World Bank retaliates against Parliamentary Whistleblower

World Bank retaliates against Parliamentary Whistleblower

Saturday, December 27, 2008

Yerevan's Water Users Pay for Armenia’s Economic Crisis

Through the past 8 years the Yerevan water utility received nearly $150 million to finance improvements in its operations, including more than $55 million in development funding; $30 million from the World Bank, a few million from the German Kfw bank and a twenty million inter-governmental loan from France. Plus co-financing from the Armenian government and tens of millions in state subsidies, not to mention the millions of dollars Yerevan’s householders pay to the company each year for water they may, or may not receive.

Starting in 2000 with Richard Walkling and the Italian water giant ACEA – A. Utilities, and followed by Sergey Popov and the French water giant Veolia, this massive amount of money has been spent, plus even more in receipts from the sale of water, with the promise to improve the consistency of supply and reduce operating costs. But the cost of water keeps going up and consistency continues to be a problem.

The water problem has raised its head again, this time in response to Armenia's economic crisis. Water delivery has recently been cut from 16 hours to 8 hours each day in a central region of Yerevan.

The largest expense for the company is electricity to drive the pumps. There are large low-pressure source pumps, which are needed to deliver 175,000 cubic meters of water into Yerevan’s water system every day. But they deliver five times more than is actually needed - a massive 875,000 cubic meters, 700,000 of which is lost, together with the millions of dollars in pumping costs.

Then there is a system of localized high-pressure ‘booster pumps’ to deliver the water to the upper floors of Yerevan’s thousands of high-rise apartment buildings. In 2000 there were 795 booster pumps, but in 2005, after A. Utilities had completed its 5-year contract the number had been reduced to 550. A. Utilities reportedly replaced 240 of them with new and more efficient units. In January 2007, Veolia was into the second year of its contract and General Director Popov announced he was to install another 500 new and efficient booster pumps.

In practice, A. Utilities did not install the 240 new and efficient units it claimed (picture - new A.Utilities booster pump), Popov has not installed all his new pumps, and today the system of booster pumps is still inefficient and unreliable – except for one.

In 1997, when I moved into my Yerevan apartment on the 8th floor of a ten-storey apartment building, both the booster pump and the lift were out of service, so the residents of the 300 apartments in our region collected water from the local fountain and carried it up the stairs in buckets. That situation continued for nearly a month, until I agreed with the water company that I would pay for the repair of the booster pump and at my cost I would manage its operation.

Our top floor residents subsequently received water for an hour in the morning and an hour in the evening, sufficient to fill their buckets and pans, etc., without having to carry water up the stairs. During the following 8 years, the percentage of subscriber payments increased, so the duration of pumped water increased to 4 hours in the morning and 4 in the evening. The water company paid for the electricity used by the pump and I paid each time the pump needed to be repaired, about 2 times each year.

Eventually in 2005, the water company decided to take back control of the booster pump and a new and more efficient A. Utilities booster pump unit was installed. It was actually a straight replacement for the original pump, but fitted with a cheap Chinese motor, which courtesy of Richard Walkling lasted not for six months but for no more than three months before needing repair.

After my having repaired the pump a few times for the water company, I persuaded the World Bank to support a pilot project to demonstrate that a genuine modern and efficient booster pump system would not only operate continually and reliably, but it would use less energy operating all day than the original pump used when operating for 8 hours. The bank agreed and the water company paid for three units, which I designed, and built, and one of which I installed to serve the 300 apartments in my region.

The water company confirmed to the state water committee that the pump was even more efficient than anticipated; operating all day it actually used a little more than half the electricity of the original pump operating for 8 hours – 2,100 kilowatts per month compared to 3.600 kilowatts. Assuming 20 Drams per kilowatt; that is $135 electricity per month for all day water, compared to $235 for 8-hour water. The savings in electricity alone would pay for the new unit in a little over a year.

The cost of the water passing through this single pump generates more than $2,000 subscriber receipts per month. But although subscribers had been regularly paying their accounts, pleased for having had continual water for two years, the water company instructed me to reduce the water supply period from 16 to 8 hours a day, explaining that it was in response to the economic crisis.

I made the change, saving the water company $65 each month, but leaving our residents without water during the day. The residents of course complained vehemently, to me and to the water company, so the water company eventually agreed that I could return the water delivery period to the original 16 hours.

Today, after several tariff increases the water company has an annual income of more than $40 million, compared to $12 million in 2000.

If Walkling and Popov had kept their promises and installed the modern and efficient equipment needed to reduce their costs, instead of misappropriating millions of dollars, then these problems would not continually arise and the people would not keep having to pay the price.

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