The management of water resources in Slovakia did not undertake any economic restructuring after political changes in 1989. The Government has had the responsibility to regulate, develop, and provide water services to all users, such as population, industry and agriculture. With respect to infrastructure development, the water and wastewater (W&WW) services were funded directly by the Government.
In 2003, the Slovak Government decided on the decentralization of state owned W&WW services and a transfer of assets to the municipal level. Decentralization threw up many questions regarding the sustainable financing of water and waste services. This situation became more acute with the adoption of EU legislation in 2004 which tightened rules and regulations regarding permissible levels of pollution and treatment.
Recognizing that economic and financial conditions are critical to the effectiveness of various tariff and effluent charge reforms, a financial model (ASTEC) was devised. The ASTEC model simulates municipal W&WW accounts. This simulation includes separate accounts for drinking water and wastewater services and both financial and physical accounting for those services.
In ASTEC model, water customers can be divided into up to nine groups and distinguished by any dimension considered important by the model user. The ASTEC model helps give decision makers an overview of the financial health of the service, can help explain the reason for the financial situation, and can be used to develop alternative scenarios.
- Many water operators do not have transparent systems of bookkeeping and accounting practices.
- These systems and practices are essential for developing cost-of-service pricing.
- Municipal board representatives are unable to meet their responsibilities, unless they have access to information that clearly shows the financial condition of the operation in enough detail to explain why it is in that condition.
- The board has a responsibility to ensure that the municipal water company does not abuse its position as a public monopoly.
Importance of the case for IWRM
Use of economic instruments supports to achieving the IWRM management objectives. Firm and clear regulation of tariffs set by water operators is one of the most important preconditions for the successful cost recovery policy.
In many cases, both regulators and water providers are not fully familiar with economic implications of changes, such as new investments planned to up-grade the technical performance of water utility, proposed increase in pollution charges, and changes in social and economic development of area provided by water. Application of models to simulate different scenarios might help to better decision on future development.