Krisztina Kasza
Program Director
ERRA Secretariat
Danube Water Program Annual Event
May 7, 2014
Vienna, Austria
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About ERRA
What is ERRA:
Voluntary, not-for-profit organization of independent
energy regulatory bodies of the Central Eastern
Europe (CEE), South East Europe (SEE), the
Commonwealth of Independent States (CIS), Baltic
States (Estonia, Latvia, Lithuania) and Affiliate
members from Jordan, United Arab Emirates, Africa,
Saudi Arabia and USA.
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About ERRA
Objectives:
 To improve national energy regulation in member countries
and foster development of stable energy regulators with
autonomy and authority → stable investment climate
 To improve cooperation among Energy Regulators and
facilitate the exchange of information, research, training
and experience among members and other regulators
around the world → harmonized regulatory framework →
more chance for regional market building
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About ERRA
ERRA Members:
Currently
24 Full Members:
Albania, Armenia, Azerbaijan, Bosnia & Herzegovina, Bulgaria, Croatia, Estonia,
Georgia, Hungary, Kazakhstan, Kyrgyz Republic, Latvia, Lithuania, Macedonia,
Moldova, Mongolia, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Turkey,
Ukraine
5 Associate Members:
Regulatory Commission for Electricty in BiH, Regulatory Commission for Energy of
Republik of Srpska (BiH) National Commission for Regulation in the Sphere of
Communal Services of Ukraine, Energy Regulatory Office (ERO) of UNMIK, Energy
Regulatory Commission of the City of Moscow
7 Affiliate Members:
Electricity Regulatory Commission of Jordan, Regulation and Supervision Bureau of
United Arab Emirates, Electricity & Co-Generation Regulatory Authority of Saudi
Arabia, NARUC (USA), Nigerian Electricity Regulatory Commission (NERC), Ecowas
Regional Electricity Regulatory Authority (Africa), Electricity Sector Regulatory
Agency of Cameroon
Page 4
About ERRA
CONSTITUTION
Article III/Section 2-4.
Membership
Full Members: Energy Regulators with primary responsibility for electricity
regulation. Only one Energy Regulator from each country may be a Full
Member of the Association.
Associate Members:
Additional Energy Regulators (with primary responsibility for natural gas,
district heating or other energy areas) from countries located within the
Region.
Associations of Energy Regulators from countries located within the Region.
Affiliate Members:
Energy Regulators and Associations of Energy Regulators from countries
located outside the Region.
Other state authorities within the Region who are not Energy Regulators but
who have responsibilities related to Energy Regulation.
Organizations that qualify as Associate Members but choose Affiliate
Membership status.
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About ERRA
ERRA Members - Map
Page 6
About ERRA
ERRA in Numbers :
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About ERRA
ERRA's Structure:
The supreme body of the organization is the General
Assembly, comprised of all Full Members.
The representative and executive body of the
association is the 7-member Presidium.
The ERRA Secretariat provides administrative
assistance to the Members, the General Assembly, the
Presidium, the Standing Committees and Working
Groups of the Association.
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About ERRA
Main Activities
 Standing Committees with detailed work plan and deliverables:
 Licensing/Competition Committee
 Tariff/Pricing Committee
 Working Group on Customers and Retail Markets
 Chairmen meetings
 Deliverables: discussion papers, case studies, issue papers
 Energy Investment & Regulation Conference (since 2001)
 Technical Exchange Programs
 Peer Reviews
 Website (library – issue papers as background material for training
and self-development!)
 Tariff Database
 Newsletter
 Training programs
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ERRA TariffDataBase
Premier data source on the official electricity and gas tariffs
of the ERRA member-countries (2008 – 2012 Quarter 2)
Highlights:
- Quarterly Electricity Prices for Residential and Non-residential Consumers;
- User friendly format, option to export data into Excel sheets for application in Power Point
Presentations and energy industry analyses;
- Producer, Wholesale and End-user prices for Electricity; Wholesale and End-user Prices for Natural
Gas;
- Per capita Electricity Consumption;
- Composition of Tariffs (Wholesale/Retail Margins, Taxes).
Subscription Fee for 1 year online
subscription: €1,300 + VAT
Subscription for ERRA members:
Free of charge
Payment fee for RENEWING
subscription within 1 year
from the expiry date of
subscription:
€500 + VAT
Tariff Database
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Tariff Database
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Tariff Database
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Tariff Database
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Residential Natural Gas Prices with taxes
in USD/GJ from Q3 of 2009 to Q2 of 2012 for
the Baltic States
2015.04.13.
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About ERRA
ERRA Training Courses
Background
As our association evolved and members faced staffing issues
(recruitment of qualified staff, staff changes etc.) it became clear
that there was a strong need for formal, structured training
programs to augment the best practices transfer exercised in
ERRA meetings and other activities of the association.
ERRA has developed a systematic in-house training program to
reach its members in what is probably the largest geographic
area covered by any single regional professional regulatory
association. As ERRA’s courses have gained international
recognition the association has welcomed participants from
Africa and Asia.
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About ERRA
ERRA Training Courses
Energy Regulatory Training Programs:
Introductory level:
• Summer School: Introduction to Energy Regulation
Intermediate level:
• Principles of Electricity Markets
• Gas and District Heating Regulation
• Monitoring Activities of Energy Regulatory Commissions
• Price Regulation & Tariffs
• Regulatory Information & Public Participation
• Renewable Energy Regulation
• Energy Regulation in Emerging Countries
High-level:
• Seminar for Newly Appointed Commissioners and Chairmen
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About ERRA
ERRA Training Courses
Main Characteristics of ERRA Training Programs
The guiding principles for the development of our in-house
training courses have been the following:
• the courses should focus on applied, hands-on experiences of
practising regulators;
• consideration of members’ needs when developing new
training modules;
• courses are available in classroom format;
• strong cooperation with researchers and academia;
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About ERRA
ERRA Training Courses
A unique feature of ERRA’s applied training programs is the use of
current and former ERRA members with academic background as well
as select industry experts as course instructors. This characteristic
allows ERRA to design training courses that focus equally on practical
applications and theoretical methodology, and include the transfer of
relevant direct experience. The added value that ERRA brings to
regulatory training is the real-life applied experience of its instructors
as professional regulators in the transitional economy environment.
The programs include:
• case studies,
• preparatory homeworks,
• group works, simulations, practical exercises and
• final tests.
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About ERRA
ERRA Training Courses
Course Materials
Participants receive a vast array of documentation to support the different
themes and modules.
These materials include:
• training handbook,
• powerpoint presentations of all course instructors,
• list of suggested readings and
• reference materials.
Personalized certificates are awarded to participants who successfully
complete the programs.
Certified Energy Regulator Programme (CER)
ERRA acknowledges participants who have successfully participated in a
minimum three of the training programs organized by ERRA.
The Credit System is based on credits which are earned following successful
completion of the ERRA training courses.
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About ERRA
ERRA Training Courses
Course Faculty Team
Most of the training programs are facilitated by the Regional Centre for
Energy Policy Research (REKK). REKK provides comprehensive research,
consulting and teaching in the field of electricity, gas and carbon-dioxide
markets. Prof. Péter Kaderják, Director of REKK, serves as director for most of
the training courses, who was the former President of the Hungarian Energy
Office (HEO), former Chairman of ERRA. Currently he is a Professor at the
Corvinus University and the director of a Regional Centre for Energy Policy
Research (REKK). In the framework of a long-lasting partnership between
ERRA and REKK, Dr. Peter Kaderjak is the Training Director of ERRA.
In addition to research associates of REKK, classes and group exercises are
taught by former and practicing energy regulators, most of them representing
the ERRA region and the European Union. Occasionally we invite utility
representatives to join the course faculty.
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About ERRA
ERRA Training Courses
Training Participants:
January 2005 – April 2014
Total Number of Trained Participants from
2005 to April 2014: 1,879
• Number of employees from the ERRA
Member organizations: 1,222
• Commissioners: 92
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About ERRA
ERRA Experience in Knowledge Transfer:
Regulating Emerging Markets
Good example:
• INOGATE project: "Capacity Building for Sustainable Energy
Regulation in Eastern Europe and Central Asia „
• 3 successful INOGATE projects since 2007
• 11 INOGATE beneficiaries: Armenia, Azerbaijan, Belarus, Georgia,
Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan,
Ukraine, Uzbekistan
About ERRA
ERRA’s International Relations
• ERRA is active in the international arena of
regulators.
• Close working relationship with NARUC
(National Association of Regulatory Utility
Commissioners) and CEER (Council of
European Energy Regulators).
• Membership in ICER
• Bilateral cooperation with many individual
non-member regulators
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ERRA Website:
www.erranet.org
2015.04.13.
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ERRA Website
http://www.erranet.org/Library/Search
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ERRA Website /Member Area
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ERRA Website/ Member Area
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Background Information
• Growing tendency among ERRA member regulators to
assume water regulatory tasks
• In 2008 only 35% of member organisations were
responsible for water regulation, in 2013: 50% of full
members cover water regulation
• The current list of ERRA Members in charge with
water regulation:
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Background Information
Public Services Regulatory Commission of Armenia, Armenia
Tariff (Price) Council of the Republic of Azerbaijan, Azerbaijan
State Energy and Water Regulatory Commission, Bulgaria
Estonian Competition Authority, Estonia
Georgian National Energy and Water Supply Regulatory Commission, Georgia
Hungarian Energy and Public Utility Regulatory Authority , Hungary
Agency of the Republic of Kazakhstan on Regulation of Natural Monopolies,
Kazakhstan
Public Utilities Commission, Latvia
National Commission for Energy Control and Prices, Lithuania
National Energy Regulatory Agency, Moldova
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Background Information
Federal Tariff Service, Russia
Regulatory Office for Network Industries, Slovakia
Regional Energy Commission of the City of Moscow, Russia
National Commission for Regulation Municipal Services of Ukraine, Ukraine
Electricity & Co-Generation Regulatory Authority, Saudi Arabia
Regulation and Supervision Bureau, UAE
NARUC, USA
Independent water regulators in the ERRA region: Albania, Mongolia,
UNMIK
Western European tendencies: the same tendency applies, e.g. the Italian
regulator assumed responsibility over water regulation, strong Portugese
water regulator
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Publications in 2002
Three educational materials produced in 2002 with
funding received from the Local Government
Initiative of the Soros Foundation
• Monitoring Water, Sewage and District
Heating Activities
• Performance Management
• Price Setting and Revenue
Administration
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(June 12, 2013, Budapest)
• Participants: 25 regulators joining the meeting
• The Agenda was developed around the following
topics:
• Legal Framework of the Water Management
Regulation
• Market Structure and Operational Model Issues
• Benchmarking in the Water Regulatory Sector
• Pricing Issues
http://www.erranet.org/ErraEventPages/waterregulatio
n2013/presentations
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Need
capital
invested!
Aging
infrastructure
Tariff
setting???
Overlap
with
energy?
Can
remain
a local
issue?
The role of
governments?
Justified
cost
Capital
sensitivity
Social
tariffs???
Technical/
commercial
losses?
Investments
needed!!!
Benchmarking
is key!
Disproportional
market share
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Water is different from energy
•
•
•
•
•
•
•
You can store it
Fixed costs are much greater
Efficient cost mix varies (e.g., surface v. ground)
Seasonal v. daily peaks
Monopoly is stronger (e.g., different energy sources)
Conflict over raw material with other sectors
Much more local b/c water is heavy
Source: The manager's dilemma: How to price water for cost
recovery, operational efficiency and customer satisfaction by
David Zetland, Wageningen University, The Netherlands
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…survey respondents
considered aging
infrastructure as the
most important issue
facing our industry,
with managing costs,
funding or availability
of capital, and energy
costs closely behind.
Energy costs can
account for as much as
30% of most utilities’
[water and
wastewater] operating
budget.
Survey results found in 2012 Strategic Directions in the Water Utility Industry, Black and Veatch
Source: by Denise Parrish, Deputy Administrator, Office of Consumer Advocate, State of Wyoming, USA, (NARUC)
Hungarian water utility Benchmarking
Club
Benchmarking Club within the Water Utility
Association
Launched in 2007
Voluntary and open to new entrants
20-24 companies, representing
• 60% of water service
• 30% of wastewater service
Individual company data is strictly confidential
External experts
Source: Benchmarking in the Water Regulatory Sector by András Kis, Regional Energy Research Center (REKK)
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Selected conclusions
Economies of scale are present, and take place through:
•
unit consumption (cost of water, cost of sewage, labor efficiency)
•
and the number of customers (cost of sewage, electricity consumption)
Household income:
•
has an indirect impact on costs through consumption
•
higher income equals more efficient labour
Hills/mountains (measured through the variation of altitude above sea level within the
service area):
•
contribute to higher costs for water
•
but not for wastewater service
•
higher electricity consumption, especially for water
Network density:
•
counterintuitive results for the unit costs
•
but higher density implied higher labor efficiency
Differences in drinking water treatment technology significantly influenced costs
Source: Benchmarking in the Water Regulatory Sector by András Kis, Regional Energy Research Center (REKK)
Selected conclusions
Higher water loss:
•
implies somewhat higher unit costs for the water service
A higher number of settlements
•
increases the unit cost of sewage service
•
but limited impact on the cost of water service
Ratio of industrial consumption:
•
no significant role
40-60% of differences among company values can be attributed to different operating
conditions  good first result, but further work and larger sample is needed
Source: Benchmarking in the Water Regulatory Sector by András Kis, Regional Energy Research Center (REKK)
Seawater Desalination
• A burning issue in member countries from the Middle East region
(increasing share of water production from desalination plants)
• Imminent need for desalination code which
• responds to the development in desalination industry
to privatize the sector and increase private investment
participation
• standardizes procedures
• provides regulation for the development of new plants and the
operation of existing plants
Source: Nasse al Quahtani, ECRA Saudi Arabia
Page 40
September 25, 2008
•
•
•
•
•
•
•
•
•
•
•
Benchmarking, legal and economical issues should be discussed in detail!
Aging infrastructure is a problem from the point of view of finding the capital.
Technical losses are difficult to identify, cause it is underground.
The UN declaration on the right for water should always be considered! A
certain amount of water has to be provided to each people!
Should water really be sold below the tariff? Should the rich pay for the poor
people’s consumption?
If consumers require differentiated tariffs based on low quality, how would
you regulate that?
A water company is not a welfare company, so it is not reasonable to give the
water cheaper than the actual price.
The value of water can vary based on the quantity consumed.
In case of benchmarking less is sometimes more, meaning that having too
many indicators can result in the loss of focus.
Benchmarking should not be used to have the result as it is, but to
understand why there are differences between prices.
Burning issues in certain countries: lack of unbundling of companies based on
technological cycles; diversity of technologies; absence of private capital;
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great number and varying nature of regulated companies.
• Burning issues in certain countries (cont’d): water utilities are often owned
by municipalities; the difference between actual tariffs for residential
consumers and economically justified costs is too high, these tariffs do not
cover costs thus, particular water utilities badly need investments.
• Who is responsible for taking the final tariff? The Parliament or the
Regulator?
• Is the Commission financially independent or financed from the national
budget?
• Growing need for transparency and public hearings!
• Is the capital intensive characteristic of the industry a rather political or
regulatory question?
• Does the water regulator usually regulate resources and the quality of
water? Or is this rather the responsibility of environmental authorities?
• How is it possible to measure security of supply?
• Need to think more about the customers!
• Stop using block tariffs for policy proposal!
• Balance between consumer protection and sustainability of operator is
very important.
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• The workshop was very successful, with a very
topical agenda, good and lively discussion and
with a clear request from the participants to
continue organizing similar workshops on an
annual basis
• Suggestion: to evaluate the possibility of
organizing a water regulatory training course
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What other topics would be suggested?
• Process of measuring water consumption
• Processing meter values
• Quality of supply
• “Philosophy” of water sector (natural resource,
consumers – their way of thinking)
• Incentive regulation, improving water efficiency
• Political intervene
Other suggestions:
• Should be longer
• Need treatment plant visits!
• Pricing topic should be divided from the rest as it is time
consuming
• Calculations would be appreciated
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International Outreach of ERRA
• The Danube Water Program –sponsored by The
World Bank
• ERSAR
(Portugese
regulator)
launched
a
panEuropean initiative for water regulators and will
organize a large-scale conference involving many
water regulators in September 2014 in Lisbon
• As of 2012 AEEG (Italian regulator)
has
competencies in water regulation and recently has
started intensive dialogues with other water
regulatory organizations in order to promote
cooperation.
Future Initiatives in Water Regulation
ERRA participates in international fora dedicated to
water regulatory issues in order to maintain and to
possibly increase its role in water regulation.
ERRA undertakes a formal regulatory training course
designed for water regulators.
ERRA continues to offer a meeting platform for water
regulators.
The pilot training course on
water regulation:
Possibly launch: February 2015 in Budapest
Professional content provided by REKK
Participants are primarily ERRA member regulators but the
program is open to non-member organisations and to the
general public as well.
ERRA is currently in the process of seeking partners for cofunding the project.
The pilot training course on
water regulation:
Preliminary Agenda topics
The regulator, water utility economics
and regulatory models
• Fundamentals of water utility
economics
• Regulatory models
• Exercise: setting up a regulator from
scratch
Price regulation; Benchmarking
• Price setting
• Special considerations
• Modelling exercise
• Asset management
• Performance benchmarking –
Introduction and Group exercise
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The pilot training course on
water regulation:
Preliminary Agenda topics (cont’d)
• Water utilities within the larger water management context
• Water markets with active utility participation
• Voluntary and negotiated agreement between the water
utility and farmers
• Innovative developments within the water utility sector.
• Good regulatory practices
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The pilot training course on
water regulation:
Course outline:
The regulator
The purpose of regulation.
Authority, autonomy, and accountability of a water regulator. Organizational
structure and management of a regulatory body.
Leadership.
Fundamentals of water utility economics
The economics of natural monopolies.
Supply and demand characteristics, customer profiles. Elasticity of demand.
Seasonality. The role of precipitation. Non-payment and disconnectability.
Economies of scale. Fixed and variable costs and revenues.
Room for competition within the industry.
Regulatory models
Licensing, tariffs, service quality.
Models of ownership and operation.
Different levels of regulation (EU, national, local).
Handling uncertainty and asymmetric information faced by the regulator.
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The pilot training course on
water regulation:
Course outline (cont’d):
Price regulation I – Price setting
Economic principles of price regulation.
Cost of capital, expected rate of return considerations.
Tariff designs.
Incentive regulations.
Periodic reviews. Appeal mechanisms.
Price regulation II – Special considerations
Demand management.
Smart metering.
Low income consumers, affordability, social considerations.
Revenue and tariff consequences of non-payment and late payment.
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The pilot training course on
water regulation:
Course outline (cont’d):
Asset management
Valuing the asset base. Depreciation policy. Length of asset cycles.
Financing long term asset replacement and new investments.
Divestitures, definition of the core activity profile.
Room for outsourcing.
Performance benchmarking
Utility initiated vs. regulatory benchmarking.
Data collection and data verification, quality control.
Types of indicators and their utilisation.
Statistical analysis of benchmarking data to aid regulation.
Water utilities within the larger water management context
Global trends. Climate change and where it leads.
Management of scarce water resources.
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The pilot training course on
water regulation:
Course outline (cont’d):
Innovative developments within the water utility sector
Smart water metering. Smart networks.
Leakage reduction programs and their economics.
Risk management.
Synergies with the regulation of other network services.
Desalination.
Reuse of grey water.
New methods to curb non-payment.
Good regulatory practices
Worldwide advances in water utility regulation.
Synergies between energy and water regulation.
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ERRA UPCOMING
ACTIVITIES
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December 2014 (date and venue TBD)
• Available for ERRA Members only!
• Please let us know if you are interested in participating! If you are not an
ERRA Member, your participation will be evaluated.
February 2015 (date and venue TBD)
• Are you interested in participating?
Please send an email to: secretariat@erranet.org
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Thank you for your attention!
ERRA Secretariat
secretariat@erranet.org
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