1 implementation of water services industry act (wsia) 2006 - issues and challenges asiawater 2010...

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IMPLEMENTATION OF WATER SERVICES INDUSTRY ACT (WSIA) 2006- ISSUES AND CHALLENGES

ASIAWATER 2010Kuala Lumpur Convention Centre

SURUHANJAYA PERKHIDMATAN AIR NEGARA (SPAN)(NATIONAL WATER SERVICES COMMISSION)MALAYSIA

7 April 2010

CONTENTS

• Background

• Significant Milestones

• Migration to new regime

• Regulating the Water Services Industry

• Challenges

• Conclusion

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3

1 Feb 2007• SPAN Act came

into force

1 Mac 2007• Appointment of

Chairman & CEO

2 Apr 2007• Appointment of 8 other

Members of Commission

12 Apr 2007• 1st Commission Meeting

12 Apr 2007• Recruitment of 1st group

of staff

16 May 2007• 1st tranche of RM20

mil grant

20 Nov 2007• SPAN moved to new

office in Cyberjaya

19 Dec 2007• Licensing Regulation and

Permit Rules gazzetted

IMPLEMENTATION OF WSIASignificant Milestones in 2007

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1 Jan 2008• WSIA

came into force

25 Jul 2008• Water Forum

designated by SPAN

17 Dec 2008• 1st transfer of asset

and liabilities from Melaka State Government to PAAB

1 Jan 2009• 1st Individual Licence under

WSIA issued to SAINS• SAINS - 1st operator

corporatised under WSIA

27 Apr 2009• MEGTW set up Task Force

headed by Secretary General to negotiate restructuring in Selangor

11 Aug 2009• Issuance of Facilities Licence to

PAAB

14 Aug 2009• 1st case of offences charged

and convicted under WSIA

IMPLEMENTATION OF WSIASignificant Milestones 2008 - 2010

11 Mac 2008• 1st sewerage product

supplier registered with SPAN

15 Apr 2008• 1st water product supplier

registered with SPAN

1 Jan 2008• Licensing Regulation and

Permit Rules came into force

Apr 2008• Appointment of SPAN by

MEWC to lead negotiation for restructuring of Johor Water Services Industry

23 Feb 2010• SPAN appointed as

Standard Writing Organization (SWO) by SIRIM

SPAN HUMAN RESOURCES(2007 – 2010)

1 May 2007 1 Jan 2008 1 Jan 2009 1 Jan 20100

20

40

60

80

100

120

140

160

17

5274

92

39

52

57

HeadquartersFour Regional Offices (Central, Southern, Northern and Eastern)

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NO

. O

F S

TAF

F 91

126

149

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2007 2008 2009 TOTAL

Launching Grant RM20,000,000 RM5,000,000 RM15,000,000 RM40,000,000

Total Operating Expenditure RM1,944,437 RM13,275,708 RM17,055,145 RM32,275,290

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SPAN EXPENDITURE (2007 – 2009)

i) Water operators- Public system 19 nos.

- Private system 35 nos.

ii) Sewerage operators- Public system 5 nos.

- Private system 179 nos.

iii) Facilities owner (PAAB) 1 no.

iv) Developers* 204 nos.

v) Consultants 2,059 nos.

vi) Contractors 7,129 nos.

vii) Product Suppliers- Water 305 nos.

- Sewerage 175 nos.

7Note: * - Developers who have not handed over their water supply and/or

sewerage system to respective operators

REGULATING THE INDUSTRY(Regulated Industry Players as at 31 Mac 2010)

WHY GOVERNMENT SHOULD OWN WATER ASSETS?

• Water services infrastructure is capital intensive, tariff is highly sensitive (developed and developing countries alike), is a critical service, natural monopoly and long pay back period

• Public sector has a greater capability to raise funding while private sector can provide more efficient and effective operations**

• Even in many advanced countries, water assets are owned by Government but operated by private sector or corporatized public-sector owned entities. In Malaysia, good examples are Penang, Perak, Melaka, Terengganu etc.

• Need to restore consumers’ confidence especially on transparency and efficient management of water assets

• PAAB will ease the management of financial risks to the operators and will serve as a bridge for them until full-cost recovery can be achieved**

Note: * The Water Tablet- Malaysian Water Reforms, Ministry of Energy, Water and Communications, Malaysia

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SUSTAINABILITY OF THE INDUSTRY

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State A State B State C State D State E State F0%

20%

40%

60%

80%

100%

27.5%

47.5%

13.8%

33.0%

76.7%

98.2%

% of Payment to WTO / Sales of Treated Water

Source from State Water Supply Entities (2008 Data)

Water Supply Revenue against Payment to Treatment Operators

RM Mil

State with Privatised Treatment Operators

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CONCESSION Long term Contract

Pre-determine tariff increase

Agreed IRR

High cost of funding to finance CAPEX

LICENSING Issued a 3-year Service Licence

Tariffs to be determined every 3 years

Returns to licensee benchmarked against efficient costs

“Asset-light” operator

Efficient and Effective Service Delivery

LICENSING REGIMEModel

State Licence issued

Corporatization Transfer of Assets and Liabilities

Completed On-going negotiations

Melaka √ √ (before WSIA) √

N. Sembilan √ √ (SAINS) √

Johor √ Privatized √

Selangor Privatized √

Pahang Approved by Federal Government √

Perlis Approved by Federal Government. Corporatization

process in progress

√

Kedah √ (SADA) √

Perak Waiting for State’s consent √

Terengganu √ (before WSIA) √

Kelantan Approved by YB Minister /Licence to be

issued

Privatized but now fully owned by State Government

√

Pulau Pinang √ (before WSIA) √

Labuan In the process of getting Federal Government’s approval

√

WATER RESTRUCTURING PROGRESS

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WHY NEED TO EXPEDITE THE CORPORATIZATION?

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Strengthen the Management Team Assignment of Management

Responsibility Provide Authority

• empowerment - faster decision making

• enable actions to achieve company’s objectives

Improve Efficiency Improve Financial Status

• reasonable overheads• address the capital needs• accrual accounting basis –

- reflect actual financial position of the company (better projections and planning)

- depreciation impact to bottom line Improve Service Delivery Improve Performance Monitoring

• able to benchmark with other operators

MANAGEMENT OPERATIONS

PERFORMANCE IMPROVEMENT

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PAAB – FUNDING• SPAN has issued Facilities Licence to PAAB on

11 August 2009

• A RM20 billion Sukuk program has been approved to finance the acquisition of water infrastructure assets and development of new infrastructure projects

• PAAB has raised its first tranche of RM2.5 billion Medium Term Notes from the capital market on November 2009

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PAAB – NEW CAPEX PROJECTS• PAAB has commenced CAPEX works for states that have migrated to

the new regime :– Negeri Sembilan:

• Gemas Baru Water Treatment Plant– Melaka :

• DAF Fasa 2, Durian Tunggal• Water Supply System to Sunpower Plant at Rembia, Alor Gajah

– Johor :• Semangar Water Treatment Plant• Water Supply System for Endau• Mersing Buluh Kasap Water Supply Scheme

• PAAB is also the appointed agency for the development of Langat 2 and KLIA Water Supply Scheme

Consultants for Langat 2 has been appointed (selection of consultants is through open tender)

Open tender for construction has commenced

• To date, PAAB has called a total no. of 14 tenders

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State AState B

State CState D

- Relieve State Governments from outstanding loans and the task of securing funding for water assets- Better credit ratings compared to private operators, thus lower cost of funds

-PAAB to finance water infrastructure and lease to water operators- SPAN to ensure lease charges are fair and reasonable- New or replacement of water assets must be approved by SPAN and tied to KPIs of Water Operators

Water Operators can finance own assets without depending on PAAB ( i.e. industry achieve full-cost recovery status)

ROLE OF PAAB BEFORE INDUSTRY ACHIEVES FULL COST RECOVERY

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Tariff < OPEX+CAPEX

2008 Full Cost Recovery

Tariff > OPEX + CAPEX

* OPEX includes raw water charges and CAPEX includes environmental costs

MIGRATION TO CLASS LICENCE• Registration of Class Licence for private water supply / sewerage

system:

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TYPE OF SYSTEMCATEGORY OF

CLASS LICENSETOTAL

Water Supply SystemFacility 35

Service 35

Sewerage SystemFacility 179

Service 178

TOTAL 427

ISSUES IN MIGRATION• Negotiations between Federal and State Government require

careful and cautious approach

• More time required than anticipated

• Need to finalize quickly the restructuring of water services industry particularly in Selangor– 1.5 million customers

– Heavy investments

– Customers high expectation

– Stagnant NRW level (33.90% in 2008, 32.38%* in 2009)

– RPS Loan of RM131.6 mil by Federal Government not sufficient to fund critical works

– Immediate replacement of aging communication pipes

– Immediate refurbishment of reservoirs, tanks, valves and pumps

17Note: * - Unaudited figure

TOWARDS BETTER WATER SERVICES

Improve level of service

Better consumers’ acceptance

Increase in willingness to

pay

Effective regulations and

Increase investment to

improve services

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30-YEAR & 3-YEAR BUSINESS PLAN

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• REVENUE• COST

Business Plan

Operator Review Cost Impact

Tariff Environ-mental

KPIs

SPAN

PAAB

ApprovedCAPEX Works

NRW ReductionWater QualityEfficient Maintenance

Comply with DOE Requirement

Appoint Contractor Open Tender

Primary Instrument of Planning in the Water Services Sector

PAAB to plan CAPEX fundingand works

roadmap towards full-cost recovery

OPEXLease Rental

IMPROVEMENT PROGRAMS

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• Some improvement programs undertaken by Water Service Licensees to meet KPIs:– Setting up central lab– Special Task Force to resolve water issues at specific areas– Internal audit– Health check for facilities e.g. water tanks– Special committee to reduce operational cost (electrical cost, chemical

cost and plant wastage) e.g. installation of energy saving devices– Intensive meter changing program esp. commercial and industrial– Renegotiating with sub-contractors– HR recruitment exercise– HR Development Plan

• Training need analysis• Motivational program and Competency-based training

– Establishment of new Customer Service Center– Water conservation & public awareness program– Stepping up enforcement

CONFORMANCE OF WATER QUALITY• Conformance to minimum quality standard is listed as

one of KPIs for water supply services

• Close collaboration with MOH on compliance monitoring

• SPAN conducts regular audits esp. WTP with high violation cases

• Marked improvement on water quality from 2007 to 2009

– e.g. Improvement on conformance of Aluminium Residual of 10.2% over 2007 – 2009 period

• Measures by operator to improve water quality:

– In-house monitoring at WTPs and distribution system

– Formation of task force to address specific quality issues

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A private sewerage treatment plant

A private (estate) water supply system

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HANDING OVER OF PUBLIC WATER SUPPLY / SEWERAGE SYSTEMS

• Failure of developers in handing over water supply and sewerage system has led to social problems which required SPAN’s intervention

• Status on handing over of water supply system :

• Some of major projects resolved:– Bukit Beruntung, Bukit Sentosa, Lembah Beringin and Saujana Putra

Zone No. of Water Supply System not handed over

Resolved (As of March 2010)

Central(All in Selangor & KL)

43 19

Southern 4 0

Eastern 8 4

Northern 12 0

TOTAL 67 23

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• Status on handing over of sewerage system :

• Delay in resolving handing over of sewerage system mainly due to land issues. SPAN has applied for allocation of RM55 mil for rehabilitation under 10th Malaysia Plan

Zone No. of Sewerage System not

handed over

Resolved (As of March 2010)

Central 64 2

Southern 30 -

Eastern 30 4

Northern 40 -

TOTAL 164 6

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HANDING OVER OF PUBLIC WATER SUPPLY / SEWERAGE SYSTEMS (Cont’d…)

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Resolving water supply issues at Bukit Beruntung, Bukit Sentosaand Saujana Putra

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Oxidation pond in Puchong Intan, Puchong

STP in Taman Velox, Rawang

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Prima Villa, Cameron Highlands

CERTIFICATION OF COMPLIANCE BY QUALIFIED PERSON

• Lack of supervision by some consultants contribute to water supply system and sewerage system not handed over as per earlier slides

• Under Sec. 47, SPAN recognizes person who issues certificate of compliance as “Qualified Person (QP)”

• In line with Completion and Compliance Certification (CCC) concept which allows self-regulation

• Qualified Persons not carrying out their responsibilities will be taken off the list

• To date, SPAN has recognized 2,059 “Qualified Persons” for certification of water supply and sewerage systems

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ASSURING QUALITY AND PERFORMANCE OF WATER AND SEWERAGE PRODUCTS

• To date, SPAN has registered 712 water products and 372 sewerage products

• Suppliers will be hold accountable for non-conformity of standard and quality

– 5 water products suspended

– 1 warning

• Regular meetings with manufacturers for product improvement

• SPAN appointed by SIRIM as Standard Writing Organization (SWO) to assist in the development of standards for sewerage products

• Working closely with SIRIM to develop Malaysian Standards for water products taking into account of local requirements

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Failure of water products

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Failure of sewerage products

UNIFORM REGULATIONS, RULES AND GUIDELINES

• SPAN is reviewing existing specs and practices in design, construction and operation of water supply and sewerage system

• Rules, regulations and guidelines currently formulated are:• Desludging and Discharge of Sewage Sludge Rules

• Desludging and Discharge of Sewage Sludge Charges Regulation

• Malaysian Sewerage Industry Guidelines on design and construction of sewerage system

• Water Supply Rules

• Water Fees and Charge Regulation

• Uniform Water Supply Technical Guideline on Design and Construction of Water Supply System

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UNIFORM REGULATIONS, RULES AND GUIDELINES (Cont’d…)

• Some pertinent features in the new Water Supply Rules:– Internal plumbing plans to be designed by submitting

person without having to obtain approval from water operators

– Inspection and certification of internal plumbing by submitting person

– Mandatory installation of dual flush WC

– Installation of rainwater harvesting system within the internal plumbing system

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COMPETENT CONTRACTORS

• To date, SPAN has issued 7,129 no. of various permits.

• Plan to improve construction methods and workmanship through partnering

– MOU with CIDB on development of syllabus for plumbers and conduct training program

• Priority on health and safety aspects at work site

– In compliance to DOSH’s requirement

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Non-conformance of DOSH’s requirement at worksite which resulted death of workers

ENFORCEMENT• 60 officers (including 9 prosecuting officers) appointed by Minister

to enforce provisions of WSIA

• Jan 08 – March 2010, 909 complaints received and 692 resolved

• Status on cases including those charged under Water Supply Enactments apart from WSIA 2006 by SPAN:

Water Supply Enactment

WSIA 2006

Total

Number of cases to date (26th March 2010) 42 92 134

Summons withdrawn 11 - 11

Cases under investigation - 63 63

Cases for DPP’s approval to prosecute - 3 3

Cases for mention in court 6 5 11

Cases for trial in court 6 - 6

Cases convicted 11 4 15

Cases under review 8 - 8

No further action (insufficient evidence) - 17 17

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Berita Harian 19 Jun 2009

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PUBLIC AWARENESS

• Public awareness of their responsibilities is low especially on:– Replacement of aging internal piping (after meter)

which can effect water quality and cause leakage

– Regular maintenance of internal storage tank

– Engagement of qualified plumbers with SPAN permit for plumbing works

– Use of quality products registered with SPAN

– Water saving and conservation

– Prompt payment of water bills

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CHALLENGES• Raw water – quantity and quality

• State government’s cooperation and support needed

• Slow migration to new regime

• Higher expectation of consumer upon corporatization

• Training and capacity building for SPAN as regulator

• Capacity building for the industry esp. as new corporatized entity

• High leakage – a total of 38,500 km of AC pipes to be replaced gradually as it is also highly capital intensive

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CONCLUSION• Federal Government has put in place a clear

policy and legal framework of the water services industry

• Promote transparency and effective participation from stakeholders

• Increase efficiency and effectiveness in service provisions by licensees

• Ensure sustainability of development of capital works to meet demand requirements

• More enforcement needed

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THANK YOU

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SURUHANJAYA PERKHIDMATAN AIR NEGARAAras Bawah dan Aras Satu, Prima Avenue, Blok 3510

Jalan Teknokrat 6,63000 Cyberjaya

Selangor Darul EhsanTel: 03 – 8317 9333Fax: 03 – 8317 9336

Web: www.span.gov.my

CAPEX WORKS PROCUREMENT

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CAPEX WORKS PROCUREMENT

CASES CHARGED UNDER WSIA 2006

Summons No. Accused Offence Fine

1. 63-46-2009 PP –v- Rosliza binti Othman

sec.123Unlawful connection of water supply

RM2,000.00

2. 87-4884-09 PP –v- Resort Villa Development Sdn. Bhd.

sec. 122(1)(d)Trespass into sewerage treatment plant

RM4,000.00

3. 87-4885-09 PP –v- Binastra Construction (M) Sdn. Bhd

sec. 122(1)(d)Trespass into sewerage treatment plant

RM5,000.00

4. 63-2-2010 PP –v- Jallcon Sdn. Bhd.

sec.123Unlawful connection of water supply

RM6,000.00

5. 63-46-2009 PP –v- Sykt Success Sdn Bhd

sec. 38(1) & 38(3)Unlawful connection of water supply

RM9,000.00 for each charge

6. 87-231-07 PP –v- Decorasia Sdn Bhd



7. 87-653-07 PP –v- Ban Hing Electrical & Const. Sdn Bhd



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Summons No. Accused Offence Fine

8. 87-233-2007 PP –v- Bargain System Sdn Bhd



9. 87-964-07 PP –v- Ab Wahab B Husin


RM600.00

10. 87-965-09 PP –v- Mohd Ali B Kalithu

sec. 38(3)Unlawful connection of water supply

RM1000.00

11. 87-64-06 PP –v- Sykt Cresent Way Sdn


RM10,000.00

12. 87-232-2007 PP –v- Prompt Ad Sdn Bhd



13. 87-981-2007 PP –v- Inno Wood Products Sdn Bhd



14. A87-1093-09 PP –v- Rashidah Md Nor


RM800.00

15. A87-0982-09 PP –v- Zuraidah bt Abd Rahman


RM1,000.00

CASES CHARGED UNDER WSIA 2006

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1 implementation of water services industry act (wsia) 2006 - issues and challenges asiawater 2010...

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