42176-012: Technical Assistance Consultant’s Report...Prepared by PricewaterhouseCoopers Pvt. Ltd....

Technical Assistance Consultant’s Report

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents.

Project Number: 8320-BAN Policy and Advisory Technical Assistance (PATA) June 2015

Bangladesh: Establishing a Regulatory Framework for Urban Water Supply and Sanitation (Cofinanced by the Netherlands Trust Fund under the Water

Financing Partnership Facility)

Prepared by PricewaterhouseCoopers Pvt. Ltd. (PwC) India Gurgaon, India

For Policy Support Unit under the Local Government Division

Knowledge summary of TA8320BAN: Establishing a Regulatory Framework for Water

Supply and Sanitation Sector in Bangladesh

A Consultants’ team was appointed by ADB to facilitate design and establishment of a regulatory framework for water supply and sanitation sector in Bangladesh. The consultancy focused on

development of the regulations, standards, and legal framework necessary for establishing the framework.

Based on inputs from GoB, the drafting of a Water Supply and Sanitation Regulatory Commission

(WSSRC) Bill was undertaken on priority. Stakeholder workshops, meetings, interviews, National Water

and Sanitation Forum meetings, and drafting committee meetings were held under the auspices of the

Policy Support Unit (PSU) of the Ministry of Local Government, Rural Development, and Cooperatives

(the Ministry). A training for key officials of WSS service providers, planning commission officials, and

PSU officials was carried out to share knowledge about the regulatory framework designed.

The WSSRC Bill lays out the principles of establishment of the WSSRC, the procedures to be followed for

decision-making in the WSS Sector, and the powers and functions of the WSSRC. Stakeholder

consultations demonstrated the need for transparency, predictability, accountability balanced with

autonomy, and stakeholder participation in WSS sectoral decision-making.

Establishment of such a regulatory mechanism is perceived as further in line with the Government’s sectoral objectives expatiated in the Sector Development Plan 2011-25.

The Regulations (pertaining to (i) financial management & reporting, (ii) tariff adjustment, (iii) customer

interest protection, and (iv) performance monitoring of service providers) further detail the principles and

processes envisaged as part of the establishment & operationalization of the regulatory framework. The

continual engagement of consultants with key officials of the sector in Bangladesh, as well as the training

session focused on dissemination of the regulations, sensitizing the officials about key aspects of the

regulatory framework, and obtaining responses to the regulatory requirements from key service providers

in the country.

The design of regulatory framework has aimed to address stakeholder concerns in a comprehensive

manner. This has led to inclusion of a number of innovative components in the framework. For example,

(a) The WSSRC has been made accountable for its decisions through elaborate and comprehensive

procedures of stakeholder consultations. This balances the autonomy conferred upon the WSSRC by its

status of a Civil Court. (b) The WSSRC has been mandated to issue reasoned orders and decisions, clearly

specifying the rationale for such decisions and orders. (c) Tariff adjustment procedures clearly lay out

opportunities for the service providers to rationalize the tariffs, while committing to better services. (d)

Customer interest protection regulations lay out mechanisms to protect customer interests as well as the

interests of the service providers through a well-specified grievance redressal mechanism.

Further, the work has produced a significant contribution in development of knowledge regarding water/

sewerage service regulation in Bangladesh through the following deliverables:

1. Guidelines for introducing regulatory accounting

2. Guidelines for business planning with a link to implementing time-bound performance improvement

thru target setting of KPIs linked also to tariff determination

3. Definition of a dashboard with selected kPIs to monitor performance and quality of service

4. An analytical study on subsidy flows (explicit and implicit) in urban water supply

To complement and further contextualize the discussions and deliberations in Bangladesh, an exposure

visit was conducted for key officials of WSS providers, planning commission officials, and PSU officials to

Manila and Kuala Lumpur. Aspects of regulation highlighting the benefits, both socio-economic and

environmental, were especially discussed with the service providers and regulating agencies during the

visit.

The actual on-ground success of such a framework depends on the enactment of the Bill, and the

stakeholders’ willingness to actually participate and use the extensive number of opportunities to engage

with the decision-making process. It is hoped that these possibilities will realize, making the regulatory

framework in reference here a landmark initiative.

***

www.pwc.com/in

1

Reference: Contract no. 104692-S52090 dt. 21 June 2013 Asian Development Bank June 2015

TA 8320-BAN Establishing regulatory framework for water supply and sanitation sector in Bangladesh Final Report

Final Report Establishing a regulatory framework for WSS sector in Bangladesh

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Table of Contents

1. EXECUTIVE SUMMARY .......................................................................... 6

1.1. Rationale: The ‘Why’ of Regulation .......................................................................................................... 6

1.2. Components: The ‘What’ of Regulation.................................................................................................... 6

1.3. Institutions: the ‘Who’ of Regulation ....................................................................................................... 8

1.4. Tools: the ‘How’ of Regulation .................................................................................................................. 8

2. BACKGROUND AND INTRODUCTION .................................................... 9

2.1. A note on the terminology used .............................................................................................................. 10

3. PROGRESS OF WORK ............................................................................ 12

4. DEVELOPING REGULATIONS FOR WATER UTILITIES ......................... 13

5. MONITORING PERFORMANCE OF WATER UTILITIES (INCLUDING WATER QUALITY) ......................................................................................... 17

6. INITIATING PREPARATION FOR ESTABLISHING A WATER ECONOMIC REGULATORY COMMISSION ........................................................................ 18

7. STRENGTHENING THE CAPACITY OF RELEVANT AGENCIES FOR IMPLEMENTING THE REGULATORY FUNCTIONS ....................................... 20

8. ROAD MAP FOR ESTABLISHING THE COMMISSION AND TO IMPROVE THE PERFORMANCE OF THE SECTOR ......................................................... 22

8.1. Operationalisation of WSSRC ................................................................................................................. 25

8.2. Operational Aspects – initiatives by WSSRC to prepare service providers to participate in regulatory processes ............................................................................................................................................................... 27

8.3. Interim Arrangements ............................................................................................................................. 28

9. SUMMARY ............................................................................................ 29

9.1. Key achievements and challenges faced during the implementation of the TA Consultancy ............. 29

9.2. Summary of the consultative workshops and meetings held on the draft WSSRC Bill ....................... 30

ANNEX 1. REGULATORY ACCOUNTING GUIDELINES .............................. 32

ANNEX 2. TARIFF REVIEW AND ADJUSTMENT REGULATION ................ 32

ANNEX 3. SAMPLE APPLICATION OF TARIFF REVIEW METHODOLOGY 32

ANNEX 4. CUSTOMER INTEREST PROMOTION AND PROTECTION REGULATION ............................................................................................... 32


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ANNEX 6. STUDY OF SUBSIDIES TO WATER SUPPLY UTILITIES ............. 32

ANNEX 7. BUSINESS PLAN GUIDELINES .................................................. 32

ANNEX 8. PERFORMANCE MONITORING AND REPORTING TEMPLATE . 32

ANNEX 9. FIRST PERFORMANCE REPORT (PERFORMANCE MONITORING DATABASE) 32

ANNEX 10. REVISED DRAFT OF WSSRC BILL- ENGLISH ......................... 32

A. REVISED DRAFT OF WSSRC BILL – BANGLA ...................................... 32

ANNEX 11. OUR NOTES ON THE KEY CHANGES PROPOSED IN BANGLA VERSION BASED ON THE STAKEHOLDER COMMENTS .............................. 32

ANNEX 12. PROPOSED ORGANOGRAM FOR THE FULLY OPERATIONAL WSSRC 33

ANNEX 13. CONCEPT NOTE ON DUE DILIGENCE OF O&M EXPENDITURE OF UTILITIES ................................................................................................ 34

ANNEX 14. ALL COMMENTS RECEIVED FROM STAKEHOLDERS ON THE ENGLISH DRAFT OF WSSRC BILL AND RESPONSES TO THOSE .................. 34

ANNEX 15. MATERIAL USED FOR TRAINING PROGRAM IN NOVEMBER 2014 34

ANNEX 16. LIST OF PARTICIPANTS IN THE TRAINING PROGRAM ......... 34

ANNEX 17. SUMMARY OF DISCUSSIONS HELD DURING EXPOSURE VISIT IN NOVEMBER 2014 TO MANILA AND KUALA LUMPUR, AND LIST OF PARTICIPANTS IN THE VISIT ....................................................................... 35

ANNEX 18. SUMMARY OF DISCUSSIONS HELD DURING THE TRAINING PROGRAM IN NOVEMBER 2014 ................................................................... 35


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Foreword

We would like to place on record our sincere thanks to officials of the PSU as well as of the ADB for the

warmth, hospitality, help, and support extended to us.

Mr Kazi Abdul Noor, the Project Director, Mr Md. Rauf, the Assistant Project Director, and all officials of the

PSU have been accessible, open for discussion, and available to address the questions we have had during the

course of this assignment.


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LIST OF ABBREVIATIONS

ADB Asian Development Bank

BFRS Bangladesh Financial Reporting Standards

CBO Community-Based Organisation

CIPP Customer Interest Protection Plan

DPHE Department of Public Health Engineering

DMD Deputy Managing Director

IBT Increasing Block Tariff

ICAB Institute of Chartered Accountants of Bangladesh

KPIs Key Performance Indicators

LGD Local Government Division

LGED Local Government Engineering Department

LPCD Litres per Capita per Day

MD Managing Director

MOLGRD&C Ministry of Local Government, Rural Development, and Cooperatives

NGO Non-Governmental Organisation

NRW Non-Revenue Water

NPV Net Present Value

O&M Operations and Maintenance

PSU Policy Support Unit

TA Technical Assistance

WASAs Water Supply and Sewerage Authorities

WSS Water Supply and Sanitation

WSSRC Water Supply and Sanitation Regulatory Commission


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1. Executive Summary 1.1. Rationale: The ‘Why’ of Regulation

1 The water supply and sanitation (WSS) sector in Bangladesh is characterised by the need for reduction

of non-revenue water, enhancing cost recovery by rationalising tariffs, improving utility autonomy,

and making operations more efficient, thereby ensuring better service delivery. To assist the

Government of Bangladesh to address this situation and to improve the efficiency of the WSS sector,

the Asian Development Bank agreed to finance this Technical Assistance (TA) to design an economic

regulatory commission for the water supply and sanitation sector. This Technical Assistance was

intended to build on the work that had been started, in 2011, with the creation of the Water Cell in the

Project Support Unit of the Local Government Division. Regulation of the sector is expected to bring

in efficiency, transparency, accountability, autonomy, and therefore an overall improvement in the

way the sector is managed.

2 Initially, the Water Cell within the Policy Support Unit of the Ministry of LGRD&C was envisaged to

develop, taking on the role of a regulator. Discussions were held with various stakeholders, primarily

the Ministry on the role of the Government (or any government entity) in regulation of the sector. It

was thought important that the role of the Government is to be a ‘facilitator’ or ‘policy director’, and to not directly control the sector. The need for a Water Economic Regulatory Commission that would be

independent of the Government was therefore stressed. Based on this, the Terms of Reference and the

activity schedule of the TA consultants were re-aligned to first prepare a draft of the Bill establishing

the Water Economic Regulatory Commission. This re-alignment was also based on the inputs from the

then Secretary (LGD) to expedite the process of first establishing the Regulatory Commission before

preparing the tools of regulation. It has been debated that the political objectives over-turn the

financial and economic interests of the sector. At the same time, the government is ultimately a

political representative of the public. Due to this competition of interests of the sector and the public,

it is important that the government takes a transparent position representing both the sector's as well

as the public interests. Therefore, instead of direct control of the sector (chiefly the single-handed

powers on tariff) from the government, we have proposed a mechanism that allows avenues for all

stakeholders to transparently and accountably consider the sectoral as well as public interests. The

autonomy or independence of the regulator is in the sense of the processes and procedures that the

WSSRC is allowed to conduct. In that sense, the government would pass a legislation that would

empower and entrust the WSSRC to carry out processes that are transparent and pre-agreed. The

words independent and autonomous are therefore automatically to be construed in this context, since

the WSSRC's establishment itself is going to be through an instrument approved by the Hon.

Parliament of Bangladesh.

3 During the further rounds of discussion, various stakeholders stressed (a) the need for inclusion of

sanitation (to the extent of sewerage management initially) in the purview of the regulation, and (b)

the interconnections amongst the ‘economic’ aspects of regulation, and the other aspects (such as

quality, coverage, reliability, & affordability of service) of regulation. Therefore, the WERC was re-

termed as the Water Supply and Sanitation Regulatory Commission (WSSRC) with appropriate

modification in the powers, functions, and responsibilities of the Commission.

1.2. Components: The ‘What’ of Regulation

4 The goal of this assignment is to integrate international experience in regulating the water supply and

sanitation sector with the Bangladesh context, and design a regulatory commission which would be

recognised by the key stakeholders in Bangladesh as a credible means of improving the efficiency and

effectiveness of the various water supply and sanitation service providers. This assignment supports

the Government’s reform agenda for WSS as elaborated in the ‘Sector Development Plan (FY2011-

2025): WSS sector in Bangladesh’.


7

5 PricewaterhouseCoopers Pvt. Ltd. (PwC) India was selected as the consultant for the Technical

Assistance with a mandate to develop an appropriate regulatory framework for the urban water supply

and sanitation sector and to support the government in drafting of rules and standards for regulating

water utilities. The consulting team conducted a series of workshops and meetings with key

stakeholders to understand their concerns regarding the WSS and their opinions/ideas regarding how

best to proceed in designing the proposed economic regulatory commission and the broader

regulatory framework for the sector.

6 The team also used its international experience in the sector and integrated the information received

from those meetings with the experiences and lessons learned from other countries in designing the

proposed regulatory framework. Those preliminary plans and concepts were presented to key

stakeholders for review and discussion, and based on the feedback received, those initial concepts

were refined to make them more appropriate for Bangladesh. The following table summarises the key

lessons learnt from international experience, placed in the Bangladeshi context.

Table 1 Lessons from international case studies and their placement in Bangladeshi context

Key aspects of Water Regulation

Lesson from International Experience

Placement of the Lesson in Bangladeshi Context (this has been subject to stakeholder consultation)

Tariff adjustment Tariff can be effectively used as a tool to not only achieve financial/ economic objectives, but also to send signals for better service provision to utilities, and judicious use of water to the customers.

Instead of establishing a regulator that solely works towards revising water tariffs, the WSSRC has been empowered to handle tariff adjustments by using tariff as such a tool to facilitate achievement of objectives including financial, economic, social, and environmental.

Independence and Accountability of the Regulator

Regulator’s reporting to the Government or other agencies may result in Regulatory Capture. On the other hand, absolute independence may result in irrational/ unjustified decision-making.

To manage the tension between independence (irrational governance) and accountability (capture), procedural accountability mechanisms have been proposed. These mechanisms will make the decision-making transparent (the WSSRC has to publish all its decisions, minutes of meetings, directives received from government, as well as comments received from all stakeholders), participatory (clear processes are prescribed for elaborate public consultation), and accountable (the WSSRC has to issue ‘reasoned’ orders, demonstrating why and how exactly a decision has been made.

Autonomy of utilities

Excessive regulation (micro-management) by the Regulator mars efficiency and good judgement of the utilities to make decisions best suited for them. On the other hand, too much freedom may tempt the utilities to get away with unreasonable tariffs, low efficiencies, poor service coverage etc.

The principles of transparency, accountability, and participation have been extended to cover utilities’ decision making as well, for key regulatory decisions. The utilities are to seek public comments on their proposals (such as tariff, customer interest protection plan etc.) on which the WSSRC would pass the final order subject to the participatory processes mentioned above.

Information provided in a standard format

It is important to have the utilities provide key operating and financial data to the regulator in a standard format to facilitate effective analysis and comparison of the results.

The Performance Monitoring and Reporting Regulation and the Regulatory Accounting Guidelines define the data to be provided by the utilities and the required formats. To further standardize the process, the WSSRC will use the data provided to calculate the agreed upon KPIs to


8

Key aspects of Water Regulation

Lesson from International Experience

Placement of the Lesson in Bangladeshi Context (this has been subject to stakeholder consultation)

ensure accuracy and facilitate benchmarking.

1.3. Institutions: the ‘Who’ of Regulation 7 The proposed Bangladesh Water Supply and Sanitation Regulatory Commission (WSSRC) can serve

as a change agent for the WSS in Bangladesh by helping the utilities deliver sustainable services. This

change will result in improved operating efficiency, improved accountability to customers, and

strengthened management by monitoring and the benchmarking of performance, tariff levels

commensurate with efficient levels of operating expenses, and increased levels of capital flowing into

the sector.

8 The proposed Bangladesh Water Supply and Sanitation Regulatory Commission (WSSRC) will also

address issues associated with consumer interest promotion and quality assurance. Regulation will

give the service providers an opportunity to be heard and to demonstrate and publicise their customer

protection interests. It will also give the service providers a very well-organised opportunity to ask for

rational tariffs, covering rational and efficient costs of service provisioning.

9 As discussed before, the role of the Government (LGD and PSU) will be to draft appropriate policy

framework for the utilities to adhere to. The WSSRC will operate within this framework. All

Regulatory decisions will be made considering the policy directives (or the ‘value-based choices’) made by the Government as a representative of the people of the country1.

1.4. Tools: the ‘How’ of Regulation

10 The outputs developed by the consultant team are attached as annexes to this report and include: (i)

the draft Bill (English version) to establish the Bangladesh Water Supply and Sanitation Regulatory

Commission , (ii) tariff review and adjustment methodology, (iii) regulatory accounting guidelines,

(iv) service standards and key performance indicators, (v) Customer Interest Protection and

Promotion Regulation, (vi) finance and operating reporting requirements, and (vii) business planning

procedures. In the process of designing the proposed regulatory commission and in working with the

Policy Support Unit and other key stakeholders, the following findings and conclusions were

identified:

a. Support at the highest levels of government is essential for the establishment of the WSSRC

b. Support at the highest levels of government is essential in order to enable the utilities to

improve the level of sustainable water supply and sanitation services needed in reducing

poverty and promoting economic development

c. The current system of implicit operating subsidies being provided to the utilities should be

replaced with a system of explicit subsidies targeted to customers and intended to increase

access to the piped water supply network

d. A foundation for effective regulation should be developed through the use of regulatory

accounting guidelines and business planning

1 For example, what level of cost recovery should be allowed is a value-based choice. Most governments choose to set this at 100% of the O&M costs. The policy directives can further specify what costs can be termed as O&M costs, how much of these can be charged to tariff etc. On the downstream, the policy directives can specify if a section of society will get free/ subsidized water. So that the WSSRC, while adjusting tariffs will consider these preferences and carry out the tariff adjustment procedures accordingly.


9

e. Tariffs should be adjusted based on proper levels of operation and maintenance expenditures

intended to extend the useful life of the fixed assets and improve the operational efficiency

and sustainable asset management of the utilities

f. The operations and management of the public utilities should be strengthened to make them

“regulatable”

g. The level of managerial autonomy and accountability for the utilities and for the management

of the WSSRC should be enhanced.

h. The functions regarding policy (government), regulations (WSSRC), and operations (utilities)

should be clearly separated and

i. Time should be provided for the changes to be implemented. It is important to understand the

sector and the key stakeholders will need time to develop the needed capacities and trust in

the newly formed WSSRC. As such, the draft Bill to establish the Bangladesh Water Supply

and Sanitation Regulatory Commission should contain a derogation clause to provide the time

needed to make the transition from the current operating environment to one in which the

utilities recover their full cost of operations through tariff, and the increased capital flows into

the sector which will enable the utilities to expand their networks and increase the service

coverage levels.

2. Background and Introduction

11 A study conducted by Asian Development Bank (ADB) and Policy Support Unit (PSU) in 2010 to

reform the water supply and sanitation sector, recommended that the regulatory framework should be

passed-in gradually in 2 (two) stages:

a. The first stage would be the creation of a Water Cell within the Ministry (Ministry of Local

Government, Rural Development & Cooperative, MLGRDC) which will have the function of

leading the reform initiatives for utilities as well as pave the way for the creation of a Water

Economic Regulatory Commission. The Water Cell could be incorporated in the PSU to

reduce time for its creation and for better coordination and synergy with the PSU itself. The

Regulator is also involved in policy recommendations for the water sector.

b. The second stage would involve the creation of the independent Commission. The second

stage could be done after 3-6 years when sector conditions are fit for a Commission.

12 These recommended reforms are consistent with ADB’s country partnership strategy (2011-15)

highlighting the need for improving the legal and regulatory framework of the urban water subsector.

The Government of Bangladesh (GoB) accepted the recommendation and established Water Cell in

2011. This Technical Assistance assignment from ADB was designed to establish the regulatory

framework for urban water and sanitation sector (WSS) in Bangladesh. This assignment supports the

Government’s reform agenda for WSS as elaborated in the ‘Sector Development Plan (FY2011-2025):

WSS sector in Bangladesh’.

13 The objective of this TA assignment is to assist Government of Bangladesh (GoB) in making the water

cell in the Policy Support Unit (PSU) of the Local Government Division (LGD) fully functional, in

addition to establishing the WSSRC. This can be implemented by developing necessary rules,

regulations, and standards for regulating water utilities operating in the urban sector and starting

performance monitoring of major water utilities. Specific outputs of the TA include:

a. Regulations and standards for regulating water utilities, including (i) financial management

regulations, (ii) tariff adjustment methodology, (iii) service standards and key performance

indicators, and (iv) customer service regulations;

b. Preparing monitoring reports on the performance of major WSS service providers by using

the approved regulations and standards by reviewing the reports submitted by water utilities;


10

c. Initiating preparation for the establishment of a water supply and sanitation regulatory

commission (WSSRC), including the preparation of the road map for its establishment; and

d. Capacity building of the government officers, particularly those of the water cell, to perform

their functions.

14 With the support and assistance of the PSU, the Team met with a large number of stakeholders both

as part of three formal stakeholder workshops that were conducted and in private meetings to discuss

the assignment and to listen to their comments and opinions. A number of stakeholders also

communicated their comments in writing to the PSU and to the team of Consultants. The following

table presents a representative list of organisations who provided through their key officials their

comments on the draft of the WSSRC Bill. A compiled set of comments from multiple stakeholders,

and the responses to those are included in Annex 14 of this report.. In addition, three drafting

meetings were held in the PSU to draft and refine the Bangla version of the Draft Bill. The Bill was

also hosted on the PSU’s website to invite public comments. Thereafter, the comments received from various stakeholders were incorporated by the PSU in the Bangla version to finalise it.

Table 2 Organisations whose comments were incorporated in the Draft WSSRC Bill before submitting it to PSU for further processing and translation into Bangla

1 WaterAid, Bangladesh

2 Water and Sanitation Review Committee Meeting (October 2013)

3 Water and Sanitation Review Committee Meeting (November 2013)

4 Dhaka WASA

5 Bangladesh Energy Regulatory Commission

6 Project Director, Bangladesh Groundwater Management Project

7 Bangladesh University of Engineering and Technology

8 Khulna WASA

9 Department of Public Health Engineering

10 Water and Sanitation Programme, Bangladesh (World Bank)

11 Legal Counsel, Asian Development Bank

12 Bangladesh Telecom Regulatory Commission

13 The World Bank

14 Policy Support Unit, MoLGRD&C

15 UNICEF

16 Narayanganj City Corporation

17 Japan International Cooperation Agency (JICA)

18 DevCon Bangladesh

19 Ministry of Public Administration

20 Stamford University

21 Dushto Shasto Kendra (an NGO)

22 Preparing Urban Governance and Infrastructure Development Project, III (ADB) –

Dy. TL

23 Deputy MD (Research, Planning, and Development), Dhaka WASA

24 Senior Water and Sanitation Specialist, WSP

25 Co-Chair, LCG's sub-group on Water and Sanitation

26 Institute of Water Modelling

2.1. A note on the terminology used 15 Since the inception of the assignment, more clarity has emerged regarding a few of the terms used in

the ToRs for this assignment to denote legal and policy instruments in Bangladesh. The following

table presents this clarity, and the connection it has with our outputs of this TA.


11

Table 3 Terms used in the ToR and their interpretation in the context of the assignment execution

Terms used in the ToR for this assignment

Brief note on clarification regarding those

Connection of the terms/ the clarity with the outputs of this assignment

Rules and standards for regulating water utilities Service standards and key performance indicators

Rules are promulgated by the Government as per the Acts. These rules specify the daily operation level details of the authorities, such as their working hours, the offices, the status of the officials, etc.

The regulations (procedures for regulating the utilities) have been developed herewith for regulating the WSS utilities. The regulations are drafted, promulgated, and enforced by the Regulatory Commission (WSSRC). The Bill as well as the regulations provide clear framework, mechanisms, and procedures to be followed for this (drafting, promulgation, and enforcement of regulations).

Standards are components of regulations. For example, performance monitoring will include standards on level of service, etc. against which the performance of the utilities will be assessed.

The Performance Monitoring Regulations, as well as the other regulations (such as Financial Management Regulations, Tariff Adjustment Regulations, and CIPP Regulations) include standards for various components. These standards are often determined by policy decisions (e.g., a 24x7 standard for water supply is a policy decision to provide round the clock water). The regulations therefore, in addition to inclusion of standards, provide mechanisms to take on board policy decisions as well as stakeholder inputs on the standards to be followed and enforced.

Financial management regulation, including billing and collection systems, and preparation of financial statement; finance and operating reporting requirements for water utilities

Financial management is a system internal to the operators and would include items such as recording transactions, billing & collection, and the preparation of financial statements. These internal systems need to be developed to provide the information needed for regulatory requirements.

The Regulatory Accounting Guidelines specify the financial information needed by the regulator using information recorded by the internal financial management systems of the operators. This standardised information allows for benchmarking across the utilities.

Reporting to the water cell; assisting the water cell in commencing performance monitoring of water utilities by using the rules, regulations, and standards drafted under output 1.

Water Cell is a part of PSU, which is in turn mandated to support the LGD for water sector activities, and facilitate reform. More clarity is still needed to ensure whether PSU/ Water Cell can be the monitoring agency for performance of water utilities. This is since the PSU has not been integrated with the Ministry yet. After integration of the PSU in the Ministry, the Ministry will decide on the role of the PSU as a possible monitoring agency on behalf of the Government (separate from the proposed WSSRC).

By the time the WSSRC is established, the PSU will be the repository for the data and information on performance monitoring. The PSU will not be mandated to monitor or play any other regulatory role, but to assist in policy formulation.

Water Quality Monitoring Framework (including

This framework is a part of performance monitoring

The Performance Monitoring Regulations include these items.


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Terms used in the ToR for this assignment

Brief note on clarification regarding those

Connection of the terms/ the clarity with the outputs of this assignment

microbiological and residual chlorine requirements)

The microbiological & residual chlorine requirements will flow from WHO Guidelines. The actual costs and their efficiency for cost recovery will fall under the purview of the WSSRC. This has been incorporated in the Tariff Regulations.

3. Progress of work 16 Extension of the project closing date: The Government and the ADB agreed to extend the

closing date for the project until June 30, 2015, within the original budget.

17 Drafting of WSSRC Bill: The effort to establish the regulatory framework for the urban water and

sanitation sector proceeded through meetings with multiple stakeholders (both individually as well as

in workshop mode), based on which a draft of the WSSRC (Water Supply and Sanitation Regulatory

Commission) Bill was prepared. Based on the meetings with the various stakeholders, the decision

was made that the proposed Regulatory Commission should be responsible for the entire sector and

not just urban. It was also agreed with the stakeholders that the roll-out of the Commission should be

done is a phased manner and that the first phase would focus on urban service providers.

a. Phased approach to cover geographical & sectoral purview: While the initial focus of

this consultancy was on urban WSS, as a result of the early stakeholder workshops, the

decision was made to draft the Bill for establishment of the Water Supply and Sanitation

Regulatory Commission which can extend to the entire sector, while the Regulations drafted

currently would focus only on the urban sector2. Further, the WSSRC would be empowered to

draft regulations based on the identified needs, following transparent and accountable

procedures as prescribed in the Bill.

18 Submission of Progress Reports 1 and 2: The first Progress Report was submitted in July 2014

and the second report in December 2014. The second report covered the following items:

a. The reports of the training program and the exposure visit to Malaysia and the Philippines,

b. The updated draft of the WSSRC Bill,

c. The performance monitoring of service providers,

d. The presentations used in the training programme, and

e. A summary of discussions held during the exposure visit and the list of the participants.

19 Refinement of the documents drafted: The regulations and other documents drafted have been

refined to incorporate the feedback from the aforementioned activities. This Draft Final Report

presents these refined versions of the documents.

a. The draft WSSRC Bill: As indicated in Progress Report 2, the draft of the English version

of the WSSRC Bill was submitted to the National Forum for Water Supply and Sanitation on 4

September, 2014. The meeting concluded that the draft WSSRC Bill would be translated into

Bangla and comments would be invited from various stakeholders on the Bangla version of

the Bill. The first Bangla version of the Bill was prepared and public comments were invited in

March 2015. As discussed further under Section 6 of this report, the Bangla version of the

draft WSSRC Bill has been updated to reflect the comments received and it was submitted by

2 This has been addressed in the Bill by introduction of a phased approach that enables gradually expanding sectoral and geographical purview of the WSSRC.


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the PSU to the Ministry for review and further processing. 17th Meeting of National Forum for

Water Supply and Sanitation was held on 12 February 2015 and there were some specific

decisions giving the importance of the Act. It was decided to finalize the Act

addressing/accommodating the provisions of present acts, especially the WASA Act, City

Corporation Act, Municipality Acts and others. After addressing the observations of the key

sector organizations the Bengali version was to be finalized and processed for approval.

b. Updating Regulations: During the training conducted in November 2014, the draft

regulations were presented to the participants (detailed list of participants was included in

Progress Report 2 – this consisted of officials from major water utilities, Planning

Commission, DPHE, as well as PSU). Based on the comments and suggestions provided by the

participants and the observations made during the exposure visit, the draft regulations have

been updated. A discussion of those updated documents is presented in Sections 4 and 5 of

this report and the updated documents are presented as annexes.

c. Preparation of Performance Monitoring Reports: During the training program held

in Dhaka from 9 to 11 November 2014, the proposed Performance Monitoring Report

template to be used by the operators to report the operational details to the Commission were

presented and discussed. The proposed report template had been sent to the participants

prior to the training and they were requested to respond with the data needed to complete

these reports and bring that data to the training program. The template for the proposed

monitoring reports have been revised based on these discussions and the revised Performance

Monitoring and Reporting Regulation is discussed in Section 5 of this report along with the

First Financial Management and Operations Report. Further, given the difficulties

encountered by many of the operators in collecting the needed information, the Road Map for

Establishing the Commission and to improve the Performance of the Sector presented in

Section 8 of this report includes programs to be provided to strengthen the capacity of the

operators to collect and report on the results of their operations.

4. Developing Regulations for Water Utilities

20 As indicated in Section 3, the draft regulations to be used by the Commission to regulate the water

utilities have been revised to reflect the feedback received from the participants in the training

program and from other meetings and discussions. The summary of the revised regulations is

presented below and the revised documents are attached to this report as annexes.

21 It may be noted that the drafts of the regulations provide for revision, refinement, and promulgation

of the regulations only after a process of incorporation of stakeholder comments. The WSSRC has

been mandated to carry out this process. The process will broadly have the following steps:

a. The WSSRC prepares and publishes the first draft of the Regulations,

b. Stakeholder comments are invited on the first draft,

c. Final revised draft of the Regulations is circulated and promulgated,

d. The stakeholders can file petitions against the final Regulations in case of grievances, or

e. The stakeholder can start complying with the Regulations.

22 Regulatory Accounting Guidelines (RAG): The Regulatory Accounting Guidelines have been

developed to enable the operators to produce consistent financial statements reflecting the cost of

providing services. This has been done by including both historic and current cost accounting. This

will enable WSSRC to ensure the tariffs reflect and cover the cost of service provision. Regulatory

accounting is recognized as international good practice as it provides the regulator with the financial

information needed to monitor the utility’s performance. Regulatory accounting is based on the


14

utility’s data but generally includes additional information deemed essential by the regulator to determine the real cost of providing water supply and sanitation services for tariff setting purposes.

23 The Regulatory Accounting Guidelines have been adapted from the Guidelines for the Contents of

Regulatory Accounts developed for OFWAT for the United Kingdom. To facilitate the implementation

of the RAGs, the changes from the information required by the Bangladesh Financial Reporting

Standards have been kept to a minimum.

a. The RAG does not replace the requirement for the operators to provide their financial statements

in accordance with Bangladesh Financial Reporting Standards (BFRS)3. In this context, the RAG

are intended to take precedence over the accounts produced using the BFRS for the purposes of

the Commission. As a corollary, wherever the RAG does not specifically address an accounting

issue, the BFRS should be followed. Further, the RAG is based on the same transactions and

documentation used to develop the financial statements required by the BFRS. Following are the

areas where the RAG requires different (in terms of content) information than that required by

the BFRS:

i. The separation of business activities into core and non-core;

ii. The use of infrastructure renewal accounting to estimate expenses for the

maintenance of below ground infrastructure; and

iii. The use of replacement cost (or current cost) accounting for all above ground

fixed assets.

b. Infrastructure renewal accounting is an internationally practised idea across infrastructure

sectors4. The advantage of accounting for infrastructure renewals is that it helps avoid disputes on

whether major maintenance costs would be termed as capital outlay or O&M. Recognizing the

infrastructure renewal charge would provide the WSSRC a handle to approve or reject costs to be

recovered through tariff adjustment. In context of Bangladesh, where the assets are old and

possibly deep underground, this practice will need time to mainstream. The wealth of experience

and expertise available with the utility officials will also enable them to make educated estimates

where the exact figures may not be feasible to assess.

c. The WSSRC Regulatory Accounting Guidelines consist of the following standards:

i. Regulatory Accounting Standard 1: - The Content of Historic Costs Accounts &

Infrastructure Renewal Charge: Regulatory Accounting Standard (RAS 1)

presents the requirements for the accounting information to be provided by the

service providers:

a) The historic cost accounting statements of the service providers;

b) The analysis of the core and non-core business activities; and

c) The Infrastructure Renewal Charge.

ii. Regulatory Accounting Standard 2: - Accounting for Current Costs : This

Standard presents the requirements for the service providers to present current

cost accounting statements, which:

a) Provides the means to measure the actual costs of supplying services

across the water supply and sanitation sector;

b) Provides the means to calculate a realistic measure of an asset’s current value; and

3 The BFRS pertain to ‘how’ or the manner of reporting (such as double entry, cash flow, profit and loss, balance sheet etc.), while the RAG focus on ‘what’ or the content of financial reporting (e.g., current or replacement costs of over-ground assets, infrastructure renewal charge for underground assets etc.) 4 One of the references is http://ec.europa.eu/transport/themes/infrastructure/studies/doc/2005_11_30_guidelines_infrastructure_report_en.pdf which coves infrastructure renewal charges as part of the infrastructure costs.


15

c) Promotes transparency of the real costs involved with providing

water and sewerage services.

The Regulatory Accounting Guidelines are presented in Annex 1.

24 Service Standards and Key Performance Indicators: Please refer Section 5 for discussion

regarding the Performance Monitoring and Reporting Regulation.

25 Tariff Adjustment Methodology: Tariff Adjustment and Review Regulations specify a

transparent, independent, predictable, as well as participatory procedure for tariff adjustment. This

includes the following steps:

a. The WSSRC drafts, updates based on stakeholder comments, & promulgates the Tariff

Adjustment & Review Regulations;

b. The Tariff Regulations specify the components (O&M costs, time-bound target performance

with selected KPIs, inflation adjustments, unacceptable costs, etc.) to be considered for tariff

adjustment;

c. The Service Providers prepare tariff proposals based on the Regulations;

d. The WSSRC examines the proposals (after as well as before incorporation of comments from

stakeholders)

e. The WSSRC invites stakeholder comments on the tariff proposals;

f. The Service Providers revise/ refine the tariff proposals based on the stakeholder’s comments;

g. The WSSRC issues tariff orders based on the above steps; and

h. Pursuant to the Regulations as well as the quasi-judicial powers bestowed upon the WSSRC,

aggrieved stakeholders (it can be anyone- service providers as well as the customers) can

petition the WSSRC and obtain a hearing on their grievance5 related to the tariff order6.

26 The Tariff Adjustment and Review Regulation and the application of that regulation to two operators

are presented in Annex 2 and Annex 3 respectively.

27 The route for automatic adjustment for inflation is provided in the Regulations. The way to exercise

this would be for the WSSRC to promulgate an order enabling such inflation adjustment.

28 Casting this ‘automatic’ adjustment in the Act or in the Regulation would compromise the flexibility in

such adjustment, due to the procedures required for modification of either. On the other hand, an

Order of the WSSRC promulgated in line with the Regulations and the Act will be quick, flexible, and

easy to implement. The other considerations for tariff adjustment (such as the future costs estimated

for improving service delivery, infrastructure renewal charge etc.) have been included in the

methodology.

29 Customer Interest Protection and Promotion Regulations: The draft Customer Interest Protection

Plan (CIPP) to be prepared as per the CIPP Regulations encompasses various aspects of service

providers’ interaction with the customers and vice versa. These aspects may have overlaps and inter-

connections with other aspects of service provisioning such as the key performance indicators of

service providers and the tariff charged for service provisioning. At the same time, these Regulations

need to be perceived and defined separately from KPIs and tariff regulations to ensure that the overall

interests of customers as well as those of the Service Providers are protected and the service

provisioning is regulated effectively. Ensuring the redressal complaints from customers is a part of

this concept of customer protection. These Regulations have, therefore, been drafted considering the

5 WSSRC Bill distinguishes a complaint (as that against the service provider or against a customer), from a grievance (as that against an order or a decision made by the WSSRC). 6 A relevant point is that the WSSRC is mandated to issue reasoned orders, i.e., orders with reasons.


16

inter-connections amongst transparency, accountability, participation, and protection of customers’ interests.

30 The draft Regulations to address the interests of water users in the context of the establishment of the

WSSRC have been discussed during the consultations with various stakeholders, as well as in the

workshops organized by the PSU. Based on these discussions, the interests of customers would be

related to the following dimensions:

a. Access to service,

b. Affordability of service,

c. Reliability of service,

d. Quality of water provided,

e. Redressal of customers’ complaints related to the service, and

f. Overall transparency, accountability, and participation in decision-making of the water

and sanitation sector under WSSRC’s purview.

31 Further, the required preparation of a Customer Interest Protection Plan (CIPP) by the service

providers would serve to:

a. Make the service providers aware of the measures they need to take to protect customers’ interests,

b. Make the customers aware of these measures expected to be taken by the service

providers,

c. Provide remedies and measures for the service providers to prove that they have complied

with what they targeted for protection of customers’ interests, d. Provide mechanisms to the WSSRC in case of non-compliance of the service providers

with the CIPP, and

e. Provide remedies to the customers in case of non-compliance of service providers with the

CIPP.

The Customer Interest Protection and Promotion Regulations are presented in Annex 4.

32 Finance and Operating Reporting Requirements: The finance reporting requirements are defined in

the Regulatory Accounting Guidelines presented in paragraph 22 above. For the discussion on

performance (operating) requirements, see Section 5.

33 Legislative Changes to Improve Coordination: The draft Act, i.e. the Bangladesh Water Supply and

Sanitation Regulatory Commission Act, 2015, once it becomes a law, will entail amendments,

modifications, and re-adjustments in certain other statutes. If Government wants to achieve optimum

benefits from these statutes would need to undergo some modifications. This may be necessary for

coordinated efforts in water resource planning sector for efficient administration of the Acts, as

presented in Annex 5.

34 Subsidies to water utilities (Service Providers): There are essentially two distinct rationales for

subsidizing water supply services. The first rationale is that subsidies help to make (or keep) services

affordable for poor households, and the second rationale is that utility subsidies are an effective way to

address income poverty and inequality. In many cases, subsidies have adverse consequences that can

actually work against improving the quality of service to existing consumers and extending access to

unconnected households. Subsidies can also induce inefficiency in utility operations. Misdirected

subsidies tend to produce financially weak utilities with stagnant service areas and declining service

quality, because fiscal transfers are not always dependable and cross-subsidies are frequently

insufficient to cover the subsidies provided to consumers. The impact of financially weak utilities

means that the poorest unconnected households face the prospect of relying on alternative and often

more expensive water. Further, while the objective of providing subsidized water services is to benefit


17

the poor, the impact is generally just the opposite – those who consume the most water (non-poor)

receive most of the benefits from these subsides.

35 The study discusses the types of subsidies provided to utilities – capital and operating – and the

importance of explicit and targeted subsidies versus the more common implicit subsidies. The study

proceeds to indicate the types of subsidies being provided to utilities in Bangladesh, and using the

financial information provided by the three largest major water supply and sanitation service

providers, Dhaka, Chittagong and Khulna Water Supply and Sewerage Authorities, estimates that the

Government of Bangladesh provides operating subsidies to the three WASAs which totals to

approximately 9,000 lac taka (approx. 12 Mn USD equivalent) per year. Please refer to Annex 6 for the

details supporting this estimation. It may be noted that this amount will reduce with reducing levels of

NRW. This is because the actual revenues will increase when the NRW decreases.

36 The study concludes by stating that it is beyond its scope to comprehensively document all of the

subsidies being provided to the sector, including both subsidies to the service providers and subsidies

to customers, and recommends that the issue of the amount and form of subsidies in the water supply

and sanitation sector be addressed by Government as part of its larger poverty reduction strategy.

37 The study also recommends that Government review its current water subsidy policy and ensure that

the subsidies are clear, transparent and easy to monitor and implement, and that the subsidies

provided to both the service providers and the consumers are explicit and targeted and based on

increasing access to water for the poorest residents rather than providing operating subsidies to the

service providers. If the decision is made to continue providing operating subsidies to the service

providers, those subsidies should also be clear and transparent and declining over a short and fixed

period of time. The study is presented in Annex 6.

38 Business Planning: Business planning enables both the service providers as well as the Regulator to

envisage the upcoming initiatives for service level improvement. This will have direct and important

connections with the tariff proposals, in terms of acceptable costs that can be charged to tariffs. The

Business Planning guidelines have been prepared based on this concept, and specify the aspects that

need to be incorporated in the business plans of the service providers. The Business Planning process

and formats are presented in Annex 7. Business planning is envisaged as an integral part of Tariff

Adjustment and Review.

5. Monitoring Performance of Water Utilities (including water quality)

39 Performance Monitoring & Reporting Regulations: Monitoring performance of the service providers is

a critical activity that will: (a) ensure that the service providers achieve their objectives, (b) verify that

operating expenses reflect the agreed upon levels of efficiency, and (c) support tariff levels to enable

the operators to recover their costs from the customers. With this in perspective, the Performance

Monitoring Report includes indicators to monitor a service provider’s operations, financial performance, its level of service coverage, the efficiency of its distribution systems, and the quality of

water. The Performance Monitoring & Reporting Templates are presented in Annex 8.

40 The First Performance Monitoring Report and Database: The performance monitoring regulation

encompasses (a) the baseline data to be provided by the service providers, and (b) the key

performance monitoring indicators to be computed by the monitoring authority (WSSRC). The

baseline data asks for the parameters that can be perceived as ‘given’ or already available with the service providers. The computation provides for formulas that will arrive at the key performance


18

indicators. The Performance Monitoring Report Database is presented in Annex 9. This database

presents in a comparable form the performance indicators across the service providers.

41 The service providers may not necessarily be monitoring all the KPIs/ standards of service included in

the performance monitoring template. The aspect of making them ‘regulateable’ pertains to enabling them to capture the data so that they and the regulator can monitor the KPIs/standards of service.

The component of the roadmap specifying capacity building and support to them is based on helping

to develop this ability – currently their ability to provide this information is limited. The feasibility of

the service providers being able to prepare the monitoring report will depend on (a) how strongly the

WSSRC and/ or the policy mechanism (from Ministry/ PSU) is implemented, and (b) how well the

component on making the service providers regulateable is carried out. In this context, a large part of

the further actions needed are included in the roadmap’s component on making the service providers ‘regulateable’. The monitoring results presented in Annex 9 are therefore largely indicative of the need

to make the service providers regulateable. At the same time, in the immediate reference, these

showcase the need for the service providers to (a) expand coverage, and (b) provide for well-

functioning mechanisms to ensure stakeholder participation in decision-making.

6. Initiating Preparation for Establishing a Water Economic Regulatory Commission

42 Considering the important connection of economic regulation with other aspects of regulation (such

as level of service, quality of service, etc.—as described in Table 4 below), the concept of an economic

regulatory commission was further developed in view of the establishment of the Water Supply and

Sanitation Regulatory Commission, which would regulate in a comprehensive manner the economic,

financial, and other aspects of service provisioning. The stakeholder discussion started with having

the WSSRC only as an economic/ tariff regulator. Later, need for ensuring better and more efficient

services, more coverage, and considerations for disadvantaged sections of the society emerged as the

other objectives of regulation. Further to these two points, economic regulation needs to be perceived

as a tool to achieve these other objectives of regulation. Table 4 presents how this is achieved.

Table 4 Relationship between economic regulation and other aspects of regulation

Function Aspect of Regulation

How is regulation executed

How economic (tariff) regulation impacts the focus aspects of regulation

Economic regulation

Financial sustainability

Establishing tariff structures at a level that adequately covers costs, and, monitoring tariffs.

Tariff to reflect various levels of cost recovery as per sectoral policies: O&M, capital, Return on Investment, etc.

Service quality Defining the contour of service standards and monitoring the compliance of the same.

Higher quality of service provision may entitle utility to charge higher tariffs.

Customer protection

Redressing customer complaints and ensuring access to services

Rebates and exemptions from connection charges or other charges ensuring access to water supply

Environmental regulation

Waste water discharge

Setting standards and monitoring waste water discharge quality and quantity.

Polluters pay principle; to pay the cost of restoring the environment to unpolluted state


19

Function Aspect of Regulation

How is regulation executed

How economic (tariff) regulation impacts the focus aspects of regulation

Water resources

Groundwater protection & management, surface water protection & management

Charging higher license fees or tariffs to agencies for ensuring protection & conservation of water resources

Health and customer protection

Quality of water

Setting water quality standards and monitoring.

Rebates and exemptions from connection charges or other charges reflecting quality of water supply, subject to principles of customer protection

43 The Bangladesh Water Supply and Sanitation Regulatory Commission (WSSRC): A draft

Bill to establish the WSSRC has been prepared based on international experience and amended to

reflect conditions in Bangladesh through a number of stakeholder workshops and dialogue with key

agencies such as the Dhaka Water Supply and Sewerage Authority. From these efforts, a draft of the

English version of the WSSRC Bill was submitted to the National Forum for Water Supply and

Sanitation on 4 September, 2014, and based on the recommendations from that meeting, the draft

WSSRC Bill was translated into Bangla and comments were invited. Annex 10 includes the revised

English version of the draft WSSRC Bill. It may be noted here that the Bangla version is not merely a

translation of the English version. This is because of the following reasons:

d. Many terms in English do not have direct Bangla counterparts. In finding the

terms that most closely represent the meaning intended in the English version,

there is a possibility of minor/ fine deviation from the originally intended

meaning in English (e.g., definition of ‘sanitation’ or ‘sewage’). e. Bangla version is the official version acceptable to the Government of Bangladesh.

Due to this, the content of the Bangla version is decided/ determined by the

MoLGRD&C considering the comments/ inputs from various stakeholders. The

Bangla version is therefore within the purview of the MoLGRD&C. The English

version of the act will be finalized following the Bengali version of the act after its

final approval (Bengali version).

44 The revised Bangla version of the draft Bill has been prepared by the PSU reflecting the comments

received and it was submitted by the PSU to the Ministry for review and further processing.

45 The draft WSSRC Bill (English) was prepared by combining international experience with input

regarding local conditions, preferences, and capacities, and the best practice in the sector indicates the

importance of ensuring that the regulator has the authority to issue, suspend and cancel licenses to

the service providers, including those regarding the drilling of private wells. Without this authority the

Commission will be too weak to have a meaningful impact on improving the performance in the

sector. One of the concerns raised in earlier drafts of the Bill by Dhaka WASA was with regard to the

licensing provisions of the Bill and in particular the licensing of tube-wells by Dhaka WASA and the

importance of that licensing income to the financial performance of Dhaka WASA. The concerns

raised about the ability of Dhaka WASA to continue to issue licenses to private firms to drill deep

water wells are understood as a part of the areas where the WSSRC Bill could be perceived to be

contesting with the provisions of the WASA Act.

46 International experience also demonstrates the importance of providing the utilities with an operating

environment which will allow for the full recovery of its operating expenses. While the tariff levels are

being adjusted to allow for the recovery of operating and capital expenses from collections, the license

fees being collected for the drilling of private wells are an important source of revenue to Dhaka

WASA and must continue, according to the preference of the WASAs. Therefore, while the revised


20

draft Bill to establish the WSSRC provides the Commission with the authority to issue licenses, that

authority, as it relates to the licensing to drill deep water wells, should be phased in over a number of

years so as to not disrupt current operations.

47 The policy of transition phasing is well accepted in regulating utilities and should be applied in

Bangladesh to the licensing of private wells. The transition will also need to be applied to the

submission of standard monitoring reports to give the various operators time to upgrade their current

financial and management information systems.

48 Further, considering the importance of tariff adjustments and licensing as parts of regulatory

functions, the English version of the WSSRC Bill supersedes the existing provisions of the WASA Act

on two points: (a) the 5% adjustment of tariffs and (b) licensing the deep tube-wells. To provide the

utilities with time to comply with these (licensing and tariff related) regulatory requirements, a

provision of derogation7 has been proposed. In this context, the English version of the WSSRC Bill

retains the authority for licensing and tariff determination with the WSSRC, along with provisions of

derogation.

49 In sum, the Bangla version of the draft WSSRC Bill is different from the English version. In the Bangla

version, the WSSRC Bill does not supersede the WASA Act regarding the two points referred to in

paragraph 48 above. This difference is based on that the Bangla version has been modified according

to the stakeholders’ comments in Bangla. These comments differ from the international experience as reflected in the English version of the Bill. Annex 11 presents the responses to the comments of the

stakeholders, from the consultants’ team. The Government’s English version of the Act will be finalized following the Bengali version of the act after its final approval (Bengali version).

7. Strengthening the Capacity of Relevant Agencies for Implementing the Regulatory Functions

50 The objective of the training program carried out in November 2014 was to both acquaint the

participants on the use of these regulations and tools and to seek their comments and suggestions as

to how these tools could be revised to make them more appropriate and useful to the various agencies

and officials.

51 Following the above-mentioned training program, a delegation from selected agencies participated in

an exposure visit to Malaysia and the Philippines to meet with government officials and the regulatory

agencies in those countries to learn from their experiences in designing and implementing a

regulatory commission for their water supply and sanitation sector.

52 The PSU was designed to provide technical assistance to the Local Government Division (LGD), in the

Ministry of Local Government, Rural Development & Cooperatives (MoLGRD&C) on issues related to

the water supply and sanitation sector. The PSU is tasked to develop and review sector policy

strategies and plans; coordinate and monitor performances; and facilitate the development of

institutional capacity. The PSU is the Secretariat to the National Forum for Water and Sanitation,

Local Consultative Group (LCG) for the WSS, Policy & Monitoring Support Committee and Technical

Committee. In addition, the PSU has a Water Cell to facilitate reforms specific to the sector. 7 Derogation is the partial non-application or repeal of a law or a provision thereof, usually by a subsequent act that in some way diminishes its intent or scope (adapted from http://legal-dictionary.thefreedictionary.com). Thus, in this case, parts of the WSSRC Act can be subject to derogation in areas where the WSSRC Bill supercedes the WASA Act.


21

53 As an entity involved in developing government policy for the sector, the staff of the PSU also

benefited from their involvement in developing the draft Bill to establish the Commission and to

ensure that the comments and concerns expressed by the various agencies and officials reviewing the

drafts were incorporated in the revised Bill. The participation of the staff of the PSU in the

development of the draft regulations and tools for the WSSRC made those regulations and tools more

realistic and appropriate and strengthened their capacity to support the sector and the

implementation of the WSSRC.

54 The decision has been made to mainstream the PSU as a branch of the Local Government Division

(LGD) in the MoLGRD&C by the end of 2015. In preparation for this transfer, the Ministry has

established 15 positions. The positions include: Deputy Secretary (1), Senior Assistant Secretary (3),

Administrative Officer (3), Personal Officer (2), Computer Operator (3), and MLSS (4). All of these

positions except those of the Deputy Chief and Senior Assistant Chief have been permanently created.

The positions are expected to be filled in soon for the full functioning of the branch.

55 PSU, when mainstreamed into the LGD, will act in a dedicated manner to assist the Ministry to draft

and promulgate policies and guidelines for the sector. These guidelines/ policies will be used by the

WSSRC as a framework to regulate the sector. In the initial phases, the PSU will also assist the

Ministry in hiring consultants and procuring other types of support to progress along the proposed

roadmap. Since the WSSRC will need some time to be fully functional, the PSU during this time

period, can continue to follow up with service providers on the preparation of performance

monitoring reports, and support them in promulgating the reports through appropriate means. After

mainstreaming into the LGD, PSU can draw lessons from the performance monitoring for drafting

policies and guidelines.


22

8. Road Map for Establishing the Commission and to Improve the Performance of the Sector

56 The strong interest in establishing the WSSRC is evidenced by the number of comments and

suggestions received as part of the review of the Bangla and English versions of the draft Bill to

establish the WSSRC. In developing the proposed Road Map, consideration has been given in trying

to build on that interest. The Road Map is intended to assist Government and its development

partners in the operationalization of the WSSRC and the strengthening of the broader water supply

and sanitation sector. The proposed organisational structure of WSSRC, when it is fully functional, is

included in Annex 12.

57 In designing the Road Map to operationalize the WSSRC, two scenarios were considered: (i) a

sequential scenario, and (ii) a parallel scenario. The sequential scenario is not recommended for the

following reasons: (i) it risks losing the momentum gained during the process of consultation and the

drafting of the Bill, and (ii) because of the time required and the multitude of tasks for establishing a

rigorous regulatory framework. In order to expedite the operationalization of the WSSRC and to build

on the interest and enthusiasm that currently exists, the preferred scenario is to proceed in parallel.

This scenario presents the activities needed to prepare for the operationalization of the WSSRC and to

strengthen the capacity of the WSS utilities in parallel with the processing of the draft Bill.

58 The Road Map considers that it will take a number of months before the legislation to authorize the

WSSRC has been enacted by the Hon. Parliament by initially focusing on providing support and

capacity building to the WSS service providers to make them “regulatable”. The initial phases of the Road Map also focus on providing short-term consultants to undertake preparatory work to draft

further procedures and regulations that the WSSRC will need once it has been legally established.

59 The Road Map addresses the following major activities:

f. Approval of the organogram, job description preparation of the initial staff, and

design of procedures and governance (Code of Conduct) of the WSSRC,

g. Preparation of additional regulations and policies to operationalize the WSSRC,

h. Logistical and financing issues, and

i. Capacity building and training to the service providers.

60 Figure 1 presents the Road Map of the major activities that are required to be completed in order to

operationalize the WSSRC and to make the sector “regulatable”. The Road Map also indicates the

milestones that are expected to monitor the progress. The time line for these activities follows the

major steps needed to complete the processing, enactment and implementation of the WSSRC Act and

some estimates of the time that will be required to complete each step.


23

Figure 1 Road Map for transition to fully operational WSSRC (24 months starting May 2015)

Milestone legend:

Legal

WSSRC Operationalisation 1. Approval by Ministry: start time plus 1 month

8. Government approval of the funding mechanism for transition budget (see Table 5)

2. Approval by Cabinet: plus 3 months

9. Appointment of interim manager recruitment starting after Approval by Ministry; in place at Cabinet Approval (=milestone)

Activity/ time line starting from May 2015 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

24 25 Primary responsibility

Legal Government

WSSRC Institutional: Governance & HR Nomination Committee/ WSSRC

WSSRC Logistics WSSRC

Capacity Building and

Training (international

experts)

Continued Training

Support to the urban water sector to make it

regulatable Operationalising Regulatory

Devising customer interest

Establishing regulatory

Mainstreaming Business

Carrying out O&M Audit

PSU till enactment of the Bill, WSSRC after that

PSU

Recruitment of initial WSSRC staff

WSSRC Operationalisation Management of transition period by Interim Manager

Short term local consultants working

under guidance of Interim Manager

1 2 3 & 4 5

8

14

6 7

9

10

13

11, 12


24

3. Enactment by Parliament: plus less than 15 months

10. Appointment of consultants to work under Interim Manager

4. Gazetting: immediately after

11. Approval from the Government on first 4-year WSSRC budget 5. Rules of Implementation: plus less than 5 months

12. Draft Regulatory Calendar determined, All Draft Regulatory Procedures established in Bangla

WSSRC Institutional : Governance & HR

WSSRC Logistics

6. Appointment of Nominating Committee

13. Initial office installed

7. Initial staff (Chairperson + 2 Members) recruited

Support to the urban water sector to make regulatable

14. Established, i.e. completed the support activities to make the sector regulateable


25

61 The capacity building and training component of making the sector regulateable will include:

a. Operationalising the regulatory mechanisms by ensuring that the service providers have the

means and mechanisms to monitor parameters/ KPIs required for effective regulation

b. Mainstreaming business planning by assisting the service providers to prepare effective

business plans

c. Carrying out O&M audit to ensure that the O&M costs are correctly reported and reflected,

especially for the purpose of tariff adjustment

d. Devising customer interest plans by supporting the service providers to comply with the CIPP

regulations

e. Completing the establishment of the regulatory mechanism by ensuring that all the interfaces

(amongst the WSSRC, service providers, and the Ministry/PSU)

8.1. Operationalisation of WSSRC

62 While the draft Bill is being processed for review and approval by the Cabinet and enactment by the

Parliament, the PSU/LGD will be responsible to implement the Road Map and the operationalization

of the WSSRC. The initial activities to be undertaken by the PSU/LGD, will be approval of the budget

needed during this transition period and the recruitment of an Interim Manager to provide leadership

during this interim period. The Interim Manager, with the description and requirements as included

in Box 1, should be on-board within 2 months of the approval for the draft Bill by the Ministry.

Box 1 Succinct job description & requirements for the Interim Manager

Succinct job description (Term contract with 24 month duration, with possibility for extension) o Manages and coordinates all activities under the Transition Period which include: (i) the

operationalization of WSSRC and (ii) the capacity building program for WASAs

o Develops the TOR for the local consultants

o Develops the TOR for the international consultants

o On behalf of PSU, supervises consultants who are working on the different activities during the

Transition Period

o Liaises with WASAs who are participating in the capacity building program

o Reports to the Director of the PSU

Professional Requirements o A PhD or MSc degree in civil and/or environmental engineering; a Master degree in Public

Administration is an asset. o At least 20 years of demonstrated experience in water utility operations and management, and

regulation, with an international exposure. o Proven knowledge of water & sanitation sector regulatory issues and challenges in LDCs. o Being familiar with legal and governance aspects of the water sector in Bangladesh is an advantage. o Excellent analytical and interpersonal skills. o Extensive experience of presenting and discussing sector strategy issues to high-level Government

audience. o Excellent oral and written communication skills in English and Bangla.

63 During the transition period before the WSSRC is fully functional, a transitional budget will be

needed. This budget will be used to finance the Interim Manager, and consultants to (1) assist in the

drafting of the additional regulations and policies to operationalize the WSSRC and procedures to

make the WSSRC operational, code of conduct, job descriptions, and (2) provide capacity building and

training to the service providers (See paragraph 59). The estimated cost of this transitional budget is

presented in Table 5. Under the direction of the Interim Manager and with the support of the

PSU/LGD, the Terms of Reference will be developed and the Consultants will be recruited. The table

has been prepared based on the following considerations for consultants: (a) local consultancies: 2 to

3 local experts, on an intermittent basis, (b) international support: 1 international expert, one mission

per year. For support to utilities, the considerations are: (a) international consultants, 2 to 3 experts, 2


26

to 3 missions per year, declining in year 2, (b) local support, local consultants teaming up with

international experts. The figure for Interim Manager is a gross annual salary.

Table 5 Indicative budget of WSSRC for transitional period

Item no. Budget head

24 months

Year 1 Year 2

USD USD

1 Operationalization

Local experts 30,000 30,000

International experts 15,000 15,000

2 Support to utilities – to make them ‘regulateable’ International experts 95,000 55,000

Local experts 25,000 25,000

3 Interim Manager 60,000 60,000

4 Contingencies 20,000 20,000

Total 245,000 205,000

64 The additional regulations/procedures to be drafted are presented in Table 6.

Table 6 WSSRC Regulations and Procedures to be drafted during Transition Period

Functions of the WSSRC Actions Needed

Regulatory Accounting Guidelines

Capacity building in applying the RAG

Monitoring and evaluations of operators

Capacity building of operators in the following areas: a. Business planning

b. O&M Audit with Infrastructure Renewal Accounting

c. Regulatory Reporting

Human resource management

Preparation of job descripitons for recruitment of the initial staff

Governance: Code of Conduct

Preparation of Regulations on Code of Conduct and Guidelines and procedures regarding transparent and open processing and decision making

Financial management Guidelines and procedures specifying items such as the preparation of budgets, maintenance of account books, accounting systems and procedures, and external audits

Issuing of licenses to operators

Regulations for licensing, including the issuance, cancelation and/or suspension Define period of derogation regarding the licensing by WASAs for private deep wells

65 Once the Bill to establish the WSSRC has been enacted, the Chairperson and two Members, and an

Executive Assistant shall be appointed as soon as possible. This chapter also describes that a

committee will be established to nominate qualified candidates for the positions of Chairperson and

the Members of the Commission.

66 Even though the WSSRC is intended to be responsible for economic regulation of the entire water

supply and sanitation sector with the possibility of regional offices spreading across the country in

addition to its headquarters in Dhaka, it is essential that the establishment of the Commission be done

in a phased manner so as to minimize its operational expenses and to allow time to develop its

regulatory capacity and technical scope. It is expected that the Commission will be housed in its

initial office space immediately at the appointment of the Chairman and the Members of the

Commission.


27

67 During the start-up period, it is estimated that the annual budget for the WSSRC will evolve from

535,000 USD to 1.61 M USD over a period of four years. Table 7 indicates the tentative composition of

the budget. It is envisaged that at the time of enactment of the Bill by the Hon. Parliament, this

amount could be allocated by the Government to the WSSRC as its first budget. It may be noted that

this number is presented for the purpose of passing the WSSRC Bill by the Parliament, since it may be

queried by the Hon. MPs on how much the WSSRC Act is going to cost the GoB in total when fully

operational after an estimated four years. The considerations for this table are: (a) salaries: initial 2

professional staff, gradually increasing over time, but limited in number, keeping WSSRC a lean

organization, and (b) expert support: essentially building capacity within WSSRC, phasing out over

time.

Table 7 Indicative annual budget of WSSRC during operational phase (evolving over 4 years)

Item No.

Budget head Year 1 Year 2 Year 3 Year 4

USD USD USD USD

1 Salaries 300,000 500,000 750,000 1,000,000

2 Expert support 70,000 50,000 40,000 30,000

(International Consultants)

3 Public Consultations 15,000 15,000 20,000 20,000

4 Office & Admin

Annual rent 100,000 200,000 300,000 500,000

Maintenance 10,000 10,000 15,000 20,000

5 Recruitment expenses 25,000 25,000 25,000 -

6 contingencies 2.5% 15,000 20,000 30,000 40,000

Total 535,000 820,000 1,180,000 1,610,000

8.2. Operational Aspects – initiatives by WSSRC to prepare service providers to participate in regulatory processes

68 While the draft Bill to establish the WSSRC is being processed by the Government, under the

leadership of the Interim Manager, the PSU/LGD will prepare terms of reference and procure

consultants to support the strengthening of the service providers and support their efforts to be

“regulatable” and to enable them to provide sustainable services. The nature and content of this

support must be provided in close collaboration with the service providers and other key stakeholders

and could include such activities as:

a. Continued training in the use of the regulations drafted for the WSSRC:

i. the Regulatory Accounting Guidelines,

ii. performance monitoring and regulatory reporting

iii. business planning procedures,

iv. implementation of the Tariff Setting Methodology, and

v. the Customer Interest Protection Plan.

b. The preparation of operational and maintenance audits for each of the WASAs to forecast the

cost to maintain the below ground assets at its current level of operational efficiency as

required by the Regulatory Accounting Guidelines.

c. The assessment of the replacement value of the above ground fixed assets


28

8.3. Interim Arrangements 69 In considering what the interim regulatory arrangements should be, it is important to remember that

countries with effective regulatory systems have clearly defined roles regarding (a) the policy function

to be played by the Government, (b) the regulatory function to be provided by entities similar to the

WSSRC and (c) the role of the operator.

70 International best practice has demonstrated the importance of keeping these three functions separate

and robust, and it is recommended that Bangladesh attempts to exercise the same level of discipline.

71 In parallel with the processing of the draft WSSRC Bill, it is important for the Government and its

development partners to focus on:

d. Developing the needed regulations and procedures to be used by the WSSRC once the Bill has

been enacted,

e. Strengthening the capacity of the various utilities to make them reguleatable and to provide

sustainable services, and

f. Strengthening the capacity of the Government to use the performance monitoring data

developed by the WSSRC to set clear and realistic policies for the sector.


29

9. Summary 9.1. Key achievements and challenges faced during the

implementation of the TA Consultancy 72 The key achievements realized from this consultancy include:

a. Sensitisation of stakeholders regarding the regulatory framework: A greater appreciation of

the regulatory framework was achieved as a result of the process of extensive consultation

with a wide range of stakeholders. The stakeholders now appreciate the role that should be

played by the economic regulator as well as the need for the WSSRC to coordinate its activities

with other agencies to ensure that issues of water quality, environment, water resources, etc.

are effectively addressed.

b. Sensitisation regarding the importance of service delivery: The operators have a greater

appreciation that the WSSRC will also focus on issues other than tariff increases. There is a

greater appreciation that the WSSRC will be concerned with the issue of delivering

sustainable services that are consistent with the priorities of the communities. The WSSRC

will enable the service providers to increase their tariff levels, but only to recover those

operating expenses which are determined to have resulted from efficient operations.

c. Tariff Setting Methodology: Analyses of the operations of Dhaka WASA identified the

unrealistically low level of operating expenses and the importance of the service providers

ensuring that their maintenance expenditures are sufficient to maintain their fixed assets.

Further, since the current level of operating expenses are so low, tariff policies must first focus

recovering the appropriate level of operating expenses before proceeding to recovering debt

service and paying taxes to Government.

d. Making the service providers regulateable: The preparation of the first performance report

highlighted the limited amount of information available to management and the regulator

regarding the operations of the various service providers. From the process of developing this

report as well as the performance monitoring, a greater appreciation was developed regarding

the actions needed to make the sector regulateable including the need to implement a

standard MIS and accounting system to be used by all service providers.

e. Training and capacity building for the PSU and the service providers: Training sessions were

successful in communicating the core of the regulatory framework as well as the performance

monitoring of the service providers. The capacity of the participants was developed through

the consultation process used to develop the various regulations and the draft Bill to establish

the WSSRC.

f. Need for a review of the subsidies provided to the sector: The subsidy study identified a

number of implicit and un-targeted operating subsidies being provided to the service

providers which have not achieved the assumed objective of delivering low cost services to the

poor. The study presented a series of recommendations to make these subsidies more

effective and focused on reducing the level of poverty.

g. Separation of responsibilities: The delay in passage of the Bill to establish the WSSRC

provided more time to gain a consensus on the importance of separating the policy, regulation

and operating responsibilities and making the regulator and operators as independent as

possible.

h. Drafting of the Bill to establish the Bangladesh Water Supply and Sanitation Regulatory

Commission: The draft Bill incorporates international good practice with Government’s vision and objectives in establishing the WSSRC with key abilities, powers, and functions to

act effectively as the change agent required for the water and sanitation sector in the country.

i. Drafting regulations and related documents: To support the operationalization of the WSSRC,

the following items have been drafted and reflect both international good practice and the

result of extensive stakeholder consultation:


Tariff Review and Adjustment Regulation


30

Customer Interest Promotion and Protection Regulation

Business Planning Guidelines

Service Standards and Key Performance Indicators

Finance and Operating Reporting Requirements

73 Some of the challenges in completing this consultancy include:

a. Changes in LGD: Frequent transfers of key officials from the LGD posed a challenge for the

retention of knowledge and information regarding the consultancy and at times resulted in a

leadership vacuum regarding the establishment of the WSSRC.

b. Uncertainty on the exact role and functions of the PSU: As an entity in the Government, the

PSU should assist the Ministry in drafting policy directives which would form the framework

within which the regulator and service providers operate. However, in the absence of a clear

idea as to when the Bill to establish the WSSRC would be passed, the exact role and function

of PSU and that of the interim regulator is uncertain. This also translates into that the PSU

could not be the interim monitor of utility performance.

c. Security issues: Frequently changing dynamics of the socio-political atmosphere in

Bangladesh at times made it a challenging task to get security clearances and schedule

planned visits.

9.2. Summary of the consultative workshops and meetings held on the draft WSSRC Bill

74 A series of workshops and meetings were held to consult stakeholders on the draft of the WSSRC Bill.

The workshops included presentation of the key elements of the draft WSSRC Bill to the stakeholders

present, a discussion, and a follow up during which the stakeholders could submit their comments in

writing. Annex 14 includes all comments received on the English draft of the WSSRC Bill, and the

responses to those. The following table presents a summary of the meetings and workshops held.

Table 8 Summary of key stakeholder meetings or workshops regarding the WSSRC Bill

Stakeholder meeting: 1 August 2013, Bangladesh Secretariat, Dhaka

In this stakeholder meeting attended by the Hon. Secretary and other key stakeholders, the initial aspects of regulatory framework, such as the need and the possible optimal arrangements for the regulatory framework were discussed.

Stakeholder meeting: 11 September 2013, DPHE Conference Hall, Dhaka

Based on inputs from PSU and ADB, a list of key stakeholders was developed for the workshop. The participant’s covered representatives from WASAs, city corporations, Local Government Engineering Department (LGED), LGD, Bangladesh Water Development Board (BWDB), Water Resources and Planning Organisation (WARPO), Department of Environment (DoE), donor agencies including the World Bank, and JICA, officials from Municipal Association of Bangladesh (MAB), Bangladesh Telecom Regulatory Commission (BTRC), WaterAid, UNICEF etc. The stakeholder workshop was chaired by Project Director, PSU along with Join Secretary, Local Government Division (LGD), and Principal Urban Development Specialist, Asian Development Bank (ADB).

Stakeholder workshop: 20 February 2014

The discussion points on various aspects of regulatory commission were presented during the stakeholder workshop, held on 20 February 2014. The workshop was chaired by MD, Dhaka WASA and attended by Secretary, LGD along with other key stakeholders in the water sector including water utilities, city corporations, civil society representatives, donor agencies etc.

Presentation to the Hon. Secretary, LGD: 22 April 2014

The key aspects of the proposed WSSRC Bill and the responses to the comments raised during second stakeholder workshop were presented to the newly appointed Secretary, LGD on 22nd April 2014 for his inputs. He was joined by other senior official of the ministry including the Additional Secretary and the PD (PSU) were also present The Secretary, LGD emphasized the need to expedite further processing of the Bill.

16th Meeting of the National Forum on Water Supply and Sanitation: 4 September 2014

The following decision was made during this meeting:


31

The proposed Regulatory Commission Bill would be translated into Bengali. PSU will take initiative for translation. Then it would be uploaded in to website of LCD and PSU for seeking comments/suggestions from all stakeholders, Hard and soft copy would also be circulated among the forum members and development partners for their comments or suggestions. Just after uploading in the web site, a press release would be given from ministry regarding its circulation and seeking suggestions from all concerned. Timeline: three months for translation & one month in web site. Then it would be placed in the forum meeting to proceed further.

Consultation meetings for refining the Bangla version of the Bill (December 2015)

Two consultation meetings were held under the chairmanship of the Project Director, PSU, to refine the Bangla version of the draft WSSRC Bill. Key participants in the meetings included representatives of Dhaka WASA, Stamford University, and the consultant appointed by PSU for translation of the Bill into Bangla and its refinement.

Public comments on the Bangla version of the Bill (Jan-Feb 2015)

The Bangla version of the Bill was hosted on the PSU’s website for public viewing and comments. The PSU compiled the comments received from the public. These were incorporated in the Bangla version of the Bill.

17th Meeting of the National Forum on Water Supply and Sanitation: 12 February 2015

It was decided to finalize the Bill considering the provisions of present Acts, especially the WASA Act, City Corporation Act, Municipality Acts and others. After addressing the observations of the key sector organizations the Bengali version should be finalized and processed for approval.

***


32

Annex 1. Regulatory Accounting Guidelines

Annex 2. Tariff Review and Adjustment

Regulation

Annex 3. Sample application of Tariff Review

Methodology

Annex 4. Customer Interest Promotion and

Protection Regulation

Annex 5. Changes proposed in the other sectoral

legislations

Annex 6. Study of Subsidies to Water Supply

Utilities

Annex 7. Business Plan Guidelines

Annex 8. Performance Monitoring and Reporting

Template

Annex 9. First Performance Report (Performance

Monitoring Database)

Annex 10. Revised draft of WSSRC Bill- English

a. Revised draft of WSSRC Bill – Bangla The Bangla version was prepared by the PSU through consultative meetings and appointment of relevant consultant.

Annex 11. Our notes on the key changes proposed

in Bangla version based on the stakeholder

comments


33

Annex 12. Proposed Organogram for the fully

operational WSSRC 1 The organizational structure of WSSRC, as it is proposed, is conceived in order to be in a position to

effectively deliver regulatory tasks and services, and to align key functions of WSSRC to the policy and

strategy of the Government for the urban water supply and sanitation sector. Four directorates are

proposed to focus on key roles, functions and responsibilities without ambiguities and duplication of

efforts.

2 The Technical Services Directorate would handle four key functions: (i) setting standards, monitoring

compliance with design and operations of infrastructure, (ii) economic regulation, including tariffs

analysis and financial analysis, (iii) inspectorate services, including water quality, and (iv) Sector

Information Systems management and benchmarking.

3 The Legal and Enforcement Directorate would handle legal and regulatory enforcement issues, quality

assurance as well as monitoring and evaluation.

4 The Consumer and Public Affairs Directorate would handle the stakeholder interface and

consultation, and awareness building. The Directorate would also handle customer complaints.

5 The Corporate Services Directorate would handle support services to the WSSRC, including finance,

human resources, and administration, including procurement.

6 Internal Audit Services would ensure that the WSSRC complies with financial and operational rules

and regulations, including the Code of Conduct. The Internal Audit will report directly to the WSSRC.

Figure 2 Broad organisational structure of WSSRC (the divisional offices would be established in due course of time)

Water Supply and Sanitation Regulatory Commission

(WSSRC)

Chairman

Internal Audit

Director, Corporate Services

Director, Consumer and Public Affairs

Director, Legal and

Enforcement

Director, Technical Services


34

Annex 13. Concept note on due diligence of O&M

expenditure of utilities

Annex 14. All comments received from

stakeholders on the English draft of WSSRC Bill

and responses to those

Annex 15. Material used for training program in

November 2014

Annex 16. List of participants in the training

program S. No. Name Position & Organisation

Contact number Email address

1. Md. Golam Mowla DMD (F), CWASA CTG

008801715079679 mowlag21@gmailcom

2. Jane Alam Bhuiyan

Superintending Engineer, CTG WASA 01715022141 [email protected]

3. Md. Anisur Rahman

Conservancy Officer, Khulna City Corporation

041-730128; 01711981551 [email protected]

4. Dhirendra Sarkar MD, WASA Rajshahi 01711955668 [email protected]

5. Ali Ahmed CEO, CTG City Corportation 01712955583 [email protected] 6. Rusksana

Parvin Assistant Engineer, DPHE 01779749220 [email protected] 7. Md. Fayazul

Islam Soman Executive Engineer, Planning Division DPHE 01727262074 [email protected]

8. Md. Rafiqul Islam

Assistant Engineer, Kishoreganj Poursheva 01711784310 [email protected]

9. Md. Abdur Rauf

Asst. Project Director (Deputy Secretary), PSU, 2GD 01711576741 [email protected]

10. Md.Golam Murshed

Executive Engineer, Rajshahi City Corporation 01711280850 [email protected]

11. Md. Ruhul Amim Khan Chief Executive Officer, RpCC 01711316570 [email protected]

12. Shishir Kumar Biswas Assistant Engineer, WSSRC, PSU 01819437295 [email protected]

13. AKM Ibrahim SE, GW Circle, DPHE 01732875474

[email protected]; [email protected]

14. Md. Abul Kashem Chif Engineer, Dhaka WASA 01552341854 [email protected]

15. Quamrul Alam Chowdhury DMD (officer), DWASA 01720304030 [email protected]

16. Dr. Md. Sha Alam DMD Rajshahi WASA 01712674881 [email protected]

17. Uttam Kumar Roy Commercial Manager, DAWSA 01818393939 [email protected]


35

S. No. Name Position & Organisation

Contact number Email address

18. Md Rezaul Islam Khulna WASA 01713237217 [email protected]

19. Md. Rafiqul Islam Miah

Executive Engr. Mymensingh Pourshava 01711455189 [email protected]

20. Md, Abdullah P.Eng

Manageing Director, Khulna WASA 01720030066 [email protected]

21. S.M. Zahir Khan

Division Chief, Planning Commission 01552445575 [email protected]

22. Md. Faruquz Zamaan SAS, LGD 01819135451 [email protected]

Annex 17. Summary of discussions held during

exposure visit in November 2014 to Manila and

Kuala Lumpur, and list of participants in the

visit

Annex 18. Summary of discussions held during the

Training program in November 2014


36

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37

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Bangladesh Water Supply and Sanitation

Regulatory Commission


April 2015

2

Table of Contents

Item Activity Number

Table of Acronyms

I. Regulatory Accounting Standard 1 – Accounting for Historic Costs

A. Introduction

B. Principle

C. Infrastructure Renewal Accounting

D. Definitions

E. Requirements – Accounting Rules

F. Audits

II. Regulatory Accounting Standard 2 – Accounting for Current Costs

A. Introduction

B. Asset Valuation Principles

C. Definitions

D. Requirements – Accounting Rules

III. Financial Statements and Financial Reports

A. Audited Financial Statements

B. Unaudited Financial Reports

Annex

1. Financial Statements and Financial Report Formats

3


Table of Acronyms

AMP Asset Management Plan

BFRS Bangladesh Financial Reporting Standards

CCA Current Cost Accounting

DORC Depreciated Optimal Replacement Cost

HCA Historic Cost Accounting

IRC Infrastructure Renewals Charge

IRE Infrastructure Renewals Expenditure

MEA Modern Equivalent Asset

RAS Accounting Standard

RPI Retail Price Index

WSSRC Water Supply and Sanitation Regulatory Commission

4

Bangladesh Water Supply and Sanitation Regulatory

Commission

Regulatory Accounting Guidelines1

I. Regulatory Accounting Rule 1 – Historic Cost Accounts

A. Introduction

1. Regulatory Accounting Standard (RAS 1) presents the requirements for the

accounting information to be provided annually by the water supply and sewerage

service providers using historic accounting. This rule addresses:

a. The financial statements and reports of the various service providers;

b. The operational analysis of the core and non-core business activities;

c. The use of infrastructure renewal accounting; and

d. The audit requirements for the financial statements.

B. Principle 2. The regulatory accounts are the primary source of financial information about the

Operators regulated by the WSSRC. The Guidelines do not replace the requirement for

the Operators to provide their financial statements in accordance with Bangladesh

Financial Reporting Standards, but the Regulatory Accounting Guidelines are intended

to take precedence over the accounts produced using the BFRS for the purposes of the

Commission. Where the Regulatory Accounting Guidelines do not specifically address

an accounting issue, the BFRS should be followed.

3. To ensure transparency, a complete reconciliation between the statutory accounts

prepared in accordance with Bangladesh Financial Reporting Standards and those

accounts prepared according to the Regulatory Accounting Guidelines is provided in a

prescribed format as part of the regulatory accounting reports.

C. Infrastructure Renewals Accounting

4. Historical cost accounting (HCA) is recognized universally as a legitimate method

of financial reporting but it has a variety of limitations, in particular in regard to the 1 The Bangladesh Regulatory Accounting Framework is based in part on the Regulatory Accounting Rules

developed by the Water Industry Commission for Scotland version 3.0, March 2007, the Guidelines for the

Contents of Regulatory Accounts developed by OFWAT for the United Kingdom, February 2007, and the Regulatory

Accounting Guidelines, Edition 2, for the Laos PDR Water Supply Authority, February 2004.

5

return on capital2 earned in capital intensive industries with long asset lives such as the

water supply and sewerage industry. In the presence of inflation these limitations

typically lead to:

a. Understated asset values;

b. Overstated profits; and

c. Overstated returns on capital.

5. Infrastructure Renewals Accounting overcomes many of the limitations of

traditional historic cost accounting for long-life infrastructure assets such as the

underground network for water supply and sewerage utilities. With Infrastructure

Renewal Accounting, this long-life underground network is considered as a single asset

which is treated differently than above ground assets. As with traditional accounting

principles on cost recovery, all above ground assets will be depreciated (as is currently

the case) and charged to operations over the assets’ estimated useful lives. However, for

the underground network, depreciation is replaced by the Infrastructure Renewal

Charge which is an expense equal to the estimated cost to maintain that asset at its

current level of operation.

6. As stated above, one of the limitations to historic cost accounting is that it tends

to understate of value of the fixed assets, and because the annual depreciation expense

is based on historic costs the profits are overstated. The use of Infrastructure Renewal

Accounting replaces the traditional depreciation expense for the underground network

with the Infrastructure Renewal Charge (IRC) which is a forecast of charges needed to

maintain the underground network (see para 7). Given the fact that depreciation is

based on historic costs and the IRC is an estimate of the current costs to maintain the

network, the charges to income will be greater with the IRC than with depreciation and

the resulting profits/losses will be more accurate. The replacement of the depreciation

for the underground assets with the IRC will result in increases to tariff levels to enable

the utility to realize its agreed upon rate of return.

7. Infrastructure Renewals Accounting is based on an operational assessment

developed by the technical staff of the investments needed to maintain the serviceability

of the underground infrastructure over a medium to long-term period (typically in

excess of 15 years). This forecast of the investments needed to maintain the

serviceability of the infrastructure is referred to as the Infrastructure Renewal Charge

(IRC). The investment period for the IRC should be directly linked to the Operator’s 2 Although return on capital is a policy matter, it needs consideration in determination of the financial

management and operating reporting requirements. More specifically, in the context of Bangladesh as well as in

the Indian subcontinent, recovery of only O&M costs is accepted at the policy level. Even in such scenario, current

costs of assets are critical because some of the O&M costs are considered as a % of the capital costs which need to

be correctly accounted to ensure appropriate recovery.

6

investment planning horizon. The IRC should include all forecasted expenditures

involved with sustaining the system at its present state and protecting it from falling in

value. The use of infrastructure renewals accounting provides WSSRC with measures of

the total real costs to maintain the infrastructure network of each water supply and

sewerage service provider.

8. While the IRC represents the forecasted level of spending needed to maintain the

serviceability of the underground infrastructure, the Infrastructure Renewals

Expenditure (IRE) is the actual expenditure incurred in maintaining the underground

asset. As an operating expense in-lieu of depreciation, the IRC is charged to the profit

and loss statement of the Operator and reflected on the balance sheet as a provision or

contra-asset (or credit) against which the actual expenditures, the IRE, are charged

when the actual work is undertaken.

9. The difference between the infrastructure renewals charge (IRC) and the

infrastructure renewals expenditure (IRE) is presented as either an accrual or

prepayment on the balance sheet. If the IRC exceeds the IRE, the difference is

presented as an accrual or a liability since the underground asset has not been

maintained to the level that was forecasted. However, if the IRE is greater than the IRC,

the difference is presented as a prepayment or an asset since it indicates that the

Operator has performed more maintenance work than had been forecasted.

10. The Bangladesh Financial Reporting System requires that all fixed assets be

depreciated over their estimated useful lives. For all above ground assets, the current

accounting policy for depreciation will continue. However, for the underground

network, Infrastructure Renewals Accounting is used by the WSSRC as an alternative to

depreciation expense. As stated earlier, the infrastructure renewals charge (IRC) should

be used in-lieu of depreciation expense the underground asset and the amount that is

deducted from the recorded amount of the asset in the financial statements. Due to the

differences in the charges for depreciation under statutory (BFRS) and the Regulatory

Accounting Guidelines using Infrastructure Renewals Accounting, the Guidelines

require that a full reconciliation between the two approaches be included in the

regulatory financial statements.

11. Each service provider is responsible for developing a policy for calculating its

infrastructure renewal charge (IRC) and ensuring that it is in accordance with the

Guidelines. A critical component of this requirement is to link the IRC to the service

provider’s own medium to long-term maintenance and investment planning. This

policy should be based on and consistent with the Operator’s Operations Maintenance

Management plan and the systemic process of managing the routine (at least monthly)

and non-routine (less than once a month) operations and maintenance tasks.

7

D. Definitions 12. The following terms which either are not present in the BFRS and/or which

present information in more detail than the present financial statements provide are

defined for use in the Regulatory Accounting Guidelines.

Core Business Activity: Core business activities comprise those regulated

activities which are necessary in order for the Operator to fulfill the functions and

duties of a water supply and sewerage service provider.

Activity Includes Excludes

Production The abstraction of raw water

for delivery to the piped network

The abstraction of raw water for purposes other than delivery via the piped network

Treatment The treatment of raw water prior to entry into the piped network

The treatment of raw water for sale as bottled water

Storage The storage of treated and untreated water prior to entry into the piped network

The storage of water for purposes other than for entry into the piped network

Distribution The distribution of water via the piped network

The distribution of bottled water

Connections The installation and repair of connections to residential and non-residential customers

Domestic plumbing

Non-Core Business Activity: Those activities which are related to the core

activities but which are not essential to the delivery of water supply and sewerage

services.

Infrastructure Assets: Mainly underground systems of mains and sewers,

impounding and pumped raw storage reservoirs, dams, sludge pipelines and sea

outfalls. Information about infrastructure assets is also to be regarded as an

infrastructure asset.

Infrastructure Renewals Charge: The infrastructure renewals charge (IRC)

is the forecasted cost based on an operational assessment of the activity needed

to maintain the serviceability of the underground infrastructure over a medium

to long-term period (typically in excess of 15 years). The IRC is charged to the

profit and loss statement and reflected on the balance sheet as a provision, and

the actual expenditures (IRE) on infrastructure assets are off-set against this

provision as they occur.

8

Infrastructure Renewals Expenditure: The infrastructure renewals

expenditure (IRE) is the actual expenditure incurred to maintain the existing

operating capability of the infrastructure assets.

Infrastructure Renewals Accrual: The infrastructure renewals accrual is

the cumulative excess of IRC over IRE. The accrual may indicate that the service

provider will need to carry out higher levels of maintenance sometime in the

future.

Infrastructure Renewals Prepayment: The infrastructure renewals

prepayment is the cumulative excess of the IRE over the IRC. The renewals

prepayment indicates that the service provider is ahead of the original plan to

maintain its underground infrastructure and there will be a likelihood of lower

levels of maintenance in the short term.

Operating Surplus: The difference between revenue from core business (water

sales), and the operating expenses.

Regulatory Financial Statements: Those financial statements specified by

the WSSRC to be submitted annually by each service provider, and which serve as

the primary source of financial information about the businesses being regulated.

These statements take precedence over the accounting standards issued using the

Bangladesh Financial Reporting Standards (BFRS), however, where the

regulatory financial statement do not specifically address a specific issue, the

BFRS should be followed.

13. The following terms relating to Income and Expenditure which are either not

present in the BFRS and/or which present information in more detail than the present

financial statements provide are defined for use in the Regulatory Accounting

Guidelines.

Income and Expenditure – Historic cost Accounting

Revenue:

9

o Household measured and unmeasured water supply: All revenue derived

from charges for the sale of water to household customers with and

without meters.

o Household measured and unmeasured wastewater services: All revenue

derived from charges to household customers for the provision of

sewerage services.

o Non-household measured and unmeasured water supply: All revenue

derived from the sale of water to non-household customers.

o Non-household measured and unmeasured wastewater services: All

revenue derived from the provision of sewerage services to non-household

customers. Sewerage services include sewage treatment and disposal and

exclude reception, treatment and disposal of trade effluent.

Operating expenses

o Infrastructure renewal charge: The infrastructure renewals charge is the

forecasted cost based on an operational assessment of activity needed to

maintain the serviceability of the underground infrastructure over a

medium to long-term period (typically in excess of 15 years).

Balance Sheet – on a historic cost basis

o Infrastructure renewals prepayment: Any cumulative excess of

infrastructure renewals expenditure (IRE) over the infrastructure renewals

charge (IRC).

o Infrastructure renewals accrual: Any cumulative excess of the

infrastructure renewals charge (IRC) over the infrastructure renewals

expenditure (IRE).

E. Requirements - Accounting Standards 14. Accounting statements requirements: The Bangladesh water supply and sewerage

service providers shall prepare regulatory financial statements using both historic and

current cost accounting principles in respect of their total business with specific

information provided for the core and non-core elements of that business. The formats

of these regulatory financial statements are presented in Annex 1.

10

15. Comparability and Transparency: Regulatory accounts are used for assessing the

comparative performance of the various service providers. The regulatory financial

statements should include a statement reconciling the amounts reported in the statutory

accounts with those reported in the historic cost portion of the regulatory financial

statements. Further, the regulatory financial statements should aim to be transparent

and readily understood by their readers. For this reason the accounting policies should

be fully and clearly set out in a way that follows best practice. Accounting policy changes

should be clearly identified.

16. Management Discussion and Analysis: The service providers are required to

provide additional commentary and explanation of trends in the regulatory financial

statements so that the readers of the statements are able to understand them properly.

The principles to be followed in preparing the commentary and explanation include:

a. Explaining significant trends in information included in the five year

summary covering not only movements from the prior year but the

trend over time.

b. Highlighting those areas where there is a material difference from the

prior year amount and the reason for the difference.

c. Providing details of any atypical amounts which have occurred during

the report year whether or not they are declared as exceptional items.

F. Audits

17. The Regulatory Accounting Guidelines require auditors to address the reports

submitted to the Bangladesh Water Supply and Sanitation Regulatory Commission

concerning:

a. Accounting records;

b. Accounting statements;

c. Historical cost accounts; and

d. Current cost accounts.

18. The auditor should indicate that the regulatory financial statements have been

prepared in accordance with the Regulatory Accounting Guidelines issued by the Water

Supply and Sanitation Regulatory Commission, and the accounting policies set out in

the statement of accounting policies in the notes to the historical cost financial

statements and the notes to the current cost financial information. The auditor should

state that the regulatory financial statements are separate from the statutory financial

statements of (insert name of company) and have not been prepared under the basis of

Bangladesh Financial Reporting Standards.

11

19. The auditor should provide an opinion on the regulatory financial statements of

the specified service provider. The audit opinion should be issued in accordance with

Auditing Standards applicable in Bangladesh. The opinion should also provide an

assessment of the significant estimates and judgments made by the service provider in

the preparation of the regulatory financial statements, and whether the accounting

policies are consistently applied and adequately disclosed.

20. The auditor should indicate whether or not the regulatory financial statements

fairly present the historical cost financial statements and the current cost financial

information for the company’s state of (insert name of company) affairs at 30 June

200X and for the year then ended and the current cost cash flow for the year the ended.

The opinion should also indicate if the financial statements were prepared in accordance

with the Regulatory Accounting Rules issued by the Commission.

21. The auditor’s report should also indicate if:

a. Proper accounting records have been kept by (insert name of company)

as required by the Commission;

b. The information is in agreement with Commission’s Regulatory

Accounting Guidelines and has been properly prepared in accordance

with the Regulatory Accounting Rules issued by the Bangladesh Water

Supply and Sanitation Regulatory Commission;

c. Except for the treatment of infrastructure assets, the historical cost

regulatory financial statements fairly present the revenues, expenses,

assets and liabilities of the (insert name of company); and

d. The current cost financial information has been properly prepared in

accordance with Regulatory Accounting Rule 2, “Accounting for current costs”, issued by the Bangladesh Water Supply and Sanitation Regulatory Commission.

22. If the service provider makes any change in the audit firm used, the Commission

should be informed by the service provider of the change and the following details:

a. The name and address of the new auditors;

b. The name of the partner responsible for the audit;

c. The name, address, telephone number and e-mail address of the

principal contact; and

d. The date on which the auditors were appointed.

12

23. The Commission also requires a statement confirming that the contract of

appointment with the auditors satisfies the requirement that the auditors will provide

such further explanation or clarification of their reports, and such further information

in respect of the matters which are the subject of their reports, as the Commission may

reasonably require.

13

II. Regulatory Accounting Standards 2 - Accounting for Current

Costs

A. Introduction

24. Regulatory Accounting Rule (RAS 2) presents the requirements for the service

providers to present regulatory financial statements consisting of current cost accounts.

This rule:

a. Specifies the form and content of CCA statements;

b. Requires reconciliations between the CCA statements and the historical

cost statements prepared for statutory purposes; and

c. Specifies the accounting principles and the basis of calculation to be

used in preparing CCA statements.

25. More specifically with RAS 2, the Commission is seeking to:

a. Provide a comparable measure of the real costs of supplying services,

across the water supply and sewerage sector;

b. Provide realistic measures of asset values and the trends in the returns

earned on these assets; and

c. Promote transparency of costs.

26. The Commission is primarily concerned with current cost accounting information

in order to ensure that the tariff levels charged by the service providers reflect the real

costs of supplying services. The use of CCA provides the Commission and other

stakeholders with measures of the real costs to provide the specified services and of the

trends in the real rates of return on the core business of the various service providers

that can be used for comparative purposes. With CCA, profit is measured in real terms

and the value of the fixed assets for the core business is valued at their replacement cost.

B. Asset Valuation Principles

27. In current cost accounting (CCA), the value of the fixed assets to a business is

what potential competitors would pay for them, even if the competition is hypothetical.

This value will be the cost of an asset of equivalent productive capability to satisfy the

remaining service potential of the asset being valued or the Modern Equivalent Asset

(MEA). The gross MEA value is what it would cost to replace an old asset with a new

asset using current technology and with the same service capability as the old asset

allowing for any difference both in the quality of output and in operating costs. The net

14

MEA, or the Depreciated Optimal Replacement Cost (DORC), is the depreciated value

taking into account the remaining service potential of an old asset compared with a new

asset, and is stated gross of third party contributions.

28. In valuing the initial operational assets used in the core business, the assets

should be valued at their full MEA less the accumulated depreciation whether or not the

assets were paid for by a third party.

29. If changes in the price of an asset are expected, not considering inflation, this

change should be reflected in the depreciation profile and in the estimated life of the

asset. If rapid technical progress is expected, it may be appropriate to use some form of

accelerated depreciation to reflect the shorter than expected estimated life.

30. If general inflation is superimposed on the expected relative price movements of

the assets, the historic cost of the assets should be indexed. For purposes of the WSSRC,

the method used to address general inflation is through the use of the retail price index

(RPI).

31. The WSSRC Guidelines require the use of RPI in annual asset revaluations,

focusing specific price changes on the periodic reviews at which the latest Asset

Management Plan (AMP) information can be taken into account. At these reviews,

special consideration should be given to changes in the net book values of specific assets

and the need to change depreciation profiles and the corresponding treatment in the

regulatory accounts.

32. These asset revaluations need to be updated regularly. This means that a full

valuation should be completed at least once every five years with less detailed interim

valuations in the third year and in other years if there is evidence that the value has

changed significantly. For the purposes of the regulatory accounts, the asset revaluation

using RPI should be carried out on an annual basis. In order to ensure consistency

across the industry service providers will be notified in advance of the current RPI rate

that should be used in the revaluation process.

33. To be consistent with the above treatment of depreciating assets, non-

depreciating and possible appreciating assets should also be reviewed and valued at

their market values and the real increases taken to income. The initial valuation should

be indexed for general inflation using the RPI. The Framework follows the normal

historic cost practice of only recognizing, in the profit and loss account, holding gains on

realization when they need to be identified as exceptional or extraordinary.

15

C. Definitions

34. The following terms which are either not present in the BFRS and/or which

present information in more detail than the present financial statements provide are

defined for use in the Regulatory Accounting Guidelines.

Current Cost Accounting: Current cost accounting (CCA) is a method of

accounting that reports the cost of assets at current replacement prices, rather

than valuing them at their original cost and as a result more accurately reflects

the current economic conditions. This is not necessary for high turnover items

such as supplies as their costs already reflect current prices.

Depreciated Optimal Replacement Cost: The aggregate net book value of

the fixed assets valued on an MEA basis. This is the cost of an asset of equivalent

productive capability to satisfy the remaining service potential of the asset, less

accumulated current cost depreciation.

Gross Modern Equivalent Asset Value: The gross modern equivalent asset

(MEA) value is what it would cost to replace an old asset with a technically up-to-

date asset with the same service capability.

Retail Price Index: The retail price index (RPI) is the % change in RPI in a

financial year (Closing RPI - Opening RPI/Opening RPI). The RPI is a reflection

of the annual rate of inflation.

35. The following terms relating to Income and Expenditure which are either not

present in the BFRS and/or which present information in more detail than the present

financial statements provide are defined for use in the Regulatory Accounting

Guidelines.

Balance sheet – current cost accounting

o Fixed assets: The current cost value of fixed assets before third party

contributions. Assets are included at their replacement value or their

Modern Equivalent Asset (MEA) value.

Cash flow statement – current cost accounting

o Infrastructure renewals expenditure: The actual level of expenditures

incurred in maintaining the existing operating capacity of the

infrastructure assets.

16

A. Requirements – Accounting Standards 36. Pro forma Financial Statements: Regulatory accounting financial statements

should, as far as is practicable, have the same content as the statutory financial

statements of the service providers prepared in accordance with the formats and the

accounting policies and principles which apply to those annual financial statements.

The information in the regulatory financial statements should be provided in the

required format as presented in Annex 1. It is intended that these pro forma financial

statements are consistent with the information submitted as part of the annual financial

statements prepared under statutory requirements.

37. Asset registers and valuation: It is necessary to revalue the fixed assets in use as

part of the core business to determine the appropriate tariff levels to enable the service

provider to earn a fair rate of return on its investment. Asset registers should be

established for each fixed asset to record the initial historic cost of the asset, all

additions, disposals and the adjustments due to inflation. The result is the modern

equivalent value (MEA) of the asset.

17

III. Financial Statement Formats 38. The formats for the financial statements and reports to be presented to the

Bangladesh Water Supply and Sanitation Regulatory Commission by the water supply

and sewerage service providers are presented in Annex 1. These formats, listed below,

require the presentation of both historic and current cost financial statements and more

detailed analyses of the aspects of the current cost performance of the operators. The

audited regulatory financial statements will be accompanied by the auditor’s report, as described earlier, and the notes to the financial statements needed to ensure a complete

understanding of the basis used to present the material.

A. Audited Regulatory Financial Statements

1. Historic Cost Income and Expenditure Statement

2. Historic Cost Balance Sheet

3. Current Cost Accounting Income and Expenditure Statement

4. Current Cost Accounting Balance Sheet

5. Current Cost Accounting Cash Flow Statement

6. Reconciliation between Statutory and Regulatory Accounts

B. Unaudited Financial Reports

1. Analysis of Revenues and Current Cost Operating Profit

2. Current Cost Analysis for Fixed Assets – Water Supply

3. Current Cost Analysis for Fixed Assets – Sewerage Services

4. Five Year Rolling Current Cost Income and Expenditure Statement

5. Capital Management Report – Water Supply

6. Capital Management Report – Sewerage

7. Management Discussion and Analysis

18

Annex 1

Bangladesh Water Supply and Sewerage Regulatory Commission


Financial Statements and Reports

The following financial statements and reports comprise the Regulatory Financial

Statements to be provided annually to the Bangladesh Water Supply and Sanitation

Regulatory Commission by the water supply and sewerage service providers. The

regulatory financial statements and reports should be supported by appropriately

descriptive notes to ensure a complete understanding of the basis for the material

presented.

Audited Financial Statements

1. Historic Cost Income and Expenditure Statement

2. Historic Cost Balance Sheet

3. Current Cost Accounting Income and Expenditure Statement

4. Current Cost Accounting Balance Sheet

5. Current Cost Accounting Cash Flow Statement

6. Reconciliation between Statutory and Regulatory Accounts

7. Notes to the historic cost and current cost financial statements

Financial Reports

1. Analysis of Revenues and Current Cost Operating Profit

2. Current Cost Analysis for Fixed Assets – Water Supply

3. Current Cost Analysis for Fixed Assets – Sewerage Services

4. Five Year Rolling Current Cost Income and Expenditure Statement

5. Capital Management Report – Water Supply

6. Capital Management Report – Sewerage

7. Management Discussion and Analysis

19

Annex 1

Financial Statement 1

Historic Cost Income and Expenditure Statement

For the twelve months ended

30 June 20xx

(Taka 000)

Element Notes Current Year Prior Year Revenue Core activities –Water Supply Core activities –Sewerage Core activities - Other Non-core activities Total Revenue Operating Expenses Salaries and wages Materials, consumables, chemicals, spares Power (electricity and fuel) Services, supplies and bulk water Administrative, overhead, training, other Depreciation and Amortization Infrastructure renewal charge Total Operating Expenses Operating Profit Other income Interest expense Profit Before Tax Taxes - current Taxes - deferred Extraordinary items Net Profit

20

Annex 1


Historic Cost Balance Sheet

As of 30 June 20xx

(Taka 000)

Element Notes Current Year Prior Year Non-Current Assets Fixed assets Work in progress Other Total Non-Current Current Assets Cash and equivalents Receivables Advances Materials and supplies Infrastructure renewals prepayment Other Total Current Assets Current Liabilities Accounts payable Infrastructure renewals accrual Short term debt Total Current Liabilities Non-Current Liabilities Grants and other funds Long term debt Other creditors Total Non-Current Liabilities Provision for Liabilities and Charges Deferred tax provision Other Total Provisions Net Assets Capital Capital fund Revaluation surplus – (statutory) Net income Retained earnings (loss) Capital and Reserves

Annex 1

21


Current Cost Income and Expenditure Statement


30 June 20xx

(Taka 000)

Element Notes Current Year Prior Year Revenue Core activities –Water Supply Core activities –Sewerage Core activities - Other Non-core activities Total Revenue Current Cost Operating Expenses Salaries and wages Materials, consumables, chemicals, spares Power (electricity and fuel) Services, supplies and bulk water Administrative, overhead, training, other Depreciation and Amortization Infrastructure renewal charge Total Operating Expenses Current Cost Operating Profit Other income Interest expense Current Cost Profit Before Tax Taxes - current Taxes - deferred Extraordinary Items Current Cost Net Profit

22

Annex 1


Current Cost Balance Sheet

As of 30 June 20xx

(Taka 000)

Element Notes Current Year Prior Year Non-Current Assets Fixed assets Work in progress Other Total Non-Current Current Assets Cash and equivalents Receivables Advances Materials and supplies Infrastructure renewals prepayment Other Total Current Assets Current Liabilities Accounts payable Infrastructure renewals accrual Short term debt Total Current Liabilities Non-Current Liabilities Grants and other funds Long term debt Other creditors Total Non-Current Liabilities Provision for Liabilities and Charges Deferred tax provision Other Total Provisions Net Assets Capital Capital fund Revaluation surplus (statutory) Current cost reserve Net income Retained earnings (loss) Capital and Reserves

23

Annex 1


Current Cost Cash Flow Statement


30 June 20xx

(Taka 000)

Element Notes Current Year Prior Year Cash flows from Operating Activities Net Cash from Operations Collections Payments to contractors and employees Net cash from Operations Net Cash from other Activities Other income Interest expense Payment of taxes Net Cash from other Activities Net Cash from Operating Activities Cash Outflows from Investing Purchase of fixed assets Infrastructure renewal expenditure Investments Cash used in Investing Activities Cash Inflows from Financing Activities Repayment/adjustment of loans Receipt of grants and other funds Disposal of fixed assets Cash from Financing Activities Net Increase (Decrease) in Cash and Equivalents

Cash and Equivalents 1 July 20xx Cash and Equivalents 30 June 20xx

24

Annex 1

Financial Statements 6

Reconciliation between Statutory and Regulatory Accounts


30 June 20xx

Element Statutory Current Cost Regulatory

Explanation

Income and Expenditure

Total Income Operating Profit Profit Before Tax Balance Sheet Working Capital Net Fixed Assets Long Term Debt Deferred Income – Grants and contributions

25

Annex 1

Financial Reports 1

Analysis of Revenues and Current Cost Operating Profit


30 June 20xx

(Taka 000)

Current Year Prior Year Element Water Supply Sewerage Water Supply Sewerage

Revenues Core Activities Household Non-Household Total Non-Core Activities Total Revenues Operating Expenses Salaries and Wages Materials and supplies Power (elec & fuel) Services Admin, overhead, other Deprec & Amort Infra Renewal Charge Total Operating Expenses

Operating Profit

26

Annex 1

Financial Reports 2

Current Cost Analysis of Fixed Assets

As of 30 June 20xx

(Taka 000)

Water Supply

Element Infrastructure Other Fixed Assets

Total

Gross Replacement Cost as of 1 July 20xx

Inflation adjustment Additions Disposals Gross Replacement Cost at 30 June 20xx

Depreciation at 1 July 20xx Inflation adjustment Additions Disposals Charge for the year Depreciation at 30 June 20xx Net Book Value 1 July 20xx Net Book Value 30 June 20xx

27

Annex 1

Financial Reports 3

Current Cost Analysis of Fixed Assets

As of 30 June 20xx

(Taka 000)

Sewerage Services

Element Infrastructure Other Fixed Assets

Total

Gross Replacement Cost as of 1 July 20xx

Inflation adjustment Additions Disposals Gross Replacement Cost at 30 June 20xx

Depreciation at 1 July 20xx Inflation adjustment Additions Disposals Charge for the year Depreciation at 30 June 20xx Net Book Value 1 July 20xx Net Book Value 30 June 20xx

28

Annex 1

Financial Reports 5

Five Year Rolling Summary Statement

Current Cost Income and Expenditure

For the years ended 30 June 20xx

(Taka 000)

Element Current Year

Prior Year 1

Prior Year 2

Prior Year 3

Prior Year 4

Turnover Current Operating Exp Operating Income Other Income Interest Expense Profit Before Tax Tax Expense Extraordinary Items Net Profit

29

Annex 1

Financial Reports 6

Management Discussion and Analysis


30 June 20xx

Drawing on the financial and operational data presented, management is expected to

discuss and analyze the results for the financial just ended and compare those results to

previous years’ results and to expectations. The analysis should also address the financial position for the year just ended and present a brief forecast for the next year’s operating results.

A. Discussion of Operating Results

B. Discussion of Balance Sheet

C. Discussion of Forecast

Annex 2. Tariff Review and Adjustment

Regulation

Introduction

1 This section outlines the requirement for an independent, transparent, and predictable tariff

review methodology for the water supply and sanitation sector in Bangladesh. The section

outlines the considerations for tariff adjustment mechanism, including; (a) the draft

regulation on procedure or steps for tariff adjustment, as presented in this annex, and (b)

the methodology for computing the revision in tariff and other charges, based on (i)

automatic adjustments linked to inflation, and (ii) real based adjustments linked to objective

criteria including service levels, operational efficiency etc. Additionally, for long-term

consideration, tariff-setting methodology needs to be maintained at the horizon of policy

making and regulation. Parts of this section also outline the components that need to be

considered for such long-term purposes.

2 Before proceeding to the details of process and content for tariff determination, we have

summarised below the suggested framework for adoption by WSSRC for review and

adjustment of tariffs in water supply and sanitation sector. The subsections thereafter detail

the process (considering principles of transparency, accountability, and participation), and

the content (the computation for tariff review, and long-term considerations for tariff

determination).

3 The overall WSS sector policy guiding tariff and other aspects of service such as reliability,

quality, equity, and environmental sustainability should be set by the government. This is in

line with the currently in-force policies and various applicable laws (including the WSSRC

Bill, currently in the draft stage) in water and sanitation sector made by the Government.

The role of the regulatory commission (WSSRC) is to advise the government on the

development of policies. In the context of tariff determination, the WSSRC role should be to

(a) assess the implication of policy and legislative instrument’s on tariffs, and (ii) provide feedback on the adequacy and appropriateness of such instruments. The WSSRC will also be

responsible for implementing the policy decisions through various regulatory tools such as

penalties and incentives.

4 The tariff policy development process should be inclusive although the regulator will be

responsible for steering and guiding the participants and contributors into recording their

observations, and appreciating the impacts of suggested /proposed policy initiatives. Ideally

the tariff policy will be the result of a consensus of all stakeholders but in practice universal

agreement will not be achieved on each and every issue. Ultimately, it is regulator who will

be responsible for implementing the tariff policy and, as such, have the final say in its

content. The challenge and key aspect for WSSRC to ensure and monitor is the water service

provider’s respective business plans that will form the foundation of tariff applications are in line with the policy objectives.

5 Notwithstanding the potential for differences in the determination methods, the tariffs

should set with the objectives of efficient cost recovery. Cost recovery on the other hand

should not be interpreted as giving service providers the licence to pass on the costs of

inefficiency to the users but rather the role of the regulator is to ensure that only efficient

costs are passed through to users. The key objectives of tariff determination are to:

a. ensure financial sustainability of efficient service providers,

b. ensure affordability of tariffs and avoidance of tariff shock,

c. incorporate equity in service provisioning,

d. ensure reliable service to the users,

e. protection of interests of users1, and

1 Covered in separate regulations

PwC Page 2 of 19

f. contribute to environmental sustainability

6 In most cases it is expected that the water utilities are operating at below cost recovery

levels. When factoring in corrections to the accounts such as current cost depreciation and

poor revenue collection efficiency the situation is likely to be significantly worse that it

would otherwise appear. It is generally unrealistic to suddenly increase tariffs to cost

recovery levels in an instant. Rather a strategy that leads to cost recovery over a reasonable

period should be developed. This ‘phase-in’ period to cost recovery should also be treated as

the opportunity to the service providers to improve efficiency.

7 The sub-section 59 below outlines the process for tariff adjustment, while the subsequent

sections deal with tariff setting component.

8 Tariff adjustment methodology for current (short-term) consideration: The

methodology for tariff adjustment in the current context is based on the principles of

recovering only the relevant costs and supporting the appropriate inflationary requirements.

The decisions on relevance and appropriateness are to be made by the WSSRC, through a

transparent, accountable, participatory, and predictable process.

a. Adjustment for inflation: current inflation (through Consumer Price Index) in

Bangladesh is referred to from the data published by the Bangladesh Bureau of

Statistics. According to these data, the costs of construction materials have

increased 6.93%2, while the average wage rate index has been increasing at 9.61%.

Considering 70-30 mix of infrastructure materials and consumables (including

salaries and wages) in the O&M costs of service provider respectively (DWASA used

as an example), the inflation adjustment is suggested to be 7.7%. This number and

methodology is also suggested to be subject to stakeholder comments, as reflected in

the regulations annexed. The procedural steps for adjustment of inflation have also

been included in the procedural steps suggested for the WSSRC and the service

providers.

b. Adjustment for service quality improvement, and efficiency

enhancement: For the current (and short-term) purposes, recovery based on

improvements in service delivery, and enhancements in efficiency have been

suggested. The details of the requested adjustment in tariff and the approval by the

Commission would depend on (a) the stakeholder comments on the proposed

adjustment, as well as (b) the scrutiny of the proposal by the Commission, to the

satisfaction of the Commission ensuring that the proposed costs should actually

achieve the intended results. The following table summarises the same.

No. Component of adjustment parameter Level of

parameter

approved

1. Costs incurred for improving each or a combination of these

aspects of service delivery:

a. reliability of service delivery

b. efficiency of water distribution (proportion

of unaccounted-for water)

c. environmental conditions with respect to

water and sanitation

d. equitability in provision of service

e. coverage of services

f. transparency, accountability, and

participation in decision-making with

In line with the

level arrived at

after stakeholder

consultations and

applicable policies

2 Source: Price & Wages Section, National Accounting Wing, BBS

PwC Page 3 of 19

respect to service provision

g. health of users

9 Tariff setting methodology for long term consideration: The development of a tariff

policy is a task for the government in consultation with WSSRC, utilities, investors, users,

and other interested stakeholders. Once there is a defined tariff policy it should be placed in

the public domain by way of a published document, freely available and posted on the

WSSRC website. A similar policy needs to be developed for sanitation (sewerage) services.

The key policy issues include:

a. Social fairness: responsibilities of government, service provider, uniformity of

tariffs, user groups, lifeline tariffs and fixed charges, subsidies, cross subsidies;

b. Compliance with service standards including efficient operations of

service providers: tariffs to reflect levels of service, and efficiency of service

providers to improve service standards;

c. Service expansion: connection fees, infrastructure development charges (capital

contributions);

d. Environment: water use control, abstraction charges, water losses, direct

environmental protection;

e. Level of cost recovery including levels of billing and collection: definition,

time based, efficiency expectations, capital investment, grants;

f. Capital structure: principles, treatment of debt / equity; and

g. Capital value and return on capital: definition of capital values, reasonable

return on capital, taxation.

10 The current policy framework needs to be strengthened/ revised, as required, to clearly

reflect the aspects mentioned above as well as any other relevant aspects. In light of this, the

tariff regulation section prepared hereby suggests tariff setting and review in the framework

currently understood to be applicable, the objectives of tariff setting and review, and the

draft WSSRC Bill.

11 A significant element of the revenue requirement upon which the tariff is calculated is the

financing necessary for maintenance, upgrading, and system refurbishment. Maintenance

includes current cost depreciation for above ground (non-infrastructure) assets and

infrastructure renewals charging for underground (infrastructure) assets. The regulatory

capital value (RCV) of the utilities need not immediately bear any relation to the book value

of the assets and can be set at a level to ensure no or least price shocks to the vulnerable

sections of society, subject to falling within certain specified boundary conditions. The

return on RCV is a matter of government policy that is envisaged to be clearer with due

course and revisions in the policy framework. In case of a regulatory levy being preferred, a

simple annual charge on the utilities could be recommended rather than a more complex

and unstable tariff or turnover surcharge.

12 The basis of the content is elaborated in the subsequent subsections, and included in

Annexure as a document to be promulgated by WSSRC.

13 Information required for tariff-setting: Calculation of tariff would require data and

information to be processed as per the methodology adopted. In the context of current

regulatory objectives built around tariff, the tariff proposal should include the following sets

of information:

a. An operational plan setting out planned activities including measures to improve

efficiency etc.;

b. An asset management plan describing the investment programme and how such

investments will contribute to the strategic objectives of the service provider (e.g.,

mains replacement to help reduce losses and thereby release more water to users

that suffer from supply-demand imbalances);

PwC Page 4 of 19

c. A commercial plan setting out the activities of the service provider with respect to

service expansion, improvement in billing and collection etc. together with the

investments planned for each of these components;

d. A financial plan setting out the (realistically) expected sources of finance for the

investments and the necessary tariffs in order to finance the activities as set out in

the plan. This shall also include projections on financial statements

14 The determination of water tariffs is based upon the necessity to satisfy a revenue

requirement by the service providers and the recovery of all approved/ accepted costs (as

per the currently applicable policy framework and subject to regulatory scrutiny) in the

provision of water supply and sanitation services. This revenue requirement includes for:

a. Reasonable and/ or efficient operating costs: labour, energy, consumable

materials, chemicals, overheads, non-recoverable taxes, and recurrent expenditure;

b. Reasonable capital maintenance: infrastructure renewals charges,

depreciation and other appropriate mechanisms;

c. Reasonable/ approved/ allowed return on capital: a return on the capital of

service providers, subject to such return on capital being approved/ accepted by

currently applicable policy framework. [A fundamental principle of these

procedures is that the service providers shall be entitled to a revenue stream

sufficient to finance its activities but at the same time shall ensure that its return on

capital is limited to a fair representation of the investments made by the service

providers, e.g. investments financed through grants shall not qualify as capital upon

which a return can be earned. This would also be subject to the currently applicable/

approved/ accepted policy on return on capital in the water and sanitation sector. A

significant element of the revenue requirement upon which the tariff is calculated

may be the financing necessary for capital maintenance, upgrading and system

refurbishment. The concept is based upon the assumption that the allowances

provided for in the revenue requirement for capital maintenance (and return on

capital) reflect actual expenditure. At the same time, in view of the currently

applicable policy framework, this component is optional in case of Bangladesh,

which can be introduced in the due course of time depending on its necessity and

the decisions made in consultations with all stakeholders.]

d. All taxes and levies as applicable in the context of Bangladesh. The

regulatory accounting guidelines (RAG) that require the recording of financial

transactions would facilitate or feed into the data inputs to the tariff determination

methodology. The RAG are described in a separate document entitled ‘Regulatory Accounting Framework – Rules and Guidelines for the Preparation of Regulatory

Accounts.

15 The data requirements that need to be established in the calculations of the required tariff

are as below:

a. The approved annual revenue requirements (costs), and

b. Demand projections and target efficiency gains (performance analysis)

The following sub-sections elaborate these data requirements.

16 Approved costs (Establishing the revenue requirements): To recover the revenues

that will allow for the proper operation and maintenance (O&M) of the system and sustain

the system’s viable operation, the first step in tariff setting is to establish the annual revenue requirements of the entire period during which the tariff adjustment shall apply.

a. The projection of O&M costs, directly related to the water supply and sewerage

service provided, and, for the current (base) year and the forecast years (tariff

adjustment period) need to follow the cost categories as defined in the Regulatory

Accounting Framework.

b. The projected inflation rate is contained in the O&M cost projections and thereby

taken into account in the calculations for the required average tariff. The inflation

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rate used should be stated. Therefore, no additional inflationary adjustments need

to be foreseen.

c. For accuracy of the cost accounting, WSSRC will mainly rely on the results of the

audited financial statements as far as the figures from previous year(s) are

concerned. WSSRC has the right to consult all accounting details and supporting

documents of any service provider. For this purpose access to the documents has to

be given to WSSRC. In order to establish the level of O&M expenditure that will

support the proper operation and maintenance of the system, the service provider

must link the capacity of existing and projected supply against future water demand

based on committed levels of service. This is to ensure that the infrastructure and

supply based on programmed capital improvements are adequate. The published

high value of NRW (> 50%) indicates that the distribution systems are not in good

working order and are deteriorating. Maintenance expenditure needs to be

sufficient for rehabilitation of assets. The priority is therefore to make a diagnosis of

the actual state of disrepair of all water supply and sanitation systems and use best

estimates of O&M as prepared by the service providers.

17 Water demand projections and target efficiency gains (performance

analysis): The tariff adjustment to be submitted to WSSRC will include a comprehensive

business or corporate plan. The business plan shall contain the target operating levels and

how these will be achieved. It shall include an asset management plan that defines planned

rehabilitation, renewal and replacements, and, investments in capacity augmentation and

network extension. The level of service that will be provided based on the proposed level of

tariff shall be included in the business plan.

a. When assembling the projections, the service provider has to start with the actual

quantities billed in the previous period. Then estimates for the current period as

well as projections for the following period (forecast years) have to be made. The

service provider shall provide realistic figures of water production, based on the

latest available actual figures.

b. In the projection of the available water supply the link will be made with target

values of key performance indicators. The performance analysis will concentrate on

certain indicators to determine gains in efficiency, and, in future, whether there are

deviations from the agreed target performance.

c. The following indicators have been taken into account in the performance analysis

for calculation of the tariff adjustment:

i. Level of Non Revenue Water (NRW)

ii. Billing and collection efficiency

iii. Contribution to conservation of resources

iv. Access for services provided to users

v. User protection and accountability extended

d. By applying the agreed benchmarks for each criterion in the calculations, the service

provider is proposed to be penalized if it fails to achieve the target value of the

performance indicator. The following equations show how the tariff is derived:

projected quantity produced minus non-revenue water = projected quantity billed

(1)

performance adjusted O&M costs/projected quantity billed = projected average

cost/m3 (2)

projected average cost/m3 = projected average tariff/m3

(3)

e. For these calculations, the individually agreed benchmark for NRW is used. If the

actual NRW still exceeds the benchmark, it reduces the actual quantity billed,

thereby increasing the actual average cost per m3. The average tariff would then be

too low to cover the actual average costs. Hence, each service provider has a clear

incentive to meet the agreed benchmark. This mechanism assumes that the demand

for water is not yet satisfied. This implies that an increased amount of water

available for distribution will actually increase the amount of water consumed and

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paid for, thus will result in increased revenue. This assumption is believed to be

realistic in the current situation, at least for the next few years.

f. In case where the assumption of a non-satisfied water demand is not true, NRW

above the benchmark would be compensated by a higher quantity produced, while

the quantity billed would be assumed to be constant. A higher quantity produced

entails increased actual production costs compared to the projections. Again the

average tariff would then be too low to cover the actual average cost, thereby setting

again an incentive for the service provider to achieve the benchmark.

g. In order to apply the above described mechanism, the best estimate baseline value

of NRW for the current year need to be determined. The annual improvement of

NRW will be dependent on the NRW reduction strategy and (investment) means

made available to achieve these. A sensitivity analysis of different scenarios should

be carried out to determine the most realistic time-bound targets for NRW.

h. While the above equation (3) is generally binding, it implies a bill collection

efficiency of 100%. However it is recognized that the utilities will not be able to

collect 100% of the billed amount. Following a similar approach as for NRW,

incentives shall be set to continuously improve the bill collection efficiency, using

the following equation:

projected average tariff at 100% collection efficiency/target bill collection

efficiency (4)

i. Another variable that determines the annual revenue of the service provider is the

number of additional domestic connections per year. In the business plan the

number of connections that can be attained during the tariff adjustment period

should be given, with a breakdown of the domestic connections per user category.

This information is also an entry in the financial model.

18 Setting tariff levels (Methods for cost recovery): While a number of terminologies

and specific regulatory terms can be observed to be used in tariff review and setting

methodologies across the world, each context requires a specific combination of principles

best suited, and implementable. Four approaches to the determination of tariffs were

compared to arrive at the suggestion included herein: short-run accounting, short-run cash

flow, long-run discounted cash flow, and the unit cost approach (modified to suit the

Bangladesh context and tariff objectives, by considering some of the concepts and principles

from other methods as well).

a. Short-run accounting method: The short-run accounting method is

mathematically the simplest method. Its basic concept is to set the entire tariff on

the basis of full cost recovery including return on capital and depreciation by

dividing total costs by unit usage (m3 for metered systems or number of connections

for un-metered systems). The total costs are based upon projections or budgets for

the following year. The principal areas of concern with this method are the validity

of projections, especially as to whether the costs reflect realistic and efficient costs,

and, the allowable return on capital (profit and interest). It is important in this

method to ensure that depreciation and capital valuations must be determined

appropriately. Subsidies can be accommodated by treating them as income in the

analysis thereby reducing the cost recovery demands on the tariff. It is difficult to

apply this method as a transition towards full cost recovery.

b. Short-run cash flow method: The short-run cash flow method is very similar to

the accounting method but excludes non-financial costs such as depreciation but

replaces this with actual cash flows for investments and debt services. The principal

advantage of this method is that it may ensure positive cash flows for the service

provider. On the other hand, the disadvantage is that it may result in fluctuating

tariffs as cash flow fluctuates although this can be alleviated through short-term

borrowing.

c. Discounted cash flow method: this is based upon principles of time value of

money. The basis of the discounted cash flow is the Net Present Value (NPV)

calculation, i.e. to discount all income and costs to their present day value through

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the application of a discount rate that reflects the cost of capital. If the NPV is

negative then the business is not covering its cost of capital whereas if it is positive

the business is earning more than its cost of capital. For the optimum tariff the NPV

should be zero. This method is applied to determine uniform tariffs over a long

period (e.g. 5 years). In this method all actual costs are included, such as capital and

operating costs but exclude depreciation and interest charges. The value of the

existing assets should be included as an initial cost. The basic formula for the

determination of the long-run average tariff is (discounted costs)/ (discounted

sales). The uniform average tariff is assumed to increase with inflation, which is the

only adjustment required. The disadvantages of this method are:

i. Data for long-run analyses are not always available and often speculative;

ii. The result is often a tariff that is below cost recovery in the early years but

compensated by being above cost recovery in the longer term, thereby

raising questions about financial sustainability in the immediate future;

iii. The derived tariff is unresponsive to cash flow demands; and

iv. The model assumes all costs and revenues will rise with inflation whereas

this may not always be accurate, especially when improved service provider

operational efficiency is to be expected.

d. Unit cost approach: The approach based upon unit cost analysis negates the

need for detailed sales and cost profiles but rather analyzes the actual costs per unit

of water used. In determining future unit costs assumptions are made concerning

efficiency improvement targets based upon professional judgment and comparative

analysis. A principal feature of this is the short-term time horizon, i.e. three to five

years. Although it is recognized that this approach is not accurate, this is not an

issue whilst the service provider is operating at less than full cost recovery,

especially with respect to depreciation or return on investment (subject to policy

framework). The method takes each cost element and divides it by the volume of

water used and paid for. A main advantage is that the unit cost approach can be

easily monitored. Other advantages include:

i. Can ensure positive cash flows

ii. Simplicity and easily disseminated to the general public

iii. Easy to monitor performance against time bound targets

iv. Promotes improved efficiency

It is recommended that in the early years of regulation, this simplified tariff

determination method should be adopted, gradually moving to the further involved

approach to tariff determination as mentioned in the beginning paragraphs of this

section.

19 Proposed tariff structure: The first consideration with respect to a tariff structure has to

be given to the number and type of different consumer groups. The group with the highest

number of connections is the group of domestic consumers that on its own can be divided in

at least two groups: users with individual house connections, and, users at water kiosks or

public taps. A different group of domestic users may be identified due to the absence of

metering. The necessity to cluster users according to their likely amount of consumption or

to their likely level of purchasing power, leads often to areas with low, middle and high-

income users. However as soon as universal metering is introduced it is no longer justified

continuing with the clustering of domestic users that is sometimes, especially in mixed

areas, rather difficult to do. Other user groups are industrial and commercial users as well as

Government institutions and bonded3 clients, such as hospitals, schools. After full metering

is achieved it is recommended to keep the number of different consumer groups to a

minimum. This makes the tariff system simple and fewer irregularities are likely to prevail.

3 Bonded clients: users that cannot be disconnected for non payment

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20 Proposed Increasing Block Tariff (IBT) for domestic users: The average tariff as

calculated in the above sections has to be translated into a suitable tariff structure based on

the increasing block tariff (IBT) structure. In order to include cross subsidizing between

consumer groups and to achieve water conservation purposes, the “Increased Block Tariff” (IBT) is proposed, however with no more than three blocks for domestic consumers, as

shown below, with tariff rates per cubic meter:

a. Block 1: 0 to 10 m3, with T1 25% of average tariff

b. Block 2: 10 to 40 m3, with T2 100% of average tariff

c. Block 3: more than 40 m3, with T3 200% of average tariff

Block 1 represents the lifeline consumption and is supposed to be billed at a social tariff rate

to allow affordability of water to low-income users, while the cubic meters in excess of this

first block should be billed in accordance with the average cost per cubic meter of water. The

remaining third block of the tariff structure is then for consumption above the normal needs

and has to generate in principle the revenues for the cross subsidizing of the first block of

consumption. The quantity of the second block (40 m3) relates to the local consumption

patterns (as influenced by family size and consumption habits), but should not exceed 140

lcd4 or typically 25 m3 per month for a household of 6. The IBT model can be rightly

criticized but remains an acceptable approach when recovery of running costs is not yet

achieved and a number of users are not metered. It is however recommended to reform the

tariff structure once universal metering of all connections has been achieved and running

cost recovering has been realized.5 In order to verify whether the proposed tariff structure is

in line with the calculated average tariff and will deliver the projected revenues, the

quantities billed per tariff block have to be estimated. The following table shall be used to

forecast the average revenue per m3 of water using the proposed tariff structure. It is

essential that the projected quantities billed for the different tariff blocks are based on actual

figures. The proposed tariff structure has to be modified if the average tariff resulting from

the revenue projections differs from the required average calculated tariff in section 6.2.As a

measure of affordability of tariffs to the poor, a spending of 5% of the average income of

such households has been internationally acknowledged as a limit to allocated spending for

water. This analysis will determine whether the tariff T1 level (set at 25% of average tariff) of

the lifeline consumption block is affordable.

Type of consumer Tariff Quantity billed per

year

Annual

Revenue

Metered domestic connections

Block 1 (0 to 10 m3)

Block 2 (10 to 40 m3)

Block 3 (over 40 m3)

T1

T2

T3

Q1

Q2

Q3

T1 * Q1

T2 * Q2

T3 * Q3

Non-metered connections T4 Q4 (estimate) T4 * Q4

Water at standpipes, kiosks T5 Q5 T5 * Q5

Industrial, commercial

connections

T6 Q6 T6 * Q6

Total ∑ Qi ∑ Revenues

Average Revenue per m3 (total revenue over total billed quantity) (1) ∑ R / ∑ Qi

21 Tariff structure for other user groups: At water kiosk the water tariff per m3 (T5)

should be equal to the lifeline or social block tariff, increased with the margin of the kiosk

operator. The service provider has the obligation to control and set the tariffs of water resale

at the kiosks, and the regulator to monitor. The water tariffs (T6) applied to commerce,

4 lcd: liter per capita per day

5 Whittingdon D. (2003): Municipal water pricing and tariff design: a reform agenda for South Asia. Water Policy 5 (2003) 61-76

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industry, public administration and bonded clients should be cost recovery. Tariff blocks

should not necessarily be introduced. Since an institution does not have a need for a basic

consumption, like individuals, a single tariff block is sufficient unless there is a need to give

an incentive for water conservation. The tariff for sewerage should, due to practical reasons,

be calculated as a percentage of the water consumption. The percentage should be calculated

in such a way that in principle a cross subsidizing of sewerage services by revenue resulting

from water supply and vice versa is to be avoided

22 Other fees and penalties from users (charges per bill or as applicable): There are

a number of other services involved that also cause costs to the service provider and

therefore have to be paid for by users. The overall guiding principle hereby should always be

that it is more sustainable to subsidize access to the service or network, than consumption.

Rather than subsidize volumetric water use, any subsidies that are available to the sector are

more appropriately targeted at reducing up-front connection costs than used to reduce

volumetric charges. The tariff structure is hence composed of two parts: the usage

volumetric charge, and the fixed charge. The following fixed fees can be considered:

a. Administrative fee: This fee would cover administrative overhead costs such as

cost of billing including meter reading, and meter testing in regular intervals.

b. Connection fee: This would be levied only once when a new user is added to the

system by means of a single household connection

c. Reconnection fee: This fee would be levied whenever a user has been

disconnected for a justifiable reason; the fee should be high enough to give an

incentive to the users for paying bills on time.

d. Meter installation fee: This fee would be applicable when a meter has to be

replaced because of user damage. This should ideally cover the price of the meter,

and the service charges for the replacement, together with a penalty.

e. Meter testing fee: This fee would apply for testing of meter upon request of a

user; but if the meter is faulty, no should be charged.

f. Resource conservation charge: This component of tariff would reflect the need

for conservation of water resources in the country, passed on to all stakeholders as a

collective responsibility. The fixed charges should be determined from actual costs

incurred per connection under the afore-mentioned heads.

It is worth noting again that in case data is not available under any of the heads required

by the tariff methodology, the service provider should mention so. This will enable the

other regulatory instruments to ensure that the concerned systems are placed underway

for development, to record and furnish such data.

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Water Supply and Sanitation Regulatory

Commission, Dhaka

Water Supply and Sanitation Regulatory Commission Tariff (Adjustment and

Review) Regulations, 2013

No.__________________

In exercise of the powers conferred by Section _____ read together with Section

_________ of the Water and Sanitation Regulatory Commission Act, 2014 (Act No.

The recommended system-specific staged approach for tariff adjustment, identified three

stages:

a) Stage 0: Introduction and making operational within WASAs of the Regulatory

Accounting Framework; duration of this transitional period: one fiscal year.

b) Stage 1: Towards the recovering of total O&M costs, with tariff adjustment based

upon the unit cost methodology (non-financial costs such as depreciation are not

included in the tariff but replaced with actual cash flows for investments and debt

service; duration: typically 3 to 4 fiscal years – the trigger to move to next stage is

cash flow equilibrium and operational surplus).

c) Stage 2: Full cost recovery with tariff adjustment based on the Discounted Cash Flow

Method.

2. An O&M cost analysis is presented in Annex 1, based on audited accounts. Tariff

adjustment based on the unit cost methodology does not include non-financial cost such

as depreciation but replacing this with actual cost flows for investments and debt service.

The calculated average tariff for 2014/2015 of 11.23/m3 (of water distributed) hence need

to be augmented with this two cost elements.

3. In the calculation a bill collection efficiency of 90% has been assumed. This remains a

matter of discussion. Indeed in the proposed tariff adjustment procedure it was indicated

that this should be based on a business plan which incorporates, among other, an

operational plan setting out planned measures to improve operational efficiency, and, a

commercial plan setting out the activities of the organization with respect to service

expansion, revenue collection improvement etc.

4. As indicated elsewhere it is clear that the calculated average tariff underestimates the real

cost of O&M, leading to deferred maintenance and rehabilitation projects. Further,

adjusting the water tariff for reduced billing collection efficiency would result in passing

on to the payers, the costs of inefficiency in billing collection.

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______ of 2014), the Water Supply and Sanitation Regulatory Commission (henceforth

referred to as ‘the Commission’) hereby makes the following Regulations.

2. Short Title, Object, Commencement & Application

i. These Regulations may be called the "WSSRC Tariff (Adjustment and Review)

Regulations, 2014."

ii. The objective of these Regulations is to set out a procedure for fixing

methodology for review and adjustment in water and sanitation tariff.

iii. These Regulations shall come into force from the date of publication in the

Official Gazette.

iv. These Regulations are applicable to the Regulated Areas and to all matters

within the jurisdiction of the Commission.

3. Definitions

i. In these Regulations, unless the context otherwise requires:

(a) 'Act' means the Bangladesh Water Supply and Sanitation Regulatory Commission

Act, 2014, as amended from time to time;

(b) 'Commission' means the WSSRC Established under section 4 of the Act;

(c) 'Control Period' for the purposes of the applicability of tariffs shall be one

consecutive year starting from July 1st to June 30th.

(d) 'Consultant' includes any person not in the employment of the Commission who

may be appointed as such to assist the Commission on any matter required to be

dealt by the Commission under the Act on such terms and conditions as may be

determined by Regulations made under Section 16(4) of the Act;

(e) 'Experts' means experts in the field of water management, water use economics, or

an area of water sector relevant to the Commission’s purview as identified by the

Commission;

(f) ‘Investment’ means the investments made by the service provider for improvement

in service delivery and enhancement in efficiency, as approved by the Commission

subject to presentation of relevant documents elaborating the manner in which

proposed investments would enhance service delivery as per Commission’s scrutiny

and satisfaction;

(g) 'Methodology for Tariff' means the parameter-based methodology determined by

the Commission for adjustment in tariff levied to the users.

(h) 'Methodology Paper' means the methodology or guidelines prepared for, inter-alia,

indicating the methodology for adjustment of the Tariff;

(i) 'Ministry' means the Ministry of the Government of Bangladesh dealing with water

resources and local governance as applicable;

(j) 'Operation & Maintenance (O&M) Cost' means the sum of establishment cost and

the cost of maintenance and repairs (M&R) of the system of provision of water and

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sanitation services, as approved by the Commission and does not include either

depreciation and amortization expenses.

(k) ‘Regulated Area’ means the area to which these Regulations apply.

(l) 'Stakeholder' means any user or any organisation or group representing the

interests of either of them.

(m) ‘Service provider’ means any water service provider, private or public, providing

water and/ or sanitation services to its users, and charging them a tariff;

(n) 'Tariff' means the tariff levied on water users by the service providers, as per the

tariff order issued and in force on the date of levy.

(o) ‘Urban Center’ means a city or a town as determined by the Commission for the

purpose of these Regulations.

(p) 'User' means any User, who is serviced directly by a service provider;

ii. Terms not defined in these Regulations shall have the same meaning as

assigned to them under the Act.

iii. For the purpose of these Regulations, a licensed service provider is not a User of

the supplier of water to the service provider.

4. Procedure for fixing methodology for tariff adjustment

i. The Commission shall, either by itself or through duly appointed Consultants or

Experts, prepare a draft Methodology Paper for fixing the Methodology for

adjustment of Water and Sanitation Tariff, subject to provision 5 of these

Regulations.

ii. The draft Methodology Paper, both in English and Bangla, shall be hosted on

the Commission's website for a period of 3 (three) months for inviting

comments/suggestions from all the Stakeholders.

iii. The draft Methodology Paper shall be circulated by the Commission to the

Ministry, other relevant departments of the Government, concerned Non-

Governmental Organisations in the relevant sector(s), service providers dealing

with provision of water or sanitation services, and Experts in the relevant fields.

iv. The Commission shall make available copies of the paper at all offices of the

Commission with due publicity of this availability in at least 3 English and 3

Bangla newspapers, two each with National circulation.

v. The Commission shall hold public hearings at all the Urban Centres of the

Country to consider the views and comments of the Stakeholders on the draft

Methodology Paper.

vi. The quorum for public hearings shall be at least two Members of the

Commission, at least one of whom shall be a native Bangla speaker.

vii. The Commission shall fix the dates and venues for the public hearings and

publish this information in at least one (1) English and two (2) Bangla

newspapers widely circulated in the area at least 15 (fifteen) days prior to the

date of the public hearing.

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viii. The process mentioned in Regulations (i) to (vii) above shall be completed by

the Commission within 4 (four) months from the date of hosting of the draft

Methodology Paper on the Commission's website, unless extended by the

Commission with due publicity of this fact.

ix. The Commission, at the end of the 4 (four) months, shall consider the

comments/suggestions received on the draft Methodology Paper and shall

prepare a list of views expressed by the Stakeholders relating to Tariff and host

it on the Commission's website within 15 (fifteen) days of the last public hearing.

x. The Commission shall within thirty (30) days of hosting on its website the

comments and Commission’s responses to those, revise the Methodology Paper

based on the comments received and inputs.

xi. The Methodology Paper revised by the Commission shall be final and binding

till a review is taken up as per procedure prescribed in these Regulations for

such a review.

xii. The Commission shall host on the website of the Commission, the revised

Methodology Paper, complete with a pro-forma for drafting of tariff proposal,

and arrange for all relevant service providers to receive the Methodology Paper

as soon as possible.

xiii. Subject to provisions of paragraphs (5)(i.a) and (5)(iii), inflation adjustment

shall be admissible with or without the procedure of public consultation, as

prescribed by the Commission.

5. The format, values, and numbers in this provision shall be included in the Methodology

Paper prepared and promulgated by the Commission.

i. O&M cost structure:

Previous

Year

(Actual)

(1)

Previous

Year

(% of

Total)

Current

Year

(Actual)

(2)

Current

Year

(% of

Total)

Following

Year

(Forecast)

(3)

Following

Year

(% of

Total)

(2)/(1)

%

(3)/(2)

%

1 Power

Electricity

Fuel

2 Materials &

Consumables

Chemicals

Spare Parts

Other

3 Services &

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Supplies

Subcontractors

Supply of bulk

water

4 Personnel

Wages & salaries

Employer’s Contributions

Training

Other

5 Administrative

Overhead

6 Extraordinary

Costs

Total O&M

Costs

a. The Commission shall scrutinize the Business Plan prepared by the Service

Providers to assess the costs proposed by them to be recovered through

Tariff Adjustment.

ii. Amount of inflation adjustment:

The amount of inflation adjustment shall be computed as follows:

No. Inflation

component

Value as per

Bangladesh Bureau

of Statistics and

subject to

stakeholder

comments

Weightage subject to the extent

of investments made by the

service provider and the share

of wages in the expenses, as

approved by the Commission

1. Inflation in prices of

building construction

materials

6.93%6 0.7

2. Wage and price 9.61%6 0.3

3. Resulting inflation 7.7% 1.0

6 The averaging has been carried out over 10 years, starting from 2000-2001. The number of years over which this averaging needs to be

done would also be subject to stakeholder comments.

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adjustment

(including the

weightages from the

second column)

iii. Performance Adjustment: the tariff adjustment based on O&M costs, and the

performance-related adjustments shall be publicised, invited stakeholder

comments on, and approved duly by the Commission, as specified in these

Regulations.

a. The following format shall be used for this purpose.

Component for tariff adjustment Value Reference

Projected O&M Costs for ____ (year)

A

Minus unacceptable costs

e.g. an increase in staff is requested by WASA due to an

unjustified increase of number of meter readers, reaching a

below than target meter reading efficiency

B

Adjusted O&M Costs

A – B = C

Performance Adjustment (can be penalty (-) or bonus (+))

e.g. whereas WASA reached the benchmark for water quality

and service hours, it only progressed 30% in the targeted

metering ratio

-D

Performance Adjusted O&M Costs

C – D = E

Projected Water Billed is Projected Water Quantity

Produced minus NRW projected benchmark for the new

period

F

Projected average tariff

(without collection efficiency factor)

E / F

Target collection efficiency factor for the given period x%

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Component for tariff adjustment Value Reference

Projected average tariff (G)

(E / F) *

100/x

Projected average tariff with inflation adjustment (G

multiplied by inflation permitted from (5)(i.a))

G x (1+

inflation %)

6. Preparation and Submission of Tariff adjustment Proposal

i. Each of the service provider is allowed four weeks from the receipt of the

Methodology Paper from the Commission, or as may be extended by the

Commission, to prepare based on the Methodology Paper, a draft of the Tariff

adjustment proposal for the Control Period and submit it to the Commission.

ii. The Service provider shall submit the draft Tariff proposal to the Commission

complete in all respects accompanied by all requisite information, particulars

and documents with all the requirements mentioned in the Methodology Paper.

iii. The tariff adjustment proposal shall contain rates for service provision to be

adjusted adopting the methodology, and format for calculation laid down in the

Methodology Paper.

iv. The Commission, while scrutinising the draft Tariff proposal, if deemed

necessary, demand such additional data, information, documents, or

clarifications from the Service Provider which shall be furnished to Commission

within 15 (fifteen) days from the date of such demand.

v. Upon receipt of the complete draft Tariff proposal accompanied by all requisite

information, particulars and documents with all the requirements to the

satisfaction of the Commission, the proposal shall be deemed to be in order. The

Commission shall thereafter intimate to Service provider that the proposal is

ready for publication in such form and manner as may be specified.

vi. The Service provider shall within 7 (seven) days of such intimation under

Regulation 5(v), publish a notice in Bangla language in all leading local

newspapers and in English language in at least 2 (two) English newspapers in

the country outlining the Tariff proposal, the proposed change in tariff for all

categories of users, and inviting comments/suggestions on the Tariff Proposal

from all public and stakeholders.

vii. The Service provider shall make available copies of the draft Tariff proposal in

English and Bangla in all its offices as applicable, and also host it on web site of

Service provider.

viii. Comments/ suggestions from all stakeholders and public shall be invited, and

40 (forty) days time shall be given from the date of publication in the

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newspapers for receiving comments/suggestions in writing, or in a manner

prescribed by the Commission.

ix. The Commission shall hold or cause to hold public hearing on the draft Tariff

proposal mutatis mutandis as that for preparation of the Methodology Paper.

x. The Service provider shall compile all suggestions/comments received from

public and with Service provider's views on each comment/suggestion forward

them to Commission within 10 (ten) days of the public hearing.

xi. The Commission shall, within 60 (sixty) days of the date of publication of notice

in newspapers and considering all suggestions and comments received from the

public together with the response of the service provider, issue a tariff order

both in English and Bangla effective from first (1st) day of the Control Period, or

such date as may be decided by the Commission, accepting the draft tariff

proposal of the Service provider with such modifications or such conditions, as

may be specified in the order. The tariff order shall be hosted on the website of

the Commission.

xii. The Tariff Order shall be for the tariff for provision of water or sanitation

services to all Users in the Regulated Area.

xiii. The Service Provider shall publish the Tariff Order as specified in Regulation

5(xi) in all leading daily newspapers in Bangla and English languages having

wide circulation in the regulated area. Service provider shall also host the Tariff

Order on its website and make the same available to public in printed form kept

at its concerned office/offices.

xiv. The Commission shall initiate all required activities for issue of Tariff Order two

years before start of the Control Period.

7. Procedure for Review of Methodology

i. The validity of the Methodology will be for the Control Period for which the

tariff orders are issued.

ii. Before taking up review and revision of the water charges for subsequent

Control Periods, the Commission shall take up the review and revision of the

Methodology.

iii. The procedure detailed in provision (4) of these Regulations shall be followed

for issue of an updated Methodology for tariff adjustment, as part of a new draft

Methodology Paper.

8. Application for Review of Tariff Orders

i. Any stakeholder or a member of the general public, or any other person or entity

if aggrieved by the Tariff Order passed by the Commission, shall be eligible to

apply to the Commission for a review of tariff order.

ii. The application shall be filed within 90 (ninety) days from hosting of Tariff

Order on the Commission's website and in the form as specified by the

Commission.

PwC Page 18 of 19

9. Saving of inherent power of the Commission

i. Nothing in these Regulations shall be deemed to limit or otherwise affect the

inherent power of the Commission to make such orders as may be necessary for

meeting the ends of justice or to prevent the abuse of the process of the

Commission.

ii. Nothing in these Regulations shall deem to limit or otherwise bar the

Commission from adopting in conformity with the provisions of the Act, a

procedure, which is at variance with any of the provisions of these Regulations,

in view of special circumstances of a matter or class of matters and for reasons

to be recorded and published for the knowledge of all stakeholders in writing,

the Commission deems necessary or expedient.

iii. Nothing in these Regulations shall, expressly or impliedly, bar the Commission

to deal with any matter or exercise any power under the Act for which no

Regulations have been framed, and the Commission may deal with such

matters, powers and functions in a manner it thinks fit.

10. Interpretation

The Commission shall be the final authority for interpretation of these Regulations.

11. General power to amend/rectify

i. The Commission may, at any time and on such terms as to costs or otherwise, as

it may think fit, amend any defect or error in any document before it (including

any clerical or arithmetical error in any order passed by the Commission), and

all necessary amendments, rectifications shall be made for the purpose of

determining the real question or issue arising in the document.

ii. Provided that if the Commission desires to make amendments or rectifications

in order to determine the real question or issue arising the Commission shall

provide an opportunity to the parties affected by such amendment or

rectification touching the real question or issue to make representations and

submissions with respect to the proposed amendment or rectification.

12. Power to remove difficulties

If any difficulty arises in giving effect to any of the provisions of these Regulations, the

Commission may, by a general or special order, do anything not being inconsistent with the

provisions of the Act, which appears to be necessary or expedient for the purpose of

removing the difficulties.

13. Extension or abridgement of time prescribed

Subject to the provisions of the Act, the time prescribed by these Regulations or by order of

the Commission for doing any act may be extended (whether it has already expired or not)

or abridged for sufficient reason(s) by an order of the Commission, with such reason(s)

being recorded in writing and publicised for the knowledge of all stakeholders.

14. Effect of non-compliance

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Failure to comply with any requirement of these Regulations shall not invalidate any

proceeding before the Commission merely by reason of such failure unless the Commission

is of the view that such failure has resulted in miscarriage of justice.

15. Costs

i. Subject to such condition and limitation as may be directed by the Commission,

the costs of and incidental to, all proceedings related to these Regulations shall

be awarded at the discretion of the Commission and the Commission shall have

full power to determine by whom or out of what funds and to what extent such

costs are to be paid and give all necessary directions for the aforesaid purposes.

ii. The costs shall be paid within 30 (thirty) days from the date of the order or

within such time as the Commission may, by written order, direct. If a party fails

to comply with an order for costs within the permitted period, the order of the

Commission awarding costs shall be executed forthwith in the same manner as a

decree/order of a Civil Court under the Code of Civil Procedure.

16. Enforcement of orders passed by the Commission

The Secretary of the Commission shall ensure proper enforcement and compliance of the

orders passed by the Commission, by the persons concerned in accordance with the

provisions of the Act and Regulations and if necessary, may seek the orders of the

Commission for directions in this regard.

17. Implementation of Regulations

Subject to the provisions of the Act and these Regulations, the Commission may, from time

to time, issue orders and practice directions with regard to the implementation of these

Regulations and procedures to be followed.

***

1.5.2 Amount of inflation adjustment

Inflation component Value as per Bangladesh

Bureau of Statistics and

subject to stakeholder

comments

Weightage subject to the

extent of investments made

by the service provider and

the share of wages in the

expenses, as approved by the

Commission

Inflation in prices of building construction materials 6.93% 0.7

Wage and price 9.61% 0.3

Resulting inflation adjustment 7.70% 1

Tariff adjustment component Dhaka WASA Chittagong WASA Rangpur City Corporation

Water supply operational expenditure proposed to

be recovered (A), Tk.

7,299,826,000 1,318,690,790 5,957,067

Unacceptable costs (B) based on levels of NRW and

other operational inefficiencies as assessed by the

Regulator further to public consultations and CIPP

regulations: For this, the regulator will have to

conduct O&M audits

15,000,000 12,000,000 150,000

Adjusted operational expenditure (A – B = C) 7,284,826,000 1,306,690,790 5,807,067

Commercial Performance Adjustment (penalty

based on low collection efficiency: only 50% of the

commercial losses charged to the tariff) (-D): for

this, the regulator would have to conduct financial

and commercial audits

17,000,000 4,500,000 700,000

Acceptable additional costs that can be recovered

(based on approved major maintenance costs and

investment servicing for the upcoming year),

approved by the regulator based on public

consultations and CIPP regulations (+L): for this,

the regulator would have to conduct O&M audits

250,000,000 18,000,000 1,000,000

Performance Adjusted operational expenditure (C – D + L= E)

7,517,826,000 1,320,190,790 6,107,067

Inflation-adjusted costs (E*(1+inflation rate)) = J 8,096,698,602 1,421,845,481 6,577,311

Current System Input Volume (F) (m3) 791,900,000 66,065,000 2,010,055

Current NRW for the new period (G) (m3) 211,120,540 3,100,000 360,000

Current water quantity billed (F-G=H) 580,779,460 62,965,000 1,650,055

Resultant average volumetric cost ( BDT/m3) (K = J

/ H)

13.9 22.6 4.0

Target collection efficiency (x%) 95% 98% 80%

Average volumetric costs adjusted with collection

efficiency = K / x / 100

14.67 23.04 4.98

Current average tariff (as applied by the utility),

BDT/m3 (= tariff revenues BDT / water quantity

billed m3)

9.27 7.17 1.52

Tariff adjustment needed for unit cost recovery 37% 69% 70%

Difference in the average volumetric costs and the

current average tariff (BDT/ m3)

5.41 15.87 3.47

Allowable tariff increase at target collection

efficiency (ceiling)

6.92 15.77 2.86

Average volumetric costs adjusted with collection

efficiency of 2% higher than target = K / x / 100

6.63 15.31 2.74

Lower than the targeted collection efficiency results in higher costs to be recovered than agreed for tariff adjustment. Hence, this

presents a penalty to the utility for not meeting the target. The burden is therefore on the WSSRC to set realistic target collection

efficiency, and providing realistic and achievable incentives. For example, if the business plan does not mention investments for

reduction of physical NRW, setting targets for NRW reduction is non-realistic. This further emphasises the connection between

business planning and tariff adjustment proposal.

Tariff Adjustment - Sample Application of Tariff Review and Adjustment Regulation to 3 utilities

1. Tariff adjustment procedure: The Tariff Regulations drafted as part of the TA propose the following procedure for adjusting the tariffs of WSS service

provisioning:

a. The WSSRC will specify:

i. The components of costs allowed to be recovered,

ii. The adjustments to the costs based on performance, and

iii. The adjustments to the costs based on inflation.

b. The service providers will prepare a tariff proposal based on the specifications promulgated by the WSSRC

c. The WSSRC will scrutinise the tariff proposals and invite stakeholder comments on the proposals of service providers from respective jurisdictions

d. The service providers will revise and submit to the WSSRC their tariff proposals based on the comments collated by the WSSRC, and

e. The WSSRC will pass a tariff order based on the revised tariff proposals.

Annex 3 Sample application of Tariff Regulation

All three utilities have similar information on the below

given parameters

Draft Customer Interest (Protection and Promotion) Regulations

Water Supply and Sanitation Regulatory Commission,

Dhaka

Customer Interest (Protection and Promotion) Regulations, 2015

No.__________________

In exercise of the powers conferred by Section 30 read together with Sections 31, and 32 of the Water

Supply and Sanitation Regulatory Commission Act, 2014 (Act No. ______ of 2014), the Water Supply

and Sanitation Regulatory Commission (henceforth referred to as ‘the Commission’) hereby makes the

following Regulations.

1. Short Title, Object, Commencement, & Application

i. These Regulations may be called the "WSSRC Customer Interest Protection and

Promotion Regulations, 2014."

ii. The objective of these Regulations is to set out procedures and standards for ensuring

improvement in service provisioning to customers and protection of interests of

customers.

iii. These Regulations shall come into force from the date of publication in the Official

Gazette.

iv. These Regulations are applicable to all matters within the jurisdiction of the Commission.

2. Definitions

i. In these Regulations, unless the context otherwise requires:

(a) 'Consultant' includes any person not in the employment of the Commission who may be

appointed as such to assist the Commission on any matter required to be dealt with by the

Commission under the Act on such terms and conditions as may be determined by

Regulations made under Section 16(4) of the Act;

(b) ‘Control Period’ means the period between July 1st and June 30th, for which the Customer

Interest Protection Plan would be applicable;

(c) 'Experts' means experts in the field of water management, water economics, or an area of

water sector relevant to the Commission’s purview as identified by the Commission;

(d) ‘Prescribed’ means such determined and promulgated by the Commission as in a manner

coherent with the principles of Transparency, Accountability, and Participation

(e) ‘Regulated Area’ means the area to which these Regulations apply.

(f) 'Stakeholder' means and includes any Customer or any organisation or group representing the

interests of Customers, or any other entity, person, or other type of group concerned with the

decisions of the WSSRC;

ii. Terms not defined in these Regulations will have the same meaning as assigned under the

Act, read together with the definitions under the other Regulations.

iii. For the purpose of these Regulations, a Service Provider is not a Customer of the supplier

of water to the Service Provider.

3. Preparation and revision of template for Customer Interest Protection Plan

i. The Commission shall, either by itself or through duly appointed Consultants or Experts,

prepare a draft template in English and Bangla languages, for preparation of Customer

Interest Protection Plan by the Service Providers (hereafter referred to as the Template).

This Template shall be hosted on the website of the Commission, as well as included in

the Public Register1.

ii. The Commission shall hold public hearings in at least four urban centres of the Country’s

Regulated Area to elicit the views and comments of the Stakeholders on the draft

Template, not before 15 (fifteen) days after the draft Template is hosted on the

Commission’s website.

iii. The quorum for public hearings shall be at least two Members of the Commission, at least

one of them being a native Bangla speaker.

iv. The Commission shall fix the dates and venue for the public hearings and publish this

information in at least two (2) English and four (4) Bangla newspapers widely circulated

in the country at least 15 (fifteen) days prior to the date of the public hearing.

v. The process mentioned in Regulations 3 (i) to 3 (iv) above shall be completed by the

Commission within 4 (four) months from the date of hosting of the draft Template on the

Commission's web-site, unless extended by the Commission with due publicity of this fact

as per provision 3 (iv).

vi. The draft Template in English and Bangla, shall be hosted on the website of the

Commission with due publicity of this fact in at least two (2) English and four (4) Bangla

newspapers widely circulated in the country and also circulated to the Ministry,

concerned departments of the Government, service providers, concerned NGOs and

Experts, inviting comments /suggestions. Time till the last public hearing, shall be

provided for comments/ suggestions of the Stakeholders.

vii. The Commission, at the end of 4 (four) months, shall prepare a list of all comments

received from Stakeholders relating to the draft Template, together with the response of

1 A sample Template that WSSRC can consider has been included in the Appendix to this Regulation.

the Commission to each of the comments. This list shall be hosted on the Commission’s

website within 30 (thirty) days of the last public hearing.

viii. The Commission shall revise the draft Template within 30 (thirty) days of hosting on its

website the list of comments from Stakeholders and the Commission’s response to those.

ix. The Commission shall forward the revised Template to all Service Providers for

preparation by the Service Providers and submission to the Commission of the draft

Customer Interest Protection Plan. The revised Template shall also be hosted on the

website of the Commission, and included in the Public Register, with due publicity of this

fact as per provision 3 (iv).

x. The Template revised by the Commission shall be final and binding till a review is taken

up as per procedure for such review prescribed in these Regulations.

4. Preparation by Service Providers and Submission to the Commission of draft Customer Interest

Protection Plan (CIPP)

i. Each of the service providers shall, within four weeks of hosting of the revised Template

on the Commission’s website, or as may be prescribed by the Commission, prepare a draft

of the CIPP as per the Template and submit to the Commission for the relevant Control

Period.

ii. The Commission, while scrutinising the draft CIPP, if deemed necessary, demand from

the Service Providers such additional data, information, documents, or clarification which

shall be furnished to Commission within 15 (fifteen) days from the date of such demand.

iii. Upon receipt of the complete draft CIPP accompanied by all requisite information,

particulars and documents with all the requirements to the satisfaction of the

Commission, the CIPP shall be deemed to be in order. The Commission shall thereafter

intimate to Service Provider that the CIPP is ready for publication in such form and

manner as may be specified.

iv. The Service Provider shall within 7 (seven) days of such intimation under Regulation 4

(iii), publish a notice in at least two (2) English and four (4) Bangla newspapers widely

circulated in the country outlining the CIPP and inviting comments/suggestions from all

the public and stakeholders.

v. The Service Provider shall make available copies of the draft CIPP in English and Bangla

in all its regional or divisional Offices as applicable, and host it on website of Service

Provider.

vi. 40 (forty) days’ time shall be provided from the date of publication of outline of draft

CIPP in the newspapers for receiving comments/suggestions from the public.

vii. The procedure for public hearing on the draft Template shall apply mutatis mutandis to

the preparation of the CIPP.

viii. The Service Provider shall compile all suggestions/comments received from public and

with Service Provider's views on each comment/suggestion forward them to Commission

within 10 (ten) days of the last public hearing.

ix. The Commission shall, within 30 (thirty) days of the submission by service providers of

the comments and responses, and considering all suggestions and comments received

from the public, issue an order accepting the CIPP of each Service Provider with such

modifications or such conditions, as may be specified in the order (hereafter the CIPP

order), both in English and Bangla effective from first (1st) day of the first year of the

Control Period, or such date as may be decided by the Commission. The order shall be

hosted on the website of the Commission.

x. The Service provider shall publish the CIPP Order in all leading daily newspapers in

Bangla and English languages having wide circulation in the Regulated Area. Service

provider shall host the CIPP Order on its website and make the same available to public in

booklet form kept at all offices of the service provider.

5. Template for the CIPP

i. The CIPP shall specify:

a. The notice period or timeline available for the users to pay the bills;

b. The manner in which the service providers shall adhere to the requirements of

protection of customer interests, viz.:

1) Keeping of appointments (provision 5(ii))

2) Complaints, account queries, and requests about payment arrangements

(provision 5(iii))

3) Notice for interruption of services (provision 5(iv))

4) Entitlement to payment or credit where supply is not restored as promised

(provision 5(v))

5) Timing of payments (provision 5(vi))

6) Means of payments, including where the customer is in arrears (provision

5(vii))

ii. Keeping of appointments

a. This provision applies if a representative of a service provider is to visit a customer’s

premises in connection with the provision of services.

b. If the representative requires access to the premises, or it would otherwise be

reasonable to expect the customer or a person acting on the customer's behalf to be

on the premises, the service provider must—

1) consult the customer orally or in writing to try to agree on a day to attend the

premises and

2) give the customer notice, orally or in writing, of when the

representative will attend the premises.

c. The Service Provider's notice must specify—

1) the premises;

2) the date that the representative will attend them;

3) either—

1. if the customer so requests, a period of two hours during which the

visit will be made; or

2. otherwise, whether the visit will be made during the morning or the

afternoon; and

3. if the notice specifies that the visit will be made during the morning

or afternoon, at what times the Service Provider regards the morning

or the afternoon, as the case requires, a beginning and ending.

d. Subject to paragraph (f), the service provider must pay the customer a penalty as

Prescribed by the Commission if—

1) the service provider gives a notice that is not in accordance with paragraph

(c);

2) a representative does not attend the premises on the date specified in

the notice; or

3) a representative does attend the premises on that date, but—

4) if the notice specified a two-hour period for the attendance, the

representative does not attend during the specified period; or

5) if the notice specified that the representative would attend during the

morning or afternoon, the representative does not attend during the period

specified in the notice as being the period of the morning or the afternoon, as

the case requires.

e. No application by the customer for the payment of penalty is necessary.

f. However, the service provider need not pay the customer under paragraph (d) if—

1) The Commission prescribes so after hearing the parties involved;

2) the customer cancels the appointment;

3) the service provider cancels the appointment by giving the customer

at least 24 hours' notice orally or in writing, of the cancellation; or

4) it became impracticable, for a reason mentioned in paragraph (g), for

the representative to keep the appointment, and the service provider could

not reasonably have so foreseen in time to enable it—

1. to cancel the appointment giving 24 hours' notice; or

2. to make other suitable arrangements for a representative to attend

the premises at the arranged time.

g. The reasons are—

1) severe weather;

2) industrial action by employees of the service provider; and

3) the act or default of a person who is not—

1. an officer, employee or agent of the service provider; or

2. a person acting on behalf of the service provider or of an agent of the

service provider.

h. The representative of a service provider who attended a customer’s premises may

make and sign a written record stating that the representative attended the premises

and the time and date of such attendance.

i. Unless the customer establishes that the record is incorrect, it is taken to confirm that

the representative attended the premises as stated in the record.

iii. Complaints, account queries, and requests about payment arrangements

a. This regulation applies where a customer of a relevant service provider—

1) complains in writing about the services provided by the service provider;

2) queries, in writing, the correctness of an account for the provision of

services; or

3) asks, in writing, for a change to payment arrangements.

b. The service provider must provide a substantive reply to the customer—

1) in the cases of a reply to a complaint or a query, within 10 working days; or

2) if the request is for a change to payment arrangements and the

request cannot be met, within 5 working days.

c. The first day of the period for reply is the day after the day when the service provider

receives the complaint, query or request.

d. Subject to paragraph (f), if the service provider does not comply with paragraph (b), it

must pay the customer a penalty as Prescribed by the Commission.

e. No application by the customer for getting the penalty is necessary.

f. However, the service provider need not pay the customer under paragraph (d) if—

1) The Commission Prescribes so after hearing the parties involved;

2) the address that the customer wrote to was not a notified address of

the service provider for a complaint, query or request of that kind;

3) the customer does not wish to pursue the complaint, query, or

request and has so informed the service provider;

4) it was impracticable for the service provider to send a reply within the

required period because of—

1. industrial action by employees of the service provider; or

2. the act or default of a person who is not—

a. an officer, employee or agent of the service provider; or

b. a person acting on behalf of the service provider or of an

agent of the service provider; or

3. in the case of a reply to a complaint or query—

a. the complaint or query was frivolous or vexatious; or

b. the service provider reasonably considered that a visit was

necessary before replying, and severe weather made that visit

impracticable.

g. For the purposes of paragraph (f.1), an address of an service provider is a notified

address of the service provider for a complaint, query or request of a particular kind if

the service provider has notified that

1) address to its users as the appropriate address for a complaint, query or

request of that kind by—

1. publishing it in a telephone directory;

2. notifying it on the service provider's website; or

3. showing it on the service provider's publicity material.

h. In this regulation—

1) "payment arrangements" means the arrangements by which a customer

makes payments (including installment payments) to the service provider;

and

2) "a change to payment arrangements" includes a change to the

frequency of payments (including installment payments).

iv. Notice for interruption of services

a. This regulation applies where a service provider makes disconnections for the

carrying out of necessary works.

b. The service provider is required to serve a notice in this regard, and the service

provider must specify in the notice—

1) the earliest date and time after which the service provider reasonably expects

that the supply will be interrupted or cut off; and

2) the latest date and time by which the service provider reasonably

expects that the supply will be restored; and

3) if the service is to be discontinued or interrupted for more than four

hours, give at least 48 hours' notice before the service is interrupted or

discontinued.

c. Paragraph (d) applies if, because of an emergency, a service provider interrupts or

cuts off the supply of water to the premises of a customer;

d. If this paragraph applies the service provider must, as soon as is reasonably

practicable, take all reasonable steps to notify each affected customer—

1) that the supply has been interrupted or cut off;

2) where an alternative supply can be obtained;

3) of the time by which it is proposed the supply should be restored; and

4) of the telephone number of an office from which further information

may be obtained.

e. Subject to paragraph (g), if the service provider fails to comply with paragraph (b)(2),

it must pay each customer whose supply of water was disconnected or cut off a

penalty as Prescribed by the Commission

f. No application by the customer for the payment is necessary unless the service

provider could not practicably have identified the customer as having been affected.

g. However, the service provider need not pay the customer under paragraph (e)—

1) if it was impracticable to give notice by the time required because of—





agent of the service provider; or

2) If

1. the service provider could not practicably have identified the

customer as having been affected, and

2. the customer does not claim (orally or in writing) a payment under

this regulation within the 3 months following the date on which the

supply was cut off.

v. Entitlement to payment or credit where supply is not restored as promised

a. This regulation applies if a service provider interrupts or cuts off the services to

premises, as described in regulation (5)(iv).

b. However, this regulation does not apply if the service provider interrupts or cuts off

the supply because of drought.

c. The service provider must restore the service—

1) by the time and date specified in the notice, if the service provider has served

a notice stating when the service is to be restored;

2) within 48 hours after it first became aware that the service was

interrupted or cut off, if the service was interrupted or cut off in an

emergency because of a leak or burst in a strategic main; or

3) within 12 hours after it first became aware that the service was

interrupted or discontinued, if the service was interrupted or cut off in an

emergency, but not because of a leak or burst in a strategic main.

d. Subject to paragraph (f), if the service provider fails to restore the service by the time

by which the service provider should, under paragraph (c), have done so, the service

provider must pay the customer a penalty as Prescribed by the Commission.

e. No application by the customer for the payment is necessary unless the service

provider could not practicably have identified the customer as having been affected.

f. The service provider need not pay the customer under paragraph (d)—

1) if (or, as the case may be, so long as) the service provider was prevented from

restoring the service by—

1. severe weather;





agent of the service provider;

2) in a case described in paragraph (c)(2) or (3), if the circumstances are

so exceptional that

1. it is unreasonable to expect the service to be restored within the

relevant period; or

2. if—

a. the service provider could not practicably have identified the

customer as having been affected, and

b. the customer does not claim (orally or in writing) a payment

under this regulation within the 3 months following the date

on which the service was discontinued or interrupted.

g. In this regulation, "strategic main" means a main that conveys water or seweage in

bulk to centres of population that have no other service that can fully meet the normal

demand for services.

vi. Timing of payments

a. If regulation (ii) or (iii) requires a relevant service provider to make a payment to a

customer, the service provider must make it within 10 working days of its becoming

payable.

b. If the service provider fails to make the payment in accordance with paragraph (a),

the service provider must pay the customer a further penalty as Prescribed by the

Commission if the customer makes a written claim for payment under this paragraph

within 3 months after the payment referred to in paragraph (a) becomes payable.

c. If regulation 5(iv) or 5(v) requires a relevant service provider to make a payment to a

customer, the service provider must make it within 20 working days of its becoming

payable.

d. If the service provider fails to make the payment in accordance with paragraph (c),

the service provider must pay the customer a penalty as Prescribed by the

Commission.

e. For the purposes of this regulation, a payment becomes payable—

1) if the customer concerned must make an application for the payment, at the

end of the day on which the service provider receives that application; or

2) if no such application is necessary, at the end of the day on which the

relevant breach of a service standard occurred.

vii. Means of payments, including where the customer is in arrears

a. Subject to paragraph (b), a customer who is entitled to payment under these

Regulations may ask the relevant service provider concerned to make the payment

directly to the customer.

b. If the customer has not asked for direct payment, the service provider may make the

payment directly to the customer or by credit to the customer's account.

c. If—

1) a customer of a relevant service provider is entitled to a payment under these

Regulations but owes money to the service provider; and

2) at the material time, the customer's debt to the service provider has

been outstanding for more than 6 weeks;

the service provider must make the payment, or so much of it as does not exceed the

amount that the customer owes, by credit to the customer's account.

d. For the purposes of paragraph (c)(2), "the material time" is—

1) if the payment is payable without a written claim being made, the time when

it becomes payable; or

2) otherwise, the time when the customer makes a written claim for it.

6. Grievance redressal mechanism

i. The Commission shall appoint one or more full-time Grievance Redressal Officers (GRO)

for each district of the country.

ii. The responsibilities of the GRO shall include but not be limited to:

a. Being available to all stakeholders for support, assistance, and

b. facilitation of redressal of their service grievances.

iii. The officials in-charge of all service providers shall make available one fixed and adequate

place, shall extend all the necessary resources, communication and other facilities, and

amenities, without any restraint, to the GRO for the discharge of functions of the GRO.

iv. Each service provider shall establish at least one, or more Grievance Redressal Cells

(GRCs), according to the need for Grievance Redressal in the regulated area.

7. Procedure for Review of the Pro-Forma

i. The validity of the Pro-Forma will be for the Control Period for which the CIPP order is

issued.

ii. Before taking up review and revision of the CIPP for subsequent Control Periods, the

Commission shall take up the review and revision of the Pro-Forma.

iii. The procedure detailed in Regulation 3 will be followed for issue of a fresh Pro-Forma.

8. Application for Review of CIPP order

i. Any stakeholder or a member of the general public, or any other person or entity if

aggrieved by the CIPP order passed by the Commission, shall be eligible to apply to the

Commission for a review of CIPP order.

ii. The application shall be filed within 60 (sixty) days from hosting of CIPP order on the

Commission's website and in the form as specified.

9. Saving of inherent power of the Commission

i. Nothing in these Regulations shall be deemed to limit or otherwise affect the inherent

power of the Commission to make such orders as may be necessary for meeting the ends

of justice or to prevent the abuse of the process of the Commission.

ii. Nothing in these Regulations shall deem to limit or otherwise bar the Commission from

adopting in conformity with the provisions of the Act, a procedure, which is at variance

with any of the provisions of these Regulations, in view of special circumstances of a

matter or class of matters and for reasons to be recorded and published for the knowledge

of all stakeholders in writing, the Commission deems necessary or expedient.

iii. Nothing in these Regulations shall, expressly or impliedly, bar the Commission to deal

with any matter or exercise any power under the Act for which no Regulations have been

framed, and the Commission may deal with such matters, powers and functions in a

manner it deems fit.

10. Interpretation

The Commission shall be the final authority for interpretation of these Regulations.

11. General power to amend/rectify

i. The Commission may, at any time and on such terms as to costs or otherwise, as it may

deem fit, amend any defect or error in any document before it (including any clerical or

arithmetical error in any order passed by the Commission), and all necessary

amendments, rectifications shall be made for the purpose of determining the real

question or issue arising in the document.

ii. Provided that if the Commission desires to make amendments or rectifications in order to

determine the real question or issue arising the Commission shall provide an opportunity

to the parties affected by such amendment or rectification touching the real question or

issue to make representations and submissions with respect to the proposed amendment

or rectification.

12. Power to remove difficulties

If any difficulty arises in giving effect to any of the provisions of these Regulations, the Commission

may, by general or special order, do anything not being inconsistent with the provisions of the Act,

which appears to be necessary or expedient for the purpose of removing the difficulties.

13. Extension or abridgement of time prescribed

Subject to the provisions of the Act, the time prescribed by these Regulations or by order of the

Commission for doing any act may be extended (whether it has already expired or not) or abridged for

sufficient reason by an order of the Commission.

14. Effect of non-compliance

Failure to comply with any requirement of these Regulations shall not invalidate any proceeding

before the Commission merely by reason of such failure unless the Commission is of the view that

such failure has resulted in miscarriage of justice.

15. Costs

i. Subject to such condition and limitation as may be directed by the Commission, the costs

of and incidental to, all proceedings shall be awarded at the discretion of the Commission

and the Commission shall have full power to determine by whom or out of what funds and

to what extent such costs are to be paid and give all necessary directions for the aforesaid

purposes.

ii. The costs shall be paid within 30 (thirty) days from the date of the order or within such

time as the Commission may, by written order, direct. If a party fails to comply with an

order for costs within the permitted period, the order of the Commission awarding costs

shall be executed forthwith in the same manner as a decree/order of a Civil Court under

the Code of Civil Procedure.

16. Enforcement of orders passed by the Commission

The Secretary of the Commission shall ensure proper enforcement and compliance of the orders

passed by the Commission, by the persons concerned in accordance with the provisions of the Act and

Regulations and if necessary, may seek the orders of the Commission for directions.

17. Implementation of Regulations

Subject to the provisions of the Act and these Regulations, the Commission may, from time to time,

issue orders and practice directions with regard to the implementation of these Regulations and

procedures to be followed.

***

Appendix: Sample Template for Consideration

Particulars Pleas tick the relevant box/ provide information wherever applicable

Payment of Bills

Have you specified the timeline for users to pay bill? Yes

No

If answer to the previous question is yes, then what is the time limit?

If user does not pay bill on time, is there any fine imposed on him? Yes

No

If the answer to previous question is yes, then what is the amount of the fine?

Keeping of Appointments

Do you have necessary people delegated to visit users’ premises, if required, in connection with the provision of services?

Yes

No

If a visit is required then how do you inform the user? Orally

Written Notice

Does the notice specify the

(a) Premises,

(b) Date on which representative will visit the user

Only (a)

Only (b)

Both (a) and (b)

If representative does not visit the user as per the agreed meeting time then what is the action taken on your part?

Complaints, account queries, and requests about payment arrangements

Do you have a formal structured mechanism where a user can file their complaint?

Yes

No

Do you have a formal mechanism where a user can present their query regarding provision of services?

Yes

No

Are there avenues available to users to request for a change in payment arrangements?

Yes

No

What is the average time taken to reply to a complaint or a query?

What steps are taken if the requests for a change to payment arrangements are not met within 5 working days?

Notice for interruption of services

Have services been disconnected in the controlling period due to any reason?

Yes

No

If answer to the previous question is yes, then please give a number of such incidents?

Have services been disconnected in the controlling period to carry out necessary works except emergency work.

Yes

No


How many days prior to the disconnection of service, in-case of necessary work other than emergency work, is the notice of interruption issued to user?

Does the notice include

(a) earliest date and time after which the supply will be interrupted or cut off

(b) latest date and time by which the supply will be restored

Only (a)

Only (b)

Both (a) and (b)

Have services been disconnected in the controlling period to carry out emergency works?

Yes

No


What are the steps taken to notify each affected user in case of disconnection of service due to emergency work?

Entitlement to payment or credit where supply is not restored as promised

Have services been disconnected in the controlling period due to drought?

Yes

No


Except cases of drought, how many times in the controlling period has the service been restored by the time and date specified in the notice?

Was there any incident of leak or burst in a strategic main in the controlling period?

Yes

No

If answer to the previous question is yes then what is the number of such incidents

In how many cases service was restored within 48 hours after it first became aware that the service was interrupted or cut off due to leak or burst in a strategic main?

If service was not restored as per the timelines given in the notice then what was the action taken on your behalf?

Timing of payments

If there is a requirement to make a payment to a user, then what is the average time taken to pay the user?

If payment is not made to the user in the stipulated time, then what is the action taken from your side?

Means of payments

How is the payment made to user? Directly to the user

Credit to the user's account

Grievance Redressal Mechanism

How many Grievance Redressal Cells (GRCs) have you established in your area of service provision?

Do you have dedicated officials in charge of grievance redressal? Yes

No

If No, please provide the reasons for non-appointment of dedicated officials.

Is there any schedule specifying the duties, roles, and responsibilities of officers in charge of grievance redressal.

Yes

No

***

Annex 5 Changes proposed in the other sectoral

legislations

1 The draft Act, i.e. the Bangladesh Water Supply and Sanitation Regulatory Commission Act, 2015,

once it becomes a law, will entail amendments, modifications, and re-adjustments in certain other

statutes. If Government wants to achieve optimum benefits from these statutes, all of these,

including the draft Act, should under-go some modifications. This may be necessary for

coordinated efforts in water resource planning sector for efficient administration of the Acts, as

presented in the following paragraphs. These amendments are envisaged to incorporate the

Commission in the mainstream activities of water sector in Bangladesh. It is envisaged that the

concerned Ministries and Departments of the Government will follow an appropriate approach to

ensure the changes are effected smoothly and effective.

2 The legislations considered for this suggestion are: The Ground Water Management Ordinance, 1985 (Ordinance No 27 of 1985), Water Resources Planning Act, 1992 (Act 12 of 1992), the Water and Sewerage Authority Act, 1996 (Act 6 of 1996), Bangladesh Water Development Board Act, 2000, the Bangladesh Water Act, 2013, Bangladesh Water Act, 2013 (Act 14 of 2013).

3 The Water Supply and Sewerage Authority Act, 1996 (Act 6 of 1996) may be amended for the

following inclusions:

a. The word Commission shall have to be inserted in the definition section, i.e. section 2 of the Act 6 of 1996.

b. Section 10 of Act 6 of 1996 needs to be recast to accommodate standards of service,

grievance management, handling of complaints in harmony with the draft Act. The power of the Board under the Act 6 of 1996, to determine tariffs on various services has to be modified/re-adjusted in line with the Commission’s power under the draft Act.

c. Section 11, 14 of the Act 6 of 1996 may have to be modified to make the Board responsive to Commission’s activities. The relationship between the Board and Commission has to be defined or spelt out so that a viable working relationship is established.

d. The Government’s policy-making role should be clearly spelt out in the relevant sections

of the Act.

e. Sections 16, 20 of Act 6 of 1996 may have to be amended by replacing the word Govt with the word Commission. This will put the Commission in a supervisory role over the WASAs.

f. Sections 18, 19 of Act 6 of 1996 may be modified to provide for informing the Commission

of some activities performed by WASAs.

g. Section 21 of Act 6 of 1996 may be amended to adjust power to determine tariffs etc. of the WASA Boards in keeping with the power of the Commission under the draft Act.

h. Section 24 of Act 6 of 1996 may have to be modified to re-adjust provisions of absolute

control of the WASAs over collection, purification and supply of water in the light of the provisions of draft Act.

i. Sections 28, 38 and some other sections of the Act 6 of 1996 may have to be modified to

establish/provide for legal framework for a good working relationship with MDs of the WASAs and the Commission under the draft Act.

j. Currently, the WASA Act enables the WASAs to licence deep tube wells. Based on the international experience, regulation of extraction of water is part of the core regulatory functions to be carried out by the Regulatory Commission. This issue needs to be resolved.

4 Amendments are also proposed to Act 14 of 2013, Bangladesh Water Act, 2013 (Act 14 of 2013), as

follows:

a. Section 9 of the Act 14 of 2013 may be modified to allow a representative of the Commission (under the draft Act) to be a Member of the Executive Committee and also the Council under the above Act 14 of 2013.

b. Necessary legal framework should be made to provide for integrated actions, of the

Executive Committee and the Commission, as stated in sections 16, 17, 19, in matters relating to issuance of NOC for any Project on Water Development, sharing information, on matters relating to declaration of Water Critical Area, and determination and maintenance of aquifer and ground water level to a recognized and acceptable level. The Commission under the draft Act should be allowed to play a role in the activities contemplated under the provisions of Act 14 of 2013.

5 The 1992 Act, namely the Water Resource Planning Act, 1992, may have to be amended to allow

the representative of the Commission to be a Member of the ‘Water Resource Planning Organisation”.

6 The Ground Water Management Ordinance, 1985, sec. 5 may have to be amended to

accommodate a representative of the Commission in the Upazila Irrigation Committee. This will enable the Commission to be involved in grass root level activities.

7 The Water Development Board Act, 2000, may be amended to allow the Commission’s

representative to be a member in the Council that governs the Board.

8 In the Bangladesh Environment Preservation Act, 1995 (Act 1 of 1995), it may be proper to accommodate in the draft Act certain factors provided for in that Act. The Commission should require a would-be service providers to obtain an NOC (under section 12 of that the 1995 Act) from the DG, Environment Directorate, to be submitted along with an application for license.

9 And, the Commission should be required, by a provision in the draft Act, to have regard to the

‘Ecologically Critical Area’ (under section 5 of the 1995 Act) while granting license for supplying of water.

***

1

Establishing a Regulatory Framework for the Water Supply and Sanitation Sector in

Bangladesh

Subsidies to Water Utilities

1. Introduction

1. Included in the requirement to develop rules and standards for regulating the water supply and

sanitation utilities is a requirement to undertake a study of subsidies to the water utilities for capital

and operating expenditures along with appropriate recommendations on subsidy rationalisation and

an appropriate subsidy mechanism.

2. This component focusing on subsidies in the water and sanitation sectors is envisaged to form a basis

for subsidy rationalisation, as well as going forward, pave the way for efficient application of funds.

1.1. Rationale and Impact of Subsidies

3. There are two distinct rationales for subsidising water supply services. The first rationale is that

subsidies help to make (or keep) services affordable for poor households and thus facilitate the

achievement of universal access and broader cost recovery for the sector. The second rationale is that

utility subsidies are an effective way to address income poverty and inequality, particularly in

countries that may lack the administrative capacity to implement more sophisticated means-tested

cash transfer schemes. With subsidies, households would be able to afford critical water supply

services and the population and the economy would benefit from improved health and productivity1.

4. The counterargument is that subsidies have adverse consequences that can actually work against

improving the quality of service to existing consumers and extending access to unconnected

households. Studies have demonstrated that subsidies engender distortions in the use of the services

being subsidized leading to an inefficient use of resources and thus indirectly raising the cost of

service provision.

5. Subsidies can also induce inefficiency (e.g., less-than-required billing and/ or collection) in utility

operations. Subsidies to utilities have tended to produce financially weak utilities with stagnant

service areas and with declining service quality, because fiscal transfers are not always dependable

and cross-subsidies are frequently insufficient to cover the subsidies provided to consumers. The

impact of financially weak utilities means that the poorest unconnected households face the prospect

of relying on alternative and often more expensive water2.

6. Finally, while the objective of providing subsidized water services is to benefit the poor, the impact is

generally just the opposite. “Global water subsidies are estimated at $200 to $300 billion per year (McKinsey and Company 2011) as stated in World Bank 2012). While generally intended to promote

affordability and equity across income groups, subsidies in developing countries have proved to be

regressive, benefiting a relatively small, well-off group of consumers3.” So, while governments’

1 Water, Electricity, and the Poor, Who Benefits from Utility Subsidies, World Bank, p. 36

2 IBID, p. 4

3 Investing in Water Infrastructure, Capital, Operations and Maintenance, Water Partnership Program, World Bank,

November 2012, p. 25

2

objective of providing subsidies to utilities is to benefit the poor, the result is that the consumers who

consume the most water (the non-poor) receive most of the benefit from these subsidies.

2. Subsidies

7. Even though the objective of this notes focuses on the subsidies provided to the water utilities for

capital and operating expenditures, a discussion on subsidies to the utilities should also include

subsides to the customers since, as stated earlier, the objective of subsidies is to reduce the cost of

water supply and sanitation services for the customer.

8. Subsidies are generally grouped into two categories - those that go directly to the user and those that

go to the utility. Regardless of the type of subsidy, the general objective of all subsidies is to reduce the

cost of water supply and sanitation services to the user or a sub-set of users. The motivation for the

use of subsidies is to improve the social welfare of the poor by facilitating their access to and use of

such services, as well as by redistributing resources to augment their purchasing power, however, in

fact most water supply and sanitation subsidies (based on consumption, provided to the customers)

prove to be regressive.

9. In some cases, subsidized service is made possible by large transfers from general tax revenue, which

can be in the form of either capital projects, one-time up front transfers or recurring transfers to cover

revenue/operational shortfalls. Utilities also benefit from a wide range of less visible subsidies,

including underpricing of fuel inputs in electricity generation and of electricity and raw water inputs

in water production. In addition, many utilities use cross-subsidization within their customer base to

fund subsidies for specific groups of users. A common example of a cross-subsidy in the water supply

sector is to charge commercial and industrial users a higher tariff rate so that individuals, especially

the poor, can pay a tariff which may be below the cost to provide the service. Other utilities simply

absorb the financial loss from the general or targeted group with the result that the capital stock is

gradually worn-down and pushing repair and maintenance costs off into the future4.

10. Some examples of subsidies which are common in the sector and some of those that exist in

Bangladesh are presented later in this note.

11. Subsidies depend on the willingness to pay and the cost of availing services. Level of subsidies existing

can be calculated based on (a) the difference between operations and maintenance (O&M) costs and

the revenues, and (b) the O&M costs and the payment made by the targeted recipients of the subsidy

– reverse subsidies as they may be called.

Subsidies to Utilities

12. Utilities have the following options to finance the customer subsidies in three general forms of

subsidies they themselves receive:

a. Capital subsidies;

b. Operating subsidies; and

c. Cross subsidies

13. Capital subsidies are provided through the use of capital grants and other instruments (such as

concessional loans) which allow the authority to borrow at below-market rates. The evolution of the

4 Water, Electricity, and the Poor, Who Benefits from Utility Subsidies, The World Bank, p.1

3

water supply and sanitation sector in the United States shows how capital subsidies can be

transformational for meeting policy objectives. If phased out over time, they can free-up government

resources for other purposes, while making service provision more sustainable5. A large portion of

overseas development assistance to the water supply and sanitation sector comes in the form of

concessional loans. Donors offer these loans to meet explicit policy objectives and to provide an

implicit subsidy to the government and the sector. The concessional loan funds are then on-lent to the

utility. This preferential treatment translates into an implicit subsidy. The governments can also

assume the foreign exchange risk (an additional subsidy) by borrowing in foreign currency and

lending in local currency, which provides another implicit subsidy to the local utility6.

14. Capital subsidies have the potential to lower the utility’s costs (and thus lower tariff levels) or to avoid burdening customers with the cost increases associated with improved service levels. If part of the

concessional financing, or capital subsidy regardless of the source of the financing, also involves

determining which capital projects will be implemented (tied financing), then the capital subsidy has

the effect of determining how the benefits of the subsidy will be distributed. For example, capital

projects that lead to service expansion will benefit unconnected customers, whereas capital projects

aimed at improving the reliability of service will benefit only existing customers7.

15. Operating subsidies are intended to provide financial support to enable the utility to continue to

provide critical services. Generally, policy makers assume that an operating subsidy will be for only a

limited amount of time (short-term), but in reality these subsidies can continue for a much longer

period of time because the under-lying issues which justified the subsidy, such as low levels of receipts

and/or high operating expenses, have not been addressed. These can be provided in a variety of ways,

but a common approach is to direct general financial support to the utility and then expect the utility

to pass along the benefit (subsidy) in the form of lower prices to customers in general or to some

specific group within the society. Alternatively, utilities can be directed to provide certain services for

less than full cost and request reimbursement from government once the service has been provided.

16. In the case of government financial support for utilities, customers face an additional risk that

resources transferred by the government to the utility will be absorbed in the form of inefficiency and

will fail to filter through in the form of lower prices. When utilities rely on state transfers, utility

managers experience a soft budget constraint that undermines incentives to manage resources

efficiently, because higher costs may be accommodated by larger state transfers. In such situations,

subsidies may effectively be captured by utility employees and contractors in the form of excess costs,

rather than being transferred to users in the form of lower prices.8 An example of this can be seen in

higher than normal staffing levels normally expressed in terms of the number of staff per 1000

connections. When confronted with a situation of having too many staff for the size of the network,

effective management should make the decision to reduce the staffing levels into a normal range, but

if government has a program in place to subsidize the operating costs to ensure that the customers

have affordable water, the operator does not have the incentive to reduce staffing levels – or other

operating expenses – to normal levels. Thus, the impact of the operating subsidy is diluted by the

inefficiency of the operator.

17. “In the case of the Hyderabad Municipal Water Supply and Sewerage Board, it was estimated that

about 40 percent of the annual subsidy transfer from the state government in 2001 was absorbed by

5 Investing in Water Infrastructure, Capital, Operations and Maintenance, World Bank, p. 25 6 IBID, p. 29

7 Water, Electricity and the Poor, p. 16

8 Water, Electricity and the Poor, p. 14

4

utility employees in the form of excess labor costs (Foster and Homman 2001). The remaining 60

percent of the subsidy benefited customers in the form of utility tariffs that were below the true costs

of efficient service provision. Nevertheless, the unreliability of government funds led to

underfinancing of maintenance and capital programs, so that the utility was able to provide water for

only a couple of hours every other day. Customers spent a sum equivalent to about half of the subsidy

they received on storage systems and tanker water so they could cope with intermittent service”.9

18. Implicit operating subsidies are common in the water supply and sanitation sector and they

frequently come in the form of technical and managerial inefficiencies. Some of the most significant

examples of implicit subsidies come from water being sold at rates which are below the levels required

to even recover operations and maintenance expenses, poor billing and collection systems, and

excessive levels of non-revenue water.

19. A survey by Global Water Intelligence (GWI) covering water utilities in 132 major cities worldwide

revealed that underpricing of water supply services is widespread, even in high-income and upper

middle-income countries (GWI 2004). According to survey data and estimates of tariff levels that

would be needed to achieve varying degrees of cost recovery (see Appendix 1), 39 % of water utilities

have average tariffs that are set too low to cover basic operation and maintenance (O&M) costs. A

further 30% have tariffs that are set below the level required to make any contribution toward the

recovery of capital costs. The average tariff rises substantially across country income levels, from

US$0.11 per cubic meter in low-income countries to about US$0.30 in middle-income countries,

reaching US$1.00 in high-income countries. Nevertheless, even in high-income countries, only 50%

of water utilities charge tariffs high enough to cover more than O&M costs. In low-income countries,

barely 3% of water utilities were able to achieve this level. Some degree of general subsidy is thus the

norm.10

20. Comparing the current water tariff levels charged in Dhaka of approximately US$0.092/m311 with the

table presented in the Appendix 1 which indicated that in 2004 a rate of US$0.20/m3 was needed to

recover operations and some maintenance costs provides a good indication of the level of implicit

subsidy being provided by Dhaka WASA through its tariff levels. Jane Ebinger, in her paper for the

World Bank entitled “Measuring Financial Performance in Infrastructure: An Application to Europe

and Central Asia”, indicates that the hidden costs or implicit subsidies for water utilities are found in the following three major areas, and of these, she estimated that the hidden costs associated with

unaccounted for water to be 50%, tariffs set below cost to be 43% and poor collections to be 7%. In her

study, she used the level of unaccounted for water in England and Wales of 20% as the benchmark

against which to compare the performance of other utilities. The three elements of the hidden cost

that she determined affect infrastructure are:

a. Poor bill collection rates,

b. Excessive losses due to inefficient operations and/or illegal connections, and

c. Tariffs below cost-recovery rates.

21. Explicit subsidies provided by water supply and sanitation utilities most often appear in the tariff

structure and rates being charged. It is common to find higher average prices for industrial than

residential users indicating the presence of cross-subsidies between user classes. In addition, most

residential water tariff structures are block tariffs, which means that quantity targeting is used to

9 IBID, p.15

10 IBID, p.19

11 The current tariff of BTK 7.34/m3 at an exchange rate of BTK80 to 1US$

5

allocate subsidies within the residential user base. However, it is also quite common to find that the

rates charged for the various blocks are below the levels needed to recover operations and

maintenance costs, and in most cases the wealthy users also benefit from the low rates charged for the

lower block thus receiving an implicit subsidy.

22. Cross subsidies generated within the utility provide a politically attractive alternative to funding

subsidies from government funds. Revenue earned in excess of costs from some users or in one part of

the utility’s business is used to offset losses created in another part of the utility by the subsidy

programs. Cross-subsidisation may take many forms. The two most common forms are for industrial

customers to pay prices in excess of costs to subsidise residential consumption, and for high-volume

customers within the residential customer class to subsidise low-volume users. Cross-subsidies can

also be used to finance the expansion of the water supply network into unserved areas. Cross-

subsidies are popular because they appear to permit utilities to achieve cost recovery without relying

on central government transfers or any other grants.

23. Generally, the more favorable balance between industrial and residential users makes electricity

appear to be a more promising sector for applying this type of cross-subsidy than the water supply

and sanitation sector. However, the growing liberalization of electricity markets for larger industrial

users has at the same time made such cross-subsidization increasingly difficult to sustain. By

contrast, in the water supply sector, which remains a monopoly, industrial users are more exposed to

this type of policy. Nevertheless, even in the water supply sector, industrial users still have the option

of reacting to cross-subsidization by disconnecting themselves from the public network and by

arranging their own private supply of water, or perhaps by relocating to a different service area. The

use of cross-subsidies can lead to a vicious circle in which the shrinking base of subsidising users

leads to even more punitive prices on the remaining cross-subsidisers, which further accelerates the

contraction of the user base.12

3. Subsidies in Use in Bangladesh13

24. The following subsidies are currently being provided to water supply and sewerage authorities by

Government (in some cases only partially funded) and by the customers:

Operating Subsidies By Government

i. No cost for raw water ii. Staff costs charged to projects and to operations

iii. Licensing of private firms to drill tube wells Implicit

i. Cross-subsidies included in the tariff structure ii. Tariffs below full cost recovery leading to deferred maintenance

iii. Deferred maintenance iv. Excessive levels of non-revenue water v. Low levels of billing and collection

Capital Subsidies i. Capital grants

ii. Interest rates on long-term debt below market rates iii. Debt service obligations partially assumed by Government iv. Foreign exchange obligations assumed by Government

12

Water, Electricity and the Poor, p. 16 13

Based on meetings with management and staff of Dhaka WASA and analysis of relevant reports

6

Subsidies to Government i. Non-payment of water supply and sanitation services by government agencies

ii. Requirements by WASA Act to provide services below market rates for certain groups such as the public stand posts

iii. Drainage services not fully funded by government

25. Based on the financial information provided by the three largest major water supply and sanitation

service providers, Dhaka, Chittagong and Khulna Water Supply and Sewerage Authorities, the total

amount of operating subsidies totals approximately 90 Crore taka (approx. 12 million USD) per year.

The calculation of those subsidies is presented below14.

Table 1 Calculation of difference between O&M expenses and revenues – indicating subsidy

DWASA (2012-13)15

CWASA (2013-

14)16

KWASA (2012-

13)

Operating revenues (lac taka) 68,912 4,891 67 Actual O&M spending (lac taka) 76,716 6,055 71 Subsidy (Actual O&M – Operating Revenues : lac taka)

7,804 1,164 4

Dhaka WASA

26. A review of DWASA’s 2013 financial statements indicates an operating profit of approximately 3,009

lac taka, however, as the above table indicates, Dhaka WASA’s operating expenses were 7,804 lac taka

greater than its operating revenues. The difference, or the reason that DWASA was able to report this

operating profit, was other income, which can be considered as an operating subsidy, of about 2,348

lac taka in royalties from deep tube wells and a further 7,961 lac taka in non-operating revenue.

27. A revised income statement presenting the results of the operations of Dhaka WASA would be:

Table 2 Indicative financial statement considering other income as operating subsidy

Budget head Figure (lac Taka)

Operating Revenues 68,912 Operating Expenses 76,716 Operating Loss (7,804) Other income including licensing revenues 10,812 Interest expense 1,333 Profit before tax 1,675

28. While the operating subsidy from royalties for deep water wells and other income was instrumental in

allowing DWASA to finance its operating expenses, DWASA’s operating expenses appear to benefit17

14

Since the operating results for DWASA have not been released for the fiscal year ended in June 2014 and the

results for Chittagong and Khulna are preliminary, the actual subsidies may vary 15

Audited financial statements for FY 2013 16

Audited financial statements for FY 2014

7

from an additional inherent subsidy in the form of deferred maintenance. Deferred maintenance is

one of the most common forms of implicit subsidies in water supply and sewerage companies world-

wide.

29. While deferred maintenance is common, it is also difficult to calculate. The 2013 Corporate Business

Plan indicates that the level of repair and maintenance spending in Dhaka WASA is approximately 1%

of the net book value of the fixed assets. Since neither the report nor the audited financial statements

provide detailed information regarding the composition of the fixed assets i.e. value of the civil works

versus the mechanical and electrical fixed assets, it is not possible to say if that level of spending is

adequate or not.

30. However, a “rule of thumb” is that repair and maintenance spending should be about 5% of the cost of the civil works and about 7% of the cost for the mechanical and electrical assets. While DWASA’s water and sewage network is old and would thus require higher levels of maintenance than normal, if

DWASA was to spend only 5% to maintain its entire asset base, the spending should have been about

26,150 lac taka in 2012-13 instead of 5,500 lac taka.

31. Thus, the estimated inherent operating subsidy due to deferred maintenance is approximately 20,650

lac taka (difference between 26,150 and 5,500 lac taka). The result of prolonged periods of deferred

maintenance is the need for new capital projects along with new long-term borrowing just to continue

serving those already connected to the network.

32. Other types of inherent subsidies being provided to Dhaka WASA are in the form of reductions in cash

collected from the production and sale of water due to:

a. Non-revenue water because of physical loses,

b. Billing ratio - water delivered which was not billed, and

c. Collection ratio - water billed that will not be collected.

33. Using the information regarding the levels of non-revenue water (NRW – termed as ‘System Losses’ in the statements of WASA), and billing and collection efficiency contained in the Dhaka Corporate

Business Plan dated November 2013 as presented below:

Table 3 Inherent subsidy-equivalent arising from NRW, billing inefficiency, & collection inefficiency

Subject area Units Performance 201318

Benchmark Standard

Inherent subsidy-equivalent19

Non-revenue water

% of water produced and unbilled

29.6% 20% 1,649 lac taka20

Billing efficiency

% of registered accounts billed

93% 99.5% 2,861 lac taka21

Revenue collection

% of total amount billed

93.4% 95% 4,548 lac taka22

17

This is envisaged due to the sub-required level of maintenance. To establish the extent of this, an O&M cost

audit has been suggested (pl. see other annexes of the main Draft Final Report). 18

Dhaka WASA 5 year Corporate Business Plan, November 2013, p. 13 19

Basis for calculation: multiplication of the % difference by total corresponding 20

(29.6% -- 20% ) x (value of total water produced at the reported O&M cost) 21

(99.5% -- 93%) x (value of total registered accounts to be billed) 22

(95% -- 93.4%) x (total amount billed)

8

4. Summary and Recommendations

34. This study on subsidies has been able to identify the types of subsidies being provided by Government

to the utilities and in many cases those subsidies being provided to the Government by the utilities

(see paragraph 24). The study has also developed robust estimates of many of the operating subsidies

being provided to the three largest Water Supply and Sewerage Authorities as well as many implicit

operating subsidies being provide to DWASA. However, it is beyond the scope of this study to

comprehensively document all of the subsidies being provided to/ from the sector, including both

subsidies to the service providers and subsidies to customers.

35. In-depth analysis of system losses, real O&M costs, and Billing/ Collection Efficiency: It

is understood and acceptable that the total level of income to the utilities is what matters. At the same

time, some in-depth analysis will enable the utilities to recover their O&M costs and move away from

the dependence on other income. This study should be viewed from that perspective, and the fact that

further in-depth analysis is required to see whether:

a. The current system losses are indeed acceptable or not,

b. The current O&M costs are indeed the ‘real’ costs or not, and

c. The current billing & collection efficiency is the best the Bangladeshi utilities can achieve

or not.

36. Link utility subsidies to well-planned initiatives enabling the needy to avail the

subsidies: As indicated earlier in this study, while the rationale for subsidizing water supply services

is to make services affordable for poor households and to address issues of poverty and inequality, the

reality is often that subsidies – particularly operating subsidies - result in financially weak and

inefficient utilities. The impact of a financially weak utility means that sustainable levels of service

generally are not available to most of the population which translates to the poorest unconnected

households relying on alternative and often more expensive sources of water. So, while the objective

of having subsidies to utilities is to benefit the poor, the result is that the customers who use the most

water (mostly the non-poor) receive most of the benefit from these subsidies. The subsidies should be

extended to the utilities only after they present a well-designed plan to enable the poor/

disadvantaged communities to benefit from the subsidies. For example, a utility that presents a plan

to provide connections to the needy, can opt for connection subsidies (from various sources analysed

elsewhere in this note).

37. Link utility subsidies with the Government’s overall poverty reduction strategy: It is

recommended that the issue of the amount and form of subsidies in the water supply and sanitation

sector be addressed by Government as part of its larger poverty reduction strategy. To properly

document the full extent of the subsidies being provided, including both subsidies to the service

providers and to the customers, a comprehensive public expenditure review should be undertaken.

This review will indicate not only the amount of all of the subsidies being provided to the sector but

also more detail regarding exactly what is being subsidized and its impact. A public expenditure

review is the critical next step to determine the nature and extent of the subsidies being provided to

the sector.

38. Conduct a public expenditure review: In parallel with the public expenditure review,

Government should review its current water subsidy policy to reflect the findings and

recommendations from the public expenditure review. Further, in updating the current policy,

Government should ensure that the subsidies are clear, transparent and easy to monitor and

implement, and that the subsidies provided to both the service providers and the consumers are

explicit and targeted and based on increasing access to water for the poorest residents rather than

9

providing operating subsidies to the service providers. If the decision is made to continue providing

operating subsidies to the service providers, these subsidies should also be clear and transparent and

declining over a short and fixed period of time.

39. Regulatory authorities should consider subsidies to each utility on case-to-case basis:

There is no one-size fits all solution for governments to gradually reduce the level of subsidies being

provided to its utilities, but that transition should be done because it is generally acknowledged that

utilities that are efficient and financially sustainable provide better levels of service to their customers.

Further, it is generally acknowledged that the management of efficient utilities must have the needed

level of autonomy and authority to provide efficient services and a tariff structure that allows for the

full recovery of their costs.

***

Appendix 1. Indicative Cost-Recovery Ranges for Water Services23 GWI (2004) developed the following ranges for identifying the probable degree of cost recovery in developing and industrialised countries. The table differentiates between tariffs that are in most cases insufficient to reach even basic operation and maintenance (O&M) costs, tariffs that are probably high enough to be covering operation and some maintenance costs, and tariffs that may be high enough to be covering O&M plus some capital costs. Cost estimates for developing countries are somewhat lower, reflecting lower labor costs.

Rates Developing Countries Industrialised Countries Less than US$0.20/ m3 Tariff insufficient to cover basic

operation and maintenance (O&M) costs

Tariff insufficient to cover basic O&M costs

US$0.20 – US$0.40/m3

Tariff sufficient to cover operation and some maintenance costs

Tariff insufficient to cover basic O&M costs

US$0.40-US$1.00/m3 Tariff sufficient to cover operation, maintenance, and most investment Needs

Tariff sufficient to cover O&M costs

Greater than US$1.00/m3

Tariff sufficient to cover operation, maintenance, and most investment needs in the face of extreme supply shortages

Tariff sufficient to cover full cost of modern water systems in most high-income cities

Source: GWI 2004.

23 Water, Electricity, and the Poor, Who Benefits from Utility Subsidies, The World Bank, p.20

Establishing a regulatory framework for WSS sector in Bangladesh

Draft

Annex 7 Business Plan Guidelines

1. INTRODUCTION ..................................................................................... 2

2. CONTENTS.............................................................................................. 2

2.1. The Executive Summary ............................................................................................................................ 3

2.2. General Utility Description ....................................................................................................................... 3

2.3. Management .............................................................................................................................................. 3

2.4. Strategic Plan ............................................................................................................................................. 3

2.4.1. The Utility Objectives ............................................................................................................................ 4

2.4.2. Analysis of Current Position of the Utility ........................................................................................... 4

2.4.3. Business Environment Analysis ........................................................................................................... 5

2.4.4. Activities and Work Programs .............................................................................................................. 5

2.4.5. Overall Policies and Guidelines for Achieving Objectives ................................................................... 5

2.5. Market Orientation .................................................................................................................................... 5

2.6. Efficiency Indicators .................................................................................................................................. 6

2.6.1. Performance Improvements ................................................................................................................. 6

2.6.2. Improvements of Water Quality and Customer Service ...................................................................... 6

2.7. Five-Year Operations and Maintenance Budget (OPEX) ........................................................................ 7

2.8. Five-Year Capital Investment Program (CAPEX) .................................................................................... 7

2.9. Revenue Needs and Tariff Analysis / Pricing Strategy ............................................................................ 7

2.10. Non Core business activities ..................................................................................................................... 7

3. THE BUSINESS PLAN PRESENTATION STRUCTURE ............................. 8

4. MONITORING ......................................................................................... 8


Draft

1. Introduction 1 Water utility management has increasingly required an entrepreneurial outlook in recent years; as

water utilities must understand the spectrum of potential market conditions and develop strategies

that: i) protect their ability to continue delivering reliable, cost efficient service; and ii) provide

opportunities for organizational growth and development. This challenge entails deciding how to

invest limited resources to achieve the greatest desired returns within acceptable levels of risk.

2 Business planning is a process to help utilities to plan operations, investments and finance in a

sustainable way. It provides a benchmark, when considering the past year, e.g. why did we not

achieve our capital program expectations? It provides also a means of both reporting to the Executive

Board and seeking its approval for the coming year’s budget. 3 Strategic business planning is a recognized best practice for any entity to manage the service

expansion and the efficiency improvement in a systematic, logical and realistic manner. It brings

planning activities together under a common framework that links all planning and budgeting

decisions to the utility’s fundamental goals. 4 A business plan is a comprehensive overview of a utility’s missions, objectives, strategies and

programs for a given period. These objectives, strategies and programs must be linked to the sector

policy. It identifies the current situation of a utility, where it wants to be at the end of the planning

period and, in broad terms, how it proposes to get there. Therefore, the Business Plan is an essential

management tool, guiding management’s decisions and actions. 5 The Business Plan should reflect a realistic view of the expectations and long-term objectives of a

company. The Business Plan establishes a consistent picture of the company’s current and future situation, pointing out its weaknesses and strengths as well as the potential to improve. In particular,

the Business Plan should demonstrate how the company intends to be more efficient by specifying

appropriate objectives and logically setting out the actions necessary to achieve them.

6 A Business Plan shows that careful consideration has been given to the business's development. A

Business Plan provides a logical framework within which a business can develop and pursue business

strategies over the planned period. It provides a benchmark against which actual performance can be

measured and reviewed.

7 A Business Plan furthermore helps management to clarify, focus and research their business's

development and prospects and serves as a basis for discussion with third parties (e.g. the financial

institutions, stakeholders, regulator, etc.).

8 The Executive Board therefore must endorse it, as future board and management decisions will be

within the framework of the Business Plan. The other documents to be elaborated by the utility

should be consistent with it, including the agreements concerning the minimum service level and the

tariff adjustment proposals

9 The business plan should cover a period of five years on a revolving basis.

2. Contents 10 The business plan should comprise but not restricted to the following main parts:

a. Executive summary

b. General utility description

c. Management

d. The strategic plan

e. The activities and work programs

f. Market orientation

g. The efficiency improvement indicators

h. Other non-core business activities.


Draft

2.1. The Executive Summary 11 The Executive Summary should present the Business Plan in a concise manner. It should be short and

outline the main elements of the Business Plan in a few paragraphs by giving succinct statements of

objectives, strategies and actions planned. Special emphasis should be laid on risks and possible

actions to overcome obstacles. It should also include a brief Mission Statement of the utility. This

statement describes the basic purpose of an organization. It is used as a basis for formulating goals,

objectives and short-term targets, and is written within the policy framework of the Water and

Sanitation sector. It will bring out in a short statement what the utility is trying to address or achieve.

12 This section of the Business Plan is prepared once the Business Plan is completed and it provides the

senior management the opportunity to provide a summary explanation of its situation and to

communicate its concerns and approach to improving performance.

2.2. General Utility Description 13 The general utility description will in the first place bring out an overview picture of the water and

sanitation industry. It will then bring out the following:

a. The background of the utility

b. Its vision and mission statement

c. Its major services

d. Its main focus

e. Perceived potential growth

f. Main partners

g. Major contracts and agreements

h. Recent important changes and

i. Any other general information about the utility and the sector

2.3. Management 14 The success or failure of any business will largely depend on the management team in place. A

business with adequate resources is bound to fail if management fails to utilize the resources. The

strength of the management team must therefore be strongly stated in the Business Plan. Brief

profiles of key personnel including qualifications (academic and professional) and number of years of

experience must be stated.

15 The key personnel to be mentioned by name with their qualification and experience in relevant fields

are the chief executive officer and heads of departments (directors) of finance, commercial, technical,

and human resources. It will be necessary to include an organization structure in this section.

16 Since people can only achieve performance, organizational structure and staffing levels are key

components of a Business Plan. The Business Plan will emphasize the cost of labor on the overall

budget and the downward pressure that over-staffing has on the wages that it can afford to pay.

2.4. Strategic Plan 17 The Strategic Plan outlines the course of action including the specification of resources required to

achieve a specific target. This will set the utility’s objectives for the planned period. The strategic plan will:

a. Provide a framework for utility decision making within the period of the business plan

b. Furnish the utility with a formal systematic and continuous process of decision making,

c. Give direction to the whole organization

18 The Strategic Plan is therefore conceptual and directional in content. It should state and include the

following:

a. Utility Objective

b. Analysis of Current Position of the Utility


Draft

c. Environmental Analysis

d. The Activities and Work programs

e. Overall Policies and Guidelines for achieving the Objectives

19 The Strategic Plan and its Goals is the key to the Business Plan process, since they capture the

quantifiable targets that improve the performance of the utility. Strategic Goals are written to be

specific, measurable, realistic, and time bound.

20 The Business Plan links to the Strategic Plan and covers (typically) a one-year period of the strategic

vision on a five-year revolving basis. It addresses the following key elements:

a. The objectives for the past year and how/if they were achieved;

b. The aims/objectives of the utility for the coming year;

c. OPEX and CAPEX program (e.g. growth related, replacement/rehabilitation, operational

requirements, design and construction);

d. Key projects to be initiated in the year ahead;

e. The staffing, including hires;

f. Funds committed and required funds to be committed.

2.4.1. The Utility Objectives 21 The objectives of the utility will be derived from the utility’s Mission Statement. Objectives will

normally be formulated within a hierarchical structure with each level in the hierarchy deriving its

objectives from the next level above, all therefore emanating from the organization overall mission.

There must be therefore a hierarchy of objectives going down the organization structure.

22 When presenting utility objectives and strategies for the five-year period, the progress in ensuring

Minimum Service Levels will be clearly reflected. In particular, the utility should indicate its objectives

for the next five years and the strategies how it intends to achieve them relating to the following key-

indicators:

a. Coverage in the service area

Water (domestic connections, kiosks, standpipes)

Sewerage (connections)

b. Non-Revenue Water

c. Metered billing

d. Collection rate

e. Personnel costs

f. Continuity of service provision

g. Water quality

h. Cost recovery

i. Untreated trade effluent discharged, etc.

2.4.2. Analysis of Current Position of the Utility 23 In order to formulate a course of action, it is necessary to first determine the current situation by

way of carrying out a Position Audit. A Position Audit focuses the attention of those responsible

for the formulation of the Strategic Plan upon the question “where are we now”. This is with

regard to:

a. Fixed and Operating assets

b. Finance

c. Operating systems

d. Internal organization

e. Returns to key stakeholders

f. Delivery of services, and other utility concerns

24 A Position Audit will include a SWOT Analysis. SWOT Analysis will basically outline the utility’s

current Strengths, Weaknesses, Opportunities and Threats.


Draft

2.4.3. Business Environment Analysis 25 During and after the setting of the strategic plan, the utility needs to analyze the business environment

in which it operates. The effects of the environment may sometimes make it difficult for the utility to

achieve its objectives within the planned period. The environment will include among others Political,

Economical, Social and Technological factors. (PEST Analysis Factors

26 Providers must outline in their Business Plan what impact the PEST analysis factors will have on their

business. Where necessary remedial measures should also be outlined so as to show that the

objectives would still be achieved.

2.4.4. Activities and Work Programs 27 This part of the Business Plan will outline in broad terms how the utility will get where it wants to be.

It will translate the objectives identified in the previous section into activity and work programs for

the different departments considered. It will explain why these programs are felt being necessary and

explain why they are believed sufficient to achieve the set goals. It will be helpful to divide the

objectives into sub-objectives for each level of management and set targets and time limits for each

sub-objective. Performance measurements methods that will be used must also be expressed clearly

for each target.

2.4.5. Overall Policies and Guidelines for Achieving Objectives

28 This section helps to establish realistic Policies and Guidelines, which the utility will adopt to direct it

towards achieving the intended objectives. These will be internal policies and guidelines, which the

utility perceives as appropriate taking into account its internal and external environments.

29 Particular emphasis should be directed towards key indicators and any other mentioned in the

Minimum Service Level Agreement.

2.5. Market Orientation 30 The marketing-oriented organization places the customer and meeting the customers needs at the

center of its corporate plan. An understanding of the customer needs will provide an opportunity for

investment. This leads to the development of viable marketing plans that target and promote

appropriate service, payment and management options that can be provided reliably at appropriate

prices to each of the customer groups.

31 Marketing Orientation will have at its center an in depth outline of marketing mix. Marketing Mix is

the process of understanding the nature of customers, their current practices, needs, the way they

want their needs delivered, the best way to communicate to them and their knowledge of the service

provider. In this part of the Business Plan, factors identified as part of the market mix and how they

are together blended must be brought out. The market mix is key to satisfying customer needs which

is critical to the survival of the utility. There is no such thing as typical marketing mix because each

company prescribes its own unique formula.

32 However, the task of the management is to convert the utility assets into customer-valued assets. For

example service providers may bring out how they will blend Products, People, Promotion, Price and

Place (the 5 Ps). A feasibility study may be carried out at the end of which certain localities (place)

may be identified as better provided (promoted) with house connections (product) as opposed to kiosk

because of the life style of the people in the area. This may include adopting block tariff as the pricing

method. The sanitation aspect in this example may involve looking at the social and religious patterns

of the people in certain areas (places). The dominant group in a certain area may not use tissue

because of religious persuasions. The marketing strategy may be to build special latrines (product)

with water basins making it easier to clean without tissue at a special tariff.


Draft

33 Market Orientation is about satisfying customers through pricing the product at the level, which is

sustainable. Therefore measures to be taken in this regard should be outlined clearly in the Business

Plan.

34 The marketing strategies will also address revenue collection. Strategies will have to be formulated

which are specifically targeted enhancing at revenue collection. The Business Plan will have to be

explicit on revenue collection efficiencies.

2.6. Efficiency Indicators 35 The efficiency indicators define quantitative and measurable indicators for the set objectives. It should

state their current level and the targeted level as the result of the planned actions. A distinction

should be made between efficiency improvements (reduced costs or higher revenues) and

improvements of service and quality.

2.6.1. Performance Improvements 36 In developing its strategic plan the utility should define its potential to improve its efficiency during

the Business Plan period. The purpose of this part is for the utility to:

a. Set out its views on the extent of possible improvements in efficiency (e.g. reduction of Non-

Revenue for Water by x % during the next three years, increase in collection rate to,

percentage of bills based on metering increased to, number of staff and personnel expenditure

reduced to … etc.) and the evidence on which they are based, establishing links to the other parts of the Business Plan (e.g. programs of installation of new meters, changes in the

organizational structure); and

b. Explain the implications of these improvements on cost (e.g.: 10 % less NRW will result in

production cost lowered by x %) and establish a link to the set targets (e.g. for the first year a

reduction of 20 % of NRW, its targeted cost will decrease by x % respectively y that will result

in achieving the equilibrated result being attained at the end of the second year).

37 Efficiency improvements should be stated in the first instance in non-financial quantitative terms or

percentage terms (e.g. streamlining of procedures will reduce the required number of meter readers

by x or the meter installation program will reduce the NRW by y %) before assessing the possible

financial benefits (e.g. by the reduction of the number of meter readers personnel costs will decrease

by x, the proposed reduction in consumption of chemicals for treatment without loss of water quality

will reduce the costs for chemicals by …). 38 The provider should explain how it intends to meet its efficiency assumption and confirm that this can

be done without increasing the risk of service or quality compliance failure.

2.6.2. Improvements of Water Quality and Customer Service

39 The purpose of this part for the utility is to:

a. Set out its views on the scope for improvements in water quality and customer service and the

evidence on which they are based (thereby especially focusing on the Minimum Service Level),

and

b. Give detailed estimates of the cost implications.

40 Quantified targets for indicators for efficiency improvements and improvements in quality and

customer service should be included.


Draft

2.7. Five-Year Operations and Maintenance Budget (OPEX)

41 With the above information, the operations and maintenance budget can be elaborated over the

coming five-year period. The issues that are key to the budget are the impact of management

decisions on expenses for labor, power and chemicals. These three items drive the budget of most

utilities.

2.8. Five-Year Capital Investment Program (CAPEX) 42 Since capital expenditures have often been a central government decision in in many countries, and

often remain that way today, there is little expertise or experience at the local level to properly develop

a capital investment program that ties to the performance priorities in a cost-effective manner. This

element of the Business Plan is extremely helpful in this regard and demonstrates that you “cannot have it all”, and that life is not simply appealing to donors for grants

2.9. Revenue Needs and Tariff Analysis / Pricing Strategy 43 The Business Plan process ends with a series of Tariff Analysis iterations that may cause the

management to reconsider its O&M Budget. Once a realistic “average tariff” has been calculated, the pricing strategy can be developed to reflect any differentiations amongst classes of users (customers).

44 Business planning is best understood as an iterative process. Initially an assessment is carried out of

current service levels in relation to regulatory requirements, operational performance and consumer

demand. This assessment serves as a basis for outlining requirements in technical, management and

operations plans, which form the basis of the FOPIP (Financial and Operational Performance

Improvement Plan). These parameters are then matched to the outcomes of “willingness to pay” study and a financial projection is prepared. If the cost of the initial investment plans is too high,

customers will not be able to afford the system (tariffs too high and not affordable) and the utility will

be financially un-viable.

45 Hence a prioritized utility risk management plan will drive the investment expenditure and business

plan and the corresponding annual budgets. It will provide supporting documentation for decision-

making and provide the framework to conduct a value-for-money analysis to demonstrate that

resources are being allocated to the areas of greatest risk, hereby optimizing the cost to minimize the

risks to acceptable levels and the available budgets. Opportunities to increase revenue for the

business are considered as positive risks.

2.10. Non Core business activities 46 The Business Plan so far has been addressing the main core business of the utility, which is water

supply and sanitation. However, water companies may be involved in other businesses. In this

section of the Business Plan companies should outline other business activities they are engaged in.

These activities must be described in full details giving reasons why the utility has undertaken these

activities with details of expected benefits. The following will also have to be shown:

a. Strict separation from the core business

b. Separate accounts

c. Separate utility structure

d. No subsidizing from the main core business and

e. The activity is for the benefit of the main core business


Draft

3. The business plan presentation structure

47 In view of the foregoing, the Business Plan to be submitted to WSSRC should be structured as follows:

a. Cover sheet mentioning name, date and mission of the utility

b. Table of Content

c. Executive summary

d. General utility description Management

e. Strategic Plan

f. The Activities and Work Programs

g. Marketing Orientation

h. The Efficiency Improvement Indicators

i. Non –Core Business Activities

j. Appendices

4. Monitoring 48 As every management tool, a business plan is only useful to the utility if it is used. Therefore, it is

essential for a utility to monitor regularly the agreed business plan’s implementation. It is therefore recommended to integrate all key aspects of the business plan in the internal reporting system.

Management should be monitoring the implementation of the business plan at least once a month and

prepare reports for their discussions. Major deviations should be explained and possibilities to react

to undesired developments should be discussed and decided upon.

49 The Service Provider shall undertake a semi-annual review of the Business Plan. The report of the

review shall be submitted to the WSSRC. The WSSRC shall consider the monitoring report and issue

directives for the adjustment in the Business Plan.

***

Bangladesh Water Supply and Sanitation Regulatory Commission Performance Monitoring Template

PwC 1

Annex 8 Template for preparation of performance monitoring database

The following monitoring reports are based on the Regulations drafted under the draft Bill to establish the

Water Supply and Sanitation Regulatory Commission (WSSRC). The monitoring reports will be completed as

specified in the Bill by all providers of water supply and sanitation services. The data provided by the service

providers will enable the WSSRC to monitor the performance of the service providers, ensure that the service

providers are protecting and promoting the interest of users, and that they managing their operations

efficiently.

1.1 Management Discussion and Analysis

This portion of the monitoring report is for the Chief Executive Officer to present a written review of the

performance of the service provider during the previous year. The review should draw on the more detailed

information presented later in the report to highlight changes in service delivery and operational performance.

1.2 Baseline Data and Key Performance Indicators

In order to monitor performance of service provision, a series of operational, financial, management and asset management performance indicators for water supply and wastewater services has been proposed. The indicators are presented in the Table below. The indicators help defining the minimum standard of services to be provided to water users. A methodology is

provided on how each performance indicator is calculated from available data.

The Service Provider shall prepare a plan for primary surveys and other required data collection activities. The

WSSRC shall examine the case and facilitate such activities through appropriate mechanisms of compensating

for the costs associated with those.

Table 1 Baseline data to be provided by the service providers

Serial Number

Variable Measurement Unit

Water Supply Services (all categories)

1. Water Production

a

Treated surface water volume input into the water distribution network – groundwater per year {Volume of water produced (SIV)}

cubic metres

2. Water Supply Service

b Total population resident in the service area #

c Number of service connections #

d Number of water kiosks #

e Total population in service area provided thru service connections

#

3. Metering

f Number of metered service connections #

G Total number of water service connections #

H Metered water consumption cubic metres

4. Operations and Asset Management


PwC 2

Serial Number


i Number of employees #

j Average employee salary, on annual basis BDT

k Money value of outsourced contracts BDT

l Number of employees (internal + equivalent outsourced) #

m NRW volume cubic metres

n Total length of distribution network kilometres

o Length of pipes rehabilitated during assessment period kilometres

p Total number of pipe breaks per year #

5. Quality of water service

q Number of treated water tests carried out #

r

Number of treated water tests complying with the applicable standards or legislation

s

Number of treated water tests required by applicable standards of legislation #

t

Number of new service connections installed during assessment period

#

u Total time spent for establishing new service connections days

v Total number of complaints of quality of service #

w Total number of billing complaints #

x

Average number of hours for which water supply is available per day

hours

y

Number of new service connections installed during assessment period

#

Wastewater/ Sewerage Services (all categories)

z Volume of wastewater treated cubic metres

aa Dry weight of sludge safely utilized cubic metres

ab Dry weight of sludge handled cubic metres

ac Number of sewer connections #

ad Resident population with sewer connection #

ae Total number of sewer blockages per year #

af Total length of the sewers

kilometres

ag

Length of defective sewers rehabilitated during assessment period

kilometres

ah Total number of complaints as a result of sewer blockages #

ai Number of effluent samples tested #

aj

Number of effluent samples required by applicable standards of legislation #

ak

Number of effluent samples tested meeting applicable standards

#

al

Number of new sewer connections installed during assessment period

#

am Total time spent for establishing new sewer connections days

Financial Indicators

an Billed consumption of current assessment period (year) cubic metres


PwC 3

Serial Number


ao Sales revenues from billed consumption of current assessment period (year) = annual revenues from water sales BDT

ap Total annual operating expenses BDT

aq Energy (electricity + fuel) costs BDT

ar Internal total staff costs BDT

as Current Liabilities BDT

at Current Assets BDT

au Depreciation BDT

av

Sum of principal payments or current portion of long term loans

BDT

aw Interest Payments BDT

ax

Accounts receivable at the reference date of the previous assessment period BDT

ay

Accounts receivable at the reference date of the current assessment period BDT

Table 2

Table 2 Key performance indicators computed using the baseline data1

Variable Calculation Measurement Unit

Formula


Water Supply Service

Total population Total resident population in water distribution service area

# = b

Number of service connections Number of service connections # = c

Number of water kiosks Number of water kiosks # = d

Population coverage with piped water supply

(Resident population supplied thru service connection / total resident population in water distribution service area) x 100

% = (e/b) X 100

Metering

Number of metered service connections

Number of metered service connections # = f

Metering ratio Number of water service connections that are metered / total number of water service connections x 100

% = (f/c) X 100

Water consumption per capita Total annual water consumption (SIV/ population served per day) lpcd = (a/e)/365

1 Formula refers to serial numbers used in Table 1


PwC 4


Formula

Percentage of unmetered water System input volume minus metered water consumption / system input volume x 100

% = {(a-h)/a} X

100

Operations and Asset Management

Number of employees Internal personnel # = i

Equivalent number of outsourced staff

Money value of outsourced contracts / average employee salary, on annual basis

# = k/j

Employees per million m3 water produced

Number of employees (internal + equivalent outsourced) / volume of water produced (SIV)

# /million m3/year

= {i +(k/j)}/a

Employees per 1000 service connections

Number of employees (internal + equivalent outsourced) / number of service connections

# / 1000 connections

= {i +(k/j)}/c/ 1000

Non-Revenue Water (NRW) NRW as a percentage of system input volume (SIV) % = (m/a) X 100

Distribution network rehabilitation Length of pipes rehabilitated during assessment period / total length of distribution network x 100

% = (o/n) X 100

Distribution pipe breaks/bursts

Total number of pipe breaks per year expressed per km of

the water distribution network; and per number of water

connections

# Breaks /km/year

= (p/n)

# Breaks /connection/year

= (p/c)

Quality of water service

Number of treated water tests carried out

Number of treated water tests carried out # = q

Number of treated water tests required by applicable standards of legislation

Number of treated water tests legally required # = s

Water quality compliance Number of treated water tests carried out / number of treated water tests required by applicable standards of legislation x 100

% = (q/s) X 100

Water quality conformity Number of treated water tests complying with the applicable standards or legislation / total number of tests of treated water carried out x 100

% = (r/q) X 100


PwC 5


Formula

Continuity of Service Average number of hours for which water supply is available through a service connection during the day

Hours/day = x

New service connection efficiency Total time spent for establishing new service connections / number of new service connections installed during assessment period.

Days / new service

connection = u/y

Service complaints per service connection

Total number of complaints of quality of service / number of service connections x 1000

# / 1000 connections /

year = v/(c/1000)

Billing complaints per service connection

Total number of billing complaints / number of service connections x 1000

#/ 1000 connections /

year = w/(c/1000)


Volume of wastewater treated Sum of daily volume of treated wastewater m3 = z

Sludge utilization Dry weight of sludge safely utilized / dry weight of sludge handled x100

% = (aa/ab) X 100

Number of sewer connections Number of sewer connections # = ac

Population coverage with sewerage Resident population with sewer connection / Total population in service area provided thru service connections X 100

% = (ad/e) X 100

Sewerage blockages

Total number of blockages per year expressed per km of

sewers; and per number of sewerage connections.

# Blockages /km/year

= ae/af

# Blockages /connection/year

= ae/ac

Sewer rehabilitation Length of defective sewers rehabilitated during assessment period / total sewer length x 100

% = (ag/af) X 100

Sewer blockage complaints per sewer connection

Total number of complaints as a result of sewer blockages / number of connections to sewer system x 1000

# / 1000 connections /

year = ah/ (ac/1000)

Waste water quality compliance Number of effluent samples tested / number of effluent samples required by applicable standards of legislation x 100

% = (ai/aj) X 100

Waste water quality conformity Number of effluent samples tested meeting applicable standards / total number of effluent samples tested x 100

% = (ak/ai) X 100


PwC 6


Formula

New sewer connection efficiency Total time spent for establishing new sewer connections / number of new sewer connections installed during assessment period.

Days / new sewer connection

= (am/al)


Billed consumption of current assessment period (year)

Total annual volume water billed m3 / year = an

Sales revenues from billed consumption of current assessment period (year) = annual revenues from water sales

Annual sales revenues from billed consumption

BDT/year = ao

Average water tariff Annual revenues from water sales / Total annual volume billed

BDT/m3 = ao/an

Unit operating cost per m3 billed Total annual operating expenses / Total annual volume billed.

BDT / m3 = ap/an

Unit operating cost per m3

produced Total annual operating expenses / Total annual volume produced (SIV)

BDT / m3 = ap/a

Energy costs Energy (electricity + fuel) costs / annual operating expenses x 100

% = (aq/ap) X 100

Internal manpower costs Internal total staff costs / annual operating expenses x 100

% = (ar/ap) X 100

Operating Surplus (Total revenues from water sales – total annual operating expenses) / total revenues from water sales x 100

% = {(ao-ap)/ ao}

x 100

Current Ratio Current assets / current liabilities Ratio = at/as

Working Ratio Total revenues from water sales / total operating expenses, during the assessment period

Ratio = ao/ap

Operating Ratio Total revenues from water sales / (total operating expenses + depreciation), during the assessment period

Ratio = ao/(ap+au)

Debt service coverage ratio (Annual revenue from water sales - operating expenses + depreciation) / financial debt service (sum of principal payments or current portion of long term loans, interest payments)

Ratio = (ao-

ap+au)/(av+aw)


PwC 7


Formula

Debt collection period (Accounts receivable at the reference date of the current period/ sales revenues during the assessment period) x assessment period

Days = (ay/ao) X 365

Bill collection efficiency (Accounts receivable at the reference date of the previous assessment period + sales revenue during the assessment period - accounts receivable at the reference date of the current assessment period) / sales revenue during the assessment period x 100

% = {(ax+ao-

ay)/ao} X 100

***

Serial

Number

Variable Measurement

Unit

Dhaka Chittagong Rajshahi Khulna Kishoreganj


a

Treated surface water volume input into the water distribution

network – groundwater per year {Volume of water produced (SIV)}

cubic metres 844,938,500 67,525,000 26,426,000 19,710,000 745,695

b Total population resident in the service area # 12,500,000 2,868,000 80,000 1,500,000 106,567c Number of service connections # 334,372 52,000 34,116 NA NAd Number of water kiosks # NA NA NA NA NA

e Total population in service area provided thru service connections # 12,500,000 1,352,000 60,000 690,000 38,400

f Number of metered service connections # 288,205 52,000 NA 300 2,757g Total number of water service connections # 334,372 52,000 NA 15,100 4,800

h Metered water consumption cubic metres 501,183,161 56,210,000 NA 547,500 NA

i Number of employees # 3,523 668 NA 270 37j Average employee salary, on annual basis BDT 862,435 73,460 NA NA NAk Money value of outsourced contracts BDT NA NA NA NA NAl Number of employees (internal + equivalent outsourced) # NA NA NA NA NA

m NRW volume cubic metres 207,711,781 11,315,000 8,935,200 5,124,600 250,244n Total length of distribution network kilometres 3,462 687 NA NA NAo Length of pipes rehabilitated during assessment period kilometres NA NA NA NA NAp Total number of pipe breaks per year # NA 2,061 NA NA NA

q Number of treated water tests carried out # 15,123 7,300 1,645 24 5

rNumber of treated water tests complying with the applicable

standards or legislation

15,123 NA NA 20 5

sNumber of treated water tests required by applicable standards of

legislation #NA 10,220 1,530 48 11

tNumber of new service connections installed during assessment

period #11,359 2,214 1,180 1,000 2,000

u Total time spent for establishing new service connections days NA NA NA NA NAv Total number of complaints of quality of service # 4,406 2,525 1,580 1,200 360w Total number of billing complaints # NA 2,311 205 750 10

xAverage number of hours for which water supply is available per day

hoursNA NA 12 12 24

yNumber of new service connections installed during assessment

period #11,359 2,214 NA NA NA

z Volume of wastewater treated cubic metres NA NA NA NA NAaa Dry weight of sludge safely utilized cubic metres - NA NA NA NAab Dry weight of sludge handled cubic metres 25,000 NA NA NA NAac Number of sewer connections # 64,540 NA NA NA NAad Resident population with sewer connection # 2,500,000 NA NA NA NAae Total number of sewer blockages per year # NA NA NA NA NA

af Total length of the sewers kilometres 490 NA NA NA NA

agLength of defective sewers rehabilitated during assessment period

kilometresNA NA NA NA NA

ah Total number of complaints as a result of sewer blockages # 4,227 NA NA NA NA

ai Number of effluent samples tested # 2 NA NA NA NA

TABLE I: BASELINE DATA PROVIDED BY SERVICE PROVIDERS

Performance Monitoring and Reporting Template


1. Water Production

2. Water Supply Service

3. Metering

4. Operations and Asset Management

5. Quality of water service

Serial

Number

Variable Measurement

Unit

Dhaka Chittagong Rajshahi Khulna Kishoreganj

TABLE I: BASELINE DATA PROVIDED BY SERVICE PROVIDERS

Performance Monitoring and Reporting Template

ajNumber of effluent samples required by applicable standards of

legislation #NA NA NA NA NA

akNumber of effluent samples tested meeting applicable standards

#2 NA NA NA NA

alNumber of new sewer connections installed during assessment period

#266 NA NA NA NA

am Total time spent for establishing new sewer connections days NA NA NA NA NA

an Billed consumption of current assessment period (year) cubic metres 637,226,719 54,092,000 NA NA NA

ao

Sales revenues from billed consumption of current assessment period

(year) = annual revenues from water sales BDT

5,382,917,882 451,538,296 NA NA 17,371,200

ap Total annual operating expenses BDT 8,293,368,221 379,305,318 102,800,000 68,542,596 6,000,000aq Energy (electricity + fuel) costs BDT 2,611,529,032 174,999,998 31,436,400 17,859,496 6,000,000ar Internal total staff costs BDT 3,038,358,103 49,071,135 41,411,218 46,903,159 6,000,000as Current Liabilities BDT 5,619,209,006 1,356,281,820 145,375,320 NA 12,200,000at Current Assets BDT 11,928,984,197 2,075,016,861 75,573,713 NA 17,371,200au Depreciation BDT 833,342,442 60,625,563 5,000,000 NA 1,737,120

av

Sum of principal payments or current portion of long term loans

BDT

127,765,471 9,110,886 NA NA NA

aw Interest Payments BDT 122,234,531 60,585,166 NA NA NA

axAccounts receivable at the reference date of the previous assessment

period BDT3,960,793,231 251,652,309 NA 2,800,000 906,000

ayAccounts receivable at the reference date of the current assessment

period BDT4,354,976,843 235,069,837 NA 2,250,000 1,737,120


Variable Calculation Measurement

Unit

Formula Dhaka Chittagong Rajshahi Khulna Kishoreganj


Water Supply Service

Total population Total resident population in water

distribution service area

# = b 12,500,000 2,868,000 80,000 1,500,000 106,567

Number of service connections Number of service connections # = c 334,372 52,000 34,116 NA NA

Number of water kiosks Number of water kiosks # = d NA NA NA NA NA

Population coverage with piped water

supply

(Resident population supplied thru service

connection / total resident population in

water distribution service area) x 100% = (e/b) X 100

100 47.14 75.00 46.00 36.03

Metering

Number of metered service

connections

Number of metered service connections# = f

288,205 52,000 NA 300 2,757

Metering ratio Number of water service connections that

are metered / total number of water

service connections x 100

% = (f/c) X 100

86.19 100 NA NA NA

Water consumption per capita Total annual water consumption (SIV/

population served per day)lpcd = (a*1000/e)/365

185.19 136.83 1,206.67 78.26 53.20

Percentage of unmetered water System input volume minus metered water

consumption / system input volume x 100 % = {(a-h)/a} X 100

40.7 16.8 NA 97.2 NA

Number of employees Internal personnel # = i 3,523 668 NA 270 37

Equivalent number of outsourced staff Money value of outsourced contracts /

average employee salary, on annual basis # = k/j

NA NA NA NA NA

Employees per million m3 water

produced

Number of employees (internal +

equivalent outsourced) / volume of water

produced (SIV)# /million m

3/year = {i +(k/j)}/a

NA NA NA NA NA

Employees per 1000 service

connections

Number of employees (internal +

equivalent outsourced) / number of service

connections

# / 1000

connections= {i +(k/j)}/c/ 1000

NA NA NA NA NA

Non-Revenue Water (NRW) NRW as a percentage of system input

volume (SIV)% = (m/a) X 100

24.58 16.76 33.81 26.00 33.56

Distribution network rehabilitation Length of pipes rehabilitated during

assessment period / total length of

distribution network x 100

% = (o/n) X 100

NA NA NA NA NA

# Breaks

/km/year= (p/n)

NA 3 NA NA NA

# Breaks

/connection/year= (p/c)

NA 0.0396 NA NA NA

Quality of water service

Number of treated water tests carried

out

Number of treated water tests carried out# = q

15123 7300 1645 24 5

Number of treated water tests required

by applicable standards of legislation

Number of treated water tests legally

required # = s

NA 10220 1530 48 11

Water quality compliance Number of treated water tests carried out /

number of treated water tests required by

applicable standards of legislation x 100% = (q/s) X 100

NA 71.43 107.52 50.00 45.45

Performance Monitoring and Reporting TemplateTABLE II: PERFORMANCE INDICATORS VALUES (COMPUTED USING BASELINE DATA)

Operations and Asset Management

Distribution pipe breaks/bursts

Total number of pipe breaks per year

expressed per km of the water distribution

network; and per number of water

connections


Unit



Water quality conformity Number of treated water tests complying

with the applicable standards or legislation

/ total number of tests of treated water

carried out x 100

% = (r/q) X 100

100 NA NA 83.33 100

Continuity of Service Average number of hours for which water

supply is available through a service

connection during the day

Hours/day = x

NA NA 12 12 24

New service connection efficiency Total time spent for establishing new

service connections / number of new

service connections installed during

assessment period.

Days / new service

connection= u/y

NA NA NA NA NA

Service complaints per service

connection

Total number of complaints of quality of

service / number of service connections x

1000

# / 1000

connections / year= v/(c/1000)

13.18 48.56 46.31 NA NA

Billing complaints per service

connection

Total number of billing complaints /

number of service connections x 1000#/ 1000

connections / year= w/(c/1000)

NA 44.44 6.01 NA NA


Volume of wastewater treated Sum of daily volume of treated wastewaterm3 = z

NA NA NA NA NA

Sludge utilization Dry weight of sludge safely utilized / dry

weight of sludge handled x100% = (aa/ab) X 100

0 NA NA NA NA

Number of sewer connections Number of sewer connections # = ac 64540 NA NA NA NA

Population coverage with sewerage Resident population with sewer connection

/ Total population in service area provided

thru service connections X 100% = (ad/e) X 100

20 NA NA NA NA

# Blockages

/km/year= ae/af

NA NA NA NA NA

# Blockages

/connection/year= ae/ac

NA NA NA NA NA

Sewer rehabilitation Length of defective sewers rehabilitated

during assessment period / total sewer

length x 100

% = (ag/af) X 100

NA NA NA NA NA

Sewer blockage complaints per sewer

connection

Total number of complaints as a result of

sewer blockages / number of connections

to sewer system x 1000

# / 1000

connections / year= ah/ (ac/1000)

65.49 NA NA NA NA

Waste water quality compliance Number of effluent samples tested /

number of effluent samples required by

applicable standards of legislation x 100% = (ai/aj) X 100

NA NA NA NA NA

Waste water quality conformity Number of effluent samples tested meeting

applicable standards / total number of

effluent samples tested x 100% = (ak/ai) X 100

100 NA NA NA NA

New sewer connection efficiency Total time spent for establishing new sewer

connections / number of new sewer

connections installed during assessment

period.

Days / new sewer

connection= (am/al)

NA NA NA NA NA

Sewerage blockages

Total number of blockages per year

expressed per km of sewers; and per

number of sewerage connections.


Unit



Billed consumption of current

assessment period (year)

Total annual volume water billedm3/ year = an

637226719 54092000 NA NA NA

Sales revenues from billed

consumption of current assessment

period (year) = annual revenues from

water sales

Annual sales revenues from billed

consumptionBDT/year = ao

5382917882 451538296 NA NA 17371200

Average water tariff Annual revenues from water sales / Total

annual volume billedBDT/m

3 = ao/an8.45 8.35 NA NA NA

Unit operating cost per m3billed Total annual operating expenses / Total

annual volume billed. BDT / m3 = ap/an

13.01 7.01 NA NA NA

Unit operating cost per m3produced Total annual operating expenses / Total

annual volume produced (SIV) BDT / m3 = ap/a

9.82 5.62 3.89 3.48 8.05

Energy costs Energy (electricity + fuel) costs / annual

operating expenses x 100% = (aq/ap) X 100

31.49 46.14 30.58 26.06 100.00

Internal manpower costs Internal total staff costs / annual operating

expenses x 100% = (ar/ap) X 100

36.64 12.94 40.28 68.43 100.00

Operating Surplus (Total revenues from water sales – total

annual operating expenses) / total

revenues from water sales x 100% = {(ao-ap)/ ao} x 100

-54.07 16.00 NA NA NA

Current Ratio Current assets / current liabilities Ratio = at/as 2.12 1.53 0.52 NA 1.42

Working Ratio Total revenues from water sales / total

operating expenses, during the assessment

period

Ratio = ao/ap

0.65 1.19 NA NA NA

Operating Ratio Total revenues from water sales / (total

operating expenses + depreciation), during

the assessment periodRatio = ao/(ap+au)

0.59 1.03 NA NA NA

Debt service coverage ratio(Annual revenue from water sales -

operating expenses + depreciation) /

financial debt service (sum of principal

payments or current portion of long term

loans, interest payments)

Ratio = (ao-ap+au)/(av+aw)

-11.15 1.91 NA NA NA

Debt collection period (Accounts receivable at the reference date

of the current period/ sales revenues

during the assessment period) x

assessment period

Days = (ay/ao) X 365

80.90 52.06 NA NA NA

Bill collection efficiency (Accounts receivable at the reference date

of the previous assessment period + sales

revenue during the assessment period -

accounts receivable at the reference date of

the current assessment period) / sales

revenue during the assessment period x

100

% = {(ax+ao-ay)/ao} X 100

92.68 103.67 NA NA NA


of 23

FINAL DRAFT BILL

Bangladesh Water Supply and Sanitation Regulatory Commission Bill, 2014

Table of Content

CHAPTER 1. Preliminary Provisions .................................................................................................. 4

1. Short title, extent and commencement - ................................................................................ 4

2. Definitions - ............................................................................................................................... 4

3. Overriding effect of the Act - ................................................................................................... 6

CHAPTER 2. Establishment and composition of Commission ....................................................... 6

4. Establishment of the Commission - ........................................................................................ 6

5. Head Office, etc - ...................................................................................................................... 6

6. Broad objectives of the Commission to be achieved in the Water Supply and Sanitation

Sector - .................................................................................................................................................... 6

7. Constitution of the Commission - ........................................................................................... 6

8. Qualifications and disqualifications of the Chairperson and Members - .......................... 7

9. Establishment and functions of the Nomination Committee - ........................................... 8

10. Tenure of office, resignation, etc. of the Chairperson and Members - .............................. 8

11. Actions and proceedings not to be void due to the vacancy in the position of Member -8

12. Status, pay and allowances, etc. of the Members - ............................................................... 8

13. Conflict of interest ..................................................................................................................... 8

14. Removal of Members - ............................................................................................................. 9

15. Commission’s meetings - .......................................................................................................10

16. Appointment of Secretary, employees, and consultants of the Commission - ...............10

17. Formation of committee - ......................................................................................................10

18. Work outside commission - ...................................................................................................10

CHAPTER 3. Duties and Functions of the Commission ................................................................. 10

19. Duties and functions of the Commission- ...........................................................................10

20. General powers - .....................................................................................................................11

21. Power to obtain information by entry, search and seizure - .............................................11

22. Powers to initiate investigation and proceeding - ..............................................................12

23. Power to hold inquiries and assessment - ...........................................................................12

of 23

24. Delegation of power - ..............................................................................................................13

25. Consultation with users, industry, other relevant stakeholders, and Government - .....13

26. Public register to be kept by Commission - .........................................................................13

27. Confidentiality of information - ............................................................................................14

CHAPTER 4. Power of the Government to issue policy directives ................................................ 14

28. Powers of the Government - ..................................................................................................14

29. Emergency power to control water use - ..............................................................................14

CHAPTER 5. Grievance Redress Mechanism, Review, and Appeal .............................................. 15

30. Grievance redress mechanism - ............................................................................................15

31. A decision by a branch office to be placed on the public register - ..................................15

32. Review, and Appeal against the decisions of the Commission - ......................................15

CHAPTER 6. Tariffs ............................................................................................................................. 15

33. Power to regulate charges - ....................................................................................................15

CHAPTER 7. Services and Licences .................................................................................................. 16

34. Requirements for licence to provide water supply and sanitation services - ..................16

35. Grant, renewal, revision, suspension, and cancellation of licence - .................................17

36. Exemption from the requirement of licence - .....................................................................17

37. Licence fees - ............................................................................................................................17

38. Duty to provide adequate service - .......................................................................................17

39. Order of the Commission to comply with duty - .................................................................17

40. Standards of performance of regulated service providers - ..............................................18

41. Restrictions to the licencee - ..................................................................................................18

42. Annual accounts of licencee - ................................................................................................18

CHAPTER 8. Complaints and User Dispute Resolution ................................................................. 18

43. Receipt of complaints - ...........................................................................................................18

CHAPTER 9. Power to Issue Orders and Enforce their Compliance ............................................ 19

44. Interim or final order - ..........................................................................................................19

45. Emergency powers - ................................................................................................................19

46. Implementation of interim or final order - ..........................................................................19

CHAPTER 10. Offence and Penalty ..................................................................................................... 19

47. Offences - ..................................................................................................................................19

48. Offence by a company – ........................................................................................................20

of 23

49. Not to hinder with proceedings under the Act - .................................................................20

50. Filing of complaint and procedure of investigation - .........................................................20

51. Application of Code of Criminal Procedure - ......................................................................20

52. Assistance to the Public Prosecutor by the Officer of the Commission - .........................20

CHAPTER 11. Financial Provisions ..................................................................................................... 21

53. Establishment of the fund of the Commission - .................................................................21

54. Surplus funds -.........................................................................................................................21

55. Accounts and audits - .............................................................................................................21

56. Annual report - ........................................................................................................................22

CHAPTER 12. Miscellaneous Provisions ............................................................................................ 22

57. Government’s power to make rules - ....................................................................................22

58. Commission’s power to make regulations - .........................................................................22

59. Transitional Provisions - ........................................................................................................23

60. Derogation provision ..............................................................................................................23

61. Publication of Translated Bangla Version of the Act..........................................................23

of 23

Bangladesh Water Supply and Sanitation Regulatory Commission Bill, 2014

A

Bill

to make provisions for the establishment of an economic regulatory commission for the water supply and sanitation (WSS) sector in Bangladesh, that functions in an independent, accountable, transparent, and participatory manner, to regulate tariffs, service quality, and protection of interests of users;

Whereas such regulation needs to also consider financial, environmental, and social sustainability of the governance of the WSS sector in the country; Whereas it is expedient to make provisions for the establishment of an independent, expert, and accountable economic regulatory commission for such effective regulation of the WSS sector; It is hereby enacted as follows —

CHAPTER 1.

Preliminary Provisions

1. Short title, extent and commencement - (1) This Act may be called the Bangladesh Water Supply and Sanitation Regulatory Commission

Act, 2014. (2) It extends to the whole of Bangladesh, and applies to the providers of water supply and

sanitation services. (3) It shall come into force on such day as the Government may, by notification in the official

Gazette, appoint. (4) The Government may appoint different days as under sub-section (3), for the commencement

of different provisions of this Act.

2. Definitions - In this Act, unless the context requires otherwise:

(1) “administrator” means the administrator appointed by the Commission pursuant to regulations made under section 20;

(2) "annual report" means the annual report of the Commission; (3) “applicable law” means Act, Ordinance, rules, regulations, Notification or any other legal

instrument having the force of law in Bangladesh; (4) "branch office" means in relation to the Commission, any office of the Commission, other

than its head office; (5) “charges” means the sums prescribed by the Commission and collected either by itself or by

the service provider or by both for granting licence, regulatory fee, reconnection, granting connection, annulment, late fees, penalty, or other charges prescribed by the Commission to be collected by the Commission or by the service provider or both;

(6) "Chairperson" means the Chairperson of the Commission appointed under section

7(2)(d)(vii) and includes any other person performing the functions of the Chairperson

under section 7(6); (7) "Commission" means the Bangladesh Water Supply and Sanitation Regulatory Commission

established under section 4 ; (8) "Company'' means any incorporated business, trade organization, association or organization (9) "confidential information" includes any information which the Commission is satisfied that it

is of confidential nature and its disclosure- (a) may adversely affect the competitive position of any person;

of 23

(b) is commercially sensitive for some other reason; and (c) may affect the security of Bangladesh as a nation

(10) “employee” means Members, staff, and officers of the Commission; (11) “entity” means any public, private ,or mixed public-private entity, sole proprietorship or

partnership firm, company, corporation or branch including a Bangladesh or a Foreign joint-venture entity established or organized under any applicable law of the Bangladesh, or an informal group, association, or organisation interested in the matters related to the Commission.

(12) “Fund” means the Bangladesh Water Supply and Sanitation Regulatory Commission Fund established under section 53 .

(13) “Government” means the Government of the People’s Republic of Bangladesh; (14) “Head of the Nomination Committee” means the Secretary in charge of the Government

Ministry or Division dealing with water supply and sanitation sector; (15) "inquiry" means an inquiry instituted by the Commission; (16) “licence” means any licence issued under this Act; (17) “local authority” means the local government authority constituted under a statute for the

fulfillment of the purpose of article 59 of the Constitution of Bangladesh; (18) "Member" means a Member of the Commission, and unless the context otherwise requires,

includes the Chairperson; (19) “Minister” means the Minister in charge of the Ministry or Division dealing with the water

supply and sanitation sector; (20) “Ministry” means the Ministry or Division of the Government dealing with the water

supply and sanitation sector; (21) "official Gazette" means the official Gazette of the Government of Bangladesh; (22) “Nomination Committee” means Nomination Committee established under section 9; (23) “person” includes an individual natural personality and entity; (24) “prescribed” means prescribed by rules or regulations, as the case may be; (25) "Public Register" means the Public Register kept and maintained by the Commission; (26) "regulated services" means any services provided by any person regulated by the

Commission; (27) "regulated sector" means the water supply and sanitation sector; (28) "regulated service provider" means any person, entity (whether registered or not) engaging

in activities in or in connection with a regulated sector and includes an institution declared by the Commission as service provider;

(29) “regulations” means regulations framed under this Act; (30) “rules” means rules framed under this Act; (31) “sector law” means any applicable law on or in related to the water and sanitation sector; (32) “sanitation” means containment, collection, transportation, storage, treatment, and

disposal by regulated service provider through centralized, decentralized, or on-site systems of liquid human waste and sludge, excluding solid waste, storm water, and industrial effluents, and shall include other means of sanitation as determined by the Commission in consultation with the service providers from time to time;

(33) “sector” means water supply or sanitation sector in Bangladesh; (34) “service” means water supply and/ or sanitation service; (35) “service provider” means any person or entity (whether registered or not) providing water

and/ or sanitation services; (36) “sewerage” means human excreta and sullage, municipal/ domestic /sanitary wastewater,

sullage, and fecal sludge, collected from residences and other establishments through pipes and other networked structures, and shall include such definition of sewerage as determined by the Commission in consultation with the service providers from time to time;

(37) "standards" includes the standards relating to the quantity and quality of water and sanitation service provision, as per the provisions of Environment Conservation Act 1995 and the Environment Conservation Rules 1997 and any other acts or rules in force;

(38) “tariff” means a sum prescribed by the Commission as tariff to be appropriately collected from the users against the water supply and sanitation service(s) provided to them;

(39) “user” means the users of the water supply and sanitation services;

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(40) “water supply” means piped supply of water through household connections, stand-posts, water kiosks, or yard connections, and shall include other means of water supply as determined by the Commission in consultation with the service providers from time to time;

3. Overriding effect of the Act - Notwithstanding anything contained in any other laws for the time being in force, the provisions of this Act shall prevail.

CHAPTER 2.

Establishment and composition of Commission

4. Establishment of the Commission - (1) To carry out the purposes of this Act, there shall be established a Commission to be called as

the Bangladesh Water Supply and Sanitation Regulatory Commission. (2) The Commission shall be a statutory body having perpetual successions and a common seal

with power, subject to the provisions of this Act, to acquire, hold, transfer, and dispose of property, both moveable and immovable, and shall by the said name sue and be sued.

(3) Every deed, instrument, contract or any other documents of the Commission shall be deemed to be duly executed and authenticated by or on behalf of the Commission if it is sealed with the seal of the Commission and signed by the Chairperson or the Secretary, as the case may be, duly authorised by the Commission.

5. Head Office, etc - (1) The Head Office of the Commission shall be located in Dhaka. (2) The Commission may, in case of necessity, set up its branch offices at such other places as the

Commission may think fit.

6. Broad objectives of the Commission to be achieved in the Water Supply and Sanitation Sector - The broad objectives of the Commission shall be-

(1) to build and promote equitable, sustainable, and efficient water supply and sanitation system; (2) to build the economic regulatory system in a phased manner, such that the progress is in step

with the institutional preparedness; (3) to ensure transparency, accountability, and public participation; (4) to promote effective competition and efficiency; (5) to protect interests of users through ensuring access of regulated services to all users,

especially low income, vulnerable, marginalised, and disadvantaged sections of the society; (6) to protect financial viability of efficient service providers; (7) to enhance public knowledge, awareness, and understanding of the regulated sector

including- (a) the rights and obligations of users and service providers; (b) the ways in which complaints and grievances may be raised and resolved; and (c) the duties, functions, and activities of the Commission.

(8) to coordinate with other agencies in the country that are mandated to carry out activities to protect and conserve the environment;

(9) to promote efficient long-term investment in water supply and sanitation section, so as to achieve the lowest sustainable cost of the provision of water supply and sanitation services;

(10) to coordinate with appropriate authorities that are responsible to monitor quality of water supply, to ensure proper quality of water supply is provided, and

(11) to be sensitive towards gender issues in specific to the WSS sector as well as to the governance of the WSS sector

7. Constitution of the Commission - (1) The Commission shall consist of five Members and one of them shall be the Chairperson. (2) The Members of the Commission shall be appointed from amongst the following disciplines-

(a) One Member shall have at least a bachelor degree from a recognised university in engineering;

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(b) One Member shall have at least a post-graduate degree from a recognised university in the field of science, economics, finance, commerce, accounting science, business administration, or management;

(c) One Member shall have at least a post-graduate degree from a recognised university in the field of law; and

(d) Two Members shall have at least a post-graduate degree from a recognised university in two different fields of following fields- (i) environmental science or ecology, (ii) sociology, (iii) statistics, (iv) public policy, (v) public health, (vi) public administration, or (vii) political science.

(3) The Chairperson and the Members shall be appointed by the President of the Peoples’ Republic of Bangladesh on the basis of the recommendation made by the Nomination Committee constituted under section 9 (2).

(4) The Chairperson shall be a full-time officer of the Commission. (5) After the commencement of the Act -

(a) the Chairperson and two Members shall be appointed as soon as possible; and (b) other two Members shall be appointed within a period not exceeding two years from the

day of such commencement. (6) The Chairperson shall be the chief executive of the Commission. (7) If the post of the Chairperson falls vacant or the Chairperson fails to discharge the duties due

to absence, illness, or for any other reason, a Member appointed by the President of the Peoples’ Republic of Bangladesh shall act as the Chairperson, until the Chairperson resumes duty, or a newly appointed Chairperson joins in the vacant post.

8. Qualifications and disqualifications of the Chairperson and Members - (1) A person shall, subject to the provisions of sub-sections (2) and (3), be qualified to be

selected- (a) for the post of Chairperson if he or she has at least 25 years relevant work experience in

the fields mentioned in the section 7(2), or in the field of water supply or sanitation; (b) for the post of Member if he or she has at least 20 years relevant work experience in the

fields as mentioned in the section 7(2) , or in the field of water supply or sanitation. (c) The experience of at least two members of the Commission considered together shall be

in the sectors of water supply and sanitation. (2) A person shall be disqualified for selection for appointment as, or for being, a Member or

Chairperson who: (a) is not a citizen of Bangladesh; (b) attains the age of {sixty five}1 years; (c) was declared a loan defaulter by a bank or any financial institution; (d) was declared insolvent by a competent Court; (e) is charge sheeted or convicted for committing offence of corruption; (f) has been convicted for a criminal offence involving moral turpitude, sentenced to

imprisonment for a term not less than two years; and (g) has a business interest in any matter within the scope of the Commission (h) is engaged in any business in water supply and sanitation sector either in her or his own

name or in the name of any other person;

1 Numbers and other mentions in braces are subject to revision/ refinement as required at the time of finalisation

of Bill. The values included currently are based on our understanding, and to optimise the draft of the Bill with

multiple considerations associated with each of the terms (in braces).

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(3) A person, who was or is in the service of the Republic, shall, after the expiry of a period of {two} years from the day of his or her retirement or resignation from the service, be qualified to apply for the post of Chairperson or a Member, as the case may be.

9. Establishment and functions of the Nomination Committee -

(1) The Ministry shall constitute a Nomination Committee for the selection of persons to be appointed as Chairperson and Members, and for other purposes as stipulated under this Act,

(2) The Nomination Committee shall consist of: (a) the Secretary in charge of the Government Ministry or Division dealing with water

supply and sanitation sector, who shall be the ex-officio Head of the Nomination Committee;

(b) a representative from the Ministry of Finance not below the rank of Additional Secretary; (c) a retired Judge of the Supreme Court, or a member of a central-level independent

regulatory agency in any of the infrastructure sectors to be nominated by the Government;

(d) a Professor, Dean, Director, or an equivalent faculty member of a reputed Bangladeshi university, or an eminent expert in the related field, to be nominated by the Head of the Nomination Committee; and

(e) one person to be nominated by the Government from amongst representatives of well-reputed Non Government Organisations;

(3) The functions of the Nomination Committee shall be to select and recommend the name of persons for appointment as Chairperson and Members of the Commission.

(4) If the President is not satisfied as to the suitability of a person recommended for appointment, the rejection of the recommendation shall be communicated to the Committee with a request for further recommendation.

(5) The Meetings of the Nomination Committee shall, as required for the purposes of this Act, be held on such date and place as may be determined by the Head of Nomination Committee.

(6) The Nomination Committee may take such actions as are reasonably necessary to identify and attract the best candidates including by advertising in the news media and website(s) widely read or viewed, as the case may be, within and outside Bangladesh.

10. Tenure of office, resignation, etc. of the Chairperson and Members - (1) The Chairperson and Members shall, unless removed sooner or ceases to be a Member, shall

hold office for a period of three years from the date of assumption of office and shall be eligible for re-appointment for another term only.

(2) The Chairperson or a Member may, even before the completion of the tenure as mentioned in sub-section(1), resign from her or his post by giving three months prior notice in writing addressed to the President, with a copy to the Minister, and, in case of a Member, with an additional copy to the Chairperson.

11. Actions and proceedings not to be void due to the vacancy in the position of Member - Any vacancy in the post of Members shall not render any action, decision, or proceeding of the Commission illegal, if it is taken or made, as the case may be, by the Commission where the number of Members meets the quorum for the Commission’s meetings as per section 15(4).

12. Status, pay and allowances, etc. of the Members - (1) The status, pay and allowances, privileges and other conditions of service of Chairperson and

Members shall be determined by the prescribed rules. (2) Until such rules are made, status, pay and allowances, privileges and other conditions of

service of Chairperson and Members shall be determined by the Government. (3) After appointment of a person as Chairperson or Member the status, pay and allowances,

privileges and other conditions of the service for the Chairperson or any Member shall not be so changed that the change is disfavorable to that person.

13. Conflict of interest

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(1) A Member or employee of the Commission shall be considered to have a conflict of interest for the purposes of this Act, if the Member or employee acquires any pecuniary advantage or other interest that could conflict with the proper performance of her/ his duties, or assists in the acquisition of any pecuniary advantage by another person, as a Member or employee of the Commission.

(2) In case of a conflict of interest, the Member or employee shall immediately disclose in an affidavit filed to the Commission, the conflict of interest.

(3) The subject Member or employee shall refrain from taking part, or taking any further part, in the activities of the Commission, while an inquiry is conducted in the matter pursuant to section 13 of this Act.

(4) When the Commission determines that the conflict is likely to interfere with the Member's or employee’s proper and effective performance, the matter shall be investigated pursuant to the provisions of this Act.

(5) The Annual Report of the Commission shall disclose details of all conflicts of interest and the determination arising there from.

(6) A Member or employee of the Commission who is subject to this Act shall be considered to have breached section 13 of the Act if Member or employee - (a) fails without reasonable cause to make declaration of his or her interests as required; or (b) knowingly makes a declaration that is false or misleading in a manner affecting the

decision of the Commission. 14. Removal of Members -

(1) A Member and the Chairperson may be removed from his or her office if:

(a) any situation specified in section 8(2), and section 13 occurs, or (b) he or she is found guilty by the Enquiry Committee constituted under subsection

14(2) of corruption, misuse of power, gross misconduct, or gross negligence in duty, or

(c) the Member fails to attend at least two thirds of all meetings of the Commission in a period of twelve consecutive months.

(2) If the Government is of opinion that a Member or the Chairperson is unfit to hold that office on any ground specified in sub-section (1), the Government shall constitute an Enquiry Committee consisting of one or more sitting or retired judges of the Supreme Court, and shall also specify in the order by which the Enquiry Committee is constituted, the time limit for submission of its enquiry report.

(3) The Committee constituted under sub-section (2) shall, on the basis of specific information and reasons, submit a report as to whether or not the allegations brought against the Member or Chairperson have been proved and whether or not he or she should be removed from his or her office, and the Government shall, take action in accordance with the recommendation contained in the report submitted by the Enquiry Committee.

(4) The Government shall not remove any Member or Chairperson under this section without giving him or her opportunity of showing cause, within the period prescribed by rules for replying to show-cause notice, against the proposed removal.

(5) Where the Enquiry Committee is constituted under sub-section (2), the Government may, in consideration of the relevant circumstances, direct the Member or Chairperson to refrain from performing the functions of his or her office, and the Member or Chairperson shall be bound to comply with such direction.

(6) The Enquiry Committee shall be deemed to be a Commission appointed under the Commission of Enquiry Act, 1956 (VI of 1956) and the provisions of that Act shall, subject to this Act, apply to the Enquiry Committee.

(7) A Member, including the Chairperson , shall not, during a period of eighteen months after the expiration or termination of the term of office or service within the Commission-

(a) enter into any contract of employment with or contract for the supply of services to, any person or organisation under the jurisdiction of the Commission during the Member's term of office or employee's service with the Commission;

(b) acquire or hold any financial interest, whether as an employee, partner, shareholder, officer or joint venture, in any business or organisation supplying services to any

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person or organisation under the jurisdiction of the Commission during the Member's term of office or employee's service with the Commission.

(8) Notwithstanding the other provisions of this section, copy of notices, decisions, and any reply by the Member and any report shall as soon as practicable after they are brought into existence whether or not they result in the removal of a Member, be made available for public.

15. Commission’s meetings - (1) Subject to other provisions of this section, the Commission may determine the procedures of

its meetings by the regulations. (2) The meetings of the Commission shall be held on such time and at such place as determined

by the Chairperson. (3) The Chairperson shall preside at all meetings of the Commission. (4) The presence of three Members including the Chairperson shall form the quorum of the

meeting of the Commission. (5) The decision of the meeting of the Commission shall be taken by a majority of votes of the

Members present and in case of a tie or equal votes, the Chairperson shall have the second or casting vote.

(6) Two (2) Members may request the Chairperson in writing to arrange a meeting to discuss or for making a decision on any specific issue and upon receipt of such a request, the Chairperson shall convene a meeting within {seven days}

(7) The Commission shall cause accurate minutes to be kept of the proceedings at its meetings.

16. Appointment of Secretary, employees, and consultants of the Commission - (1) There shall be a Secretary to the Commission who shall be appointed by the Commission. (2) The Commission may, for the purpose of carrying out its functions effectively, appoint such

other required number of officers and employees, as it deems necessary. (3) The procedure of appointment, duties, and other terms and conditions of service of officers

and employees including its Secretary shall be determined by regulations. (4) The Commission may, for the purpose of carrying out its functions effectively, appoint

consultants and experts in various disciplines on such terms and conditions as may, from time to time, be determined by the Commission.

(5) The Government may, until the regulations are made, appoint an officer not below the rank of or to a Deputy Secretary as Secretary to the Commission on deputation.

17. Formation of committee - The Commission may, to perform its duties effectively, constitute required number of committees comprising one or more than one of its Members and employees or any other person or organisation and the terms of reference and proceedings of such committee shall be determined by the Commission.

18. Work outside commission - A Member of the Commission, without the written prior permission of the Government and any officer or employee, without the written prior permission of the Commission shall not engage or continue in any work outside the Commission.

CHAPTER 3.

Duties and Functions of the Commission

19. Duties and functions of the Commission- (1) The duties and functions of the Commission shall be:

(a) to perform the functions conferred on the Commission by this Act or by sector legislation; (b) subject to sector legislation:

(i) to issue, renew, amend, and cancel licences; (1) Subject to the appointment of an interim administration for the

service provider whose licence has been cancelled or suspended, in such manner as to ensure continued provision of services;

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(ii) to ensure the service providers comply with the established standards for water supply and sanitation services;

(iii) to determine methodology for and approve proposals for, water supply and sanitation tariff, penalty charges, and other charges including but not limited to licensing fees and connection charges;

(iv) to make regulations to give effect to the provisions of this Act; (c) to monitor the performance of the water supply and sanitation sector in relation to:

(i) levels of investment; (ii) coverage, availability, adequacy, and standard of water supply and sanitation

services; (iii) the cost of water supply and sanitation services; (iv) the efficiency of production and distribution of water supply and sanitation services; (v) the extent of mitigation of environmental impacts; and (vi) other matters relevant to the Commission;

(d) to advise the Government generally or on the utilization and development of water supply and sanitation sector;

(e) to resolve complaints and disputes, and to redress grievances; (f) to disseminate information about matters relevant to its functions; (g) to consult suo moto with other regulatory Commissions, experts, and governing agencies

as well as any other stakeholders as necessary and appropriate; (h) to issue reasoned orders or decisions on the petitions, applications or proposals from

governing agencies, utilities, other stakeholders, or citizens, in adherence to the relevant provisions of this Act, within the framework of the relevant policy framework, and as per the procedures and processes stipulated in this Act.

(i) to perform such other functions as are conferred on the Commission under this Act; (j) to administer this Act.

(2) In performing the duties and functions and exercising powers by the Commission or under its

authority, the Commission must seek to achieve the objective specified in section 6 of this Act.

(3) The Commission shall host or cause to be hosted a website of the Commission, to which all documents necessary and relevant to the responsibilities and functions of the Commission shall be uploaded and made available for public.

(4) The Commission may order: (a) requiring a party to supply services for specified periods; (b) requiring a party to supply services on specified terms and conditions; (c) requiring a party to pay the costs of another party or of a person appearing at the

hearing or producing documents; (d) dismissing a complaint; and (e) as per the regulations prepared by the Commission in this regard.

(5) Subject to the provision 22(1), the orders of the Commission shall be enforceable as orders of a competent court to be specified by regulations.

20. General powers - (1) Subject to the provisions of this Act, the Commission shall have power to do all things which

are necessary for or in connection with the performance of its functions or to enable it to discharge its duties.

(2) Without limiting the powers conferred under subsection (1), the Commission shall also have such powers as may be conferred on it by the sector legislation.

21. Power to obtain information by entry, search and seizure -

(1) Subject to other provisions of this Act, when the Commission has reason to believe that a person is capable of supplying information, producing a document or giving evidence that may assist in the performance of any of its duties and functions, the Commission may, by

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summons signed by the Chairperson or Secretary of the Commission served on that person, require that person or entity as the case may be, -

(a) to furnish the information in writing signed by him or her, in the case of a body corporate signed by a competent officer of the body corporate;

(b) to produce the document to the Commission. (2) A summons under this section shall specify the required time and manner of compliance. (3) The Commission has right to enter any premises and search and seize information in any

form as considered appropriate and required pursuant to fulfilling the functions, and duties conferred upon the Commission hereby.

(4) The procedure of entry, search and seizure under sub-section (3) shall be prescribed by regulations.

22. Powers to initiate investigation and proceeding - (1) The Commission shall have all those powers for the purposes of an investigation or

proceedings, which are exercised by a Civil Court in a proceeding under the Code of Civil Procedure,1908 (Act V of 1908) such as: –

(a) to summon a witness and ensure his presence and examination of the witness on oath and deposition;

(b) to detect and present any important document which may be submitted as a document or evidence;

(c) to collect evidence through an affidavit; (d) to call for public record from any office; (e) to adjourn hearing; (f) to ensure presence of the parties; (g) to restrain any parties to continue any acts; and (h) to review the Commission's decisions, directives or orders.

(2) The Commission may pass any interim order relating to any proceeding or hearing conducted before it.

(3) If the Commission is satisfied that for achieving objectives of this Act or for discharging duties under this Act, an examination of any book, accounts or deed is necessary relating to the provision of services in the sector, or matters otherwise connected therewith, but the same is lying under the custody or control of any person, in that case, the Commission may direct the said person to present the book, account or deed to any officer of the Commission for that purpose and may order examination and direct the said person to supply the information within his control to discharge duties under this Act.

(4) If the Commission during an investigation, or any proceeding under this Act, has reasons to believe to the effect that any book or account involving interest of the unit or person under investigation, presentation of which shall be necessary for investigation, but the same is being destroyed, partially destructed, altered, tampered, or concealed or likely to be done so, in that case, the Commission, by an order in writing, empower its officer to enter, investigate and confiscate, as if he is exercising powers of an Inspector appointed under the Companies Act, 1994 (Act No.18 of 1994).

(5) Notwithstanding anything contained in any other law for the time being in force, the Commission, by a general or special order, may ask for information on the following matters from any person or licencee for the sake of discharging its duties under this Act, such as:-

(a) matter related to provision of water supply and sanitation services; (b) any other matter prescribed by regulations.

(6) The Commission may, if necessary discuss related issues with such person or persons who may be affected by the decision of the Commission.

23. Power to hold inquiries and assessment - (1) The Commission may conduct an inquiry where it considers necessary or desirable for the

purpose of carrying out its functions. (2) The Commission shall conduct an inquiry before exercising a power to:

(a) grant, renew or cancel a licence; (b) regulate any rate or charge; and

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(c) take actions in such other matters as the Commission may deem necessary for fulfillment of its duties and functions prescribed by this Act.

(3) The Commission shall give notice of an inquiry by: (a) publishing a notice in the official Gazette and in at least three daily newspapers

circulating widely in Bangladesh specifying the purpose of the inquiry, the time within which submissions may be made to the Commission, the form in which submissions should be made, the matters the Commission would like submissions to deal with.

(b) sending written notice of the inquiry, including the information in subsection ((a)) to: (i) service providers known to the Commission whose interests the Commission

considers are likely to be affected by the outcome of the inquiry; (ii) industry and user organisations which the Commission considers may have an

interest in the matter; (iii) the Minister and Ministries having responsibilities for water supply and

sanitation service providers. (4) The Commission shall, in discharging its functions, if it considers necessary, solicit expert

opinion from any specialized organisation, and shall engage any person or institution to conduct research in any particular or specialized matter, and shall asses and consider the result of that research in taking its decision.

(5) The Commission shall prescribe through regulations the procedure to be adopted for carrying out such inquiry, research and format to solicit opinion both the regulations and the results of such inquiry or research being made available to public.

24. Delegation of power - The Commission may, by a reasoned order in writing, and subject to the conditions mentioned in the order, delegate any or all of its powers to any Member, officer or employee of the Commission, or to any other person or institution.

25. Consultation with users, industry, other relevant stakeholders, and Government - (1) The Commission shall make regulations for consultation and hearing with such relevant

users, persons, organisations, and/or other stakeholders as the Commission may consider necessary and desirable to consult for the purpose of effectively carrying out its functions under this Act.

(2) The Commission shall meet with and consult representatives of citizens and community groups to listen to and understand their needs and concerns related to the operations of the Commission, including through public hearing.

(3) Subject to provisions of subsections (1) and (2), the Commission shall, supply a copy of its consultation programme to the secretary, host its soft copy on the website of the Commission, and place a copy of the annual programme on the Public Register.

(4) The Commission shall include in its annual report, a report on the implementation of its consultation programme during the year covered by the report.

(5) For the purposes of this section, it shall be the duty of the Commission to establish and identify the persons, organisations and institutions to be consulted and such identity of the consulted stakeholders may not necessarily be made public.

(6) In taking the Commission’s decisions in the regulated sector, the Commission shall consider the comments and suggestions received from the stakeholders, and all orders of the Commission shall be reasoned with due explanation on how the comments from stakeholders were considered for making such decisions.

(7) At the end of every year, the Commission shall suo moto publish a report on actions taken with respect to the comments and suggestions received from stakeholders.

26. Public register to be kept by Commission - (1) There shall be a Public Register kept by the Commission in hard copy at its Head Office and

other offices of the Commission, if any, which shall be available for public inspection and photocopying at all times during business hours.

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(2) The Commission shall or shall cause to be published in the official Gazette as soon as may be practicable; in addition to hosting on its website (the hosting intimated to the public through notifications in widely circulated national as well as local dailies in both English and vernacular language):

(a) any code of conduct to be adopted; (b) any rules or regulations; (c) an application for granting license; (d) any decision of the Commission favoring of issuance of license; (e) a summary of any decision by the Commission setting tariff for the regulated

services; and (f) any other decision or information the Commission may decide to publish in the

official Gazette. (3) The Commission shall exclude from the Public Register any document or part of a document

which is confidential within the provisions of section 27. (4) The Commission shall, in the official Gazette, its website, and prominent English and

vernacular dailies, publish Public Register including all the decisions and applications or other submissions to the Commission, including but not limited to those mentioned in subsection (2).

(5) The Commission shall ensure that, where possible the Public Register shall be accessible to the public by internet.

27. Confidentiality of information - (1) For the purposes of this Act, any person who gives or discloses any information to the

Commission, whether under compulsion of law or otherwise, that person may claim the information to be Confidential information as defined herein, in respect of the whole or any part of the information.

(2) The Commission shall set out procedures and publish them in the Gazette on how it will disclose its confidential information.

(3) Any person who discloses confidential information other than as authorized by the Commission, shall be deemed to have committed an offence.

(4) Notwithstanding anything contained in this section of the Act, this section shall be construed in accordance to the applicable sections of the Right To Information Act of Bangladesh.

CHAPTER 4.

Power of the Government to issue policy directives

28. Powers of the Government - (1) The Government shall have the power of issuing policy directives for the decision-making in

the sector, provided (a) shall be accompanied by written rationale provided simultaneously with the

directives; (b) shall not affect the techno-economic efficiency, social equity and justice, and

environmental sustainability of the sector; and (c) if it involves the financial and economic implications, that shall be borne by the

government, and compensated to the relevant agencies. (2) The Government may, if required in consultation with the Commission, issue policy

directives.

29. Emergency power to control water use - The Government may, in consultation with the Commission, control or prohibit the use of water and may make rules relating to distribution of water, to meet the unexpected shortfall, or an emergency condition in respect of availability or use of water;

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CHAPTER 5.

Grievance Redress Mechanism, Review, and Appeal

30. Grievance redress mechanism - (1) The Commission shall have a decentralised grievance redress mechanism, and shall publish it

in the form of regulations, to address grievances of users, service providers, and other stakeholders of the sector.

(2) The Commission may suo-moto deploy the grievance redress mechanism to issue reasoned orders to any stakeholders as the Commission deems necessary and required for carrying out the duties and functions allocated to the Commission under this Act.

31. A decision by a branch office to be placed on the public register - (1) A decision by a branch office of the Commission, a Member or Members or employees of the

Commission shall, if not applied for review in pursuant to section 32, be placed on the Public Register.

(2) Where there is an application for review of a decision of the branch office of the Commission, a Member or Members or employees of the Commission, that decision shall not be placed on the Public Register until the application for review or the appeal to the court or entity to be specified by regulations, is resolved.

32. Review, and Appeal against the decisions of the Commission - (1) Any person, organisation, entity, or informal group aggrieved by the decision of the

Commission or any other decision made in connection to the purposes of this Act, may, (a) file a review petition to the Commission within a period prescribed by the

regulations; or (b) where a review petition is rejected, or not admissible, prefer an appeal to the Court

as may be prescribed by the rules. (2) Subject to the provisions of subsection (1), the grounds of appeal or review shall be on the

following, that: (a) the decision made was not based on evidence produced; (b) there was an error in law; (c) the procedures and other statutory requirements applicable to the Commission were

not complied with and non-compliance materially affected the determination; (d) the Commission was not in possession of evidence required for the determination of

the matter; (e) the Commission did not have power to make determination; or (f) other grounds as specified by the Commission in its regulations, or by the

Government in the rules, were not adhered to; or (g) any other matter related to the functioning, scope, or purview of the Commission.

(3)The Commission shall prescribe detailed procedure in respect of filing application, and review petition.

CHAPTER 6.

Tariffs

33. Power to regulate charges - (1) Subject to the provisions of sector legislation and licences granted under that legislation, the

Commission shall carry out determination and regular reviews of tariff, penalty, and other charges including licensing fees and connection charges for water supply and sanitation services.

(2) The Commission shall conduct public hearings and consultations on the methodology for tariff determination, tariff proposals, and tariff orders, in accordance with the regulations prepared by the Commission in this regard.

(3) In making any determination, setting charges or establishing the method for regulating such tariffs, and charges, the Commission shall take into account:

(a) Operational efficiency and financial sustainability of the service providers;

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(b) predictability and logical basis of arriving at tariffs; (c) the costs of making, producing, and supplying the services; (d) the return on assets in the regulated sector as per the policy directives or other

sectoral decisions made; (e) any applicable relevant benchmarks including international benchmarks for prices,

costs and return on assets in comparable industries; (f) the financial implications of the determination; (g) environmental and social implication of tariff determination; (h) the policies, directives, and other documents (reports) promulgated by the

Government or the relevant Ministries, with respect to regulation of the sector; (i) the Water and Sewerage Authority Act,1996 (Act 6 of 1996), the Bangladesh Water

Act, 2013, the Water Resources Planning Act, 1992 (Act 12 of 1992), Local Government (Paurashava)(Amended) Act, 2010, Local Government (City Corporation) (Amended) Act, 2011, Bangladesh National Policy for Safe Water Supply and Sanitation 1998, and any other relevant law;

(j) the desirability of carrying out regular reviews of charges; (k) any other factors specified in the relevant sector legislation; (l) the interests of the users, investors, and the general public, including but not limited

to the affordability of the service to the users; (m) the desire to promote competitive charges and attract market; (n) any other factors the Commission considers relevant; and (o) the implication of tariff, penalty, and other charges on:

(i) access to adequate quality and quantity water for all, (ii) access to adequate quality of sanitation for all; and (iii) other aspects of regulation of the sector as appropriate.

CHAPTER 7.

Services and Licences

34. Requirements for licence to provide water supply and sanitation services - (1) No person or entity shall provide water supply or sanitation services except under the

authority of a license issued by the Commission. (a) Provided that a licence for supply of water services shall be granted only in the

case of the applicant complying with the conditionality applicable under Water Act 2013 if abstraction of water is involved in such an arrangement to supply water.

(2) All persons, entities, or other service providers {mandated/ empowered/ licenced} under WASA Act, Pourashava Act, or rules or regulations made thereunder for the water supply and sanitation services shall be treated as licencees under this Act, and provisions of this Act shall be applicable to them.

(a) Service providers licenced by WASAs to operate tube-wells shall be treated as licencees under this Act

(3) All persons or entities (whether registered or not) providing water supply or sanitation services under any arrangements other than under Acts or other legal instrument, shall apply for a licence within a period to be determined in line with the transitory approach to be developed vide Regulations in this regard.

(4) The service providers with whom agreements have been executed between the service providers and the Government or any of its agencies, immediately before this Act comes into force shall be treated as licencees for the production, supply, distribution and storage of water or provision of sanitation services under this Act, and notwithstanding anything contrary is contained in this section, the concerned conditions of the agreement shall be applicable to those cases.

(5) If a question or difference of opinion exists whether a person is engaged in water supply, and storage, distribution or provision of sanitation service under sub-section (1), such difference

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of opinion shall be addressed in accordance of the review and appeals procedures specified in CHAPTER 5.

(6) The Commission may order any person who is not a licencee or not empowered by any other way, to disconnect or stop the provisioning of services relating to water treatment, production, supply, storage and distribution, and sanitation services, subject to provisions

34(3) and 34(4) of this Act.

35. Grant, renewal, revision, suspension, and cancellation of licence - (1) A Licence may be issued, renewed, suspended, cancelled and revised by a process prescribed

by regulations, which shall also specify the area of service to be covered by the licencee; provided that the area so prescribed may, but need not, coincide with the boundaries of the area or areas of jurisdiction of one or more local governments.

(2) The regulations for grant, renewal, revision, suspension and cancellation of licences shall consider including but not limited to the following principles:

(a) continuity of adequate level of services to the users; (b) financial and economic sustainability of service provision; and (c) satisfaction of users with respect to the services being provided.

(3) The Commission shall appoint an administrator according to regulations made pursuant to

this Act, to manage the business of a service provider whose licence to operate has been cancelled or suspended, to ensure that the service provisioning is continued.

36. Exemption from the requirement of licence - (1) The Commission may make regulations for giving exemption from the requirement of licence

subject to the fulfillment of the conditions specified herein. (2) Any person, or entity (whether registered or not) who is exempted by the Commission shall

have to observe those conditions which a licencee shall have to observe under the licence, or this Act, or the regulations, unless contrary is mentioned in the order of exemption.

(3) Exemption under this section may be given for a specified period; (4) The Commission may revoke the exemption at any time recording reasons in writing.

37. Licence fees -

(1) A licencee shall pay to the Commission, on issue of the licence and at prescribed intervals thereafter, such licence fees as the Commission may determined and published in the Gazette from time to time by the Commission.

(2) The fee shall be determined by reference to a schedule of fees following public consultation.

38. Duty to provide adequate service - (1) A service provider licenced or authorised under any Act to provide water supply and

sanitation services shall- (a) maintain its equipment and property used in the provision of the service in such

condition as to enable it to effectively provide the service; (b) make all efforts as may be necessary to provide to the public service that is safe,

adequate, efficient, reasonable, equitable, and non-discriminatory, in compliance with all applicable standards; and

(c) make such repairs, changes, extensions and improvements in or to the service as may be necessary or proper for the efficient delivery of the service to the user;

(d) provide a water supply and/or sewerage connection to any applicant within a reasonable period of time as stipulated in relevant regulations or indicate to the applicant why the application is being denied. Any disputes in this regard shall be settled in accordance with CHAPTER 8 of the Act.

39. Order of the Commission to comply with duty - (1) Where the Commission discovers on its own or upon a complaint that the service provided by

a service provider is not in accordance with section 38, the Commission shall in writing direct the provision of the adequate or reasonable service that should be provided and may include such other directions as to secure compliance with section 38.

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(2) A direction under subsection (1) may include payment of compensation by the service provider to any user for damage or loss suffered on account of the failure of the service provider to comply with section 38.

40. Standards of performance of regulated service providers - (1) The Commission shall monitor standards of performance applicable to service providers. (2) Where a service provider fails to meet any required standard of performance, it shall pay such

compensation as the Commission may determine to any person adversely affected as a result of the failure.

(3) The requirement for payment of compensation under this section: (a) does not limit the right to any other remedy at law which may be available to the

complainant; (b) does not preclude the Commission from taking any other measure or imposing any

other sanction that the Commission has a right to impose in respect of the act or omission that constitutes the failure.

41. Restrictions to the licencee - (1) No licencee shall, without having prior permission in writing from the Commission, acquire

any undertaking by purchase or any other means: Provided that before making an application for such consent licencee shall serve

30(thirty) day's notice to the Commission and if the licence is for distribution and supply, in that case, to each of the concerned local authorities.

(2) No licencee shall, without the prior permission from the Commission, sell, mortgage, lease, exchange or transfer by any other means his undertaking or any part of it.

(a) Further, controlling stake of an entity granted licence under this Act shall not be transferred from the original promoters to other entities without the permission of the Commission.

(3) Unless clearly prohibited by the condition of licence or by the general or special order of the Commission, any licencee can enter into contract for purchasing water.

42. Annual accounts of licencee - Every licencee shall prepare annual audit report of the undertaking and each of the business units, in the form prescribed by the Commission, before the date specified by the Commission for this purpose and the same or an extract of a specific portion of it shall have to be published in a manner prescribed by the Commission.

CHAPTER 8.

Complaints and User Dispute Resolution

43. Receipt of complaints - (1) This section shall apply to any complaint against a service provider in relation to any matter

connected with the supply, possible supply or purported supply of the services. (2) Where a complaint is referred to, or otherwise comes to the attention of the Commission and

it appears to the Commission that: (a) the complainant has an interest in the matter to which the complaint relates; and (b) the complaint is not frivolous or vexatious,

the Commission shall investigate the matter. (3) Where it appears to the Commission at any time during or after its investigation that the

service provider has not considered the complaint, or has not considered it adequately, the Commission may direct the complaint to the service provider with a request that the service provider should consider or reconsider the complaint.

(4) Every licenee shall make arrangements for necessary numbers of complaint centers to receive complaints or inconvenience of the users regarding water supply and sanitation services or matters connected therewith and shall publish notices from time to time with information regarding the location of centers of communication.

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(5) Any user may submit their inconvenience or complaint to the said center over telephone or in writing.

(6) All complaints received from the users and the information regarding their settlement shall have to be recorded in writing in a Public Register at that center.

(7) After receipt of any information or complaint regarding the inconvenience from the user, licencee shall settle it within {7 (seven)} days and shall follow the regulations prepared by the Commission in this regard.

(8) If the licencee, in spite of being informed by the user regarding his inconvenience or complain, fails to settle in due time and in due process, the said user may submit the matter in writing to the Commission for taking action.

(9) The Commission shall pass a necessary reasoned order not exceeding {7 (seven)} days from the date of receipt of such application.

CHAPTER 9.

Power to Issue Orders and Enforce their Compliance

44. Interim or final order - (1) Where the Commission is satisfied that a person has committed or is likely to commit an

offence against this Act or a sector Act, it may suo moto make a compliance order under this section.

(2) Any person against whom an interim or final order is made shall comply with the order. (3) An interim or final order may require a person to refrain from conduct which is in

contravention of the provisions of this Act or a sector Act or to take actions required to be taken in order to comply with this Act or a sector Act.

(4) An interim or final order shall be made in writing specifying the grounds for its making and shall be enforceable as an injunction by a competent court to be specified by regulations.

(5) A copy of an interim or final order shall be placed on the Public Register and a copy shall be served on the person against whom it is made.

45. Emergency powers - In consideration of objectives of this Act and the necessity of providing uninterrupted supply of water to the users, subject to the approval of the Government, the Commission, shall be authorized to order any licencee for vesting any undertaking of the licencee, its properties, along with its interests, rights, duties of management and control, to any other person or Local Authority till the completion of investigation and issuance of interim or final order for the preservation of the object as required under this Act and in the interest of safe and uninterrupted supply of water to the users, no question can be raised against such order, but before giving such order, Commission shall provide opportunity to the licencee for hearing in accordance with the provisions of this Act.

46. Implementation of interim or final order - (1) Without affecting any provision of this Act, all orders and instructions, be it interim or final,

shall be implemented in such a way, as if the same is a decree of a Civil Court (2) Commission, at the time of passing interim or final order, may order the violator to pay

compensation to a person(s) who suffered loss for their work.

CHAPTER 10.

Offence and Penalty

47. Offences - (1) Any person who contravenes or fails to comply with a provision of this Act, commits an

offence against this Act and is liable on conviction to a fine specified by the regulations made by the Commission.

(2) A person commits an offence against this Act if he or she: (a) aids, abets, counsels or procures;

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(b) conspires with others to commit; or (c) is directly or indirectly knowingly concerned in, an offence under subsection (1).

48. Offence by a company –

If an offence is committed by a Company under the Act, the Proprietor, Director, Manager, Secretary or any other officer of the Company who was responsible for the operation of the business at the time of commission of such offence, shall be deemed to be an offender unless he can prove that, the said offence was committed beyond his knowledge or he tried his level best to prevent the commission of the offence.

Explanation - In this section - (a) In the case of business organization "Director'' means any partner or member of the Board of Directors.

(1) For the purposes of this section, any partner of a firm shall be jointly and severally liable for the acts or omissions of any other partner of the same firm done or omitted to be done in the course of the firm's business.

(2) For the purposes of the provisions of this section, a penalty for non compliance of an order of the Commission shall be a fine which shall be equal to a civil debt.

49. Not to hinder with proceedings under the Act - The proceedings or measures taken under this Act, rules or regulations shall be in addition to the measures provided by or under any other Act and shall not restrict any measures including penal measures provided in that other Act.

50. Filing of complaint and procedure of investigation - (1) The Commission may authorize an Inspector or any other officer for investigation of an

offence under this Act. (2) Inspector or the said officer, herein after called investigating officer, may start proceeding

under this Act, on the basis of written complaint of any person or on any other information. (3) An Investigating Officer of an offence, shall submit a primary report to an officer appointed

for this purpose by the Commission and the said officer, after considering the relevant incident and the circumstances, shall give a decision within seven days from the date of receipt of the report whether formal investigation or other recourse in accordance with the provisions of the Act or regulations shall be taken or any action at all be taken, and accordingly next step will be taken.

(4) An Investigating Officer in connection with an investigation of an offence may exercise the powers like an officer in charge of a police station under the Code of Criminal Procedure.

(5) After completion of the investigation, the Investigating Officer shall submit original copy of the investigation report and documents in support of it or attested copies of those to the Magistrate of the first class or Metropolitan Magistrate having jurisdiction and a copy of the same shall be kept in his or her office.

(6) Notwithstanding the provisions of sub-section (3), due to the necessity of the concerned offence and circumstances, the Investigating Officer may, if he or she is satisfied that because of delay the said deed, things or equipment may be removed or destroyed and may arrest the person involved in the offence, if he thinks that the accused may abscond, seize documents, things and equipment relating to the offence, even before receiving formal decision of investigation.

51. Application of Code of Criminal Procedure - (1) Subject to this Act, rules, and regulations made under it, Code of Criminal Procedure, 1998

(Act V of 1998) shall be applicable for the investigation, trial, appeal and all other incidental matters.

(2) A case started in the Court under this Act on the basis of the report of the Investigating Officer shall be treated as a case started on the basis the police report under the Code of Criminal Procedure.

52. Assistance to the Public Prosecutor by the Officer of the Commission -

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In conducting a case under this Act, before the Court of Sessions, Public Prosecutor or concerned Additional or Assistant Public Prosecutor may be assisted by an officer so appointed by the Commission and the said officer being present in the Court may make submission before the Court.

CHAPTER 11.

Financial Provisions

53. Establishment of the fund of the Commission - (1) The Commission shall have a fund to be known as the Water Supply and Sanitation

Regulatory Commission Fund and the Fund shall consist of : (a) grants and loans made to the Commission by the Government under budgetary

allocation to the LGD, under sub-section (3); (b) all fees received by the Commission under sub-section (4); (c) all sums received by the Commission from such other sources as may be decided

upon by the Government through rules made pursuant to this Act. (2) The Fund shall be utilized to meet :

(a) the expenses relating to the salary, allowances and other remuneration of Chairperson, Members, Secretary, officers and other employees of the Commission;

(b) the expenses of the Commission in discharge of its functions under this Act; (c) the expenses on objects and for purposes authorised by this Act; (d) the expenses incurred for operations of the grievance redressal, appellate, and other

mechanisms, and the consultants to Commission. (3) The Commission shall every year prepare its budgeted fund requirement, providing for

discharge of its duties and functions as prescribed in this Act, for operations, for preparation of accounts and audit reports, and for hiring of Consultants. The Commission shall submit the budget to the Government within the time specified by the Government, and before commencement of that financial year, the Government shall on the basis of that statement allocate to the Commission the necessary budget.

(4) A regulatory fee may be recovered from all service providers across the purview of the Commission.

(a) The regulatory fee may be allocated to water user categories based on objective and independent criteria, to be specified by the Commission as part of the regulations.

(b) Regulatory fee shall be treated as an integral part of the costs of operations of the water sector.

(5) The Commission shall by regulations published in the official Gazette and Public Register prescribe filing fees, fixing fees, licence fees and other fees to be paid in connection with the procedures of the Commission.

54. Surplus funds - (1) As soon as may be reasonably practical after the end of each financial year but not later than

60 days after the end of the financial year, the Commission shall deposit to a Special Account all surplus funds of the Commission at the end of that financial year.

(2) The Commission shall use funds from the Special Account only for one or more of the following purposes:

(a) user education or information projects; (b) special non-recurring projects; (c) budgeted capital expenditure; and/or (d) major rate regulating inquiries.

55. Accounts and audits -

(1) The Commission shall maintain proper accounts, keep books of accounts and maintain proper records of its operations and shall prepare annual statement of accounts in accordance with commercial accounting standards.

(2) The accounts of the Commission (a) may, at any time, and (b) shall, at the end of the financial year,

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be audited by an independent auditor registered as an auditor, being chartered accountants within the meaning of the Bangladesh Chartered Accountants Order, 1973 (P.O.No 2 of 1973), who shall be appointed by the Commission, in consultation with the Auditor-General, on such terms and conditions as the Commission may determine.

(3) Notwithstanding anything contained in sub-section (2), the Auditor-General (a) shall at least once every two years carry out such an audit of the performance by the

Commission of its functions including its performance in relation to key performance indicators; and

(b) may, at any time, either of her or his own motion or upon a request in this behalf from the Government or the Commission carry out such an audit of the performance by the Commission of its functions including its performance in relation to key performance indicators.

(4) The Auditor-General may conduct additional audits of the performance of the Commission. (5) The Commission shall annually publish and host on its website audited accounts reports as

part of its Annual Report. (6) The Commission shall make available copies of its audit reports and the reports of the CAG to

the Head of the Nomination Committee and the Minister.

56. Annual report - (1) Before 30th December of each year, the Commission shall prepare an annual report in respect

of that year up to the immediately preceding 30th June and submit it to the Government and the Minister shall cause it to be laid before Parliament.

(2) The annual report shall provide detailed information regarding the exercise of the functions and powers of the Commission during the year to which it relates and shall include:

(a) a copy of the audited accounts of the Commission as per section 55 of this Act; (b) a copy of the report of the Controller and Auditor-General on the performance audit

carried out under section 55 of the Act; (c) such information and other material as the Commission may be required by this Act

or the regulations to include in the annual report. (3) The Commission shall make available the copies of its Annual Report to the Government

within fifteen days of preparation of such report.

CHAPTER 12.

Miscellaneous Provisions

57. Government’s power to make rules - The Government may, in consultation with the Commission and by notification in the official Gazette, make rules to carry out the purposes of this Act.

58. Commission’s power to make regulations - (1) The Commission in accordance with the provisions of this Act, shall make regulations to

determine a phased approach for the regulations and other provisions of this Act to be applicable to various service providers.

(2) The Commission may, by notification in the official Gazette, within the framework specified in directives, policy documents, and other relevant documents prepared, promulgated, or endorsed by the Government, make regulations to carry out the purposes of this Act with respect including but not limited to:

(a) codes of conduct; (b) records to be kept, including the form and content of accounting and business

records, and information and documents to be supplied to the Commission by regulated service providers;

(c) standards of regulated services; (d) terms and conditions of the supply of regulated services; (e) conduct in connection with the production, distribution and supply of regulated

services;

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(f) complaint handling procedures; (g) tariffs and charges for regulated services; (h) levies and fees payable to the Commission; (i) the circumstances in which, and the terms and conditions on which, a service

provider or intending service provider of regulated services shall be able to gain access to facilities owned or controlled by another person;

(j) such other matters as the Commission considers necessary or desirable to give effect to this Act.

(3) The Commission shall pre-publish all the proposed regulations in draft on its website and announce through at least three dailies widely read in Bangladesh, soliciting objection or advice through such pre-publication, and shall make such regulations after giving due consideration to the objections or advice received.

59. Transitional Provisions - (1) All Licences and permits granted, prior to the commencement of this Act, in relation to the

production, distribution or supply of regulated services shall remain in force as if these are granted under this Act.

(2) This Act shall not operate so as to affect in a prejudicial way the rights of any person under a licence or permit granted prior to the commencement of this Act or any contract entered into prior to the commencement of this Act.

60. Derogation provision

Subject to general supervision of the Commission, nothing in this Act will preclude the Authorities (DWASA, CWASA, KWASA, RWASA) constituted under Act 6 of 1996 from exercising the rights, powers, jurisdictions conferred on, and from performing responsibilities assigned to them under the said Act. However, due to the importance of tariff adjustment and licensing as part of regulatory functions, the WSSRC Bill supersedes the existing provisions of the WASA Act on two points: (a) the 5% adjustment of tariffs and (b) licensing the deep tube-wells. To provide the utilities with time to comply with these (licensing and tariff related) regulatory requirements,

a request for derogation2 can be submitted to the WSSRC.

61. Publication of Translated Bangla Version of the Act In case of conflict between Bangla & English version, the Bangla version will prevail.

***

2 Derogation is the partial non-application or repeal of a law or a provision thereof, usually by a subsequent act

that in some way diminishes its intent or scope (adapted from http://legal-dictionary.thefreedictionary.com). Thus,

in this case, parts of the WSSRC Act can be subject to derogation in areas where the WSSRC Bill supercedes the

WASA Act.

tariff

tariff

vii

sewerage

sanitation

i Ecology

ii

iii

iv

v

vi

vii

viii

The Commission of Enquiry Act, 1956

(Act VI of 1956)-

Act

(

i

ii

iii

iv

i

ii

iii

iv

v

i

ii

iii

tariff

return

The Ground Water Management Ordinance, 1985 (

), The Bangladesh Standards and Testing Institution Ordinance, 1985 (

),

i

ii

iii

The Public

Demand Recovery Act,

Bangladesh Chartered Accountants

Order, 1973 (PO No. 2 of 1973) Article 2(1)(b)-

key performance indicators

performance audit

performance audit

Penal Code, 1860

(Act 45 of 1860) section Public Servant

1

Annex 11 Notes on the key changes proposed in

Bangla version based on the stakeholder

comments

The draft Act, the Bangladesh Water Supply and Sanitation Regulatory Commission Act, 2015, has

attracted reactions and opinions from various individuals and organizations. Total 87 recommendations

and some observations were received. These were received from the targeted circulation of the Bill

amongst the Ministry officials, the WASAs, and the general public. The WASAs submitted their comments

in writing to PSU, while the other comments were communicated to the PSU through consultation

meetings and workshops such as the National Forum for Water and Sanitation.

Here is a statement of some salient opinions, proposals and how we would like to respond to them:

1. There is a proposal for modification of Sec. 7 for inclusion of some Subject/ Discipline in the

academic qualification of Members. These are Environmental Sanitation, Hydrology and Business

Administration. The proposal is acceptable. Water Supply should be included as well in the

qualifications.

2. There has been a modification proposal for sub-section (3) of Sec. 8, intended to enable the

serving Govt. Officers to apply for Membership of the Commission- something which, in the draft

Act, has been banned for two years immediately after retirement or resignation from active

service. This proposal is not acceptable.

3. There is a proposal for modification for sec. 7 intended to include professional degrees from

Institutes having the status of University. This is not acceptable.

4. There is a proposal for inserting a new subsection (4) to sec 33 to the effect that no law can be

made to impose on the Commission a ceiling level of fixing tariffs. Although such law cannot be

made (in the interest of the sector), the mention of this is not acceptable in the Bill as it proposes

to impose restrictions on the law making power of the Parliament.

5. Dhaka WASA and Other WASAs are apprehensive of the curtailment of some of their rights,

power etc, once the draft Act is in force, this apprehension is not correct. Even then, they have

proposed for provisions ensuring their rights (licensing the deep tube wells, and automatic 5%

tariff increase) granted to them under their parent statute, which is Act no. 6 of 1996. This is

proposed to be accommodated (in the Bangla version) and a new subsection (3) to sec. 62 of

WSSRC Bill (Bangla version) has been proposed, this is as follows (English Translation of the

Bangla provision):

(3) Subject to general supervision of the Commission, nothing in this Act will

preclude the Authorities (DWASA, CWASA, KWASA, RWASA) constituted under Act

6 of 1996 from exercising the rights, powers, jurisdictions conferred on, and

from performing responsibilities assigned to them under the said Act.

However, due to the importance of tariff adjustment and licensing as part of regulatory functions, the

WSSRC Bill (English) supersedes the existing provisions of the WASA Act on two points: (a) the

5% adjustment of tariffs and (b) licensing the deep tube-wells. To provide the utilities with time to

2

comply with these (licensing and tariff related) regulatory requirements, a provision of

derogation1 has been proposed (in the English version). Provisions to this effect (empowering the

WSSRC to adjust tariffs as well as including licensing as a regulatory function of the WSSRC)

already exist in the current English draft of the WSSRC Bill.

6. There is a proposal for making the draft Act applicable only to private service providers. This is

not acceptable.

7. There is proposal that in the event of giving license to a private service provider to work within

the territorial jurisdiction of WASA or City Corporation, the Commission will be required to

obtain opinion from them. It is acceptable and it is proposed that a proviso to section 34(1) will be

added, to the following effect:

“Provided that, before granting license to any private service provider for providing service in the

territorial jurisdiction of any authority established under Act 6 of 1996 or any City Corporation or

Municipality area, the Commission will have to obtain opinion from them.”

8. There is a proposal of restricting the activities of the Commission in dealing with matters relating

to fixing of tariffs only. This proposal is not acceptable.

9. There is a proposal for mandatory inclusion of a woman Member in the Commission. This is

acceptable and it is being suggested that a proviso be inserted at the end of Sec. 7(1) to the

following effect: (English Translation) “Provided that there shall be at least one female Member in

the Commission”.

10. There is a proposal for increasing the Age limit of the Members/Chairperson of the Commission

from 65 yrs to 67 yrs. The age limit for the members should be 70 years.

11. There is a proposal that the draft Act should be placed before the Executive Committee of the

National Council for Planning of Water Resources, a very high level committee. This is under the

purview of the Ministry of LGRD&C as per all existing laws and procedures.

12. There is a proposal that the Commission should encourage public-private partnership. This is

acceptable, it has been suggested that subsection (4) to section 6 be recast as follows:

“(4) to promote competition and efficiency in water supply and sanitation sector through

public-private partnership;”

13. There is a proposal that the draft Act should provide that the tenure of the Chairperson and the

Members of the Commission shall come to an end with the attainment of 65 yrs. Considering this

and the previous point regarding the age of the Members, it is suggested that the relevant clause

reads:

“Provided that the Chairperson or a Member shall hold office until he attains the age of

seventy years.”

14. There is a proposal that all income by way of bank interest or investment in securities shall be

deemed to be Commission’s income. It is acceptable and accordingly it has been suggested that

the following words be inserted at the end of sec 56(1) :

1 Derogation is the partial non-application or repeal of a law or a provision thereof, usually by a subsequent act that in some way diminishes its intent or scope (adapted from http://legal-dictionary.thefreedictionary.com). Thus, in this case, parts of the WSSRC Act can be subject to derogation in areas where the WSSRC Bill supercedes the WASA Act.

3

“All income from investment or savings, if any, of the Surplus Fund of the

Commission shall be treated as Commission’s income.”

15. There is also a proposal for modification/replacement of sec. 57- Accounts and Audit: This is

intended for creating appropriate legal framework for auditing in accordance with key

performance indicators side by side the traditional system. The replacement also intended to

make auditing effective for good governance and making the audit report part of the Annual

Report. The replacement proposal is as follows: (English translation).

“57. Accounts and Audit: (1) The Commission shall maintain its accounts and shall

prepare an annual statement of accounts in such manner as may be prescribed by the

Government.

(2) The accounts of the Commission shall be audited by the

Comptroller and Auditor-General of Bangladesh once in a year, and shall send to the Government

reports of all types of audits conducted under the provisions of this section.

(3) For the purpose of an audit under this section, the

Comptroller and Auditor-General or any person authorized by him in this behalf, shall have

access to all records, books, documents, cash, bank deposits, stores and other property of the

Commission and may examine the Chairperson or any Member or any officer or employee of the

Commission.

(4) In addition to an audit held under sub-section (2), the

Commission may, for the purpose of auditing the accounts of the Commission, appoint one or

more Chartered Accountants as defined under article 2, sub-article (1)(b) of the Bangladesh

Chartered Accountants Order, 1973 (PO No. 2 of 1973).

(5) Notwithstanding anything mentioned in sub-sections (2) to

(4), the Comptroller and Auditor-General may, at least once in every two years, upon his own

accord or at the request of the Government or Commission, hold or cause to hold performance

audit in accordance with the principles of key performance indicators.

(6) The Commission shall take steps forthwith to remedy

irregularities, if any, pointed out in the audit reports, and it shall publish the audit reports, and

also the actions taken thereupon, if any, in its annual report.

***

Annex 13 Concept Note on Due Diligence on O&M Expenditure

A. Introduction

1. Operations and Maintenance Management (OMM) is the systematic process of managing routine (at least monthly) and non-routine (less than once a month) O&M tasks in order to achieve desired results.

2. Operations are the processes that transform various inputs to useful outputs. Operational optimization aims for ongoing, timely, cost-effective, reliable and sustainable performance improvements in all facets of operations by minimizing the amount of inputs that are used or wasted.

3. Maintenance in its simplest form means the work required keeping an asset in good condition. Maintenance activities can be divided into the following three categories:

Preventive – systematic inspection, correction and prevention of asset failures.

Corrective – activities undertaken to detect, isolate and rectify a fault so that the asset can be restored to its normal state.

Emergency– reactionary response to a situation (e.g. burst, break, damage) requiring immediate attention.

4. Utilities already perform O&M tasks, but an OMM system formalizes and optimizes these functions. An OMM process clearly defines the workload and corresponding budget needs for operations and preventive and corrective maintenance. Managers need this information in order to allocate limited resources effectively. An OMM process helps a utility to determine the level of service it can afford to deliver its consumers by O&M costs. The frequency of performing certain tasks may influence the cost of providing a certain level of service - although these short-term costs may be offset by a reduction in longer-term investment needs. 5. A well-executed OMM system can even extend the life of some assets beyond their original life expectancy, resulting in great savings for the utility. OMM systems are beneficial for finances and financial management. A well-developed O&M plan provides managers with information to accurately budget for maintenance; and progressive maintenance planning should reduce costs over time by limiting the frequency of expensive emergency repairs. 6. An OMM system requires considerable up-front time, effort and expertise; as well as good organizational skills and capacity for regular data updating. It may require a change in attitude in staff that are used to performing a particular task and are reticent to be ‘burdened with new tasks’. Some staff may not appreciate the level of accountability that accompanies an OMM system. 7. An OMM is an iterative and cyclical process and involves six key steps:

Establish viable service levels: What do customers expect? What can be feasibly delivered?

Identify workload, materials and equipment requirements: Which activities need to be undertaken to achieve our defined level of service? What materials and equipment are needed?

Estimate human resource needs Is there enough staff to undertake all activities? Is there a need for training?

Readjust workload/program: The workload may need to be adjusted regularly, depending on financial and human resources constraints.

Schedule and assign tasks: Schedules may be produced once the workload and staffing requirements have been adjusted. Schedules will likely include monthly and quarterly plans broken down into daily and weekly schedules.

Monitoring and evaluation: A monitoring and evaluation (M&E) system helps ensure that tasks are accomplished on time, that records are maintained, and that all problems and resolutions are documented. An M&E system also provides historic information on staffing, materials, and equipment that are useful in determining the next budget.

8. A Rehabilitation and Replacement (R&R) schedule requires understanding the deterioration rate of assets and communicating these into a schedule with ideal rehabilitation and replacement dates. An inventory system helps the utility to systematically determine what materials and equipment are needed, and the quantities in stock and to be ordered. The utility will need to:

Identify what should be in the inventory;

Develop a method for recording inventory; and

Develop a method for monitoring quantities. 9. Asset management is a systematic process of maintaining, upgrading, and operating assets cost-effectively. It provides tools to facilitate a more organized, logical approach to decision-making. It encompasses operations, maintenance and new investments. It requires the integration of data and decision-making processes across the utility’s engineering, finance, accounting, maintenance and operations functions. It allows decision makers to explore how operating and maintaining existing assets (facilities, equipment, infrastructure) and capital investments are likely to help meet demands and affect current and long-term budgets.

B. Background

10. The Dhaka and Chittagong Water Supply and Sewerage Authorities (Dhaka WASA and Chittagong WASA) are service oriented autonomous commercial organizations with the responsibility to provide water supply, sewerage disposal (wastewater), and storm water drainage services to the urban dwellers in the cities of Dhaka and Chittagong. 11. The main responsibilities of WASAs are the:

Construction, operation, improvement, and maintenance of the necessary infrastructure to collect, treat, preserve, and supply potable water to the public, industries, and commercial concerns;

Construction, operation, improvement, and maintenance of the necessary infrastructure to collect, treat, and dispose of domestic and other sewage; and,

Construction, operation, improvement, and maintenance of the necessary infrastructure needed for storm water drainage facilities in the City.

12. The reported ability of Dhaka WASA to report an operating profit, service its debt to the Government and pay income taxes despite an average tariff level (USD0.15/m3) which is far below other major cities in the region, indicates that there is a disconnect between the reality on the ground and the financial statements. The fact that high levels of NRW (estimates vary between 29% and 35%) are reported and the need for system rehabilitation investment projects (which are an indicator of postponed maintenance) provides further evidence that repairs and maintenance are not being properly funded. 13. Due to limitations in traditional historic cost accounting, the water supply and sanitation sector in Bangladesh will make use of a Regulatory Accounting Framework to provide financial data for the various water supply and sanitation service providers to the Regulator. One of the elements included in the Regulatory Accounting Framework is the concept of an Infrastructure Renewal Charge (IRC). The IRC is developed through an operational assessment (O&M Baseline Audit) of the water supply and sanitation systems of each operator to determine the investments needed to maintain the serviceability of the underground infrastructure over a medium to long-term period (typically in excess of 15 years). This forecast of the investments needed to maintain the serviceability of the infrastructure is referred to as the Infrastructure Renewal Charge (IRC). The IRC should include all expenditures involved with sustaining the system at its present state and protecting it from falling in value.

C. Outputs

14. The main output of a due diligence O&M audit is to assess the Infrastructure Renewal Charge (the level of O&M spending needed to maintain the drinking water production and distribution system and the sewer system in good operating condition). The second output is a clear and well-documented management system to forecast the Infrastructure Renewal Charge in the future.

15. The due diligence and baseline audit would include a review of the current O&M practice, procedures, tools including:

o Critically evaluation up-to-date information and available data: Basic systems for recording the operation of pumps and treatment facilities, water main repairs and water meter performance, etc.;

o Review of availability of operating manuals and standard operating procedures (SOPs) for equipment and facilities;

o Review, if any, of current preventive maintenance tasks involving a combination of scheduled maintenance and ‘just in time’ maintenance; and

o Review of O&M reports and work allocation protocols. o Assessment of budgeted annual available funds for O&M.

***

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Response to comments on Draft WSSRC Bill from the Review Committee, received on 10 Oct 2013

No. Reference Comment Response

1. Title of the Bill The title of the bill would be renamed as "Bangladesh Water Supply and Sanitation Regulatory Commission bill”.

Incorporated

2. Scope of the Commission

The document appears to have been written considering only "urban water supply" in mind. This needs to be expanded, especially considering "sanitation".

Incorporated


The word sewerage would be replaced by sanitation all over the document.

Incorporated


Scope of works of the Commission should be clarified at the beginning.

Incorporated through collating the scope of work of the Commission in Chapter 3 of the Bill.


The sanitation issue has to be equally focused.

Incorporated in Chapter 3 (Powers and Functions of Commission) and Chapter 6 (Tariffs)

6. Scope and purview of the Commission

It appears that draft bill is urban focused and need to check with WASA, City Corporation and Pourashava Acts and mandates in relation to water supply and sanitation services.

City Corporation and Paurashavas Act are also mentioned in the Bill.

Subsequent to the suggestions received in the stakeholder consultation held on 11 Sept 2013, the purview and scope of the Commission was to be as broad as possible (including entire Urban as well as Rural areas). Therefore, the Bill currently does not restrict itself only to urban aspects of WSS.


Clarified that initially title of the bill was Water Economic Regulator Commission Bill for Water Supply in Bangladesh

Incorporated: we share this approach - as per the stakeholder consultation held on Sept 11, 2013, the regulatory commission was suggested to be not only Economic, but also extending to other aspects of regulation umbilically connected to economic and financial regulation.

8. Transparency, Accountability, Participation

The public hearing does not reflect consumer hearing, these are two different aspects.

Incorporated - the Bill now provides for ‘public hearing’ as well as ‘user hearing’ in Section 25 (1). However, we understand consumer hearing to be a subset of public hearing.


Commission should have boundary for easy functioning.

Incorporated - (additionally referring to response to comment no. 6), the boundary (purview) of the Commission would be defined more clearly in the Regulations to be made by the Commission.


Act should be utility based. While a bit more clarification would be needed on this comment, the Bill does not restrict at the moment if Commission regulates only utilities.

This approach would mean (a) that the

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Commission can devise Regulations extending to utilities and other agencies, and (b) in case of such extension of scope and/ or purview, the Act may not necessarily need to be amended.

11. Independence and Accountability

The regulatory commission should be an independent body for proper functioning. Accordingly, the document has to be revised to remove the flavor of sub-ordinate office, if any.

Already reflected in the Bill- the Commission is mandated to make decisions with respect to various aspects of water supply and sanitation sector in the country. At the same time, the Commission shall make these decisions by keeping fully informed all stakeholders of the decisions, including the government, public, NGOs, private parties etc.

Further, the Commission also has a check on its appointment and removal procedure, publication of annual reports, and audit reports, through various relationships with the Parliament, President, Secretary of MoLGRD&C, auditors, and various other stakeholders who can petition the Commission.

12. Independence and Accountability

The commission should be responsible either to the President or the Government. Accordingly, relevant sections and sub-sections need to re-write.

The Commission is to operate in an independent manner, to ensure rational and transparent decision-making in the sector. At the same time, there has to be an accountability of the Commission with respect to the decisions it makes.

In view of this delicate balance between accountability and autonomy, the Commission has been made responsible to various government and Presidential entities with respect to (a) appointment of members, (b) removal of members, (c) preparation and granting of budget, (d) publishing of annual reports, and (e) auditing the finances of the Commission.

Furthermore, it is noteworthy that the Commission has been made accountable to ALL stakeholders through mandatory provisions for public participation in key decisions to be made by the Commission, viz. licensing, and determination of tariff methodology.

This has accepted and strengthened the views expressed by the stakeholders in the consultation workshop held on 11 Sept 2013, as well as in the individual meetings held by the Consultants with the Stakeholders.

13. Title and scope (sanitation)

The title could be changed as "Bangladesh Water Supply and Sanitation Regulatory Commission" instead of "Bangladesh Water Supply and Sewerage Regulatory Commission" and changes need to be reflected in relevant sections and sub-sections.

Incorporated

14. Clarity in scope and The Scope of Works/Functions of The Commission’s powers, functions, duties,

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purview of the Commission

the commission are required to spell out clearly, otherwise too much work load may jeopardize functioning of the Commission.

and responsibilities have been clearly spelled out in various chapters of the Bill.

Details on how exactly the Commission is to carry out these duties and responsibilities, as well as the manners in which it would exercise its powers would be specified more clearly in the Regulations to be made by the Commission.

15. Sanitation-related scope of Commission

The draft Act seems dealt with water supply; similarly sanitation issue need equal importance.

Incorporated as per response 5 in this document

16. Clarity on sub-legislative policy instruments

The Act should be precise as much as possible having provision of formulating rules, regulations and by laws, if needed.

The Bill specifies the power of the Commission to make Regulations, and provides for the Government to be able to issue policy directives, as well as to make rules pursuant to the Act.

17. Autonomy of water utilities

Provisioning of functional autonomy of water and sanitation service providing agencies/ institutions/ organizations has to be in the Act.

The Bill does not restrict the autonomy of any water utility.

What is additionally worthy of note here is that the Bill’s scope is to establish a Commission, that would enable financially, economically, and environmentally sustainable decision-making and operations in the water supply and sanitation sectors. Therefore, the utilities as per the draft WSSRC Bill are still autonomous to make their investment, O&M, and tariff-related decisions as long as these decisions are made within the framework specified by the Regulatory Commission in the Act (e.g., the procedures for stakeholder consultation), and in the Regulations (e.g., the tariff determination methodology to be fixed by the Commission).

18. Scope of the Commission to include efficiency of Utilities

The Commission should have control on the work-force engaged by the service provider for ensuring cost and the quality control.

The Bill specifies that the Commission would support operations of ‘efficient’ utilities by protecting their financial viability.

How exactly it would accomplish this would be detailed further in the Regulations to be prepared and promulgated by the Commission.

19. Scope of Commission - sanitation-related

The water issue has highlighted sufficiently but sewerage issue lacks of highlighting.

Incorporated - the Bill now places equal emphasis on Sanitation-related issues.

20. Specific focus of Commission’s functioning to include water quality and also accountability of various stakeholers

The water quality and accountability issues have focused specifically.

The principles of Transparency, Accountability, and Participation have been at the core of drafting of the Bill.

21. Accountability in formulation of the Bill

The Act should be consumer friendly for this reason public/consumer hearing has to be done from the formulation stage.

As mentioned, the Bill already incorporates the same.

22. Scope of work of The scope of work for the Incorporated: various provisions of the Bill are

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Commission to be clarified

commission in the Act has to be added.

dedicated to expatiating on the scope of work of the Commission.

23. Enactment of the Bill

The enactment of the Act has to be done by the parliamentary committee and notification by the government.

The exact procedure of enactment of the Bill would be followed after the Bill is ready.

24. Title of the Bill The title of the bill should be Bangladesh Water Supply and Sanitation Regulatory Commission Bill instead of Bangladesh Water Supply and Sewerage Regulatory Commission (WSSRC) Bill.

Incorporated

25. Purview of the Commission

In respect to the effective functioning of the commission it should fix up boundary, otherwise, it would be difficult performing particular role.

Please refer to response to comments no. 9 and 14.

26. Expertise of team drafting the Bill

Support of one legal expert and one water and sanitation expert is needed to formulate this Act.

The PATA team already has the suggested experts and they are closely involved in drafting of the Bill along with other specialists in the team having relevant experience in Bill drafting and in various aspects in water supply and sanitation sector.

Additionally, the stakeholders consulted in the meetings on 1 Aug 2013, as well as on 11 Sept 2013 had backgrounds from fields far more diversified than and subsuming legal and sanitation aspects

27. Scope of work in terms of Sanitation

Widening the scope of work, title of the Bill may remain as it is, so that commission can function properly. He added that the word "sewerage" should not be substituted by "sanitation", because sanitation is very wide issue.

Incorporated: the word Sanitation, while may be a little wider in scope than ‘sewerage’, has been included based on the comments from the Review Committee. The term has been defined appropriately for the Commission to be able to take initiative in ensuring the overall good of the WSS sector as well as improvement of public health in Bangladesh.

Particular comments on the draft bill-

No. Reference Comment Response 1. Point-2 Add definition of water supply, sewerage, sanitation

and service Provider and any other relevant terminology included in the bill.

Following definitions have been incorporated: 1). Water supply 2). Sanitation 3). Sewerage 4). Entity 5). Branch office

New Definitions: 1). “water supply” means piped supply of water through household connections, stand-posts, water kiosks, or yard connections, and shall include other means of water supply as determined by the Commission from time to time. 2). “sewerage” means human excreta and sullage, collected from residences and other establishments through pipes and other networked structures, and shall include such definition of sewerage as determined by

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No. Reference Comment Response the Commission from time to time 3). “sanitation” means sewerage collection, transportation, treatment, storage, and disposal by regulated service provider through centralised or decentralized systems, excluding solid waste, storm water, and industrial effluents and shall include other means of sanitation as determined by the Commission from time to time; 4). “entity” means any public, private ,or mixed public-private entity, sole proprietorship or partnership firm, company, corporation or branch including a Bangladesh or a Foreign joint-venture entity established or organized under any applicable law of the Bangladesh, or an informal group, association, or organisation interested in the matters related to the Commission. 5). "branch office" means in relation to the Commission, any office of the Commission, other than its head office; 2. Point- 2(23) If meaning of branch office and sub-office are

same then, it is wise using any one them all through the document.

Incorporated. We have used ‘Branch office as the terminology for any office of the Commission, other than its head-office.

3. Point-2(10) Add Local Government Division before Ministry of Local Government, Rural Development and Cooperatives. Under Chapter-2

Incorporated.

4. Chapter 2, Point 4-6

Points 4-6 in Chapter 2, could be considered as composition/constitution of the commission and point 7-15 could be considered as regulation.

The constitution of the Commission needs to be fixed by the Act, and therefore these sections have been included in the Bill. And have also referred to other regulatory Commission Acts for this aspect.

5. Point-6 Add improvement of public health as another principle.

Incorporated.

6. Point-7(2) Appoint[ment] of Chairperson and two members could be done on adhoc basis till the recruitment through nomination committee, keeping eligible for application for the post.

We understand the existing provisions in the Bill reflect standard procedures as per our references on constitution and establishment of regulatory commissions in other international and national regulatory Commission Acts.

7. Point-7(3) The Chairperson and Members shall be appointed by the President only.

The Bill requires a process of recommendation / nomination by a committee. This committee would have the resources to assess multiple candidates for the positions being recruited for, and therefore would be helpful for the President in appointing the Members and Chairperson.

8. Point-8(3) Interested persons can be appointed only after resigning from the government service, provided applied through proper channel and are selected by the nomination committee.

The existing provisions of the Bill restrict that no Member (or Chairperson) can be appointed if s/he is a serving government official. The rest of the provisions - on nomination committee etc. would apply to all prospective Members/ Chairperson.

9. Point-10(4) Words "or Parliamentary Standing Committee" may be deleted.

Incorporated.

10. Status [of Members] needs to be mentioned in the Act. Pay allowances etc. may be determined by prescribed rules. Status of members shall be that of a sitting Justice in High court. Status of Chairperson shall be that of a sitting Justice in Appellate Division.

The Rules will determine status, pay, allowances of the members and till such time the rules are made, the Government will determine the same. And this is in line with the other regulatory Commission Acts

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No. Reference Comment Response prevalent in Bangladesh.

11. Point-13(3) Words "and/or the Head of the Nomination Committee" may be replaced by "the Government".

We have now defined the Head of the Nomination Committee as the Secretary, LGD, MLGRDC and hence are retaining the same provision.

12. Ponit-13(6) Words "the Head of the Nomination Committee" may be replaced by "the Government".

As response 11 above.

13. Point-14(2) The word "judges" may be replaced by "justice". Incorporated 14. Point-14(4) The time limit for explaining his/her positions

by the accused shall be determined by rule. One sentence "The time limit for submission of reply of show-cause shall be determined by the prescribed rules" may be added.

Incorporated

15. Point 19 (b) Add a point for sanitation and sanitation services. Incorporated. 16. Point-19 (b)

ii) Sec 19.1.b.ii may be replaced by "to establish standard of service to be determined by the prescribed rules in terms of quantity, quality and availability".

Incorporated.

17. Point-19 (c) Add a point for sanitation and sanitation services. Incorporated. 18. Point-22 Make provision of expert opinion from

specialized organization. Make provision of studies that may require taking particular/specialized decision. Add and assessments after Power to hold inquiries

Section 17 on ‘Formation of Committee’ enables the Commission to elicit opinion from experts and/or organisations based on the terms of reference determined by the Commission. Section 23 now reads as ‘power to hold inquiries and assessment”.

19. Point-23 (3.b)

The consultation process as proposed need to be widened by keeping the provision of public hearing for any major decisions. Consultation with representatives of citizens and community groups to listen to and understand their needs and concerns is not enough in the context of Bangladesh. Such groups may not always represent people's voice.

Section 25 (2) on “Consultation with users, industry, other relevant stakeholders, and Government’” provides for public hearing.

20. Point-26(2) Not only had those proposed in the draft all major decisions including issuance of license need to be made available in the web. Besides these, applications for licenses should also be made available in the web. In case of any major license, such application should also need to be published in the newspapers. So that, people at risk or likely to be affected may raise their voice to the Commission prior to take any decision.

Section 26 (2) and (4) read together imply that Commission will publish, public register including applications for granting license in prominent English and Vernacular dailies.

21. Point-29 Consultation with the Commission needs to be made mandatory prior to such prohibition of uses of water and making rules.

Incorporated

22. Point-32(1) The detail procedure for submission and appeal to the court should be spelled out in rules. There shall not be any way to go to the court without submitting petition to the Commission. Any such person, organizations, entity or informal group may appeal to the court only if they are not satisfied with the decision of the Commission on their petition. The level of court should also be mentioned. No such appeal should be allowed in any court lower than high court. So, this clause may be re-written.

Incorporated in Point 32 (1) b

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No. Reference Comment Response 23. Under

Chaper-6 This chapter appears to have been written considering "water tariff". This needs to be broadened considering the "sanitation" issues.

Incorporated

24. Point-33 (2)

Add a point for environmental and social implications of the Determination.

Incorporated

25. Add a point for improvement of environment and public health.

Incorporated

26. Under Chapter-7

This Chapter has been written considering urban water supply; this now needs to be expanded considering "sanitation".

Incorporated

***

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Response to comments on Draft WSSRC Bill from the Review Committee, received on 24 November 2013

No. Reference Comment Response (Article Nos. in updated Bill)

Mr. SDM Quamrul Alam Chowdhary, Deputy MD, Dhaka WASA

1. Chapter 1, Article 2 The definition of “rates”, “authority”, “company”, “environment” may please be added

Incorporated

“Rates” – we have replaced rates with charges, and the same has been defined in the Act.

“Company” definition was earlier in section 51 and now has been moved to Chapter 1 (definition section) and defined as “any incorporated business, trade organisation, association or organisation”.

“Local Authority” definition included as “the local government authority constituted under a statute for the fulfillment of the purpose of article 59 of the Constitution of Bangladesh”.

“Environment” definition is outside the scope of this legal instrument of this Bill, hence not included.

2. Chapter 1, Article 2. (26) and (27)

“And/or” may be inserted in place of “or”

Incorporated (Article 2 (34) & (35));

“service” means water supply and/or sanitation service

3. Chapter 1, Article 2. (28)

“Sewage” may be inserted in place of “Sewerage”

We have maintained this in line with the Water and Sewerage Authority (WASA) Act.

4. Chapter, Article 2.(29)

“Water and sanitation management system” may be inserted in place of “supply of water and sewerage distribution”

Incorporated (Article 2 (37));

“standards” include the standards relating to the content applied in the water and sanitation management system.

5. Chapter 1, Article 2.(32) Last Line

Please insert the following after the Word Commission as “in consultation with service providers”.

Incorporated (Article 2 (40));

“water supply” means piped supply of water through household connections, stand-posts, water kiosks, or yard connections, and shall include other means of water supply as determined by the Commission in consultation with service providers from time to time.

6. Chapter 1, Article 3 Add a new subsection after subsection 3 (2).

3 (3) – that the provision of this Act shall not reduce the power of any service provider vested to it under the existing relevant act of the service provider

The provisions of the Bill already accommodate the relevant considerations that the service providers may have about their powers. In this context, such blanket provision as suggested, may not be required.

7. Chapter 1, Article 3 This article needs rethinking and The Article was provided for interpretation of the Bill in a manner not prejudicial to the

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rewriting overall well-being of the sector and interest of all stakeholders of the sector. Further, this provision has been strengthened by requirements on the Commission’ part to consult stakeholders and make reasoned decisions.

However, we have modified Article 3 to align it with similar regulatory Acts in the country as below:

Article 3: Overriding effect of the Act

Notwithstanding anything contained in any other laws for the time being in force, the provisions of this Act shall prevail.

8. Chapter 2, Article 6 In the first line the word "consideration" and the third bracket may be deleted

(Article 6):

The choice of words between {objectives/ considerations} is kept open for the authority passing the final Bill.

9. Chapter 2, Article 6 The following may please be added as point (10) - “to ascertain the tariff structure for the services provided by service providers"

(Article 6);

The provisions of this Article intend to provide a broad framework for the functioning of the Commission, and also for the interpretation of the Bill in case of a conflicting view. The determination of tariff has already been dealt in detail under Chapter 6 of the draft Bill.

10. Chapter 2, Article 7. (2) a

After the word “civil” the following may be inserted – “water resources”

(Article 7 (2) (a));

We have broadened this provision by enabling any engineering discipline to be included for qualification of the Member.

11. Chapter 2, Article 7 (3)

After the word "President" the following may be inserted "of the People's Republic of Bangladesh"

Incorporated, (Article 7 (3));


The criteria for fixation of seniority may be added in the following Article: “The Chairperson shall be the chief executive of the Commission and where the Chairperson is unable to perform the functions of the office due to resignation, removal, absence, illness or any other cause, the member who is senior to others shall be competent to exercise all the powers and perform all the functions and duties of the Chairperson till a new Chairperson is appointed or, as the case may be, the existing Chairperson is able to resume his or her office; and where both them are unable to perform their functions and duties, the Government may

Incorporated (Article 7 (5)) now reads as:

7 (5) The Chairperson shall be the chief executive of the Commission.

7 (6) If the post of the Chairperson falls vacant or if s/he fails to discharge the duties due to absence, illness, or for any other reason, a Member appointed by the President of Peoples’ Republic of Bangladesh shall act as the Chairperson, until the Chairperson resumes duty, or a newly appointed Chairperson joins in the vacant post.

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direct another member to temporarily act as the Chairperson.”

13. Chapter 3, Article 20

Please add the following "20 (2) (c). This article shall not be applicable for the service providers which are operating under certain existing Act" (Re-examination needed).

(Article 20 (2));

The point is incorporated to the extent that service providers empowered/mandated by existing Acts for WSS service provision shall be treated as licencees, however the provisions of this Act shall be applicable to them.

We have redrafted Chapter 7 (Services and Licences) as attached in Anenxure-1: (Chapter 7: Services and Licences) to this document.


Article 24 (3) (a) may be deleted

“(3) Notwithstanding the powers conferred to the Commission to delegate, the Commission shall not delegate some of its powers, namely the power to:

(a) Grant, renew, or cancel a licence;

The (Article 24) has been modified in a way to enable the Commission to make decisions with respect to delegation of powers.

The Article 24 now reads as:

“The Commission may, by a reasoned order in writing, and subject to the conditions mentioned in the order, delegate all the powers of it to any Member, employee, or to any other person”.


The text of this article needs some more elaboration for clear understanding and also this article need to be cross checked with the existing water supply and sewerage authority Act 1996.

(Article 29):

(Emergency powers to control water use) is simplified to reflect the need to address emergency situations.

Now it reads as:

“The Government may, in consultation with the Commission, prohibit the use of water and may make Rules relating to distribution of water, to meet the unexpected shortfall, or an emergency condition in respect of availability or use of water, provided that the Government in making such Rules shall ensure that the licencees and other stakeholders must not be affected”.

16. Chapter 2, Article 33 (2) (i)

In the list of the Acts "Bangladesh Water Supply and Sanitation Act 1998" may be added.

(Article 33 (3) (i))

Incorporated

17. Chapter 6, Article 33 (2) (o) (iii)

After the word "water resources" the following may be added "and the environment"

(Article 33 (3) (o)(iii))

Incorporated

18. Chapter 7, Article 34 (2) (b)

At the end of the last sentence the following may be inserted. "With the permission of the concerned service providers operating under certain Act"

We have removed provision in Article 34 (2) (b) addressing specific cases, since a blanket clause on exemption to be decided by the Commission is already provided in Chapter 7 on Services and Licences.

Please refer to the Anenxure-1: (Chapter 7: Services and Licences) in this document.

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The following may please be added "this article of compensation will not be applicable for the statutory entity like W ASA, Public Health Engineering etc. however; these entities may only be directed for improvement of their services"

(Article 40 (2));

The present provisions of the Bill ensure that compensation is provided to the water users, as a disincentive to all the service providers.


A new article 44 (10) may be added describing the measures against false complaints by any user.

Protection of service providers against false complaints shall be ensured through the powers and functions of the Commission to penalise various stakeholders, as a quasi-judicial authority.


The following may be please added "Article 64 (4) Notwithstanding the task described in 1, 2, 3, above the right and privileges which are being enjoyed by the local statutory authorities under some Act will continue as it is and those enterprises/ authorities who are operating under some Act will not need to obtain any licenses under this Act".

Please refer to comment 13 above.

22. Miscellaneous The permission of development works by different Real Estate organizations as long as the water supply and sanitation is concerned may be bring under direct control of Bangladesh Water Supply and Sanitation Regularity Commission.

They are required to follow their normal approval process and not included under the Commission’s purview.

Ms. Quamrun Naher Siddiqua, Deputy Secretary, Bangladesh Energy Regulatory Commission

23. Preamble section ‘An Act’ is needed to be added at the start of the preamble

Incorporated – changed from existing ‘Bill’ to an “Act’


The Government may appoint different dates for the commencement of different sections of this Act?

(Article 1 (3));

The referred provision was included in the Bill with the intention to provide for deferral of provisions of the Act as needed, based on the capability, manpower, skills, funds etc available with the various related institutions.

However, the provision can be deleted based on wider consultation.

25. Chapter 2, Article 6 Broad {objectives/ considerations} of all Commission while performing its functions and duties.

It was highlighted in red color with no comments. Kindly suggest.

26. Chapter 2, Article 16 Section 16 (1) stating that “there shall be secretary to the Commission to be appointed by the Ministry/ Government” is not consistent with independent and impartial regulatory commission.

Incorporated as (Article 16 (1) -(4));

Articles 16 is modified as below:

(1) the commission, may, for the purpose of carrying out its functions effectively, appoint such required number of officers and employees,

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including its Secretary, as it deem necessary

(2) The procedure of appointment, duties, and other terms and conditions of service of officers and employees including its secretary shall be determined by Regulations.

(3) The Commission may appoint consultants and experts of the Commission in various disciplines on such terms and conditions as the Commission may from time to time determine

(4) Until such Regulations are made, the Government may appoint a Secretary on deputation for the Commission.


Power to regulate charges - it should also include “Commission shall determine tariff after giving hearing to licencees and other who have interest in it”

Incorporated as (Article 33 (2));

“The Commission shall conduct public hearings and consultations on the methodology for tariff determination, tariff proposals, and tariff orders, in accordance with the Regulations prepared by the Commission in this regard.”


The regulation making process is not referred here. It may be added. Such as—The Commission shall, for the regulation to be made under this section, make pre-publication of all the regulations soliciting objection or advice through it, and shall make regulation after consideration of the objection or advice received. Section 49(3) – where the word –“with rules” in here “regulations” may be added.

Incorporated as (Article 49 (2));

“The Commission shall, for the regulation to be made under this section, make pre-publication of all the regulations soliciting objection or advice through it, and shall make regulation after consideration of the objection or advice received.”

Also ‘rules’ is changed to ‘regulations’ in this section

Mr. Robin Raihan Ahmed, Project Director, Ground Water Management Project

29. General In recent time water supply and sanitation is monitored and guided by local government division. The formation of the commission is warmly welcomed. But at present the necessity of forming such WSSRC are not clearly spelled out in the draft Bill.

The preamble outlines the necessity for establishment of such Commission

30. General comment Now the Local Government Division of LGRD ministry is responsible for monitoring the system of water supply and sanitation. Then what will be the relationship between LGD and the new commission WSSRC?

LGD would be (a) responsible for policy formulation as an arm of the Government, and (b) responsible for provisions of water and sanitation services through its local government institutions, where it is mandated to do so.

WSSRC would establish standards and make other decisions by considering these policy directives, and also regulate the service providers that may be under LGD’s purview.

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31. General comment Department of Public Health Engineering (DPHE) is mandated for providing water supply and sanitation facilities throughout the country except where WASA’s operate. The role of Department of public Health Engineering (DPHE) is not clear.

The description on role and responsibilities of DPHE is not within the purview of this Act

32. General comment At present the urban water supply and sanitation is managed by pourashavas except WASAs and an elected Mayor is headed by mayor. Mayor is solely responsible for managing water supply system and collecting tariff. The commission will look after the activity of water supply of both large and small Paurashavas. What would be the linkage between proposed WSSRC and publicly elected Mayor?

The Act’s scope is to establish the linkage between WSSRC and service providers in water supply and sanitation sector.

33. General comment There are about 135 Paurashavas out of 317 pourashavas and 9 city corporations, responsible for water supply in urban areas. What are the policies undertaken by the commissions for monitoring and integrating such a large volume of the activities?

The Commission would (a) work in a phased manner, (b) be free to establish local offices as required, and (c) hire permanent as well as contract staff, qualified and capable of handling such large volume of activities.

34. General comment At present a lot of NGOs are working on urban water and sanitation. If the commission is formed, how the NGOs’ activities would combine with the commission?

The Commission is mandated to (a) carry out public consultations and hearings to consider views from all stakeholders of the sector; including NGOs, (b) issue licences to service providers which may also include NGOs, and (c) establish various committees, as per section 17 of the Bill, which may include NGOs too.

Further, (Article 9 (1) (2) (e)) requires the Nomination Committee for appointment of the Commission members to include one representative from well-reputed NGOs.

35. General comment There are 20-40% fringe area in every urban region which can not be served with pipe water supply. How these areas would be treated and monitored by the commission? Do they have any consideration for these percentages?

(Article 35 (1)) read together with (Article 40 (1)) addresses the mentioned aspect and implies that service providers shall have to make adequate arrangements to supply adequate services to all areas falling under their purview. Fringe areas may be included by the Commission in the purview area of a licencee, at the time of granting the licence.

36. General comment From the draft guideline it is understood that every service provider willing to provide services in the urban region has to take license prior to provide water supply. Now pourashavas and WASAs are providing and collecting tariff. If

Please refer to (Article 35 (1)) of the Bill stipulating the process the Commission will follow for grant of licence, also the area of the Licence.

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licenses are provided to private sectors, how would the commission define the coverage of each licensee?

Mr. Ashraf, BUET (Bangladesh University of Engineering and Technology)


Definition of Sanitation suggested as:

“Sanitation” means the service and science of effecting proper disposal of all human waste (including liquid waste and sludge; excluding solid waste and industrial effluent), proper drainage of storm water and wastewater, and shall include other aspects of sanitation (e.g. food sanitation, hygiene) as determined by the Commission from time to time.

As highlighted below, we have included “liquid human waste and sludge”.

(Article 2 (32)); The definition now reads as

“sanitation” means collection, transportation, storage, treatment, and disposal by regulated service provider through centralised or decentralised systems of liquid human waste and sludge, excluding solid waste, storm water, and industrial effluents, and shall include other means of sanitation as determined by the Commission from time to time;

38. Chapter 1, Article 2 New definition of “products” suggested

“products” means systems including treatment systems, equipment, appurtenances, accessories used in water supply and sanitation.

The definition is indeed important, insofar as the usage of products and materials affect the efficiency, effectiveness, and quality of provision of water supply and sanitation services. In this sense, it would be more prudent for the Regulations to encompass the concept presented by inclusion and definition of 'products' rather than in the Act.

39. Chapter 1, Article 2 Definition of “service provider” altered….. with inclusion of “products”


40. Chapter 1, Article 2 Definition of “sewerage” altered

Modified as (Article 2 (36)); except the onsite sanitation component suggested, as during stakeholder workshop it was discussed and agreed to include only the networked sewerage system under the WSSRC’s purview.

“sewerage” means human excreta and sullage, municipal/ domestic /sanitary wastewater, sullage, and fecal sludge, collected from residences and other establishments through pipes and other networked structures, and shall include such definition of sewerage as determined by the Commission from time to time.”

41. Chapter 1, Article 2 Though the term sewerage has been defined, it has not been used anywhere in the Bill

The term has been used as required in relevant sections. For instance in (Article 34 (5)), (Article 39 (1) (d)) etc.

42. Chapter 1, Article 2 Definition of “standards” altered as;

“standards” include the standards related to the quantity and quality of water supply and sanitation services and products.

(Article 2 (37));

Incorporated as below:

"standards" includes the standards relating to the quantity and quality of water and sanitation service provision.

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Earlier statement as;

To build equitable, sustainable, and efficient water supply and sanitation system

(Article 6 (1)); Incorporated;

To build and promote equitable, sustainable, and efficient water supply and sanitation system


Change suggested as highlighted below;

“to protect interests of users through ensuring access of regulated services to all users, especially low income, vulnerable, marginalised, and disadvantaged sections of the society, and ensuring standards of services and products ”;

(Article 19 (1) (b) (ii)) covers the service standards.



“After the commencement of the Act , the Chairperson and two members shall be appointed as soon as possible and other two members shall be appointed within a period not exceeding two years from the date of such commencement”.

Comment - All 4 members should be appointed as soon as possible. The members would perform somewhat different functions based on their background (as noted above). So all members should be appointed simultaneously.

The intention is that the working of the Commission should not be delayed in anticipation of having all members of the Commission on board. Hence, retained as it is.


Means of determining seniority should be provided, in case of Chairperson is unable to perform the functions of the office.



Comment as:

A persons who is in the Government services may, subject to other provisions of this Act, apply to the Head of Nomination Committee, through the proper channel for the post of Chairperson or Member, and if the person is selected for appointment, he or she may join in selected post after acceptance of her or his resignation from the service, not within {five} years after severing lien with the Government services

Incorporated in (Article 8 (3)).



The Nomination Committee may take such actions as are reasonably necessary to identify and attract the best candidates including by advertising in the news media widely circulating within and outside

Incorporated in (Article 9 (5));

The Nomination Committee may take such actions as are reasonably necessary to identify and attract the best candidates including by advertising in the news media and website widely read and viewed within and outside Bangladesh

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Bangladesh


Comment – to replace “the chairperson or the Head of the Nomination Committee” with “a Member” and the original statement to read as

Where a Member becomes aware of a conflict of interest in relation to any smatter relevant to the Commission, the Member shall inform the Head of the Nomination Committee of the perceived conflict of interest, upon such information the Head of the Nomination Committee shall appropriately direct the Member to refrain from taking part, or taking any further part, in the activities of the Commission.

(Article 13) has been modified and attached as Annexure-2 (Chapter-2; Article 13 – Conflict of Interest) in this document.


Comment – to replace “person’s” with “Member’s” in the following statement;

“The commission shall report to the Government any determination of the conflict which is likely to interfere significantly with the concerned person’s performance.”

Please refer to comment 49 above

51. Chapter 2, Article 8 “employee” should be defined in the Act

Incorporated in (Article 2 (10));

“employee” means members, staff, and officers of the Commission.

52. Chapter 2, Article 13, 8 (b)

To delete “that person shall be guilty of an offence the effect of which will be resigning from office”

Please refer to comment 49 above


“corruption” by whom Incorporated in (Article 14 (1) (b));

….by the enquiry committee.


The person of three Members including the Chairperson shall form the quorum of the meeting.

If only two members are appointed as stipulated in Section 7(4), the quorum rule should be modified?

Already (Article 7 (4)), requires Chairperson and two members.


Commission Members and employees should not be permitted for any employment outside Commission

We have changed the title from “Employment outside Commission” to “Profitable Pursuit outside Commission”.


New inclusion in the functions of the Commission

“to determine the methodology and approve proposals for designing and marketing water supply and


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sanitation PRODUCTS”.

57. Chapter 3, Article 19 (1) (c)

New inclusion in the functions of the Commission

To monitor the performance of the water supply and sanitation sector in relation to …..(vi) quality and standards of water supply and sanitation products


58. Chapter 3, Article 23 (3) (a)

The commission shall give notice of an inquiry by;

Publishing a notice in the official Gazette and in a daily newspaper circulating widely in Bangladesh……

Comment – Should it be in only one newspaper?

Incorporated in (Article 23 (3) (a));

At least 3 (three) newspaper.


Delegation of power –

“The Commission may delegate to the Chairperson or a Member or an employee of the Commission, either generally or otherwise as provided by the instrument of delegation, any of its powers other than the power of delegation, its powers to revoke or vary a delegation and the powers

referred to in subsection Error!

Reference source not found.”

Comment – Is this applicable for any employee of the Commission? Needs to define "employee"



Comment – scope of exemption should be extended to ‘small water supply” systems installed / run on non-profit basis

(Article 36) stipulates the Commission to make regulations to exempt service providers from requirement of license, with some conditions.

Mr. Md. Abdullah, MD, Khulna WASA

61. Chapter 1, Article 2 Please add following definitions:

Rules, Regulations, Users, Employees, Low income, Vulnerable, Marginalised, Stakeholders, Industry, Administrator

Incorporated as:

“rules” means rules framed under this Act. “regulation” means regulations framed under this Act. “licence” means any licence issued under this Act. “users” already defined “employee” means members, staff, and officers of the Commission. “administrator” means the administrator appointed by the Commission pursuant to regulations. Definition of “low income”, “vulnerable”, “marginalized”, and “industry” are beyond the purview of this Act.

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62. Chapter 1, Article 2 Definition of “Sewerage” – to include ‘mechanical equipment’ in this



Definition of “Tariff” – in the second line to include “supply and” may be incorporated.

“tariff” means a sum prescribed by the commission as tariff to be appropriately collected from the users against the supply and service provided to them

Incorporated in (Article 2 (38)) as;

“tariff” means a sum prescribed by the commission as tariff to be appropriately collected from the users against the water supply and sanitation service(s) provided to them


It would be more justified to create wider scope in the field of engineering as follows:

a). One member shall be from the

field of engineering having at least a

graduate degree from a recognized

university;

Incorporated in (Article 7 (2) (a)).

65. Chapter 2, Article 9 Composition of the Nomination Committee:

It would be worthy to consider the representative from the reputed Bangladeshi university in the nomination committee instead of alternative option as kept in (1) (c). Keeping this view sub clause (c), (d) and (e) may be re arranged as follows: (c)a retired judge of the supreme court, or a member of a central-level independent regulatory agency in any of the infrastructure sectors; (d) a professor, Dean, Director, or an equivalent faculty member of a reputed Bangladeshi university; and (e) one representative to be nominated by the Government from amongst well-reputed Non Government Organizations or legally recognized bodies representing private sector interests

We understand there is little recognized private sector participation in networked water supply and sanitation sector in Bangladesh. Hence, provision related to representation of private sector in the Nomination Committee can be discussed and included as required.

66. Chapter 3, Article 19 (b) (i)

Powers and functions of the Commission

The word ‘amend’ may be included in (b) (i) as follows

(i) To issue, renew, amend, and cancel licenses

(v) To make regulations to give effect to the provisions of this Act by publishing gazette.

New inclusion may be:

(vi) through consultation with the Commission, the

In (Article 19 (1) (b) (i)), we have incorporated “amend” in the functions.

(Article 26 (2) (b)) requires the regulations to be published in the gazette and hence addresses the suggestion on point (v).

(Article 62 (1) & (2)) already incorporates the suggestions mentioned in point (vi)

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Government to make Rules to give effect to the provisions of this Act by publishing gazette.

67. Chapter 10, Article 50 (1) and (2)

Clause 50 (1) and (2) under this chapter has mentioned about offences but not any specific penalty in terms of fixed period of imprisonment and fixed amount of financial fine. Although it has referred in the clause 50(1) that it is to be specified by the regulation developed by the commission, which would require a reasonable time after establishment of the Commission. So it would be justified to make provision of such penalty in this Act for the purpose of Good governance and administration from the beginning of the functioning of the Commission.

To be covered as part of the Regulation.

Dr. Khailrul Islam, WaterAid

68. General Comment Overall; it is a supply side driven regulation. Nothing has been mentioned how the suppliers will secure, extract, produce or process water for supply.

Bangladesh Water Act 2013 requires that regulatory mechanism will have to be in place so that no one can extract any amount of ground water as they wish. The authority of regulation has to be vested to a body which the Government will determine. As an example, now anyone can set up a deep tubewell and extract as much as they wish and can sell that water in the market. As a result of unregulated extraction, the tubewell of the neighboring villages may go dry due to rapid depletion of the underground water layer. The villagers will then be compelled to buy water from the water utility (private or public). Hence, regulation of sourcing of water is very important from the angle of social justice. Bangladesh Water Act 2013 is yet to be implemented. Now; this Bill remains silent on the “sourcing” of water supply. As these are inter-related and inextricable; another regulatory body to “control” sourcing or to look after extraction of water may be too much for a country. Hence, this fundamental issue of regulation of sourcing of water for

Rightly pointed out, however, the intention and objective of this Act is to focus primarily on the water supply and sanitation services than the water resources development and management regulation, which need to be addressed separately by another agency in line with Water Act 2013, such as the WARPO etc.

Nevertheless, (Article 6 (8)) includes protection and conservation of the environment in the broad considerations of the Commission’s operations.

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water supply needs to be addressed in this bill.


Although the definition of water supply has been given in the Chapter 1, Clause 2 (32), it is not clear if the Commission will undertake the regulation of water supply of irrigation, agriculture or industry in future or not. If the aspiration is to cover those areas, then the composition of membership would require revisiting to include people from agriculture and irrigation.

(Article 2 (40));

The water supply definition restricts the coverage of services limited to as piped supply of water through household connections.

70. Chapter 3, Article 19 and 24

These clauses will mean that the sole authority to issue, renew and cancellation of license will remain on the commission and the commission cannot delegate this authority to anybody else. So these clauses and clause 34 will mean that for each small scale intervention at the community level, people or local level community groups (like for a pond sand filter around a pond) has to come to the commission to get a license. This is not practical; and will not be poor friendly. Please consider revising so that small scale community intervention is exempted from taking license centrally.

(Article 36 (1) to (4)); stipulates the Commission to make regulations to exempt service providers from requirement of license, with some conditions.


The clause is explicit about its power to regulate rates and charges but not about prices at the consumer level. For example, it will determine the tariff for WASAs to sell to private bottle water companies but not the prices for the bottle water companies to consumers. This will help maintain social injustice as many water companies will use water from WASA (which is subsidized by people) to sell bottle water to people and make profit out of it. So people will be paying for private companies’ profit twice. This needs further clarity and be rephrased to establish social justice.

The purview of this Act is limited to water supply through piped network as restricted in the definition section and hence, excludes bottled water brands.


There are 15 items to consider in determination of tariff as per this Article. However, there is no mention of Right to Water and Sanitation which is accorded in UN where Bangladesh is a signatory. Also the parameters of UN standard for water and obligation of state parties about water for life have not been mentioned; 20 liters per person per

(Article 6 (5)); mandates the Commission to protect interests of the users through ensuring access of regulated services to all users. The principles mentioned in the comment are therefore covered under this provision of the Act.

The details of the same such as the norms about amount of water supply and ceiling on the tariff would be determined by the relevant

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day has to be supplied by the state party as a basic human right; and the service provider must ensure such supply; and overall expenses of a family on WASH cannot exceed 5% of their disposable income. Water tariff must not be set without considering the human rights aspects of water.

policy directives, rules, and regulations.


This means that NGOs have to get licenses for each of the small scale water supply interventions (such as PSF, reverse osmosis, or other types of piped water services) or decentralized waste water treatment or faecal sludge treatment plants. Community based system of small scale or not-for-profit initiatives need to be treated specially and that needs to be mentioned

(Article 36 (1) to (4)); stipulates the Commission to make regulations to exempt service providers from requirement of license, with some conditions.

74. Chapter 2, Article 7 (2) (d)

Please include “public health” as a qualifying field for members as public health has been mentioned as an objective of the commission as mentioned in Chapter 2 Clause 6 (9).

Incorporated in (Article 7 (2) (d)).


Please clarify how the “seniority” will be determined


76. Chapter 2, Article 9 (1)(e)

Please specify that the nominated private sector representative will not be concerned with any business related to water supply and sanitation.


77. Chapter 2, Article 9 One new clause should be inserted that the Nomination Committee will also direct or recommend to President to ask the Chairman or member to refrain from taking part in activities if conflict of interest is being reported for the concerned person

Modified and (Article 13 (3)) reads as

“The subject Member or employee shall refrain from taking part, or taking any further part, in the activities of the Commission, while an inquiry is conducted in the matter pursuant to section 13 of this Act”.

78. Chapter 2, Article 13 The clause (conflict of interest) should be applicable to the members as well as to the Chairperson.

Sub-clause (3): how the head of the nomination committee will become aware?

Clarity should be provided as the “Government” term has been used non-specifically. As of now, it can mean the office of the appointment; or the Secretary LGD or something else. Similarly, the term ministry/ Government has been used

(Article 13) has been modified and attached as Annexure-2 (Chapter-2; Article 13 – Conflict of Interest) in this document.

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interchangeably. Does it mean so?

79. Chapter 1, Article 2 Definition of “sector” is to be given Incorporated in (Article 2 (33));

“Sector” means the water supply and sanitation sector in Bangladesh


Please double check this. So far no one could appoint any administrator (as in the case of Destiny and others)

Possible challenges in implementation of sections of the Act should not prevent the Act from having such sections.


The public register should be made public; both hardcopy as well as digitally



Should be in conformity with the RTI Incorporated in (Article 27 (4)):

Notwithstanding anything contained in this section of the Act, this section shall be construed in accordance to the applicable sections of the Right to Information Act of Bangladesh.


Please double check with the approved Water Act 2013 and should be consistent with the Act

In light of the need to handle emergency situations, this section has been inserted in the Bill, which does not override provisions of the Water Act 2013.


CHAPTER 6: TARIFFS – Clause 2 must incorporate the minimum standards of UN approved standards and mention those – e.g. Right to water, adequate access and quantity (20 liters); 5% of disposable income for WASH; etc.

(Article 6 (5)), mandates the Commission to protect interests of the users through ensuring access of regulated services to all users. The principles mentioned in the comment are therefore covered under this provision of the Act.

The details of the same such as the norms about amount of water supply and ceiling on the tariff would be determined by the relevant policy directives, rules, and regulations.

Mr. Mohammad Khaled Salahuddin, AE, DPHE


How the seniority of members will be decided? Based on experience? Educational qualification? Or what?



In case of qualification of chairman or members of the commission there should not have any case filed in Anti Corruption Commission against them

Incorporated in (Article 8 (2) (d)) as:

“has a running enquiry constituted by the Anti-Corruption Commission of Bangladesh or was convicted by the Anti-Corruption Commission”.


Definition of “family” should be included

(Article 8 (4)), highlights that “….family members for the purpose of this sub-section shall mean and include definition of family members as prescribed by relevant rules or regulations.”

88. Chapter 2, Article 9 (1)(d)

Representatives from NGO should not be included. Instead of this Chief Engineer of DPHE can be included.

Service provider representative should not be in the Nomination Committee, to avoid conflict of interest. As long as Government representation is required, (Article 9(2) (a) &

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(b)) addresses the same.

89. Chapter 2, Article 9 (1)(e)

Instead of representatives from legally recognized bodies representing private sector interests, PD of PSU should be included. In case PD of PSU cannot be included then representatives from professional bodies can be included



Age should be limited to 60 years, not 65 years. In case of early resignation of any member the position may be reappointed for the rest of the tenure of the commission

The choice of age limit {65} is kept open for the authority passing the final Bill.


“Secretary” should be appointed from the officers of BCS (Public health Engineering) Cadre.

Currently in the Bill this is kept open and BCS candidates are not disallowed.


In case of appointing of “Officers” BCS (Public health Engineering) Cadre officers should be given preference

Commission to decide and make appropriate Regulations.


Commission shall ensure the usages of fund given to local government institutions to be used in water supply and sanitation sector.

While this is related to service provision, the Commission can look into the matter (even suo moto) as long as it is related to quality of service provisioning.

94. Chapter 7 DPHE and WASAs are government mandated organizations to provide water supply and sanitation services in rural and urban areas respectively. Is there any necessity to give license to any other organization to provide such service?


Mr. Abdul Motaleb, Senior WS Specialist, WSP-WB

95. General Comment Commission linkage with service providers. How this will be materialized? One way could have been to have few (Ex-Officio) members from service providers like Secretary LG, DPHE and MD WASA but with more professional members.

The Commission provides for qualification and eligibility of its members in such a manner that former officials of the service providers can become the members of the Commission. Further, the Commission is empowered to form committees comprising such eligible persons as the former officials of service providers, as well as government officials could be. In this manner the Commission already has intricate and well-designed linkages with not only service providers, but any and all professionals who are knowledgeable in the sector in Bangladesh.

96. Chapter 3, Article 19 (b) (ii)

That commission will establish standards for water supply and

The policy-makers would make policy decisions that would reflect the choices

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sanitation services in terms of quantity, quality, and adequacy and on same page that commission to monitor the performance of the water supply and sanitation sector in relation to: (i) levels of investment; (ii) coverage, availability, adequacy, and standard of water supply and sanitation services; Can commission notify standards and monitor them? Generally the policy maker should develop and notify standards, another tier implement (service delivery) and third entity to regulate (commission).

required by the country’s society on the whole. For example, ‘so-and-so sections of the society should pay no more than # amount on water’ could qualify as a policy decision. Further, as rightly pointed out in the comment, this policy decision would then be required to reflect in the standards, and then needed to be monitored. These two are the functions entrusted with the Commission. The comment is very well taken, and also we appreciate sharing of the PMWA of Pakistan.

ADB Legal Counsel


Instead of naming the division and the ministry in this sub section, it is more appropriate to adopt the approach in sub section 14 and state "Secretary in charge of the Ministry or Division dealing with water supply and sanitation sector." This takes away the risk of uncertainty should the name of the ministry or division change.


98. Chapter 1, Article 3 Subsection 1 seems to contradict with sub section 2. Subsection 1 says this Act prevails over other Acts. Subsection 2 says the provisions shall be read together. If 1 is really intended, 2 should be softened to stated that the provisions shall be read to the extent possible together with the provisions of the other laws.

Please refer to response to comment 7 above:

99. Chapter 2, Article 7 What is the rationale for requiring a post-graduate degree in some cases? Since the requirement is of experience of 20/25 years, requirement of a post-graduate degree may be unnecessarily restrictive. More fundamentally, I don't think a university qualification should be mentioned in the provision, since what we are looking for are people with relevant experience rather than a degree.

(Article 7 (2)) mentions the requirement of post-graduate degree in the fields except in the ‘engineering field”

This was based on discussions and inputs from various stake-holders and in reference to similar provisions in other regulatory Acts. However, provision related to university qualification can be further discussed and included accordingly.

100. Chapter 2, Article 7 I am not sure what the logic is for the staggered appointments

“The intention is that the working of the Commission should not be delayed in

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(4) proposed in sub section (4). anticipation of having all members of the Commission on board.”


In sub section 5, consider using the expression "senior most member" or something similar as the individual who will serve in the absence of the chair.

Incorporated in (Article 7 (5)) and modified as:

7 (5) The Chairperson shall be the chief executive of the Commission.

7 (6) If the post of the Chairperson falls vacant or if s/he fails to discharge the duties due to absence, illness, or for any other reason, a Member appointed by the President of Peoples’ Republic of Bangladesh shall act as the Chairperson, until the Chairperson resumes duty, or a newly appointed Chairperson joins in the vacant post.


Sub section 3 is a bit confusing on whether a government officer can apply, get selected and then resign from government service before taking up the appointment at the Commission or if there is a requirement of 5 years of cooling period as the expression "not within {five} years after severing lien with the Government services" seems to suggest. The requirements are contradictory and need to be cleaned up.

(Article 8 (3))is modified as:

“A persons in the Government services, subject to other provisions of this Act, not within {two} years after having resigned from the Government services and subject to the acceptance of the resignation, may apply to the Head of Nomination Committee through the proper channel for the post of Chairperson or Member”.


Section 9 - Sub section (1) (a) - same as comment on Article 2 (11) in comment 97 above.

Incorporated in (Article 9 (2) (a)).

“the Secretary in charge of the Government Ministry or Division dealing with water supply and sanitation sector, shall be the Head of the Nomination Committee”.

104. Chapter 2, Article 9 (1)(d) and (e)

Presumably the idea here is to appoint two individuals belonging to the NGOs and representative private sector bodies. The language should be changed to reflect it properly. It currently reads like an NGO or a trade body will be appointed.

Incorporated in (Article 9 (2) (e)) as:

“one person to be nominated by the Government from amongst representatives of well-reputed Non Governmental Organizations”.


I note that the process of appointment will be on the basis of open competition, which has its merits, but considering the time it will take the likelihood that it will be a very cumbersome exercise, I hope it has been considered well and is deemed to be the best way.

(Article 9 (5)), provides advertisement etc as one of the option and the Commission is not disallowed to resort to other measures as required.


In line three, please add the words "of his duties" after the word


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performance.


Please replace the word "equality" with tie or equal votes.



Section 16 subsection (2) - After the word "direction" in line one, please add "of the".

(Article 16 (1)-(4));

The provision has been revised by mandating the procedure of appointment, duties, and other terms and conditions of services of employees of the Commission including its secretary to be made by regulations.


The last six words of this subsection seem to suggest that in matters not related to the Commission, the members can continue to work even while serving in the Commission. Is that really the intent?

(Article 18) is modified as:

“A Member of the Commission without the written permission of the Head of Nomination Committee and any employee, without the written permission of the Commission shall not engage him or her or continue in any work outside the Commission”.


It uses "Government or Commission". It may be better to choose one out of the two since the two could have difference of opinion on what constitutes adverse effect. Change the word affect to effect.

This clauses has been removed in light of the comment 109 above

111. Chapter 3, Article 19 (1) (h)

Who would confer the additional functions to the Commission. Government?

(Article 19 (1) (h)) is modified as

“to perform such other functions as are conferred on the Commission under this Act”


What is the logic behind this provision? I don't know if the international agreements have the force of law in Bangladesh. If that does, this provision is reasonable. This is for Bangladesh legal specialist to consider.

Agreed, and have removed the same.


Please add "made" before the word available in line 3.



Is the intention to publish it in the form of Regulations? Please correct the last part of the sentence.

(Article 30(3)) is modified as:

“Within a period of {four} months from the commencement of this Act, the Commission shall develop the details of the grievance redress mechanism and shall publish it in the form of Regulations”


The provision below seems to be creating a jurisdiction of the Supreme Court through Rules. Is it possible under Bangladesh law? This should be considered by Bangladesh legal specialist.

Agreed, and have removed this provision.

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“where a review petition is rejected, or not admissible, prefer an appeal to the Court as prescribed by the Rules, in consultation with the Supreme Court.”

116. Chapter 7, Article 38 (3) (c)

Same as number comment 115 on Article 32 (1) (b) above.

This being one of the regulatory tools available to the WSSRC, it has been included as part of this Act.


Same as number comment on Article 32 (1) (b) above.

Agreed, and have removed the same.


Same as number comment on Article 32 (1) (b) above

(Article 46 (4)).

In the Acts we have referred to, such court-like status has been accorded to the Commission being established by the Act and hence this provision has been included in this Act to provide similar status to the Commission for its effective functioning.

We will confirm this with our national legal specialist.


It is not clear what this provision is trying to say.

This is being repetitive with respect to (Article 3), hence removed.


This requires a general consistency check with prevailing Bangladesh law. Bangladesh legal specialist should consider.

Please refer to response to comment 118 above.


This provision should use the word "shall" and made more exacting. Read together with Section 61, the intent is for the Government to be required to provide the budget to the Commission, therefore this provision should not make it appear like an option.

Incorporated, we have removed the Article 56 (3) and have modified (Article 60) as below:

“Every year, the Commission shall for the next financial year, submit to the Government annual budget statement within the time specified by the Government and in such statement the estimated amount to be required from the Government for that financial year shall be mentioned, and before commencement of that financial year, the Government shall on the basis of that statement allocate the necessary budget.”


Bangladesh legal specialist should consider if subsection (1) is consistent with the prevailing tax laws in Bangladesh, or if there are special provisions in the tax laws which take away from this provision.

We have removed Article 58 to avoid any inconsistencies.

PwC Internal Team Comments

123. Chapter 2, Article 11 Vacancy in the post of Members shall not render any action, decision, or processing of the Commission illegal and no question

(Article 11) is modified as:

Vacancy in the post of Members, provided the quorum for the Commission’s

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can be raised as to its legality. meeting shall be met as per provision 15 (4), shall not render any action, decision, or processing of the Commission illegal.

124. Chapter 2, Article 9 Establishment and constitution of Nomination Committee is redefined.

(Article 9) is modified as;

9 (1) There shall be constituted and called for meetings a Nomination Committee as per provision 9(3), for selection of persons to be appointed as Chairperson and Members, and for other purposes as stipulated under this Act,

9 (3)The Head of Nomination Committee shall call the constitution and meetings of the Nomination Committee as required for the purpose of this Act;

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Anenxure-1: (Chapter 7: Services and Licences)

1. Requirements for licence to provide water supply and sanitation services:

(1) No person shall provide water supply or sanitation services except under the authority of a license issued by the Commission.

(2) All persons, entities, or other service providers {mandated/ empowered} under WASA Act, Pourashava Act, or Rules or Regulations made thereunder for the water supply and sanitation services shall be treated as licencees under this Act, and provisions of this Act shall be applicable to them.

(a) Persons or entities (whether registered or not) providing water supply or sanitation services under arrangements other than under Acts or other legal instrument, shall apply for a licence within {one} year of promulgation of this Act.

(3) Nothing in this section prohibits the provision of water supply and sanitation services- (a) by a person or entity to his or her employees; (b) on the premises of an institution including a hospital, factory, school, hotel, research

institution, or other institution of a similar nature to the occupants thereof, in cases where the source of supply of the water is lawfully under the control of the institution or where the water is supplied to it in bulk by a licencee;

(c) in circumstances which are prescribed by regulations made by the Commission to be exempt from the requirement of a licence.

(4) The service providers with whom agreements have been executed between the service providers and the Government or any of its agencies, immediately before this Act comes into force shall be treated as licencees for the production, supply, distribution and storage of water along with the bulk water supply or provision of sanitation services under this Act, and notwithstanding anything contrary is contained in this section, the concerned conditions of the agreement shall be applicable to those cases.

(5) If a question or difference of opinion exists whether a person is engaged in water supply, and storage, distribution or provision of sanitation service under sub-section (1), such difference of opinion shall be addressed in accordance of the review and appeals procedures specified in CHAPTER 5.

(6) The Commission may order any person who is not a licencee or not empowered by any other way, to disconnect or stop the provisioning of services relating to water treatment and/ or production, supply, storage and distribution, and sewerage services, subject to provisions 34(2)(a) and 36 of this Act.

2. Grant, renewal, revision and cancellation of licence -

(1) A Licence may be issued, renewed, cancelled and revised by a process prescribed by Regulations, which shall also specify the area of service to be covered by the licencee, provided that the area so prescribed may, but need not, coincide with the boundaries of the area or areas of jurisdiction of one or more local governments.

(2) The Regulations for grant, renewal, revision, and cancellation of licences shall consider including but not limited to the following principles:

(a) continuity of adequate level of services to the users; (b) financial, economic, and environmental sustainability of service provision; and (c) satisfaction of users with respect to the services being provided.

3. Exemption from the requirement of licence -

(1) Commission may, make regulations for giving exemption from the requirement of licence subject to the fulfillment of the conditions specified herein;

(2) Provided that any person, or entity (whether registered or not) who is exempted by the Commission shall have to observe those conditions which a licencee shall have to observe under the licence, or this Act, or the regulation, unless contrary is mentioned in the order of exemption.

(3) Exemption under this section may be given for a specified period; (4) Commission may revoke the exemption at any time recording reasons in writing.

4. Supply of bulk water -

(1) No person shall supply water in bulk to a water services provider without a licence issued by the Commission, subject to sub-section 34(1), and subject to provisions 34(2)(a) and 36 of this Act.

(2) Any service provider may enter into an agreement with any other licencee or service provider for the supply of water in bulk for any period and on terms and conditions to be approved by the

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Commission, and where the supply is to be given by a person which is itself a water service provider, either within or outside the area of service of that water services provider.

(3) Where it appears to the Commission that: (a) it is expedient that:

(i) a licencee or water service provider should give a supply of water in bulk to another licencee or water service provider; and

(ii) the other licencee or water service provider should take such a supply; and

(b) the giving and taking of such a supply cannot be secured by agreement, the Commission may, by order served on them, require the licencees or water service providers concerned to give and take such supply for such period such terms as it may specify.

5. Licence fees -

(1) A licencee shall pay to the Commission, on issue of the licence and at prescribed intervals thereafter, such licence fees as the Commission may determined and published in the Gazette from time to time by the Commission.

(2) The fee shall be determined by reference to a schedule of fees following public consultation.

6. Duty to provide adequate service -

(1) A service provider licenced or authorised under any Act to provide water supply and sanitation services shall:

(a) maintain its equipment and property used in the provision of the service in such condition as to enable it to effectively provide the service;

(b) make such reasonable effort as may be necessary to provide to the public service that is safe, adequate, efficient, reasonable, equitable, and non-discriminatory; and

(c) make such repairs, changes, extensions and improvements in or to the service as may be necessary or proper for the efficient delivery of the service to the user;

(d) provide a water supply and/or sewerage connection to any applicant within a reasonable period of time as stipulated in relevant Regulations or indicate to the applicant why the application is being denied. Any disputes in this regard shall be settled in accordance with CHAPTER 8 of the Act.

7. Order of the commission to comply with duty -

(1) Where the Commission discovers on its own or upon a complaint that the service provided by a service provider is not in accordance with section 39, the Commission shall in writing direct the provision of the adequate or reasonable service that should be provided and may include such other directions as to secure compliance with section 39.

(2) A direction under subsection (1) may include payment of compensation by the service provider to any user for damage or loss suffered on account of the failure of the service provider to comply with section 39.

8. Standards of performance of regulated service providers -

(1) The Commission shall monitor standards of performance established by the licencing authorities of service providers.

(2) Where a service provider fails to meet any required standard of performance, it shall pay such compensation as the Commission may determine to any person adversely affected as a result of the failure.

(3) The requirement for payment of compensation under this section: (a) does not limit the right to any other remedy at law which may be available to the

complainant; (b) does not preclude the Commission from taking any other measure or imposing any

other sanction that the Commission has a right to impose in respect of the act or omission that constitutes the failure.

9. Restrictions to the licencee –

(1) No licencee without having prior permission in writing from the Commission shall acquire any undertaking by purchase or any other means:

Provided that before making an application for such consent licencee shall serve 30 (thirty) day's notice to the Commission and if the licence is for distribution and supply, in that case, to each of the concerned local authorities.

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(2) No licencee, without the prior permission from the Commission shall sell, mortgage, lease, exchange or transfer by any other means his undertaking or any part of it.

(3) Unless clearly prohibited by the condition of licence or by the general or special order of the Commission, any licencee can enter into contract for purchasing water.

10. Annual accounts of licencee -

Every licencee shall prepare annual audit report of the undertaking and each of the business units, in the form prescribed by the Commission, before the date specified by the Commission for this purpose and the same or an extract of a specific portion of it shall have to be published in a manner prescribed by the Commission.

Annexure-2 (Chapter-2; Article 13 – Conflict of Interest)

13. Conflict of interest

(1) A Member or employee of the Commission shall be considered to have a conflict of interest for the purposes of this Act, if the Member or employee acquires any pecuniary advantage or other interest that could conflict with the proper performance, or assists in the acquisition of any pecuniary advantage by another person, as a Member or employee of the Commission.

(2) In case of a conflict of interest, the Member or employee shall immediately disclose in an affidavit filed to the Commission, the conflict of interest.

(3) The subject Member or employee shall refrain from taking part, or taking any further part, in the activities of the Commission, while an inquiry is conducted in the matter pursuant to section 13 of this Act.

(4) When the Commission determines that the conflict is likely to interfere with the Member's or employee’s proper and effective performance as provided in subsection (1), the matter shall be investigated pursuant to the provisions of this Act.

(5) The Annual Report of the Commission shall disclose details of all conflicts of interest and the determination arising there from.

(6) A Member or employee of the Commission who is subject to this Act shall be considered to have breached section 13 of the Act if Member or employee -

(a) fails without reasonable cause to make declaration of his or her interests as required; or

(b) knowingly makes a declaration that is false or misleading in a manner affecting the decision of the Commission.

Comments from participants of the consultation workshop held on Feb 20, 2014, and

response to those

Comment shared in the workshop Response

DMD (O&M)-DWASA-Qamrul Alam Choudhury

1. As per article 42 of proposed bill there is a provision of paying compensation to the customers. But initially it will be very difficult as WASA will not be in a position to supply water meeting the standards for drinking water. Some of the factors for not meeting the standards are also beyond WASA's control, like contamination of underground and overhead tanks. It is therefore necessary to allow sufficient time (10-15 years) for compliance of the provision.

The Bill has detailed provisions for (a) assessing into complaints made by the users, (b) hearing the parties involved - in the WSSRC’s capacity as a quasi-judicial authority, and (c) issuing orders related to grievances. The provision to compensate the users should be looked at comprehensively with all the provisions of the Bill that apply.

2. He also asked whether the WASA needs to obtain a new license from the commission.

As per provision 34 (2) of revised Bill, WASAs would be treated as licensees under this Act.

3. He recommended that the provision of water supply and sanitation services in the privately develop housing areas (by REHAB) should be licensed to private sector by the commission.

No person or entity is prohibited to apply for license for supplying water, this covers the case mentioned.

Tareq Hasan Siddique: Director-BTRC

4. On compensation he mentioned that experience from India & Nigeria indicates that failure in compliance is taken very seriously leading to cancellation of operator license.

Point noted.

5. Level of independence should be very high. In Bangladesh such regulatory commission is not quite independent. But in Norway such commissions are fully independent.

Independence needs to be balanced by accountability. The Bill reflects this concept.

6. Special power should be vested on to the chairman of the commission has been provided in the Post and Telegraph ordinance of 1979.

Provision 15 (5) of revised Bill gives the Chairman a casting vote in case of a tie. The Chairman has additional powers such as to convene meetings, sign the summons of the Commission etc.

7. Clearly define the eligibility criteria for obtaining the license.

The Bill is open to provide licenses to any service provider including NGO, CBOs etc. However, the detailed eligibility criteria for grant/rejection of licenses are to be provided in regulations.

8. If the license of an operator is cancelled for any reason how soon the operator can get this license back and what should be the procedure of getting back the license.

License agreement will include the details of cancellation and re-obtaining of the license.

9. Can an operator transfer his license to another operator? If the answer is yes, then what is the procedure?

Operator cannot transfer as per provision 42 of the Bill.

10. Can one operator transfer shares to another operator. Provision included as 41 (2) (a) and read as: “Further, controlling stake of an entity granted licence under this Act shall not be transferred from the original

promoters to other entities without the permission of the Commission”.

Md. Ibrahim ( DPHE):

11. The bill should be submitted to the ministry in both Bangla and English.

Point noted.

12. The provision of the bill should be implemented gradually and phases.

Provision 6 (2) includes “to develop a transitory approach towards building the economic regulatory system, such that the progress is in step with the institutional preparedness”.

13. About selection of chairman and members, will the nomination committee be a selection committee and an appointing committee.

Nomination committee shall only nominate/recommend names to the Hon. President, who shall appoint the members of the Commission.

14. Duties and responsibilities of commission in term of quality and quantity of water supply should be separately spelled out.

Provision 6 (10) now provides for coordination of WSSRC with appropriate authorities that are responsible to monitor quality of water supply, to ensure proper quality of water supply is provided.

15. All the existing service providers should apply for license within 1 year of the establishment of the Water Supply and Sanitation Regulatory Commission.

Same as point 2 above.

Peter Ravenscoft (World Bank):

16. Qualification of Commissioner should be properly established.

Provision 8 (1) now read as – “(a) A person shall, subject to the provisions of sub-sections(2) and (3),be qualified to be selected- (a) for the post of Chairperson if he or she has at least 25 years relevant work experience in the fields mentioned in the section 7(2), or in the field of water supply or sanitation; (b) for the post of Member if he or she has at least 20 years relevant work experience in the fields as mentioned in the section 7(2) , or in the field of water supply or sanitation”. (c) the experience of at least two members of the Commission considered together shall be in the sectors of water supply and sanitation.

17. Expertise in WSS should be essential. Incorporated as above 18. Expert from both water supply and sanitation should

be separately identified. Provision 7 (2) (d) already takes care of this by having field of ‘public health’ as one of the fields for consideration.

19. Initially City Corporation and pauoroshovas should be brought under this act.

Provision 6 (2) provides for a development of transitory approach such that the progress is in step with the institutional preparedness

20. Water act of 2013 should be carefully reviewed to Point noted

identify possible areas of conflicts with the proposed bill with special reference to abstraction license for ground water.

21. Look into the limitation of small water utilities, especially in the rural areas.

Same as point 19 above

22. Examine the linkage of management of water supplier and water resource management as whole.

The Bill while focusing exclusively on distribution of water stipulates that Water Act 2013 should be considered as applicable, since Water Act 2013 already concerns itself on abstraction of water and management of water resources.

23. Poverty focus may be strengthened which may be done through by-laws (section 6.5 of bill).

Point noted

24. Limitations of scope of Licensing There must be clear differentiation between the nature and scope of a Water Supply Licence and the anticipated Abstraction Licensing system required to implement the Water Act 2013. The primary scope is on urban systems. While it may be desirable to regulate rural areas, this will be impractical to implement in the near future. There should be significantly delayed to be consistent the capacity of the Commission to implement the Bill, and to include appropriate exemptions for small systems.

Provision 34 (1) is modified to reflect separation of licensing among WSS services and water source abstraction. It now reads as- “No person or entity shall provide water supply or sanitation services except under the authority of a license issued by the Commission. (a)Provided that a licence for supply of water services shall be granted only in the case of the applicant complying with the conditionality applicable under Water Act 2013 if abstraction of water is involved in such an arrangement to supply water”.

25. The timescale for implementation of licensing in City Corporations, paurashavas and rural areas should specifically separately (replacing the blanket one year term currently specified in the Draft Bill).

Provision 34 (3) is modified as – “All persons or entities (whether registered or not) providing water supply or sanitation services under any arrangements other than under Acts or other legal instrument, shall apply for a licence within a period to be determined in line with the transitory approach to be developed vide Regulations in this regard”.

26. Ambiguity in Relation to other Laws and Agencies The Bill seeks to introduce licences for water supply (and sanitation) services. How does this differ from Abstraction Licences that are widely anticipated in the implementation of the Water Act 2013? It is not made clear what a water supply licence or sanitation licence is. Abstraction licensing is a routine process in many, if not most, parts of the world. Water supply licensing (for comparison with UK practice1) is a more specialised application in competitive water markets, and it is not certain that this is what is intended in the

Point related to separation of Abstraction and WSS service licence and linkage with Water Act 2013 is clarified in point 24 above. Point on objective of a sanitation licence is as below: The objective of a sanitation licence is to ensure proper and scientific provision of sanitation services. The clarity on what exactly the conditions of sanitation licence would

1 Source: https://www.gov.uk/water-supply-licence-england-wales

Bill, and almost certainly not what is intended in the Paurashava Act 2009. There is a lack of clarity in how this Bill would operate in relation to the duty of WARPO (and MoWR in general) to regulate abstraction from a water resources management perspective.

The objective of a sanitation licence is even less clear, and requires elaboration.

be (how the sewerage should be collected, what should be the target quality of treated grey water etc.) would be clearer in the Regulations for licensing, and the licence agreements. The Bill currently accommodates the space needed to have the aforementioned arrangement.

27. Transitory Strategy. There is reference to transition in 6(1), but the gap between the present state and the vision of a fully regulated, efficient and competitive market in this Bill is so huge that there must be a parallel medium to long strategy concerning its implementation. Failure to develop and follow such as strategy is likely to result in massive bureaucratic inefficiency, a huge backlog of pending actions, and rent-seeking opportunities. The accompanying strategy must identify and focus on the areas where there can be short-term, cost-effective benefits, whether this be in relation to (i) private sector partnerships or (ii) delivery of basic needs to the poorest and most vulnerable.

Point noted.

28. Poverty focus. Although 6(5) refers to “ensuring access of regulated services to all users, especially low income, vulnerable, marginalised, and disadvantaged” there does not seem to be any mechanism or clear chain of responsibility through which this will be promoted and achieved. At best, this is implicit and open to the interpretation of the Members of the day, whereas in order to meet the requirements of the Water Act 2013, the National Policy on Safe Water and Sanitation 1998, and the National Water Policy 1999, this should be made explicit.

Regulations are being developed to reflect this point. Further, in case of petitions and/or litigations, 6 (5) will be used as a guiding principle.

29. Provision 6(4). The meaning of competition is unclear in this context.

This provision should be looked at as a guiding principle, whose clarity would be specific to the matters being decided (and/ or adjudicated in case of petitions/ litigations).

30. 6(8). Suggest adding “, especially natural resources supporting water supply”

The current provision includes the possibility mentioned here, and also to handle other implications such as those on water bodies in general (irrespective of whether they support water supply or not)

31. 7(2) and 8(1). There is excessive focus on only the degree and not relevant experience. Not a single member of the Commission is required to have any experience in water or sanitation.

Incorporated to reflect experience in relevant fields.

32. 7(2a). The expression “… the field of engineering”. First engineering is not a discipline, and covers a range from aeronautics to shipbuilding, structures and software. Second ‘engineering’ excludes many scientists whose life is spent working in water and sanitation. Also, if

Incorporated as above.

every other member is required to have a higher degree, why not this person. Suggest replacing with “post-graduate degree in science or engineering closely related to water supply or sanitation.”

33. 7(2a). The suitable Member might well not have desired level of expertise in both water supply and sanitation, and so inclusion of separate experts would be wise.

Noted, no change envisaged in light of the changes made so far.

34. 7(2). The specific inclusion of a Member who has experience in financial or administrative sections of a water and sewerage utility would be desirable.

As above.

35. 33(3i). There is no such thing as the Water Supply and Sanitation Act 1998, although there was a National Policy for Safe Water and Sanitation.

Changes incorporated

36. 34(1-5) and notwithstanding S36. This could require around 12 million licences. It does not seem to fully appreciate the nature of rural water supply and sanitation.

Noted; at the same time, section 36 empowers the Commission to promulgate a ruling/ order that would obviate the necessity for the large number of licences in rural areas as mentioned in the comment. Further, the Commission is empowered to set up regional offices to better handle issues related to the field conditions. This should also help effective decision-making in this regard.

37. 39(1b). Why is there such a weak demand for ‘reasonable effort’ for water to be ‘safe’? If this is a water supply licence, why isn’t the water required to comply with legal drinking water quality standards?

Incorporated. The provision now is 38 1 (b) and reads as – “make all efforts as may be necessary to provide to the public service that is safe, adequate, efficient, reasonable, equitable, and non-discriminatory, in compliance with all applicable standards”.

38. There is occasional confusion over the use of ‘licence’ (noun) and ‘license’ (verb).

Incorporated.

Abu Zafer Shamsuddin (PSU):

39. He is concerned particularly about chapter-3, where in his opinion too much work has been given to the commission for compliance and hence the commission is over burden with small things.

This is in line with points / issues raised by various stakeholders to be addressed by the Commission

40. This Regulatory framework is difficult to implement in the rural areas.

The transitory approach is provided to build capacity and preparedness

Shofiqul Alam (UNICEF):

41. Regulation for urban and rural areas should be given equal importance.

Point noted.

42. Page-17, the definition of "Bulk" is not adequately clarified.

While incorporating provisions to coordinate with Water Act 2013, the WSSRC Bill does not now concern with bulk water supply.

43. Pro-poor emphasis should be further specified. The Regulations would further specify the scope for pro-poor interventions. This would mean that the Regulations

(such as Tariff, User Interest Protection etc.) would include provisions to protect and promote interests of poor and disadvantaged sections.

44. Scope of work of the regulatory commission seem to be very wide, need to be focused.

As discussed earlier, the Commission has the resources and powers to handle all the scope of the work necessary to achieve its objectives. These objectives have been finalized through extensive discussions with various stakeholders, and incorporation of numerous comments from stakeholders.

Abdul Motaleb (World Bank):

45. Attempt should be made to harmonize water act of 2013 and regulatory commission bill as there appears to have seem gap between the two.

Incorporated.

46. For individual well, no license should be needed. This pertains to Abstraction licence to be taken care in line with provisions of Water Act 2013.

47. Inconsistencies in tariff setting should be carefully examined and eliminated. For Example, Chandpur district a low income area appears to have higher tariff rate, then Sylhet district which is a higher income area.

Tariff-review methodology to address the same.

48. Some bench mark should be done for effective regulation.

International cases were studied while drafting the Bill

49. Safety and security of supplied water should be ensured.

Point noted.

50. Sanitation has been not adequately addressed. Already incorporated 51. Contamination of surface water has to be prevented. Agreed.

S.M. Ihtishamul Huq (JICA):

52. It is very difficult to enact a bill through a parliament therefore adequate time should be allowed for enacting the bill.

Point noted.

53. The bill should be for the whole country, but emphasis has given for urban area only.

Transitory approach to be followed

54. Many people are installing individual water points. How these will be regulated?

Subject matter to be dealt in accordance with Abstraction regulations in line with Water Act 2013

55. Many water installation, like dug wells with sand filter are being contaminated. How to regulate these?

This relates to water resource protection and is outside the purview of this Bill

56. Sanitary latrines are constructed very close to the water wells. Someone should regulate these also.

Same as point 55 above.

57. 1 or 2 Para should be inserted in the bill for on-site sanitation and rural sanitation.

Outside the purview of this Bill

Engr. Md. A. Aziz (SE)-Narayanganj City corporation:

58. The constitution of the commission should be done in such way there should be adequate provision for woman representatives at all levels.

The Bill does not restrict any qualified or experienced person from being appointed at any level in the

Commission. 59. Water tax should be levied in addition to tariff. Taxes are beyond the purview of this

Bill, hence not included Tsuyoshi Kano (JICA Representative):

60. Tariff is low in CWASA. The tariff issue is very important to JICA.

Tariff-review methodology are being prepared.

Md. Tanveer Ahsan (Director-DEVCON):

61. Capacity building is very important and should be done at all levels of the regulator and the regulated.

Point noted.

62. Check conflict with other existing lows and acts. Incorporated

Md. Shariful Alam ( D.S. Ministry of public Administration):

63. The bill is inherently faulty in case of recruitment of commissioners, as people with age 65+ do not qualify to the commissioner- needs re-examine.

The cooling period of {2} years and max. age limit of {65} is subject to revision/ refinement as required at the time of finalization of Bill.

64. Commissioners educational qualification and experience should be made more flexible.

Incorporated as required.

65. Water act of 2013 should have careful scrutiny for possible conflict with the propose bill.

Incorporated as required.

Dr. Feroze Ahmed (Vice- Chancellor of Stamford University):

66. Qualification of the commissioners should be more clearly spelled out.

Incorporated, as required

67. Punishment for non-compliance by the operators should be more severe, then suggested in the bill.

Point noted

68. Age limit for commissioner should be similar to those of Supreme Court judges.

Please refer to point 63 above.

69. Selection procedures of the commissioners should be more clearly spelled out.

The procedure is detailed in provision 9

70. Nomination committee should include eminent experts.

Provision 9 (2) (d) now incorporates this as - “Professor, Dean, Director, or an equivalent faculty member of a reputed Bangladeshi university, or an eminent expert in the related field, to be nominated by the Head of the Nomination Committee; and”

71. Commission should not set standard for water quality as it is already done by two other organizations.

Point noted. Provision 19 (1) (b) (ii) is modified as – “to ensure the service providers comply with the established standards for water supply and sanitation services”

72. Solicit opinion from civil society also in addition to different organization.

Point noted, the existing provisions has no restrictions and opinions are invited from all stakeholders

73. All types of water supply including bottled water and vendor supplied water should also be brought under regulation.

Bottled water is not a service, hence not included.

74. Sanitation has not been adequately addressed in the bill which should be done.

Point noted

Comments from PSU

75. Preamble: Incorporated as:

It should be rephrased to include the specific focus of the act.

“to make provisions for the establishment of an economic regulatory commission for the water supply and sanitation (WSS) sector in Bangladesh, that functions in an independent, accountable, transparent, and participatory manner, to regulate tariffs, service quality, and protection of interests of users;

Whereas such regulation needs to also consider financial, environmental, and social sustainability of the governance of the WSS sector in the country; Whereas it is expedient to make provisions for the establishment of an independent, expert, and accountable economic regulatory commission for such effective regulation of the WSS sector;”

76. Chapter 1 : Section 1(2): It should be specifies as to whom the act would be applicable.

Incorporated as – “It extends to the whole of Bangladesh, and applies to the service providers of water supply and sanitation services”.

77. Chapter 1 : Section 2(37) “Standards”: Following sentence may be added …as per the provisions of Environment Conservation Act 1995 and the Environment Conservation Rules 1997 and any other acts or rules in vogue.

Incorporated as suggested.

78. Chapter 2 : Section 7 (2) Composition of Commission: There must be one member having post graduate degree in engineering, environmental science, social science or other relevant disciplines with well reputed expertise in WSS sector should be included.

Incorporated.

79. Chapter 2: Section 12 (1): The rank and status should be in the act, however, details of the benefit packages could be in the rules to be framed under the act.

The decision(s) on the status and rank of the Members of the Commission are best decided at the Government’s level. At the same time, suggestions on the preferred status and rank are welcome.

80. Chapter 3: Section 20 (2)(b): Definition and role of administrator should be rearticulated

Bill specifies the role of administrator to manage the business of a service provider whose licence to operate has been cancelled or suspended. The details of the duties of administrator shall be clarified in regulations as well as in licence agreement.

81. Chapter 8(3): Nomination Committee should be renamed as Search Committee. The Committee should search the Chairperson and Members of the Commission. The rank and status of the Chairperson and Members

Nomination committee to nominate/recommend relevant personnel(s) to the Hon. President, based on their search. Hence, we

should be clearly spelt in. recommend retaining the name as it is. 82. Chapter 11 Financial Provisions

Section 56 One of the sources of fund could be the regular budgetary allocation from LGD revenue budget on the basis of the budget requirements made by the Commission to the LGD.

Incorporated in provision 55 (1) (a)

83. Other important comments: There may be a section titled “Purpose and Tasks of the Commission” There should be a section titled “ Compatibility, Conflict and amicability with other Act” To finalize this section existing Acts like Water Act 2013, WASA Act 1996, Water Resources Planning Act 1992, Local Government (Pourashava) (Amendment) Act 2010, Local Government (City Corporation) (Amendment) Act 2011 and other relevant Acts have to reviewed to find out the issues of conflict or complementarity. Those issues could be addressed with specific reference to the concerned Acts and to give an outline to how best this act will address those issues.

Provision 6 and 19 together describe the broad objectives and duties and functions of the Commission Provision 33 (3) (h) incorporates the suggestion.

84. Chapter 12: Miscellaneous Provisions : Another section should be added entitled- Publication of Translated English Version In case of conflict between Bangla & English version the Bangla version will prevail.

Incorporated as Provision 63.

Es t a b lis h in g a R eg u la t o r y

Fr a m ew o r k fo r W a t er a n d Fr a m ew o r k fo r W a t er a n d

Sa n it a t io n Sect o rTraining ProgramTraining Program

November 2014November 2014

Ou t lin e

• Introducing the Regulatory FrameworkIntroducing the Regulatory Framework

• Details of the Water Supply and Sanitation Regulatory

Commission

• Role and Responsibilities of service providers and government

agencies

• Training Program to introduce proposed rules and standards for

the Commission

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Establishing a Regulatory Framework for Water and Sanitation Sector • Training

In t r o d u cin g t he R eg u la t o r y Fr a m ew o r kFr a m ew o r k

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Section 1 – Introducing the Regulatory Framework

W ha t is R eg u la t io n ?

g g y

• System of rules checks and balancesSystem of rules, checks and balances

• Introduced by Government to monitor the

performance of operators in the sector and entry and exit performance of operators in the sector and entry and exit

of operators in the sector

• Regulate public and private service providers• Regulate public and private service providers

• Administered by an agency with powers delegated by

an Act of Parliamentan Act of Parliament

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R o le o f t he R eg u la t o r

g g y

• Award and cancel licenses permits, etc.

Adj t t iff ( id i i li ti f t iff • Adjust tariffs (considering implication of tariff

implementation and adjustment on end user interest)

D fi d t il d t h i l t d d• Define detailed technical standards

• Monitor performance of the service providers

• Monitor and enforce service standards

• Assist Government with technical issues

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Ob ject iv e o f t he R eg u la t o r

g g y

• Protect consumersProtect consumers

• Protect service providers

P t th i l i h i t d • Promote other social issues such as environment and

service to the poor

P t i ffi i• Promote economic efficiency

• Coordinate with other agencies involved with the

sector

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At t r ib u t es o f a g o o d R eg u la t o r y Fr a m ew o r k

g g y

•Co he re n ce right combination of tariffs and subsidies and •Co he re n ce – right combination of tariffs and subsidies, and

service standards and coverage, to enable providers recover costs

and consumers receive the desired services.

• Pre dictability an d cre dibility – regulatory decisions should

be time-consistent, and made on clear precedents and rules.

• Le gitim acy, tran spare n cy, an d acco un tability –

regulatory decisions need to be clear, widely accepted, and

publicly accessiblepublicly accessible

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Des ig n co n s id er a t io n s o f t he R eg u la t o r y Fr a m ew o r k

g g y

Re gulato ry co m ple xity fun ctio n s ; e co n o m ic o r Re gu lato ry co m ple xity – fun ctio n s ; e co n o m ic o r

m o re

O l i l ti ith t iff f • Only economic regulation with tariff focus; or

• To include other aspects like environmental,

h lth/ f t t i d t ti thealth/ safety, customer services and protection etc.

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Des ig n co n s id er a t io n s o f t he R eg u la t o r y Fr a m ew o r k

g g y

Re gulato ry s co pe all / o r s e le ct s e rvice Re gulato ry s co pe – all / o r s e le ct s e rvice

pro vide rs

St t ith WASA lik Dh k Kh l d • Start with WASAs like Dhaka, Khulna, and

Chittagong

G d l i t i l d it ti • Gradual expansion to include city corporations,

and Paurashavas

• Eventually include all service providers

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Des ig n co n s id er a t io n s fo r t he R eg u la t o r y Fr a m ew o r k

g g y

In de pe n de n ce is sue sIn de pe n de n ce is sue s

• Composition of regulatory body as a constitutional

b dbody

• Financial independence – budgetary provisions

d i t t d th l l t t during start-up, and then levy regulatory tax on

service providers

• Identifying the right skills in regulatory body – mix

of technical, financial, and economic skills

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Section 1 – Introducing the Regulatory Frameworkg g y

• Fo rm ulatio n o f W SSRC Bill: Based on overall sector assessment,

d t il d t k h ld lt ti d t d f l t l t

Ba n g la d es h R eg u la t o r y Fr a m ew o r k

detailed stakeholder consultations, and study of relevant regulatory

models

• Re fo rm s thro ugh e s tablishm e n t o f W SSRC: The reform seeks to

t bli h i d d t t d t bl i l t establish independent, expert, and accountable economic regulatory

commission for effective regulation of WSS sector. Broad objectives of

WSSRC include:

o To allow access to quality services for low income communitieso To allow access to quality services for low income communities

o To ensure transparency, accountability, and stakeholder

participation

o To promote effective competition and efficiency ando To promote effective competition and efficiency, and

o To protect interests of customers and of service providers

• Ke y co m po n e n ts o f re gu lato ry fram e w o rk in clude :

o WSSRC Acto WSSRC Act

o Regulations by WSSRC

o Rules formulated by the Government

o Policy Directives recommended by the Policy Support Unit (PSU)

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o o cy ect es eco e ded by t e o cy Suppo t U t ( SU)

Det a ils o f W SSR C

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Section 2 – Details of WSSRC

Po s it io n in g o f W SSR C a m o n g s t k ey s t a k eho ld er s

Pre s ide n tNo m in atio n

Co m m itte e

Re gulato ry o rde rs

Pe n al o rde rs

Publicatio n o f

W ate r Supply an d Othe r

Publicatio n o f

o rde rs &

de cis io n s

San itatio n

Re gu lato ry

Co m m iss io n

Lin e

Min is try

Othe r

Go vt.

Age n cie s

Appo in tm e n t/

W ASAs & Users and

Appo in tm e n t/

re m o val o r

re co m m e n datio n s

fo r Me m be rs

W ASAs &

o the r s e rvice

pro vide rs

Users and

user interest

groups

Co n su ltative

in puts

Po licy dire ctive s

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Co m p o s it io n o f W SSR C a n d it s a ct iv it ies

Procedures & Activities

Financing

Grie van ce

re dre s sal

&

5 Me m be rs

re dre s sal

Tariff adjus tm e n t

Se cre tary

an d o the r

s taff

Co n su ltan ts &

o the r e xte rn al

as s is tan ce

Lice n s in g

Se rvice le ve ls &

th tCo m po s itio n o f W SSRC

Framework for

operation Draftin g

Re gu latio n s &

o the r aspe cts

Transparency, Accountability,

Participation, Protection of Users

Quas i-judicial

po w e rs

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Su m m a r y o f K ey Pr o v is io n s o f t he Bill - Fun ctio n s o f the

Co m m iss io n

1. Issue, renew and cancel licences

2. Establish standards for goods and servicesg

3. Regulate rates and charges

4. Monitor performance of the regulated sectors regarding (a) levels of

i (b) il bili i d d d f i ( ) f investment, (b) availability, quantity and standard of services, (c) cost of

services, and (d) the efficiency of production and distribution of services

5. Establishing an operating mechanisms for (a) redress of users’ grievances

and utilities’ complaints, and (b) protection of users as well as of utilities

6. Disseminating information about matters relevant to the functions of the

Commission and the sector – to promote transparency, accountability, and Commission and the sector to promote transparency, accountability, and

stakeholder participation

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Su m m a r y o f K ey Pr o v is io n s o f t he Bill – Po w er s &

Pr o ceed in g s

1. The power to regulate rates and levies

2. The power to obtain information – even to enter premises of any entity

3. The WSSRC may seize any document/ evidence as required

4. The WSSRC shall hold stakeholder consultations and deliberations as required to

ensure transparency and participation in sectoral regulationensure transparency and participation in sectoral regulation

5. The WSSRC will be a quasi-judicial body, authorised to:

i. Summon/ Subpoena,

ii. Hear petitions and issue orders on those under the WSSRC Act,

iii. Hold inquiries,

iv Require deposition on oath iv. Require deposition on oath,

v. Issue notices

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Pr in cip les o f W SSR C’s fu n ct io n in g , a n d Po licy Dir ect iv es t o W SSR C

In clu s iv e d ev e lo p m en tp

Equitable, sustainable, & efficient operation of W SS system

Sensitivity to all sections of society and consider gender issues

Coordination w ith agencies carry ing out related activities

Prom otion of long term investm ent in W SS

Av o id s ho ck s & en s u r e t r a n s p a r en cy a n d

a cco u n t a b ili t y

Transparency about duties, functions, & activities of W SSRC

Transparency about users’ rights and obligations

Ot her p o licy d ir ect iv es : Go v er n m en t t o d e t er m in e

R u les & PSU t o r eco m m en d d ir ect iv es

[On recom m endations of PSU] Governm ent to issue policy directives to

W SSRC

Governm ent bears cost of the directives (if any)

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Governm ent bears cost of the directives (if any)

R o le a n d R es p o n s ib ili t ies o f s er v ice p r o v id er s a n d g o v er n m en t a g en ciesp r o v id er s a n d g o v er n m en t a g en cies

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Section 3 – Role and Responsibilities of service providers and government agencies

R o le o f s er v ice p r o v id er s in t he R eg u la t o r y Fr a m ew o r k

p p g g

W SSR C Ser v iceW SSR C Ser v ice

Pr o v id er s

Actio n s

• Promulgate regulations

Actio n s

• Provide feedback for • Promulgate regulations

concerning tariff, service

delivery and other priority

areas of regulation

• Provide feedback for

implementation of

promulgated regulations

Re spo n se s• Issue orders on tariff,

licensing, penal orders and

other operational parameters

Re spo n se s

• Implement orders by WSSRC

with compliance to specified

standards of service

Maintain financial feasibilit Re spo n se s

• Duly consider feedback and

comments from the

stakeholders

• Maintain financial feasibility

by complying with orders

related to performance, tariffs,

licensing and penalties

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Section 3 – Role and Responsibilities of service providers and government agencies

R o le o f g o v er n m en t a g en cies in t he R eg u la t o r y Fr a m ew o r k

p p g g

Go v er n m en t Ag en cies W SSR Cin clu d in g PSU

W SSR C

Actio n s

PSU ill t t l

Re spo n se s• Upon consideration of • PSU will pursue contextual

studies and situation analysis

• Based on analysis, recommend

policy directives to be issued

Upon consideration of

directives/ consultative inputs,

take necessary steps for

feasibility checks and

implementation• Line Ministry will issue policy

directives / consultative inputs

based on recommendations

N i ti itt ill

implementation

• Take into account

recommendations for

appointment/ impeachment of

WSSRC members• Nomination committee will

recommend

appointment/ impeachment of

WSSRC members including

P id t

WSSRC members

President

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Tr a in in g p r o g r a m o n p r o p o s ed r u les a n d s t a n d a r d s o f t he W SSR Ca n d s t a n d a r d s o f t he W SSR C

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Section 4 – Training program on proposed rules and standards of the WSSRC

Ob ject iv es o f Tr a in in g Pr o g r a m

g p g p p

• Introduce and discuss proposed rules and standards Introduce and discuss proposed rules and standards

for regulating water supply and sanitation utilities

• Introduce and discuss the proposed Performance • Introduce and discuss the proposed Performance

Monitoring Report to be provided by the operators to the

WSSRC

• Complete and collect the first Performance Monitoring

Reports p

• Pilot-test the tariff methodology

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Tr a in in g s es s io n s (1/ 2 )

g p g p p

• Re gulatio n o n Acco un tin g fram e w o rk (Fin an cial

Man age m e n t) :

o Depict importance of account framework for efficient financial

managementmanagement

o Introduce basic concepts accounting practices such as

preparation of financial reports

Pro ide a closer look into ario s forms of financial reports and o Provide a closer look into various forms of financial reports and

their utility for efficient functioning of WSSRC

• Re gulatio n s o n Tariff Adjus tm e n ts an d Re vie w g j

Me tho do lo gie s :

o Explain methodology for tariff calculations

o Propose methodology for tariff adjustments based on cost o Propose methodology for tariff adjustments based on cost,

benefits, service delivery, inflation, and availability

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Tr a in in g s es s io n s (2 / 2 )

g p g p p

• Re gulatio n s o n s e rvice s tan dards an d ke y pe rfo rm an ce in dicato rs e g a o s o se ce s a da ds a d e y pe o a ce d ca o s

(KPIs ) :

o Illustrate importance of enhancing efficiency and effectiveness of water

service providers

o Introduce concepts to improve operational performance, customer service,

and financial & corporate governance

o Provide inputs to water service providers for moving towards technical,

environmental, and financial sustainability

o Illustrate importance of service standards and KPIs for determining tariff

adjustments

• Re gulatio n s o n Cus to m e r Se rvice ( Im pro ve m e n t) an d Cus to m e r

In te re s t (Pro te ctio n ) :

o Explain importance of increasing user base and revenue collection

P id i t l t d t tt i i fi i l t i bilito Provide inputs related to attaining financial sustainability

o Illustrate importance to service delivery to increase user confidence

o To improve user service and user interest, showcase role of efficient fund

management for service expansion and maintenance

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management for service expansion, and maintenance

Tha n k Yo u !!

This docum ent has been prepared for and only for Asian Developm ent Bank in accordance w ith the agreed term s and conditions as per the contract num ber

104692-S52090 dated 21st June 2013 and for no other purpose. W e do not accept or assum e any liability or duty of care for any other purpose or to any other

person to w hom this docum ent is show n or into w hose hands it m ay com e save w here expressly agreed by our prior consent in w riting The opinions contained in person to w hom this docum ent is show n or into w hose hands it m ay com e save w here expressly agreed by our prior consent in w riting. The opinions contained in

this docum ent are based on the facts, assum ptions, and representations stated herein. Our assessm ent and opinions are based on the facts and circum stances

provided/ collected during our m eetings w ith related officials and research from sources in public dom ain held to be reliable. If any of these facts, assum ptions or

representations are not entirely com plete or accurate, the conclusions draw n therein could undergo m aterial change and the incom pleteness of inaccuracy could

cause us to change our opinions. The assertions and conclusions are based on the inform ation available at the tim e of w riting this docum ent and Pw C w ill not be

responsible to rew ork this docum ent any such assertions or conclusion if new or updated inform ation is m ade available. The procedures w e carried out in

perform ing the w ork that form s the basis of this docum ent w ere not as to constitute an audit. As such, the content of this docum ent should not be considered as p f g f f , f

providing the sam e level of assurance as an audit. Pw C disclaim s all liability to any third party w ho m ay place reliance on this docum ent and therefore does not

assum e responsibility for any loss or dam age suffered by any such third party in reliance thereon. This docum ent is provided on the basis that it is for the use of

Asian Developm ent Bank only and that it (and any extract of it) w ill not be copied or disclosed to any third party or otherw ise quoted or referred to, in w hole or

in part, w ithout Pw C’s prior w ritten consent. Furtherm ore, Pw C w ill not be bound to discuss, explain, or reply to queries raised by any agency , other than the

intended recipient of this docum ent.

R eg u la t o r y Acco u n t in g

www.pwc.com

R eg u la t o r y Acco u n t in g Fr a m ew o r k fo r t he W a t er Su p p ly a n d Sa n it a t io n in p p yBa n g la d es h

Regulatory Accounting Framework

Dhaka BangladeshDhaka, BangladeshNovember 2014

Ou t lin eOu t lin e

• Introduction of Regulatory Accounting• Introduction of Regulatory Accounting

• The Regulatory Accounting Fram ew ork

• Infrastructure Renew al Accounting• Infrastructure Renew al Accounting

• Efficient Com pany Model

• AuditsAudits

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Regulatory Framework for Urban Water Supply and Sanitation

Slide 2

R eg u la t o r y Acco u n t in g : Ob ject iv esR eg u la t o r y Acco u n t in g : Ob ject iv es

• To ensure that price s are fair an d re aso n able and include costs

efficiently.

• To assist in be n chm arkin g, and co m parative co m pe titio n

• To improve tran spare n cy and reduce re gu lato ry risk

• To ensure services utilities re po rt to re gu lato ry autho ritie s on a • To ensure services utilities re po rt to re gu lato ry autho ritie s on a

timely, consistent, structured and accurate basis. This will enable

regulators to ve rify co m plian ce w ith bas ic re gu lato ry

o bje ctive s such as:o bje ctive s such as:

Eco n o m ic &

Fin an cial Allo cative Pro ductive

EquityFin an cial

Sus tain abilityEfficie n cy Efficie n cy

Equity

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Slide 3

Fin a n cia l fea t u r es o f R eg u la t o r y Acco u n t in gFin a n cia l fea t u r es o f R eg u la t o r y Acco u n t in g

• Additional to statutory financial reporting

• Prepared on the basis of GAAP (Generally Accepted Accounting

Principles)

• Based on the similar information source as statutory statements –

and reconciliation between the two is providedp

• Will follow regulatory accounting guidelines over statutory

accounting standards when there is a conflict

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Slide 4

Efficien t co s t s & R eg u la t o r y Acco u n t in g Efficien t co s t s & R eg u la t o r y Acco u n t in g

Fr a m ew o r k

As per definition, regulatory accounting includes the allocation of

prudent/ efficient costs Regulators reserve the “right” and obligation to prudent/ efficient costs. Regulators reserve the right and obligation to

reject costs based on inefficiency.

Ke y s te ps to arrive at tariff de te rm in atio n upo n e xcludin g

i ffi i in e fficie n t co s ts

0 1 Acco u n t in g d a t a fo r a ll ca p it a l a n d o p er a t in g exp en d it u r es :

Sep a r a t e r eg u la t ed a n d u n r eg u la t ed a ct iv it ies

0 2Acco u n t in g d a t a fo r ca p it a l a n d o p er a t in g exp en d it u r es

r e la t ed t o r eg u la t ed a ct iv it ie s :

Allo ca t e exp en d it u r es t o r eg u la t ed s u b -a ct iv it ies

0 3 Acco u n t in g d a t a fo r ca p it a l a n d o p er a t in g exp en d it u r es

r e la t ed t o r eg u la t ed s u b -a ct iv it ies :

Exclu d e in efficien t co s t s

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Slide 5

0 4Av er a g e t a r iff d e t er m in a t io n

R eg u la t o r y Acco u n t in g Fr a m ew o r k (R AF): R eg u la t o r y Acco u n t in g Fr a m ew o r k (R AF):

Gu id e lin es

The Framework provides the Regulatory Accounting Guidelines (RAG)

to enable the service providers to produce consistent historic and to enable the service providers to produce consistent historic and

current cost accounting regulatory financial statements to the

Bangladesh Water Supply and Sanitation Commission (WSSRC).

Th bj i f h G id li The objectives of the Guidelines are to:

• Based on current costs review financial performance of the providers

• Evaluate requests from the providers for adjustments to current tariff Evaluate requests from the providers for adjustments to current tariff

levels

• Using reliable and consistent data compare operating performance of

one provider with the results of another andone provider with the results of another, and

• Monitor compliance of the service providers with license provisions

and other applicable legal instruments

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Slide 6

R o le o f Ba n g la d es h Fin a n cia l R ep o r t in g R o le o f Ba n g la d es h Fin a n cia l R ep o r t in g

St a n d a r d s (BFR S) in R AF

• For the Commission regulatory accounting statements take For the Commission, regulatory accounting statements take

precedence over accounting based on BFRS

• For transparency, a complete reconciliation between the statutory

accounts prepared in accordance with BFRS and those accounts accounts prepared in accordance with BFRS and those accounts

prepared according to the Regulatory Accounting Guidelines is

provided as part of the regulatory accounting reports

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Slide 7

Co n t en t o f t he Gu id e lin esCo n t en t o f t he Gu id e lin es

The Guidelines consist of the following rules:

In it ia l co n t en t In it ia l co n t en t

Regulatory Accounting Rule 1:- Accounting for Current Costs

Regulatory Accounting Rule 2:- The Content of Regulatory g y g g y

Accounts

Fu t u r e R u les

Regulatory Accounting Rule 3: Classification of expenditures

Regulatory Accounting Rule 4: Financial analysis

R l t A ti R l T f i iRegulatory Accounting Rule 5: Transfer pricing

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Slide 8

Fea t u r es o f R eg u la t o r y Acco u n t in g Gu id e lin es

• The current Guidelines are designed to implement the various rules

in a phased manner

Th G id li ill b d d d d d ith l th • The Guidelines will be amended and expanded with new rules as the

sector gains experience and capacity

• The Guidelines specify formats for the various audited financial

statements and the un-audited financial report formats

• The financial statements require both historic and current cost

accounting information using data from normal statutory reportsg g y p

• The formats were designed to be consistent with current financial

reporting by Dhaka WASA and international experience, to make the

transition as easy as possiblet a s t o as easy as poss b e

• The initial phase of the Guidelines is designed to introduce operators

to the concept of preparing regulatory financial statements and to

the core issues

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the core issues .


Slide 9

Co r e Is s u esCo r e Is s u es

The following are the core or critical issues in the Framework

• The separation of activities – regulated and un-regulated

• Regulatory asset baseg y

• Current cost accounting

• Infrastructure renew al accounting

• Efficient com pany m odel

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Slide 10

Dis cu s s io n : The s ep a r a t io n o f a ct iv it ies –Dis cu s s io n : The s ep a r a t io n o f a ct iv it ies

r eg u la t ed a n d u n -r eg u la t ed

• What activities or business units exist in besides providing network What activities or business units exist in besides providing network

water and sewerage services?

• Do these activities exist in all WASAs and in the city corporations?

• Do these other activities use the some of assets of the main business?

• Are these other activities in competitive markets?

• Are these other activities vertically integrated with the main • Are these other activities vertically integrated with the main

business?

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Slide 11

R eg u la t o r y a s s e t b a s eR eg u la t o r y a s s e t b a s e

Tariffs should generate enough revenue to cover the economic cost of

service provision – this includes the financial costs and a reasonable

rate of return on capital (provided there is cash flow sufficiency)rate of return on capital (provided there is cash flow sufficiency)

Once the regulated activities have been identified, the regulator must

perform valuatio n o f the re gu lato ry as se t base to which the rate of

ld l hi i l dreturn would apply – this includes:

• Determination of investments which are efficient and prudent aimed

at regulatory activities; prioritized on risk-based analysis as a

mandatory regulatory requirement

• Determining value of assets for regulatory purposes

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Slide 12

Va lu a t io n M et ho d o lo g iesVa lu a t io n M et ho d o lo g ies

Asse t base of regulated activities should reflect value of the assets

engaged in the public service of providing water and sewerage services

Three approaches to determine the value of the assets

• Historic cost

• Market value (of bonds and stocks)• Market value (of bonds and stocks)

• Re place m e n t co s t/ Mo de rn Equivale n t Asse t (MEA): MEA is

an estimate of the replacement cost of old asset with a

t h l i ll t d t t ith th i bilit technologically up-to-date new asset with the same service capability

at modern standards.

The MEAs are estimated on a plant by plant basis – except where

there is a clear need to re-design and re-build the system – the MEAs

should be based on the actual system (however, it is difficult to apply

to distribution systems – that leads to the infrastructure renewal

charges like Rehabilitate Rene Replace 3Rs)

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charges like Rehabilitate, Renew, Replace – 3Rs)


Slide 13

M o d er n Eq u iv a len t As s e t (M EA)M o d er n Eq u iv a len t As s e t (M EA)

• The initial value of the regulatory asset base should consist of the

gross MEA

• Third party contributions – for regulatory purposes – should be

included in the regulatory base at their gross MEA

• The asset base should be re-valued regularly (every 4-5 years) to

coincide with the preparation of the new capital investment plan

• The MEA should be updated annually to reflect the impact of

inflation using De pre ciate d Optim al Re place m e n t Co s t

(DORC). Key features of DORC include:

• Taking MEA asset configuration and depreciating it to reflect the

remaining useful life - it is determined by

• The optimal configuration (network) of the assets identified

• The costs of the assets that form the optimal network are calculated at

current values

• The assets are depreciated using the standard economic life of the asset

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• The assets are depreciated using the standard economic life of the asset

together with an estimate of the asset’s remaining useful lifeRegulatory Framework for Urban Water Supply and Sanitation

Slide 14

Dep r ecia t ed Op t im a l R ep la cem en t Co s t (DOR C)Dep r ecia t ed Op t im a l R ep la cem en t Co s t (DOR C)

Depreciated Optimal Replacement Cost (DORC) – this takes the MEA

asset configuration and depreciates it to reflect the remaining useful life

- it is determined by

• The optimal configuration (network) of the assets identified

• The costs of the assets that form the optimal network are calculated The costs of the assets that form the optimal network are calculated

at current values

• The assets are depreciated using the standard economic life of the

asset together with an estimate of the asset’s remaining useful lifeasset together with an estimate of the asset s remaining useful life

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Slide 15

As s e t R eg is t er sAs s e t R eg is t er s

• Asse t re gis te rs an d valuatio n : It is necessary to revalue the fixed

assets in use as part of the regulated business to determine the

Regulatory Capital Value and the appropriate tariff levels to enable

the service provider to earn a fair rate of return on its investment.

• Asset registers should be established for each fixed asset to record the

initial historic cost of the asset, all additions, disposals and the

adjustments due to inflation.

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Slide 16

R eg u la t o r y As s e t Ba s eR eg u la t o r y As s e t Ba s e

Exe rcis e

Using the actual financial statements and information from your g y

organization

• Separate the regulated and the un-regulated activities

Identify the asset base for the regulated activities including any • Identify the asset base for the regulated activities – including any

related deferred income on third party contributions

• Identify an appropriate depreciation policy that best reflects the

f h l d b inature of the water supply and sewerage business

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Slide 17

R eg u la t o r y Ca p it a l Va lu eR eg u la t o r y Ca p it a l Va lu e

• The Re gulato ry Capital Value (RCV) is widely used by investors

as a proxy for the market value of regulated businesses.

Th RCV i i il d i tti i t th t i • The RCV is primarily used in setting prices to ensure that a service

provider receives an adequate return on the capital invested in its

core business.

I d l i th RCV th l f th i iti l ti t f • In developing the RCV, the value of the initial operating assets of a

service provider is the gross MEA of the fixed assets used in the core

business less the related accumulated depreciation (DORC)

• The RCV is rolled forward annually to reflect inflation new capital • The RCV is rolled forward annually to reflect inflation, new capital

investments, depreciation (based on the MEA values of the assets)

and the Infrastructure Renewal Charge (IRC) charged as operating

expenses (discussed later)expenses (discussed later)

• The net capital investment included in the RCV is that amount

determined by the service provider and submitted to the regulator at

the strategic reviews as necessary to meet new service obligations

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the strategic reviews as necessary to meet new service obligations


Slide 18

R et a il Pr iced In d exR et a il Pr iced In d ex

To account for general inflation the historic cost of the assets

should be indexed using the Retail Priced Index (RPI) during g g

annual asset revaluations, focusing specific price changes on the

periodic reviews at which the latest Asset Management Plan

(AMP) information can be taken into account( )

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Slide 19

In fr a s t r u ct u r e R en ew a ls Acco u n t in gIn fr a s t r u ct u r e R en ew a ls Acco u n t in g

• In fras tructure Re n e w als Acco un tin g is based on an operational

assessment of the investments needed to maintain the serviceability

of the underground infrastructure (based on the 3Rs concept and of the underground infrastructure (based on the 3Rs concept and

related O&M strategy – a subject outside this presentation’s scope for

now)

F l d h i d d k • For water supply and sewerage the entire underground network

consisting of individual assets in treated as a single infrastructure

asset

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Slide 20


• The concept of renewal accounting refers to accounting, reporting

procedures and it is an operating expense to be recovered by the

tarifftariff

• The information should be based on standard operating procedures

(SOPs) of proper levels of maintenance spending

B d O ti M i t M t Pl• Based on Operations Maintenance Management Plan

Co n cep t s o f In fr a s t r u ct u r e R en ew a l Acco u n t in g

• Infrastructure Renewal Charge

• Infrastructure Renewal Expenditure

• Infrastructure Renewal AccrualInfrastructure Renewal Accrual

• Infrastructure Renewal Prepayment

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Slide 21


• The In fras tructure Re n e w al Charge ( IRC) represents the

forecast of the investments needed to maintain the serviceability of

the infrastructure The IRC should include all expenditures involved the infrastructure. The IRC should include all expenditures involved

with sustaining the system at its present state and protecting it from

falling in value

Whil h IRC h f d l l f di d d • While the IRC represents the forecasted level of spending needed to

maintain the serviceability of the underground infrastructure, the

Infrastructure Renewals Expenditure (IRE) is the actual expenditure

incurred in maintaining the existing operating capability of the assetsincurred in maintaining the existing operating capability of the assets

• The difference between the infrastructure renewals charge (IRC) and

infrastructure renewals expenditure (IRE) is either an accrual (IRC is

t th th IRE) t (IRE i t th th IRC) greater than the IRE) or prepayment (IRE is greater than the IRC) on

the balance sheet to reflect the actual level of maintenance spending

in comparison with that which has been estimated to be needed to

maintain the serviceability of the underground assets

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maintain the serviceability of the underground assets


Slide 22

Efficien t Co m p a n y M o d elEfficien t Co m p a n y M o d el

The regulator has a duty to support the requests by the operator

for tariffs which will allow them to fully recover their economic for tariffs which will allow them to fully recover their economic

and financial costs – thus the nature of the operator’s costs are

critical

G l ti i i lGeneral accounting principles:

• Presumption of prudent management

• Realism• Realism

• Materiality

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Slide 23

Co n s id er in g e fficien t co s t s u s in g t he R eg u la t o r y Co n s id er in g e fficien t co s t s u s in g t he R eg u la t o r y

Acco u n t in g Fr a m ew o r k

0 1 All ca p it a l a n d o p er a t in g exp en d it u r es a cco u n t in g d a t a

Sep a r a t e r eg u la t ed a n d u n r eg u la t ed a ct iv it ies

Ca p it a l a n d o p er a t in g exp en d it u r es a cco u n t in g d a t a

0 2Ca p it a l a n d o p er a t in g exp en d it u r es a cco u n t in g d a t a

r e la t ed t o r eg u la t ed a ct iv it ies

Allo ca t e exp en d it u r es t o r eg u la t ed s u b -a ct iv it ies

0 3 Ca p it a l a n d o p er a t in g exp en d it u r es a cco u n t in g d a t a r e la t ed

t l t d b t i i t i

0 4Av er a g e t a r iff d e t er m in a t io n

0 3t o r eg u la t ed s u b -a ct iv it ie s

Exclu d e in efficien t co s t s

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Slide 24

In efficien t Co s t sIn efficien t Co s t s

• Regulators have the right and obligation to exclude certain costs or

approve only portions of incurred costs if those costs are considered

to be the result of poor management and inefficienciesto be the result of poor management and inefficiencies

• Typical examples of costs which are not permitted to be recovered

from tariffs are excessive salaries, excessive capital investments, and

i l i f excessive energy costs – costs resulting from poor management

Efficien t Co s t a n d Per fo r m a n ce An a ly s is

Decisions should be based on objective and quantifiable analysesDecisions should be based on objective and quantifiable analyses

Regulators should compare performance in the following ways:

• Comparative and benchmarking approach

Hi t i b d t d fi i l i f ti• Historic budget and financial information

• Price-based – productivity as a ratio to output and input

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Slide 25

Au d it sAu d it s

• The auditor should provide an opinion on the regulatory financial

statements of the specified service provider

• The audit opinion should be issued in accordance with Auditing

Standards applicable in Bangladesh

• The opinion should also provide an assessment of the significant p p g

estimates and judgments made by the service provider in the

preparation of the regulatory financial statements, and whether the

accounting policies are consistently applied and adequately disclosed

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Slide 26

Au d it sAu d it s

• The auditor should indicate that the regulatory financial statements

have been prepared in accordance with the Regulatory Accounting

Framework issued by the Commission, and the accounting policies

set out in the statement of accounting policies in notes to the

historical cost financial statements and notes to the current cost

fi i l i f tifinancial information

• The auditor should state that the regulatory financial statements are

separate from the statutory financial statements and have not been

prepared under the basis of Bangladesh Financial Reporting

Standards

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Slide 27

Fin a n cia l M o n it o r in g R ep o r t sFin a n cia l M o n it o r in g R ep o r t s

• What issues did you encounter in preparing the packet of financial What issues did you encounter in preparing the packet of financial

statements and reports?

• Did you have access to the data that you needed?

• Do you believe that these statements and reports are meaningful and

do they add considerably work load to you and your staff?

• If you add the IRC to your income statements what is the impact on y y p

the operating income and net income?

• Please update your statements and reports to reflect the IRC, and

either the accrual or prepayment and submit the revised reports at e t e t e acc ua o p epay e t a d sub t t e e sed epo ts at

the next session.

PwC


Slide 28

Tha n k y o u

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You

should not act upon the information contained in this publication without obtaining specific professional advice. No representation or

warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers Pvt. Ltd. India, its members, employees and agents do not accept or assume any liability responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in reliance on theliability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the

information contained in this publication or for any decision based on it.

© 2013 PricewaterhouseCoopers Private Ltd. All rights reserved. “PwC”, a registered trademark, refers to PricewaterhouseCoopers

Private Limited (a private limited company in India) or, as the context requires, other member firms of PwC International Limited, each

of which is a separate and independent legal entity.

Business Unit

Es t a b lis h in g a R eg u la t o r y

Fr a m ew o r k fo r W a t er a n d Fr a m ew o r k fo r W a t er a n d

Sa n it a t io n Sect o r

Subsidies in the Water Sector

November 2014

Ou t lin e

“Objective of this consultancy w as to undertake a study of the subsidies to the

w ater utilities in Bangladesh”

The study highlights following aspects:

• Rationale and Impact of Subsidies• Rationale and Impact of Subsidies

• Types of Subsidies to utilities

Capitalp

Operating

Cross subsidies

PwC


Ca t eg o r ies o f s u b s id ies

U b idi Use r subs idie s :

• Consumption vis-a-vis access subsidy (access subsidies are preferable)

• Targeted and non-targeted (targeted subsidies to low income communities Targeted and non targeted (targeted subsidies to low income communities

are preferable)

• Implicit and explicit (explicit subsidies are preferable)

• Cross subsidies

Utility subs idie s :

• Implicit and explicit (explicit subsidies are preferable)• Implicit and explicit (explicit subsidies are preferable)

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Establishing a Regulatory Framework for Water and Sanitation Sector •

Subsidies in the Water Sector

Su b s id ies in Us e in Ba n g la d es h

Ope ratin g Subs idie s pro vide d by Go ve rn m e n t

• No cost for raw water

• Cross subsidies included in tariff structure

• Staff costs charged to projects and to operations

• Maintenance of pumps

• Requirement to provide services below cost for certain groups• Requirement to provide services below cost for certain groups

Ope ratin g Subs idie s pro vide d to Go ve rn m e n t

• Non-payment of water services by GovernmentNon payment of water services by Government

• Drainage services

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Su b s id ies in Us e in Ba n g la d es h

Capital Subs idie sp

• Capital grants

• Long term debt interest rates below market rates

• Debt service obligations partially paid by Government

Long term debt interest rates charged are above concessional rates provided to

GovernmentGovernment

Im plicit Subs idie s

• Tariffs below full cost recovery leading to deferred maintenancey g

• Excessive levels of NRW

• Low levels of billing and collection

PwC

Tha n k Yo u !!

This docum ent has been prepared for and only for Asian Developm ent Bank in accordance w ith the agreed term s and conditions as per the contract num ber

104692-S52090 dated 21st June 2013 and for no other purpose. W e do not accept or assum e any liability or duty of care for any other purpose or to any other

person to w hom this docum ent is show n or into w hose hands it m ay com e save w here expressly agreed by our prior consent in w riting The opinions contained in person to w hom this docum ent is show n or into w hose hands it m ay com e save w here expressly agreed by our prior consent in w riting. The opinions contained in

this docum ent are based on the facts, assum ptions, and representations stated herein. Our assessm ent and opinions are based on the facts and circum stances

provided/ collected during our m eetings w ith related officials and research from sources in public dom ain held to be reliable. If any of these facts, assum ptions or

representations are not entirely com plete or accurate, the conclusions draw n therein could undergo m aterial change and the incom pleteness of inaccuracy could

cause us to change our opinions. The assertions and conclusions are based on the inform ation available at the tim e of w riting this docum ent and Pw C w ill not be

responsible to rew ork this docum ent any such assertions or conclusion if new or updated inform ation is m ade available. The procedures w e carried out in

perform ing the w ork that form s the basis of this docum ent w ere not as to constitute an audit. As such, the content of this docum ent should not be considered as p f g f f , f

providing the sam e level of assurance as an audit. Pw C disclaim s all liability to any third party w ho m ay place reliance on this docum ent and therefore does not

assum e responsibility for any loss or dam age suffered by any such third party in reliance thereon. This docum ent is provided on the basis that it is for the use of

Asian Developm ent Bank only and that it (and any extract of it) w ill not be copied or disclosed to any third party or otherw ise quoted or referred to, in w hole or

in part, w ithout Pw C’s prior w ritten consent. Furtherm ore, Pw C w ill not be bound to discuss, explain, or reply to queries raised by any agency , other than the

intended recipient of this docum ent.

W a t er Su p p ly a n d

Sa n it a t io n R eg u la t o r y Sa n it a t io n R eg u la t o r y

Co m m is s io n R eg u la t io n sService standards and key Service standards and key performance indicators November 2014November 2014

Ag en d ag

Page

1 Purpose of service standards and key performance 11 Purpose of service standards and key performance

indicators

1

2 Considerations in drafting KPIs 3

3 Proposed Performance Indicator 63 Proposed Performance Indicator 6

4 Summary and Conclusion 17

Pu r p o s e o f s er v ice s t a n d a r d s a n d k ey Pu r p o s e o f s er v ice s t a n d a r d s a n d k ey p er fo r m a n ce in d ica t o r s

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Draft WSSRC (Water Supply and Sanitation Regulatory Commission) Bill • Service standards and key performance indicators

DraftSection 1 – Purpose of service standards and key performance indicators

Pu r p o s e s er v ed b y s er v ice s t a n d a r d s a n d k ey

p er fo r m a n ce in d ica t o r s (K PIs )

p y p

Service Standards and KPIs are needed:

For defining minimum standard of services to be provided to water users

To act as a guide for service providers in carrying out their obligations & functionsTo act as a guide for service providers in carrying out their obligations & functions

To link performance indicators with the tariff adjustment mechanism

To provide a regulatory instrument to the commission in reviewing and monitoring the operational and financial performance of the regulated water service providers

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Co n s id er a t io n s in d r a ft in g K PIsCo n s id er a t io n s in d r a ft in g K PIs

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DraftSection 2 – Considerations in drafting KPIs

Co n s id er a t io n s in d r a ft in g K PIsThe proposed set of indicators on service standards and performance

indicators:

g

indicators:

• Practiced and monitored by large water utilities like WASAs in the

Takes into account relevant existing indicators

y gcountry

• That are benchmarked and practiced by water service providers regulated

Provides some additional performance indicators

• That are benchmarked and practiced by water service providers regulated in other similar countries

Include the industry best practices

• As defined by the International Water Association (IWA) Manuals of Best Practice for the development of Performance Indicators for Water Supply Services and Wastewater Services

• WASAs, city corporations, private players, NGOs, and LGD

Will be discussed and finalised with key stakeholders

PwC 4


DraftSection 2 – Considerations in drafting KPIs

Co n s id er a t io n s in d r a ft in g K PIs (Co n t .)For each proposed performance indicator:

g

• On how each performance indicator is calculated A clear methodology is pfrom available data

gyprovided

• Against which values of the indicator will be monitored

A baseline value is to be calculated

• As part of the overall target for improved water A target value is to be As part of the overall target for improved water service provider performance

A target value is to be recommended

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Pr o p o s ed Per fo r m a n ce In d ica t o rPr o p o s ed Per fo r m a n ce In d ica t o r

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DraftSection 3 – Proposed Performance Indicator

Pr o p o s ed Per fo r m a n ce In d ica t o r

p

The proposed performance indicators are structured into;

(i) Indicators for water services, ( ) ,

(ii) Indicators for wastewater/ sewage services,

(iii) Financial Indicators, and

(iv) Personnel indicators.

The tables following this slide outline the set of indicators for each of the above

mentioned categoriesmentioned categories.

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Pr o p o s ed Per fo r m a n ce In d ica t o r (Co n t .)Below mentioned performance indicators are related to provision of water

services

p

services.

W ate r Supply Se rvice s (all cate go rie s )

W ate r The treated water volume input into the entire water m 3/ dayW ate r

Pro ductio n

The treated water volume input into the entire water

distribution system – groundwater

m 3/ day

Treated water volume input - surface water m 3/ day

Tre atm e n t Plan t

Utilizatio n

(Actual water treated / design capacity of the plant)X 100 %

Utilizatio n

W ate r Supply

Se rvice

Exte n s io n

Number of new individual domestic water connections made Number/ year

Number of new water kiosks constructed Number/ year

No n -re ve n ue NRW as a % of system input volume (SIV) %No n -re ve n ue

w ate r (NRW )

NRW as a % of system input volume (SIV) %

Te s ts carrie d o ut

(quality

co m plian ce )

Number of treated water tests carried out / number of

treated water tests required by applicable standards of

legislation

%

co m plian ce ) legislation

Un m e te re d

W ate r

(System input volume – metered consumption) / System

input volume

%

Po pulatio n

Co ve rage

Resident population supplied by the water commercial

utility / total resident population

%

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Co ve rage utility / total resident population

8




i

p

services.


Po pulatio n Resident population supplied by the water commercial %Po pulatio n

co ve rage w ith

se rvice

co n n e ctio n s

Resident population supplied by the water commercial

utility through service connections / total resident

population

%

Me te rin g Ratio Number of water service connections that are metered / %Me te rin g Ratio Number of water service connections that are metered /

total number of water service connections

%

Ne w Co n n e ctio n

Efficie n cy

Total time spent for establishing new connections during

the assessment period / number of new connections

installed

Days

installed

W ate r

Availability

(Co n tin u ity o f

Se rvice )

Average number of hours for which water supply is

available through a service connection during the day.

Hours / day

Se rvice )

Se rvice

co m plain ts pe r

co n n e ctio n

Total number of complaints of quality of service / number

of service connections x 1000

Number / 1000

connections / year

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services

p

services.


Billin g Co m plain ts Number of billing complaints and queries / number of Number / 1000Billin g Co m plain ts

an d Que rie s

Number of billing complaints and queries / number of

registered customers x 1000

Number / 1000

connections / year

Quality o f supplie d

w ate r

Total number of treated water tests complying with the

applicable standards or legislation / total number of

Number / 1000

customers / yearw ate r applicable standards or legislation / total number of

tests of treated water carried out x 1000

customers / year

W ate r

Co n sum ptio n (pe r

Total annual water sold expressed by population served

per day & by connection (lpcd)

litres/ person/

daype rso n & pe r

co n n e ctio n )

Split by cus to m e r

type (Re s ide n tial,

day

m3 / connection /

monthtype (Re s ide n tial,

In dus trial/ Co m m e

rcial, In s titu tio n al

& Othe rs )

PwC 10



Pr o p o s ed Per fo r m a n ce In d ica t o r (Co n t .)Below mentioned performance indicators are related to provision of sewerage

services

p

services.

W as te w ate r/ Se w e rage Se rvice s (all cate go rie s )

W as te w ate r Number of effluent samples tested meeting applicable %W aste w ate r

tre atm e n t plan t

e fflue n t quality

Number of effluent samples tested meeting applicable

standards / total number of effluent samples tested X 100

%

Sludge Dry weight of sludge safely utilized / dry weight of sludge %

utilizatio n handled x 100

Tre atm e n t

capacity

u tilizatio n

(sewage treated / design volumetric capacity) X 100 %

utilizatio n

Se w e r

re habilitatio n

Length of defective sewers rehabilitated during the

assessment period / total sewer length X 100

%

W aste w ate r Total number of tests carried out / total number of tests %

quality te s ts

carrie d o ut

/

required by applicable standards or legislation X 100

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Pr o p o s ed Per fo r m a n ce In d ica t o r (Co n t .)Below mentioned performance indicators are related to provision of sewerage

services

p

services.

W aste w ate r/ Se w e rage Se rvice s (all cate go rie s )W as te w ate r/ Se w e rage Se rvice s (all cate go rie s )

San itatio n

e xte n s io n

Number of new sewer service connections made /

year

Number

Re s ide n t

l ti

Resident connected to the sewer system managed by

th tilit / id t l ti

%

po pulatio n

co n n e cte d to

the se w e r

sys te m

the utility / resident population x 100

N T t l ti t f t bli hi i D /Ne w sewer

s e rvice

co n n e ctio n

e fficie n cy

Total time spent for establishing new service

connections / number of new service connections

installed during assessment period.

Days / new

connection

S Bl k T l b f l i l f bl k / N b /Se w e r Blo ckage

co m plain ts

Total number of complaints as a result of blockages /

resident population connected to sewer system x 1000

Number / 1000

persons / year

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Pr o p o s ed Per fo r m a n ce In d ica t o r (Co n t .)Below mentioned are the financial performance indicators

p

Fin an cial In dicato rs

Sale s vo lum e

gro w th

(Billed authorized consumption of current assessment period

- billed authorized consumption of previous assessment

period)/ billed authorized consumption of previous

assessment period x 100

%

Sale s re ve n ue

gro w th

(Sales revenues to all customers over the current assessment

period – Sales revenues to all customers over the previous

assessment period) / Sales revenues to all customers over

previous assessment period x 100

%

Ope ratin g

surplus (%)

(Total revenues – operating expenses) / total revenues x 100 %

Curre n t Ratio Current assets / current liabilities Ratio

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p

Fin an cial In dicato rs

Bill co lle ctio n

e fficie n cy

(Accounts receivable at the reference date of the previous

assessment period + sales revenue during the assessment

%

y p g

period - accounts receivable at the reference date of the

current assessment period) / sales revenue during the

assessment period) x 100

De lays in Accounts receivable at the reference date / sales revenues Daysy

acco un ts

re ce ivable s o r

De bto rs

Co lle ctio n pe rio d

/

during the assessment period x assessment period

y

p

W o rkin g ratio Total revenues / operating expenses, Ratio

Ope ratin g ratio Total revenues / (operating expenses + depreciation), during

the assessment period

Ratio

PwC 14




p

Fin an cial In dicato rsFin an cial In dicato rs

Ave rage w ate r

charge s

Water sales revenue / billed consumption BDT (USD)/ m 3

De bt s e rvice

co ve rage ratio

Cash generated from operating activities (sum of net

income depreciation interest expenses and any other

Ratio

co ve rage ratio income, depreciation, interest expenses and any other

non-cash items) / financial debt service (sum of

principal payments or current portion of long term

loans, interest expense and lease payments or current

portion of long term loans) x 100portion of long term loans) x 100

En e rgy co s ts % Energy costs / operating expenses x 100 %

Man po w e r

co s ts %

Internal staff costs / operating expenses x 100 %

Contract costs of outsourced functions / operating

expenses x 100

%

expenses x 100

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Pr o p o s ed Per fo r m a n ce In d ica t o r (Co n t .)Below mentioned are the performance indicators related to personnel deployment

p

Pe rs o n n e l In dicato rs

To tal re ve n ue

pe r e m plo ye e

Operating revenues from sales / full time equivalent

employees

BDT (USD)

/ employee

Equivale n t n o .

o f o utso urce d

Value of the contract for outsourcing / average per person

salary

Equivalent No.

of outsourced o f o utso urce d

s taff

salary of outsourced

staff

Em plo ye e s pe r

w ate r pro duce d

Number of all employees (including internal + equivalent

outsourced staff) / vo l u m e o f water produced

No. / million

m3 / year

Em plo ye e s pe r

10 0 0

co n n e ctio n s

Number of full time equivalent

Employees / number of service connections x 1000

No / 1000

Connections

To tal train in g Number of training hours / number of full time employees Hours /

employee /

year

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Su m m a r y a n d Co n clu s io n

Section 4


PwC 17


DraftSection 4 – Summary and Conclusion

Su m m a r y a n d Co n clu s io nService standards and key performance indicators will:

y

• Provide an overview of the efficiency and the effectiveness of the water

service providers

• Aim at improving operational performance, customer service, and financial

& corporate governance

• Ensure that water service providers are moving towards technical Ensure that water service providers are moving towards technical,

environmental, financial, and commercial sustainability

• Provide the basis for determining the tariff adjustments since the level of

services defines the investments and costs associated with operatingservices defines the investments and costs associated with operating

PwC 18


Ad d clo s in g s t a t em en t her e

This document has been prepared for and only for Asian Development Bank in accordance with the agreed terms and conditions as per the contract number 104692-S52090 dated 21st

June 2013 and for no other purpose. We do not accept or assume any liability or duty of care for any other purpose or to any other person to whom this document is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. The opinions contained in this document are based on the facts, assumptions, and representations stated herein O r assessment and opinions are based on the facts and circ mstances pro ided/herein. Our assessment and opinions are based on the facts and circumstances provided/ collected during our meetings with related officials and research from sources in public domain held to be reliable. If any of these facts, assumptions or representations are not entirely complete or accurate, the conclusions drawn therein could undergo material change and the incompleteness of inaccuracy could cause us to change our opinions. The assertions and conclusions are based on the information available at the time of writing this document and PwC will not be responsible to rework this document any such assertions or conclusion if newPwC will not be responsible to rework this document any such assertions or conclusion if new or updated information is made available. The procedures we carried out in performing the work that forms the basis of this document were not as to constitute an audit. As such, the content of this document should not be considered as providing the same level of assurance as an audit. PwC disclaims all liability to any third party who may place reliance on this document and therefore does not assume responsibility for any loss or damage suffered by any such third party in reliance thereon. This document is provided on the basis that it is for the use of Asian Development Bank only and that it (and any extract of it) will not be copied or disclosed to any third party or otherwise quoted or referred to, in whole or in part, without PwC’s prior written consent. Furthermore, PwC will not be bound to discuss, explain, or reply to queries raised by any agency, other than the intended recipient of this document.

Dr a ft Cu s t o m er Ser v ice

( Im p r o v em en t ) a n d ( Im p r o v em en t ) a n d

Cu s t o m er In t er es t

(P t t i ) R l t i(Pr o t ect io n ) R eg u la t io n s

Ag en d ag

Page

1 Context 11 Context 1

2 Purpose of Customer Service (Improvement) and

Customer Interest (Protection) Regulations

3

3 Application of CIP Regulation to Service Providers 53 Application of CIP Regulation to Service Providers 5

4 Responsibility of various stakeholders 7

5 Customer Interest Protection Plan 10

6 Summary and Conclusion 136 Summary and Conclusion 13

Co n t ext

Section 1

Co n t ext

PwC 1

Draft Customer Service (Improvement) and Customer Interest (Protection) Regulations • Customer Interest Protection Plan

DraftSection 1 – Context

Need fo r p r o t ect in g cu s t o m er in t er es t s

It is important to protect customer interest:

To promote quality of services provided

To receive feedback on the services provided

To provide a platform for grievance redressal

To increase the customer base leading to increase in revenues

Eg California Public Utilities CommissionEg. California Public Utilities Commission

• Protect consumers’ interests by ensuring provision of safe & reliable utility service

Eg Water Service Regulatory Authority in England & WalesEg. Water Service Regulatory Authority in England & Wales

• Incorporated customer service regulations as parameters that are perceived as KPIs for service providers

PwC 2


Pu r p o s e o f Cu s t o m er Ser v ice

Section 2

Pu r p o s e o f Cu s t o m er Ser v ice ( Im p r o v em en t ) a n d Cu s t o m er In t er es t (Pr o t ect io n ) R eg u la t io n sIn t er es t (Pr o t ect io n ) R eg u la t io n s

PwC 3


DraftSection 2 – Purpose of Customer Service (Improvement) and Customer Interest (Protection) Regulations

Pu r p o s e Ser v ed b y Cu s t o m er Ser v ice ( Im p r o v em en t ) a n d

Cu s t o m er In t er es t (Pr o t ect io n ) R eg u la t io n s

CIP l ti ill

p ( p ) ( ) g

CIP regulations will:

Ensure transparency, accountability, & participation

• In service provisioning and related decision-making

Create awareness among service providers

• Regarding steps needed to protect customer interests

Create awareness among customers

• About what to expect from their service providers

g

Provide measures to service providers, WSSRC, &

• For monitoring and evaluation of protection of customer interests

p , ,Customers

PwC 4


Ap p lica t io n o f CIP R eg u la t io n t o

Section 3

Ap p lica t io n o f CIP R eg u la t io n t o Ser v ice Pr o v id er s

PwC 5


DraftSection 3 – Application of CIP Regulation to Service Providers

Ap p lica t io n o f CIP R eg u la t io n t o Ser v ice Pr o v id er s

pp g

WSSRC will prepare the draft pro-forma for CIP plan

WSSRC will update pro-forma based on comments of stakeholders

Service providers will prepare CIP Plan

Service Provider will update plan based on comments received from stakeholders and submit it to WSSRC

WSSRC will review and the service providers will update CIP plan at the end of controlling period

PwC 6


R es p o n s ib ili t y o f v a r io u s

Section 4

R es p o n s ib ili t y o f v a r io u s s t a k eho ld er s

PwC 7


DraftSection 4 – Responsibility of various stakeholders

R es p o n s ib ili t y o f v a r io u s s t a k eho ld er s

p y

Task Re spo n s ibility Tim e lin e

Prepare draft pro-forma for WSSRC

p p

CIPPWSSRC

Within 120 days of hosting

draft Pro-forma on

Commission's web-site

Hold public hearings to

elicit views/ comments ofWSSRC b

Stakeholders on draft Pro-

forma

WSSRC

Prepare list of comments

i d f St k h ld WSSRCWithin 30 days of last

received from Stakeholders

and host on website

WSSRC3 y

public hearing

Revise draft Pro-forma

based on comments WSSRC

Within 30 days of hosting

list of comments on based on comments WSSRC list of comments on

commission’s website

Prepare & Submit draft

CIPP as per pro-formaService Providers

Within 30 days of

finalisation of pro-forma

PwC

CIPP as per pro forma finalisation of pro forma

8


DraftSection 4 – Responsibility of various stakeholders

R es p o n s ib ili t y o f v a r io u s s t a k eho ld er s (Co n t .)

p y

Task Re spo n s ibility Tim e lin e

Publish draft CIPP & Within 40 days of hosting

receive comments Service Provider

4 y g

CIPP on service providers

website

Modify CIPP based on Service Provider

Within 10 days of last

comments receivedService Provider

public hearing

Implementation of

RegulationsWSSRC

Within 60 days of

submission by service

id f t d providers of comments and

responses

PwC 9


Co n t en t o f Cu s t o m er In t er es t

Section 5

Co n t en t o f Cu s t o m er In t er es t Pr o t ect io n Pla n

PwC 10


DraftSection 5 – Customer Interest Protection Plan

Cu s t o m er In t er es t Pr o t ect io n Pla nThe plan will include:

1. Ke e pin g o f appo in tm e n ts ; th is s e ctio n w ill in clude

(Sect io n 5.i .b .1 o f t he r eg u la t io n )

i Proced re for cons ltation & fi ing isits ith the c stomeri. Procedure for consultation & fixing visits with the customer

ii. Schedule of when service provider visits customer’s premises

iii. Payment of financial penalty by service provider to the customer for not adhering to meeting schedule

2 Co m plain ts acco un t que rie s & re que s ts ; th is s e ctio n w ill in clude2 . Co m plain ts , acco un t que rie s & re que s ts ; th is s e ctio n w ill in clude


i. Handling of complaints made by customers related to services provided or payment arrangements

ii Timelines as per which service provider is required to respond to complains/ queries/ requestsii. Timelines as per which service provider is required to respond to complains/ queries/ requests

iii. Payment of financial penalty by service provider for not adhering to timelines

3 . No tice fo r in te rruptio n o f s e rvice s ; th is s e ctio n w ill in clude

(Sect io n 5 i b 3 o f t he r eg u la t io n )(Sect io n 5.i .b .3 o f t he r eg u la t io n )

i. Procedure of notifying customers about disconnection of services

ii. Steps taken by service provider in case of disconnection of service due to emergency

PwC 11


DraftSection 5 – Customer Interest Protection Plan

Cu s t o m er In t er es t Pr o t ect io n Pla n (Co n t .)The plan will include:

4 . En title m e n t to paym e n t/ cre dit ; th is s e ctio n w ill in clude


i C diti d hi h fi i l lti ill b i d i id f t i. Conditions under which financial penalties will be imposed on service provider for not restoring service as per notice

5. Tim in g o f Paym e n ts ; th is s e ctio n w ill in clude

(Sect io n 5.i .b .5 o f t he r eg u la t io n )(Sect io n 5.i .b .5 o f t he r eg u la t io n )

i. Timelines as per which service provider is required to pay customers for not restoring services after disconnection

6 . Me an s o f Paym e n t; th is s e ctio n w ill in clude


i. Ways & conditions under which customers account can be credited

7. Grie van ce Re dre s sal Me chan ism ; th is s e ctio n w ill in clude7 ;


i. Procedures for redressal of service grievances of customers

PwC 12



Section 6


PwC 13


DraftSection 6 – Summary and Conclusion


y

Be n e fits o f the CIPP

1. Increased customer base

2. Increased revenue collection

3. Greater financial sustainability

4. Increased customer confidence in the operations of the service provider

5. Greater legitimacy to the service provider for accessing funds, and making

propositions to the Government for expansion/ maintenance/ repairpropositions to the Government for expansion/ maintenance/ repair

PwC 14


Dis cu s s io n a n d Feed b a ck



www.pwc.com

Ta r iff Ad ju s t m en t R eg u la t io n

Tariff Setting & ReviewTariff Setting & Review

Dhaka, BangladeshNovember 20144


1. Backgro un dg

2. Water Sector Objectives

3. Function, Purpose and Objective of Water Tariff

4. Analysis & Types of Tariff Structures

5. Ladder of Financial Sustainability

6. Tariff Adjustment Regulatory Methodology

Draft

Ba ck g r o u n d

A t t iff i i t t t t l th t d h ld b d • A water tariff is an important management tool that can and should be used

to promote sector reform process.

• The pricing of water services is, however, controversial, and it is important to

understand why there is so little consensus on water pricing and valuation understand why there is so little consensus on water pricing and valuation

issues.

• There is often disagreement over the objectives of water pricing and tariff

designdesign.

• Water pricing decisions affect several different objectives or goals of

policymakers, often in conflicting ways.

• There is often disagreement over what would actually happen if different • There is often disagreement over what would actually happen if different

water tariffs were implemented.

PwCSeptember2014

3

Draft User Service (Improvement) and User Interest (Protection) Regulations • User Interest Protection Plan


1. Backgroundg

2 . W ate r Se cto r Obje ctive s





Draft

Sect o r Ob ject iv es : R eg u la t io n

• Universal Services

Efficient Ser ices Fi i ll• Efficient Services

• Good Quality Services

• Conservation of Resources

Financially

Strong utility

A f R l iAspe cts o f Re gu latio n

• Controlling costsControlling costs

• Generating cash from operations

PwCSeptember2014

4


Draft

As p ect s o f R eg u la t io n : Co s t co n t r o l

W ays to co n tro l co s ts W ays to co n tro l co s ts

• Im ple m e n tin g affo rdable s tan dards

o customers informed asked what they want and are willing to pay o customers informed, asked what they want and are willing to pay

for

o avoid pushing rich-country standards onto low-income

communitiescommunities

o stage environmental improvements

• Efficie n t de live ry

o competition (for the market, for inputs, bulk, inset, comparative)

o transparent incentive regulation

o performance-based contracting: public sector and private sector

o focus on asset management & sustainability

PwCSeptember2014

6


Draft

As p ect s o f R eg u la t io n : Gen er a t in g Ca s h

W ays to ge n e rate cashW ays to ge n e rate cash

• Large s t so urce o f W SS in ve s tm e n ts in clude

o Asset (extension capacity augmentation)o Asset (extension, capacity augmentation)

o Most small, routine investment (3Rs)

o The only source in many developing countries

/ transition countries/ transition countries

o A major component of concession finance

“The b a s is fo r a n y u s e o f cr ed it

o r p r iv a t e eq u it y ”

CREDIT

CASH

PwCSeptember2014

7



1. Backgroundg


3 . Fun ctio n , Purpo se an d Obje ctive o f W ate r Tariff




Draft

Fun ctio n s o f tariff

• Determines level pattern and stability of utility revenue• Determines level, pattern, and stability of utility revenue

• Contributes to ability to attract capital

• Create incentives impacting the production and use of services

• Influence value of the services received and total cost of production• Influence value of the services received and total cost of production

• Allocate cost among customers groups based on parameters

Purpo se o f tariff

• Economic EfficiencyEconomic Efficiency

• Fairness (a perception)

• Equity (a testable hypothesis)

• Revenue sufficiencyRevenue sufficiency

• Simplicity and understandability

• Resource conservation

PwCSeptember2014

8


Draft

Additio n al Co n s ide ratio n s in Tariff De s ign

• Public acceptability – affordability and willingness to pay• Public acceptability – affordability and willingness to pay

• Political acceptability

• Ease of implementation

• Enhancement of credit rating of service providers• Enhancement of credit rating of service providers

H ie rarchy o f Obje ctive s : Mo s t re s trictive

• Economic Efficiency

• Equity “Setting w ater tariffs requires Equity

• Simplicity, transparency

• Fairness

• Resource conservation

Setting w ater tariffs requires that one strikes a balance am ongst these objectives”

Resource conservation

• Net revenue stability

• Revenue sufficiency

PwCSeptember2014

10



1. Backgroundg



4 . An alys is & Type s o f Tariff Structure s



Draft

An a ly s is & Ty p es o f Ta r iff St r u ct u r es

• On e Part Tariff

o Metered

o Unmeteredo Unmetered

• Tw o Part Tariff

• Blo ck Tariffs

o Increasing Block Tariffs

o Decreasing Block Tariffso Decreasing Block Tariffs

PwCSeptember2014

12


Draft

On e Pa r t Ta r iff: St r u ct u r e a n d o b ject iv esM et er ed

• Usage based pricing

• Category-wise equity

Conservation (some)

M et er ed

• Conservation (some)

• Implementation

• Legality

Un m et er ed

• Revenue Stability

• Simplicity

R bili

Un m et er ed

• Rate stability

• Implementation

PwCSeptember2014

14


Draft

On e Pa r t Ta r iff: Pr o s a n d Co n s

Me te re d: Usually in the form of a

“Fixed Volumetric Charge”

Un m e te re d: Usually in the form of a

“Fixed Charge”

Pro s

• The price per unit remains constant

providing complete liberty on

consumption levels

• Water costs are directly proportional to

• One price no matter how much water is

used

• Results in revenue stability

• Simplicity• Water costs are directly proportional to

water used

• Easy to understand and implement

• Equity – all within a rate class are

• Simplicity

• Rate Stability

treated the same

Co n s

• Potential Inequities – if applied broadly • No water conservationq pp y

• Revenue Fluctuation due to Weather

induced Demand

• Inequity of cost distribution and

subsidy distribution

PwCSeptember2014

13


Draft

Tw o -Pa r t Ta r iff: St r u ct u r e a n d o b ject iv e Ta r iff s t r u ct u r e

• Fixed Charge

• Volumetric Charge

Ta r iff s t r u ct u r e

g

If co n s ide rin g a tw o part tariff, the re late d o pe ratin g e xpe n se s to

the fixe d charge n e e d to be subtracte d fro m the w ate r sale s

re ve n ue re qu ire m e n t.re ve n ue re qu ire m e n t.

• Revenue Stability

Ob ject iv es

• Cost of Implementation

• Equity

• Conservation (some)

L lit• Legality

• Rate Stability

• Implementation

PwCSeptember2014

15


Draft

Tw o -Pa r t Ta r iff: Is s u es w it h fixed cha r g es

• Fixed charges associated with minimum consumption discriminates on large

families or multi-apartment buildings and encourages waste

• High fixed charges relative to volumetric charges weakens price signal (water g g g p g (

conservation) and bars entry to poorer communities

o Should a low volume customer pay the same fixed charge as a high

volume customer?

o Do we really need a minimum charge in our environments?

PwCSeptember2014

16


Draft

Blo ck Ta r iffs : St r u ct u r e a n d o b ject iv e Ta r iff s t r u ct u r e

• Two or more prices, each applies to use within a defined segment (block) of

monthly use

• Unit charge is constant over a specified range of water use and then shifts as

Ta r iff s t r u ct u r e

• Unit charge is constant over a specified range of water use and then shifts as

use increases

• Main Block Type structures include

D i bl ko Decreasing block

o In cre as in g blo ck Tariff ( IBT)

Still actively promoted in developing countries

Adopted when water conservation is the objective

“ W ater pricing is an im portant instrum ent for stim ulating efficient use of

w ater A basic am ount could be used at a relatively low rate w hile w ater w ater. A basic am ount could be used at a relatively low rate, w hile w ater

consum ption beyond that am ount could be charged w ith progressively

higher rates ”

So u r ce: Ur b a n W a t er R es o u r ces M a n a g em en t UN 19 9 3 p 19

PwCSeptember2014

17


So u r ce: Ur b a n W a t er R es o u r ces M a n a g em en t , UN, 19 9 3 , p . 19

Draft

Blo ck Ta r iffs : In cr ea s in g b lo ck Ta r iffsR a t io n a le fo r IBTs

• Claims to transfer income from rich to poor

• Claims to transfer income from firms to poor households

• High prices in the top blocks claim to discourage “extravagant” and

R a t io n a le fo r IBTs

High prices in the top blocks claim to discourage extravagant and

“wasteful” use

• IBT’s are said to implement marginal cost pricing

• IBT’s are said to reflect assumed marginal cost curvesg

• No consistency in how blocks are established

Lim it a t io n s o f IBTs

• Difficulty in limiting the size of the first block

• Difficult to provide proper economic incentives to most customers

• Difficult to meet revenue target without large departures from marginal

cost

• Lack of transparency and difficulty of administration

• In case of shared connections, or where connected households resell

water to vendors IBT’s increase cost to the very poor

PwCSeptember2014

18


water to vendors, IBT s increase cost to the very poor

Draft

Blo ck Ta r iffs : Pr o s a n d Co n sIn cre as in g Blo ck Tariff: Rate De cre as in g Blo ck Tariff: Rate decreases g

increases with amount consumed

g

with amount consumed

Pro s

• Equity • Reflect economies of scale in serving large Equity

• Conservation

Reflect economies of scale in serving large

users Conservation

• Indirect way of charging rates to different

customer classes whose unit cost of

i diffservice differs

• Makes added use of water less expensive

on a per unit basis

• Used as an incentive to attract large firms g

that use large amounts of water in low-

income and rural areas

Co n s

• Lack of consistency in consumption

• Low customer acceptance

• Negative effect on revenue stability

d l

• Increased water bills and increased

consumption

PwCSeptember2014

19


and on large users

Draft

On e Pa r t Ta r iff: St r u ct u r e a n d o b ject iv esIn cr ea s in g Blo ck Ta r iff

• Equity

• Conservation

In cr ea s in g Blo ck Ta r iff

Decr ea s in g Blo ck Ta r iff

• Economic Development

Decr ea s in g Blo ck Ta r iff

PwCSeptember2014

20


Su m m a r y : Differ en t Ta r iff St r u ct u r esAd v a n t a g es a n d Dis a d v a n t a g esAd v a n t a g es a n d Dis a d v a n t a g es

Advan tage s Disadvan tage s

On e Part • Stable, Assured Revenue Stream • Inequity of Cost Distribution

Tariff:

Fixe d Flat Rate

,

• Easy to Understand and Implement

q y

• No water conservation

Tw o Part Tariff

Vo lum e tric

• Simplicity

• Ease of Understanding and Implementation

• Revenue Fluctuation due to Weather

induced Demand

• Customer Acceptance

• Equity

• Revenue and Rate Stability

• Potential Inequities - if applied broadly

• Limitations on the extent to which

specific policy objectives are supported

Blo ck Tariff Advan tage s Disadvan tage s

In cre as in g

Blo ck Tariff

• Equity

• Conservation

• No consistency in how consumption

blocks are established

• Consumer understandability and Consumer understandability and

acceptance is low

• Negative effect on revenue stability

• Negative effect on large users

De cre as in g • Reflect economies of scale • Anti-Conservationg

Blo ck Tariff • Promotion of Industrial / commercial

development

• Indirect way of charging rates to different

customer classes whose unit cost of service

differs

• Deviation from long term utility cost

differs

• Makes added use less expensive on a unit

basis


1. Backgroundg




5. Ladde r o f Fin an cial Sus tain ability


Draft

Po lit ica l Eco n o m y o f Ut ili t y Sect o r

R efo r m – A Lo g ica l Fr a m ew o r k ?R efo r m A Lo g ica l Fr a m ew o r k ?Fin an cial

Re s tructurin g Subs idie s (Taxpaye rs o r

Do n o rs ?)

f L

ev

el

"ability to

De bt

Ove rhan g

Do n o rs ?)

ge

Ta

rif

f ability to

pay "Utility

Margin

Av

er

ag

Curre n t

Tariff Le ve l

Eco n o m ic

Co s t

Re co ve ry

Tariff

Tariff le ve l

w ith

subs idie sO&M

tim e1

Tariff

2 3

O&M

PwCSeptember2014

23


Draft

La d d er o f Fin a n cia l Su s t a in a b ili t y

Creditworthy in Tested

Country Conditions

Country Conditions and

Developed Financial Markets

Marginally Creditworthy Reliable Refinancing Sources &

Security for Loans

Sustainable Cost

Recovery

Anticipates Long Term Cost

Impacts (I.e. FX, asset revaluation)

Private

Fin an ce

Cost Recovery Profitable in Any Given Year

But Not Sustainable in Long Term

P A Y G C it l

Guaran te e s

& In tl.

Do n o rs

Pay-As-You-Go

Recovery of Cash Outlays

Capital

Subsidies

Unviable Loss Making Capital & OperationalPublic

Fin an ce Utilities Subsidies

PwCSeptember2014

24


Draft

Fin a n cia l fea s ib ili t y a n d s er v ice a cces s ib ili t y

Fin a n cia l Ca s h Flo w Eq u ilib r iu m a t Ta r g e t ed Tim e H o r iz o nFin a n cia l Ca s h Flo w Eq u ilib r iu m a t Ta r g e t ed Tim e H o r iz o n

•• Early years of reform when efficiency gains are not yet fully Early years of reform when efficiency gains are not yet fully realisedrealised tariffs tariffs

are re qu ire d to be m ain tain e d w ith in an affo rdable ran geare re qu ire d to be m ain tain e d w ith in an affo rdable ran ge ..

St i l t iff dj t t h ld b d t kSt i l t iff dj t t h ld b d t k i li i li •• Ste pw ise an n ual tariff adjus tm e n ts sho u ld be un de rtake nSte pw ise an n ual tariff adjus tm e n ts sho u ld be un de rtake n , in line , in line

with increase of quality of service provided and additional volume of water with increase of quality of service provided and additional volume of water

made available to customersmade available to customers

S t k S t k t t t h h tf ll i ti l t t t h h tf ll i ti l

In cr ea s in g Acces s / Ser v in g t he Po o r Ob ject iv es

•• Suppo rt package Suppo rt package to support temporary cash shortfall, using operational to support temporary cash shortfall, using operational

subsidies can be preparedsubsidies can be prepared

• Equity: Ensuring that the benefits of reform accrue to the poor as well as

the rich

• Sus tain ability: To benefit poor, utilities should develop a system which

is technically workable and financially viable to provide WSS. During

designing of the system, specific characteristics owing to the demand of

low income/ poor customers must be kept in mind.

PwCSeptember2014

25


Draft

Co m p o s it io n o f t he Ta r iff

O & M

R3Rs

Ope r. Surplus

+Tariff =

Exte n s io n /

Expan s io n

De bt

s e rvice

e tc

PwCSeptember2014

26


e tc.

Draft

An n u a l W a t er Ta r iff Ad ju s t m en t s t o r ea ch Fu ll

Co s t R eco v er y Tavg = Total Revenue billed / Volum e billedyTavg,2

Exte n s io n / Expan s io n

Tavg,1Cash Flow

EquilibriumSD

/m

3

Tavg,1 Equilibrium

Re n e w al ( IRC)

Ta

riff

US

Op er a t in g

Deficit

Tavg,0 Ope ratio n &

Avg

T

Main te n an ce

t 0 t1 t 2 Full cost recovery

PwCSeptember2014

27


t 0 t1 t 2

TimeFull cost recovery


1. Backgroundg





6 . Tariff Adjus tm e n t Re gu lato ry Me tho do lo gy

Draft

Set t in g Ta r iff Po licy

• The tariff policy is set by Government (the regulator’s (WSSRC) supervising

authority).

• The role of the regulator (WSSRC) is to advise the supervising authority on the

d l t f th t iff lidevelopment of the tariff policy.

• WSSRC is responsible for implementing the tariff policy.

“The challenge is to ensure that the utilities’ respective business plans that w ill

form the foundation of tariff adjustm ents requested, are in line w ith governm ent

policy objectives”

PwCSeptember2014

29


Draft

Ta r iff Po licy Is s u es a n d it s d e t er m in a t io n

Is s u es w it h t a r iff p o licies

• So cial fairn e s s : Subsidies, Cross subsidies

• Co m plian ce w ith s e rvice s tan dards

S i i C ti f A t i f l i

Is s u es w it h t a r iff p o licies

• Se rvice e xpan s io n : Connection fees, Access to service for low income

populations

• En viro n m e n t

Co s t re co ve ry: Regulatory framework to ensure cost recovery tariffs • Co st re co ve ry: Regulatory framework to ensure cost recovery tariffs,

Key to raising finance

• Capital s tructure : Treatment of debt / equity

• Capital value an d (re aso n able ) re turn o n capital• Capital value an d (re aso n able ) re turn o n capital

• Pro ce s s : Review periods and interim adjustments.

Fin a n cia l Ca s h Flo w Eq u ilib r iu m a t Ta r g e t ed Tim e H o r iz o n

• The Sho rt-Run Acco un tin g Me tho d

• The Sho rt-Run Cash Flo w Me tho d

• The Lo n g-Run Disco un te d Cash Flo w Me tho d

Th U it C t A h

PwCSeptember2014

30


• The Un it Co s t Appro ach

Draft

The Sho r t -R u n Acco u n t in g M et ho d

• The short-run accounting method is the simplest method.

• The basic concept is to set tariffs on the basis of full cost recovery

including return on capital and depreciation by dividing total costs by unit g p p y g y

sales (m3 for metered systems or e.g. number of households for un-

metered systems).

• The total costs are based upon projections or budgets for the following

year.

• Subsidies can be accommodated by treating them as income in the

analysis thereby reducing the cost recovery demands on the tariff.

It is d ifficu lt t o a p p ly t h is m et ho d a s a t r a n s it io n t o w a r d s fu ll

co s t r eco v er y .

PwCSeptember2014

31


Draft

The Sho r t -R u n Ca s h Flo w M et ho d

• The short-run cash flow method is very similar to the accounting method

but excludes n o n -fin an cial co s ts such as de pre ciatio n but

re place s th is w ith actual cash flo w s fo r in ve s tm e n ts an d de bt p

se rvice s .

• The principal advantage of this method is that it ensures positive cash

flows for the utility.

• The disadvantage is that it may result in fluctuating tariffs as cash flow

fluctuates although this can be alleviated through short-term borrowing.

PwCSeptember2014

32


Draft

The Dis co u n t ed Ca s h Flo w (DCF) M et ho d• DCF method is based upon principles of time value of money. The basis of

the DCF is the Net Present Value (NPV) calculation, i.e. to discount all

income and costs to their present day value through application of a

discount rate that reflects cost of capital.

If th NPV i ti th th b i i t i it t f it l • If the NPV is negative then the business is not covering its cost of capital

whereas if it is positive the business is earning more than its cost of capital.

For the o ptim um tariff the NPV sho u ld be ze ro .

• This method is applied to determine uniform tariffs over a long period (e g • This method is applied to determine uniform tariffs over a long period (e.g.

5 years). The basic formula for the determination of the long-run average

tariff is (discounted costs)/ (discounted sales).

• The uniform average tariff is assumed to increase with inflation which is The uniform average tariff is assumed to increase with inflation, which is

the only adjustment required.

• The long-run marginal tariff method is similar to the long-run average tariff

except that it only examines costs for increased service coverage and the except that it only examines costs for increased service coverage and the

denominator is the additional sales. The marginal tariff is, in general,

higher than the average tariff.

It is recom m ended that the m arginal cost m ethod be not em ployed until such

PwCSeptember2014

33


g p y

tim e that tariffs are at cost recovery levels.

Draft

The Dis co u n t ed Ca s h Flo w M et ho d :

Dis a d v a n t a g esg

• Data for long-run analyses are not always available and often speculative

• The result is often a tariff that is below cost recovery in the early years but

compensated by being above cost recovery in the longer termcompensated by being above cost recovery in the longer term

• The derived tariff is unresponsive to cash flow demands

• The model assumes all costs and revenues will rise with inflation whereas

this may not always be accurate, especially when improved utility this may not always be accurate, especially when improved utility

operational efficiency is to be expected.

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Draft

The Un it Co s t Ap p r o a ch

• The approach analyses the actual costs per unit of water sold In • The approach analyses the actual costs per unit of water sold. In

determining future unit costs, assumptions are made concerning

efficiency improvement targets based upon professional judgment and

comparative analysis A principle feature of this is the short-term time comparative analysis. A principle feature of this is the short term time

horizon, i.e. three to five years.

• The method takes each cost element and divides it by the volume of water

that is sold and paid for. that is sold and paid for.

• Advantages of this method are:

Can be easily monitored

Can ensure positive cash flows

Simplicity and easily disseminated to the general public

Easy to monitor performance against time bound targets

Promotes improved efficiency

It is recom m ended that in the early years of regulation, the regulator em ploy this

sim plified tariff determ ination process until such tim e that full (OPEX + CAPEX)

cost recovery has been achieved and the regulatory capacity has reached a level that

can enable m ore com plex tariff determ inations.

PwCSeptember2014

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can enable m ore com plex tariff determ inations.

Draft

Id ea o f t a r iff s e t t in g a n d co s t r eco v er y

“Cost recovery should not be interpreted as giving operators

the license to pass on the costs of inefficiency to custom ers but

rather the role of the regulator is to ensure that only efficient

costs are passed through”

“The selection of w hichever m ethod for determ ining the

t iff i tt f th l t t d id average tariff is a m atter for the regulator to decide.

How ever, as a rule, it is recom m ended that until the utility is

operating at cost recovering levels the u n it co s t a p p r o a ch

is favored.”

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Draft

St ep -w is e Ap p r o a ch t o Fin a n cia l Su s t a in a b ili t y

• Ste p “Ze ro ”: Introducing & Operationalising the Regulatory Accounting • Ste p Ze ro : Introducing & Operationalising the Regulatory Accounting

Guidelines (RAG), CIPP, and the KPIs; Determining the baseline of

required O&M (O&M Audit); Procedures & Regulatory Calendar

(proposed duration: 1 year)(proposed duration: 1 year)

• Ste p 1: Towards cash flow equilibrium & recovering of total O&M costs

(explicit & implicit, variable and fixed); tariff adjustments based upon the

un it co s t m e tho do lo gy (proposed duration up to 4 years)u t co s t e t o do o gy (p oposed du at o up to 4 yea s)

• Ste p 2 : Towards full cost recovery; tariff adjustments based upon the

disco un te d cash flo w m e tho do lo gy

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Draft

The Pr o ces s o f Ta r iff Se t t in g

• A tariff calculation process is based upon the need to have tariffs • A tariff calculation process is based upon the need to have tariffs

n e ce s sary to satis fy a re ve n ue re qu ire m e n t over a period of

proposed 3 years.

• The process requires the utilities to prepare de taile d bus in e s s plan s • The process requires the utilities to prepare de taile d bus in e s s plan s

upon which their tariff proposals are founded, the most important aspect

being the financial plan component of the business plan.

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Draft

The Pr o ces s o f Ta r iff Se t t in g : Pr ep a r in g t he

Bu s in es s Pla n

The business plan submissions to the WSSRC should include:

• An o pe ratio n al plan setting out planned activities including measures to

improve efficiency etcimprove efficiency etc.

• An asse t m an age m e n t plan describing the investment program and how

such investments will contribute to the strategic objectives of the

organization, e.g. mains replacement to help reduce losses and thereby organization, e.g. mains replacement to help reduce losses and thereby

release more water to customers that suffer from supply-demand

imbalances.

• A co m m e rcial plan setting out the activities of the organization with p g g

respect to service expansion, revenue collection improvement etc.

• A fin an cial plan setting out the (realistically) expected sources of finance

for the investments and the necessary tariffs in order to finance the

activities as set out in the plan. This shall include projections on financial

statements.

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Draft

The Pr o ces s o f Ta r iff Se t t in g : Pr o ced u r es &

R eg u la t o r y Ca len d a rg y

• The procedures need to be prepared issued (in draft format) to the service

providers well in advance of the first periodic review.

• The procedures include a detailed regulatory calendar to be determined by • The procedures include a detailed regulatory calendar, to be determined by

the WSSRC:

The issuance of draft and final tariff determination procedures

Information requirementsInformation requirements

Submission of tariff proposals with accompanying data (business

plans)

Review of proposals and independent assessment of tariffsp p p

The WSSRC response to tariff proposals

Final deliberations / negotiations

Public consultation

Approval of tariffs and adoption.

Subsequent monitoring and reporting to the WSSRC

Milestone: to be com pleted during first 12 m onths (the “zero” step)

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40


Milestone: to be com pleted during first 12 m onths (the zero step)

Draft

The Pr o ces s o f Ta r iff Se t t in g St ep s

Ste ps in tariff s e ttin g

1. Co s t An alys is Annual forecasting Projected O&M

CostCost

2 . Pe rfo rm an ce

An alys is

Performance adjustment (NRW,

billing efficiency)

Performance

adjusted

O&M Cost

3 . Se ttin g o f

Tariff Le ve l

Average tariff calculation using unit

cost approach

Average Tariff

4 . Se ttin g o f Customer categories and Tariff Categories

Tariff

Structure

consumption patterns (IBT)

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Draft


Da t a R eq u ir em en t sq

Following are the data requirements that need to be established in the

calculation / adjustment of the required tariff:

• The annual revenue requirements (co s t an alys is )• The annual revenue requirements (co s t an alys is )

• The target efficiency gains (pe rfo rm an ce an alys is )

• The tariff structure

PwCSeptember2014

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Draft


The Co s t An a ly s isy

• The first step in tariff setting is to establish the annual revenue

requirements of the entire period during which the tariff adjustment shall

apply to recover the revenues that will allow fo r the pro pe r o pe ratio n apply, to recover the revenues that will allow fo r the pro pe r o pe ratio n

an d m ain te n an ce (O&M) o f the sys te m an d sus tain the sys te m ’s

viable o pe ratio n .

• The published high value of NRW (> 50%) indicates that the distribution The published high value of NRW ( 50%) indicates that the distribution

systems are currently not in good working order and are deteriorating.

Maintenance expenditure is likely insufficient and below best practice, as is

shown by the need for rehabilitation of assets, which is an indicator of

deferred maintenance.

• The priority is then to make a diagnosis of the actual state of disrepair of all

water supply and sanitation systems and use best estimates of O&M based

on sector benchmarks: Determining the baseline of required O&M (O&M

Audit)

Milestone: to be com pleted during first 12 m onths

( h “ ” )

PwCSeptember2014

43


(the “zero” step)

Draft


The Per fo r m a n ce An a ly s isf y

• The business plan shall contain the target operating and service levels and

how these will be achieved. It shall include an asset management plan that

defines planned rehabilitation, renewal and replacements, and, investments defines planned rehabilitation, renewal and replacements, and, investments

in capacity augmentation and network extension.

• In the projection of the available water supply the link will be made with

target values of key performance indicators. The following two indicators will g y p g

be taken into account in the performance analysis for calculation of the tariff

adjustment:

1. Non Revenue Water (NRW)

2. Billing and bill collection efficiency

• The number of additional domestic connections per year will also determine

the annual revenue of the utility and will be included in the business plan,

ith b kd f th d ti ti t twith a breakdown of the domestic connections per customer category.

• By applying the agreed benchmarks for each criterion in the calculations, the

utility is automatically penalized if it fails to achieve the target value of the

performance indicator

PwCSeptember2014

44


performance indicator.

Draft

Ta r iff Se t t in g

NRW EUR

Prepara on

assistance grant

Hybrid: grant / interest free

(so ) loan / concessional loan Gradually towards full cost recovery tariffs

including debt service

NRW EUR

Cumula ve

Investments

NRW increase

without interven on

NRW

TARGETED

INVESTMENTS ANNUAL MINOR INVESTMENTS

0

Base line &

NRW Strategy

& quick wins

Economic NRW level

MAJOR

INVESTMENTS

6 10

REDUCE FINE TUNE SUSTAIN

TIME ‐ Years 0

ANALYZE

PwCSeptember2014

45


Dis cu s s io n a n d Feed b a ck



/ GoB-ADB

Establishing a Regulatory Framework for Urban Water Supply and Sanitation Project

Local Government Division

Ministry of Local Government. Rural Development & Cooperatives

Wrn : "Establishing a Regulatory Framwork for Urban W ater Supply and Sanitation" ｾ＠ｾ＠ｾ＠

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and Sanitation Regu latory Commission ｾ＠ｾ＠ｾ＠ｾ＠ｾ＠ l!l ｾ＠ｾ＠ Bangladesh Water Supply

and Sanitation Regulatory Commission Bill 2014" ｉＡｒｦｾ＠ｾＨｦｩｮ｡ｬ＠ draft) ｾｦｦｩ＼ｒｴｾ＠ 1

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ｾｯＺ＾ｓ＠ｾ＠ oo ｃＧｩｴｾ＠ｾｯＺ＾ｓ＠ｾ＠ m DPHE Training Room (4th Floor)-<.!l ｈＺｪｍｾ＠ｃｦＧＨｾｾｾｴｴ＼ｴｾ＠ llMT ｾ＠ｾﾷＴＧｬＢｴｾ＠

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SI.No. Name of t he Organizati Designation andOrganization

01 Local Government Director General (Additional Secretary), MEl Wing, Local Government

Division Division

02 Establishing a Project Director (Joint Secretary), "Establishing a Regulatory Framework

for Urban Water Supply and Sanitation" project, LGD Regulatory Framework

Deputy Project Director (Deputy Secretary), "Establishing a Regulatory 03 for Urban Water

Supply and Sanitation Framework for Urban Water Supply and Sanitation" project, LGD

Assistant Engineer, "Establishing a Regulatory Framework for Urban 04 project

Water Supply and Sanitation" project, LGD

OS Superintending Engnineer, Ground Water Circle, DPHE, Dhaka

06 DPHE Executive Enginner, Planning Division

07 Assistant Enginner, Planning Division

08 Deputy Managing Director (Operation and Maintenace), Dhaka WASA

09 Dhaka WASA Deputy Managing Director (Finance), Dhaka WASA

10 Chief Enginner, Dhaka WASA

11 Deputy Managing Director (Finance), Chittagong WASA, Chittagong

Chittagong WASA Deputy Managing Director (Operation and Maintenace), Ch ittagong 12

WASA, Chittagong

13 Managing Director, Khulna WASA, Khulna Khulna WASA

14 Commercial Manager, Khulna WASA, Khulna

15 Managing Director, Rajshahi WASA, Rajshahi

16 Rajshahi WASA

Deputy Managing Director, Rajshahi WASA, Rajshahi

17 Plann ing Commision Joint Chief, Physical lnrfrastructure _Division, Planning Commision (

01 ｾ＠Contact Numbers:

18 Chief Executive Officer, Rangpur City Corporation, Rangpur

19 Chief Executive Officer, Chittagong City Corporation, Chittagong City Corporation

20 Chief Executive Officer, Rajshahi City Corporation, Rajshahi

21 Chief Executive Officer, Khulna City Corporation, Khulna

22 Chief Executive Officer /Assistant Enginner, Kishoreganj Paurashava

23 Chief Executive Officer I Assistant Enginner, Noakhali Paurashava

24 Paurashava

Chief Executive Officer /Assistant Enginner, Moulavibazar Paurashava

25 Chief Executive Officer /Assistant Enginner, Mymensingh Paurashava

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<t I Cl!mt, ｾｾ＠ｾＯ＠ f«4ht>IQ ｃｾ＠ｃＢｩｬｻｬｬｾｃｾ＠｣ｩｦｬｾ｜ＵＩｯｱＨｬＵｻｬｾ＠ｃｾ＠ I

::9·

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Annex 4. Summary of discussions held during Exposure Visit

24-27 Novem ber 2014

Kuala Lum pur and Manila

1. Suruhanjaya Perkhidmatan Air Negara (SPAN) Malay sia: The delegation visited Suruhanjaya

Perkhidmatan Air Negara (SPAN) office in Kuala Lumpur, Malay sia 24 November, 2014. The discussion

amongst SPAN officials and the delegation focused on experience sharing. Marzuki Bin Mohammad,

Executive Director, Water Regulatory Department and Noorhashim Bin Baron, Director (Technical

Standard & Compliance), SPAN introduced the Water Services Industry in Malay sia through an

informative presentation. The key points covered during the presentation and discussions with SPAN

included:

i. Area-wise piped water serv ice coverage and operators including the management of sewerage

sector. The national average water supply was 95.1% in 2013;

ii. SPAN is the commission of 12 members where the chairman is an elected member of the

government; the organization consists of 3 departments, 12 div isions, and 2 units. There are 7

regional offices involved in regulatory and enforcement activities in the states. The function of the

commission is to advise the Minister on national policy objectives; to superv ise/monitor wat er

supply and sewerage services activities; to rev iew and recommend tariffs , and to implement and

enforce the provisions of Water Serv ices Industry Act 2006.

iii. Economic, Technical, Consumer and Social factors are the main focus areas under Water Serv ices

Industry Act 2006. Before 2008, Water Supply Serv ices was a matter under the jurisdiction and

control of the State Government. After Federal Constitution Amendment, water sources and dam

are in the state jurisdiction, and treatment and distribution of water is under federal government's

purv iew.

iv. After reformation of water services, responsibilities of policy matters were allocated to the Federal

Government (Ministry of Energy , Water and Communications); Raw water matters to the State

Governments; Water resources matters to the National Water Resources Council (NWRC) –

chaired by Prime Minister, and Regulatory matters to the National Water Serv ices Commission

(SPAN).

v. Sewerage serv ices remain under the jurisdiction of the Federal Government in Malay sia.

v i. Now the commission concentrates to establish and sustainable Water Reform Business Model and

Pengurusan Aset Air Berhad – PAAB is one of this ty pes of model. PAAB is the constructor and

owner of assets in the WSS sector, while O&M of the assets, and distribution are carried out by

separate agencies.

2. Konsortium ABASS Sdn Bhd: ABASS is the operator of water treatment plant, whose responsibility is

to provide treated water to the distribution operator. The discussion of the delegation with the

representatives of ABASS encompassed the following points:

i. The Sungai Semeny ih Water Supply Scheme implemented by the Selangor State Government used

to supply clean water to South-West of Kuala Lumpur. In the y ear 2001, Konsortium ABASS Sdn

Bhd was awarded a 30 y ears concession to operate and maintain the Sungai Semeny ih Scheme.

Components of the Scheme included (i) Construction of dam; (ii) Installation of intake and raw

water pumping stations; (iii) Water treatment plant, and (iv) Lake and Dam water transfer.

ii. Upgrading the traditional norm of sludge disposal for water treatment plants in Malay sia, ABASS

constructed a modern sludge treatment facility at the Sungai Semeny ih Water Treatment Plant,

with the objective of protecting the environment under the Environmental Quality (Sewage and

Industrial Effluents) Regulations. With a capacity of 600 metric tonnes per day (at 35% dry solid),

the Sungai Semeny ih sludge treatment facility is the largest sludge treatment plant in Malay sia for

water treatment process. The sludge produced from the water treatment process is dewatered

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mechanically using six units of centrifuge decanters. The sludge treatment facility is employ ing

the “zero discharge” concept, where all the liquids are recovered from the vario us stages.

iii. Mr. Mohd Nafis Isnin showed the team the personal protective equipment, office environment,

reporting of the equipment, and working environmental conditions (including information

security and emergency event management). After the presentation he took the team to show the

clari-flocculator and sedimentation chambers of surface water treatment plant.

3. SYABAS-Sy arikat Bekalan Air Selangor Sdn. Bhd.: The team v isited the office of SY ABAS, the

distributor/supplier of the treated water. The presentat ion made by the representatives of SY ABAS, and

the discussion of the delegation with them encompassed the following points:

i. During 2002 – 2005, the distribution functions of treated water supply and the Selangor Water

Supply Department was corporatized as Perbadanan Urus Air Selangor Berhad (PUAS), 100%

State-owned Corporation. After 2005 PUAS was privatized to SY ABAS. The treated water supply

is regulated under WSIA 2006 by National Water Serv ices Commission (SPAN). Water treatment

contracted (out-sourced) by long-term concessions to 4 companies while treated water

distribution is contracted (out-sourced) under concession agreement with SY ABAS.

ii. Main task of SY ABAS is the operations & maintenance of treated water distribution including

billing & customer serv ice. At present, the serv ice is delivered to 7 .5 million people (2 million

consumer accounts or connections, out of which domestic are 1 .7 million, and Trade & others are

0.3million).

iii. The Primary Contractual Obligations of SY ABAS are (a) to distribute treated water purchased

from the water treatment companies to the consumer; (b) to build, upgrade, rehabilitate, operate,

manage, maintain and secure all water supply distribution infrastructure; (c) Billing and

collection revenue related to water use based on the gazetted and regulated public water tariff

charges; (d) promote consumer awareness on water conservation; and (e) to reduce NRW.

iv. For providing better serv ices to the customers, SY ABAS has taken various initiatives such as:

multi-channel, multi-language Contact Centre, Command Centre, real time reservoir monitoring

and management sy stem, Hy draulic Modelling & GIS/SCADA for water distribution sy stems,

Online consumer bill checking, Inter-district over-the-counter (OTC) transaction facilities, Online

water supply application for new development, Once Stop Counter Serv ice, Web -based Online

Consumer Serv ice Portal and Other multi-integrated multi-interfaced consumer applications

including iERP (water supply crisis management).

v. The points of dispute where regulatory intervention is often required include conflicts related to

the supplier of treated water and the distributor who is responsible for supply of water up to

agreed standards. Procedures have been designed to arrive at the acceptable re asons for any lapse

in quality or standards related to water treatment and supply . Disruption of quality or time of

water supply is managed using the iERP mentioned above.

v i. The other point of conflict is related to payment of bills by the supplier to the tr eatment operator,

which depends on the capital expenditure required by the supplier to ensure quality water supply

etc. These and such issues are observed due to separation of treatment and distribution functions,

as well as separation of asset constructio n and O&M functions.

4. Metropolitan Waterworks and Sewerage Sy stem (MWSS), Manila: During the v isit of the

delegation to the MWSS Regulatory Office, the following points were discussed in the presentation by

MWSS and the discussion of the delegation with officials of MWSS Regulatory Office:

i. Manila water supply is one of Asia’s oldest water sy stems. Facing the needs of improved water delivery , coverage expansion and new water source (i.e., requiring large investment), the

government privatized the water production and distribution sy stem.

ii. To regulate and promote the private companies, MWSS concession framework was developed in

1997. The Regulatory Office was created by v irtue of the Concession Agreement between MWSS

and the two Concessionaires: Manila Water Company Inc. (MWCI) and May nilad Water Serv ices

Inc. (MWSI).

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iii. MWSS regulatory commission has a Board of Trustee and the board usually makes the principal

decisions over two Concessionaires. Chief regulator is the head of the MWSS regulatory office. It

has 5 departments: (1) Public information, (2) Technical, (3) Financial, (4) Customer serv ice, and

(5) Administration and legal.

iv. The main functions of MWSS include tariff adjustment based on Consumer Price Index (CPI),

Extraordinary Price Adjustment (APJ), Rate Rebasing Adjustment, Foreign Currency Differential

Adjustments (FCDA), Early Termination Amount, Assessment of Penalties, a nd to monitor

Compliance of the concessionaires to water and waste water quality standards, Population

Coverage, Asset Management, NRW, Collection Efficiency , Operational Costs, and Customer

Serv ice Standards.

v. A point-rating system has been developed to indicate the overall performance of the WSS serv ice

provisioning sy stem. Based on this sy stem encompassing the Public Assessment of Water Serv ices

(PAWS), the point rating indicator reached 1433 in 2010 from 2 in 2003.

v i. Before reformation and privatization in 1997, the Population Served, Water Availability and Non-

Revenue Water were 6.3Million, 67 .0% and 61.0% respectively while after reformation and

privatization those values reached 14.6Million, 98.6% and 28% respectively . With the significant

expansion of water supply serv ice the water tariff also increased per cubic meter of water from

$0.16 in 1997 to $1.05 in 2013.

5. May nilad Water Services Inc., Manila: During the v isit here, Vice President, Legal and Regulatory

affairs of MWSI described the historical background of water supply system and its authority, formation of

MWSS and privatization of water supply sy stem, present structure of MWSS, obligations of the two

Concessionaires and the positive change in 24 hour water service system, house connection imp rovement,

and status of capital expenditure. The discussion at MWSI encompassed the following points:

i. Disputes amongst the customers, regulatory office, and the concessionaire often emerge from

enforcement of policies that the customers may not necessarily be aware of.

ii. Arbitration procedures are specified by the concession agreement in case of disputes to re -adjust

the water tariffs in v iew of continuing the financial sustainability of the concessionaire. The point

of dispute could be regarding whether an additional cost proposed by the concessionaire to be

recovered from tariff amounts to rate rebasing or is only an additional O&M cost recovery

proposal.

iii. Issues related to single connections being shared by multiple dwellings and a number of water

users have been observed by MWSI as well, and efforts are on to design effective solution for these

issues.

iv. Issues related to increased consumption due to average tariff, and related impacts on the network

are faced by MWSI as well.

v. MWSI has established a May nilad Water Academy that holds trainings for any interested

audience at a nominal fee, in areas such as use of EPANet software, network design, ensuring

network resilience etc.

6. Field visit to sewage and septage treatm ent plants of MWSI: The discussion of the v isiting

delegates with the officials of MWSI related to their sewage and septage management facilities

encompassed the following points:

i. The responsibilities of MWSI in Sewerage services are to (a) provide sewer serv ice connections,

(b) Maintain/repair sewer network, (c) attend to customer complaints, (d) operate and maintain

wastewater treatment facilities, and (e) plan for sewerage coverage expansion. In case of

sanitation services their responsibilities are to provide regular cleaning of septic tank, operate and

maintain septage treatment plant, attend to customer complaints, fleet maintenance, and plan for

sanitation coverage expansion.

ii. The customers connected to existing sewerage sy stem are charged Additional 20% of basic water

charge (for domestic customers) and 40% of basic water charge (for Commercial Customers).

Non-sewered Customers have to pay environmental charge of 20% of basic water charge provided

with septic tank desludging serv ices.

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iii. Land acquisition and management of local issues are responsibilities of MWSI, and not supported

by the government.

iv. MWSI and other operators of sewage and septage management facilities must adhere to the Clean

Water Act 2004, and the Supreme Court's decision in December 2008. These and such

instruments define the policy framework for environmental conservation with respect to water

and sewage treatment in the Philippines. In case of lack of adherence, contempt of court

proceeding could be moved against the defaulter.

7 . Discussion at ADB Headqu arters: The discussion at SARD, ADB, presided by Mr. Hun Kim, Director

General, South Asia Department (SARD) encompassed the following points:

i. Mr. Kim appreciated the initiatives of Bangladesh government in the formation of Water supply

and Sanitation regulatory commission and thanked the delegates for study ing the regulatory

arrangements in Malay sia and Philippines.

ii. He mentioned that Bangladesh is advancing in improvement of water supply and sanitation

coverage and remained in better position than the other south Asian countries. Mr. Kazi Abdul

Noor, Project Director, gave a short presentation on the present scenario of urban water supply

and sanitation in Bangladesh. He also thanked ADB for giv ing assistance in this project and

mentioned the importance of assistance for the follow-up on fully fledged operations of the

regulatory framework in Bangladesh.

iii. Regulatory frameworks in countries such as Bangladesh need to consider (a) the adequacy of the

mechanisms to protect poor customers, (b) the robustness of tariff mechanisms to ensure

financial sustainability of the sector, and (c) the socio -economic and environmental aspects of

regulation of WSS sector.

8. Sum m ary and conclusion: A summary of the learnings and the possible conclusions drawn from the

exposure v isit are presented in the following table:

S.

No.

Aspect of

regulatory fram ework

Sum m ary of learning and conclusion

1. Independence of the regulatory agency

1. In Malay sia, the regulatory reports to the Minister and is therefore only of

an advisory nature.

2. In Manila, the regulator is established as part of the Concession

Agreement and therefore not a strictly independent body .

3. The policy environment and the societal outlook towards the need for

regulation determines which regulatory model can work better in the

context of a country .

2. Staffing, budget, and institutional structure of the regulator

4. The institutional structure of the regulatory agencies is dy namic in nature,

with recruitment and staffing undertaken on a need basis. The regulatory

agencies have departments based on the functions required to be carried

out.

5. The regulatory agencies are financed by regulatory fees collected as a % of

the revenue of the licencees. In the initial phases, when the revenue from

the licencees was rudimentary , the government provided budgetary

support to the regulators.

6. The primary factor governing the size of the budget of the regulators is the

area being regulated, the number of licencees or 'regulated agencies', and

the number of staff required to be hired by the regulators. The regulatory

agencies v isited had staff between 25 and 40 in number.

3. Regulatory procedures

7 . The concession agreement in Manila, and the Water Serv ices Industry Act

2006 in Malay sia provide clear framework for granting of licence to

construct, operate, and maintain sy stems for WSS provisioning. The

transition procedures are laid out for handling cases related to

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S. No.

Aspect of regulatory

fram ework

Sum m ary of learning and conclusion

cancellation of licence.

4. Experience of the regulators

8. The regulator in Manila seems to have been play ing the role more of an

arbitrator. The one in Malay sia is of an advisor.

9. The overall impact of regulation on the sector has been in terms of

increased coverage of WSS serv ice provisioning (primarily through higher

confidence of licencees and the customers that their grievances will be

heard and addressed). This may have led to more efficient use of funds,

efficient operations, and also better environmental conservation thro ugh

the use of advanced technology being made possible v ia financially

sustainable operations (in turn made possible through transparent and

accountable tariff determination).

5. Possible changes to the existing regulatory mechanism

10. It could be more effective to have the regulatory agencies established

separately through their own Acts. The Acts could, instead of wording out

punishments and penalties, determine the processes and procedures to be

carried out for determination of penalties.

11. The separation of asset creation and asset maintenance was seen to create

problems related to handling conflicts. These could possibly be addressed

by regulatory restructuring.

Participants:

1. Mr. S.M. Zahir Khan, Joint Chief, Phy sical Infrastructure Div ision, Planning Commission.

2. Mr. Kazi Abdul Noor, Project Director (Joint Secretary), Establishing a Regulatory Framework for Urban Water Supply and Sanitation Sector in Bangladesh, PSU, Local Government Div ision.

3. Mr. Dhirendra Nath Sarkar, Managing Director, Rajshahi Water Supply and Sewerage Authority (RWASA), Rajshahi.

4. Mr. Md. Abdullah P.Eng, Managing Director, Khulna Water Supply and Sewer age Authority (KWASA), Khulna.

5. Mr. Md. Golam Mowla, Deputy managing Director (Finance), Chittagong Water Supply and Sewerage Authority, Chittagong.

6. Mr. Md. Abdur Rauf, Deputy Project Director (Deputy Secretary), Establishing a Regulatory Framework for Urban Water Supply and Sanitation Sector in Bangladesh, PSU, Local Government Div ision.

7 . Mr. Mohammad Ruhul Amin Khan, Chief Executive Officer, Rangpur City Corporation.

8. Mr. A.K.M Ibrahim, Superintending Engineer, Ground Water Circle, DPHE. Dhaka.

9. Mr. SDM Quamrul Alam Chowdhury, Deputy Managing Director (Operation and Maintena nce), Dhaka WASA.

10. Mr. Muhammad Faruq-Uz-Zaman, Senior Assistant Secretary, Local Government Div ision.

11. Mr. Shishir Kumar Biswas, Assistant Engineer, Establishing a Regulatory Framework for Urban Water Supply and Sanitation Sector in Bangladesh, PSU, Local Government Div ision.

TA Consultants

1. Dr. Khondaker Azharul Haq ,Deputy Team Leader (Water Supply Sector Reform Specialist), TA -8320

2. Mr. Tejas Pol, Capacity Building and Coordination Expert (International), TA -8320

***

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Annex 3. Summary of Discussions held during training programme

1. From 9 November, 2014 to 11 November, 2014 a training programme was held at Department of Public

Health Engineering (DPHE), Kakrail, Dhaka. The participants of the programme included officials from

key WSS serv ice providers in Bangladesh (including WASAs, City Corporations, and Paurashavas). During

the training, participants were presented with details of the regulatory framework. Their inputs and

suggestions were sought on the Regulations drafted as part of the regulatory framework. This section

summarises the discussions held during this training programme.

2. The overall objective of the training programme was to (a) disseminate to the key WSS serv ice providers

details about the regulatory framework, and (b) seek their feedback and inputs on revision/ refinement of

the Regulations drafted as part of designing the regulatory framework.

3. Regulatory Accounting Fram ework (RAF)

a. RAF and its relation to the Bangladesh Finance and Accounting Standards (BFAS): The WSSRC,

through RAF, will specify formats and standards for accounting, which will be within the framework

of the BFAS. These formats will require reporting by the service providers on current cost of the

assets, and renewal costs that impact the annual costs incurred by the service providers. The

participants emphasised on importance of carrying out financial analysis of WSS serv ice providers,

specifically focussing on their debt situation to assess their financial h ealth.

b. Accounting techniques: WSSRC has been empowered to set up appropriate mechanisms to oversee

implementation of the accounting methodology (related to areas such as expenses, pricing etc.). In

this context, the discussion focused on improving techniques to account for transactions related to

water supply, sewerage, and drainage separately. In addition, aligning RAF with the new proposed

ADB sy stem of account reporting was discussed. Apart from this, rules and regulations related to

accounting under the Company Law of Bangladesh were discussed to be important for the proposed

Regulations.

c. Calculation of asset value: Limited ability of service providers to calculate and account for various

financial parameters like asset valuation and expenditure projections (due to the specific on-ground

considerations) for O&M was discussed. In this context, the RAF provides for the methodology for

calculation of asset value (Regulatory Capital Value) to be refined by the WSSRC in consultation with

the serv ice providers. This would require the service providers to also carry out a detailed O&M study .

It will assist serv ice providers to gauge future replacement costs and optimally charge these costs to

the customer. The commission could support efforts for building adequate technical capacity within

serv ice provider organisations to calculate these parameters (the WSSRC Bill, inter alia, empowers the

WSSRC to (a) appoint consultants, experts etc. for studies as required, and (b) disseminate in a

consultative manner knowledge regarding the WSS sector to various stakeholders) .

4. Key Perform ance Indicators (KPIs) and Service Standards

a. Data Required: Currently, the availability of data and thoroughness of data collection mechanisms

with the WSS serv ice providers is limited. To ensure smooth functioning of the Regulations on KPIs

and Serv ice Standards, the WSSRC could take initiatives to promote data collection across all levels. It

would support gradual improvement of data quality and management across all service providers .

b. Stakeholder participation: The WSSRC will focus to collate data on additional parameters (like

understanding gender related contribution to water activities, average number of people using each

connection in WSS) to improve its services across different stakeholders. WSSRC will encourage

participation/ comments from different stakeholders and incorporate their suggestions in

implementing the regulatory framework.

c. Perception of terminology: During the discussion, WSS serv ice providers were observed to perceive

certain terms differently. For instance, officials from certain WSS serv ice providers defined 24/7 water

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availability to households for 24/7 from storage in their respective sumps. The WSSRC can

accommodate such differences in perception by improvising on the terminology through consultative

processes of drafting and promulgation of the respective Regulations. It can refine the proposed KPI

format to ensure that terms/characters convey data requirement as per the proposed regulatory

framework to achieve the larger sectoral goals.

5. Customer Service (Improvement) and Customer Interest (Protection) Regulations

a. Improving service delivery: Customer Interest Protection Regulations focus on improving customer

serv ice delivery by the service providers. During the training, measures such as drafting the Customer

Interest Protection Plan, creating customer awareness, addressing their complaints/grievances were

identified as important initiatives to improve delivery . This could enhance willingness of the

customers to pay for (improved) services. This could also permit service providers to exercise tariffs

which would meet their costs to a higher extent. Further, the Customer Interest Regulations would

also ensure that the customers are well aware of all the measures being taken or planned to be taken

by the WSS serv ice providers to protect the interests of the customers. This would result in reduction

of complaints launched by the customers. Thus, this set of procedures to protect customer interests

will in turn result in protection of the interests of WSS serv ic e providers as well. Additionally, since

the WSSRC Bill empowers the WSSRC to take on board consultative inputs from all stakeholders, the

CIP related Regulations and procedures will further strengthen these consultative procedures.

6. T ariff adjustment and review m ethodology

a. Social sustainability vis-à-vis financial sustainability: Service providers expressed their oft inability

to meet the social mandate to provide WSS serv ices to all (especially low-income groups) with existing

infrastructure, and maintain financial sustainability simultaneously. The WSSRC would therefore

support service providers through consultative procedures to (a) plan for improvement in service

provisioning, and (b) adjust tariffs to ensure financial sustainability . For example, measures such as

tax holidays (incorporated through the procedures as specified by the WSSRC Bill and the Tariff

Regulations) would permit WSS serv ice providers to gradually improve their coverage while keeping

sound financial health to meet regulatory requirements.

b. Tariff Regulation: Issues relating to improving on key service areas such as controlling non-revenue

water, improved billing, revenue collection, imposing penalties and improving coverage, that overlap

with tariff adjustment, were discussed. These are essential for financial sustainability and will be

essential for tariff adjustment.

7 . Other Issues

a. Ensuring appropriate composition of the WSSRC: Ensuring quality composition of WSSRC and

incorporation of key lessons learned for establishment of similar commissions in Bangladesh is

essential. One key suggestion was related to gradual expansion of the commission to incorporate more

participation from different areas/functionaries to ensure holistic presence.

b. Drainage: Provision for assigning responsibility, deciding tariff levels and its collection for drainage

sy stem requires attention. Therefore, it would be useful for the WSSRC to incorporate aspects related

to drainage maintenance, coverage and collection of charges, and provision for private sector

participation into proposed regulatory framework.

c. Jurisdiction of the Act: The act should specifically state area of its operation in terms of geographical

mapping for future scenarios. Such initiatives would ensure solutions to future disputes which may

arise between WSS serv ice providers of different areas (such as development of satellites cities). The

act would be instrumental to empower the commission to decide on the duties/mandate of different

WSS serv ice providers as per geographical locations.

d. Regulation mechanism in other parts of the world: Understanding regulatory mechanisms being

followed in other parts of the world is essential to incorporate best practices.

***

42176-012: Technical Assistance Consultant’s Report...Prepared by PricewaterhouseCoopers Pvt. Ltd....

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