOURCE: AUTHORS’ ELABORATION

FIGURE 1: WATER SERVICES PROVIDER TYPES AND POPULATION SERVED SOURCE: AUTHORS’ ELABORATION

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Andrea Mangano Renato Conti Partners, PW Advisory & Capital Services Italia

The main challenge for the sector is financing investments to upgrade the water and wastewater sector infrastructure.

The second phase of the national Master Plan implementation requires infrastructure investments for both water and sanitation in order to comply with EU directives by 2030. These investments are estimated at around â‚Ź640 million over the next 15 years.

WHY THE REFORM OF WATER AND WASTEWATER SERVICES is urgent in the coastal region of Montenegro Andrea Mangano (Florence, Italy, 1946), is a Hydraulic Engineer (Rome, 1972), with a postgrade in Hydrology at Padua University (1973), where he carried out research and teaching activity up to 1976.

Renato Conti, an experienced senior counsel to business corporations, proved his ability in the field of both legal operations, advising on complex international transactions, and of management of legal departments, staffed by up to 40 professionals.

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THE PRESENT SITUATION Coastal Region encompasses, in barely 90 km between the border with Croatia, at North, and Albania, at South, one of the most beautiful seashore in the Mediterranean Sea. Six Municipalities of long self-governing tradition face the sea and host slightly more than 150,000 inhabitants at winter and more than 250,000 tourists in August, for a total of overnight stays of about 10 million per year.

Each Municipality traditionally runs its water and sewage services throughout a local Municipal utility enterprise (ViK as an acronym for Vodovod i Kanalizacija, i.e. Water and Sewerage), exploiting local springs and wells originated from the rich karstic aquifer of the region.

MONTENEGRIN COASTAL REGION

Yet, the coastal area of the Republic of Montenegro presents serious water supply problems, which result in seasonal shortages during summertime.

Infact, more than 75% of the water entering in the system is lost in leakages or tampering, due to the

bad conditions of the networks, mismanagement of the infrastructures and lack of adequate commercial practices. Given the touristic vocation of the region, and the consequential huge presence of temporary visitors (mainly from abroad), in the summer months the shortages exacerbate, thus causing a significant impact on the overall quality of the tourist offer and the economic capacity of the region.

Local sources supplying five out of the six coastal Municipalities appear to be close to reach their capacity limits, and are therefore insufficient to match - and serve - the water supply demand in the summer season. Foremost, water quality of such sources is reported to be questionable. On the other end, provisioning of water by means of an aqueduct transiting across a foreign State (as is the case for the Municipality of Herceg Novi, served by the hydro-technical system “Plat”, which originates in Bosnia and passes through Croatia) appears to be strategically a weak solution, even without taking into account potential shortages of such system as well. The strategic development plans of the region’s economy, though, are based on the expansion of tourism, and related industry, and are therefore conditional upon the achievement of a sufficient and steady provision of drinkable water in adequate quantities - in a timely fashion, of course.

To solve the matter the central Government of Montenegro has developed a huge project for the construction of a regional water supply system has been developed since the second half of the twentieth Century, and its implementation, mainly based upon EBRD financing, has been completed in the recent years by the Montenegrin regional water supply company, Regionalni Vodovod Crnogorsko Primorje, (PEW). Such regional water supply system is based upon the drinkable water from the springs of Bolje Sestrjie, in the Skadar Lake basin, in the hinterland of Montenegrin Coast.

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40 THE VIKS - OPERATIONS

Nowadays, even taking into account the opposite seasonal fluctuations in the demand and in the availability of water, the Montenegrin Coastal Water Service System has much more water available to it than it needs to accomplish its mission: in round figures, it produces 4 times the water that is sold to customers, and has a potential yearly production which is 4 times the volume of water that it is likely to be demanded in the next future.If the water coming from the new infrastructure allows the ViKs to face the consumption peaks, the financial conditions of the Municipalities (and therefore of the ViKs), the tariff methodology and the fragmentation of the system do not afford a thorough restructuring of the pipes nor an efficient management of the systems. The system needs to be rationalized and governed as one entity to achieve an optimal efficiency in the usage of the resource as well as in the management of the infrastructure and of the operations.

Due to their small size the Viks are nor capable of introducing modern technologies and adopting efficient management practices. On the other side, they are heavily overstaffed , having at least twice the personnel that would be normally required, according to the current standards in the water industry worldwide.As a result, the whole water system of the coastal area is economically and financially non sustainable. An analysys based on 2016 data, shows that the system, considered as a single entity is virtually bankrupt.

THE PROPOSED REFORM To remedy the above situation and to reform the Montenegrin Coastal water supply and sanitation system,a multi-pronged approach is necessary, acting concurrently and in a coordinated fashion on all levels of the constituencies. Partial implementa-

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tions of the Reform Plan, as well as mitigations of any of its elements, would weaken its equilibrium, and almost surely would not afford the reaping of the expected benefits and the meeting of the set goals. The Reform Plan, in fact, purports to answer all questions and demands, and to provide an operational tool for the concerned Montenegrin Authorities and decision-makers aimed at bringing the water service organization, operation and management to a state-of-the-art asset capable of a longterm satisfactory performance.

The proposed Reform Plan should be predicated upon three main pillars: Unification of the decision and policy making at regional level, by creating a Consortium among the six Municipalities of the Coast and the Ministry of Sustainable Development and Tourism (MSDT). The Consortium, or whatever other entity that would be created to such an effect, should be in charge

of governing the Coastal Water Service System, deciding the strategies, the expected service levels and the investments. In the opinion of the Authors, waste water treatment and sanitation should also be included in the overall definition (and operation) of the service, thus creating a truly integrated water service (objective integration, as a consequence of and in parallel to the subjective integration); Once the objective fragmentation is solved, in fact, the plan should also impose the optimization of the operation of the system, by merging the six existing ViKs, PEW and Vodacom into one single water service Operator (the SSO - Sole Service Operator) – subjective integration; Institution of an independent National Regulatory Body (NRB) for the water and sanitation services, in charge of setting the accounting rules, establishing tariffs and checking the performance level of the Service.

REGULATORY ASSET TO BE

Ministry of Agriculture

Ministry of SD & T

National Regulatory Body

CONSORTIUM

NEWCO - SOLE SERVICE OPERATOR

Ministry of Health

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Vladimir Šimić Senior Coordinator for EU Law in HRVATSKE VODE (Croatian Waters)

Reform of the water services sector in Croatia – Act II

REFORM FOR THE SAKE OF REFORM OR REFORM WITH A GOAL

Vladimir Šimić, LLB, is a Senior Coordinator for EU Law in HRVATSKE VODE (Croatian Waters), a Croatian water management company; a member of the Water Services Council - Economic Regulator of Water Services Tariffs, in two terms: from 2010 to 2014, and from 2014 onwards, a member of the Strategic Coordination Group of the European Commission for the Common Implementation Strategy of the Water Framework Directive from 2013 onwards and a member of the Committee for Article 21 of the Water Framework Directive from 2013 onwards.

His fields of expertise are EU water law, economic regulation of water services and institutional frameworks in the water and water services sector.

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The idea of an ​​ institutional reform of the water services sector in Croatia dates from the 2008 Water Management Strategy. The need for reform has two sources. One is the application of the principle of cost recovery for water services (Article 9 of the Water Framework Directive or WFD) . The second source is the obligation to develop water utility infrastructure (dictated development) that have been taken over by all EU member states and candidates for EU accession, including Croatia. Namely, the Accession Treaty of 2012 imposes an obligation to implement the Urban Wastewater Treatment Directive and the Drinking Water Directive which require financially demanding investments (EUR 4.2 billion). The former requires increased investment in public sewerage and wastewater treatment plants with interim deadlines specified for 2018, 2020 and 2023, including a waste water treatment

plant and associated sewerage networks, while the latter requires the achievement of the health safety standard of drinking water for any water supply system or subsystem that supplies at least 50 inhabitants or where at least 10 m3 of water is delivered per day, which also requires investments in public water supply facilites and drinking water treatment technology with the deadline of 1 January 2019.

This opens a fundamental problem. One of the main requirements of EU funds is that after the implementation of the two EU Directives, the water price must cover the cost of managing, operating, maintaining and depreciating municipal water infrastructure and, at the same time, must be affordable to consumers, i.e., it must not exceed a certain share of household net disposable income (NDI).

This share is calculated from state to state and de-

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44 PLITVICE NATIONAL PARK, CROATIA

Phases of the reform of the Montenegrin coast water supply sector: 1. Founding phase 2. Reorganization phase 3. Fine tuning phase

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pends on a set of socio-economic criteria. According to the national calculation for Croatia, it should not exceed 3% of the household NDI. However, it is certain that the water price will exceed this share of net disposable income and thereby become unaffordable for citizens and businesses if the current system of atomized water utilities - some 180 is retained. That the situation is ripe for reform is indicated by the fact that 4/5 of the total water supplied in Republic are delivered by only 25 public suppliers, who individually deliver more than 2 million m3 of ware per year. Furthermore, a significant number of suppliers (i) has underestimated water service tariffs mostly due to the failure of local governments to keep pace with costs, or (ii) due to their own fragmentation, even with higher tariffs (even above the affordability limit), cannot achieve the sustainability of the system, and receive additional finance from the budget of local self-government units.

EU Cohesion Funds are ready to fund an average of up to 65% of the implementation of the two EU Directives. The rest would be financed from domestic sources (national component). But if the price is not affordable, the EU reduces its co-financing share, and the obligations from the Accession Treaty remain in full scope under the resposniblity of a member state that has to find its own resources to cover the difference. The solution is to reduce the number of service areas (the area of provision of public water supply and public sewerage and wastewater treatment) and establish a single water service price in a consolidated service area. This also requires status changes in existing water service providers, i.e., their merger into a single supplier in the service area. In the EU, this path was follwed by: the Netherlands, Romania, Scotland, Ireland, Hungary, Bulgaria, Kosovo, and none of them has the same institutional solutions. Likewise, the EU does not prescribe the mandatory institutional reform or the establishment of an appropriate institutional framework for the implementation of obligations under the two directives concerned.

PRE-REFORM STEPS Seven pre-reform steps

Prior to the drafting of the Water Act, appropriate reform steps were identified, which were gradually translated into acts, depending on when and how much there existed political will for that. Here we call them pre-reform steps: - Water services are above-municipal and not just municipal services - Exclusion of commercial activities and other municipal services from the scope of activities of the water services provider - The owner of the water infrastructure is the public water service provider - Business autonomy of water service providers - Restriction of water service concessions - Establishment of self-sustaining service areas - Establishment of economic regulation of the price of water services.

The Draft Act on Water Services, together with amended Water Act and Water Management Funding Act, provides a strong reform intervention in the institutional structure of the water services sector.

The reform inevitability has been indicated by all strategic water management documents and legislative acts in Croatia, starting with the Water Management Strategy from 2008 to date. The adoption and implementation of this Act, if political consensus is reached, would be not only a test of the success of the Republic of Croatia in withdrawing funds from EU funds intended for raising the overall social, sanitary and environmental standards, but also test the capability of a modern European society to ensure for its citizens and business users of water services, in current and future generations, an affordable water price and a quality service that can only be provided by an efficient water provider.

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Antonio Massarutto DIES, University of Udine antonio.massarutto@uniud.it

ECONOMIC REGULATION OF WATER AND SANITATION IN ITALY The Italian regime for economic regulation of water and sanitation services (WatSan) originates from the 1994 reform, aiming at establishing a financially self-sustaining industrial system, focused on operation and management.Watter &Sanitation provision until then was fragmented (more than 13.000 undertakings) and relying on public budget for nearly all capital expenditure and a significant part of operational expenditure.

The reform reorganized Watter &Sanitation provision in approx. 100 management units. In each unit, a single operator was supposed to carry out service provision and finance it on the capital market, lev-

eraging on tariffs. Operators would move outof the public administration; while ownership could be private, public or mixed, water companies should be independent self-standing entities, regulated by public bodies at arms’ length.

In a first phase, regulation was mostly based on concession contracts between local authorities (represented by a dedicated agency) and WatSan companies, with a national “standardized tariff method� providing the basis for calculating tariffs.

Yet the law did not foresee a national regulator. Due to this original weakness and other shortcomings, the reform generated only a leopard-skin improve-

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ment, with the most significant part of the country remaining at the starting post In 2011, a new breakthrough reform changed substantially the regulatory framework, by assigning competences to the national authority already in charge for electricity and gas, and newly waste management (AEEGSI, now ARERA). A parallel reorganization also concerned local regulators at the regional level.

The national authority is responsible for defining the framework regulation (tariff setting method), valid for each regulatory period (RP) of 4 years, and for the final approval of tariff plans. Local regula-

tors are responsible for implementing the method: collecting and checking data supplied by the water companies, approval of the investment plan, and definition of discretional tariff components such as the “Fund for new investment (FoNI). Tariff proposal, instructed by local regulators, awaits final approval by ARERA, which checks formal requirements and eventually discusses the merit.Each “tariff scheme� includes an asset management plan with a very detailed and analytical definition of investments for the 4-years regulatory period and a more synthetic one for the remaining period. Revisions are always possible, with the approval of local regulator.

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Lorenzo Bardelli Independent Regulatory Authority for Electricity Gas and Water (AEEGSI)

THE STRANGE CASE OF WATER REGULATION IN ITALY Lorenzo Bardelli of the Independent Regulatory Authority for Electricity Gas and Water (AEEGSI) discusses how regulation in the Italian water sector is changing, including the initial challenges and recent initiatives. A new regulatory framework sets out cost reimbursement through tariffs, contractual quality incentives, and a standard agreement for concessions. AEEGSI will continue to promote regulatory initiatives that deliver a more stable, predictable and accountable water sector.

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As Professor Alessandro Petretto, teaching Public Economics at the University of Florence, said to me in 1994 when I was researching my thesis paper: ‘there are many initiatives for the reform of Italian public utilities. I do believe that the most interesting, at the moment, are those in energy and telecommunications; the others, related to transport, waste collection and management and water, seem hindered by the relevant roles and powers still attributed to Regions and Municipalities in those fields.’

Professor Petretto proved to be a wise man: at the start of 2000, while the liberalisation processes of energy and telecoms services were being consolidated, Italian institutions were still investigating the reasons for the delays in implementing transport, waste and water reforms. In water, initiatives to overcome the main critical issues were reinforced, first with a reform in 2006, and, subsequently in 2009, by the approval of a new law concerning the reorganisation of the supply chain. This law introduced an obligation either to partially sell 100% publicly owned enterprises or to assign their entrustment contracts through auction procedures.

BEFORE 2012 At the time, water regulation was undertaken on a contractual basis, with each entrustment contract defining the risk-sharing clauses among the parties, and tariffs established on the basis of projected variables: capital expenditure (CAPEX), operating expenditure (OPEX) and water consumption. There was also an obligation to hold an investigation every three years, to verify whether any differences in projected values, including tariff and outturn values, were due to end-users (e.g. reduced consumption) or operators (e.g. cost inefficiency). The implementation of this obligation was highly unsatisfactory, generating a loss of transparency and

damaging the reputation of the parties. As a result, there were many litigation cases between consumers (unwilling to pay for investments planned, or IP, but not yet realised) and operators (asking for full recovery of actual costs). The sector outlook appeared disordered and uncomfortable.

Furthermore, a referendum result in 2011 established that a fair rate of return should not be included in the water tariff calculations, and that the obligation either to partially sell 100% publicly owned companies or to assign their entrustment contracts through auction procedures was to be abolished.1 Uncertainty over the future of the sector increased.

Decision-making processes, among both public institutions and private operators, suggested a common dominant strategy: inertia.

A few months later, the government proposed assigning the water tariff regulation, contract design, monitoring and regulatory enforcement to an independent regulator, the Italian Electricity and Gas Authority. Parliament approved this and changed the institutional framework for water services.

Two years later the regulator’s name was changed accordingly to the Independent Regulatory Authority for Electricity, Gas and Water (AEEGSI). The new institutional framework appeared to be in line with OECD recommendations on regulation2 and promoted international cooperation in the field of water regulation, leading to the foundation in 2014 of WAREG (the Network of European Water Sector Regulators).

In terms of tariff regulation, the responsibilities assigned to AEEGSI were twofold: - ex ante, to define cost reimbursement rules and tariff calculation mechanisms;

- ex post, to approve the tariff proposals set out at 68 decentralised levels (‘EGAs’) for each of the 150 industrial operators4 and 2,500 municipalities (which are predominantly still in charge of the sew-

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50 erage systems and are located in the south of Italy).

In early 2012 AEEGSI’s regulatory activity began by focusing on setting: i) tariffs; ii) compulsory standards for quality of service with incentives, penalties and refunds; iii) conditions for service supply and contracts; and vi) rules for accounting unbundling.

The key developments since then are discussed below.

FIRST REGULATORY PERIOD 2012–2015: THE FRAMEWORK In 2012 AEEGSI published several consultation papers on the tariff regulation reform that it was proposing. By the end of that year Decision 5856 was adopted, introducing a significant change: an ex ante method of tariff calculation (i.e. using expected cost) was turned into an ex post method (in which the relevant inputs to the calculation were measured). To promote efficiency, an overall cap on revenues was introduced; OPEX based on controllable outturn OPEX in a base year was rolled forward; and standardised parameters for the ‘reimbursement’ of fiscal and financing costs to operators were established on a notional basis. At the same time, AEEGSI concluded a procedure to reimburse consumers with the difference between the allowed return on capital included in the tariff (charged by water service operators under pre-referendum regulation) and the notional fiscal and financing costs.

Overall, this increased regulatory transparency and the sector’s accountability.

In 2013 AEEGSI began consulting on identifying the long-term objectives of regulation, and examined a new tariff mechanism within which all the relevant features of the Italian water sector would be considered. Decision 643 (the ‘MTI’) was adopted at the end of the year, centred on the ‘Regulatory Matrix’.7 This allowed for regulation to vary de-

pending on the initial operating circumstances of each operator. The overall framework was designed to introduce a set of innovative and asymmetric rules, which provided incentives to invest. In order to identify the specific rules applicable to tariff calculation, the MTI considered two key features: - the ratio between the planned investment expenditure and the regulatory asset base (RAB)—if this ratio was above a certain threshold, it would be possible to apply rules to achieve higher cash flows; - the expansion of activities to be managed by the operator—if new activities have to be managed, their costs have to be recovered and, therefore, included in the allowed revenues.

OUTCOMES OF THE FIRST PERIOD AEEGSI has paved the way to a clear, stable and coherent regulatory framework that takes account of the various characteristics of the water sector in Italy. The tariff-setting methodology and regulatory action for the years 2014–15 have proved to be effective: - tariff changes approved by AEEGSI for 2014–15 apply to 1,970 operators, affecting around 53m Italian citizens. The average increase in charges on the previous year was just over 4.3% in 2014 and 4.6% in 2015;8 - for 135 industrial operators (serving 43m customers), AEEGSI approved tariff proposals consistent with planned investments, amounting to approximately €5.6bn for the four-year period from 2014 to 2017; - investments (net of public contributions) for the years 2014 and 2015 show particularly strong growth, with a 55% increase recorded in 2015 compared with 2012.

The largest part of the investments has been aimed at dealing with the infrastructure gap in sewerage and sewage-treatment activities on the basis of the priorities defined by the individual EGAs (in

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The tariff scheme is characterized by a combination of having maximum pricing and being cost-based.

agreement with the relevant operator). The overall amount of investment appears to be both an encouraging result when compared with the previous period, and at the same time an unsatisfactory one when compared with international benchmarks (€33 per capita per annum seems insufficient for investment in water distribution, sewerage networks and treatment plants).

One of the main limitations to emerge for the financing of infrastructure relates to the low value of the RAB. There may be many reasons underpinning this, but one can be stated with certainty: a long period of relying solely on public funding of water infrastructure has led to asset depletion and has left operators with a very limited asset base.

SECOND REGULATORY PERIOD 2016–2019 In December 2015, AEEGSI approved the regulatory package for the new regulatory period. This comprises three elements: - a new method for defining cost reimbursement rules and tariff calculation mechanisms (‘MTI-2’); - contractual quality (i.e. quality of customer-facing

services such as complaint-handling, call response, connection time, etc.), providing for a gradual harmonisation, throughout the country, of delivery for end-users; - standard agreement regulation, approving a common framework for the allocation of legal obligations among EGAs and water service operators.This new and comprehensive regulatory package represents a coherent and broad legal framework.

However, there is ongoing controversy relating to the regulation of the cost of infrastructure. The new regulatory approach to financing and fiscal costs was not accepted by those in favour of the referendum or industrial operators, and, in 2013, this led to a legal dispute which continues to this day.

The final decision is expected by the end of 2016 (it was originally planned for September 2015). As is always the case, AEEGSI will abide by the court’s decision. However, it will continue to promote regulatory initiatives for a less strange and a more stable, predictable and accountable water sector.

52 Prof. Dr Mićko Radulović Prof. Dr Zoran Stevanović Milan Radulović Goran Jevrić

PROTECTION OF KARST WATER SOURCES IN MONTENEGRO focusing on Bolje Sestre Water Source ABSTRACT In the karst terrains of the Southeastern Dinarides, to which the territory of Montenegro belongs, a specific type of karst aquifer and permeable zones are formed, characterized by: - high rate of circulation of karst aquifer water, especially at the hydrological maximum, which results in occasional pollution and turbidity of karst springs; - the karst regime of leakage, i.e. the large amplitude of fluctuations in the aquifer level and the abundance of karst springs;

- the significant amount of karst aquifer water leaking below the sea level and the Skadar Lake level, resulting in the mixing of sea, lake and fresh spring waters; - disintegration or drying out of karst watercourses in the Adriatic Sea basin (Cetinjska River, Karucka River, Sinjak River, Bokeljska River etc.).

All of these require special attention with respect to the timely protection of karst water sources in order to permanently preserve the quality of the water intended for water supply. This particularly applies to the Bolje Sestre water source, which is in-

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LOCATION OF THE BOLJE SESTRE WATER SOURCE

cluded in the Regional Water Supply System of the Montenegrin Coast.

On the basis of complex hydrogeological studies carried out in the period 2005-2007, the Bolje Sestre water source was assessed as the most favourable source for the regional water supply system for the Montenegrin coast, with a number of advantages in relation to the previously considered sources (Karucke Vrulje, Tusko Field groundwater etc.). The finding that this is a very good water source has been confirmed during the period of its exploitation (from 2010 to the present day) through continuous monitoring of the correctness of water in terms of physico-chemical and microbiological composition.

The studies consisted of: - hydrogeological mapping of the terrain and the production of digitized hydrogeological maps, with a scale of 1:25,000 and 1:2,500,

- four tests of groundwater tracing by sodium fluorescein and one by NaCl, - hydrological measurements of flows during the dry period of the year (2005, 2006, 2007), - geophysical field tests, by electromagnetic method and geoelectric scanning method, - execution of 11 exploration-piezometer wells, 8 in the hinterland of the source and 3 in the area between Grbavac and Moraca, - well testing (by airlift and pump of appropriate capacity), - monitoring the regime of oscillations of groundwater, - performing complete chemical and microbiological analyses in different time intervals (2005-2007), - making a list of potential polluters of aquifer water and producing appropriate maps of hazards, vulnerabilities and risks, with a scale of 1:40,000.

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54 prof. dr Zoran Stevanović

CHALLENGES OF WATER INTAKE IN THE KARST – Bolje Sestre as a successful engineering venture Full professor and head of the Centre for Karst Hydrogeology at the Hydrogeology Department of the Faculty of Mining and Geology, University of Belgrade. Consultant of the UN organizations FAO and UNESCO. President of the Karst Commission of the International Association of Hydrogeologists (IAH) and Vice President of the Committee on Karst and Speleology of the Serbian Academy of Sciences and Arts. He was president of the Serbian Geological Society and president of the National Committee of the International Union of Geological Sciences (IUGS) for Serbia. Member of the Scientific Society of Serbia. Published over 300 papers. Author and editor of 15 monographs and three textbooks.

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INTRODUCTION The soluble carbonate and evaporite rocks known and studied under the name of karst occupy about 15% of the Earth’s surface, which is also the result of the recently completed major international project WOKAM - the World Karst Aquifer Map (Chen et al., 2017). In the area of the Mediterranean Basin, where the science on karst – karstology was born thanks to Jovan Cvijić (1895), the presence of carbonate rocks is significantly higher: in all mountain ranges of Alpine orogeny (Dinarides, Apennines, Carpathians, Balkanides, Pindus, Hellenides), these rocks are dominant or prevailing in geological structure (Bakalowicz 2015; Fiorillo & Stevanovic, 2015). Montenegro, along with Cuba, Jamaica and several island countries, belongs to the world leaders by the surface of the grounds covered by karst rocks: over 2/3 of its territory is under karst.

In addition to natural beauty and “dynamics”, karst terrains are distinguished by many hydrological and hydrogeological specificities. While on the surface of these terrains there is often full water scarcity, in the depth of the rocky mass extremely high quantities of high quality water can accumulate. The use and control of these water resources is a great challenge for engineers and water management experts and it is often necessary to design and implement very complex technical solutions. One of such solutions is the intake structure at the Bolje Sestre water source, which today provides reliable supply of water to the entire Montenegrin coast and has enabled its tourist and economic development

mass. Unlike the so-called consolidated (intergranular) aquifers in which the homogeneity and isotropy regulate water movement, other laws must apply to karst. Even the Darcy’s basic law of hydraulic flow in the conductor cannot be applied to the karst (Kresic, 2013), first of all, due to the fact that the water moves along privileged directions (fissures, channels, caverns) and with uneven pressure in the karstified parts of the rock mass. Thus, at short distance between them, channels with active circulation of water and its abundance meet with completely compact blocks of very small primary porosity that act as completely impervious rock mass. Karst aquifers are also characterized by great openness and rapid circulation of groundwater. This also causes a high vulnerability to all types of possible pollution that is transported easily and at long distances, and unlike intergranular aquifers, they cannot be easily absorbed and purified in the underground.

The presence of rocks of varying degrees of permeability, the absence of water on the surface of the terrain (Fig. 1), and the abundance of water in the depth, is the greatest contradiction of the karst.

High mountains are often struck by the complete

KARST AQUIFERS AND TAPPING OF WATER RESOURCES – IMPORTANCE AND CONTRADICTION Karst aquifers are water reservoirs deep in the rock

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56 lack of water and the accumulation of rainwater in reservoirs (water cisterns) is the only way to provide a minimum of drinking water for people andlivestock. Montenegro and its mountainous regions in the Dinarides are an example of this state (Bešić, 1969; Mijatović, 1984; Radulović V. & Radulović M, 1997) (Figure 2).

THE UTILIZATION OF KARST AQUIFER POTENTIALS Thanking to the presence of karst aquifers, the entire Mediterranean area and the neighbouring region of Alpine orogeny in Southeast Europe, is the water richest region in the world. However, this does not mean that the use of this resource is simple; on the contrary, the water intake operation and stability of water supply, and the overall sustainability of the use of this resource due to uneven regimes and the difficulties of protection, are the problems that are in a certain contradiction with figures and statistics confirming the rich water resources of this region.

According to the FAO data and the Aquastat statistical database, the availability of water resources per capita in Southeast Europe is significantly higher than in other parts of the world. Thus, an average of 6000 m3 is available per year in the region, and Montenegro is the leader with 21935 m3 of water/ capita/year. It should be noted that water availability of less than 500 m3/capita/year is considered to be “water poverty” according to UN analysis (Stevanović, 2011). The cause of this “water wealth” of the region is not only the demographic situation and the smaller population density, but also the significant participation of the karst terrain and accumulated water that is adequately recharged by water from precipitation. The latter does not mean that the process of recharge takes place in an even way.

Average annual rainfall is observed, which, along

with the achieved large infiltration capacity of the karst, enables an intensive water balance.

Considering the fact that Southeast Europe covers only 0.86% of the total Earth’s surface without polar regions, it is clear how big the contribution and importance of its water resources to the global water balance is. The water sources presented at recently completed World Karst Aquifer Map (UNESCO) because of their regional significance, and upon the recommendation of the author of this paper, include Bolje Sestre water source as well.

If they are so rich in water, why most of the countries mentioned have problems in water supply so often, and why some settlements and areas were exposed to long-term shortages of drinking water?

BOLJE SESTRE AN EXAMPLE OF SUCCESSFUL CAPTURE OF AQUIFER FLOW Prior to the capture of the Bolje Sestre spring on the periphery of Skadar Lake in the Malo Blato gulf, the formation of a water source and the construction of a water system, the problem of water supply of the LOCATION OF BOLJE SESTRE WATER SOURCE

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Montenegrin coast persisted for more than 20 years and was a real limiting factor for the development of tourism and economy of Montenegro. The largest number of coastal cities used water from karst springs, but given the specificity of unstable flowing regime during the summer months, there was a regular lack of sufficient quantities of water. Despite significant successes in increasing the capacity of some sources and improving the water supply of Herceg Novi, Tivat, Budva and Petrovac (Radulović, 2000), it was clear that only the transport of large quantities of water from the hinterland and

stable capacity of the water source might provide a long-term and efficient solution. Priority was given to the sub lacustrine springs along the edge of the Skadar Lake (“the eyes”), which were well known and partly studied (Radulović V. 1989, 1997; Radulović V. & Radulović M., 1997; Radulović M. 2000; Radulović Mil. et al. 2015).

In the period from 1980 to 2000, from the initial idea to create a source in the Skadar Lake basin for regional water supply with the pipeline through the mountain ranges of Rumija and Sozina, several var-

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BOLJE SESTRE WATER SOURCE

iants of the source were considered and a part of the water infrastructure was built (the hydrotechnical tunnel, the main reservoir in Đurmani, and individual pumping stations, with the concept of integrating existing local sources into the common system). From the considered sources, the Karuč and Volač springs had the best prospects (Burić & Radulović, 2005). Many years’ studies of “Energoprojekt” Belgrade still did not provide reliable data and solutions, especially with regard to the way of intervention, avoiding the mixing of aquifer and lake waters, and laying pipelines by the bottom of Skadar Lake. The Karuč spring is located on the lake bottom at a depth of more than 10 m.

During 2005, a cost-benefit analysis of the variant

solutions of water sources for the regional water supply was done (Radulović, 2002) and it included the Karuč and Bolje Sestre sources (first discussed in the doctoral dissertation of Mićko Radulović, 2000), the Vučko Blato water source, and aquifer in the fluvio-glacial sediments of the Tuško Field and the Bojana River. During 2005 and 2006 additional research was carried out on the micro-locations of Karuč, the Biševina River and Bolje Sestre (Figure 13). Engineering requirements, the area of sanitary protection of water intakes and poorer water quality first eliminated the Biševina River. Subsequent research of the two remaining sources found significant advantages of Bolje Sestre source compared to Karuč. In further studies, during 2007, additional data were collected on the geological structure, the

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filtration properties of the karst aquifer, the directions and course of the aquifer water circulation, the quality of ground and surface water in the Bolje Sestre basin, as well as the possibilities for protection against pollution (Stevanović et al., 2008; Radulović et al., 2008).

Of the complex studies that provided adequate data for the water source capture, the following were particularly significant: the definition of the route of Morača watercourse, the hydrological measurements of the yield of the springs, the geophysical tests, the aerophotogeological analysis of the tectonic structure, the detailed hydrogeological mapping of terrain, geodetic measurements and the elaboration of an elevation model of the terrain, diving survey, exploratory drilling and probes in piezometers, systematic monitoring of the waters quality of the streams and the lake, assessment of the vulnerability of the terrain for the purpose of establishing sanitary protection zones.

the dam crest (Figs 15,16). The idea is to allow the non-tapped spring water to overflow easily into the lake and to prevent lake water to enter intake. The rubber gate pillow has maximal height of 1.5m and activates only when lake level is over 6.5m a.s.l.

Since this paper is focused on the conditions and difficulties of capturing water sources, we will not deal here in more detail with the other results of these studies already described in the reference literature (Stevanović et al., 2008, Radulović et al., 2008, Stevanović, 2010b, 2014). It should be noted, however, that the request for acceleration of works and implementation of the solution that ensures stable supply of quality water to the Coastal Region has left some of the planned studies and research works for the next period, and some of them have remained unfinished yet.

The most significant achievement was the definition of the yield of the source: the minimum measured yield during the study period was 2.3 m3/s, which is significantly higher than the projected capacity for two phases of development: Phase 1 1.0 m3/s; Phase 2 (after 2020) - additional 0.5 m3/s.

Secondly, based on definition of the route of the Morača river, it has been established that there is no direct hydraulic connection with this watercourse, which was further confirmed by comparative analyses of water and sediment quality.

Following the request to avoid a mixture of aquifer and surface waters, the concrete elliptical structure – coffer dam has been designed and constructed. It covers a surface of some 300m2. Considering the importance and influence of lake water fluctuations on the intake, the special removable spillway section (rubber gate pillow) has been installed on

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Peter Dane managing director of the EBC foundation

The European Benchmarking Cooperation Foundation is a not-for-profit benchmarking initiative that facilitates water and wastewater utilities accross Europe to improve their services through benchmarking and learning from each other.

EBC-supported utility benchmarking in the Danube region

LEARNING FROM INTERNATIONAL BEST PRACTICES Peter Dane is the managing director of the European Benchmarking Co-operation (EBC foundation). He is a civil engineer by profession. Peter started his career at the water utility of the city of Rotterdam where he has been responsible for corporate strategy, investment planning, industrial water supply, contingency management and technical due diligence of mergers.

After, he changed to the Association of Dutch Water Companies (Vewin) where – together with Nordic partners - he developed an international benchmarking programme to improve water- & wastewater services. He has been a member of the Dutch National Committees that developed a guideline for reliability of water supply systems and for post-9/11 measures. Peter is a management committee member of IWA’s Specialist Group Benchmarking & Performance Assessment and co-author of the IWA/AWWA-book: “Benchmarking Water Services - Guiding water utilities to excellence”.

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BENCHMARKING – A MANAGEMENT TOOL FOR CONTINUOUS IMPROVEMENT Benchmarking is an instrument first introduced decades ago and which has proven its value many times since then. It was first put into practice in the 1970s by photocopier manufacturer Rank Xerox. This company noticed the sales of photocopiers trailed those of Japanese manufacturers. The Japanese not only made higher quality machines but also had more efficient production methods.

At that time Rank Xerox introduced the principle of benchmarking to learn ways to run business processes more efficiently and to better stand up to competition from Japan. Since it’s emerging in the 1970’s, benchmarking is widely spread across many different industries.

In the last few decades, in many countries, regional or national benchmarking schemes for water and sanitation utilities have been established. In quite some cases these benchmarking initiatives substantially improved the performance of water utilities.

At the same time, it is not easy to continue the success of a programme. In general, when programs have been in operation for a certain amount of time, the law of diminishing returns tends to set in.

This will of course depend on the number of participants, the extent of the program, the level of detail and the extent to which participants seek to identify and implement best practices.

Experience shows that looking beyond the border of a country can provide new perspectives: the original reference group can be enlarged, and, in some cases, utilities across the border may provide a better comparison than with utilities in the home country. This is especially true for larger utilities or multi-utility companies. International benchmarking enables utilities to take a next step on the learning curve by finding new peers, setting new targets, and identifying new best practices and innovative solutions for management and operations.

METHODOLOGY APPLIED BY EBC EBC’s international benchmarking program includes both water- and wastewater services. Water- and wastewater services are closely related and form the so called ‘Water Chain System’. Six main activities can be distinguished (see Figure 1):

In its first pilot scheme in 2006, EBC used the Dutch benchmarking methodology for drinking water. Although this methodology thoroughly investigates performance areas and business processes, the EBC partners thought it was too extensive and complex for first time users. For this reason, an entirely new methodology has been developed for the second pilot scheme based on IWA’s Performance Indicators System. The new benchmarking methodology suits both large and small utilities in the areas of both water and wastewater.

Essentially, water utilities carry out the same kinds of activities, but scale and operating environments can differ largely. Therefore, a benchmarking model has been developed with three participation levels: basic, metric and advanced. These levels were

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THE BENCHMARKING PROCESS EBC’s benchmarking process consists of seven phases. In the preparation phase, tools and planning are updated and participants are informed about the time lines, organization and possible changes in the benchmarking methodology.

In the data collection phase, the most important work takes place. Participants collect the required data and can obtain assistance from the EBC and reghional hUB coordinators if necessary. The collected data are submitted to EBC’s online benchmarking platform (www.waterbenchmark.org) by the utilities themselves.

In the data analysis phase, the submitted data is analysed. Participants are provided with an Exception Report in case of sharp variations or other possible inconsistencies for comments and/or corrections.

The data are thoroughly reviewed by the EBC and the regional hUB coordinators. Such review and validation is essential for a reliable and unbiased dataset and for the subsequent comparisons and policy conclusions.

In the reporting phase, a series of reports are prepared on the basis of the data supplied, containing the most important performance indicators in comparison with a reference group to identify strong and weak points in performance. The participants may also view results directly online and download data and reports for any required performance indicator from the website. Additionally, by using EBC’s data reporting tool individual utilities or regional benchmarking hubs can produce cus-

tom made analysis. Thus, utilities are able to determine their position and performance gaps for the different performance areas.

In the improvement phase, utility representatives meet each other in workshops and during site visits and bilateral visits. In this phase, the results of the comparisons are discussed, good/best practices are identified and shared, and ideas are developed for utility action plans. Within a short period of time, participants are encouraged to interact as much as possible. This is the most important phase of the benchmarking process.

In the evaluation phase, the participants and team of coordinators conduct an evaluation to identify areas for improvement relating to the benchmarking process, methodology, reports, online feedback, tools, exchange of best practices and other general or practical matters.

Finally, the benchmarking cycle ends and the continuous plan-do-check-act cycle to improve performance starts all over again.

INTERNATIONAL BENCHMARKING IN THE DANUBE REGION In 2017, the International Association of Water Supply Companies in the Danube River Catchment Area, (IAWD), EBC Foundation started facilitating an international benchmarking program on a Danube catchment area level, open to water and sanitation utilities from 17 countries in the Danube region. Based on the regional benchmarking experiences from 2014 until 2016 (the first phase of the Danube Water Program), it was noticed that there was a demand to introduce this new ‘regional level’.

Therefore the Danube Region Hub was initiated in 2017, in order to support capacity building, sharing good practices and experiences, internationally, among utilities similar in size, stage of development

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and operating environment.. This new initiative provides an additional benchmarking opportunity on top ofnational and sub-regional programmes that were developed in the past few years under the Danube Water Program.

The methodology and the IT platform used for the benchmarking exercise are provided by the EBC Foundation, technical partner of the IAWD. The project team consist of the Hub Coordinator who can be contacted for practical and methodological question and IAWD Head of Technical Secretariat, who can be contacted for managerial issues. Coordinators of national and sub-regional utility benchmarking hubs may also be contacted for additional information.

Utilities that participate get their own, individual company report in which their performance in several areas is compared with other utilities in the group and with the average performance of utilities abroad as a reference. Next to this, meetings and workshops are organized to exchange knowledge and good practices. The exercise is conducted in English, though the data entry is (partly) available in Albanian, Bulgarian, Serbian and Ukrainian.

Utilities located in one of the eleven primary targeted countries of the Danube Water Program (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, FYR Macedonia, Moldova, Montenegro, Romania, Serbia, and Ukraine) and other utilities which are located in the Danube catchment area and who are (prospect) IAWD members are welcome to join the Danube HUB.

IN SUMMARY The European Benchmarking Co-operation Foundation is a not-for-profit benchmarking initiative that facilitates water- & wastewater utilities across Europe in improving their services through benchmarking and learning from each other. EBC is structured as a foundation under Dutch law and is governed by a Board composed of representatives from the Danish Water and Wastewater Association (DANVA), the Danube Water Program (DWP), the European federation of national associations of drinking water suppliers and waste water services (EurEau), Norwegian Water (Norsk Vann) and the Association of Dutch Water Companies (Vewin).

EBC Foundation annually organizes benchmarking exercises for water- & wastewater utilities in Europe and beyond. Participation in EBC’s benchmarking program is on a voluntary basis. The program is fully aligned with the benchmarking framework of the International Water Association (IWA) & the American Water Works Association (AWWA) and applies the IWA Performance Indicator System, providing a standard for exchange between different programs.

Next to the core program for Western Europe utilities, EBC facilitates regional benchmarking programs in the Danube region in close collaboration with the local national water associations. In 2017, jointly with International Association of Water Companies in the Danube River Catchment Area (IAWD) and the Danube Water Program which is jointly led by the World Bank and IAWD, EBC Foundation supports the development of the Danube Region hub, which is a benchmarking program open to water and wastewater utilities from 17 countries in the Danube river catchment area.

MORE INFORMATION ABOUT THE DANUBE HUB AT: www.d-leap.org/d-leap/the-danube-hub

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Peer Overgaard Pedersen Anders Lyngaard-Jensen Flemming Husum Aarhus Water

OBTAINING 150% ELECTRICITY SELF-SUFFICIENCY

at a Wastewater Treatment Plant OBJECTIVES Traditionally wastewater treatment is an energy intensive process and the average power (electricity) self-sufficiency achieved is 50-80%. This power self-sufficiency is based on the use of biogas from anaerobic digesters without co-digestion as fuel for biogas engine driven generators. In comparison a 150% electricity self-sufficiency (without co-digestion) has been achieved at Marselisborg wastewater treatment plant (WWTP) situated in the City of Aarhus, Denmark, and this paper describes actions taken in order to reach this degree of power self-sufficiency. Marselisborg WWTP has a capacity of 220,000 PE (1 PE ~person equivalent = 60 g BOD5 / day).

The potential for optimizing the energy self-sufficiency was identified through an energy manage-

ment audit identifying several options for energy optimization. The identification was based on results from a detailed sub-metering system for power consumption, and lead to an action plan for possible energy savings and increased energy production. The plan included 3 phases in order to convert the WWTP from an energy consumer to a net energy producer: 1. Process optimization using sensor based real time control 2. Upgrading and optimizing components (blowers, mixers, pumps, biogas engines, etc.)

3. Introduction of new processes.

Besides reaching a power self-sufficiency of 150%, reduction of energy consumption and optimization of the energy production has allowed Aarhus Water to reduce the total OPEX for the wastewater treatment service 6%.

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FIGURE 1. CONFIGURATION OF MARSELISBORG WWTP

METHODOLOGY Marselisborg WWTP (figure 1) is a conventional activated sludge plant with pre-treatment (fine screening, sand- and grit removal). Primary treatment consists of primary settlers, and secondary treatment consist of an activated sludge process (extended aeration) with Nitrogen removal and chemical precipitation for phosphorus removal. Tertiary treatment consists of sand filters. Side stream treatment of sludge liquor from final dewatering of the sludge from the anaerobic digesters has been introduced as a part of this work.

Traditional wastewater treatment is an energy-intensive process and the average energy selfsufficiency reached is 50-80%.�

RELEVANCE Using process optimization, component upgrading and introduction of new processes it has been possible to: - reduce power consumption at the Marselisborg WWTP from 4.7 GWh/year to 3.2 GWh/year, a 32% reduction.

- reduce energy costs, increase sales (power + heat) and reduce the Danish pollution tax. Value: $655,000. Return on investments ranging from 1 to 8 years – overall period for return of investments approximately 4.5 years - reduce OPEX (operating expenditures) with 6.2 % of total cost for wastewater treatment in the entire company.

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Aleksandar Šotić, D.Sc. in C.Eng. Udruženje za tehnologiju vode i sanitarno inženjerstvo (UTVSI) aleksandar.sotic@utvsi.com

Asset management:

SYSTEMIC APPROACH TO SYSTEM MANAGEMENT AND SYSTEM CONDITION MEASURING SYSTEM ABSTRACT Engineering infrastructure systems (including water supply systems) are increasingly complex and increasingly interconnected, and their value, reliability and functionality are continually worsened if these are not taken care of. In order to properly manage this process, it is necessary to adopt and apply systemic approaches to asset management - infrastructure assets. This paper presents and discusses the constituent elements of the management of infrastructure assets. The data structured and obtained in asset management processes are the basis for establishing a system for measuring the condition of a system - performance indicator system.

The traditional performance indicator system refers to backward indicators, and this paper proposes a system of advanced indicators based on assumptions.

Key words: asset management, infrastructure assets, decision making, performance indicators

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Engineering infrastructure systems, in general, and including water supply systems, are increasingly complex and increasingly interconnected, and their value, reliability and functionality are continually worsened if the systems are not properly managed.

In order to properly manage the systemic processes of these systems, it is necessary to adopt and apply systemic approaches to asset management - infrastructure assets.

The worsening of the condition of water infrastructure coincides with the increasing demands and increasing expectations of the customers, as well as with the chronic lack of capital. It is widely known that the expansion and reconstruction of utility infrastructure is one of the most financially demanding tasks at the level of local self-governments.

Based on the appropriate structured data on these systems, i.e. adequate databases based on modern ICT solutions, the management of existing assets and the planning of priority long-term investment needs for the development of water supply systems

FIGURE 1. ELEMENTS OF THE ISO 55001 ASSET MANAGEMENT SYSTEM (ISO, 2014)

can be implemented in a much more coherent and effective way.

Infrastructure assets and value derived from them are the basis for any organization that delivers a certain level of services (water supply service). Whether in the public or private sector, and whether the assets are physical, financial, human or “intangible”, Asset Management (AM) is good if it maximizes the value obtained for the money invested and the level of satisfaction of stakeholders’ expectations (Figure 1). It includes coordinated and optimized planning, asset selection, procurement /development, use, care/maintenance, and the longest possible disposal or renewal of appropriate funds and system of assets. The concept of integration and optimization of asset management has evolved since the 1990s (by the public sector in Australia), identifying a number of basic business processes, their synchronization activities, and system integration functions that give very significant performance improvements to the system being managed.

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68 In other words, asset management is to maintain the desired level of service that the managed assets (as part of a system) need to provide, for the lowest cost of their life cycle. The lowest cost of the life cycle of assets relates to the most appropriate costs of rehabilitation, repair or replacement of assets. Asset management is implemented through an asset management program and usually includes a written asset management plan.

Today’s challenges faced by water and wastewater systems are multiple. Some of them include increased demand for services (e.g. expansion of water supply systems in new industrial zones), reduced availability of resources (e.g. overexploitation of aquifers - groundwater), increased expectations of consumers and other stakeholders (e.g. shorter repair time), increased scope of regulatory requirements (e.g. requirements for monitoring individual performance indicators), overcoming resistance against price increases, identifying the best/optimal time for rehabilitation/ repair/ replacement of worn-out assets, response to emergencies as a result of failure of certain assets (e.g. due to major damage or excess pollution), etc. The stated challenges are with multiple perspectives and very different in their nature, often conflicting, which in turn requires a systemic and structured response.

Along with solving day-to-day issues, water utility companies must also face tomorrow’s issues.

Benefit resulting from asset management is a comprehensive view of the system in relation to a more specific focus in the application of another traditional approach. Some of them are annual budgeting that focuses on activities that are critical to sustainable performance (for example, by considering systemic performance - for the system as a whole), satisfying customers’ demands with a focus on system sustainability (and not on short-term requirements that can be opposed to long-term), meeting

the expected conditions for delivering services and regulatory requirements, setting tariffs based on sound operational and financial planning, extending life cycle and supporting repair decision making/ repairs/ replacement through effective and focused operations and maintenance, better response in emergencies, etc.

The application of the concept of infrastructure asset management in water and sanitation systems can be implemented taking into account one of the best practical concepts developed by the US Environmental Protection Agency, the Portuguese National Laboratory for Civil Engineering, or the Canadian National Research Council, among others. A good starting point for a water company of any size can be to define a road map, or basic and advanced asset management processes. This road map or framework could lead a utility through all the main activities constituting asset management and can be applied at a maturity level that is reasonable for a particular infrastructure system. This framework is the basis for many practical uses of asset management (Figure 2).

FIGURE 2. BASIC AND ADVANCED ASSET MANAGEMENT PROCESSES

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DIRECTOR OF REGIONAL WATER SUPPLY GORAN JEVRIĆ DURING SIGNING WITH PROF. DR VESELIN VUKOTIĆ

Signing of the Memorandum of Understanding in Educational Cooperation with University Donja Gorica In the premises of the Public Enterprise for Regional Water Supply of the Montenegrin Coast (Regionalni Vodovod Crnogorsko Primorje) (PEW), located near the Bolje Sestre water source, Rector of the University of Donja Gorica Prof. Dr. Veselin Vukotić, and Director of PEW Goran Jevrić, signed today a Memorandum of Understanding in Educational Cooperation.

Rector of the University of Donja Gorica Prof. Dr. Veselin Vukotic expressed great pleasure at having the opportunity to visit with his associates the Bolje Sestre source and the water plant of the same name, pointing out that the importance of this water system and the company is immeasurable.

He emphasized that water is a huge resource that we are not aware of enough, and that PEW is one of the best companies that he had ever visited. Cooperation between the University of Donja Gorica and PEW is significant from several aspects, and it will particularly focus on the capacity utilization of the regional water system, joint work on development projects and preparation of documentation for applying for EU funds, etc.

“PEW is a company that has been changing Montenegro, and this is certainly the beginning of a good cooperation between the educational system and the economy. I am convinced that PEW has human resources that, in cooperation with the scientific

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community, will certainly be able to implement a very serious development vision that I have been introduced to today,” said Prof. Dr. Vukotić.

PEW has been managing the regional water supply system for the Montenegrin coast responsibly and successfully for seven years. This project is the largest investment undertaking of the Government of Montenegro since the renewal of independence in 2006. As it is the case with all major projects, it took some time, and also expertise and dedication, to bring the operation of the system and the enterprise to the present level. This is best illustrated by the business performance of this Public Enterprise that is getting better from year to year, enabling it to dedicate itself to the implementation of carefully designed development projects.

Aware of the fact that the company’s human resource base needs to be improved if the company wants to engage in development projects, the company believes that young people should be given possibility to acquire technical knowledge in systems that, from both technical and institutional and financial aspects, are as complex as PEW. Due to its commitment to such a value system, PEW considers the signing of the MoU in Educational Cooperation with the scientific institution UDG as an important support to the development of the enterprise.

On this occasion, the Director of PEW Goran Jevric said: “PEW is predominantly committed to the implementation of development projects, and today’s signing of the MoU with the Rector of the University of Donja Gorica, Prof. Dr. Veselin Vukotić, is an additional incentive for PEW to begin to implement important development projects through joint work on creating young personnel who will continue their careers in the water sector of Montenegro. After having signed the MoU with the University of Montenegro last year, and before that

with the Montenegrin Academy of Sciences and Arts, PEW has institutionalized the cooperation with the umbrella scientific and educational institutions in Montenegro, and now we have much more incentive to dedicate ourselves to the implementation of the vision of future development and improvement of the water sector on the Montenegrin coast.”

This will be the way to utilize the most valuable resources of this country, which are the young people who will successfully manage complex business systems and the country in the future and continuously contribute to the further economic and social development of Montenegro.

As a socially responsible company, PEW will continue to support similar initiatives in the future and we take this opportunity to invite other companies in Montenegro, whether in state or private ownership, to further support such activities.

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CHARLOTTE RUHE, EBRD DIRECTOR FOR CENTRAL AND SOUTHEASTERN EUROPE

EBRD delegation visits Regional Water Supply Company Charlotte Ruhe, EBRD Director for Central and Southeastern Europe, with colleagues, newly elected head of EBRD office in Montenegro, Jaap Sprey, and Rade Ralevic, banker in EBRD Office in Podgorica, visited the Public Enterprise for Regional Water Supply of the Montenegrin Coast (PEW). This visit is the result of long-term successful cooperation

between this state-owned company and the EBRD, which has been a partner of PEW since 2007 in the construction of a regional water supply system for the Montenegrin coast by providing a loan of EUR 18 million. PEW has been regularly servicing its debt to the European Bank for Reconstruction and Development. Cooperation in the construction of

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the regional water supply system served as a basis for the Bank, at the initiative of the Government of Montenegro and the Ministry of Sustainable Development and Tourism, to support, in 2015, a new project – the development of Montenegro’s Water Sector Reform Study. EBRD provided a grant in the amount of around EUR 90,000.00 for the purposes of this study, which has been awarded, through an international tender procedure, to Italian company Studio Mayone, in a consortium with Italian and Montenegrin companies.

The goal of the project is to create a model of water sector optimization for the Montenegrin coast, given the fact that the present model has proved to be dysfunctional and unsustainable in every respect, and especially unsustainable in the long run, with all the challenges that we are facing, particularly when it comes to water management in the context of consequences of global climate change.

EBRD High Representative Charlotte Ruhe pointed out that she was “impressed by the achieved business results of PEW in the period 2014-2017, with the expectation that the continuing reforms in the company itself and the water sector as a whole will establish modern management standards for this important sector, to which the Bank will continue to provide decisive support, and above all for development projects in the water supply sector”.

“The business results achieved in recent years by PEW were assessed at this meeting again as a confirmation of the justification for the vision of continuing cooperation between the EBRD and PEW through further financial support for the implementation of development projects that PEW will soon commence, in cooperation with the Government of Montenegro, such as: connection of the Herceg Novi municipality to the regional water system, the continuation of the construction of the

2nd phase of the regional water supply system, the water factory, the construction of a local water supply network for several tens of thousands of houses on the Montenegrin coast which are not connected to the water supply systems managed by local water companies (ViKs), etc. It was concluded that Montenegro had significantly enhanced its institutional capacities and could rightfully point out the business success of state management in demanding technical and technological business systems such as PEW”- says Goran Jevric, director of the Public Enterprise for Regional Water Supply of the Montenegrin coast.

During its visit to PEW, the EBRD delegation received information on all the challenges faced during the implementation of this important infrastructure project and was pleased to see a video called “The Project that Transformed Montenegro”, but also the presentation of business results of this state-owned company in recent years, characterized by a stable trend of growth of all business parameters, which fully reflects the sustainable management of this demanding infrastructure system, which has a significant impact on the overall economic environment of Montenegro.

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DEPUTY DIRECTOR OF EBRD FOR INFRASTRUCTURE LIN O’GRADY

EBRD offers support for further development of the Regional Water Supply System

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The delegation of the European Bank for Reconstruction and Development, led by Deputy Director of EBRD for Infrastructure, Lin O’Grady, paid a working visit to the Public Enterprise for Regional Water Supply of Montenegrin Coast (PEW). This is the second visit of the high representative of EBRD in a very short period of time, since Charlotte Ruhe, EBRD Director for Central and Southeastern Europe, visited the company at the end of October last year.

“What is particularly exciting is the fact that PEW has reported excellent business performance in the past three years, which is the result of dedicated work of the management in financial stabilization and raising the human resource capacities of the company, as well as the readiness to respond in an appropriate and timely manner to the demands that the business environment and circumstances require. I am pleased to say that following the activities defined by the procedures of the European Bank for Reconstruction and Development, the letter of intention for the implementation of new infrastructure projects will be signed, in order to be able to create the most favourable model of financing, after the harmonization with the line ministries and the Government of Montenegro, which might not even require sovereign guarantees, due to the financial stabilization achieved by PEW in recent years,” said the EBRD Deputy Director for Infrastructure Lin O’Grady.

The business results achieved by PEW in recent years were assessed as impressive at this meeting and they are the best confirmation of the justification for the vision of the development of the regional water supply system and the continuation of cooperation, which has been ongoing between EBRD and PEW since 2007. The cooperation will

continue through further financial support for the implementation of development projects that this company will soon start in cooperation with the Government of Montenegro, including the connection of the municipality of Herceg Novi to the regional water supply system, continuation of the construction of the second phase of the regional water supply system through additional capacity increase for part of the system for the municipalities of Kotor, Tivat and Herceg Novi, because year after year, for an increasing period of time during the summer season, this part of the system works with 100% capacity, and only in 2017 it was a total of 76 days. The meeting also focused on the upcoming transformation of a public enterprise into a limited liability company, with an analysis of the effects of the new Law on the economic viability of PEW. “The EBRD delegation had the opportunity to hear about all the challenges in the functioning of this important infrastructure project, but also the ways in which they were handled by the management, because of our commitment to identifying and implementing system solutions that in just a few years resulted in a sustainable stabilization of all financial parameters with a clear trend of growth in company operational parameters. This has fully proven that a state-owned company that manages an important and demanding infrastructure has the capacity to independently solve not small business challenges, which is crucial for the Bank in making important decisions such as expressing willingness to the Government of Montenegro and us to offer a model for financing new development projects of PEW, now even without state guarantees, because PEW has demonstrated sustainability and thus obtained such status with the EBRD”, said Goran Jevric, PEW Director.

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PROF DR ZORAN STEVANOVIĆ AND REGIONAL WATER SUPPLY DELEGATION

Bolje Sestre among 150 most important karst springs in the world The World Karst Aquifer Map (WOKAM) is part of the World Hydrogeological Mapping and Assessment Programme (WHYMAP), which aims to enable global water resource management. The WOKAM project, supported by the International Association of Hydrogeologists (IAH) and UNESCO, was established in 2012 in order to gain a better global overview of karst water sources and create a basis for sustainable international and global water resource management.

A group of 30 international karst experts, working on the mapping of 150 most important karst points in the world, included the Bolje Sestre source on the map. This source supplies the entire Montenegrin coast with high quality drinking water and

deserves to be found on the new list of 150 most important karst sources in the world. It is very important for us that such important natural resource of Montenegro, given for the management to the Public Enterprise for Regional Water Supply of the Montenegrin Coast (PEW), is among the most important world karst points, because now we have a globally recognized importance and responsibility to continue with the activities that will contribute to better protection of the springs, but also to continue exploration works that involve the collection of data on the composition of the sediment, the yield of the springs, and the quality of water�, said Goran Jevric, director of the Public Enterprise for Regional Water Supply of the Montenegrin Coast.

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“The construction of the Bolje Sestre water abstraction structure for the needs of the regional water supply system is the largest implemented regional water supply project in the last quarter of century in the whole karst of the Mediterranean and Southeastern Europe, and this recognition by international experts under the auspices of UNESCO and IAH points to the global importance of water resources available to Montenegro, but is also another confirmation of the correctness of the vision of the Government of Montenegro of how to solve in a technically and technologically complex way the multiannual problem of lack of drinking water on the Montenegrin coast. This now also presupposes the global responsibility of PEW for sustainable management of overall water resources and for further capacity building of PEW in order to protect and develop the Bolje Sestre water source”, added Director Jevric.

A Memorandum of Understanding was signed with the Faculty of Mining and Geology of the University of Belgrade, defining the cooperation of PEW with this Faculty, but it was also signed with the Faculty of Civil Engineering of Podgorica and the Institute for Geological Research of Podgorica. It is planned to organize an important international gathering in Montenegro in 2018 for the first time, under the auspices of UNESCO, within which studies will be carried out in the area of Niksic Field, Bolje Sestre water intake, Skadar Lake, and the Montenegrin Coast.

“During the meeting at the Faculty of Mining and Geology, discussions were held on the results of the WOKAM project, implemented under the auspices of UNESCO and the German Geological Survey, which was completed in 2017 through five years of scientific research and resulted in mapping 150 of the most important karst springs in the world. The quality of water from Bolje Sestre source, supply-

ing regional consumers on the Montenegrin coast with drinking water, completely justified all the very complex methods that were applied during the construction of water intake structures at Bolje Sestre source”, said Prof. Dr. Zoran Stevanovic, who is currently chairing the IAH Karst Commission, which greatly contributed to the implementation of the project related to the Bolje Sestre source from 2006 to 2009, and who is one of seven members of the international committee of this important fiveyear research of UNESCO in the development of Map of 150 world most important karst aquifers.

The important cooperation of PEW with Professor Stevanovic and the Faculty of Mining and Geology from Belgrade includes joint support to an international event entitled “Characterization and Engineering of Karst Aquifers (CEKA)”.

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78 REGIONAL WATER SUPPLY DIRECTOR GORAN JEVRIĆ AND DEAN OF THE FACULTY OF MECHANICAL ENGINEERING, UNIVERSITY OF MONTENEGRO, PROF. DR IGOR VUŠANOVIĆ

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Cooperation in the implementation of the environmental management system between the Regional Water Supply of the Montenegrin Coast and the Faculty of Mechanical Engineering Dean of the Faculty of Mechanical Engineering, prof. Igor Vuťanović, PhD, and Director of Public Enterprise for Regional Water Supply of the Montenegrin Coast (PEW) Goran Jevric signed a contract on the provision of consulting services by the Center for Quality of the Faculty of Mechanical Engineering for the implementation of the environmental management system in the regular operation of PEW. This is another one in a series of activities in the successful implementation of the Memorandum of Understanding signed between the University of Montenegro and PEW in 2016.

The PEW has recognized the importance of applying the quality system in the performance of regular business activities, and after the introduction and certification of HACCP, it continues to improve its work and operations through the introduction of other quality systems. Bearing in mind the importance of environmental protection in the perfor-

mance of regular activities, the logical sequence of activities is precisely the introduction of an environmental management system.

By introducing this quality system, it is possible to reduce the possible negative effects on the environment, reduce the risk of ecological disasters, increase the ability to quickly and efficiently intervene, improve reputation and create trust in the community, etc.

By adopting an EMS policy that presupposes a range of activities such as creating the necessary documentation, training the team that will implement this system in the company, training all employees and adapting the work of the system to environmental standards, PEW, as an environmentally conscious company, wishes to show how important the concern for the preservation of the environment and natural resources is.

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PUBLIC ENTERPRISE FOR REGIONAL WATER SUPPLY OF THE MONTENEGRIN COAST AND PUBLIC ENTERPRISE FOR THE COASTAL ZONE MANAGEMENT SIGNED

The Memorandum of Cooperation and the Co-editor Agreement Public Enterprise for Regional Water Supply of the Montenegrin Coast (PEW) and Public Enterprise for the Coastal Zone Management signed the Memorandum of Cooperation and the Co-editor Agreement for the purpose of cooperation of the two state-owned enterprises in the valorization of valuable and significant national resources they manage, specifically in terms of joint activities and conceiving further thematic contents to be published in the professional journal

“THE WATERS OF MONTENEGRO“ (“VODE CRNE GORE“)

Thus, with No. 2 issue that will be published on the World Water Day on 22nd March 2018, the PEW project will become a joint project of these two stateowned companies.

It can be concluded that, starting from this issue, fresh and salt water of Montenegro will be covered by this professional publication of exceptionally high quality, published in both Montenegrin and English, whose first issue was published on the Regional Water Day, on 29 September 2017.