National Commission for Energy Control and Prices - NCC (Lithuania)

Regulation

Regulatory Model

National Commission for Energy Control and Prices of the Republic of Lithuania (NCC) is the multi sector regulatory authority which activities encompass the natural gas, electricity, renewable energy, heating, transport, water sectors regulation and the overall supervision of the energy sector. NCC mission is to ensure the quality and availability of public services to consumers, creating equal conditions for all market participants. The objectives of NCC are the following: to integrate into the EU‘s regulatory space and seek for effectiveness of NCC activity; to ensure predictable and transparent business environment in energy and drinking water supply and wastewater treatment sectors; to ensure protection of energy‘s and drinking water‘s consumers rights and legitimate interests. NCC is a public administration authority accountable to the Parliament of the Republic of Lithuania. Each year by May 1st, NCC releases its annual operational and financial report and submits it to the President, the Parliament and the Government of the Republic of Lithuania. Financial and operational audit is carried out by the National Audit Office of Lithuania. NCC rights and obligations in terms of drinking water supply and wastewater treatment sectors regulation are defined in the Law on Drinking Water Supply and Wastewater management. The actual version of the law was adopted in June 2014 and applicable from November 2014. The law expanded powers of NCC in drinking water supply and wastewater treatment sectors, if to compare to its previous edition (2006).

Regulated sectors

Activities encompass the natural gas, electricity, renewable energy, heating, transport, water sectors regulation and the overall supervision of the energy sector. In 2013, 1655 players were operating in the electricity market of Lithuania: 1547 of them were producers of electricity from renewable energy resources, 29 – producers using fossil fuel for electricity production, 1 entity operating the transmission network by the proprietary right, 6 entities operating the distribution networks, 5 entities performing the public supply function.  Moreover, in 2013 there were 67 independent suppliers operating in the electricity market, which held the issued licenses/permits, and 25 of them were active. Thirty licenses have been issued in the natural gas sector where the NCC performed the regulation of 6 distribution system operators and 1 transmission system operator. In the heat energy sector the NCC was regulating 50 heat suppliers (33 were controlled by the municipalities, 17 were the undertakings operating on the basis of leasing (concession) agreements). 1611 physical and legal entities were producing energy from renewable energy resources and supplying it to the networks. In 2013, the number of the power plants using the renewable energy resources reached 2108, among these 89.1 percent were the solar power plants, 4,6 – the hydro power plants, 5.1 – the wind power plants. The biogas and biofuel power plants covered an insignificant share in the market structure – 0.8 and 0.4 percent, respectively. In terms of the regulation of the transport sector, NCC is adjusting the maximum level of tariffs for passenger transportation over local trains and passenger and vehicle transportation with inland water transport across the Curonian Lagoon.

Main responsibilities

NCC responsibilities are provided in point 10 of NCC Regulations http://www.regula.lt/en/Pages/regulations.aspx

Tariff Setting

Water supplier submits to the NCC the water supply and waste water management price calculation draft with the long term infrastructure development plan approved by the municipality. Then NCC reviews the price calculation draft and the investment plan and makes a decision on setting the price. After the price calculation drafts are coordinated with the NCC, they are submitted for the approval of the municipality. The prices approved by the municipalities are submitted to NCC for verification. The reasonable and benchmarked costs are taken into consideration only.  Water supply service average price – 1,54 Eur per cubic meter. Average cold drinking water consumption – 60 litr. per day per capita, total water sold – 106 litr. per day per capita (2013). Cost recovery level: 100% of reasonable and benchmarked costs are recovered by the tariff.

Quality of Service

Average consumption – 60 litres per person per day;
Main source – 100% underground; Water losses – 25%
According to the Ministry of Environment, the primary waster water collection system in Lithuania complies 100 percent with the EU's requirements, while secondary waster water cleaning has 98 percent compliance and tertiary waste water cleaning (the strictest) has 85 percent compliance. The supplied water is safe and of a good quality, does not exceed the limits and specific indicators, meets the requirements of the Hygiene Norm of Lithuania HN 24:2003 and the EU Council Directive 98/83/EC on the quality of water intended for human consumption.

The Regulator

Year of establishment: 1997
Characteristics: Multi-sector regulator, Independent National Regulatory Authority; Legal basis: Law no. XI-1888 of 2011. Number of employees: 92 employees (7 for water sector regulation), including 3 Commissioners, 1 deputy Chair and 1 Chair mandated for 5 years; Budget: 2,8 million Euros (2014).
Contacts: NCC – National Commission for Energy Control and Prices, Verkių 25C-1, LT-08223 Vilnius,
Tel: +37080020500, Fax:+37052135270, http://www.regula.lt

Sector

Sector Description

In 2013, the drinking water and waste water management undertakings provided the drinking water supply and waste water management services to 2 040 728 household customers and 34 057 subscribers/commercial customers (54.84 percent of the supplied drinking water were supplied to the household customers, 44.96 percent – to the commercial customers). Totally in 2013 the drinking water supply undertakings sold 92.1 million m3 of drinking water and treated 87.9 million m3 of waste water. The revenues of the water supply undertakings equaled 138 million Euro. In the respective period the costs incurred in providing the drinking water supply and waste water management services equaled 145.7 million Euro. The annual investments in the drinking water supply and waste water management infrastructure totaled 135,8 million Euro, from this amount 65 percent were the allocations from the European Union structural funds, the state and municipality funds in the structure of financing the investments equaled 22 percent, 13 percent were the funds of the water suppliers. Totally 661 million Euro were invested in the infrastructure in 2009–2013. At the end of 2013, the value of the tangible non-current assets of the drinking water supply and waste water management undertakings was 1.44 billion Euro: the value of the assets acquired from subsidies and grants equaled 0,71 billion Euro (49 percent of the total assets). The investments were aimed at the development of the services, improvement of the reliability of supply and the reduction of operational costs.

Legal and institutional framework

The current legal framework in the water sector consists of: Law on local self-government, Law on water, Law on drinking water and waste water management, hygiene norms, drinking water quality standards, Law on taxes for use of natural resources, acts and decrees of the National Commission for Energy Control and Prices (NCC). All these documents are in line with EU directives. The institutional framework is covering local municipalities, the Government, the NCC, environmental, consumers’ protection, health and sanitation agencies. Municipalities are responsible for public water services based on the description of the duties in the law on local self-government. Municipalities are also responsible for implementing the laws related to environmental protection, developing and implementing local environmental programs, and allocating funds for environmental protection purposes. The Ministry of Health together with the State Food and Veterinary Service is responsible for controlling the quality of drinking water. The Ministry of Environment is responsible for the regulation and sustainability of water resources and the regulation of environmental pollution. The municipal water utility has to obtain the license for performing public service. The license has to be issued by the NCC. NCC calculates and approves prices for municipal water services. NCC is the multi sector regulatory authority, accountable to the Parliament of the Republic of Lithuania. NCC activities encompass the natural gas, electricity, renewable energy, heating, transport, water sectors regulation and the overall supervision of the energy sector. NCC mission is to ensure the quality and availability of public utility services to consumers, creating equal conditions for all market participants, to ensure predictable and transparent business environment in energy and drinking water supply and wastewater treatment sectors.

Market Structure

Currently there are 78 regulated public water suppliers that coordinate prices with NCC out of almost 300 water suppliers. Water suppliers that coordinate prices with NCC, supply more than 98 percent of total amount of water to almost 2 million inhabitants. Other water suppliers supply only 2 percent.

Ownership and management of services.

Ownership structure (78 companies in water and waste water subsectors): public - 95%, private - 5%.

Country profile

Area – 65,200 km2; Population – 2,97 million, Population density – 46 inhab/km2; Share of urban population - 67% (2013); Number of households - 1327 thous. (2012); Average households’ size - 2,25 (2012); GDP per capita - 11816 EUR (2013).

Main indicators of the water sector

Number of water and wastewater operators – 300;
Percentage of households served: water supply – 84%; wastewater collection and treatment – 79%; Extracted water volume – 123 million m3; Wastewater treated– 154 million m3; Average consumption – 60 liters per person per day; Turnover – 139 million Euros; Employment – 5411 employees

Evolution

Lithuania joined the EU in the spring of 2004. Already at that time, the water legislation was in place and was in line with the European Union law (Acquis communautaire). No major problems existed with water supply and wastewater collection in bigger cities where the majority of inhabitants already connected to water supply and wastewater collection systems. Situation was different in smaller towns and settlements where existing water supply infrastructure was very old, poorly functioning and in need for renovation. No waste water treatment facilities existed in such settlements; therefore municipal waste water was a significant source of pollution of surface waters. At that time, water supply and waste water treatment investment plans have been prepared and actual investment projects started. Large financial resources (including a major part from the EU funds) were used for their implementation. Over the decade, in order to eliminate the gap between the existed and required level of municipal water and waste water sector operational and environmental indicators, the considerable amount of financial resources in the water, waste water and waste water sludge management facilities were invested. In parallel, the institutional framework, covering local municipalities, the Government, the NCC, environmental, consumers’ protection, health and sanitation agencies was continuously developing.

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