In this exclusive interview, we converse with Ivaylo Kastchiev, WAREG Vice-President, who played a crucial role in drafting the KPIs Report 2023.
Kastchiev, with his extensive expertise and experience in both the operational and regulatory aspects of the water sector, chairs the working group responsible for this key report. His role in WAREG has been instrumental in fostering a collaborative environment where knowledge, best practices, and innovative methodologies are shared and developed. This interview aims to shed light on the objectives, challenges, and impacts of the KPIs Report, as well as to explore Kastchiev’s motivations, insights, and the broader implications of this work for water regulation across Europe.
Vice-President Kastchiev, could you provide an overview of the KPIs Report 2023? What are its primary objectives?
Surveying and identifying methodologies and practices of WAREG members in monitoring utilities work through performance indicators is complex, strategic and much anticipated work to be done. Its proper fulfilment would require expertise and in-depth knowledge of the theory and practice of how a regulatory authority address collection of information from regulated entities, how it checks its credibility and truthfulness, how it analyses it, how it uses it to make decisions. Then it comes the matter of what type of indicators are selected, how are they designed, explained and applied. This is a compound process that integrates several activities, and in order to survey it, you will need to have a good understanding.
One of the primary objectives of WAREG is to share best practices, facilitate information exchange, and enhance the expertise of professionals in water regulation. In 2017, representatives of Bulgarian and Maltese regulators joined to identify and analyse water efficiency KPIs in WAREG member countries. After survey of existing benchmarking systems, followed by long debates we were able to select small number of indicators based on IBNET list, and to survey and identify their application and levels among WAREG members. After days of hard work, we prepared a detailed report, which was one of the first in-depth analytical researches in WAREG, together with the report on the Affordability in European water systems.
In 2022 our WAREG team decided that it`s about time to continue survey and analyse the performance of monitoring methodologies, but this time to cover the whole story, not just separate aspects. So, I agreed to chair a working group, designed a questionnaire, collected information from 20 WAREG members that agreed to participate in the survey, and provided initial results from the gathered information.
This survey was unique in the whole WAREG history, as we not only collected information and prepared a report, but together with the Secretariat’s experts we organized and conducted total of 15 meetings and thematic workshops, where all members had the chance to share and present their practices in the different thematic aspects of the survey. This allowed for all members to acquire specific knowledge and good practices at “first hand”, and therefore provided opportunities for internal networking and knowledge sharing among the experts in different fields of water regulation.
Finally, after almost two years of work, the KPIs report was completed, reviewed by all participating authorities and finally approved by the General Assembly.
What was your motivation to involve in KPIs survey and report preparation?
I have a longstanding and detailed experience in the water sector, with now more than 20 years of work both in the biggest water operator in Bulgaria and in the national regulator. Even though that I came into this sector originally with a university degree in business administration and management, I also had to deal in the water company with a lot of technical work – strategic and investment planning, life-cycle asset management strategies, both proactive and reactive network management and operations, strategies for non-revenue water reduction, business planning, etc. Therefore, I had to study and understand as much as possible what people in the other countries have achieved and developed, in order to adopt and apply best international practices at home. I am happy that my approach was successful and led to significant real results. Thus I personally realised how important is to study and share information and practices. Then I used both my theoryethical and practical experience to proceed with PhD dissertation.
So, think my academic and professional curiosity was my main driver for conducting surveys and preparing reports in WAREG. Our joint work with my Maltese colleague and the preparation of the Water efficiency KPIs report in 2017 made me really proud and motivated me to continue with other academic and research activities in WAREG.
Another interesting and challenging project I was also involved deeply in was the preparation of the WAREG position on the proposal of the new drinking water EU Directive, approved by the General assembly in 2018.
Later on, in 2019, I designed and conducted in-depth survey and analysis of the tariff regulatory frameworks among WAREG members, and produced detailed analytical report. This report was published on the WAREG website and has been used by many scientists, researchers and consultants in the water sector globally. This makes me believe that such works are proper example of success in knowledge sharing and building expertise globally in a sector, where not much public papers are available free of charge. I keep WAREG`s plaque of appreciation for this report`s preparation in my office as valuable and remarkable reminder of our joint achievement.
So, all of these activities prepared WAREG and me in particular to dream of making even more complex project – which was KPIs survey that took place in 2022-2023.
How do you believe this report contributes to the understanding of water regulation in Europe?
In the KPIs report, as also in the previous 2019 Tariff report and 2017 Water efficiency KPIs report we started surveying general powers and competences of the member regulators. This is very useful and important picture of the roles and scope of the different regulators, as we allow each authority to briefly describe its main objectives. WAREG secretariat produced in 2021 detailed report on Water Governance across Europe that provided a comprehensive overview of all WAREG members country profiles. In WAREG, ensuring the update and public dissemination of key information about the powers and obligations of water regulators is a core responsibility.
The KPIs report provides a detailed overview of the methodological, analytical and technical aspects of data collection and verification, monitoring performance, setting targets and linking service quality with tariff setting. In each section the reader is able to review the different practices of the regulators and to understand the limitations of water regulation (compared for example with the Energy sector), which is mostly due to the lack of unified regulatory standards in the EU water legislation, but also to the fact that each country in Europe has different and sometimes unique governance and regulation model of the water sector.
Finally, we come to the specific indicators used by the WAREG members. Water services are very complex and compound, in all terms – technical, economic, social, organizational, etc. Regulators are not able to monitor all of these aspects, so focus is paid to one or another area which requires more attention. A balance also is needed on the regulatory burden, as the regulators cannot and should not interfere too much in the operators` work. Indeed, the task of analysing 425 KPIs used by 19 different regulators, categorizing them into appropriate groups, and comparing the nuances and differences in their methodologies represented a significant challenge. Such an undertaking required meticulous attention to detail and a deep understanding of the various indicators and regulatory contexts. However, I do hope that this work was successfully done and more over – will be useful for the whole water sector.
What are the main findings of the report?
The main objective of this report was to identify, analyse and describe the differences in the practices and methodologies used and applied by WAREG members in a sector that lacks common rules and requirements, has different governance models and different regulatory powers. Almost all WAREG members have differences in their regulatory approaches, and they are incomparable.
We didn’t aim to judge or to evaluate the methods and approaches of the regulators, as these are products and results of the different sector models (both political and social), of the powers, scope of capacities and funding that each country has decided on according to its water regulatory authority, and the organization, competences and expectations set towards the utilities providing water and sanitation services.
Our report will, for the first time, present a thorough overview of the variations, differences, and unique aspects in the processes and methodologies used to monitor the performance of water operators via performance indicators in European countries with established national water regulation. This approach mirrors the method we used to demonstrate tariff setting methodologies in our 2019 report.
This is a valuable information for all the stakeholders, that can be used for decision making and setting targets for improvement, reform and therefore – long term resilience of the European water and sanitation.
In what ways can the report assist regulators in their daily work and/or in addressing the challenges of climate neutrality and adaptation?
All WAREG members that participated in the workshops were able to compare their practices with those of the other regulatory bodies. Representatives shared valuable information on number of interesting topics – online platforms for reported data submission; tools for data validation; requirements for operators` internal information systems; aspects of target setting and monitoring performance; reflection of KPIs levels with tariff setting and tariff updates and data publicity.
Detailed reviews and discussions were conducted on the similarities and differences of the KPIs methodologies in the different categories – water losses, energy efficiency, asset management and capacity, service coverage and quality and efficiency, economic efficiency, social affordability and environment. Thus WAREG members had the chance to know from the source what indicators are used and why, and to check and verify their programs and strategies. Some of the regulators are planning to update or modify their benchmarking platforms, so this knowledge sharing is crucial for solid decision making. Especially today, when climate change is becoming increasingly irreversible.
Which are the main messages for Regulators and for the Sector coming from this report?
We see that EU water legislation is changing and new demands are introduced. Initially EU directives (framework, drinking water and wastewater quality) did not introduce monitoring of service quality and/or efficiency, nor introduced any legal basis for measuring service providers` performance. This is not the case anymore – 2020 drinking water directive recast introduced specific requirements for monitoring water losses (although the exact indicator – whether ILI or other appropriate is yet to be determined) and required much information to be publicly shared. 2022 proposal for recast of urban wastewater treatment directive goes further and requires number of different indicators to be introduced – level of treatment achieved, the costs of treatment, the energy used and produced, and the related GHG emissions and carbon footprint, etc. Taxonomy regulations are and will introduce not only specific indicators, but also targets to measure efficiency success.
Currently, as no unified methodologies are required on EU level, each country has introduced their own benchmarking platforms and types of indicators. As our report demonstrates, many similarities are identified in some areas, while diversity of indicators are established in others. A positive result from the report is the fact that each regulator has understood the importance of performance monitoring, has introduced requirements and guidance, and has formalized the process of data reporting and inspections. Thus, the initial preparation for effective monitoring and regulation has been established, and further development and unification of approaches is possible and potentially are easier to achieve.
How does the report address the status and performance of water regulators in Europe?
This report, as well as the previous WAREG surveys demonstrate that significant differences exist in roles and scopes of competence of water regulators. The majority of the Regulatory authorities that participated in the survey powers to collect technical and economic data from utilities, to monitor KPIs, to calculate tariffs and to approve tariffs.
However, less than half participants in the survey have powers related to licensing of utilities and business plans approval. The same is related to usage of KPIs in the tariff calculation process and possibility to calculate/report KPIs levels on national level.
Most WAREG members receive economic and technical information through Excel files. Around half of the regulators have developed specific online platforms for data submission with different scopes and capabilities. The most used tool for data validation by the regulators is the cross-check of specific data reported for reported and previous years as well as cross-check of similar data in the reports for the reported year, which are used together from most of the WAREG members that participated in the survey. Many of the members request physical documents during data validation, and more than half of the participating regulators validate data during on-site inspections and have introduced, or are planning to introduce, regulatory requirements for the information systems used by the regulated entities for reporting data.
Half of the members that participated in the survey set targets of KPIs levels for the regulated entities. This is not a surprise, as we already mentioned that less than half of WAREG members are involved in licensing companies, business plan approval, and/or usage of KPIs in the tariff calculation process. Without performing these tasks, regulators are hampered in establishing KPI targets as no integrated regulatory approach is introduced. In other cases, targets are established by law, policy strategies, best practices, or local authorities. Nevertheless, regulators are monitoring achieved results by the regulated entities, analysing and benchmarking their performance, and using KPIs levels in the tariff-setting process.
Our review demonstrates that water regulators have usually little powers in case of non-implementation of established targets of performance indicators. Only in a few cases KPIs levels can be linked directly with tariff setting process, and even in fewer cases regulators can penalize water operators.
Can you elaborate on the role of KPIs in enhancing the sustainability of water services?
The survey and report on KPIs detailed and examined a total of 425 distinct performance indicators. A total of 19 regulatory authorities, each using between 10 and 50 indicators, participated in this survey.
Considering that these indicators cover different organizational, technical and economic scope of WS activities, they were structured and analysed in the following 5 categories:
- Service coverage (49 KPIs);
- Service quality (99 KPIs);
- Environment (33 KPIs);
- Asset efficiency (118 KPIs);
- Economic efficiency (126 KPIs).
All of these indicators were then structured in 23 sub-categories for the sake of the analysis. It’s crucial to emphasize that I avoided using categories from any existing benchmarking platforms for indicators, due to the substantial differences in methodologies and platforms encompassed by the analysis.
Some of the indicators used for monitoring service coverage and environment are more or less similar, although some interesting solutions were identified among them (for example monitoring number of households that are not connected to available networks; or monitoring wastewater discharge without treatment in emergency cases). Similarities were also identified in the monitoring of water losses and energy efficiency, where again positive examples applied by a few regulators were identified (like monitoring physical losses and/or ILI; or monitoring own energy production).
Other areas demonstrated significant differences and diversity of indicators – for example network events, service interruptions and flooding – in terms of types of events and network elements (specific data included or excluded). Many regulators monitor different aspects of asset management and asset capacity topics with entirely different and non-compatible types of indicators.
Different solutions are also applied in monitoring cost coverage and efficiency, as well as personnel efficiency (most commonly used economic indicators), as well as meters and readings and consumption and billing. Debt collection is monitored with specific indicators where no matches were elucidated among regulators.
Nevertheless, even by using different types of KPIs, it is obvious to say that WAREG members monitor almost all aspects of climate neutrality and service resilience topics and issues. Probably it is only a matter of time for the introduction of unified principles of designing indicators methodology and benchmarking platforms in the water sector in EU.
In your mandate as a Vice-President, how do you perceive the current status and role of WAREG in Europe?
WAREG is the only Association fully dedicated to water and wastewater services in Europe. Since its initial steps in 2014, it has demonstrated progressive and increasing role among European water stakeholders. Many, even in EU institutions still do not understand the roles and responsibilities of the water economic regulators, as EU legislation does not require such institute (unlike the Energy sector or Competition area), and do not understand the differences between an independent regulatory authority and a regular state authority (like a ministry or other type of state agency). WAREG helps for better understanding of regulators` functions, performance and decision making. This is important, as water sector (as being monopolistic sector) is subject of detailed regulations in all European countries – simply not all of them have established national water regulatory body, many countries still regulate water services locally through local governments, with different forms of national subsequent control.
The trend however is that more and more countries introduce water regulation on national level, and usually they use the existing energy regulator to overcome it – this has been done in Armenia, Georgia, Malta, Bulgaria, Latvia, Lithuania, Italy, Hungary, Ireland, Moldova, Montenegro, North Macedonia, Brussels, and recently – in Greece. Of course other forms of national regulation also exist – like water only regulator – introduced in England and Wales, Scotland, Portugal, Albania, Kosovo and Poland; or other authorities playing the role of regulator – like in Croatia, Flanders, Denmark and Estonia. All of these authorities are WAREG members or observers.
But WAREG includes also representatives of ministries in countries without national water economic regulators – like Spain, France, Czech Republic and Turkey, as well as regional authorities like in Catalonia.
WAREG provides specific support and knowledge sharing for all of these authorities, which is crucial for their development and successful implementation of powers and responsibilities. This is achieved through different options – internal working groups, as well as exploring all external sources for funding and organization like KEP or TAIEX, explored by WAREG secretariat. We also assign report preparation to external consultants in any case of specific need.
Members of WAREG board and secretariat are involved and actively participate in seminars, workshops and conferences organized by different stakeholders in the European water sector.
What have been the main pillars of WAREG’s organization in recent years?
WAREG has travelled long road since its establishment in 2014. Initially it was an informal body that organized common conferences and meetings of water regulators. After that we started internal working groups surveying competences and practices and drafting reports. Little by little we organized WAREG as formal association hosted by the Italian Regulatory Authority for Energy, Networks and Environment (ARERA) under the Italian legislation, with annual budget, internal statute and code of practice. The formal bodies of the Association are the General Assembly (the decision-making body, where each Member has right to vote), the Board (i.e. President and 4 Vice-Presidents, elected every 2 years) and the permanent Secretariat with headquarters by ARERA in Milan and a representational office in Belgium, hosted by the Water and Energy Regulatory Authority of Brussels.
All this would never happen without the efforts of the Italian regulatory authority ARERA, that took the initiative to launch WAREG in 2014 and has been elected as President of the Association for several consecutive terms since then, hosting the Association’s headquarters and Secretariat in its offices, in Milan (Italy).
And of course we would not have achieved our success without the Vice-Presidents, who are elected every 2 years among Commissioners or Directors representing their Authorities in the General Assembly of Members. In the last 10 years, WAREG’s Vice-Presidents have been appointed from the Regulators of Albania, Azores Islands, Bulgaria, Hungary, Malta, Scotland and Portugal. However, the key driver of success of WAREG remains the commitment of its Members, who are represented at the highest level and provide their deep knowledge of the sector during the many internal meetings, workshops and project activities.
A key pillar in the evolution of WAREG has been its Secretariat. With its unique and smart organization, aimed at preserving the institutional views of its Members, while fostering EU relations, capacity-building projects with non-EU Countries and external communication, it is composed by a mix of professional resources hired in the labour market and of civil servants offered voluntarily by Regulators, currently by the Regulatory Authorities of Italy (ARERA) – who appointed the Head of the Secretariat – and Albania (ERRU).
How does WAREG plan to evolve to meet the changing needs of water regulation in Europe?
WAREG plans to be more active and influence as much as possible the process of decision making in EU. New and new requirements are being established for the water sector and regulators can support and facilitate this process, so we consider ourselves as important stakeholder.
In December 2023 WAREG organized the 3rd European Forum on the Regulation of Water Services in Brussels, so we continue with the tradition and efforts to bring together all important water stakeholders in Europe and worldwide. In the 3rd session I was proud to present not only the results of our KPIs survey, but to link it with the aspect of performance monitoring of water resilience.
At the same time, we will continue to support our members in trainings, knowledge sharing and capacity building with all means possible – General Assemblies meeting, Working groups and Task Forces meetings, Board meetings.
Furthermore, WAREG goes beyond water regulation only. We see a trend in the latest years of adding new regulatory powers to the members of our Association. As water regulation was added to the powers of many existing energy regulatory authorities, we now see that economic regulation of waste follows the same path. So we have allocated permanent Working Group on waste regulation, even though waste sector is entirely different from water in terms of organization, governance and stakeholders. At this moment our members with regulatory functions in waste are still a few, so understanding the theory and practice of organizing execution of regulatory powers in a new sector is challenging and beneficially from academic perspective.