041006salgapres

PRESENTATION TO WATER AFFAIRS AND FORESTRY PORTFOLIO COMMITTEE

SOUTH AFRICAN LOCAL GOVERNMENT ASSOCIATION SUBMISSION: WATER SERVICES AMENDMENT BILL

06 October 2004

To indicate to the committee the process of engagement that SALGA has undertaken to the proposed amendment to the Water Services Act To briefly present the model bulk water supply contract developed by SALGA and SAAWU collaboratively and the impact that it has on the proposed amendment •To confirm SALGA's position on the proposed amendment
SALGA brought to the attention of municipalities the proposed amendment to the Water Services Act •Given the heightened awareness regarding water board matters as a result of water services institutional reform, S78 assessments and the development and rollout of the SALGA SAAWU Bulk Supply agreement and the Strategic Framework for Water Services
Overwhelmingly, municipalities that have engaged with the new water board process have indicated that the current amendment does not carry their support as they unanimously believe that it undermines the executive authority of municipalities •Also believe that it undermines the progress made between municipalities and water board: as a result of the SALGA SAAWU Bulk Supply contract SALGA position formally conveyed to the DWAF
To facilitate the negotiation of appropriate contracts for bulk water supply services between WBs and municipalities in furtherance of their shared goal of effective and efficient water services provision, and in response to the one- sided nature of existing contract produced by water boards, that did not reflect the executive authority of WSAs •To regulate the relationship between the parties pending the finalisation of the institutional reform process proposed in the Strategic Framework for Water Services, September 2003 •Most provisions are negotiated to reflect and take cognisance of local circumstances (guidance Is provided in the contract where appropriate) •A number of provisions provide for the protection of the- - financial viability of the water board; and - collective interest of municipal customers served by the water board These cannot be negotiated
A number of WSAs are currently negotiating contracts based on the model, including Joburg Tshwane and Ekurhuleni with Rand Water and Sedibeng water and all its municipal clients •SALGA is providing legal assistance to WSAs where necessary •SALGA is encouraging that all existing bulk water supply agreements between WBs and municipalities should be re-negotiated where applicable

Regulations

DWAF have agreed to the request to issue the contract as a model contract in terms of section 19(7) of the Water Services Act
Request for DWAF regulations in terms of section 19(5)(b) of the Act to compulsory certain clauses not yet responded to (the non-negotiable clauses)
Clearly defined rights and responsibilities • Regional Efficiency & interests of municipalities protected through collective processes
Bulk Water Supply Charges & Capital contributions subject to acceptance by municipalities
Penalties for non-performance by WBs Dispute resolution role for SALGA and DWAF in respect of specified clauses •

The following sections are provided for In the contract

Section A Introduction
Section B Appointment, Scope, Duration & Review
Section C Water Supply Standards
Section D System Operating Standards
Section E New or Increased Water Supply Requirements
Section F Communication and Coordination
Section G Information and Reporting
Section H Bulk Water Supply Charges and Payment
Section I: Performance Management
Section J: Other Water Related Activities Impacting on the Parties
Section K: Risk Management Section L: Breach and Vis Major
Section M: Termination
Section N: Process for addressing matters impacting on Municipal Customers
Section O: Dispute Resolution
Section P: General provisions

The special provisions:

Imposes a process obligation on the water board to inform (and motivate) all municipal customers of its proposed charges and capital programme
The municipality must then initiate a consultative process with all other municipal customers
Where the municipalities cannot agree to accept or reject the charges and capital programme the matter must be referred To SALGA for mediation
Where SALGA cannot mediate, or all the municipalities rejects the charges and capital programme the water board mav revise its charges and capital programme or refer the matter to DWAF for mediation
Where DWAF fails to mediate the matter the mat must be referred to the National Treasury for mediation • Where the municipalities fail to respond In time water board may assume that they all agree with the proposed charges and capital programme
The process attempts to address timeframes and every eventuality that may arise In respect of tariff setting and the capital programme (Only a summary of the provisions Is provided)
The critical role of consultation in the contract will be undermined as a result of the proposed Amendment, as will the relationship building that has taken place
WB submits proposed tariffs and capital programme to all municipalities before 31 Jan. Municipalities must within 14 days indicate acceptance or rejection
All municipalities accept / fall to inform WB; WB sets & implement on 1July
Municipalities nor agreed WB informs municipalities within 7 days
Municipalities to accept or reject within 14 days
Municipalites not agreed
Refer to SALGA for mediation within 3 days
SALGA must inform water board within 14 days of acceptance or rejection
All municipalities dispute
WB revises and resubmit within 7 days or refers to DWAF for mediation within 7 days
DWAF mediates within 14 days
DWAF fails to madiate within 28 days refer to NT for mediation

Section J :Other Water Related Activities impacting on the Parties

Provides for special provisions imposing process obligation on the parties where activities of the municipality affect the financial viability of the water boards & the collective Interests of municipalities served by WB

The activities identified are
Where the municipality, in terms of section 6 and 7 of the Water Services Act gives notice to consumers directly provided with water services by the water board that the water services must In future be accessed directly from the municipality
Where the municipality intends to use water services from a source other than the water board resulting in the quantity of water services provided by the water board to that municipality reducing significantly

Section N: Process for addressing matters impacting on Municipal Customers

Provides for a special process that addresses timeframes and every eventuality that may arise
- a municipality significantly reduces or intents to reduce the average daily demand provided or to be provide by WB;

- a WB wishes to deviate from the obligation to impose capital contribution charges;

- the municipality, in terms of section 6 and 7 of the Water Services Act, gives notice to consumers directly provided with water services by WB that the water services must In future be accessed directly from the municipality;

- the municipality Intends to use water services from a source other than the WB resulting In the quantity of water services provided by to that municipality reducing significantly; and

- the contract is terminated

The Special Process:

Imposes a process obligation on the Municipality to Initiate a consultative process with the other municipal customers of the WB
In all Instances the WB must assess and inform the municipality & other municipal customers of potential financial Implications of the activity of the municipality once the municipality has Initiated consultation process
Where the municipalities cannot agree to < reject the activity of the municipality the m be referred to SALGA for mediation
Where SALGA cannot mediate or not all the municipalities accept the action of the municipality the WB may refer the matter to DWAF for mediation. Where DWAF fails to mediate the matter to NT for mediation
Where all the municipalities accept the action of the municipality the WfB must Implement the action and the other municipalities accept liability for any additional coats that may be Incurred due to the Implementation thereof. On termination DWAF must approve the selling of assets and costs payable by the municipality

Section O Dispute Resolution

Provides for the dispute resolution processes that will apply where the parties cannot reach agreement or disagrees
These processes do not apply in respect of the matters addressed by the special provisions
The dispute resolution processes provided for are negotiation ,mediation and arbitration

WATER BOARD	MUNICIPALITY
Provide agreed quantity	Provide information on projected demand
Provide agreed quality	Timeously inform WB of planned reduction in projected demand
Provide agreed flow rate & daily demands	Meet hourly demand
Provide agreed water pressure	Apply for new or increased supplies
Undertake normal maintenance and repairs i.t.o. agreed procedures	Pay installations charges
Deal with maters in accordance with agreed processes and procedures	Pay capital contribution charges
Provide an alternative supply or incur liability for costs associated with securing an alternative supply in emergency circumstances	Pay volume based charges
Obtain and generate information on droughts	Pay monthly accounts timeously
Install customer connections	Pay guarantees (deposits) on default
May not communicate directly with municipality’s end consumers
Provide municipality with a copy of annual report and financial statements
Must charge capital contribution charges
Must provide monthly accounts

Summary of Responsibilities : Responsibilities of both parties

Emergencies –agree on process
Coordination
Provide information timeously
Adhere to process for setting charges and adoption of capital expenditure programme
Adhere to process for addressing regional matters
Secure permits, licenses, etc
Obtain own insurance

Summary of Remedies

WATER BOARD	MUNICIPALITY
May determine projected demands where municipality fails to provide information timeously	May query consumption reflected on an acount May query accounts
May keep municipality responsible for all accounts asociated with projected demands where agreed process not followed	May impose penalties after affording WB opportunity to state its case
May levy interest on overdue accounts	May recover reasonable costs incurred in securing an alternative supply in emergency circumstances other than vis major
May set charges where municipality or municipalities fail to adhere to process for setting charges and adoption of capital expenditure programme
May dispute any penalty imposed by municipality
May keep municipality bound by commitments in terms of the contract in respect of quantities drawn by municipality or provided by the water board where agreed processes not followed Municipality remains responsible for all costs associated with regional matters where agreed processes not followed
Limitation of water services
May require guarantee(deposit) on default by municipality

SALGA’s Position

Institutional Reform;
2. Accountability of Water Boards;
3. Existing Activities; and

Consultation

1.Institutional Reform

The Strategic Framework for Water Services (SFWS) Approved by Cabinet in Sept 2003 called for development of Reform Strategy;
National Task Team (NTT) has been set up to develop the strategy;
SFWS encourages service delivery options involving both WBs and WSAs;
Frontrunners identified by NTT include WBs for feasibility investigation of service delivery options;
Proposed amendment may impede the possible

2. Accountability
Has been a concern for SALGA;

Protection of municipal and consumer interest explicitly addressed in amendment (is however addressed in the Bulk Supply agreement);
Guiding principles for ring-fencing WB activities not addressed by amendment;
Proposed amendment will negate the protection provided for in the Bulk Supply agreement

3. Existing Activities

The financial consequences of existing activities outside the borders of SA should not be borne by municipalities

4. Consultation

The bill should make provision for mandatory consultation with and approval by municipal customers of the WB or Organised Local Government; and such
such consultation should be meaningful