Ensuring appropriate public utility access and regulation is a key issue for Albania in its efforts to combat informality, reduce regional disparities, promote social inclusion and meet its MDG targets and prepare for EU accession. Inclusive governance mechanisms are needed to ensure that competing interests concerning public utilities are articulated in a transparent manner, that compromise solutions to investment and pricing decisions that reflect the interests of all relevant stakeholders are found, and that trade-offs between economic growth, consumer protection, poverty reduction, and environmental quality are appropriately managed. Legal and institutional mechanisms will be put in place, capacities of Government, utility regulators and consumer associations will be built and participatory methodologies for inclusive debate and decision-making will be established, to address the non-income dimensions of poverty by improving access to electricity and water services.
The need for better economic governance—to ensure that policy makers regulating commercial activities in key infrastructure/natural monopoly sectors have the capacity for pro-poor policymaking—is at the heart of the development agenda. Although economic growth is a necessary condition for reducing income poverty, prospects for achieving the MDGs very much depend on building capacity in the state institutions responsible for the provision of electricity and water services. As in many other countries—and particularly Southeast European countries seeking to join the European Union (EU)—these public utility services in Albania are increasingly not provided directly by government agencies. They are instead provided by commercial entities, which are in turn regulated by various national and sub-national government bodies. Likewise, concerns about consumer welfare are not addressed at the immediate service provision level, but rather within EU-compatible consumer protection frameworks. The task of ensuring the adequate provision of public utility services in Albania—particularly for social groups living in (or at risk of) poverty or social exclusion, and of protecting the interests of public utility consumers—is increasingly a regulatory challenge and requires political commitment and government resolve. While this challenge has many dimensions, two in particular stand out in Albania: · ensuring that on-going restructuring and privatisation efforts in these sectors produce regulatory institutions with the capacity to promote and benefit from broad yet constructive popular participation; and · improving access to electricity, water and related services for businesses and households forced to operate in the informal sector. In reforming these public utility sectors, the Government of Albania is seeking to align them with European institutions and policies, as part of its negotiations for eventual EU membership. Thus far the Government has created independent regulatory agencies for the electrical energy and telecommunications sectors, while separating commercial activities in these sectors both from these regulatory agencies and from the sectoral ministries that had previously discharged ownership functions. The Energy Regulatory Entity (ERE) was established in 1995. Its goal is to approve the electricity tariffs, to monitor licensed activities, and to solve disputes between licensees and customers. ERE costs are covered by licensing fees and regulation fees from the licensees . The Water Regulatory Entity is an independent entity that was established after a 1996 law on the “Regulatory Framework of the Water Supply Sector and Disposal and Processing of Wastewater.” In the framework of the decentralization reform, the authority to set tariffs will be transferred to local Government; however, because of the delay in the decentralization process, the WRE continues to hold this authority. The WRE has a legal right to monitor and issue penalties in case of law violations; however, this has not been put into practice . The government has also begun the unbundling of the electrical energy sector, in terms of separating the generation, transmission and distribution of electricity into different legal entities, for the subsequent privatisation of some of these entities. In particular the government is insisting that the KESH state-owned electrical monopoly significantly increase its collection of cash payments for, and reduce losses in, electricity delivery. The government has also partially decentralised (to municipalities) and privatised the local provision of water supply and water-treatment services. These reforms offer important development opportunities for Albania, particularly in attracting the investment needed to expand access to these services, creating regulatory frameworks that are EU-compatible, in promoting transparent, accountable, and participatory governance. All four of the key programming results in the UNDAF for Albania (“more transparent and accountable government”, “greater participation in policy and decision making”, “increased access to quality basic services”, and “regional development”) emphasise the links between good governance, poverty alleviation, and private sector development. In addition to being firmly grounded in Albania’s UNDAF and building catalytically on UNCT work that is already being done in Albania, proposed activities would constitute an innovative new programming area for the United Nations in the region. They could also be an important step in translating the promise of economic governance into concrete programming activities, aligned with the imperatives of the post-communist transition and European integration. By helping to reduce the strains on the regional electrical energy balance in Southeast Europe, these activities could help reduce the potential for inter-state tensions as well.
The objective of the project will be to enhance the capacities of public utility regulatory bodies; to enable the strengthening of pro-active civic watchdogs that would safeguard the public interest by monitoring the provision and the quality of service delivery; as well as to institutionalize the dialogue that would lead to pro-poor utility policies. This is consistent with the recent government emphasis on public consultations concerning policies, laws and national strategies within the framework of the National Strategy for Development and Integration. Outcome 1 concerns strengthening capacities of public utility regulatory bodies to better monitor the provision, use and efficiency of utility delivery. Reforms have made possible the use of transparent and participatory economic governance mechanisms in Albania. However, the capacity to implement these mechanisms—particularly at the local level—is often lacking. This is the case both for regulatory agencies and for commercial and civil society stakeholders, for whom the arts of public discourse and the robust yet courteous articulation of group interests sometimes remain works in progress. The further development of analytical, organizational, and communications/outreach capacities in all three sectors—public, private, and civil society—is needed to better reconcile the need to increase prices (in order to improve the service quality or access) with the importance of promoting social inclusion and ensuring environmental safety/quality. Project outputs envisaged to achieve this outcome include identifying key capacity constraints limiting the effectiveness of current mechanisms, and proposing, agreeing and implementing solutions to address these capacity constraints. In addition, public awareness on issues relating to utility provision will be increased, and the capacities of utility regulators (ERE and WRE) to respond to public concern and adopt participatory consultative processes will be improved. Outcome 2 envisages strengthening the Consumer Associations and their work with the utilities, providing strong national and local voices for customers. Support for consumer associations/councils will directly benefit the management of these utilities in Albania and provide the citizens with a mechanism to voice their concerns about the provision and quality of public utility service. Specific outputs will include capacity building to consumer associations in regard to the following: v investigating complaints about the services that individuals and businesses receive from electricity, gas, water and sewerage companies v identifying through qualitative surveys where companies can improve service to reduce the level of complaints v monitoring the utility providers’ year-on-year performance to see if service is improving In addition the work of the Consumer associations will be piloted in six Albanian regions bringing their work closer to the people. Outcome 3 focuses on ensuring that vulnerable groups, people in need, and those living in informal areas benefit from pro-poor utility policies. Improvements in access to water services would provide important benefits for Albanian women, who are much more likely than men to bear the burdens of collecting water from wells and standpipes (and then boiling it at home), and to deal with the family health care threats associated with inadequate water treatment. In addition, better access to electricity would significantly improve Albania’s business infrastructure and environment, increasing employment and income. This is particularly the case in Albania’s less developed northern regions, where poverty rates tend to be above national averages, and where arrears to KESh are the highest. Outputs to contribute toward this outcome include making delivery of social protection in regard to utility tariffs more efficient, ensuring consultation with vulnerable groups in regard to privatization of utility provision and the liberalization of prices, and establishment of mechanisms to institutionalize dialogue between regulatory entities, public utility providers and vulnerable groups in regard to moving away from informality. For this purpose, two offices will be established in the informal areas of Bathore (Tirana) and Keneta (Durres), that will assist the communities in these areas with information and advice on the procedures and problems related to the regulatory entities and on a wider scope of issues.
This concept note has been prepared in cooperation with the Ministry of Economy, Trade & Energy and with the Embassy of Spain. Following approval of the concept note, the detailed programming phase will explore options to ensure broad-based political support to the proposed interventions. As the purpose is to maximise access to utilities through the articulation of participatory methodologies for empowering voices of the poor within decision-making processes – a democratic principle shared by both the Government and the opposition, the success and sustainability of this project ultimately rests with national commitment and the coordination and capacities of Government and regulatory entities at both the central and the local level. A Chief Technical Advisor will be appointed, reporting through UNDP to the UN Resident Coordinator. Together with the Project Team, the CTA will be responsible for running the project on a day-to-day basis on behalf of the Project Board (Project Steering Committee). S/he will ensure that the project produces the results specified in the project document, to the required standard of quality and within specified constraints of time and cost. The World Bank will hire a number of international consultants to provide the policy advice and technical assistance it will undertake to the utility regulatory bodies and the Ministry of Economy, Trade & Energy. Consultants will be supported and augmented by in country World Bank staff. A regional project coordinator will be attached to UN/UNDP project offices in each of the six envisaged pilot regions, with responsibility for liaising with local government and organizing the participatory activities foreseen. Other UNDP activities will require international and national consultants, and subcontracts to national civil society organizations. All UNDP staff will report to the envisaged Chief Technical Advisor. The proposed activities are fully in line with government priorities as laid out in the National Strategy for Development and Integration. Capacities of energy and regulatory entities in Albania weak and activities will be specifically looking at strengthening their monitoring and benchmarking capacities. Technical assistance will be dedicated to the preparation of analytical studies in both the energy and the water sector that will provide the regulatory entities, utility companies and the relevant ministries with policy options and recommendations. In this light, the preparation of studies on alternative means of energy provision will contribute to the thinking in the Ministry of Energy Trade and Economy and ERE about the necessary policy steps that need to be undertaken towards tariff setting and respective regulations especially in view of upcoming privatization process (the government has opened the electricity market to the private sector participation by several concessions for the development of new generation plants). The water supply sector faces other challenges. The proposal will finance a study on regional utilities, at the request of the government, to look at the efficiency of the current management system and articulate interventions to address these current challenges. The public relations and public awareness aspects will build on the results of the Public Private Infrastructure Advisory Activity’s Communication Program for Private Participation in Municipal Water and Wastewater that conducted a needs assessment to identify prevailing perceptions, attitudes, and beliefs about private participation in the provision of municipal water and wastewater services. Activities of Outcome 2 are in line with both the government vision and the European Union consumer policy strategy, which is to achieve a high common level of consumer protection, effective enforcement of consumer protection rules, and involvement of consumer organisations in policies. In this sense the proposed activities will address the government strategic priorities as well as policies of support to non-government initiatives for consumer protection. Activities will take into account the current experience of the Albanian associations of consumer protection such as the Office for the Consumers’ Protection and the Consumers’ Association that have been trying to establish the culture of consumer protection. However, as stated in the National Strategy for Development and Integration, there is an acknowledged need for the articulation of policies and laws in that respect. Therefore, the project will also support the Ministry of Economy, Trade and Energy with technical assistance on the field of consumer protection as direct support to the national Consumers’ Protection cross-sectoral strategy that is due to be finalized in September 2007. Activities under outcome 3 fall into two groups. The first will examine current pro-poor support and tariff subsidies with an eye to restructuring them to more efficiently deliver social protection utility schemes. The second component will focus on combating informality in Albania in regard to utility provision. Informality in the country takes many forms, its most important geographical manifestations include large settlements of internal migrants on the outskirts of Tirana and other major cities, where properties have been built without prior permissions and where rights are not regularised. In many cases, the owners/residents of these informal properties surreptitiously tap into water, electricity, and other utility networks without paying for the illicitly obtained services, and sometimes damaging the network infrastructure on which all users depend. These extra-legal supply mechanisms can also pose risks to public health and safety—in the form of leakage from poorly regulated septic systems, jerry-rigged electrical wires, or declining local water tables—affecting the public in general. The presence of the project in these informal areas will support the formalization of public utility access in these areas. Activities will assist and support the legalization of appropriate connections with the public utilities infrastructure and encourage the replacement of informal (expensive, unsafe, inconvenient) with formal mechanisms for delivering these services. At the same time it will help service providers to find the right balance between depriving illicit users of the ability to free ride on public networks versus helping to regularise their encumbrance of (and payments for access to) these networks as well as establish a dialogue between the communities and public utilities. In the provision of support to energy sector, the project will be closely coordinated with a USAID project for building the capacities of Energy Regulatory Entity, the only other significant donor initiative in the proposed sector. Nationally, the programme will be implemented in partnership with the Ministry of Economy, Ministry of Public Works, Transport and Telecommunications, regulatory entities, regional and local governments of the pilot areas, KESH, water supply companies and AlbInvest. Civil Society will be a key partner for the implementation of all relevant activities.
UN agencies are committed to manage projects within specific measurable results frameworks. Monitoring and evaluation of this project will be conducted in accordance with the UNDAF monitoring and evaluation plan and will also be subject to the relevant agency regular internal audits. The participating agencies are primary responsibility of developing tools and methodologies for the UN to better monitor and evaluate the work of the proposed programme. Quarterly status reports will be prepared by each agency, in partnership with their government and regulatory counterparts – to be consolidated by UNDP, and submitted to the UN Resident Coordinator. A Steering Committee comprised of Government (National and Regional), civil society, the Spanish Government and the UN will be established to monitor and evaluate the effectiveness of the Programme’s implementation. UNDP will be coordinating the monitoring of Outcome Indicators, in partnership with the Ministry of Economy. A detailed Annual Work Plan will be developed during the first month of the project life. The Monitoring and Evaluation plan will also be developed. Since the objective of the project is to increase the capacities of regulatory entities and the establishment of mechanisms to protect the interests of people in need and the public at large, the project will also be subject to a participatory monitoring and evaluation. Project outcomes will be discussed, consulted, and take into account the relevant stakeholders’ comments and feedback all along the process. Each participating UN organization will prepare reports in accordance with its financial regulations and rules and operational policy guidance. Reports will be submitted to the Project Steering Committee for discussion and approval. The reporting formats should be harmonized to ensure easier consolidation by the Administrative Agent. The Administrative Agent shall be responsible for submission of the consolidated report to the Resident Coordinator to be shared with the donor in accordance to the agreed timelines.
The proposed project will be implemented in Joint Programming – Option C – Pass through management (see Guidance note on Joint Programming of the UNDG of 19 December 2003). UN agencies have been present in Albania since the early 1990s. The Country Team currently comprises UNDP, World Bank, IMF, IOM, UNICEF, UNFPA, UNHCR, UNIFEM, and WHO. The total amount of UNDP and World Bank disbursements in Albania for 2005 and 2006 were $ 15,4 Mill and $19.5 Mill respectively (this amount excludes WB lending). The proposed project will be an integral part of the One UN Programme for Albania, 2007-2010. UNDP and the World Bank in Albania have extensive experience in promoting capacity development for good governance at the central and local levels. The World Bank and UNDP joined forces to conduct a Poverty and Social Impact Analysis of the Water Sector in Albania in 2005. The World Bank has already been supporting the government efforts in the field energy and water and specifically through the Power Sector Generation & Restructuring Project and Municipal Water & Wastewater Project. Taking into account the Bank’s role and expertise both at the country and headquarters level, the specific tasks of functional reviews, capacity diagnosis, efficiency of pro-poor support in Albania and the scope for restructuring will be addressed by the World Bank contribution to the project through national and international expertise. UNDP works extensively to make sure that economic growth reaches the poor and marginalized groups. In this respect, the creation of watchdogs in the energy and water sector falls strongly under its empowerment mandate. UNDP is resident on the ground in many of the regions of Albania, and has developed Regional Development Strategies for all 12, taking a “localizing the MDGs approach” relevant to the proposed project. The project will have two main Government counterparts: the Ministry of Economy, Trade & Energy (METE) for the energy sector component and support to consumer’s associations and the Ministry of Public Works, Transport and Telecommunications for the water sector component. Cooperation with other ministries, with regional/local authorities, the private sector and with the civil society is seen as essential, and is built into project activities and design. The Government will ensure national ownership of the project and will develop its own capacity to design and implement customer protection policies, regulations and guidelines for a well functioning dialogue between communities and service providers. UNDP and the World Bank will jointly co-lead the project. It is envisaged that both Agencies will work together to implement activities necessary to securing outputs in all the project outcomes. WB will mainly focus on the structural support, in accordance also with the WB current and past policy operations, whilst UNDP only mainly focus on the social aspect of regulatory work at the central and the local level A Project Steering Committee (Project Board) will be created to coordinate and oversee the project implementation. As a principal coordinating and supervisory body for implementation of project activities the Board will provide policy guidance and recommendation regarding project strategy and project objectives and periodically review and oversee the financial and programme achievements. The Board will include representatives of the Ministry of Economy, Trade and Energy, Regional Government, the Embassy of Spain, Civil Society, UNDP and the World Bank. The Board will meet every six months. Other ad-hoc meetings of the Board may be organized if necessary. Project assurance will be the responsibility of each Board member. UNDP will serve as Administrative Agent and will operate as the main interface at the country level with the Government and targeted beneficiaries at local and central level. It will also take over the responsibilities for fund management and consolidated reporting to the UNDP/Spain MDG Achievement Fund. Implementation of the activities under the responsibility of the different agencies, and achievement of results will be independent and linked to that specific agency in line with the agreed joint programming document.
