Influence diagrams

Experts from the Water Company identified a number of interrelationships between different types of tools. For example, they perceived that financial incentives for citizens were also a form of awareness raising, hence the interrelationship of education with financial instruments, and that regulatory instruments such as water efficiency standards are interrelated with technological measures. Following analysis of the transcribed interviews, therefore, three IDs were developed where education and regulatory instruments were integrated with financial instruments, Operation and Maintenance, and Technological measures. The resulting influence diagrams, presented below, incorporate policy variables in Table 3.3 and the constraints from Table 3.4.

Financial instruments

The influence diagram in Figure 3.6 shows the policy variables, intermediate variables, goals, and performance criteria elicited from the expert consultation that are relevant to the implementation of financial instruments.

Four financial instruments were identified and included three restrictive measures -metering, price increase, and introduction of increasing block tariff (IBT) structure – and one incentive for adopting technology – loans for citizens to install water saving appliances. Expected water savings from increasing water price are dependent upon:

(i) a meter being installed, (ii) price elasticity, and (iii) the size of the price increase.

The water company, Sofiyska Voda (SV), has already introduced comprehensive metering and, according to company reports, around 98% of households in the city now have a meter installed. The potential impact of pricing mechanisms is examined and modelled in Chapter 4, Section 4.3.

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Policy variable Intervening variable Goal

Performance

revenues Need for careful tariff structure design

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KEY: A positive sign (+) denotes that an increase in the concept variable at the tail of the arrow will lead to an increase in the variable at the head and that a decrease leads to a decrease. A negative sign (-) indicates the opposite movement of the head variable from that of the tail one.

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Figure 3.6. Influence diagram showing causal relationships relevant to the implementation of financial instruments

Expert perceptions of the ease of implementation indicate that an increasing block tariff (IBT) structure would be easier to implement than a general price increase, i.e.

increasing the marginal price, and when explored further, informed practitioners stated that they considered an IBT structure to be more socially acceptable. As a result of this, citizen’s receptivity to introducing an IBT structure was explored in the social survey reported in Chapter 6.

Operational and maintenance (O&M) measures

A study into water saving measures in Sofia (EU-ISPA WDM Procedure 6 Report) in 2003-2004 identified non-functioning hot water circulation pumps (HWCPs) and high pressure in multi-family blocks as a major cause of customer-side wastage. The large number of multi-family blocks (around 60% of dwelling in Sofia) means that the water saving potential from addressing these two measures is relatively high. Following recent studies, it has been estimated that installation of a circulation pump may

reduce consumption by 10-15%, and installing pressure reducing valves can reduce consumption by 9-10%. Installation is not, however, the responsibility of the authorities or the water company - quoting one expert, “the state authority is not able to go to every building and install a circulation pump or pressure reduction valve - but depends on educating citizens about the potential reduction in their bills; the fraction of the water bill known an ‘common use’. ‘Common use’ is measured (by the water company) by subtracting the total water volume measured by all individual household meters in a building from the volume measured by the revenue meter, i.e. the meter on the supply pipe that enters the building, and then dividing this volume equally among all residents. As a result of these findings a question was included in the social survey, described in Chapter 6, exploring citizen’s perceptions of ‘common use’.

Most customer-side wastage resulting from old in-building infrastructure is currently accounted for by the Water Company through metering and is billed to the customer.

As a result, a major constraint to improving efficiency through O & M measures identified by experts is the risk of reduced revenues to the water company. Economic rebalancing through regulating the water price was suggested by experts as an option for reducing negative impacts on the Water Company, and overcoming this constraint to WDM implementation.

The influence diagram in Figure 3.7 shows the policy variables, intermediate variables, goals, and performance criteria elicited from the expert consultation that are relevant to the implementation of O & M measures.

Regulatory instruments

Seven regulatory instruments, requiring governance intervention and policy-making, were identified by experts. Two of these: “change in design norms for buildings” and

“water efficiency rating scheme” are discussed below as they also affect the uptake of water efficient appliances.

Collection of unpaid taxes was mentioned as a major issue in Sofia by experts although reported revenue collection efficiency has increased from 82% in 2001 to 89% in 2003. Reducing uncollected revenues would reduce consumption by none paying customers but experts stated that new policies need to be introduced to allow the Water Company to implement measures such as flow-restricted metering. Other

regulatory tools include outdoor use restrictions and managing unaccounted for water, as described below.

Figure 3.7. Influence diagram of elicited of causal relationships relevant to the implementation of O & M measures

Informed practitioners explained that there is a high consumption of potable water in the suburbs and rural areas of Sofia for outdoor use and this is increasing. One expert quoted a recent study which showed that “… in the small towns and suburbs people use approximately twice as much water as urban households because of outdoor use. In the first place the restriction should be imposed on outdoor use and washing cars”. Furthermore “… some people have boreholes but the electricity for pumping is expensive so they prefer to use potable water because it is cheaper. Also there is a very strict prohibition for developing a personal borehole. The regime is very slow – 6-7 months, and even for these boreholes, there is a meter installed and bills are paid to the Ministry of Environment and Water (MoEW)”.

According to a Water Company expert who works specifically on quantifying unaccounted for water, the high level of UfW (>60%) in Sofia is made up of approximately 65% physical losses (leakage) and 35% trade losses (inaccurate

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KEY: A positive sign (+) denotes that an increase in the concept variable at the tail of the arrow will lead to an increase in the variable at the head and the decrease leads to a decrease. A negative sign (-) indicates the opposite movement of the head variable from that of the tail one.

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Intervening variable

metering and thefts). Thefts, either illegal connections or where customers have by-passed the water meter, are a major problem in Sofia. Since the introduction of the concession in 2001, the Water Company, Sofiyska Voda (SV) has implemented a hydrological model of Sofia’s water supply network including 234 district metering areas (DMAs), with no more than 10,000 households per DMA. The water entering and leaving each DMA is metered and by carrying out a water balance, areas with high levels of UfW are being identified.

Technological measures

Informed practitioners referred to existing studies that indicated that water saving showers and toilets have the highest potential to reduce household water use. The cost of installing such appliances, however, means that uptake will be limited unless complimentary policies are introduced. As mentioned in Chapter 1, Section 1.2, the uptake of water saving household appliances can be increased through the introduction of instruments to promote citizen involvements. A number of WDM instruments for improving the uptake of water saving appliances in households have been mentioned in previous sections. The challenge of achieving uptake of water saving appliances in (i) existing housing stock, and (ii) new housing developments, requires specific polices to take advantage of the particular circumstances in the region of Sofia.

According to those interviewed, achieving uptake of water saving appliances in existing housing stock is more challenging than in new developments because it only occurs when water appliances are replaced. In households, opportunities arise in existing households at specific times such as: (i) when a change of occupancy occurs, and (ii) when the existing appliances reach the end of their lifetime. The currently high change of occupancy rate in Sofia, and the growing need for water appliance replacement among the large number of households built during the 1970s, means that there is, potentially, a window of opportunity to implement policies that will lead to benefits in the future. As a result of these findings a question was included in the social survey, described in Chapter 6, exploring replacement rate of water appliances in households in Sofia.

Informed practitioners also identified specific types of building, such as government buildings, universities etc., where replacement can achieve higher savings due to high frequency of use (e.g. toilets), and because these building are usually over 30 years old, with older appliances, and high leakage.

Achieving water efficiency in new housing developments poses different challenges from those in existing housing stock. Recent experience in other European countries has led to a general consensus that mandatory building regulations (design norms) are necessary to minimise the impact of new developments on the water balance.

Current design norms in Sofia are 400 litres per capita per day (l/c/d), and 220 l/c/d for smaller towns with populations of less than 100,000. The corresponding German standard is 130-140 l/c/d. It is expected that population growth in the region of Sofia in the next fifteen years will increase the requirement for new housing, and increasing affluence may also lead to the wider use of water intensive products such as washing machines, dishwashers etc. A number of individuals in the study stated that, under the above scenario, there are clear benefits for introducing tighter mandatory design norms, closer to other European countries. As with existing housing stock, there is now a window of opportunity for such policies to be implemented to have maximum effect.

A further advantage of introducing design norms cited by two practitioners was that it would reduce capital costs of network expansion and operational costs that new developments entail, e.g. wastewater capacity, pumping capacity etc. There was a suggestion that this would allow SV to re-direct investment towards network rehabilitation. This issue is discussed further below.

The following influence diagram, Figure 3.8, shows the policy variables, intermediate variables, goals, and performance criteria elicited from the expert consultation that are relevant to the implementation of WDM instruments to promote uptake of household water efficient devices.

Economic regulation and WDM in Sofia

Driven by the political and economic developments and the introduction of the private sector, regulation of the water sector in Bulgaria has undergone rapid change in the last five years. It is perhaps not surprising, therefore, that only a small number of informed practitioners were able to discuss this aspect of WDM planning in detail.

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Policy variable Intervening variable Goal

Performance

Figure 3.8. Influence diagram of elicited of causal relationships relevant to the implementation of WDM instruments to promote uptake of household water efficient devices

Two of the informed practitioners expressed the view that there is still scope for the water regulators - the Ministry of Environment and Waters (MoEW) and Ministry of Energy (MoE) – to collaborate further and put in place regulatory mechanisms and efficiency targets to assure that, where possible, funds are directed towards efficient use and reduced wastage, with the over-riding aim of securing the water supply in the future. From an economic investment perspective the EU-ISPA (European Union Instrument for Structural Policies for Pre-Accession) also has an important role in the WDM decision process.

There are two strong economic drivers that influence investment in WDM in Sofia.

The first involves the cycle of EU-ISPA funding that is part of the 25-year concession agreement under which the water company, Sofiyska Voda (SV), operates and makes investment decision. The second is the not yet fully-developed regulatory framework. These influences and how they are managed impact on the ability of SV to achieve the parallel goals of investing in rehabilitation of the existing water supply network whilst at the same time, paying for expansion of the existing water supply network to supply new development.

All experts involved in the consultation recognised the current high level of infrastructure losses as a major constraint to achieving sustainable management of the Upper Iskar’s water resources. High levels of leakage (estimated at around 58%) within the water supply network, resulting from the aging water supply infrastructure in the city was acknowledged as the most important water efficiency objective by a number of practitioners, not least because of the social effects. As one expert explained “People are paying a higher water price due of infrastructure leakage because the losses mean that costs to the water company are higher due to increased abstraction, distribution and treatment costs, even though this water leaks out of the system”. The problem of high leakage was a driver for the EU-ISPA agreeing to fund an investment programme to support rehabilitation of Sofia’s water supply infrastructure over the current 25 year concession.

The flow diagram below, Figure 3.9, presents the funding conditions set by EU-ISPA for the 160 million euros loan, which include the business plan, the basis for the future water price, and the role of the new regulator, the Ministry of Energy (MoE) in this decision.

Figure 3.9. Investment and water price setting decision process involving SV, MoE and EU-ISPA

The conditions of the next EU-ISPA loan instalment, described in Figure XX, include the water company increasing the water price to the affordability threshold stipulated by the World Bank, i.e. water bills should not exceed 3.5% of average GDP. In countries where a large proportion of the population are still living in relative poverty any water price increases can raise affordability problems and the risk of market failure (de Miras, 2005). The current situation in Sofia introduces a need for monitoring impacts of high prices on low income families.

The parallel need for the water company to invest in network expansion due to new developments draws funds away from investing in rehabilitation of the existing

Release of EBRD / tariff from 0.78 LEV to

1.44 LEV. This

network. As one expert explained “… there is expansion of the water supply network whilst the existing water supply is in disrepair. So at present, the investment is going into expansion, and not into repairing the existing network. Future water scarcity will determine the magnitude of the effects of non-investment in network rehabilitation.”

Non-enforcement of the existing planning regulations - which are the responsibility of the Ministry for Regional Development (MoRD) – was cited as an area in existing policy that has a detrimental effect of water company operation and investment.

Because the water company, SV, is obliged by law to supply all new developments, they have no choice but to expand the network or, where new developments cause the existing network to fall below capacity, replace it. Non-enforcement of planning regulations means that new developments are not always registered with the responsible planning agencies and this, combined with the current design norms in Sofia, which are currently above 400 litres per capita per day (l/c/d). puts pressure on the water company to direct investment that could otherwise go towards rehabilitation of the existing water supply network, towards network expansion to supply these new (unplanned) developments. In effect, the non-enforcement of planning regulation means that they are not consulted during the planning stage.

3.3 Discussion

The aims of the knowledge elicitation were:

1. To elicit knowledge about the current decision processes that influence water demand management (WDM) implementation in Sofia and guide the development of Bayesian network (Bn) models for supporting WDM planning.

2. To identify data collection needs for model development.

The results of the knowledge elicitation provide two main topics for discussion: (i) research and decision support priorities, and (ii) the value of knowledge elicitation in addressing science-policy interfaces.