Concept

The concept of comparative competition is the annual publication of the performances of the individual companies. The driver for improved service is the psychological desire to be the best (or at least a desire not to be amongst the worst).
In order to achieve this structure it is necessary to establish a detailed reporting regime setting out the information requirements of WASA. At this stage in the regulatory process this reporting regime has not been established and this report is based upon statutory financial reports and other readily available data. Future reports will be significantly more detailed based upon regular performance reports from the water companies and the adoption of regulatory accounting practices.
The primary areas to be addressed in these annual reports are:

• Water quality
• Level of service
• Compliance with regulations
• Efficiency

Water quality

Water quality is an area where it is extremely difficult to employ comparative competition as only Nam Papa Vientiane has the resources to undertake regular water quality monitoring. Draft legislation has been prepared by us that sets out a timetable for the water companies to:

1. Acquire the resources for testing (including appointment and training of staff)
2. Comply with World Health Organisation (WHO) minimum requirements for water quality with respect to health
3. Comply with all other water quality requirements as stipulated in the WHO guidelines.

Until this legislation is passed it is not appropriate to compare performance on water quality.

The targets on water quality monitoring vary depending upon the current status of the various water companies. Nam Papa Vientiane has the tightest target of full compliance by 2005, because it already has much of the monitoring infrastructure in place and has the capacity to generate the financial resources necessary for implementation. The larger more advance provincial water companies have medium targets, up to 2007, whereas those that are less advanced and economically disadvantaged have much later targets, up to 2009.

Levels of service

The primary levels of service criteria are:

1. Service coverage, and
2. Reliability of supply.

As with water quality it has not been possible at this very early stage of regulation to determine in detail how good or bad each company is in this respect and we can only record performance based upon details reported to us by the companies themselves. We observe that although many service providers provide a continuous (or near continuous) supply, service coverage is far from complete. The combination of these two performance criteria is illustrated in Figure 1.

In future years we intend to measure level of service performance based upon other factors such as: water pressure, the number and type of customer complaints and other measurable factors.

Compliance with regulations

2002 the regulatory framework was not established and very few regulations existed with respect to the operations of the water companies. Consequently the measurement of compliance with regulations has not been possible. In future years we will establish criteria whereby compliance with regulations can be measured such as the number and severity of enforcement notices issued by WASA.

Efficiency

The operational efficiency of the water companies is recognised as being significantly below what it should be. The principal areas of concern include:

1. Manpower utilisation.
2. Water loss management.
3. Financial performance.

Manpower efficiency

The utilisation of manpower is possibly the most important operational aspect that impacts upon overall efficiency. Although relatively simple benchmarks such as employees per thousand connections and water sold per employee appear to offer a means of comparison they need to be treated guardedly recognising the uniqueness of each water company, notably their relative sizes and economies of scale they enjoy.

We have analysed the manpower efficiency based upon these two benchmarks but building in the economy of scale factor as illustrated in Figure 2 and Figure 3. It should be recognised that the average line should not be interpreted as being a target level of efficiency and those that are better than average should not be complacent. In all cases the efficiency levels are well below ‘best practice’ observed in many other countries throughout the world. All operators have the capacity to improve efficiency; the diagrams simply indicate those where the needs are greatest.

Luang Prabang and Savanakhet stand out as possibly the two best performing companies with the balance displaying a relatively large degree of performance variation around the average. Phongsaly* and Xaysomboun appear to be the two that have the greatest capacity to improve efficiency, either by reducing staff or by increasing the customer base and therefore water sales. Of special interest is Vientiane Prefecture, by far the largest utility and with the most expertise but does not display a high level of efficiency. In order to comply with average expectations a staffing efficiency gain of approximately 10% is required.

As expected the most efficient organisations with respect to staff per thousand connections would also be the most efficient with respect to water sold per employee. However, there are a few exceptions, e.g. Vientiane Province. This appears to be due to differing water use patterns in the provinces with Vientiane Province customers consuming less half than those from Luang Prabang (refer Figure 4)

The wide variation of water consumption per connection appears to be due to several factors:

• Those suffering from supply disruptions, i.e. not a 24-hour supply, have reduced sales, notably Phongsaly.
• The larger, and hence wealthier, towns and cities may have higher water consumption due to increased household sophistication, e.g. internal plumbing, etc.
• The larger towns may have large water consuming commercial customers thereby distorting the overall sales per connection.

Although efficiency in the use of water is encouraged low sales figures do have an adverse financial impact. Where systems have the capacity to sell more the companies should try to exploit this spare capacity to the maximum, either by providing more connections or ensuring that the service is reliable allowing greater freedom of use by the customers.

Environmental concerns

Environmental duty of care

To date we have not undertaken any environmental supervision of the water companies’ activities other than scrutiny of the environmental impact assessments of new projects. We intend to request all companies to submit for our scrutiny detailed environmental assessments of their activities highlighting those that may be detrimental to the environment, e.g. sludge disposal. The companies shall be required to describe in their corporate plans what actions, if any, they propose to take to remedy or limit any environmental damage that has occurred or continues to occur as a direct result of their activities. We shall monitor and report on their progress in future annual reports.

The water companies do not (yet) have a responsibility for wastewater management, a major environmental concern. We do expect this situation to change in the foreseeable future whereupon we shall take an active role in monitoring wastewater discharge quality and practice.

Water loss management

Water losses are not losses to the company but losses to the customers. For every litre of water lost through leakage the cost of its production is wasted and it deprives a customer of being able to use that litre.

Production and sales data from the water supply state owned enterprises have been analysed in detail. The primary result of our technical research has identified that leakage appears to relate to the number of connections more than any other single factor. Leakage levels also appear to be related to the age of the systems although the evidence is not statistically conclusive.

The very strong relationship between leakage levels and the number of connections suggests that the majority of water losses occur at the connection between the main and the service pipes, attributable, in all probability, to inappropriate materials and working practices during the connection process. Unfortunately, the remedial measures in this case are expensive, generally involving the replacement of water mains and significant improvements should not be expected in the short term.

Figure 5: Water Loss Performance

1. Figures adjusted to take account of intermittent supply
2. ‘Expected’ is calculated based upon statistical expectations after allowing for the age of the systems. The statistical analysis excluded Vientiane Prefecture as the number of connections is so large that it significantly distorts the overall analysis. For Vientiane Prefecture, data from all systems applied.
3. ‘Target levels of leakage are the lesser of 75% of actual and 75% of expected.
   

Leakage per connection is, on average, approximately 260 litres per connection per day, with a range of 60 to 810 litres per connection per day for different Nam Papas. The leakage performance of the 18 water supply state owned enterprises is presented in Figure 5.

The worst performing company is Nam Papa Vientiane with a leakage per connection of over three times the average. Even allowing for the age of the system it is still almost twice what would be expected. At the other end of the scale Huanphanh and Xayabury both have suspiciously low levels of leakage, well below expectations. It is possible that this may be due to errors or misunderstandings in the reporting process and must be treated with a degree of caution.

We do not support a policy of setting arbitrary targets for levels of leakage, as we believe that it does not offer the best value to customers. We intend to continue analysing the water loss performance of the water companies with a view to establishing appropriate and economically efficient targets for each company recognising its individual characteristics and constraints. In the interim we have assumed that water suppliers should be able to reduce their leakage levels to 25% below average (adjusted for age), or 25% less than their current performance, whichever is the lower.

* Phongsaly is a special case and has many technical, financial and institutional problems that are not encountered by other companies. Some of these problems cannot be blamed on management inefficiency but rather as an accident of geography. It is recognised that the current institutional structure for Phongsaly will not be able to deliver much in the way of improved performance. It is the subject of a more rigorous examination by WASA to identify potential long-term sustainable solutions.