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© 2019 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 19 18 17 16

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November 2019

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Contents

Abbreviations .......................................................................................................................................... 5

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

1 INTRODUCTION ............................................................................................................................. 10

1.1 Context .................................................................................................................................. 10

1.2 Objective of the Study ........................................................................................................... 10

1.3 Structure of the Report ......................................................................................................... 10

2 RECOMMENDATIONS FOR REMEDIAL ACTIONS ........................................................................... 12

2.1 Starting point ......................................................................................................................... 12

2.2 Midterm Review Main Outcomes ......................................................................................... 12

2.2.1 Relevance of PENSAAR 2020 Objectives at Midterm .................................................... 13

2.2.2 Likelihood of Achieving PENSAAR 2020 Objectives ....................................................... 13

2.2.3 Issues Impeding PENSAAR 2020 from Achieving Its Objectives .................................... 17

2.3 Methodology to Design Remedial Actions ............................................................................ 18

2.3.1 Defining Remedial Actions ............................................................................................ 18

2.3.2 Prioritizing Remedial Actions......................................................................................... 23

2.3.3 Describing Priority Remedial Actions ............................................................................ 25

3 PRIORITY REMEDIAL ACTIONS ....................................................................................................... 27

3.1 ACTIONS FOR THE LEGAL, INSTITUTIONAL AND REGULATORY FRAMEWORK ...................... 27

Box 3.1 Define Basic Organizational Model .................................................................................. 27

Box 3.2 Enforce Law on Connection for Wastewater Collection ................................................... 30

Box 3.3 Tariff Regulation ............................................................................................................... 31

3.2 ACTIONS TARGETED TOWARD CAPACITY BUILDING AND GUIDANCE .................................. 33

Box 3.4 Capacity Building .............................................................................................................. 33

Box 3.5 Water Value and Willingness to Pay ................................................................................ 37

Box 3.6 Water Loss Reduction Programs ....................................................................................... 40

3.3 ACTIONS TARGETED TOWARD FINANCIAL VIABILITY ............................................................ 43

Box 3.7 Develop Business Plans per Utility .................................................................................... 43

3.4 ACTIONS TARGETED TOWARDS INFORMATION AND ACCOUNTABILITY .............................. 46

Box 3.8 Improve PENSAAR Indicators ............................................................................................ 46

Box 3.9 Create Tools for More Assertive Monitoring and Evaluation ........................................... 49

4 OPERATIONALIZATION OF PRIORITY REMEDIAL ACTIONS ............................................................ 52

4.1 Budget of Priority Remedial Actions ..................................................................................... 52

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4.2 Timeline of Priority Remedial Actions ................................................................................... 52

4.3 Modus Operandi .................................................................................................................... 54

4.4 Action Plan ............................................................................................................................. 56

APPENDIX A: PRELIMINARY REMEDIAL ACTIONS TO IMPROVE PENSAAR 2020 IMPLEMENTATION .... 59

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Abbreviations

AA AdP AEPSA ANEAS APA APDA AR

water supply Portugal Water Services Company (Águas de Portugal, state-owned) Portuguese Companies Association for the Environment Asociacion Nacional de Empressas de Agua y Saneamiento Portuguese Environment Agency (Agência Portugesa do Ambiente) Portuguese Association of Water Operators wastewater (agua residual)

capex capital expenses DECO EG

Portuguese Association for Customer Protection operator (entidade gestora)

ERSAR Water and Waste Services Regulatory Authority (Entidade Reguladora dos Serviços de Águas e Resíduos)

EU GAG

European Union PENSAAR 2020 Management Support Group

GoP Government of Portugal HR IAWD IMTA

human resources International Association of Water Service Companies in the Danube River Catchment Area Mexican Institute of Water Technologies

IRAR Institute for the Regulation of Water and Waste (Instituto Regulador de Águas e Resíduos)

IT information technology KPI M&E

key performance indicator monitoring and evaluation

MoE Ministry of Environment NGO NRW

nongovernmental organization nonrevenue water

opex operating expenses O&M operations and maintenance PEAASAR Strategic Plan for Water Supply and Wastewater—A New Strategy for the Water

Supply and Wastewater Sector (Plano Estratégico de Abastecimento de Água e de Saneamento de Águas Residuais)

POSEUR Operational Program for Sustainability and Efficient Use of Resources (Programa Operacional Sustentabilidade e Eficiência no Uso dos Recursos)

RCA SAR

root cause analysis wastewater collection and treatment (saneamento de águas residuais)

SSE State Secretariat of Environment SVGW WSS

Swiss Society for Gaz and Water water supply and sanitation

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EXECUTIVE SUMMARY

Since joining the European Union (EU) in 1986, Portugal has made significant improvements to its water supply and sanitation (WSS) sector, increasing access to services in the rural and peri-urban areas and moving toward compliance with the EU water legislation. The third strategic plan, PENSAAR 2020—A New Strategy for the Water Supply and Wastewater Sector, is currently being implemented. Its objective is to achieve quality services at a sustainable price.

The European Commission and the World Bank share the objective of building competitive and sustainable economies and reducing poverty and social exclusion—the goals of the Europe 2020 Agenda, which emphasizes smart, sustainable, and inclusive growth to achieve these. Hence, the European Commission has provided a trust fund under an administrative agreement with the World Bank to support the Government of Portugal (GoP) in conducting a midterm review of PENSAAR 2020. The main objective of the work is to improve the performance of PENSAAR 2020 through the introduction of remedial actions in the strategic plan, and to develop the outline of the next strategic plan. This report is the second deliverable of this program of work. It provides priority remedial actions for the current PENSAAR 2020 aiming at addressing the shortfalls of the plan as identified in the mid-term review.

At the end of 2018, the PENSAAR 2020 Management Support Group (GAG) reported on the PENSAAR 2020 progress compared with the operational objectives through the end of 2017. The overall evolution of most indicators is positive in line with the trend shown by the sector over the last two decades. Despite this generally positive evolution, the WSS sector still faces considerable challenges, namely water losses, flood events related to sewerage and rainwater drainage, cost recovery, and rehabilitation of mains and sewers. Further, the GAG notes that underperforming indicators have been a chronic problem, and little remedial action has been taken. These issues require immediate improvement in actions taken to ensure the medium- and long-term technical and economic sustainability of the WSS sector.

Recommendations for remedial actions are provided in this report to assist the State Secretariat of Environment (SSE) to improve PENSAAR 2020 performance and to achieve the 19 operational targets and the strategy’s five pillars. This report is the second deliverable of a broader work program structured along three lines: (i) provide a full midterm review (MTR) and proposal of remedial actions; (ii) improve the monitoring and evaluation framework; and (iii) develop the outline for the next strategic plan.

The methodology used to prepare the recommendations for remedial actions is anchored in the results and findings of the PENSAAR 2020 MTR. It comprises four steps (figure ES.1). Step 1 identifies non- or underperforming areas, and step 2 identifies the root causes. Steps 3 and 4 list and filter preliminary remedial actions that are prioritized according to a ranking made by Portuguese water stakeholders.

Figure ES.1 Four-Step Methodology to Identify and Prioritize Remedial Actions

Identify Areas of Focus

Identify Root Causes

List Preliminary Priority Actions

Filter Priority Actions

1 2 3 4

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Because the remaining timeframe of PENSAAR 2020 is very short (the plan is due to end at the end of 2020), the remedial actions could either focus on implementing actions offering the highest rate of return, or on actions aimed at improving the situation in utilities that are most lagging. For instance, reducing further nonrevenue water (NRW) in large urban utilities would be more efficient to help achieve PENSAAR 2020 targets, whereas reducing NRW in small utilities is needed but less efficient to achieve PENSAAR 2020 objectives. Nevertheless, it was decided to propose remedial actions focusing both on short-term and medium-term improvement of the WSS sector. The actions detailed in this report can start within PENSAAR 2020, and will likely continue beyond the present strategic plan, contributing to goals for the next plan. The preliminary remedial actions are grouped into four categories that reflect the areas of improvement of PENSAAR 2020 identified as a result of the MTR (table ES.1):

• Legal, institutional, and regulatory framework

• Capacity building and guidance

• Financial viability

• Information and accountability

The list of preliminary remedial actions was shared with the main water stakeholders, who ranked them using a three-level scoring system. The actions displaying the highest scores have been shortlisted as priority remedial actions.

Table ES.1 Priority Remedial Actions

Legal, institutional, and regulatory framework

• Define organizational model including key competences and skills

• Enforce applicable law on connection and integration of individual solutions for wastewater collection

• Enact tariff regulation

Capacity building and guidance

• Intensify capacity building and promote technical assistance

• Develop communication and engagement strategy on water value, efficient use of water, individual sanitation systems, and willingness to pay

• Structure water loss reduction programs (e.g., performance-based contracts, POSEUR support)

Financial viability

• Develop business plans and a base investment case for the upcoming 5-10 years per utility

Information and accountability

• Improve PENSAAR indicators, entailing KPI breakdown by utility

• Create tools for more assertive M&E

Note: KPI = key performance indicator; M&E= monitoring and evaluation; PENSAAR = Strategic Plan for Water Supply and Wastewater—A New Strategy for the Water Supply and Wastewater Sector; POSEUR = Operational Program for Sustainability and Efficient Use of Resources.

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The remedial actions are described in terms of time frame, area of involvement, political feasibility, implementation cost, type of cost, stakeholders, likelihood of funding available, expected impact, and risk of failure. A comparative analysis was performed to assess the trade-offs between the dimensions for each priority remedial action as shown in the spider diagrams (figure ES.2). The closer the blue line is to the edge, the better the variable. Each spider diagram represents a remedial action as listed in table 1.1. Finally, a Gantt chart was produced to illustrate each priority remedial action and associated practical steps, the start and end date, the expected duration, the possible time overlap, and the duration of this overlap.

Despite the short time left under PENSAAR 2020, a steering committee is needed to assess and monitor progress, implementation, and effectiveness of PENSAAR 2020 remedial actions. The key stakeholder will be SSE to initiate such steering committee and provide guidance on their role.

Figure ES.2 Assessment of Remedial Actions

Note: KPI = key performance indicator; M&E = monitoring and evaluation.

The overall budget of priority remedial actions is estimated at €3.09 million, comprising of:

• €1.42 million for “legal, institutional and regulatory framework” priority remedial actions, representing 46 percent of the overall priority remedial action budget

• €1.15 million for “capacity building and technical assistance” priority remedial actions, representing 37 percent of the overall priority remedial action budget

• €0.2 million for “financial viability” priority remedial actions, representing 7 percent of the overall priority remedial action budget

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• €0.32 million for “information and accountability” priority remedial actions, representing 10 percent of the overall priority remedial action budget.

Most priority remedial actions are to be funded by the State Secretariat of Environment (SSE), the Ministry of Environment (MoE), and the Water and Waste Services Regulatory Authority (ERSAR), and to a lesser extent by the Portuguese Environment Agency (APA).

Remedial actions need to be designed in detail, this phase is key to build consensus among stakeholders, and create a shared vision regarding the content and target of the action. This is a step to promote and ensure buy-in by municipalities, which has proven problematic in the past years.

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1 INTRODUCTION

1.1 Context

Since joining the European Union (EU) in 1986, Portugal has significantly improved its water supply and Sanitation (WSS) sector, increasing access to services in the rural and peri-urban areas and moving toward compliance with EU water legislation. The third strategic plan, PENSAAR 2020—A New Strategy for the Water Supply and Wastewater Sector, is being implemented; its objective is to achieve quality services at a sustainable price. Despite the overall good status of the services compared to other sectors, and the outstanding progress made by Portugal in the last three decades, achieving some of the operational indicators has posed difficulties over the past few years, particularly in areas relating to connection rate (although good national coverage); efficient management of assets and increased rehabilitation needs predicted in the coming years; sustainable recovery of expenses; and optimization or reduction of operating expenses (opex).

The European Commission and the World Bank share the objective of building competitive and sustainable economies and reducing poverty and social exclusion—the goals of the Europe 2020 Agenda, which emphasizes smart, sustainable, and inclusive growth to achieve these. The European Commission and the Bank concur that direct interaction is beneficial to both institutions and ultimately benefits their client countries. This is particularly true for the provision of analytical, advisory, and knowledge services and technical assistance. Hence, the European Commission has provided a trust fund under an administrative agreement with the World Bank to support the Government of Portugal (GoP) in conducting a midterm review of PENSAAR 2020, aimed at sustaining and improving the WSS sector’s performance.

1.2 Objective of the Study

The objective of the study executed under the trust fund is to improve performance of PENSAAR 2020 and develop the outline for the next strategic plan. The activities are structured along three lines:

A. Improve the implementation of the Water Supply and Wastewater Sector Plan - PENSAAR 2020 by carrying out a midterm review of the implementation of PENSAAR 2020, that will enable the State Secretariat of Environment (SSE) of the Government of Portugal (GoP) to enhance implementation of the Sector Plan;

B. Enhance the current monitoring and evaluation (M&E) framework for the implementation of PENSAAR 2020 and design of a new M&E platform to follow performance of the current and future strategic plans; and

C. Prepare the outline of the next WSS strategic plan (for the period 2021-2027) focusing on specific areas and issues that need to be addressed to improve sector performance in line with good international and European practices.

This report is the second deliverable under this program of work. It provides priority remedial actions for the current PENSAAR 2020 to address the shortfalls of the Plan as identified in the MTR.

1.3 Structure of the Report

The report is part of several other deliverables but builds strongly on the first deliverable Midterm Review of PENSAAR 2020, deliverable A.1. The report is structured as follows. Chapter 2: “Recommendations for Remedial Actions” provides a snapshot of the MTR and what has been achieved in Portugal under the first three water strategies. It provides the starting point for design of the remedial actions. Chapter 3: “Priority remedial actions” provides the proposed remedial actions and a

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description of the particular action. Chapter 4: “Operationalization of the remedial actions” discusses how the remedials actions can be made effective.

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2 RECOMMENDATIONS FOR REMEDIAL ACTIONS

2.1 Starting point

The objective of the recommendations for remedial actions is to assist the SSE to improve PENSAAR 2020 performance and the level of achievement of the 19 operational objectives and the five pillars of the strategy. The recommendations incorporate international experience (global and from the European Union [EU] benchmark) on institutions, policies, regulations, and utility performance that seem relevant for each pillar of the strategy. The recommendations account for some issues identified in the annual PENSAAR 2020 implementation reports produced by the PENSAAR 2020 Management Support Group (GAG), such as the following:

• Promote good governance and financial sustainability of Portuguese water supply and sanitation (WSS) service providers.

• Reach cost recovery while having affordable tariffs.

• Achieve efficiency improvements in small municipalities.

• Ensure sustainable financing of the WSS sector, through better access to commercial borrowing, and the challenges identified during the midterm review of PENSAAR 2020 under activity A.1.

The methodology for this activity is based on the results and findings of the midterm review (MTR). In consultation with the SSE and the PENSAAR Project Advisory Group (PAG), the activity supports the Government of Portugal (GoP) to select priority operational objectives and targets in line with national and EU priorities. Based on the root cause analysis (RCA) and the priority actions identified in the MTR, the Bank has carried out a screening of the ease of implementation, costs of implementation, and constraints for each action. The Bank has developed specific recommendations, in close collaboration with the SSE, for short-term actions (low hanging fruits) toward an improved level of achievement of PENSAAR 2020 targets.

The Bank provides global knowledge on sector and utility improvement through analytical work. It has identified relevant international experience to sector reform (including a focus on other EU Member States with similar WSS sector issues) and has worked with the SSE to propose a holistic reform path for the short- and midterm. Activities for short-term interventions focus on implementation in the remaining year(s) of PENSAAR 2020, whereas midterm activities are inputs for the outline of the new sector strategic plan to be developed. Because the remaining time for PENSAAR 2020 is brief, remedial actions will have only a limited impact on current PENSAAR objectives. Therefore, the list of remedial actions seeks to address PENSAAR 2020 shortcomings—and to trigger discussion, to create the basis for stakeholder engagement regarding priority setting for longer-term actions and thus pave the way for the next strategic plan.

2.2 Midterm Review Main Outcomes

The strategic framework established by PENSAAR 2020 relies on five key pillars: (i) environmental protection and the improvement of the quality of the water bodies; (ii) improvement of the quality of the services provided; (iii) optimization and efficient management of resources; (iv) economic, financial, and social sustainability; and (v) basic and cross-cutting conditions. Figure 2.1 summarizes the 19 operational objectives defined for each of the 5-strategy pillars, supported by 48 measures and 133 actions (Error! Reference source not found.).

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Figure 2.1 Strategic Pillars (Axes) and Operational Objectives

Source: PENSAAR 2020 Volume II.

2.2.1 Relevance of PENSAAR 2020 Objectives at Midterm

For the MTR an international benchmarking exercise was conducted with five EU Member States and utilities displaying the same performance potential. The goal is to identify Portugal’s blind spots and compare them with PENSAAR 2020 objectives. When evaluating aspects of water supply services related to citizen engagement and affordability, Portugal is at or very close to meeting the standards of EU best performing Member States, but its performance is notably weaker for other aspects of WSS services that are more technical and less publicly advertised. The distance to the best performing Member States (in most cases, Denmark) is typically more pronounced in sewerage and treatment, and much less in water services.

These results indicate that—at least at country level—a trade-off exists between affordability and infrastructure quality and sustainability. Member States at the performance frontier, such as Denmark, exhibit high performance at the cost of high tariffs, which translate into low affordability. While other surveyed Member States are in intermediate positions in the trade-off between affordability and infrastructure quality, Portugal is at the low tariff and low-quality end of the spectrum.

The results of this European comparison tend to confirm the relevance of PENSAAR 2020 objectives at midterm regarding the current state and performance of the Portuguese WSS sector. Indeed, this comparison highlights areas of improvement that match PENSAAR with these operational objectives: compliance with discharge parameters (1.1); wastewater service coverage (1.3); mains failures (2.1); water losses (3.2); rehabilitation of mains and sewers (3.4); and nonrevenue water (NRW) (4.3).

2.2.2 Likelihood of Achieving PENSAAR 2020 Objectives

At the end of 2018 the Management Support Group (GAG) reported on progress made against the operational objectives through the end of 2017. The overall evolution of most indicators is positive, which is in line with the trend shown by the sector over the last two decades. Despite this generally positive evolution, the water sector still faces considerable challenges: water losses, flood events related to sewerage and rainwater drainage, low sewer connection, cost recovery, and rehabilitation of mains and sewers. Further, the GAG notes that underperforming indicators have been a chronic

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problem, and little remedial action has been taken. The following issues, highlighted in the GAG report, require improvement in terms of actions taken to ensure the medium and long-term technical and economic sustainability of the WSS sector:

• Compliance with the applicable regulations and legal framework (OP 1.1)

• Increased physical access to wastewater services (OP 1.3)

• Improvement of the quality of WSS treatment services (OP 2.1 and 2.2)

• Optimizing the use of installed capacity and increasing the number of service subscriptions and adhesion contracts (OP 3.1)

• Efficient asset management and increased rehabilitation of assets (OP 3.4)

In the midterm review (MTR) all indicators and their performance have been reviewed (Worldbank, 2019a, Appendix A). Several objectives have not yet achieved their targets or are unlikely to achieve them by 2020 (table 2.1). Most of these worrisome areas fall in the sphere of the municipalities, including financial sustainability, efficiency of the operators and optimization of the resources used, quality of individual and small sanitation systems, failure of potential customers to connect to wastewater networks (despite available infrastructure), and quality of service indicators for wastewater services to the extent they are influenced by stormwater-related issues (such as floods). Similar to previous strategic plans, PENSAAR 2020 relies heavily on national institutions and mature operators to implement public policies for the water sector, such as Aguas de Portugal (AdP), Water and Waste Services Regulatory Authority (ERSAR), and Portuguese Environment Agency (APA). Table 2.1 PENSAAR 2020 Operational Objectives Unlikely to Be Achieved

Operational objective Indicator Unit Baseline 2011 2017

Target 2020

Pillar 1: Environmental protection, improving the quality of water bodies

1.1: compliance with regulation

1. Improving the quality of water bodies

% of Water bodies at national level that meet the classification criteria for good ecological status

52 53, assumed to be the value of 2015

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2. º Litigation processes Number of agglomerations in litigation in the three cases (normal areas, sensitive areas, and small agglomerations)

208 46 0

1.2: reduction of urban pollution in water bodies

1. Improving quality of water bodies % of national water bodies whose concentration of general physicochemical elements supporting biological elements meet classification criteria for good ecological status

52 No evaluation value of 2015 is assumed: 53

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2. Unit cost of pollution removed € CBO5 removed per inhabitant 0,.015 to €0.045)

0.03

€ N removed per inhabitant (€0.011 to €0.041)

0.026

€ P removed per inhabitant (€0.0048 to €0.072)

0.006

1.3: increase in physical accessibility to the wastewater service

1. % of households covered by operators with satisfactory evaluation in the indicators physical accessibility of the service (AR01)

% of households covered by operators with satisfactory evaluation on the indicator AR01

Bulk + retail: 67 Bulk + retail: 83

Bulk + retail: 100

2. % of households covered by satisfactory individual wastewater solutions in respect of the total of households without physical accessibility to the service (dAR09b/(dAR11b-dAR08b-dAR07b))

% of households covered by satisfactory individual wastewater solutions in relation to the total of households without physical accessibility to the service

No baseline 5 Growing trend

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Pillar 2: Improving the quality of services rendered

2.2: improving the quality of the SAR service

1. % of households covered by operators with satisfactory assessment in the occurrence of floods (AR03)



Bulk + retail: 80

2. % of households covered by operators with satisfactory assessment in the occurrence of structural collapses in sewers (AR09)



Bulk + retail: 80

3. Level of satisfaction of wastewater service users

No baseline 5.69/7 Growing trend

Pillar 3: Optimization and efficient management of resources

3.1: optimization of the utilization of installed capacity and increased adherence to the service

2. % of households served by operators with satisfactory assessment in the adequacy of treatment capacity (AA09)

% of households served by operators with satisfactory evaluation on the AA09 indicator

Bulk + retail: 33 Bulk + retail: 7 Bulk + retail: 80

3. % of households covered by operators with satisfactory assessment of adherence to the service (AR06)

% of households served by operators with satisfactory evaluation on the AR06 indicator

Bulk: 47 Retail: 48

Bulk: 62 Retail: 58

Bulk: 80 Retail: 80

4. % of households served by operators with satisfactory assessment in the adequacy of treatment capacity (AR07)



Bulk + retail: 80

3.2: reduction of water losses

% of households covered by operators with satisfactory assessment of the actual losses of water (AA13)


Bulk: 44 Retail: 43

Bulk: 45 Retail: 62

Bulk: 80 Retail: 80

3.3: control of undue influences

1. % of households covered by operators with an action plan for the control of infiltrations and undue influences to the public wastewater systems implemented

No baseline n.a. Define after baseline

2. % of undue affluent to public wastewater systems in operators with a plan of action implemented for the control of infiltrations and undue inflow

No baseline n.a. Define after baseline

3. % of the treatment capacity used under conditions of overuse (%) (AR07 adapted)

% of the treatment capacity used under conditions of overuse

Bulk + retail: 9 Bulk + retail: 8 Decreasing trend

5. % of households served by operators with satisfactory assessment in the occurrence of floods (AR03)



Bulk + retail: 60

3.4: efficient asset management and increased rehabilitation

1. % of households covered by operators with satisfactory assessment in the rehabilitation of pipelines (AA10)



Bulk + retail: 80

2. % of households covered by operators with satisfactory evaluation in the rehabilitation of sewers (AR08)


Bulk + retail: 34 Bulk + retail: 7 Bulk + retail: 80

3.5: valorization of resources and by-products

1. Reused residual water/treated residual water (%) ((dAR25i+dAR25ii)/(dAR24)

% Bulk + retail: 0.1 Bulk + retail: 1.3

Growing trend

2. % of sludge valued relatively to volumes produced: V (%) = ((quantity of treated sludge applied in agriculture + quantity of sludge treated by composting + amount of sludge energetically valued)/total quantity of sludge) * 100

% 33% 52% Growing trend

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3. Own production of energy/energy consumption (%) (DAA28/dAA29 and dAR27/dAR28)

% AA (bulk + retail): 0.18 AR (bulk + retail): 3.84

AA (bulk + retail): 1.12 AR (bulk + retail): 5.54

Growing trend

3.6: allocation and efficient use of water resources

1. % of households covered by operators with satisfactory assessment in compliance with the licensing of funding (AA14)



Bulk + retail: 100

2. Water abstraction per person (lpcd) (dAA20ab/(dAA07b x N.º hab. per households))

lpcd Bulk + retail: 300 Bulk + retail: 309

Downward trend

3. Consumption per person (billed) (lpcd) (dAA16b/(dAA07b x N.º hab. per households))

lpcd Retail: 195 Retail: 195 Downward trend

4. % of population served by operators with recognized merit in efficient use of water

No baseline n.a. To be determined

Pillar 4: Economic, financial, and social sustainability

4.1: sustainable recovery of expenditures

2. % of households covered by operators with satisfactory assessment of expenditure coverage (AA06)

% of households covered by operators with satisfactory evaluation in AA06 indicator

Bulk: 61 Retail: 46

Bulk: 66 Retail: 49

Bulk: 100 Retail: 100

4. % of households covered by operators with satisfactory assessment of total spending coverage (AR05)

% of households covered by operators with satisfactory evaluation on indicator AR05

Bulk: 74 Retail: 38

Bulk: 79 Retail: 55

Bulk: 100 Retail: 100

5. % of households covered by EGs with social tariff

% of households covered by EGs with social tariff

Retail (AA): 48 Retail (AR): 38



4.2: reduction and/or optimization of operating expenses

% of operators with operating costs satisfactory within a reference band of efficient unit operating costs

No baseline n.a. Growing trend

4.3: reduction of nonrevenue water

% of households covered by operators with satisfactory assessment in nonrevenue water (AA08)

% of households served by operators with satisfactory evaluation in the AA08 indicator


Bulk + retail: 85

Pillar 5: Basic and cross-cutting conditions

5.1: increased availability of information

Infrastructural and asset management knowledge index (DAA44 or DAR45)

Using the total length weighting of pipelines/sewers

AA (bulk + retail): 49 AR (bulk + retail): 46

AA (bulk + retail): 136/200 AR (bulk + retail): 114/200

AA (bulk + retail): 100 AR (bulk + retail): 100

5.2: innovation 1. Number of programs /partnerships between public and private entities with research and teaching centers

Number No baseline n.a. Growing trend

5.3: improvement of the operational framework, management, and provision of services

1. % of lodgings with satisfactory quality (good + median); indicators of the partnership agreement

% AA bulk: 73 Retail: 60 AR bulk: 65

Retail: 49

AA bulk: 78 Retail: 69 AR bulk: 67

Retail: 62

AA bulk: 80 Retail: 80 AR bulk: 80 Retail: 80

2. % of households covered by management entities serving less than 10,000 households

% of households served by managing entities serving less than 10,000 households

AA retail: 13 AR retail: 14

AA retail: 13 AR retail: 13

No target

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5.4: climate change, natural disasters, risk-reduction, adaptation

% of households covered by operators with contingency plans, energy efficiency, security and adaptation of approved infrastructures (or actions) and in implementation

To be defined based on future surveys

n.a. Downward trend

5.5: externalities: employment, competitiveness, internationalization

1. Number of jobs created in the private sector

Number Municipal concessions: personal affection to the service AA: 1,128 (retail) + 9 (bulk) = 1,137 Personal affection to the service AR: 516 (retail) + 46 (bulk) = 562

n.a. Growing trend

Sector: outsourcing personnel AA (bulk + retail): 894 Outsourcing personnel AR (bulk + retail): 1,000

n.a. Growing trend

2. Number of tenders launched and awarded

No baseline Growing trend

3. Volume of contracts awarded to national companies in the AA and SAR sectors in other countries

No baseline Growing trend

Note: AA = water supply; AR = wastewater; EG = operator; n.a. = not applicable; SAR = wastewater collection and treatment.

2.2.3 Issues Impeding PENSAAR 2020 from Achieving Its Objectives

Some issues preventing PENSAAR 2020 from achieving its objectives are linked to the sector context, such as the trade-off between affordability and cost recovery, or the persistent inefficiency of small utilities. Others derive from PENSAAR design in terms of targets and assumptions; lack of involvement of municipalities; and alignment between institutions, low incentive mechanisms, and enforcement capacities. Others relate to PENSAAR implementation, such as the lack of funding.

Although PENSAAR is a technically solid plan, most of the constraints affecting its performance are related to institutional or public policy issues linked to the role of the players, such as that of the AdP, municipalities, and the private sector. Municipalities are key players in PENSAAR’s implementation, and the sector considers the aggregation of municipalities as an important step to achieve some PENSAAR objectives. However, because the incentives are not sufficient for some municipalities, the lack of enforcement, some penalties, or capabilities—and limited engagement1—among other reasons, prevent the sector from achieving expected and desired results in terms of aggregation. Moreover, municipalities are not committed to PENSAAR as they should, since they are not fully performing their key role in the implementation of the plan and in the success of the public policies for the water supply sector. In the qualitative assessment of PENSAAR (see chapter 5 of the MTR report), most stakeholders agree that the municipalities’ lack of involvement, commitment, and buy-in with the plan is most likely its major pitfall.

In the MTR a root cause analysis (RCA) was conducted to highlight underlying causes that prevent PENSAAR 2020 from achieving its objectives. An RCA is a systematic process for identifying root causes

1 Engagement: process by which stakeholders are involved in the water-related policy or project processes and activities to ensure effective governance. The engagement process can happen at different stages of an initiative and can have different objectives, from information production and sharing to co-production and co-decision. Furthermore, engagement can take various forms depending on the degree of involvement of stakeholders (OECD 2015).

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of problems or events and an approach for responding to them. An RCA is based on the idea that effective management requires more than merely putting out fires for problems that develop: it requires finding ways to prevent them. The following key root causes affecting underperforming indicators under each of the five strategic pillars have been identified through the qualitative assessment and stakeholder interview processes. These are further developed in the MTR report.

• Pillar 1—environmental protection, improving the quality of water bodies. Root causes include a low engagement with the public about the willingness to connect and the cost of the connection.

• Pillar 2—improving the quality of services rendered. Underperformance after floods and failures of mains and sewers seem partly due to a poor level of planning and investments, as well as poor operational procedures.

• Pillar 3—optimization and efficient management of resources. Affected by the possibility to invest in additional connections, resource efficiency, leak and demand management, and staff operational skills to produce and distribute resources efficiently.

• Pillar 4—economic, financial, and social sustainability. Affected by low tariff levels, which require political will and cost reduction (and in turn require skilled staff to accomplish). Access to funding to implement investments is needed to increase efficiency (in particular, nonrevenue water [NRW] will require funds because it is not always eligible for Operational Program for Sustainability and Efficient Use of Resources [POSEUR]). Under a recent call from POSEUR, NRW activities are eligible, although investments are limited.

• Pillar 5—basic and cross-cutting conditions. The root cause highlights that municipalities’ reticence toward aggregation processes is likely political. There are disincentives and valid concerns because of, for instance, asymmetries in WSS systems’ status and performance, number of employees, tariffs, and capacities. Aggregation would not be the only means to achieve the desired improvements.

2.3 Methodology to Design Remedial Actions

2.3.1 Defining Remedial Actions

The methodology used to prepare the recommendations for remedial actions is anchored in the results and findings of the PENSAAR 2020 midterm review. This methodology comprises four steps (figure 2.2). Step 1 identifies non- or underperforming areas; step 2 investigates the root cause for the underperformance. The next two steps define preliminary remedial actions, which are prioritized according to a ranking by Portuguese water stakeholders.2

Figure 2.2 Four-Step Methodology to Identify and Prioritize Remedial Actions

2 ERSAR and municipalities were not among the contributing stakeholders.

Identify Areas of Focus

Identify Root Causes

List Preliminary Priority Actions

Filter Priority Actions

1 2 3 4

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The RCA identifies root causes of problems or events that lead to the underperformance of PENSAAR 2020, as well as an approach for responding. For each problem, logic trees help determine the probable root causes, identified by asking why; and likely terminal root causes given available information. Initial logic trees were prepared for the five pillars of PENSAAR 2020 based on quantitative and qualitative data. Some root causes are linked with several pillars. For instance, low cost recovery has an influence on pillars 2 and 3, and it has a strong disincentive for pillar 5. Figure 2.3 shows the probable and root causes for the underperformance of several operational objectives.

Figure 2.3 Root Cause Analysis

Note: NRW = nonrevenue water Source: Midterm review PENSAAR 2020, Deliverable A.1.

Based on RCA outcomes, a list of preliminary remedial actions has been defined and classified under four thematic areas (step 3). Figure 2.4 describes the logic flow: from PENSAAR 2020’s key areas of underperformance to root causes to definition of thematic remedial action categories. Color coding shows how the thematic categories are defined to match and respond to the root causes.

Figure 2.4 Logic flow from Key Areas of Underperformance to Thematic Categories of Remedial Actions

Wastewater analysis (OP1.1)Connection to sewerage systems (OP1.3)Occurrence of floods (OP2.2)Occurrence of failure of mains and sewers (OP2.2)Optimization of installed capacity (OP3.1)High physical losses (OP3.2)Control of rainwater (OP3.3)Efficient asset management (OP3.4)Sustainable cost recovery (OP4.1)High operational costs (OP4.2)Reduction of NRW (OP4.3)Implement aggregation processes (OP5.3)

Lack of communication with the publicUnclear role for some national institutionsLack of willingness to enforceCost of connectionLack of political willInsufficient planningLack of involvement from municipalitiesInsufficient budgetNo cost recovery/limited cost coverageLack of knowledge/skilled staffDensity of networkLack of incentivesNo training/capacity buildingSmall utilities lack of accountability

Legal, institutional and regulatory framework


Financial viability


Key areas of under-performance Root causes Thematic categories of remedial actions

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Note: NRW = nonrevenue water.

Remedial actions have been designed to address one or several root causes (table 2.3). These actions are based on international expertise and knowledge of the Portuguese sector.

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Table 2.3 Remedial Actions and Root Cause to Address

Lack of

communication

Unclear role of

insitutions

Lack of will to

enforce

Network

connection tariff

Lack of political

will

Insufficient

planning

Municipalities

commitment

Focus on

rainwater

Lack of

incentives

Lack of

accountability

Insufficient

budget

Lack of know-

how

Dispersed

population

Promote leading municipalities to play anchor

role, based on ERSAR benchmark on best

performing utilities (1 or 2 per intermunicipal

community)

✓ ✓ ✓ ✓ ✓

Define basic organizational model including key

competences/skills ✓

Enforce applicable law on connection and

integration of individual solutions for wastewater

collection✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Amend DL 195 to promote competitive

environment in the WSS ✓ ✓ ✓ ✓ ✓ ✓


environment in the WSS ✓ ✓ ✓ ✓ ✓ ✓

Elaborate and enact National Strategy for Sewage

Sludge ✓ ✓ ✓ ✓ ✓ ✓ ✓

Clarify applicable framework for rainwater

drainage, including regulation and cost-recovery

remuneration criteria✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Enact tariff regulation ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Promote viable marketplace for Sludge ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Instensify capacity building and promote technical

assistance ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Launch nationwide awareness campaign for

efficient use of water ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Develop communication and engagement strategy

on water value, efficient use of water, connection

to sewers, individual sanitation systems and

willingness to pay

✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Disseminate best practices ranking in water

metering ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Define incentives to promote the households

connection to the public facilities ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Launch and enact ENEAPAI, National Strategy for

Animal-Raising and Agroindustrial Efluents ✓ ✓ ✓ ✓ ✓ ✓ ✓

Develop contingency plans (focused on strategies

to minimize the impact of drought and floods) ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Structure water loss reduction programs (e.g.

performance-based contracts, POSEUR support) ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Develop of business plans and a base investment

case for the upcoming 5-10 years per utility ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Promote private sector access to EU funds ✓ ✓ ✓ ✓ ✓

Create funding program for investment in network

rehab ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Improve PENSAAR indicators, entailing KPI

breakdowns by utility ✓ ✓ ✓ ✓ ✓ ✓ ✓

Create tools for more assertive M&E ✓ ✓ ✓ ✓ ✓

Build an effective record of septic tanks and

individual treatment solutions ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Identify and disseminate ranking of utilities with

the best practices in sludge final disposal ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Assess impact of urban wastewater discharge on

water bodies' quality ✓ ✓ ✓ ✓ ✓


Addressed Root-Cause

Remedial Action



Financial viability

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Note: EU = European Union; KPI = key performance indicator; M&E= monitoring and evaluation; PENSAAR = Strategic Plan for Water Supply and Wastewater—A New Strategy for the Water Supply and Wastewater Sector; POSEUR = Operational Program for Sustainability and Efficient Use of Resources; WSS = water supply and sanitation.

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2.3.2 Prioritizing Remedial Actions

The strategy is ending in December 2020, so the remaining time frame of PENSAAR 2020 is quite short. To enhance PENSAAR 2020 capacities to achieve its objectives in time, remedial actions could either focus on implementing actions offering the highest rate of return, or on actions aimed at improving utilities that most lag behind goals. For instance, reducing further NRW in large urban utilities would be more efficient to help achieve PENSAAR 2020 targets, whereas reducing NRW in small utilities is needed, but less efficient. Because the intention of PENSAAR is to be inclusive, and focus on large utilities would increase sector gaps, it was decided to propose remedial actions that focus on short- and medium-term improvements. The list of preliminary remedial actions is grouped into four thematic categories, based on the MTR, that reflect the areas of improvement of PENSAAR 2020 (see section 1.2).

Legal, institutional, and regulatory framework. These remedial actions aim at consolidating modernization efforts and strengthening the legal, institutional, and regulatory framework of the WSS sector. They include actions to promote better cost recovery through an enhanced regulatory framework. Although the overall mechanisms and laws are well described in Portugal, the MTR shows a lack of enforcement.

Capacity building and guidance. These actions concern predominantly municipal service providers, especially those under direct management. They entail technical assistance and capacitation, as well as training, education, communication, awareness raising, and tutoring. Guidance may entail technical assistance and such actions as strategies development and operational enhancement programs.

Financial viability. Remedial actions aim at optimizing the efficiency with which utilities and municipalities make use of sector financial resources. They include improvement of cost recovery levels, cost-reflexive tariff levels, and documented tariff setting procedures. These actions include promoting investment, financial planning, and targeted investment programs.

Information and accountability. Remedial actions aim at improving the accountability of utilities, municipalities, and other service providers through the production of enhanced qualitative and quantitative information and data. They include efforts to improve monitoring and evaluation (M&E) processes with regard to PENSAAR 2020 indicators. Most indicators used to monitor PENSAAR 2020 are not directly linked to specific performance of utilities; thus, it is difficult to follow progress of management models or individual utilities.

The list of preliminary remedial actions was shared with Portuguese water stakeholders, namely AdP, the Portuguese Association of Water Operators (APDA), the Regulatory Authority for Water, Wastewater, and Solid Waste Services (ERSAR), the Operational Program for Sustainability and Efficient Use of Resources (POSEUR), PENSAAR 2020 Management Support Group (GAG), Portuguese

Companies Association for the Environment (AEPSA), and APA of whom many provided input. Although municipality representatives were invited to comment on proposed remedial actions, interaction has been limited and no input from municipalities was incorporated. This situation, which underlines once more the lack of ownership of PENSAAR 2020 at municipal level, may impede to some extent remedial actions from delivering outcomes. A number of these actions rely on municipalities’ participation and contribution for their successful implementation. This is an important limitation that may prevent from improving PENSAAR 2020 shortcomings. It is also a strong takeaway for the next strategic plan: the need to engage with municipalities for the design, preparation, implementation, and monitoring of the strategic plan.

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Stakeholders ranked the preliminary remedial actions using a three-level scoring system: 1 for low priority, 2 for medium priority, and 3 for high priority (table 2.4). The actions displaying the highest scores (i.e., 12 points or above) have been shortlisted as priority remedial actions. Actions 11 and 12 both display high scores. Due to their closeness, they have been merged into one comprehensive action. Action 20 also displays a high score. Nevertheless, it will be implemented in the next strategic plan, not shortlisted to be implemented within the next year and a half.

Table 2.4 Ranking of Remedial Actions

Number PRELIMINARY LIST OF REMEDIAL ACTIONS Score

Legal, institutional, and regulatory framework

1 Promote leading municipalities to play anchor role, based on ERSAR benchmark on best performing utilities (1 or 2 per intermunicipal community)

10

2 Define basic organizational model including key competences/skills 14

3 Enforce applicable law on connection and integration of individual solutions for wastewater collection

13

4 Amend DL 195 to promote competitive environment in the WSS 11

5 Amend DL 194 to promote competitive environment in the WSS 11

6 Elaborate and enact National Strategy for Sewage Sludge 10

7 Clarify applicable framework for rainwater drainage, including regulation and cost-recovery remuneration criteria

10

8 Enact tariff regulation 14

9 Promote viable marketplace for sludge 11


10 Intensify capacity building and promote technical assistance 12

11 Launch nationwide awareness campaign for efficient use of water 12

12 Develop communication and engagement strategy on water value, efficient use of water, connection to sewers, individual sanitation systems, and willingness to pay

13

13 Disseminate best practices ranking in water metering 7

14 Define incentives to promote the household connection to the public facilities 8

15 Launch and enact ENEAPAI, National Strategy for Animal-Raising and Agro-industrial Effluents

8

16 Develop contingency plans (focused on strategies to minimize the impact of drought and floods)

11

17 Structure water loss reduction programs (e.g., performance-based contracts, POSEUR support)

12

Financial viability

18 Develop of business plans and a base investment case for the upcoming 10 years per utility

13

19 Promote private sector access to EU funds 11

20 Create funding program for investment in network rehabilitation 12


21 Improve PENSAAR indicators, entailing KPI breakdown by utility 13

22 Create tools for more assertive monitoring and evaluation (M&E) 12

23 Build an effective record of septic tanks and individual treatment solutions 9

24 Identify and disseminate ranking of utilities with the best practices in sludge final disposal

10

25 Assess impact of urban wastewater discharge on water bodies’ quality 8 Note: ERSAR = Regulatory Authority for Water, Wastewater, and Solid Waste Services; EU = European Union; KPI = key performance indicator; PENSAAR = Strategic Plan for Water Supply and Wastewater—A New Strategy for the Water Supply and Wastewater Sector; POSEUR = Operational Program for Sustainability and Efficient Use of Resources; WSS = water supply and sanitation.

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2.3.3 Describing Priority Remedial Actions

The priority remedial actions have been described and detailed according to the following variables:

• Time frame

• Area of involvement

• Political feasibility

• Implementation cost

• Type of cost

• Stakeholders designing, funding, or implementing the action

• Likelihood of funds availability

• Expected impact

• Risk of failure

Experts assessed the variables associated with each priority remedial action, but stakeholders and funding agents have not yet validated the actions. The SSE will need to hold discussions with stakeholders to hear their opinion on the feasibility of the action and willingness to implement.

Time frame. The time frame of each remedial action is based on an estimate for action deployment (figure 2.5). Short-term actions can be deployed in the coming six to 15 months to improve performance to achieve PENSAAR 2020 targets. Many of the actions are stepping stones for further work to be done in the sector through the next strategic plan. Medium-term actions can be deployed in the coming 15 to 24 months and are inputs for preparing the new strategic plan. Long-term actions can be deployed in the next two to five years to help prepare the new strategic plan and trigger key institutional changes in the Portuguese water sector.

Figure 2.5 Time Frame of Remedial Actions

PENSAAR shortcoming to be addressed. Each priority remedial action refers to the pillar and the related PENSAAR 2020 operational objectives. For instance, a remedial action targeted toward “reducing water losses” would impact pillars 3 and 4, and the operational objectives OP 3.2 and OP 4.3.

Political feasibility. The political feasibility of implementing the priority remedial action is assessed qualitatively as high, medium, or low. First, the stakeholders involved or impacted by the action (e.g., municipalities, the EU, private sector, national authorities or agencies, politicians, and local communities) were identified. Then the degree of acceptance or opposition from the stakeholders to the specific action was assessed.

Implementation and type of cost. The implementation cost of each priority remedial action is estimated qualitatively as being high, medium, or low. The type of cost is described as one-off cost only, recurrent cost only, or both.

Medium-term actions To be implemented as an input for the preparation of next Strategic Plan

Short-term actions To be implemented during PENSAAR 2020

Long-term actions To be implemented during the next Plan and to trigger sectoral changes

2019–20 2020–21 2021–24

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Stakeholders designing, funding, or implementing. The stakeholders (e.g., municipalities, the EU, private sector, national authorities or agencies, politicians, local communities) most likely to design, fund, or implement the proposed priority remedial action have been identified.

Likelihood of funding availability. Based on the funding stakeholders, the likelihood of funding availability for each priority remedial action is estimated qualitatively as high, medium, or low.

Expected impact. The expected impact reflects the likelihood that the action helps close the gap with PENSAAR 2020 associated target(s). This expected impact is assessed qualitatively as high, medium, or low. Low impact on the short term remaining under PENSAAR 2020 does not imply the impact could not be high for the longer term. However, it will not likely impact the current targets.

Risk of failure. The risk of failure associated with a priority remedial action is assessed qualitatively as high, medium, or low. It corresponds to the risk that the remedial action fails to deliver its expected outcomes in the expected time frame. In all the selected actions the risk is estimated as low, which suggests that the stakeholders may have prioritized on likelihood of success.

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3 PRIORITY REMEDIAL ACTIONS

This chapter describes priority remedial actions. The full list of preliminary remedial actions is in appendix A, table A.1. For each priority remedial action, the trade-off between political feasibility, risk of failure, expected outcome, implementation cost, and likelihood of availability of funds has been assessed. This trade-off is represented for each action using a spider graph. Because of the limited remaining time to address PENSAAR 2020 shortcomings, the following priority remedial actions are “no regret” actions. They attempt to address some of the Portuguese water supply and sanitation (WSS) sector’s long-lasting challenges and are a bridge toward the next strategic plan.

3.1 ACTIONS FOR THE LEGAL, INSTITUTIONAL AND REGULATORY FRAMEWORK

Box 3.1 Define Basic Organizational Model

Category Legal, institutional, and regulatory framework

Name

Define basic organizational model including key competences and skills

Description

Based on utilities sized up to 10,000 connections, prepare a generic organizational structure identifying clearly all tasks, the required structure to implement the tasks, and human resources, including job descriptions. Support small municipalities to identify required resources, skills, and funds needed to provide WSS services. Gaps in required skills and competences should be identified, and this support might entail the organizational assessments in the scope of capacity building activities.

As a step toward ring-fencing the activities, a roadmap to identify costs and revenue of these organizations will be prepared. This remedial action is strongly correlated to the development of business plans, nonrevenue water (NRW) reduction and the information on the value of water. All of them require a well-developed cost of service concept. Proposed actions: - Analyze small utilities. - Describe all tasks. - Prepare a generic organizational structure. - Prepare resources including rudimentary job descriptions. - Implement in 10 willing municipalities. - Prepare a roadmap to implement ring-fencing. - Support utilities to ring-fence costs through clear cost accounting. - Identify gaps in resources. - Identify gaps in competences.

Stakeholder comments

Aguas de Portugal (AdP). It is important to reinforce the role of associations, as referred to at the meeting on 01/07/2019.

Portuguese Companies Association for the Environment (AEPSA).We regard as essential to provide small utilities with minimum training to allow them to know the costs of the activity, thereby allowing them to choose the management model that is most appropriate to their reality, envisaging economic sustainability and quality of service

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to users. There is a long course of changes in the political mindset and water services must cease to be a political instrument.

Portuguese Environment Agency (APA). This is the context in which “training and qualification plan” of utilities’ technicians will be announced by the Ministry of Environment (MoE), along with LIS-Water, and the Portuguese Association of Water Operators (APDA). This was supposed to have been presented, but perhaps due to the change of State Secretariat of Environment (SSE) as well as the coming elections, no one has yet heard of this initiative.

Time frame

- Analyze small utilities. - Describe all tasks. - Prepare a generic organizational structure. - Prepare resources, including rudimentary job descriptions. 3 months - Implement in 10 willing municipalities. 6 months - Prepare a roadmap to implement ring-fencing. - Support utilities to ring-fence costs through clear cost accounting. 3 months - Identify gaps in resources. - Identify gaps in competences. 3 months

PENSAAR shortcoming(s) to be addressed

Improvement of the operational framework, management, and provision of services (OP 5.3)

Political feasibility High

Implementation cost (€)

High Generic structure 100,000 Implementation 500,000 Accounting 200,000 Total 800,000

Type of cost (%) Consulting 80 Travel 15 Joint workshops 5

Stakeholder(s) designing, funding, or implementing

SSE (designing, funding), LIS-Water (implementing), Municipalities (designing)

Likelihood of availability of funds High

Expected impact Low

Risk of failure Medium

Relevant related international example

Not available.

Figure 3.1 Basic Organizational Model

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Box 3.2 Enforce Law on Connection for Wastewater Collection


Name

Enforce applicable law on connection for wastewater collection

Description

PENSAAR 2020 does not detail concrete actions to increase the number of connections to sewer networks. As a result, on-site inspections are necessary to enforce and monitor compliance with the applicable law on connection for wastewater collection. Every municipality should provide a register with the number and location of households that are not connected and propose action to increase the connection ratio. The municipality should monitor progress against the baseline on annually and report the number of connections made, the target for the following five years, and the time all properties will be connected. In addition to aiming for complete connections, the municipality has to register the properties that cannot be connected or for whom alternative arrangements have been made and approved. When there is a sewer nearby the dwelling, connection to the sewer should be established. When no sewer is nearby the dwelling, an alternative solution such as individual sanitation system should be installed and controlled. Proposed actions:

- Municipalities prepare a list of unconnected properties (water supply and wastewater), administrative check. - Municipalities prepare a plan to do site investigation (actual site investigation will take two to five years). - Prepare an action plan to increase connections. - Report and monitor on an annual basis. The implementation of this action will be incentivized through conditional funding granted by the MoE. Penalties can be applied as part of the next strategic plan if municipalities still have not produced a yearly reporting. A low level of sewer connections may result in noncompliance with EU requirements, which may result in litigation and fines.


ADP. It is also important to establish a mechanism for reporting to EU and APA, where applicable, the licensing by municipalities of discharges into the downstream industrial effluent network. AEPSA. Effective bonding and consumption are the determining factor for the sustainability of entities, promoting equity among citizens, and minimizing public (controlled water) and environmental (discharges for proper treatment) risks. APA. It is considered that the effort to promote network connectivity is not within the direct competence of APA. Management Support Group (GAG). Although the measure is important, it is unlikely to happen due to (i) lack of political will to promote enforcement; (ii) respect of private investment made in boreholes, wells, septic tanks; (iii) even if it happens, households will be connected but their consumption will be zero—this is based on real experience in Portugal—households forced to connect don’t use public water and keep consuming water from boreholes and wells.

Time frame

Short term - Municipalities prepare a list of unconnected properties (water and wastewater). 3 months - Municipalities prepare a justification for each property. 3 months - Prepare an action plan to increase connections. 3 months - Report and monitor on an annual basis. 3 months


Compliance with regulation (OP 1.1); increase in physical accessibility to the wastewater service (OP 1.3); optimization of the utilization of installed capacity and increased adherence to the service (OP 3.1); sustainable recovery of expenditures (OP 4.1); reduction and/or optimization of operating expenses (OP 4.2)

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Political feasibility Medium


Medium Software development and consulting 120,000

On-site inspection 500,000a

Total 620,000

Type of cost Recurrent cost only


MoE (designing, funding), ERSAR (designing, funding), municipalities (designing, implementing)

Likelihood of availability of funds Medium

Expected impact Medium



In France, since 2013, the provision of a sanitation diagnosis is compulsory for the sale of a real estate property. This diagnosis is to be performed at vendor expense and annexed to the purchase documents. The diagnosis checks the compliance of a facility to the sanitation legal requirements, including the adequate connection of the dwelling to the sanitation network. If the diagnosis shows noncompliance, the vendor has to undertake the necessary works before the estate property can be duly sold.

a. The action will require significant funds on national scale. For the duration of PENSAAR 2020 the budget is a meant to start the intervention.

Figure 3.2 Enforce Law on Connection

Box 3.3 Tariff Regulation


Name

Political feasibility

Implementation cost

Likelihood of availability of funds

Expected impact

Risk of failure

The closer to the edge, the better for all variables

32

Enact tariff regulation

Description

The Government of Portugal (GoP) should conclude consultation and enact the proposed tariff regulation, ensuring countrywide dissemination of the underlying implications and an effective enforcement via ERSAR. As a step toward a smoother and faster compliance with the Tariff Regulation, the Ministry of Environment (MoE) should make its best efforts to ensure that its terms and implications are understood and assimilated to the maximum possible extent by the largest number of utilities and that possible scope for improvement is identified. Proposed actions: - Analyze the remarks, arguments, and proposed changes from public discussions. - Adjust or refine where needed and reasonable. - Support the administrative enactment process, if needed. - Define enforcement framework for Regulatory Authority for Water, Wastewater, and Solid Waste Services (ERSAR), entailing scope of action, timings, pace of enforcement, applicable incentives, and penalties. - Create an informal working group to monitor impact, level of compliance, scope for improvement, and technical assistance needs from utilities. - Prepare a countrywide roadshow to deliver pedagogy, technical assistance, and guidance to utilities.


AdP. To better assess the time frame of this action, it is important to check where we stand regarding the tariff regulation review process. APDA. GoP should review the framework and content of the proposed tariff regulation, conclude consultation, and enact it, even if with a softer tariff regulation model. AEPSA. In view of the strong opposition of the different stakeholders in the water sector to the public consultation on the RTA proposal (Regulamento Tarifario, tariff regulation of water services), and taking into account that ERSAR has already assumed that it will be necessary to reformulate the document and to promote a new public discussion, it appears that the RTA cannot be enacted soon. However, it may be an important action, if applicable for the sustainability of small utilities under direct management model, despite the fact that it requires large tariff increases. APA. On this topic, the Water Services Tariff Regulation (under public discussion) will be critical and should ensure, to the maximum possible extent, a clear implementation guideline for utilities. GAG. One of the most important measures for the success of PENSAAR.

Time frame

Short term - Analyze the remarks, arguments, and proposed changes from public discussion held to date. 2 months - Adjust or refine where needed and reasonable. - Support the administrative enactment process, if needed. - Define enforcement framework for ERSAR, entailing scope of action, timings, pace of enforcement, applicable incentives, and penalties. 3 months - Create an informal working group to monitor impact, level of compliance, scope for improvement, and technical assistance needs from utilities. 3 months - Prepare a countrywide roadshow to deliver pedagogy, technical assistance, and guidance to utilities. 3 months


Sustainable recovery of expenditures (OP 4.1)


Implementation cost Low costs can be internalized by ERSAR and MoE

Type of cost One-off cost only


MoE (designing), ERSAR (designing, funding, implementing)

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Expected impact High

Risk of failure High

Relevant related international reference

Leading principles for setting tariffs. Setting the right tariffs for domestic water use is a challenging task. In many cases, utilities do not know the cost of the service and operate inefficiently, which adds costs to the provision of services. In addition, when tariffs are set below cost recovery, the provider must either rely on government subsidies or cut back on service, maintenance, and investment. Generally, tariffs that are below the costs (at least of operations and maintenance [O&M]) result in poor service, asset deterioration, and an inability to invest to meet growing demand. The role of regulation in tariff setting is to bring tariffs up to a sustainable cost recovery level in which a variety of objectives, e.g., economic efficiency and affordability of services for lower-income households, is reconciled (OECD 2009a). There are four main objectives embedded in the design of water and sanitation tariffs: environmental conservation, financial sustainability, economic efficiency, and social fairness (OECD 2010b).

Figure 3.3 Enact Tariff Regulation

3.2 ACTIONS TARGETED TOWARD CAPACITY BUILDING AND GUIDANCE

Box 3.4 Capacity Building

Category Capacity building and guidance

Name

Intensify capacity building and promote technical assistance

Description


Implementation cost


Expected impact

Risk of failure


34

Based on the gap analysis of competencies and skills in small municipalities, the action would design- and implement-specific vocational training programs and promote technical assistance with focus on O&M aspects and NRW. This remedial action complements directly the remedial action under the legal, institutional, and regulatory framework that addresses business plan and competences. Besides sufficient knowledge on the importance of tariff, accountability, and good governance, there is a need for more hands-on training. This will ensure that the activities in network management, distribution, and customer relations are done to a high standard. The workforce is the external facing part of the utilities, and the staff must provide the public with good information. Proposed actions: - Identify knowledge gaps at the level of work force (NRW management, network management, customer relations). - Prepare training activities and technical assistance program. - Set up training. - Develop cross-support networks at regional and intermunicipal levels. - Prepare performance measurement systems. - Compare individual performance.


ADP. Very generic measure. What is the role of associations? AEPSA. There is still much misinformation in the general population about all aspects involved in water services. For the same reasons, campaigns should be articulated with those provided in the education of the municipal leaders. GAG. To promote capacity building, human resources are required. Municipalities’ big gap is that they don’t have enough workforce. The suggested action should be “promote technical assistance, managerial assistance, and performance-based assistance.”

Time frame

Short term - Identify knowledge gaps at the level of work force (NRW management, network management, customer relations). 2 months - Prepare training activities. 2 months - Set up training. 3 months - Develop cross-support networks at regional and intermunicipal levels. 6 months - Prepare performance measurement systems. 3 months - Compare individual performance.


Compliance with regulation (O.P 1.1); increase in physical accessibility to the wastewater service (OP 1.3); improvement of the quality of the AA service (OP 2.1); improving the quality of the SAR service (OP 2.2); optimization of the utilization of installed capacity and increased adherence to the service (OP 3.1); reduction of water losses (OP 3.2); control of undue influences (OP 3.3); efficient asset management and increased rehabilitation (OP 3.4); valorization of resources and by-products (OP 3.5); sustainable recovery of expenditures (OP 4.1); reduction or optimization of operating expenses (OP 4.2); reduction of nonrevenue water (OP 4.3); improvement of the operational framework, management, and provision of services (OP 5.3)



Medium Gap assessment 50,000 Training curriculum 100,000 Implementation (depends on intensity) 200,000 Performance management 100,000 Total 450,000

Type of cost (%)

One-off cost and recurrent costs Consulting 55 Travel 25 Training facilities 20


MoE (designing, funding), municipalities (implementing), ERSAR (designing, funding), LIS-Water (designing)

35

Likelihood of availability of funds Unknown

Expected impact Low (most results will show after PENSAAR)

Risk of failure Low


Institutions with capacity building programs in Mexico’s water sector. Several Mexican institutions have made significant efforts to offer activities and educational courses for water professionals and civil society. For many years, the Mexican nongovernmental organization (NGO) Consejo Consultivo del Agua A.C. has shared information, exchanged knowledge, and raised awareness on water supply issues, mostly targeting civil society. The organization regularly hosts capacity building events and organizes seminars and dialogues with media professionals. In 2010, it published the first annual report on urban water and sanitation utilities in Mexico (La Gestion del Agua en las Ciudades de México–Indicadores de Desempeno de Organismos Operadores) share information, encourage efficiency and innovation in service provision, and raise awareness on utilities’ performance in Mexican cities. The National Association of Water and Sanitation Utilities (ANEAS) has capacity building programs targeting integrated management of urban water supply professionals. In cooperation with institutions (e.g., Mexican Institute of Water Technologies [IMTA], World Bank), academics, ANEAS programs offer diplomas, courses, and short seminars with a focus on (i) wastewater treatment; (ii) technical management of water networks; (iii) business management; and (iv) integrated management of urban water supply. IMTA offers a panel of educational services ranging from water bacteriology analysis to treatment plant operation. Options include full-time courses and e-learning tailored to interested utilities or institutions. IMTA has partnerships with professionals from public and private utilities. (Making Water Reform Happen in Mexico, OECD 2013). Danube Learning Partnership. D-LeaP is a regional, integrated, and sustainable capacity building initiative of national water utility associations and the International Association of Water Service Companies in the Danube River Catchment Area (IAWD). D-LeaP is a committee of IAWD, comprising representatives of national water utility associations. The target audience consists of the WSS utility companies in the Danube region and their management and technical staff.a Upper Austria Water. Founded in 1946, Upper Austria Water is an autonomous and self-reliant association gathering more than 1,700 rural cooperatives in that region. It is in charge of decentralized, small-scale water supply and sewerage installations as well as flood protection and irrigation. It is a nonprofit organization chaired by a board of seven directors. Through the association, expert support can be provided and skilled staff can be retained. Water cooperatives aim at securing sufficient, economic, high-quality, and cost-efficient drinking water supply through the construction and operation of autonomous installations. The association provides support on technical, legal, financial, and organizational issues to its members. It supplies O&M services (technical assistance, emergency supply, mobile technical equipment), pooling programs (for water meters purchase, water analyses), and measurement services (leak detection, pipes and valves location, flow rates and pressure, aquifer test). It offers training sessions, networking activities, and information opportunities to its members.b Swiss Society for Gas and Water. Through the Swiss Society for Gas and Water (SVGW), gas and water distributors can share their knowledge and skills and participate in a popular networking platform. SVGW has been defending the interests of its members for 140 years. Its mission is to stimulate the development of future solutions for the common problems of its members. It essentially provides the following services: (i) elaboration of the technical rules; (ii) publication of leaflets and other publications; (iii) organization of vocational training and development courses (including offer practice-oriented courses, executive training and university training) and specialized conferences; (iv) exercise of legal mandates as a substitute for discharging the state; (v) specialized advice; (vi) certification of products, companies, and staff; (vii) advocacy and public relations management for water; (viii) gathering the know-how of the branch to guarantee access to all its members.

a. See the D-LeaP website, https://www.d-leap.org. b. See the Upper Austria Water website, http://www.ooewasser.at/de/english.html.

Figure 3.4 Capacity Building

https://www.d-leap.org/

36


Implementation cost


Expected impact

Risk of failure


37

Box 3.5 Water Value and Willingness to Pay


Name

Develop communication and engagement strategy on water value, efficient use of water, connection to sewers, individual sanitation systems, and willingness to pay

Description

Structure, design, and elaborate informational and communication initiatives to engage with citizens on topics covering value of water, efficient use of safe water connections, and accountability of municipalities in WSS services provision. The scope of the communication activities would also include wastewater management to boost household motivation to connect to sewers or to install individual sanitation systems. Additional projects would increase the availability, quality, and transparency of information, as well as the dissemination of this information and the awareness of consumers on operators and municipalities through participation processes (e.g., public meetings, consultation on decision making). Other goals include making stakeholders more accountable by permanently sharing information and results with the population. The communication strategy should be developed with these objectives: - Increase awareness of the cost of service. - Increase awareness on the scarcity of water (and effects of climate change) and on the efficient use of water. - Increase accountability of the service provider. - Increase willingness to pay for the service. Proposed actions: - Prepare a national communication strategy, including engagement processes and participation activities. - Standardize a methodology to determine the cost of service. - Prepare policy for compulsory disclosure to the customers on performance (e.g., annual publication on website and newspaper, monthly water losses on bills). - Inform on tariff development.


ADP. This should be further detailed in view of recent citizen consultation initiatives on these issues. AEPSA. There is still a lot of misinformation in the general population about all aspects involved in water services, so these actions are very relevant and inexpensive. GAG. Awareness of the PENSAAR results is required. Local politicians and civil society need to know what is being done and what is not.

Time frame

Short term - Prepare a national communication strategy. 3 months - Standardize a methodology to determine the cost of service. 2 months - Prepare policy for compulsory disclosure to the customers on performance (e.g., annual publication on website and newspaper, monthly water losses on bills). 6 months - Inform public about tariff development. Annual


Reduction of water losses (OP 3.2); allocation and efficient use of water resources (OP 3.6); sustainable recovery of expenditures (OP 4.1); reduction or optimization of operating expenses (OP 4.2); reduction of nonrevenue water (OP 4.3)


Implementation cost (€) Medium Design, develop, and implement communication campaign 500,000


38


MoE (designing, funding), APA (designing, funding), ERSAR (designing, funding), LIS-Water (designing), DECO (consumer protection association) (designing, implementing), municipalities (designing, implementing)



Risk of failure Low

Relevant related international references

Information and accountability. Information tools include the publication of annual reports, information provided at service centers or with bills, and structured outreach programs. Information needs to be offered in plain language that users can understand. While information provision is a one-way process, consultation involves actively seeking and listening to users’ opinions. Surveys, if appropriately designed, can help utilities to understand and respond to users’ preferences, as well as to chart their performance. More interactive consultation tools include public hearings and advisory committees. The effectiveness of tools depends on their design and implementation. The challenge is to choose a set of tools to ensure that all service users can engage with the utility or at least have their concerns and views heard and responded to. Individual tools may communicate key information to users or help utilities to understand users’ preferences and ensure their participation in key decisions, and they may build trust and a habit of engagement between user and utility. To be successful, tools should be inclusive, efficient, and sustainable. Some tools focus on individuals, while others address the interests of specific groups or communities, and others cover all customers or the entire citizenry (both served and unserved) within a jurisdiction. (Van Ginneken 2008). In France, the ATR law of February 1992 establishes the Local Public Services Consultation Commission, which is compulsory in municipalities with more than 10.000 inhabitants. Chaired by the mayor, it aims to enable local public services users (e.g., drinking water, urban transport, waste management) and elected officials to obtain and discuss information on the functioning of public services, to be consulted on certain decisions related to the organization of local public services. The commission, which gathers at least once a year, is responsible for validating the annual report for the public on the price and quality of the WSS service. The French National Office for Water has created an app for citizens to access quickly and easily regulatory information and performance indicators regarding their WSS services. In Scotland, a Customer Forum was launched in September 2011 to give water supply customers a voice in setting water prices and service performance levels with Scottish Water. It was created in the midst of negotiations regarding the 2015–21 business plan of Scottish Water, the publicly owned WSS corporation that serves 5 million inhabitants. The service provider has included detailed customer inputs into the price setting process and investment priorities. Throughout 2012–13, the Customer Forum met on a regular basis with the support of the service supplier to discuss information from sources and share their views and priorities across a wide range of expertise. The engagement process culminated in January 2014 when the forum and Scottish Water reached an agreement on a business plan, followed by a statement from the Water Industry Commission for Scotland (the regulatory authority in the sector) in support of this plan and all the customer input it contained. The agreement over Scottish Water marked the completion of the first cycle of engagement for the Customer Forum. An assessment of the overall engagement process was presented in an academic report to guide decision makers on whether it would be beneficial to include customer involvement in performance monitoring processes to ensure that customer demands are met. The Customer Forum is a temporary body created to contribute to setting water prices and investment priorities. The Scottish government and regulator are currently assessing whether it can stand the test of time or whether it can work only as a time-limited tool introduced to influence particular events or strategies. (OECD 2015)

Figure 3.5 Communication Strategy

39


Implementation cost


Expected impact

Risk of failure


40

Box 3.6 Water Loss Reduction Programs


Name

Develop water loss reduction programs

Description

This critical measure is in the scope of PENSAAR and should be continued, with special eligibility criteria for the smallest utilities. In addition to programs already deployed for NRW reduction, the effort should be intensified by sourcing a support program. Structuring a long-run, performance-based POSEUR and MoE co-funded program entails: - Program for five to 10 years, based on utilities’ 10-year business plan. - Focus on utilities with >35 percent NRW, aiming at cutting its starting NRW by half after 10 years. - Funding participation percentage (from POSEUR) grows as level of NRW reduction increases. - Net benefit of program ensured, even if tariff increase is required (to finance capital expenses [capex] and operating expenses [opex]). - Payback clauses and mandatory tariff increases in case program falls below its agreed targets, after funds have been used. Proposed actions: - Validate 10-year business plan, particularly on NRW and capex assumptions, as eligibility criterion. - Based on the targets set in the business plan for operational efficiency, a NRW strategy has to be developed, including a cost benefit analysis of NRW reduction. - Setup of funding percentage according to NRW reduction levels and payback or tariff increase clauses. - Articulate with POSEUR and MoE. - Coordinate with capacity building and dissemination and coaching events (e.g., LIS-Water, ERSAR).


AEPSA. Promoting water efficiency for economic and environmental reasons is considered essential. It is unacceptable to still have operators (EGs) with more than 70 percent losses. Remember that the private sector has about 15 percent of NRW while the public sector has about 34 percent. If the public sector had the same water efficiency as the private sector (in real losses and commercial losses) there would be an annual saving of about €150 million. Promoting performance-based public procurement (NRW reduction) will surely be the fastest way to achieve the goal. APA. It is important for APA to be involved within its remit in promoting the efficient use of water.

Time frame

Medium term - Develop and validate 10-year business plan, particularly on NRW and capex assumptions, as eligibility criterion. 3 months - Based on the targets set in the business plan for operational efficiency an NRW strategy has to be developed, including a cost benefit analysis of NRW reduction. 3 months - Set up funding percentage according to NRW reduction levels and payback or tariff-increase clauses. - Articulate with POSEUR and MoE. 3 months - Coordinate with capacity building and dissemination/coaching events (e.g., LIS-Water, ERSAR). 6 months


Optimization and efficient management of resources (pillar 3), economic, financial, and social sustainability (pillar 4)


Implementation cost High

41



MoE (designing, funding), utilities (designing, implementing), POSEUR (funding)





In France, the Grenelle 2 law of July 2010 imposes new obligations on drinking water services regarding levels of water

losses and includes financial incentives to promote compliance with those new obligations. Drinking water services had to develop a detailed and documented description of their transport and distribution network and infrastructure before December 31, 2013. If drinking water services do not comply with the legal level of water losses (legal thresholds depend on the characteristics of the service and the resource, but generic level is 20 percent), an action plan had to be designed. The detailed description of the transport and distribution network and infrastructure contains information as defined by regulatory requirements, namely: - Overall layout of the networks, presenting, at least, the material and the diameter of the pipes as well as the general measuring devices (as far as this information is available) - Network inventory: total linear and per section of pipelines without connections, diameter and material, year of installation or installation period, and category of structure (sensitive or nonsensitive networks) The Action plan against water losses. Defines actions to be implemented to reduce network losses. It must be established within the two years following the noncompliance with the decree threshold. Two main types of actions can be considered: - Knowledge gathering and monitoring actions: carrying out an operational diagnosis, setting up measurement devices (e.g., meters, flow meters), analyzing acquired data - Actions to reduce losses: implementation of leak detection campaigns, pressure management, renovation, or replacement of the leakiest pipe The action plan includes an annual monitoring of the performance of the water distribution networks and may include a multiyear network improvement program. Danube Learning Partnership NRW Program. High levels of NRW (water either physically lost or not paid for by customers) is a major problem in many utilities. The Danube Learning Partnership, launched in 2016, is a capacity building program for utilities on basic NRW management; it offers tools for diagnosis of water losses to help increase understanding of utility staff and management on where the losses are and how they can be tackled. This program raises awareness of physical and commercial water losses among the participating utility companies and of ways to decrease them to consequently improve the operational and financial performance. The program has been developed with the technical partner Una Consulting, which reviews existing activities and programs on NRW, and develops guidelines, tools, training material, and manuals applicable to Danube water utilities. The program is delivered by national or regional hubs in local languages. Participating hubs are Aquasan Network in Bosnia and Herzegovina, Water Supply and Sewerage Association of Albania, and Wastewater Works Association of Kosovo. The one-year program consists of workshops and hands-on exercises at the utilities with support of trainers. Participating utilities pay a registration fee. (World Bank 2018)

Figure 3.6 Loss Reduction

42


Implementation cost

Likelihood of availability of

fundsExpected impact

Risk of failure


43

3.3 ACTIONS TARGETED TOWARD FINANCIAL VIABILITY

The goal for this action is to create more transparancy and clarity on the costs of water service, the way it is financed, and the required long-term investment for the utility. This activity focuses on the production of a yearly business plan also including a medium-term investment plan. See box 3.7 and figure 3.7.

Box 3.7 Develop Business Plans per Utility

Category Financial viability

Name

Develop business plans and a base investment case for the upcoming 5-10 years per utility

Description

In the scope of tariff approval process, ERSAR should demand from utilities a business plan that incorporates an investment plan for capex and details for opex. The business plan should incorporate the financing needs for the service provision levels to be achieved. It should include an investment plan that, based on the service levels, provides expected investment needs for the midterm (five to 10 years). This business plan should be produced and reviewed yearly by each utility, regardless of its size and scope. It should contain a section dedicated to water and a section dedicated to wastewater, as well as the associated funding plan promoting cost recovery. Proposed actions: - Define the standard and template for the business plan and investment plan requirements. - Identify critical variables, assumptions, and management arrangements. - Set time frame to prepare the investment plan in line with the business goals. - Define technical assistance and guidance process for utilities. - Elaborate dissemination, training, and coaching plan with capacity building initiatives in place (LIS-Water, ERSAR, MoE). - Identify possible advisors that utilities can consult for assistance or guidance. The implementation of this action will be incentivized through conditional funding granted by the MoE and POSEUR. Penalties can be applied as part of the next strategic plan if utilities still have not developed their business plan.


APDA. The plan should include not only renovation but also rehabilitation targets, along with available resources. AEPSA. Utilities must have a business management mindset in which business plans are essential. APA. Despite the progress made in analytical accounting in recent years, improvements in systems that can ensure segregation of cost and revenue, in particular in smaller utilities, are critical. GAG. Very important! It helps to set priorities; it helps to promote rehabilitation of networks; it also helps to draft future strategic plans.

Time frame

Medium term - Define the standard and template for the business plan. - Identify the critical variables, assumptions, and management arrangements to be highlighted in the plan. 2 months - Set time frame to prepare business plan. 2 months - Define technical assistance and guidance process for utilities. 3 months - Elaborate dissemination, training, coaching plan with capacity building initiatives in place (LIS-Water, ERSAR, MoE). 3 months - Identify possible advisors that utilities can consult for assistance or guidance. 2 months


Basic and cross-cutting conditions (pillar 5), increased availability of information (OP 5.1)

44

Political feasibility Medium

Implementation cost Medium

Type of cost One-off and recurrent costs


MoE (designing, funding), ERSAR (designing, funding), utilities (designing, implementing), POSEUR (funding)

Likelihood of availability of funds Low

Expected direct impact High


Relevant reference

Standardized business plan template is available (example table of contents): Contents Executive Summary 1 Introduction 2 Situation Analysis 2.1 Service Coverage 2.2 Quality of Service 3 Investment and Financing Plan 3.1 Methodology for Capital Investment Plan 3.2 Water Supply and Sanitation Investment Plan 3.3 Bulk Water Supply 3.4 Financing Plan (Model) 4 Operational Targets 4.1 Service-Level targets 4.2 Nonrevenue Water Targets 4.3 Improve Collections 4.4 Increase Labor Efficiency 5 Management Turnaround 5.1 Improve Organizational Structure and Human Resources Function 5.2 Introduce Performance-Based Management Approach 5.3 Implement Collections Improvement Strategies 5.4 Improve Operational Systems and Processes 6 Action Plan Appendix A: Estimating the Financing Requirement Appendix B: Draft Performance Contract for Municipality and Utility

Figure 3.7 Investment Plan

45


Implementation cost

Likelihood of availability of

fundsExpected impact

Risk of failure


46

3.4 ACTIONS TARGETED TOWARDS INFORMATION AND ACCOUNTABILITY

Box 3.8 Improve PENSAAR Indicators

Category Information and accountability

Name

Improve PENSAAR indicators, entailing KPI breakdowns by utility

Description

Review current framework of indicators and propose adjustments that can reflect individual utility performance, and identify those that denote a higher margin for improvement. The current average key performance indicators (KPIs) do not always allow for a fair comparison. Because contextual information is missing, it is hard to interpret actual achievement. To be able to do a more in-depth analysis, secondary data should be collected. This is a weak spot in the quantitative assessment of the MTR. Further, a lot of financial information that should be monitored is missing (as an example of secondary data). It is not possible to assess the effectiveness of actions or the efficiency of the actions implemented with the current information. For a strategic plan, the annual report provides an overview of the sector performance. However, this does not increase accountability of individual utilities and push performance under PENSAAR. Review of individual utilities is done through ERSAR (which, as regulator, should have that role). To increase effectiveness of PENSAAR there is a need to agree with ERSAR which activities and indicators of utilities to push, including progress reports at the individual utility level. Proposed actions: - Review existing ERSAR framework of indicators. - Identify and analyze needs to reflect individual performance. - Prepare missing indicators and secondary data. - Develop the framework to reflect individual performance. - Explain data needs and request to utilities. - Collect data. - Prepare annual analysis of performance improvement. The implementation of this action will be incentivized through conditional funding: utilities producing and reporting on their KPIs would preferably access funds from MoE and POSEUR. Penalties can be applied as part of the next strategic plan.


AEPSA. It is essential that PENSAAR indicators be disaggregated by type of management model. It is the only way to understand which utility is contributing to the achievement of objectives and what measures must be taken for utilities that do not reach the minimum objectives.

Time frame

Short-term - Review existing framework of indicators. - Identify and analyze needs to reflect individual performance. 3 months - Prepare missing indicators and secondary data. - Develop the framework to reflect individual performance. 3 months - Explain data needs and request to utilities. - Collect data. 3 months - Prepare annual analysis of performance improvement. Annual


Environmental protection, improving the quality of water bodies (pillar 1); improving the quality of services rendered (pillar 2); optimization and efficient management of resources (pillar 3); economic, financial, and social sustainability (pillar 4); basic and cross-cutting conditions (pillar 5)

47



Low Analysis 50,000 Guide (ERSAR) 75,000 Roadshow 50,000 Annual report 25,000

Type of cost (%)

Consulting 30 Internal costs 50 Travel 15 Training facilities 5


ERSAR (designing and funding), MoE (designing and funding), municipalities (designing and implementing), utilities (designing and implementing)

Likelihood of availability of funds Medium

Expected direct impact Low

Risk of failure Low


French Compulsory Annual Report of the Price and Quality of Water Supply or Wastewater Service. Since a decree dated 1995, French local authorities in charge of WSS services provision must develop, publish, and make available to citizens an annual report on the price and quality of the service. In 2009, this transparency obligation was supplemented by the obligation, for each service, to produce annual regulatory performance indicators to allow benchmarking between comparable services and to facilitate the monitoring and evaluation (M&E) of the service performance (decree 2007-675 of May 2, 2007). In addition, a National Observatory of Water and Sanitation Services in France was created and designed as a tool for mayors and local authorities to guide their decision-making processes, monitor the evolution of WSS services from year to year, and benchmark services’ performance across the country. The observatory is a public online platform at which users and civil society can access transparent information on water tariffs and service quality. The website provides a national database on water prices and public service performances updated by local authorities and validated by state services. The observatory provides an overview of the national water sector and aims to inform the public, feed discussions, and promote knowledge sharing across all stakeholders. The comparison of WSS services is based on a series of indicators that promote progress among services. These indicators address both the characteristics and the performance of services and were developed and standardized by a task force of public and private experts and representatives from the water sector. The National Observatory provides access to all relevant legislation and laws related to the WSS sector, as well as to annual national overviews of the overall performance of French public WSS services with detailed maps and tables updated in real time.a Danube Utility Benchmarking and Information Sharing. DANUBIS.org is an open online knowledge platform for everything about WSS in the Danube region. Its core piece is a publicly available performance indicator database that allows for country and utility performance data comparison of WSS utilities in Southeast, Eastern, and Central Europe. It includes information about the following countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Kosovo, North Macedonia, Moldova, Montenegro, Romania, Serbia, the Slovak Republic, and Ukraine. The DANUBIS Data Collection and Management platform (launched in October 2016) allows national institutions to easily collect, validate, manage, share, and publish utility performance data. Objectives: - Allow utility companies to enter utility performance data in an amicable web interface. - Help national institutions check the quality and consistency of data and manage and safeguard it. - Provide utility managers with a simple scorecard of their performance over time and against targets. - Ensure a linkage to DANUBIS.org data platform and the national country systems for reporting and further processing purpose.

48

Four national institutions use the platform in their country: Association of Utility Service Providers of Macedonia, the Kosovo regulatory agency, the Montenegro waterworks associations, the Serbian water professionals’ association, and the Ministry of Foreign Trade and Economic Relations in Bosnia and Herzegovina. (World Bank 2018)

a. See “Observatoire national des services d’eau et d’assainissement, » www.services.eaufrance.fr.

Figure 3.8 KPI per Utility

Note: KPI = key performance indicator.


Implementation cost


Expected impact

Risk of failure


http://www.services.eaufrance.fr/

49

Box 3.9 Create Tools for More Assertive Monitoring and Evaluation

Category Information and accountability

Name

Create tools for more assertive monitoring and evaluation

Description

PENSAAR 2020 does not include a clear adjustment mechanism when target objectives are not achieved. The M&E cycle “plan, do, check, and act” lacks the final step to improve the plan’s effectiveness. Hence, a monitoring platform will be developed to control and evaluate PENSAAR performance, while allowing for correctional courses of action. To build an effective platform, data have to be readily available and inserted on a regular basis from trusted sources. Most of the information will come from ERSAR, the main contributor to reliable sector information. Proposed actions: - Review the existing list of indicators for each PENSAAR 2020 operational objective. - Identify and analyze the gaps and the data needs for each operational objective. - Prepare missing indicators and secondary data. - Develop the framework and monitoring platform accordingly. - Explain data needs and request to data producer. - Collect data. - Prepare annual analysis of PENSAAR 2020 achievements.


AEPSA. We regard the already existing mechanisms as adequate. APA. The APA should be directly involved in this process. GAG. Important for the next PENSAAR. But not for the current one.

Time frame

Short term - Review existing list of indicators for each PENSAAR 2020 operational objective. - Identify and analyze gaps and data needs for each operational objective. 3 months - Prepare missing indicators and secondary data. - Develop framework and monitoring platform accordingly. 3 months - Explain data needs and request to data producer. - Collect data. 3 months - Prepare annual analysis of PENSAAR 2020 achievements. Annual


Environmental protection, improving the quality of water bodies (pillar 1); improving the quality of services rendered (pillar 2); optimization and efficient management of resources (pillar 3); economic, financial, and social sustainability (pillar 4); basic and cross-cutting conditions (pillar 5)


Implementation cost (€) Low Software development and consulting 120,000

Type of cost (%) Consulting 35 IT support 55 Training facilities 10

Stakeholder(s) designing, funding or implementing

SSE (designing, funding, implementing)

Likelihood of availability of funds High, through EU funds

50

Expected direct impact Low

Risk of failure Low

Relevant experience

Because Portugal has extensive experience, the aim should be a quicker GAG report by drawing all the data directly from ERSAR, ADP, and APA. The time interval of ERSAR will be the dominant factor for reporting. It is not recommended to develop a second information channel to municipalities. This would disrupt well-functioning systems. Strategy monitoring, reporting, and updating. Monitoring plays a key role in assessing and reporting progress in the implementation of a strategy. It provides stakeholders, at all levels, with key information regarding progress and backlogs, allowing them to set up corrective actions whenever necessary. The monitoring process must be continuous, consistent, focused, and disciplined. See table B3.9.1.

Table B3.9.1 Monitoring principles

Continuous process. Institutions should provide an annual reporting detailing achievement with regard to assigned objectives. Consistent process. Institutions should use the same set and source of data to monitor and report improvements and achievements reached on the ground regarding assigned strategic objectives. Focused process. Progress achieved for each strategic objective shall be clearly detailed, compared, and assessed against forecasted targets for short, medium and long terms. Disciplined process. Institutions must follow a monitoring mechanism in yearly reports to MoE. From monitoring to updating. The monitoring and reporting process goal of a WSS national strategy plan is to ensure that the plan and improvement are carried out as planned. When the reporting shows a deviation between forecasted targets and progress, a diagnosis should be made clearly stating the magnitude and reasons for the deviation. This diagnosis should describe corrective actions to respond to problems and issues and still ensure targets are reached. When necessary, targets may be adjusted, thus leading to an update of the strategy plan. It is important to distinguish corrective actions from updates to the strategy plan. Corrective actions are not intended to modify strategic objectives of the WSS national strategy plan, but rather to modify the action to ensure strategic goals are achieved. The strategy plan is to be updated only when corrective actions are insufficient to allow institutions to achieve the targets in due time and at forecasted costs. At the end of each year, the line ministry shall consolidate reporting by responsible institutions to produce an operational follow-up document highlighting the progress made to achieve all targets and identifying remaining gaps and corrective actions to be implemented. This follow-up document assesses how effective actions on the ground have been to achieve targets and can be used annually to produce an updated version of the national strategy plan. The full updating process is described in figure B3.9.1. Figure B3.9.1 Feedback model for Strategic Plan

51

Source: World Bank elaboration based on Valu-Add 2018. Note: WSS = water supply and sanitation.

Figure 3.9 Assertive M&E

Note: M&E = monitoring and evaluation.


Implementation cost


Expected impact

Risk of failure


52

4 OPERATIONALIZATION OF PRIORITY REMEDIAL ACTIONS

4.1 Budget of Priority Remedial Actions

The overall budget of priority remedial actions is estimated to €3.09 million, comprising:

• €1.42 million for “legal, institutional and regulatory framework” priority remedial actions, representing 46 percent of the overall priority remedial action budget

• €1.15 million for “capacity building and technical assistance” priority remedial actions, representing 37 percent of the overall priority remedial action budget

• €0.2 million for “financial viability” priority remedial actions, representing 7 percent of the overall priority remedial action budget

• €0.32 million for “information and accountability” priority remedial actions, representing 10 percent of the overall priority remedial action budget.

Most priority remedial actions are to be funded by the State Secretariat of Environment (SSE), the Ministry of Environment (MoE), and the Regulatory Authority for Water, Wastewater, and Solid Waste Services (ERSAR), and to a lesser extent by the Portuguese Environment Agency (APA) (see table 4.1).

Table 4.1 Proposed Funding Agency

Category of priority remedial action Funding stakeholder

Legal, institutional, and regulatory framework SSE, MoE, ERSAR

Capacity building and technical assistance MoE, ERSAR, APA, POSEUR

Financial viability MoE, ERSAR, POSEUR

Information and accountability SSE, MoE, ERSAR

Note: APA = Portuguese Environment Agency; ERSAR = Regulatory Authority for Water, Wastewater, and Solid Waste Services; MoE = Ministry of Environment; POSEUR = Operational Program for Sustainability and Efficient Use of Resources; SSE = State Secretariat of Environment.

4.2 Timeline of Priority Remedial Actions

As described in the Gantt chart (table 4.2), priority remedial actions—from design to implementation—are spread out over a maximum of 18 months. The chart presents all the priority remedial actions, showing each action, associated practical steps, stakeholders, start and end dates, expected duration, possible time overlap, and duration of this overlap. Although they are expected to impact PENSAAR 2020 axes, they will not, however, have a significant impact on achieving PENSAAR targets because the time left is simply too short. All the actions in this report can start within PENSAAR 2020, and their implementation will likely continue beyond the present strategic plan, contributing to goals for the next plan. For instance, nonrevenue water (NRW) management can start with strategy development and identification, but implementation of leakage activities or network replacement will take several years.

53

Table 4.2 Timeline Remedial Actions

Remedial Action Operational steps Stakeholders M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M13 M14 M15 M16 M17 M18

Analyze small utilities

Describe all tasks

Prepare a generic organizational structure

Prepare resources including rudimentary job descriptions

Implement in 10 willing municipalities

Prepare a roadmap to implement ring-fencing

Support utilities to ring-fence costs through clear cost accounting

Identify gaps in resources

Identify gaps in competences

Municipalities prepare a list of unconnected properties (water and wastewater)

Municipalities prepare a justification for each property

Prepare an action plan to increase connections

Report and monitor on an annual basis

Analyze the remarks, arguments and proposed changes from public discussion held to date

Adjust and/or refine where needed and reasonable

Support the administrative enactment process, if/when needed

Define enforcement framework for ERSAR, entailing scope of action, timings, pace of enforcement, applicable incentives and penalties

Create an informal working group to monitor impact, level of compliance, scope for improvement, and technical assistance needs from utilities

Prepare a countrywide road show to deliver pedagogy, technical assistance and guidance to utilities

Identify knowledge gaps at the level of work force (NRW management, network management, customer relations)

Prepare training activities and technical assistance program

Set up training

Develop cross support networks at regional and inter municipal level

Prepare performance measurement systems

Compare individual performance

Prepare a national communication strategy

Standardize a methodology to determine the cost of service

Prepare policy for compulsory disclosure to the customers on performance (annual publication on website and newspaper, monthly water losses on bills, etc.)

Inform on tariff development

Validate 10-year business plan, particularly on NRW and capex assumptions, as eligibility criterion

Based on the targets set in the business plan for operational efficiency a NRW strategy has to be developed including a cost benefit analysis of NRW reduction

Setup of funding % according to NRW reduction levels and payback or tariff-increase clauses

Articulate with POSEUR and MoE

Coordinate with capacity building and dissemination/coaching events (e.g. Lis-Water, ERSAR, other)

Define the standard/template for the business plan

Identify the critical variables, assumptions and management agenda topics that have to be highlighted in the plan for discussion

Set timeframe and plan update routines

Define technical assistance/guidance process for utilities

Elaborate dissemination/training/coaching plan in articulation with capacity building initiatives already structured (Lis-Water, ERSAR, MoE)

Identify possible advisors that utilities can resort to for assistance or guidance

Review existing framework of indicators

Identify and analyze needs to reflect individual performance

Prepare missing indicators and secondary data

Develop the framework to reflect individual performance

Explain data needs and request to utilities

Collect data

Prepare annual analysis of performance improvement

Review the existing list of indicators for each PENSAAR 2020 operational objective

Identify and analyze the gaps and the data needs for each operational objective

Prepare missing indicators and secondary data

Develop the framework and monitoring platform accordingly

Explain data needs and request to data producer

Collect data

Prepare annual analysis of PENSAAR 2020 achievements

MoE, POSEUR,

Utilities

MoE, ERSAR,

Utilities, POSEUR

ERSAR, MoE,

Municipalities,

Utilities

SSE

SSE, LIS Water,

Municipalities

MoE, ERSAR,

Municipalities

MoE, ERSAR

MoE, Municipalities,

ERSAR, LIS-Water

MoE, APA, ERSAR,

LIS-Water, DECO,

Municipalities

Imp

rove

PEN

SAA

R

ind

icat

ors

, en

taili

ng

KP

I bre

akd

ow

ns

by

uti

lity

Enfo

rce

app

licab

le

law

on

con

nec

tio

n

for

was

tew

ater

colle

ctio

n

Cre

ate

too

ls f

or

mo

re

asse

rtiv

e m

on

ito

rin

g

and

eva

luat

ion

Def

ine

bas

ic o

rgan

izat

ion

al

mo

del

Enac

t ta

riff

regu

lati

on

Inte

nsi

fy c

apac

ity

bu

ildin

g an

d

pro

mo

te t

ech

nic

al

assi

stan

ce

Dev

elo

p

com

mu

nic

atio

n a

nd

enga

gem

ent

stra

tegy

on

wat

er v

alu

e,

effi

cien

t u

se

of

wat

er,

sew

ers

con

nec

tio

n,

ind

ivid

ual

san

itat

ion

syst

ems

and

will

ingn

ess

to

pay

Dev

elo

p w

ater

loss

red

uct

ion

pro

gram

s



Financial viability


Dev

elo

p b

usi

nes

s

pla

ns

and

a b

ase

inve

stm

ent

case

for

the

up

com

ing

5-

10

yea

rs p

er u

tilit

y

54

4.3 Modus Operandi

Remedial actions need to be designed and implemented in detail (table 4.3). All relevant stakeholders should be involved because the design phase is key to build consensus and shared vision regarding the content and target of the action. This is a key step to promote and ensure buy-in by municipalities.

Table 4.3 Priority Remedial Actions during Design Phase and Stakeholders

Design phase of priority remedial action Stakeholders

Define basic organizational model including key competence/skills

SSE, LIS-Water, municipalities

Enforce applicable law on connection to wastewater collection

MoE, ERSAR, municipalities

Enact tariff regulation MoE, ERSAR


MoE, ERSAR, municipalities, LIS-Water

Develop communication strategy on water value, efficient use of water, connection to sewers, individual sanitation systems, and willingness to pay

MoE, APA, ERSAR, LIS-Water, DECO, municipalities

Develop water loss reduction programs MoE, utilities

Develop business plan MoE, ERSAR, utilities

Improve PENSAAR indicators entailing KPI breakdowns by utility

MoE, ERSAR, municipalities, utilities

Creative tools for more assertive monitoring and evaluation

SSE

Note: APA = Portuguese Environment Agency; DECO = Organization for Customer Protection; ERSAR = Regulatory Authority for Water, Wastewater, and Solid Waste Services; MoE = Ministry of Environment; SSE = State Secretariat of Environment.

Stakeholders are predominantly the municipalities, which has proven problematic due to the lack of buy-in and engagement. To maximize the success of remedial actions, the SSE and MoE should make strong efforts to consult and engage with municipalities as early as the design phase.

Despite tight time constraint, a steering committee is needed to assess and monitor progress, implementation, and effectiveness of PENSAAR 2020 remedial actions. The committee should gather every three months and could be made up of the MoE, ERSAR, the Association of Municipalities, the Portuguese Association of Water Operators (APDA), and the PENSAAR 2020 Management Support Group (GAG). Monitoring plays a key role in assessing and reporting the progress in the implementation of a strategy. It provides stakeholders, at all levels, with key information regarding implementation progress and backlogs, and allows them to set up corrective actions as necessary. The goal is to ensure that the implementation of actions translates into improvements on the ground. The monitoring and reporting process (figure 4.1) is useful for the follow-up of remedial action implementation. It can inform the next strategic plan because the impact of some remedial actions will continue beyond 2020.

55

Figure 4.1 Implementation Structure

Implementation

Remedial

action

Monitoring/reporting Implementation of practical steps

on track with planned schedule

No

Yes

Diagnosis of deviation

and corrective action for

current PENSAAR and/or

next plan

56

4.4 Action Plan

The action plan in table 4.4 summarizes for each action the operational implementation steps, stakeholders that will deliver the action, estimated cost, risk of failure and associated reasons, and expected impact.

Table 4.4 Summary of Remedial Actions

Thematic category

Priority Remedial Action

Operational Steps Stakeholders Cost (€) Risk of failure Impact (short term)

Lega

l, in

stit

uti

on

al, a

nd

reg

ula

tory

fra

mew

ork

Define basic organizational model, including key competences/skills

- Analyze small utilities - Describe all tasks - Prepare a generic organizational structure - Prepare resources, including rudimentary job descriptions - Implement in 10 willing municipalities - Prepare a roadmap to implement ring-fencing - Support utilities to ring-fence costs through clear cost accounting - Identify gaps in resources - Identify gaps in competences

SSE: designing, funding Municipalities: designing LIS-Water: implementing

Generic structure: 100,000 Implementation: 500,000 Accounting: 200,000 TOTAL: 800,000

Low: only two stakeholders are involved in delivery, with LIS-Water providing technical support and assistance to the MoE There is a widely shared consensus among Portuguese water stakeholders of need for corporate culture and robust management processes

Improve organizational efficiency and effectiveness of services; improve accounting practices, financial sustainability, and asset management

Enforce applicable law on connection for wastewater collection

- Municipalities prepare a list of unconnected properties (water supply and wastewater) - Municipalities prepare a justification for each property - Prepare an action plan to increase connections - Report and monitor annually

MoE, ERSAR: designing, funding Municipalities: designing, implementing

Software development and consulting: 120,000 On-site inspection: 500,000 TOTAL: 620,000

Medium: many stakeholders are involved in delivery and potential success of action; lack of political will to enforce has been spotted by some stakeholders

Increase compliance with discharge parameters; reduce number of agglomerations in litigation processes; reduce pollution in water bodies


- Analyze remarks, arguments, and proposed changes from public discussion held to date - Adjust or refine where needed and reasonable - Support the administrative enactment process, when needed - Define enforcement framework for ERSAR, entailing scope of action, timings, pace of enforcement, applicable incentives, and penalties - Create an informal working group to monitor impact, level of compliance, scope for

MoE: designing ERSAR: designing, funding, implementing

Costs can be internalized by ERSAR and MoE

High: potential legal and political difficulties

Improve cost recovery and financial sustainability while securing social tariff for categories of customers; promote economic efficiency

57

improvement, and technical assistance needs from utilities - Prepare a countrywide roadshow to deliver pedagogy, technical assistance, and guidance to utilities

Cap

acit

y b

uild

ing

and

gu

idan

ce


- Identify knowledge gaps at the level of workforce (NRW management, network management, customer relations) - Prepare training activities and technical assistance program - Set up training - Develop cross-support networks at regional and intermunicipal levels - Prepare performance measurement systems - Compare individual performance

MoE, ERSAR: designing, funding LIS-Water: designing Municipalities: implementing

Gap assessment: 50,000 Training curriculum: 100,000 Implementation (depends on intensity): 200,000 Performance management: 100,000 TOTAL: 450,000

Low: widely shared consensus among Portuguese water stakeholders, including municipalities, regarding need for capacity building; municipalities seem to welcome capacity building initiatives

Improve staff’s technical, financial, and operational capacity to enhance operational and infrastructure management of services; improve service quality; foster better decision making and good practices

Develop communication strategy on water value, efficient use of water, connection to sewers, individual sanitation systems, and willingness to pay

- Prepare a national communication and engagement strategy - Standardize a methodology to determine the cost of service - Prepare policy for compulsory disclosure to the customers on performance (e.g., annual publication on website and newspaper, monthly water losses on bills) - Inform on tariff development

MoE, APA, ERSAR: designing, funding LIS-Water: designing DECO: designing, implementing Municipalities: designing, implementing

Design, develop, and implement communication campaign and actions: 500,000

Low: as long as there is strong political will from stakeholders in charge of delivering action

Increase customer awareness and utility accountability; reduce consumption and promote efficient use of water resources; increase willingness to pay, financial sustainability, and environmental preservation

Develop water loss reduction programs

- Validate 10-year business plan, particularly on NRW and capex assumptions as eligibility criterion - Based on targets set in business plan for operational efficiency, a NRW strategy has to be developed including a cost-benefit analysis of NRW reduction - Setup of funding share according to NRW reduction levels and payback or tariff increase clauses - Articulate with POSEUR and MoE - Coordinate with capacity building and dissemination and coaching events (e.g., LIS-Water, ERSAR)

MoE: designing, funding Utilities: designing, implementing POSEUR: funding

Design, develop, and implement NRW program and actions 200,000

Medium: success of action lies in willingness from utilities and enforcement capacity of MoE; financial incentives, such as funding conditionality to access EU funds, may be needed

Improve technical, commercial, and environmental sustainability of the service; promote efficient use of water resources

58

Fin

anci

al v

iab

ility

Develop business plans and a base investment case for the upcoming five to 10 years per utility

- Define standard/template for business plan - Identify critical variables, assumptions, and management arrangements to be highlighted in plan - Set time frame to prepare business and investment plan - Define technical assistance/guidance process for utilities - Elaborate on dissemination, training, and coaching plan with capacity building initiatives in place (LIS-Water, ERSAR, MoE) - Identify possible advisors for utilities for assistance or guidance

MoE, ERSAR: designing, funding Utilities: designing, implementing POSEUR: funding

Design, develop, and implement investment plan: 200,000

Medium: stakeholders expressed importance of action for sector; there seems to be understanding and willingness Success lies in willingness from utilities and enforcement capacity of MoE and ERSAR (which could monitor existence of such plans); financial incentives, such as funding conditionality to access EU funds, may be needed

Improve asset management and sustainability of services; foster good, long-term management practices; promote long-term control over water tariff

Info

rmat

ion

an

d a

cco

un

tab

ility

Improve PENSAAR indicators, entailing KPI breakdowns by utility

- Review existing ERSAR framework of indicators - Identify analysis needs to reflect individual performance - Prepare missing indicators and secondary data - Develop framework to reflect individual performance - Explain data needs and request to utilities - Collect data - Prepare annual analysis of performance improvement

ERSAR, MoE: designing, funding Municipalities, utilities: designing, implementing

Analysis: 50,000 Guide (ERSAR): 75,000 Roadshow: 50,000 Annual report: 25,000 TOTAL: 200,000

Low: only one stakeholder is in charge of delivering the action; ERSAR has long and important experience in KPI information collection

Improve efficiency and performance of services; improve asset, financial, and environmental sustainability of services; reduce pollution

Create tools for more assertive monitoring and evaluation

- Review list of indicators for each PENSAAR 2020 operational objective - Identify and analyze gaps and data needs for each operational objective - Prepare missing indicators and secondary data - Develop framework and monitoring platform accordingly - Explain data needs and request to data producer - Collect data - Prepare annual analysis of PENSAAR 2020 achievements

SSE: designing, funding, implementing

Software development and consulting: 120,000

Low: only one stakeholder is in charge of delivering the action; close collaboration with ERSAR, which collects data and indicators from services, should help fulfill task

Improve effectiveness to reach objectives; improve enforcement capacity to make stakeholders deliver expected outcomes

Note: APA = Portuguese Environment Agency; DECO = Organization for Customer Protection; ERSAR = Regulatory Authority for Water, Wastewater, and Solid Waste Services; EU = European Union; KPI = key performance indicator; MoE = Ministry of Environment; PENSAAR = Strategic Plan for Water Supply and Wastewater—A New Strategy for the Water Supply and Wastewater Sector; POSEUR = Operational Program for Sustainability and Efficient Use of Resources; NRW = nonrenewable water; SSE = State Secretariat of Environment.

59

APPENDIX A: PRELIMINARY REMEDIAL ACTIONS TO IMPROVE PENSAAR 2020 IMPLEMENTATION

Table A.1 Long List Remedial Actions

60

Note: APA = Portuguese Environment Agency; ERSAR = Regulatory Authority for Water, Wastewater, and Solid Waste

Services; EC = European Commission; EU = European Union; NRW = nonrenewable water; PENSAAR = Strategic Plan for Water Supply and Wastewater—A New Strategy for the Water Supply and Wastewater Sector; POSEUR = Operational Program for Sustainability and Efficient Use of Resources; NRW = nonrenewable water; SSE = State Secretariat of Environment; WSS = water supply and sanitation; WWTP = wastewater treatment plant.

Remedial Action DescriptionDeployment Time

HorizonReach of action

Promote leading municipalities to play anchor

role, based on ERSAR benchmark on best

performing utilities (1 or 2 per intermunicipal

community)

Having anchor municipalities in aggregation is perceived to be beneficial for an aggregation

process.

Beyond financial incentives, already in place, soft measures, like conferences leaded by the

SSE | ERSAR and|or other relevant stakeholders, can be developed to highlight and

stimulate the role of reagional player the anchor can play.

This action should be part of a larger package of measures in the medium and long term.

6 to 12 monthsImprove PENSAAR and

Guidance for the next plan

Define basic organizational model including key

competences/skills

Support small municipalities to identify required resources, skills and funds needed to

provide water supply and sanitation services, as a step towards to ring-fence the activities.

Gaps in required skills and competences should be identified and this support might entail

the organizational assessments in the scope of capacity building activities.



Enforce applicable law on connection and

integration of individual solutions for wastewater

collection

Compliance with the applicable law should be monitored. Every municipalities should

provide the number of households which are not connected and propose correctional

action plans.




environment in the WSS

The amendments should create a leveled playing field for public and private entities in the

WSS market, addressing topics such as equal concession terms and comparison of different

management models




environment in the WSS

The amendments should create a leveled playing field for public and private entities in the

WSS market, addressing topics such as equal concession terms and comparison of different

management models



Elaborate and enact National Strategy for Sewage

Sludge

While problems with the correct destination of the sludge from the wastewater treatment

persist and sludge is currently considered a waste. Following EC initiative envisaging the

"end of waste" statute for sludge from the WWTP, SSE should provide guidelines and

contribute to the improvement of the management of the sewage sludge, covering sludge as

a resource



Clarify applicable framework for rainwater

drainage, including regulation and cost-recovery

remuneration criteria

Amendment of currently prevailing regulation on rainwater drainage, to define who bears

the responsibility for the cost of the service12 to 18 months

Improve PENSAAR and



GoP should conclude consultation and enact the proposed tariff regulation, ensuring

countrywide dissemination of the underlying implications and an effective enforcement via

ERSAR

18 months to 2

years

Improve PENSAAR and


Promote viable marketplace for SludgeDevelop market research in order to identify potentially blocking constraints to engage for

private investors and investigate the market for product offsets

18 months to 2

years

Improve PENSAAR and


Instensify capacity building and promote technical

assistance

Based on the gap analysis of competencies and skills in small municipalities, design and

implement specific vocational trainning programs and technical assistance with focus on

O&M aspects and NRW



Launch nationwide awareness campaign for

efficient use of water

Build pedagogic initiatives for municipal leaders covering subjects such as the cost of

water, water value chain and sector structure & organization 6 to 12 months

Improve PENSAAR and


Develop communication and engagement strategy

on water value, efficient use of water, connection

to sewers, individual sanitation systems and

willingness to pay

Structure and elaborate informational initiatives for citizens, covering value of water, value

of a safe water connection and accountability of municipalities in WSS services provision6 to 12 months Improve PENSAAR 2019

Disseminate best practices ranking in water

metering

NRW computation is to significant extent dependent on estimation, which brings scope for

improvement in accuracy. Utilities with higher accuracy should be acknowledged and

rewarded. Acknowledgement could entail list of top performers in metering. Rewards

might comprise including NRW accuracy as eligibility criterion for POSEUR funding

6 to 12 months Improve PENSAAR 2020

Define incentives to promote the households

connection to the public facilities

In paralel of its enforcement, applicable legal framework could be amended to reflect

temporary tariff exemptions, addressing the current price discrimination constraints, based

on public health, equitable public costs and asset efficiency concerns


Launch and enact ENEAPAI, National Strategy for

Animal-Raising and Agroindustrial Efluents

Altought not included in PENSAAR, the strategy for the animal-raising and agrodindustrial

efluents has impact on PENSAAR objectives, namely on water quality and overcapacity

issue on WWTP. SSE should launch the strategy and play an active role in its monitoring

and follow-up



Develop contingency plans (focused on strategies

to minimize the impact of drought and floods)

In view of climate change effects and need for a resilient infrastructure, SSE in articulation

with APA and ERSAR should demand contigency plans, addressing crisis management,

business continuity and investment needs, updated avery 3 years



Structure water loss reduction programs (e.g.

performance-based contracts, POSEUR support)

As a critical measure that has been iniciated already in the scope of PENSAAR, it should be

continued, with special eligibility criteria for the smallest utilities

18 months to 2

yearsGuidance for the next plan

Develop of business plans and a base investment

case for the upcoming 5-10 years per utility

In the scope of tariff approval process, ERSAR should demand from utilities a business plan

including capex, opex and finance underlying operational objectives

18 months to 2

years

Improve PENSAAR and


Promote private sector access to EU fundsSSE to assess barriers of Private sector to EU funding and enforce the eligibility criteria that

can overcome them

18 months to 2

years

Improve PENSAAR and


Create funding program for investment in network

rehab

Structure a guarantee-based funding arrangement with commercial banking, subject to

utilities' tariffs increase (towards cost-recover)

18 months to 2

yearsGuidance for the next plan

Improve PENSAAR indicators, entailing KPI

breakdowns by utility

Review current framework of indicators and propose adjustments that can reflect

individual performances and identify those that denote a higher margin for improvement6 to 12 months

Improve PENSAAR and


Create tools for more assertive M&EDevelop a monitoring platform that can specifically control and evaluate PENSAAR's

performance, while allowing for correctional courses of action6 to 12 months

Improve PENSAAR and


Build an effective record of septic tanks and

individual treatment solutions

APA and ERSAR should complete an extensive countrywide record as soon as possible, in

order to increase utilities' revenues and have a better control of environmental conditions6 to 12 months Improve PENSAAR 2020

Identify and disseminate ranking of utilities with

the best practices in sludge final disposal

In view of concerns with final sludge disposal, APA and ERSAR should produce and publish

a ranking of utilities on PENSAAR's (sludge-related) indicator, while acknowledging the

best performers with a formal distinction


Assess impact of urban wastewater discharge on

water bodies' quality

APA should develop a mathematical model to determine the impact of urban waste water

on the water body status12 to 18 months

Improve PENSAAR and



Financial viability



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