FRONT COVER

Strategic Business Planning for Water Districts: Guide and Model for the Preparation of Business Plans for
Water Districts

Published with assistance from the United States Agency for International Development’s Philippine Water
Revolving Fund (PWRF) Support Program. Month and year of publication: December 2009.

The views expressed here do not necessarily reflect the views of the USAID or the United States Government.

The PWRF Program is a collaborative undertaking of GOP Partners, USAID, Japan International Cooperation
Agency, LGU Guarantee Corporation, and the private financing institutions (PFIs) through the Bankers
Association of the Philippines. GOP partners include the Department of Finance as the lead, Development
Bank of the Philippines (DBP) and Municipal Development Fund Office.

Primarily, the PWRF Program aims to establish a sustainable and innovative financing facility for water supply
and sanitation projects. Its core structure is a co-financing facility that blends ODA/JICA resources with PFI
funds for lending to creditworthy water service providers (WSPs). PFIs have access to credit risk guarantees
provided by LGUGC and USAID’s Development Credit Authority. The financial structure was designed to allow
the loan terms and condition to be affordable to water service providers and at the same time at market terms
for the PFIs.

To complement the financing objectives, the PWRF Support Program also aims to assist utilities with governance
and performance improvement and capacity building on among others, strategic business planning. In this
regard, PWRF-SP prepared the Strategic Business Planning Guide and Model, a systematic, comprehensive,
and instructive reference material tailor-fitted for water districts.

The PWRF Support Program is implemented by Development Alternatives, Inc in association with

• The Community Group International LLC

• Resource Mobilization Advisors
• CEST, Inc.
 6
STRATEGIC BUSINESS PLANNNING
FOR WATER DISTRICTS
Acknowledgment
This Guide and Model was prepared with the assistance of Valu Add Management Services, the
Local Water Utilities Authority, representatives from various water districts, and local water sup-
ply and business planning experts.

The document and workbook were finalized after the training of trainers and application in five
pilot water districts, namely: Surigao, Orani, Floridablanca, Baliwag, and San Pedro Water Dis-
tricts. Thus, the document was enhanced by the comments, suggestions, inputs of the trainers
from the ranks of LWUA and water districts, as well as from the experience and lessons learned
from the pilot implementation.
 C6ntents
Strategic Business Plannning for Water Districts

1 Strategic Planning in Water Utilities

What to Expect from Strategic Planning – Issues, Concerns, Direction
Who to Involve in the Strategic Planning Process
Preparing a Vision Statement
1
1
2
3

2 Introduction to Business Planning

What Is the Purpose of the Business Planning Model and Guide?
Strategic Planning vs. Business Planning
Who Should Be Involved in Preparing/Commenting on the Business Plan?
5
5
5
6
Business Plan Timeframe and Updating the Business Plan 7

3 Business Plan Model

Structure of the Business Plan Model
Description of Each Key Element of the Business Plan Model
Business Plan Model Spreadsheet Workbook
9
9
9
11

4 General Description of the Utility

Brief Utility History and Background Information
Franchise Area, Coverage and Consumer Profile Information
Key Performance Indicators
13
13
13
14
Investment/Funding Information 14

5 Mission Statement of the Utility

What is a Mission Statement?
Importance of the Mission Statement
What Should Be Considered in Developing a Mission Statement?
15
15
15
15

6 Senior Management Overview of Business Plan

Major Challenges in Business Plan Implementation
Monitoring, Reporting, and Corrective Actions
19
19
20

7 Assessment of Current Conditions and Priority Issues

Current/Expected Conditions – Internal to the Utility
Performance Indicators and Trends
Nature of Work Force and Skills
21
21
21
21
Current/Expected Conditions – External to the Utility 22
SWOT Matrix 23
Priority Issues 23

8 Strategic Goals
What is a Strategic Goal?
Characteristics of Strategic Goals
Examples of Strategic Goals
27
27
27
29
 9 Analyzing Water Demand and
Forecasting Water Sales
Why Is Water Demand Analysis Critical in Business Planning?
Importance of a Water Balance Audit
31
31
31
32
Non-Revenue Water and Its Impacts on Utility Costs 34
Determining Current Real Water Demand of the Utility 34

10 Organizational Structure and Staffing Level

Importance of Organizational Structure for Effective Utility Performance
Current Structure and Lines of Reporting of the Utility
Typical Organization Structures of Well Performing Utilities
45
45
47
47
What Is an Optimal Staffing Level for a Utility? 55
Changing Organizational Structure 55
Transitioning to a New Staffing Level 55

11 Performance Improvement Program

Moving from Strategic Goals to Improved Performance
Performance Improvement Program (PIP)
Board of Directors Approval of Performance Improvement Program
57
57
58
60

12 Operations and Maintenance Budget Forecast

Documentation of Recent Financial Performance
Factors Impacting Future Expenditures
61
61
61

13 Capital Expenditure and Investment Forecast

Capital Renewal (Underground Assets)
Capital Repair and Replacement (Above Ground Assets)
New Capital Investments
69
69
70
70
Building the Capital Investment/Expenditure Plan 70
Identifying Sources of Capital Investment 72

14 Revenue Needs
Difference between Revenue Needs and O&M Expenditures
Determining Revenue Needs
73
73
73

15 Tariff Policy and Strategy

Addressing the Tariff Policy Issue
Addressing the Tariff Strategy and Structure Issue
Selecting the Desired Tariff Structure
77
77
77
78
Specific Fees and Charge 82

16 Business Plan Update Process

Scheduling to Conduct the Business Plan Update
Preparing for Business Plan Updating Process
Conducting the Business Plan Update Process
85
85
86
86
Approval of Board of Directors 86

17 Monitoring Business Plan Implementation

Importance of a Monitoring Process
What Should Be Monitored?
Reporting and Monitoring Performance
87
87
87
88

Annexes 93
 6
1

Strategic Planning in Water Utilities

T
his section presents the importance mon framework that links all planning and
and attributes of Strategic Planning budgeting decisions to the utility’s fundamen-
for the water utilities to effectively plan tal goals.
and guide their ongoing transformation in a
competitive marketplace. It also serves as a Water utility management has increasingly
bridge to the Business Planning process. required an entrepreneurial outlook in re-
cent years. The true market challenge is not
Why Do Strategic Planning? simply a matter of closing competitiveness
Strategic Planning is a tool for making re- gaps or reacting to perceived threats. Rather,
source allocation decisions among the core water utilities must understand the spectrum
business functions and investments in ex- of potential market conditions and develop
panding and/or diversifying business functions strategies that:
in a way that positions the utility to increase
the value to the customers/shareholders. • Protect their ability to continue delivering
The concept of value to shareholders is quite reliable, cost efficient service, and
different for public utilities than for private • Provide opportunities for organizational
utilities. In the private arena, value to the growth and development.
stakeholders is easily measured in primarily
monetary terms. For public utilities, how-
This challenge entails deciding how to invest
ever, shareholders or stakeholders bring to
limited resources to achieve the greatest de-
the table an extraordinary range of compet-
sired returns within acceptable levels of risk.
ing priorities. Of prime concern, in particular,
is the provision of safe drinking water, which
is further complicated by environmental, What to Expect from Strategic Planning –
regulatory, political, economic, community, Issues, Concerns, Direction
Strategies are the best means by which a
and social agenda. Utilities conduct multiple
planning activities that are often disjointed utility can achieve its desired ends. A well-
with no reliable way to measure how each one constructed Strategic Plan may be reduced
contributes to achieve the utility’s fundamental to a one page document, which can be circu-
organizational goals. lated throughout the water utility. Strategic
Planning is part of the corporate governance
Strategic Planning provides a potential solu- process. The Board of Directors will ultimately
tion to this predicament, as it emphasizes the approve this plan.
planning of activities together under a com-

1
Planning always requires identifying projected in strategic planning techniques is recom-
needs. The senior management of the utility mended for the utility management team.
has to be able to answer questions such as, • Varying levels of detail and analytical com-
"What do we need?" At times they might know plexity in strategic planning are needed for
exactly what they would need, while at other different utility sizes and circumstances.
times they might have to simply say, "I don't The level of detail should be appropriately
know." This uncertainty is common. Getting matched to the target audience within
the details exactly right is not an easy task, as the utility; executive managers and policy
it is difficult to predict the future, particularly boards will not have patience with details.
in a dynamic environment. The Strategic Plan
also must sketch out the sequence and timing • In identifying investment options, utilities
of events. must be careful to clarify the difference be-
tween core investments (those investments
Since the environment is always changing, the required to keep the utility in operation) and
strategic plan must be dynamic as well. Stra- strategic investments (discretionary invest-
tegic plans are not meant to be rigid; rather, ments to enhance value of services, expand
they are working documents. The senior man- services offerings, or generate new revenue
agement of the utility must always keep their sources).
goals clear in their minds, so they can adjust • Utilities need further guidance on priori-
the plans when the environment changes, and tizing “soft” (people, knowledge, communi-
make decisions that help them to attain the cation) vs. “hard” asset investments.
stated strategic goals. • A business planning tool or template is
needed in support of the strategic plan to
The senior management of the utility is com- drive goal attainment down into the utility
monly faced with the following major issues and into its various planning activities.
and concerns related to the development of
• Customer and community are separate
the strategic plan:
stakeholders groups and should be ad-
dressed individually (served costumers,
• Strategic planning requires a substantial
potential costumers, elected and appointed
commitment from executive leadership and
officials, business organizations, citizen
its governing board to the planning process
interest organizations, NGOs of any types,
and to its potential outcome. In the ab-
and other elements of civil society) in
sence of this commitment, a strategic plan
evaluating investment options and commu-
is likely to create confusion between strate-
nicating the strategic planning process.
gic planning, other planning initiatives, and
annual budgeting. Strong leadership com- • Strategic planning must be accompanied
mitment to participate in the implementa- by a Public Relation/Communication Pro-
tion of the process is essential for success. gram largely focused on utility staff and the
customers to engender a cultural shift to a
• Utilities need to set expectations for policy
goals-focused organization.
boards and stakeholders about what strate-
gic planning is and is not. Utilities must be
realistic about the ability to implement the Who to Involve in the Strategic Planning
outcomes from strategic planning and take Process
care not to raise expectations too much. Strategizing involves setting institutional goals
and finding the best means to reach those
• Strategic planning terminology may be
goals. It bridges the gap between where an
daunting to utility staff. Some education
organization is today and where it wants to

Guide and Model for the Preparation of Business Plans for Water Districts 2
be tomorrow. A Strategic Plan provides a actively. Citizens participate in water monitor-
blueprint for the entire utility and its relevant ing programs, water conservation, and serve
stakeholders. as advisors to decision makers.

A well-structured Strategic Plan will call for Once strategic and business planning have
the involvement of the following stakeholders both been completed, the outcomes may be
as a minimum: documented for public consumption. It is also
advisable that public hearings with citizen
Board of Directors of the Water District groups be organized by the water utility to
The involvement of the Board of Directors share the planning initiatives and learn more
of the Utility in the strategic and business about stakeholder needs.
planning process, in its role as the appointed
corporate governing body, is very important. Preparing a Vision Statement
Although it clearly functions in a policy and The concept of one’s vision suggests a future
monitoring capacity, the board should also orientation – an image of the future an end re-
be briefed at key milestones in the planning sult. It connotes a standard of excellence, an
process, as their opinions and comments on ideal that can be realized. It suggests, “What
key issues are vital. may be done in order to make the organization
singular and unequaled in the future?”
Ultimately, the Board of Directors of the Utility
will approve the strategic plan and the 5- year Vision is a mental image of a possible and
business plan for the water utility. Therefore, it desirable future state
is important that they have an intimate under- of the utility. A Vision
standing of the objectives and the core ele- Statement evolves out VISION STATEMENT
ments of the strategic and business plans. of answers to questions
like:
We continuously
Management Team of the Water District
strive to be
The management team prepares the strategic • If we could invent the
plan, presents and finalizes it with the Board future, what future
recognized as the
of Directors. would we invent for best water service
Local Government(s) the utility? provider in the
It is advisable that the management hold con- • What do we have
country
sultations with LGU officials within the Fran- a burning passion
chise Area of the District to exchange informa- about that we would San Pablo Water
tion regarding plans and ways to complement like to be able to
District
each others’ services. express through our
work?
Citizen’s Groups
Water utilities provide services that touch • What could be the distinctive role or contri-
everyone in the community in an essential bution of the utility in our Franchise Area?
way. Customers and community are distinct • What is our collective agenda? What do we
stakeholder groups. They need to be ad- want to prove?
dressed regarding strategic and business • What is our destiny?
planning, particularly in the context of util-
ity goals and performance metrics. Citizens
and other water users all have roles to play
concerning water quality, both passively and

3 Guide and Model for the Preparation of Business Plans for Water Districts
Guide and Model for the Preparation of Business Plans for Water Districts 4
 6
2

Introduction to Business Planning

What Is the Purpose of the Business specific questions provided in the document or
Planning Model and Guide? filling in templates provided as blank forms.
This Business Planning Guide and Model aims Examples are provided to assist the senior
to provide the necessary information and tools management of the utility in formulating their
to assist the senior management of a water thoughts.
supply and/or wastewater utility in the Philip-
pines in the development of a Five-Year Busi- It is highly recommended that the Guide be
ness Plan. followed in the “step-by-step” manner in which
it is presented. The Business Plan Model is
This document has been developed with the highly structured to ensure standardization and
review and approval of the Local Water Utilities consistency in the presentation format. How-
Administration (LWUA). Its primary purpose is ever, the content of the business plans will be
to guide the water supply and wastewater utili- unique to the utility that prepares it.
ties in the Philippines with a uniform approach
for the preparation of business plans that will Strategic Planning vs. Business Planning
assure quality services in a cost-effective and A utility conducts Strategic Planning to define
transparent manner. its vision, set long range goals and areas of
primary focus, to identify key performance in-
The process of business planning will serve to dicators, and to consider the more generalized
stimulate the creativity of the utility’s senior actions needed to achieve the desired long
management in providing solutions for the im- term performance improvement. The strate-
provement of the utility’s overall performance. gic planning process establishes the organiza-
Business Plans are essential tools for making tion’s core priorities and sets the guidelines
rational and coordinated decisions about lev- for future managerial decisions in the busi-
els and types of service provisions where the ness planning process.
resources of the utility are utilized effectively
through clear links to financial planning. The strategic planning process is both external
and internal in that the utility seeks to build a
Following a structured model for a business broad consensus amongst its various stake-
plan, this document will guide the senior holders regarding its direction and priorities.
management of the utility through the devel-
opment process. Information needed for the This document prescribes an element of
business plan will be generated by answering strategic planning; that is, requiring the senior

5
management to develop a vision and express it A Business Plan provides the means to share
in its Vision Statement prior to developing the information with employees, customers, politi-
Business Plan. cal leaders, and potential investors so that
there is agreement on the utility’s plans for
Business Planning is the process that flows sustainable operations, quality service, main-
from the Strategic Planning process and seeks tenance effectiveness, and financial security.
to make decisions and formulate actions that
will, over time, fulfill the vision of the Stra- Who Should Be Involved in Preparing/
tegic Plan. The business planning process Commenting on the Business Plan?
deals with quantified Strategic Goals, which A Business Plan is a practical plan for the
are supported by clearly detailed Performance entire utility and its relevant stakeholders.
Improvement Action Plans. It brings together the plans to improve and
extend the service being provided and how this
The Business Plan is the first step in address- service can be financially sustained. As a mini-
ing the overall performance objective of the mum requirement, a comprehensive Business
utility to become operationally and financially Planning process will call for the involvement
self-sustaining. Corollary to this objective is of the following stakeholders:
the generation of sufficient revenues to fund
capital repair and replacements needed to Water District Senior Management Team
maintain efficiency of system assets—cost- The most common approach to the prepara-
wise and reliability-wise. tion of a Business Plan is to convene a senior
management team composed of members
Why Should a Utility Do Business Planning? representing each of the functional areas of
Business planning helps water utilities plan the utility (e.g. technical operations, finance,
technical operations, determine their opera- customer service, engineering, and human
tional financing needs, quantify and schedule resources) to develop the business plan. This
the capital investments for the utility in a sus- group, which meets in a series of facilitated
tainable and affordable way. No commercial workshops, generally includes the General
company including water utilities can func- Manager of the utility.
tion successfully without a clearly stated and
understood Business Plan. Sometimes, outside professionals (e.g. con-
sultants providing technical assistance to the
Business Planning is Decision utility) are included as part of this
Making:
business planning group. Middle
• What is going to happen?
management input is obtained
• When will it happen? IF YOU FAIL through questionnaires, inter-
views, interim meetings, and
• How much will it cost? TO PLAN,
involvement in implementation
Business Planning Helps:
YOU ARE planning.
• Reduce uncertainty of the PLANNING
This approach is most effective
utility
TO FAIL when there is a positive history of
• Provide basis for monitoring/ inter-departmental cooperation,
controlling work and a good working relationship
• Improve efficiency of the between middle management and
utility senior management. If this is not the case,
then extra effort will be needed in the develop-

Guide and Model for the Preparation of Business Plans for Water Districts 6
ment of the first business plan to build a spirit timeframe. This is particularly true for Master
of cooperation amongst participating groups Plans of the systems, which commonly have
within the utility. planning timeframes of 25-30 years, and water
resource plans, which typically have planning
Water District Board of Directors timeframes of up to 50 years.
The involvement of the Board of Directors in
the business planning process in its role as The senior management of the utility should
the appointed corporate governing body is very schedule an annual update of the business
important. The Board of Directors should be plan. It is recommended that this update
briefed at key milestones in the business plan- should be conducted during the first month of
ning process to seek their opinion and com- the fourth quarter of the calendar year, using
ments on key issues. Ultimately, it is the Board data for the preceding four quarters (e.g. the
of Directors that will approve the final busi- last quarter of the preceding year and the first
ness plan; therefore it is important that they three quarters of the current year).
have an intimate understanding of the objec-
tives and elements of the business plan. Every element of the business planning model
should be reconsidered. Of particular value
Business Plan Timeframe and Updating is a comparison of the performance indica-
the Business Plan tors from year-to-year, as well as with the
The common practice in the water supply and stated strategic goals. It is very important that
wastewater utility sector is to develop a busi- the management team be totally objective in
ness plan with a five-year horizon. However, evaluating the performance of the prior year,
business planning is not a one-time activ- and in considering any changes in the action
ity rather, it is a continual process, with the plans to assure the achievement of the strate-
plan reviewed and updated annually. A water gic goals.
supply and wastewater utility must constantly
plan, finance and implement new projects as The common practice is to have the Chief
it repairs, replaces, upgrades and expands its Financial Officer (CFO) of the utility facilitate
systems to improve services. the business plan updating process. The CFO
will set the schedule of the planning process
Most performance improvement programs in and generates the historical reports needed to
a utility are implemented over several years, compare past performance against the busi-
and as such a short planning period (e.g. one ness plan. However, it is important that in the
to three years), management decisions will not updating the CFO does not merely focus on the
capture the entire action plans involved. Busi- financial exercise, rather look keenly at the
ness plan horizons greater than five years are technical operations and customer services as
interesting to consider, but the predictability of well. From experience the technical operations
future events diminishes greatly with time. It and customer service departments of the util-
is for this reason that the business planning ity have the greatest impact on overall utility
model, and these guidelines, which have been performance and customer satisfaction.
adopted by the Local Water Utilities Admin-
istration (LWUA) for the water supply and The issues of business plan updating and
wastewater utility sector, is structured around monitoring of performance are discussed in
a five-year business plan timeframe. greater detail in Sections 16 and 17 of this
Guide.
This does not mean however, that all planning
at the utility should be limited to a five-year

7 Guide and Model for the Preparation of Business Plans for Water Districts
Guide and Model for the Preparation of Business Plans for Water Districts 8
 6
3

Business Plan Model

T
his section of the Guide will present and capital investments/expenditures associated
describe the Business Plan Model for with the action plans, as well as the total ex-
water supply and/or sewerage utilities pense budget for each of the forecasted years
in the Philippines in the preparation of 5-Year of the Business Plan.
Business Plans.
Description of Each Key Element of the
Structure of the Business Plan Model Business Plan Model
The Business Plan Model follows a well- The Business Plan Model consists of the fol-
defined outline that has been successfully ap- lowing key elements:
plied in a number of utilities around the world
and conforms to many generally accepted General Description of the Utility
business-planning formats. This Model was Under this element of the Guide, the utilities
developed so that the Business Plan will be will be guided in the data collection process
understandable and useful to not only the that will provide the requisite quantitative infor-
management and staff of the utility, but also mation and the basis for key performance indi-
to its Board of Directors, local government of- cators. This section also includes background
ficials, donors and lenders, and a wide variety utility information so that someone not familiar
of interested stakeholders. with the utility will have specific information
needed to put the Business Plan in perspective.
The model is presented at the end of this
chapter. The model progresses in a building Mission Statement
block fashion, as will be described later also The Mission Statement is the first step in the
in this chapter. The model ultimately arrives Business Plan development process. The util-
at an annual “Total Revenue Need” for the ity will find it hard to define the strategic goals
utility, for each of the forecasted five years of and identify the action plans until the mission
the Business Plan, a corresponding “average of the utility can be clearly stated.
tariff per cubic meter” of water forecasted to
be sold in each of the five forecasted years, as Senior Management Overview
well as a “Tariff Policy and Strategy”. This element of the guide is normally prepared
once the Business Plan is completed. It pro-
To get to this point, the Model will have consid- vides an opportunity for the Senior Manage-
ered and detailed the following: the strategic ment of the utility to address major issues of
goals of the utility, the specific action plans concern affecting the performance of the util-
necessary to achieve the strategic goals, the ity and the general nature of the actions that

9
need to be taken to bring about improved per- the water, and regard it as a product that must
formance. In addition, this section describes be sold, not produced and lost.
the monitoring and reporting procedures that
the Senior Management will implement to Organizational Structure and Staffing
ensure that any serious departure from the Since performance can only be achieved by
business plan targets and milestones are people, organizational structure and staffing
detected early and corrections are made to the levels are key components of a Business Plan.
action plans. It has often been the situation that the water
utility is used as a “make-jobs” enterprise by
Assessment of Current Conditions and public officials and is usually over-staffed. The
Priority Issues review of the organization and staffing require-
This element of the Guide addresses the Cur- ments of the Business Plan will highlight the
rent Conditions, both internal and external, impact of the labor cost on the overall budget.
that affect the utility before starting into the It will also make apparent that overstaffing
formal process of developing the business constrains the utility to provide higher benefits
plan. It is also intended to bring focus and or incentives to staff.
consensus on the priority issues that need to
be addressed in the business plan. The senior management must be prepared
to break away from organizational structures
Strategic Goals and staffing policies that have been historically
The Strategic Goals are critical to the Business used by the utility and to restructure the or-
Plan process, since they capture the quantifi- ganization to improve productivity and overall
able targets that improve the performance of performance.
the utility. Strategic Goals are written to be
specific, measurable, realistic, and time bound. Performance Improvement Program
Once the utility has clearly stated Strategic
Water Demand Management Analysis and Goals and has prepared a sound water de-
Water Sales Forecast mand management analysis, it then needs to
Water Demand Management (WDM) aims to prepare a Performance Improvement Program
optimize production and conserve total water to achieve these Strategic Goals. The utility’s
usage by controlling demand. This element of approach to implementing the change pro-
the Guide will provide the user with guidance cess is critical to achieving long-term, lasting
on the assessment of water demand, and in improvements based on the stated Strategic
particular, address the assessment of future Goals. This will include specific Performance
water demand, based on historical records, Improvement Action Plans that are fairly
future growth, and expected water usage rates detailed, with clear implementation schedules
by category of customer. and interim milestones.

Also considered is the importance of conduct- Operations and Maintenance Budget Forecast
ing an annual water balance and its benefits This element of the Business Planning Guide
to the utility. Lastly, it addresses the issues addresses the issue of Operations and Mainte-
related to the identification and reduction of nance Budget Forecasting as an effective con-
non-revenue water (NRW). These are criti- trol tool to compare actual performance needs
cal concerns as water districts seek to reduce with planned (budgeted) performance. Par-
energy costs and maximize the sale of water ticularly critical to the budget is the impact of
produced. The utility must place a major em- management decisions on expenses for labor,
phasis on the need to quantify and account for power, chemicals and spare parts. These four
items drive the budget at most water utilities.

Guide and Model for the Preparation of Business Plans for Water Districts 10
Before starting the budget forecasting pro- placement, as well as debt service and capital
cess, the utility will be directed on how to repayments on loans.
consider and evaluate the past and present
financial and technical data to identify factors Tariff Policy and Pricing Strategy
that will impact the projection of budget line The Business Plan process ends with a series
item expenditure. of Tariff Analysis iterations that may lead the
management to reconsider its Operations,
Capital Investment Program Maintenance and Capital Expenditures Bud-
This section of the Business Planning Guide gets. Once a realistic mean tariff has been
addresses the issue of planned capital invest- calculated, a pricing strategy can be developed
ments and capital expenditures, and their to reflect any differentiations among classes
impact on the operational and financial per- of customers, and to ensure, that the needed
formance of the utility. In considering planned revenues will actually be generated so that the
capital investments and capital expenditures, utility is financially and commercially viable.
the utility management will be guided in un- This condition must be met, whether the utility
derstanding the need to consider and budget is operated “publicly” or under a contract with
for both new capital investments, as well as a private entity.
capital expenditures for both capital renewal
and capital repair and replacement, as inte- Business Plan Model Spreadsheet Workbook
gral elements of total revenue needs and their The Business Plan Model is supported by a
impact on tariffs. Business Plan Model Spreadsheet Workbook,
a template based on Microsoft Excel program.
Likewise, this element of the Guide will pres- The Workbook contained in a CD attached to
ent the need to identify the sources of capital this manual, allows the utility to record and
investments. To simply plan for a capital calculate results based on data and assump-
investment is insufficient for sound utility tions entered by the utility management.
management. The Business Plan should ex-
press a degree of certainty as to the source of The Workbook is made up of eight (8) inter-
the investment funds, the terms of those funds related worksheets titled as follows:
to be offered, and the timing as to when those
funds might come available, such that their a. Staff List
beneficial use can be realistically reflected in b. Staff Analysis and Forecast
the Business Plan and their impact on perfor- c. Water Demand Analysis and Forecasted
mance improvement. Water Sales
d. Operations and Maintenance Budget
Revenue Needs Forecast
This element of the Business Plan Guide will e. Capital Investment Program
help the senior managers determine the Util- f. Debt Service
ity’s Total Revenue Needs. The objective of the g. Revenue Needs
business planning process for water supply h. Pricing Strategy
and wastewater utilities is to help ensure
financial self-sustainability for the utility. The use of this Workbook, and the individual
This sustainability not only refers to the rou- worksheets in the Workbook, will be explained
tine operations and maintenance expenses, in various sections of the Guide. Sample
but also includes the impact of the calculated worksheets are attached as Annexes for
revenue needs for capital expenditures for reference.
capital renewal and capital repair and re-

11 Guide and Model for the Preparation of Business Plans for Water Districts
 When using the Workbook, the utility should unique name. In this way, the Workbook Mod-
start by making a copy of the Workbook pro- el, in its original form, will always be available
vided with the Guide, and giving that copy a for future use and referral.

BUSINESS PLAN MODEL OUTLINE

I. Strategic Direction and Vision Statement of the VIII. Organizational Structure and Staffing Plan
Utility 1. Current Organization and Staffing
1. Strategic Issues, Concerns, and Direction 2. Proposed Revisions to Organizational
2. Vision Statement Structure and Staffing Level

II. General Description of the Utility IX. Performance Improvement Program to

1. Brief History of the Utility Achieve Strategic Goals
2. Franchise Area Profile Information 1. Performance Improvement Plan One
3. Key Statistical Performance Information 2. Performance Improvement Plan Two
4. Corporate Governance Structure 3. Performance Improvement Plan Three
4. Performance Improvement Plan Four
III. Mission Statement of the Utility 5. Performance Improvement Plan Five

IV. Senior Management Overview of the Business X. Five-Year Cost Budget Forecast
Plan 1. Salaries
1. Priority Issues for the Utility 2. Other Personnel Costs
2. Major Challenges Facing Utility in Imple- 3. Contracted Services
menting Business Plan 4. Consumable Expenditures
3. Monitoring, Reporting, and Corrective Ac-
tions XI. Five-Year Capital Expenditure and Invest-
ment Forecast
V. Assessment of Current Conditions and Priority 1. Capital Renewal (Underground Assets)
Issues 2. Capital Repair and Replacement (Above
Ground Assets)
VI. Strategic Goals 3. New Capital Investments
1. Strategic Goal One 4. Building the Capital Investment/Expendi-
2. Strategic Goal Two ture Plan
3. Strategic Goal Three
4. Strategic Goal Four XII. Revenue Needs
5. Strategic Goal Five 1. Debt Service
2. Capital Reserves
VII. Water Demand Management Analysis and 3. Basis for Revenue Needs
Water Sales Forecast
1. Per Capita Consumption by Class of Cus- XIII Tariff Policy and Strategy
tomer 1. Average Tariff per Cubic Meter
2. Non-Revenue Water
3. Forecast of Water Sales Annexes - Workbook Worksheets
4. Sources of Supply for the Planning Period

Guide and Model for the Preparation of Business Plans for Water Districts 12
 6
4

General Description of the Utility

Brief Utility History and Background • State the total number of water works and
Information sewerage staff, as well as the staff struc-
In this section of the Business Plan, the man- ture (i.e., number of technical, administra-
agement should provide a short description of tive staff).
the history of the utility, as well as background
information To prepare this brief utility history Franchise Area, Coverage and Consumer
and background information. The manage- Profile Information
ment should consider the following points, as The Franchise Area of the WD is defined in its
a minimum: charter, and the Conditional Conformance Cer-
tificate (CCC) issued by LWUA. The Franchise
• Nature of the services provided by the util- Area may include one or more political admin-
ity (e.g., water supply only, water supply istrative jurisdictions (e.g. a city/municipality,
and sewerage services, bulk water supply or a number of contiguous cities / municipali-
to other utilities/systems, etc; ties). The Franchise Area should be clearly
• Date when the utility was first founded and defined in the Business Plan.
the relative age of the infrastructure;
The management should provide reasonably
• Current legal status of the utility, and when
accurate population statistics for the popula-
that status was established;
tion contained within the defined Franchise
• Types of valid licenses/permits held by the Area. If there is more than one political
utility; administrative jurisdiction, this information
• Type, location and safe yield of water should be presented in a table form for each
sources in active use; political administrative jurisdiction. In addi-
• Nature of the water supply system (e.g., tion, the number of consumer connections, by
pumped, gravity-fed, and/or combination); consumer category (household, commercial,
industrial, institutional, etc) should also be
• Specify any seasonal restrictions on water presented.
use;
• State whether the water supply system Within the defined Franchise Area, the utility
is used for any other community require- should describe its degree of service coverage
ments, such as fire protection; for both water supply and wastewater ser-
• Describe the nature of water treatment vices. Similarly, this should be done based on
used, the frequency of water quality testing, political administrative jurisdictions.
and the type of testing parameters; and
13
Key Performance Indicators Under this section, the management should
The key performance indicators provide in- provide information on all investments made
formation regarding the performance of the over the past five years, to include both grants
utility. As a minimum, this should include and loans, and whether they are from the
performance measures that are in the Busi- Central Government budget, bilateral grants/
ness Plan’s targeted areas for improvement. loans, international financing institutions,
These key performance indicators can simply commercial lenders, or from internally gener-
be presented in a table form. Table 4-1 shows ated funds.
commonly used performance indicators.
Lastly, the management should indicate if any
Investment/Funding Information outstanding loan obligations have repayments
The performance of the utility is affected by the that will occur within the five-year planning
amount and efficiency of the investments made period of the Business Plan.
in capital infrastructure. In general, physical
investments in infrastructure will start to yield
performance benefits after 2-3 years.

Key Performance Indicator Value

Water Coverage (% of Population in Franchise Area)
Urban
Table
Rural 4-1
Sewerage Coverage (% of Population in Franchise Area)
Urban
Rural
Metered Connections (% of Total Connections)
Non-Revenue Water (% of Production)
Collection Efficiency (% of Total Billings)
Employees per 1,000 Water + Sewer Connections
Average Total Water Sales (liters/capita/day)
Average Hours of Water Supply per Day
Direct Operating Cost Coverage-From Revenues
(Revenues / Costs)
Direct Operating Cost Coverage-From Collections (Collections / Costs)
Debt Service Coverage Ratio
Debt Equity Ratio
Net Profit Margin
Operating Margin (EBITDA/Operating income)

Guide and Model for the Preparation of Business Plans for Water Districts 14
 6
5

Mission Statement of the Utility

What is a Mission Statement? the execution of the selected strategies. It
The first step in the Business Plan process is provides the structure and framework for an
for the Senior Management to prepare a Mis- organization to build upon. The management
sion Statement based on the utility’s vision. should consider it as the foundation of struc-
The Vision suggests a future orientation – an ture, such as the foundation of a house. It
image of the utility’s perspective, and a stan- is difficult to build a strong and sound utility
dard of excellence. The Mission Statement is without stating its purpose clearly.
a short, clear statement describing the utility’s
purpose, values. It should be a succinct repre- The Mission Statement also provides an op-
sentation of the utility's purpose for existence. portunity to define your business at the most
It should incorporate socially meaningful and basic level. Once it is in place, there must be
measurable criteria addressing concepts such careful consideration for the goals and plans to
as the moral/ethical position of the utility, pub- be closely aligned with the mission statement.
lic image, services provided, the target market,
the geographic domain and expectations of An effective Mission Statement describes the
growth. Ultimately, this serves as the guiding Utility’s fundamental, unique purpose. An im-
principle for all goals and plans of the utility. portant part of this description indicates how a
utility is unique in its scope of operations and
The central focus of a utility's decisions and service offerings. Mission statements are also
operations should be its mission, which is intended to provide motivation, general direc-
the fundamental, unique purpose that sets it tion, an image of the utility’s character, and a
apart from other organizations, and identifies tone, or set of attitudes, through which actions
its scope of operations. The Mission State- are guided. Furthermore, since a mission
ment is a general, enduring statement of the statement speaks to the “soul” of the utility, it
organization's intent and describes the areas is intended to be inspirational.
of emphasis for the organization in a manner
that reflects the values and philosophies of What Should Be Considered in
management and other key decision makers. Developing a Mission Statement?
The Mission Statement should be a clear set
Importance of the Mission Statement of principles that is understood and accepted
The Mission Statement helps the utility deter- by the utility employees and is inspirational.
mine and prioritize strategic goals and guides Generally, a Mission Statement includes:

15
• Purpose of the utility in terms of the scope Examples of Utility Mission Statement:
of its operations;
• Priorities for the utility’s future perfor- Mission Statement of
mance; and Zamboanga City Water District
• Values of the utility in the provision of its
services. To pursue the objectives of the
Zamboanga City Water District as an
institution responsive to the needs of
In developing a mission statement, the man-
the consuming public and committed
agement staff of the utility should consider the
to provide the highest degree of service
following questions:
and continuous delivery of potable
water to the constituents of the City of
• What do we do as a Utility?
Zamboanga.
• Why does the Utility exist?
• What is the ultimate result of our work?
• What are our priorities? Mission Statement of
Surigao Metro Water District
• What do we value?
• What is the Utility’s vision? Guided by our vision, we commit our-
• Should we include a standard of perfor- selves to:
mance? • Ensure sustainable water resources
by being proactive in the preservation
• Should we include a customer statement?
of the environment;
• What kind of internal work environment do • Provide sufficient potable water of su-
we want for our employees? perior quality at reasonable cost; and
• Deliver quality services through com-
In addition to serving as the guidepost for petent and committed personnel, and
organizational goals and plans, a Mission continual enhancement of systems
Statement contributes to a positive percep- and technology.
tion of the utility both externally and internally.
External audiences, such as the local commu-
nity, customers, and suppliers see the Mission
Statement as commitment by the organization Mission Statement of
in carrying out its activities and this can serve Baliwag Water District
to validate the organization in the minds of
these audiences. In this way, a Mission State- We are committed to provide safe, po-
ment can serve as the basis for a public rela- table, adequate, and affordable water to
tions campaign. Internally, a strong Mission concessionaires.
Statement impacts employees by enabling
them to be dedicated to the organization be- We are committed to be model organiza-
cause they can identify with its overall purpose tion that protects and conserves human
and reason for existence. and natural resources.

We are committed to continuously im-

prove and develop our facilities and the
workforce in the highest degree of pro-
fessionalism, productivity and service.

Guide and Model for the Preparation of Business Plans for Water Districts 16
When describing the scope of its operations, Writing the Mission Statement
many utilities often include a standard for
performance directly in the statement.

The City of Juneau, Alaska, USA Water Utilities

Division describes water quality standards in
its mission statement, “…Proper treatment
and distribution is that which suitably exceeds
the minimum requirements established by
the United States Environmental Protection
Agency.” The performance target, or bench-
mark, is the U.S. Environmental Protection
Agency's requirement for clean water. This
utility will measure if the organization is meet-
ing this benchmark.

Some mission statements also convey the util-

ity’s values towards its employees and cus-
tomers. For example, part of this same utility's
Mission Statement states, “We will meet the
needs of our customers for exceptional water
and sewer service, and of our team members
for a challenging, fulfilling, and rewarding
work experience.” This utility places a high
priority on their employees, which is motivat-
ing to the staff.

17 Guide and Model for the Preparation of Business Plans for Water Districts
Guide and Model for the Preparation of Business Plans for Water Districts 18
 6
6

Senior Management Overview of Business Plan

T
his section of the Business Plan pro- coverage to the unserved areas, as well as re-
vides an opportunity for the Senior Man- pair and replacement of the existing systems.
agement of the utility to address major Such capital can only be obtained through ap-
issues of concern affecting the performance of plication for loans from LWUA or other sources
the utility. It also discusses the general nature of credits. However, all improvements are not
of the actions that need to be taken to bring driven by the need for capital investments and
about improved performance. the management must be objective in identify-
ing these challenges as well.
In addition, this section describes the monitor-
ing and reporting procedures that the senior Therefore, it is very essential that the setting
management will implement to ensure that of the strategic goals is made in close connec-
any serious departures from the business plan tion with the perceived challenges in order to
targets and milestones are detected early and take a realistic approach.
corrections are made to the action plans.
One of the major efforts needed for the Philip-
Major Challenges in Business Plan pines water sector is to achieve the Millen-
Implementation nium Development Goal of increasing formal
The senior management should use this sec- access to water supply to 90% by 2010. Under
tion of the Business Plan to identify the major this section of the Business Plan, the senior
challenges the utility is likely to face during management should list the most important
the implementation of the Business Plan. The challenges of the utility in implementing the
ability to address some of the major challeng- Business Plan. The following is a list of pos-
es that face a utility may not always be in the sible challenges that a typical utility may face:
control of the utility and its management, and
those should be clearly stated in the section of • Increase the level of water supply coverage
the Business Plan. to the Franchise Area;
• Provide a secure water supply, in sufficient
Water and sanitation services in the Philip- quantity and proper quality;
pines have not expanded in terms of coverage.
• Reduce Non Revenue Water;
Often, the poor tends to be underserved by the
existing arrangements. One typical example • Increase the sewerage coverage by imple-
is the need for major capital investments for menting a capital investment program to
extending the service to increase water supply extend the network to the unserved areas;

19
• Provide quality sewerage collection, treat- • Frequency of monitoring/measuring the
ment and disposal services in compliance results of the performance indicators;
with environmental standards; • Persons designated to be responsible for
• Operate the Utility in a commercial manner the monitoring task; and
to be financially self-sustaining, based on • Schedule of meetings to discuss the prog-
the tariff structure; and ress of the Business Plan implementation,
• Build staff capacity by implementing a com- based on the monitoring.
prehensive staff training program.
Reporting
For each of the identified challenges to the The management must clearly state the re-
implementation of the Business Plan, the porting requirements of all the departments of
senior management must come up with one the utility. Reports are the basis for the moni-
or more approaches to address them in the toring, and therefore, must be approached
Business Plan. with great attention. Under the “Reporting”
section, the management must specify the
Monitoring, Reporting, and Corrective reporting requirements for each department,
Actions to include, as a minimum:
Once the Business Plan has been prepared
and approved by the relevant authorities, the • Type of reports and data to be provided;
Business Plan will need to be monitored and • Frequency of reporting; and
updated from time to time. These measures
are essential to the successful implemen- • Designation of the person, within each
tation of the Business Plan, and make it a department, who shall be responsible for
the reporting.
living document. Therefore, the management
provides for these measures and determines
the relevant procedures into the business plan Upon review and analysis of the reports and
document. the monitoring of the Business Plan progress,
the senior management will be able to take
Monitoring the necessary corrective measures to address
The monitoring of the Business Plan requires problems or issues that arise at implementa-
an observation of the progress being made in tion stage.
the achievement of each of the stated strate-
gic goals by measuring their status at defined Corrective Measures
points in time. The senior management must first identify
any new challenges or issues that have not
Under the “Monitoring” section, the senior been identified during the preparation of the
management must determine the method of Business Plan document, and provide for the
monitoring of the Business Plan, to include, as respective solutions to each of them.
a minimum: The need for corrective measures is not in-
tended as a modification of the Strategic Goals
• Functional areas to be monitored; of the Business Plan, rather as the modifica-
tion of the actions that lead to the achievement
• Performance indicators to be applied for
of the same goals.
each of the functional areas;

Guide and Model for the Preparation of Business Plans for Water Districts 20
 6
7

Assessment of Current Conditions and

Priority Issues

B
efore developing a business plan, the Performance Indicators and Trends
management team needs to take some A number of key performance indicators were
time to come to a consensus on the cur- already suggested in Section 4 of the Guide, as
rent conditions of the utility, the external factors a way to help describe the utility. The man-
affecting the utility, and the priority issues that agement team will need to consider these in-
need to be addressed in the business plan. dicators, and others, and their recent trends to
form an objective consensus on how the utility
There are two grounding environments, is performing. The management team will
namely external and internal. The external also need to reflect on the quality of its pro-
environment is the area, industry or sector grams to measure and monitor performance
affecting or being affected by the utility, while as a management procedure. It is important
the internal environment is the utility itself. to keep the following four statements in mind,
The internal environment is composed of the in this regard:
resources, manpower, systems, processes,
capabilities and constraints of the utility. • If you are not measuring it, you cannot
monitor and manage it.
The priority issues can be best identified
• If you do measure it, be sure it is being
through a simple exercise conducted among
measured correctly and consistently.
the senior management team, which will be
discussed later in this section. • Inaccurate data produces inaccurate indi-
cators.
Current/Expected Conditions – Internal • Inaccurate indicators result in bad manage-
to the Utility ment decisions.
The senior management of a utility cannot
“see the world” as they would like it to be, but Nature of Work Force and Skills
must see it as it honestly is when it comes to The success of a utility relies ultimately on its
the current and expected conditions internal to people and their ability to perform their as-
the utility. Therefore, it must make a serious signed duties. The senior management must
effort to assess those conditions objectively assess the work force in terms of its skills and
and come to a consensus about those condi- training needs to meet the future demands of
tions amongst the senior management team.

21
the utility. It is reasonable to expect that there etc. The costs and benefits of the tie-ups must
will need to be reductions in the work force in be evaluated.
utility in the short-term. Likewise, there will
be a need for increased training in the opera- Current/Expected Conditions – External
tion and maintenance of new technologies. to the Utility
It must be recognized that the utility is not
Capital Investment Program isolated from events that occur around it in
Many utilities in the Philippines over the com- the local area or at a national level. One must
ing years will be engaged in capital invest- consider what impact these events might have
ment programs to upgrade and expand the on its ability to perform activities. Some of
system coverage and to improve the level of these events/impacts will be considered again
services. Major capital investment programs in later sections of the business planning pro-
have a profound impact on a utility and cre- cess, but are raised below as examples of the
ate changes that the senior management types of things that will need to be considered
must anticipate and build into their business and discussed by the management team.
plan. These include new customers, the need
for new worker skills, and the added costs of Changes in Sector Legislation and
operations. Regulations
The water supply and wastewater utility sector
Resource Optimization is greatly driven by legislation and regulations.
Resource optimization endeavors to find out A small change in a water quality standard
if the resources of the utility have been ef- requirement can have a significant impact
ficiently, economically and effectively sourced in the need for increased capital investment
and utilized. and operating costs to comply with the new
requirement.
Management Process
This includes Planning, Programming, Bud- As stated in the World Bank Report “Meeting
geting, Organizing, Staffing, Implementing, Infrastructure Challenges”, a robust regula-
Evaluating, Controlling, Coordinating, Monitor- tory framework is critical for sector develop-
ing, Leading, Directing, Relating, and Compen- ment, as it provides for a credible and effective
sating & Rewarding. These are the systems tariff adjustment mechanism insulated from
and procedures, both formal and informal, short-term political intrusion. A regulatory
which the utility employs to achieve its goals. framework is also crucial to make service
providers accountable to consumers. However,
Physical Assets, Environmental Conditions such a framework is still not in place.
This requires analyzing the state, condition
and competitiveness of the utility’s physical Trends in Power Service Continuity and Price
assets and conditions, including the work- Business planning must be performed with
ing environment, infrastructure and logistics the best estimate of power supply continu-
support, utilities and other physical factors ity of service and price in mind. Since power
affecting the cost of doing business and cost of cost has a major impact in the Operations and
producing the products or services. Maintenance Budget, the senior management
of the utility is required to asses the recent
Organizational Affiliations history of price increases for electrical energy
This involves evaluating the utility’s affiliations, and factor it into the O&M budget forecast.
alliances and linkages including supplier and
marketing networks, industry associations,

Guide and Model for the Preparation of Business Plans for Water Districts 22
Trends in Chemical Supply and Price Strengths-Threats (S-T) Strategic Options
Treatment chemicals will play an increas- – This matrix asks the question: How can
ing role in the operations of water supply and strengths be used to counteract threats that
utilities in Philippines. This will be true for the tend to hinder the attainment of objectives
treatment of water supplies, particularly sur- (VMO) and the exploitation of opportunities?
face water sources; the disinfection of drinking
water prior to distribution; and the treating of Weaknesses-Opportunities (W-O) Strategic
wastewater. Establishing quality and reliable Options – This matrix asks the question: How
supplies of chemicals at affordable prices can weaknesses be overcome to take advan-
will be an increasing challenge for a growing tage of or exploit the opportunities?
number of utilities.
Weaknesses-Threats (W-T) Strategic Options –
Changes in Economic Conditions Affecting This matrix asks the question: How can weak-
Customers nesses be overcome to counteract threats that
The economic well-being of the customers tend to hinder the attainment of objectives
in the Franchise Area of the utility can have (VMO) and exploitation of opportunities?
a direct impact on the economic well-being
of the utility itself. Customers who have lost Figure 7-1 SWOT Matrix

jobs due to an economic downturn in the Internal Environment

External
Weaknesses
region can quickly become customers who Assessment Strengths (S)
Environment Assessment (W)
do not pay their bills. Conversely, a growing
Opportunities (O) S-O W-O
economy, with a strong job market, can mean
Threats (T) S-T W-T
an increase in consumption per capita per day,
as well as an increase in the overall customer
base from movement to the Franchise Area. Priority Issues
The first step toward defining its Strategic
Changes in Labor Laws Affecting Employment Goals for the Business Plan is the identifica-
and Wages tion of the priority issues that will affect the
It is reasonable to expect that the Philippines utility. Senior Management will perform this
will experience continuing changes in its labor task.
laws and its minimum wage standards. The
utility, as a major employer, will always be Problems or issues that affect the perfor-
impacted by changes in labor laws and wage mance of the utility should be considered in a
standards, and must factor this into its think- structured way as they relate to different parts
ing during the business-planning process. of the organization of the utility. The follow-
ing points are provided to assist the manage-
SWOT Matrix ment team in considering probable problems/
Summarizing the previous observations, the issues.
Senior Management Team should be able to
develop a SWOT analysis which displays four Management Performance
possible combinations which can be used to • Lack of internal regulation
generate strategic options. These are:
• Lack of routine performance improvement
programs
Strengths-Opportunities (S-O) Strategic Op-
tions – This matrix asks the question: How can • Lack of performance monitoring and re-
strengths be employed to take advantage of porting practice
the opportunities?

23 Guide and Model for the Preparation of Business Plans for Water Districts
• Difficult relations with local governments in Customer Service
the Franchise Area of the utility • Fragmented Customer Services activities
• Excessive political pressure and influence across several departments
• Lack of computerized billing and account-
Financial Performance ing system
• Lack of internal audits • Low billing and/or collection efficiency rate
• Lack of compliance with accounting stan- • High percentage of non-revenue water
dards • Serious problem with illegal connections
• High total labor cost due to overstaffing • Lack of public relations/customer commu-
• Insufficient revenues and collections to nications plan
cover operations costs
• No financial reserves for new capital in- After having considered the problems/issues
vestment listed above, the senior management should
• Insufficient tariff levels to meet debt inter- conduct the exercise at the end of this section
est and repayment requirements as a process to identify their unique priority
problems/issues for the utility.

Operations Performance
Sample Format for Identifying Priorities
• Significant water quality problems at the
sources
• Delays in capital investment program Directions: Consider and document the major
• Insufficient water supply sources problems/issues that the utility is confronting.

• Low water supply coverage

1. The senior management team should
• Extremely low access to sewerage network work collectively to write all the serious
"problems/issues" they can identify, under
Maintenance Performance each section, trying to be as specific as
• Technical losses from visible leakage possible.
2. After considering and writing the prob-
• Lack of spare parts to make timely repairs
lems/issues under each section, return to
• Lack of preventive maintenance system in each section to rank the problems/issues
place based on the urgency of the problem rela-
• Severe, repeated equipment damage due to tive to all the problems in that section, by
voltage fluctuations checking an appropriate box.
3. Once this has been completed, proceed
• Lack of wastewater treatment and disposal
to the last table and transfer all of the
“Very Urgent” problems/issues” to that
Human Resources Performance last table, and then rank them in a priority
• Overstaffing order.
• Poor quality of staff, due to low salaries
• Aging staff with no qualified replacements
• Political interference in hiring practices

24
 Management Not Urgent Urgent Very Urgent
1
2
3
4
5

Finance Not Urgent Urgent Very Urgent

1
2
3
4
5

Operations Not Urgent Urgent Very Urgent

1
2
3
4
5

Maintenance Not Urgent Urgent Very Urgent

1
2
3
4
5

Human Resources Not Urgent Urgent Very Urgent

1
2
3
4
5

Customer Service Not Urgent Urgent Very Urgent

1
2
3
4
5

25
 Very Urgent Issues/Problems Not Urgent Urgent Very Urgent
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Although the table of “Very Urgent Issues/ “Very Urgent” are significant enough and can
Problems” has allowed for 15 entries and be realistically addressed in the five years of
although more than 15 problems may be the Business Plan. Experience suggests that
identified, the senior management should only 5-7 truly serious “Very Urgent” Issues/
carefully consider which of the ones ranked Problems can be practically addressed.

26
 6
8

Strategic Goals
What is a Strategic Goal? Strategic goals are critical because they provide
Strategic goals are identified to accomplish the important element of accountability to the
the organization's Mission Statement and per- strategic planning process. The senior man-
tain to the organization as a whole, rather than agement of the utility is responsible to their
to a specific department. Goals identify what Board of Directors, local government, or other
an organization wants to achieve, preserve, governing authority for achievement of measur-
reduce or eliminate. Strategic goals provide able objectives. Other members of manage-
an organization, specifically its management, ment should be made fully aware and held ac-
with a sense of direction by stating quantified countable for achieving performance relative to
performance targets. specific objectives in their areas of operational
responsibility. In some utilities, compensation
The strategic goals developed within the busi- and other rewards are tied to the achievement
ness planning process provide a utility with its of specific measurable goals stated in the util-
core priorities and a set of guidelines for virtu- ity’s business plan, or the action plan of the
ally all daily managerial decisions. Strategic particular operating unit of the utility.
goals should be written down and manage-
ment should know what they are at all times. A utility can have many important goals, but
When managers are faced with the prospect of having too many can defeat the purpose of
making a decision, they should always refer to strategic and business planning. When deter-
the stated strategic goals and act in a way that mining strategic goals, the key is to prioritize.
helps to achieve those strategic goals.
The strategic goals should address the ma-
Strategic goals should direct the operations of jor issues being faced by the utility, and its
the utility in key areas as a whole. Such areas management, over the next five years, in car-
may include all the aspects of billing and col- rying out its Mission Statement. These issues
lection, water demand management, integrat- should have been identified and prioritized as
ed water resource planning and management, described in Section 7 of the Guide.
environmental issues, water quality, commu-
nity involvement, customer satisfaction, etc. Characteristics of Strategic Goals
In addition, aspects such as management of When defining a strategic goal, there
human resources, financial management, and are certain characteristics that must be
customer service can be addressed specifi- considered in order for it to be effective.
cally in the strategic goals.

27
Figure 8-1 illustrates each characteristic of a strategic goal. These characteristics are further
defined in Table 8-1.

Figure 8-1

SG = S + M + T + A + A
Strategic Specific Mesurable Time Achievable Acceptable
Goal Bound

Table 8-1

Characteristic Description
A Strategic Goal must be clearly stated in specific terms so that there is no confusion as to
Specific
the meaning and purpose of the goal.
A Strategic Goal must be measurable in quantitative terms so that it can be monitored and
assessed objectively, which in turn, facilitates evaluating progress towards achieving the
goal.
For example, observe the difference between the two following statements in terms of
achieving a goal:
Measurable
"The reduction of non-revenue water will be a priority of the utility."

As compared to:
"Non-revenue water will be reduced to an average level of 30% of water supplied to the
system."
A Strategic Goal should be stated such that it is accomplished within a specified time frame,
say from one to five years. When stating a longer-term for a strategic goal, it is advisable to
state interim target goals to be met.
Time Bound
For example, if the goal is to increase the bill collection efficiency rate to 95% by the end
of Year 4 of the business plan, and if the collection efficiency rate is currently at 25%, then
interim goals could be stated as, "The interim bill collection goal for end of Year 1 is 35%, end
of Year 2 is 50%, end of Year 3 is 70%, and end of Year 4 is 95%.”
While a Strategic Goal should be challenging, it must also be realistically possible to achieve
Achievable the goal as stated. If a strategic goal is unrealistic, employees may become unmotivated
because they will never be able to reach it.
If the work force of the utility does not accept a particular Strategic Goal, achieving it will be
difficult. Effective management requires that the work force take ownership for achieving
Acceptable the stated Strategic Goals. If they do not understand why they are being asked to achieve
a particular Strategic Goal, or the impact that the Strategic Goal will have on them and the
utility, once achieved, they will not pursue it with commitment and determination.

Guide and Model for the Preparation of Business Plans for Water Districts 28
Examples of Strategic Goals
The following Table 8-2 presents some examples of how Strategic Goals should be stated to meet
the characteristics described earlier in Figure 8-1 and Table 8-1.

Table 8-2

Strategic Goal Measurement of Performance

Increase Billed Water Production Increase the amount of produced water that is billed, such that the Utility is billing
70% of its water production, as measured at the sources, by the end of 2011 with
interim goals of 50% by the end of 2009 and 60% by the end of 2010.

Achieve full cost recovery, to include annual interest and capital repayments on
Become Financially Sustainable current loans, and a defined annual contribution to a capital repair and replace-
ment reserve by the end of 2011.

Achieve a water quality relative to the presence of E-coli bacteria by not exceed-
Assure Water Quality ing the E-coli standard in more than 3% of the samples taken and tested by the
Department of Health by 2010.

Implement a staff-training program that will progress such that each staff member
will receive a minimum of 24-hours of training per year by the end of 2011 with
Build Staff Capacity
this goal being met in increments of 8 hours per year by the end of 2009 and 16
hours per year by the end of 2010.

29 Guide and Model for the Preparation of Business Plans for Water Districts
Guide and Model for the Preparation of Business Plans for Water Districts 30
 69

Analyzing Water Demand and

Forecasting Water Sales

T
his section provides the user with Managing water supply
guidance on the assessment of water and water demand is a
demand, and addresses the assessment function of efficient pric- Efficient water supply
of future water demand, based on historical ing, effective regulation, and water demand
records, future growth, and expected water and appropriate public
management is
usage rates by category of customer. Also education and aware-
discussed is the importance of conducting ness. At the utility level, important for a utility
an annual water balance and its benefits to it is a process that com- in its efforts to reduce
the utility. Lastly, the section discusses the bines technical, admin- the volume of water
issues related to the identification and reduc- istrative, and financial losses (cost savings)
tion of non-revenue water (NRW), which is measures. A critical ele-
and increase the
increasingly a priority issue for water utilities ment of a WDM program
throughout the world. is the implementation of volume of water sold
a comprehensive, reli- (revenues).
Why Is Water Demand Analysis Critical in able metering program
Business Planning? for bulk supply, supply
By developing an accurate assessment of zone and consumers.
water demand, the utility is able to form the
basis for nearly all planning studies to include The determination of realistic future water
the preparation of the Business Plan. Water demand should be based on:
Demand Management (WDM) has always been
a priority issue in the management of a water • historical water supply and water sales
utility, whether the water supply system is records;
based on gravity flow or mechanical pumping. • current system performance and customer
use patterns;
A standard output of a WDM program is a wa-
• assumed changes in future water use pat-
ter demand analysis/forecast. A sound water
terns;
demand forecast, together with an evaluation
of existing sources of supply, provides valuable • assumed effectiveness of efforts to reduce
insight in determining when, or if, new sources non-revenue water; and
of water supply must be developed. • unserved demand.

31
A simple graphic, presented in Figure 9-1, de- nance goals. Once a comprehensive water bal-
scribes what is included in preparing a water ance audit has been implemented, it is usually
demand analysis. less expensive to conduct the annual updates.
The cost of a water balance audit depends on
Figure 9 - 1

Current and Future Demands

Collect and Determine Improve Determine

Evaluate Basic Future Demand Management of Key Planning
Flow Data Projections Current Demand Parameters

The assumptions used in determining water the size of the Franchise Area to be audited;
demand have a permanent effect on planning the completeness, currency and accuracy of
outcomes and subsequent planning decisions. the utility’s records, including meter testing
Without a thorough analysis of water demand, programs, and records. The most expensive
premature or excessive investment in capi- task in a water balance audit is the testing of
tal works may result. This in turn may cause large water meters for accuracy.
unnecessary additional financial impacts on
the utility, and therefore, on its customers. The benefits of water balance audits to a utility
Conversely, inadequate water demand man- are:
agement and infrastructure investment may • Reduced non-revenue water;
lead to decreased quality of service, increased • Financial performance improvement;
customer service complaints, or negative envi-
• Increased knowledge of the distribution
ronmental impacts.
system;
Importance of a Water Balance Audit • More efficient use of existing supplies;
Conducting a water balance audit is the first • Safeguarding public health and property;
step to a comprehensive water demand man-
• Improved public relations;
agement program. A water balance audit quan-
titatively accounts for all the water that is input • Reduced legal liability;
to the system and identifies how much water is • Reduced service disruption to customers;
lost and what that loss costs the utility. and
• Resource conservation.
The overall objective of a water balance audit
is to help the utility select and implement
programs to reduce water losses (non-revenue Metering of the supply sources is an essen-
water) throughout the system. Ultimately, tial first step for water balance calculations.
either a reduction in the volume of water be- Whenever actual metering is not possible, or
ing produced (cost reduction), or an increase does not exist, every effort should be made to
in the volume of water being sold (revenue carefully estimate each component of water
increase) should be aspired for. usage to determine realistic quantities for the
water balance.
Water balance audits should be performed an-
nually to help managers monitor progress and The water balance calculation and analysis
identify new areas of system losses, as well quantify the total volume of water that enters
as adjust priorities and establish new mainte- the system, the volume of authorized con-

Guide and Model for the Preparation of Business Plans for Water Districts 32
Figure 9-2 Components of a Water Balance

Billed Water Exported

Billed
Billed Metered Revenue
Authorized
Exported Consumption Water
Consumption
Water
Authorized Billed Unmetered
Consumption Consumption

Own Sources Unbilled Metered

Consumption
Unbilled
Authorized Unbilled Unmetered
Total Consumption Consumption
System
Input
Supplied Unauthorized
Water Consumption
Non-Revenue
Customer Metering Water
Apparent Losses Inaccuracies

Data Handling Error

Water Losses Leakage on Mains

Imported Real Leakage on Service
Water Losses Lines
Leakage and overflows
at Storage

sumption (billed and unbilled, metered and a utility, when and if these volumes are a sig-
unmetered), as well as the volume of water nificant percentage of the Total System Input.
losses (apparent and real). This water balance Because of the wide diversity of formats and
calculation can be best understood by refer- definitions used globally for water balance
ring to Figure 8-2, Components of a Water calculations, the International Water Asso-
Balance. ciation and its Task Force on Water Losses
has produced an international best practice
Each component of the annual water balance approach for water balance calculations. This
is presented in terms of volume per year. approach includes definitions of its compo-
nents as a basis for comparing performance
The user of this Guide should focus on the between utilities. Figure 9-2 is based on the
areas shaded in red to appreciate the poten- terminology and standards produced and gen-
tial negative impacts that Water Losses, when erally accepted in the water industry for water
combined with Unbilled Authorized Consump- balances. Brief definitions of these common
tion, can have on the financial performance of terminologies are presented in Table 9-1.

33 Guide and Model for the Preparation of Business Plans for Water Districts
Table 9-1 Definitions of Water Balance Terminology

Terminology Definition
Volume of water derived from the sources owned by the utility and often referred to
Own Sources
as produced water.
Imported Water Volume of water the utility purchases from other suppliers.
Total System Input Volume of water received into the water supply system.
Exported Water Volume of water sold to another utility as bulk water.
Supplied Water Volume of water available to be sold to system users.
Authorized Consumption Volume of billed and unbilled water supplied to registered customers of the utility.
Volume of water calculated as the difference between total volume of system input
Water Losses
and the volume of authorized consumption.
Billed Authorized
All consumption that is authorized and billed by the utility.
Consumption
Unbilled Authorized Consump-
All consumption that is authorized but still unbilled by the utility.
tion
Volume of water attributed to unauthorized consumption and all types of inaccura-
Apparent Losses
cies associated with metering and billing.
Volume of water attributed to technical conditions and events experienced in the
Real Losses
system.
Volume of water billed to a customer of the utility, whether it is metered or unme-
Revenue Water
tered.
Non-Revenue Water Difference between total system input volume and volume of billed consumption.

Non-Revenue Water and Its Impacts on cases with significant electrical energy costs,
Utility Costs this reduction can be dramatic.
The reduction in Non-Revenue Water (NRW)
remains one of the major challenges facing Secondly, if NRW is the result of non-metered
water supply and wastewater utilities through- systems or systems with a high percentage of
out the world. Reducing NRW can significantly illegal, non-registered connections, then re-
impact the financial performance of the utility ducing NRW will result in increased sales and
in either of two ways. therefore, increased revenues for the utility.

First, water is costly to produce, particularly The components of NRW can be determined
considering factors such as the development by conducting a Water Balance Audit, as
of extraction facilities, any necessary water explained in the earlier part of Section 9. This
treatments which require constructed facili- is based on the measurement or estimation of
ties, chemicals, power and labor, as well as water produced, imported, exported, con-
a significant amount of electrical power for sumed (sold), and lost water.
pumping. These costs must be recovered
through water sales. If the operations are to Determining Current Real Water Demand
be sustained and for utilities that have high of the Utility
percentages of NRW, the consumer ends up This subsection of the Guide builds on the
paying for the inefficiency through increased two previous subsections, and is intended to
water tariffs. Therefore, the reduction of NRW provide the user with a common foundation of
results in the reduction of costs. In many information for considering water demand and
the concerns of all utilities with water losses.

Guide and Model for the Preparation of Business Plans for Water Districts 34
Furthermore, it also presents a methodology Franchise Area Population and Served
for the utility’s senior management, to deter- Population
mine the current real water demand of the In preparing a water demand forecast, first de-
utility for each of its customer categories. termine the “total” and “served” population, as
well as the “water demand per capita per day”.
The Workbook accompanying this document
contains a specifically designed worksheet to It is in the best interest of water utilities to be
aid senior management quantify current and as objective as possible in determining the size
projected real water demand. The worksheet of the population in its defined Franchise Area
is created in such a way that all the necessary and from which, the size of the population
calculations have been pre-programmed into served by others. The two primary sources for
the worksheet with formulas that are visible the population data in the Franchise Area are
to the user. The user of this Guide need only the respective local governments in the Fran-
input, in the yellow highlighted cells, the re- chise Area and the National Statistics Office.
quired data for the Base Year and the assump- The final values determined by the utility to be
tions required for the planning period. The the most accurate are entered in the Base Year
spreadsheet program will then automatically column as illustrated by the sample data in
calculate the projected water sales, water Figure 9-3, next to Population in the Franchise
demand, and the non-revenue water. Area and Population Served by Others.

The following subsections will guide the user When considering the population in the
of the water demand analysis worksheet Franchise Area and the population Served
through the process of considering input val- by Others, the management should solicit
ues into the worksheet. information from each local government as
to their estimated growth rate for their local
Figure 9-3

35 Guide and Model for the Preparation of Business Plans for Water Districts
population over the five-year planning period. illustrated in Figure 9-4. This will allow the
The utility should reserve the right to chal- worksheet to calculate the served population
lenge any figures provided in order to reflect a for the Base Year and for all of the Business
realistic overall growth rate for the population Plan years.
in the Franchise Area, which will be applied as
a % annual population growth rate to the base Dividing the Served Population by the Ser-
year population. Unlike population in the Fran- viceable Population, which is the difference
chise Area, the population Served by Others between the population in the Franchise Area
will be inputted for the base and future years and population served by others, provides
of the business plan. The worksheet is also a piece of Profile Information regarding the
designed to apply different annual connection utility, which is referred to as the Service
increase/decrease percentages for the Com- Coverage Ratio, expressed in Figure 9-3 as a
mercial, Institutional and Industrial costumer percentage. The utility may have, as one of its
categories. An example of the % of projected Strategic Goals, to achieve a desired service
population and connection increase variables coverage ratio within a stated timeframe.
is illustrated in Figure 9-4.
The utility management is therefore required
Figure 9-4 to take a position regarding the service cover-
age ratio over the five years of the Business
Plan. It must make an entry in the worksheet
for each of the five years. The formula in the
worksheet will multiply this entry with the
serviceable population in a given forecast year
and automatically indicate the served popula-
tion for each of five years. Any changes in the
To estimate the “served population”, the man- percentage of population provided water ser-
agement will have to consider the customer vice (service coverage ratio) will be reflected in
records of the utility. To establish this number the value for served population.
for the Base Year, the utility should use the
number of registered household connec- The Business Plan must be practical and con-
tions (metered and non-metered), as officially servative in its served population estimates,
recorded by the utility. This entry is made since this value, along with the assumed per
for each type (metered and non-metered) in capita water demand value, drives estimated
the base year. Unless the utility has a better water sales, which then directly impacts the
source of information, it should obtain data estimated revenues of the utility in its financial
on the “average household size” and “average forecast.
number of households per dwelling” from the
National Statistics Office. Multiplying average Another piece of Profile Information that is
household size by the number of connected very valuable in managing water supply sys-
household dwellings provides a good approxi- tems is the percent of “metered connections”.
mation of the number of people per connec- Figure 9-5 illustrates how this is considered in
tion, which can be inputted in the workbook as the Workbook for Household (HH) connections.

Guide and Model for the Preparation of Business Plans for Water Districts 36
Figure 9-5 Forecasting Metered Connections and New Meter Installations

Using the data already entered for metered If they feel that they cannot make that level of
and unmetered household connections, the expenditures, then they will have to revise the
program will calculate the percentage of me- household metered connection percentage.
tered household connections for the base year.
The utility management must take a position The issue of metered connections for each
as to any action (investments) that it plans to of the other customer categories (i.e. com-
make to increase the base year percent me- mercial, institutional and industrial) will be
tered connections during the five-year busi- considered in a similar way as illustrated in
ness planning period. Figures 9-6, 9-7, and 9-8. In each case, there
are two calculations taking place at the same
With the projected population increase, the time. The first is based on assumptions made
projected increase in service coverage, and by the management, as illustrated in Figure
the projected increase in metered household 9-4, regarding the growth rate of connections
connections, the worksheet program will au- in each of the categories, other than house-
tomatically calculate the “number of new me- hold. This is then combined with the assump-
tered connections” to be made in each of the tions made for increased metered connections
five years of the Business Plan. This provides which results in the number of new connec-
the management with a decision to be made tions needed to be made in each planning year
on the affordability to make those connections. for each category of customer.

37 Guide and Model for the Preparation of Business Plans for Water Districts
Figure 9-6 Registered Commercial
Connections

Figure 9-7 Registered

Institutional Connections

Figure 9-8 Registered

Industrial Connections

Guide and Model for the Preparation of Business Plans for Water Districts 38
Figure 9-9 Registered Sewer Connections

After having completed the information for hold users divided by the number of household
water connections by category, the manage- connections and the average number of people
ment should describe the current situation for per connection. The International Benchmark-
sewer connections by category and the future ing Network for Water Utilities recommends
possible changes of the number of sewer con- the same approach should be undertaken to
nections. This will help automatically calculate calculate the demand analysis for Commer-
the sewer coverage as percentage of water cial, Institutional, and Industrial Customer
connections. Figure 9-9 represents registered Categories. The per capita demand for these
sewer connections for all costumer categories. categories is calculated as a ratio of the total
consumption for each costumer category
Current Water Demand and Demand per (Commercial, Institutional, and Industrial) di-
Capita vided by the Population in the Franchise Area.
Most urban water demand forecasting ap- Figure 9-10 has been prepared to illustrate
proaches use a statistical appraisal of per how the utility management should record/
capita or per customer water use rates. The input the data on water consumption per
widely preferred water consumption indicator category to be able to calculate the per capita
from the International Benchmarking Network demand (l/c/d) for each group.
for Water Utilities is expressed in terms of
liters/capita/day. This methodology is based on To determine the apparent or current water
establishing a demand norm per capita for the demand per capita, the utility will input in
served population and relating it to data that the Base Year-- in the highlighted cells, the
is available for the served population. The de- volume of water sales for both metered and
mand norm per capita for household connec- non-metered connections; illustrated in Figure
tions is the total consumption for all house- 9-10.

39 Guide and Model for the Preparation of Business Plans for Water Districts
Figure 9-10 Water Demand Forecast

Given the water sales by customer category demand divided by the served household popu-
entered in Figure 9-10, and then using both the lation. However, for the other three categories
served population and population in the Fran- of customers, the program uses the total popu-
chise Area entered in Figure 9-3, the program lation in the Franchise Area.
will calculate an apparent demand per capita
(liters/capita/day) for each category of cus- The result of these calculations is the per
tomer by year. For the household per capita capita demand by category and total as illus-
demand, the program uses the total household trated in Figure 9-11.

Figure 9-11 Per Capita Consumption by Category of Customer

Guide and Model for the Preparation of Business Plans for Water Districts 40
Projected Water Demand - Norm The norms in Table 9-2 reflect data reported in
In the Water Demand Forecast, the utility utility performance studies conducted by the
managers will need to decide on a demand per Asian Development Bank and the Government
capita norm (liters per capita per day) for the of the Philippines.
future that will reflect their estimate of water
usage by customer category in their Franchise The management should start by defining per
Area. Therefore, the management needs to capita demands for each customer category
establish estimates of forecasted water de- in the fifth year of the Business Plan and then
mand per capita for each of the four consumer assume a “trend” of changes over time for
categories (household, commercial, institu- each category.
tional and industrial), for each of the five years
of the Business Plan Years. Factors to consider in defining a “trend”
include needs to reduce demand (Per Capita
The management should decide these norms Demand) through pricing (possibly to avoid
based on the calculated per capita demands of the need for capital investments in new
in the Base Year, illustrated in Figure 9-11, supply sources), public awareness (regarding
and water demand norms that are applicable the need for water conservation), and public
to formal water supply systems in the Philip- education (use of water-saving devices at the
pines, which have been shown in Table 9-2. end user). Some factors that may cause an
increase in the per capita demand are: the
Table 9-2 Water Demand Norms Considered (liters development of a new industrial estate, the
per capita per day)
entry of “supermalls”, and the designation of
the city/town as a regional growth center.
Consumer Type Liters/capita/day
Household 100-120
Figure 9-12 illustrates how these demand
Commercial 15-25
norms have been applied to the worksheet in
Institutional 15-30 the Workbook.
Industrial 15-35
Total 145-210

Figure 9-12 Projection of Per Capita

Demand by Customer Category

41 Guide and Model for the Preparation of Business Plans for Water Districts
From the water demands per capita decided by the utility managers for each of the customer cat-
egories, the worksheet will calculate the total annual water sales forecast for the next five years
for each of the consumer categories as illustrated in Figure 9-13.

Figure 9-13 Forecast of Water Sales

From the total water sales (metered and non-metered) and registered connections for each of the
customer categories, the worksheet will calculate the current demand per connection (m3/month)
for the base year and projected demand per connection (m3/month) for the next five years for each
of the consumer categories as illustrated in Figure 9-14.

Figure 9–14 Current and Projected per Connection Demand by Customer Category

Guide and Model for the Preparation of Business Plans for Water Districts 42
Non-Revenue Water day, and/or its forecasted purchased water, in
With reference to Figure 9-15, to determine cubic meters per day, for each of the five years
the volume and percentage of non–revenue in the Business Plan.
water, the utility will input in the Base Year
the water produced by the utility from its own Lastly, the management will need to establish
sources. The bulk water purchased from other a targeted percentage non-revenue water in
systems and the bulk water sold to other sys- the fifth year of the plan and then scale this
tems will be inputted as well. These inputs in target back to the percentage non-revenue
the worksheet automatically provide the Total water in the Base Year.
Water Demand, the Total Water to System and
the Percent Non-Revenue Water. With these input decisions, the program will
calculate the change in the Total Water to the
For the five-year forecast, the program will cal- System. To the degree that this change (reduc-
culate the Retail Water Demand based on the tion) is achieved in purchased water or pro-
same formula that was used in the Base Year. duced water, will impact different parts of the
forecasted Operations and Expense Budget.
The utility management must decide its fore-
casted bulk water sales, in cubic meters per

Figure 9-15 Forecast of Non-Revenue Water

43 Guide and Model for the Preparation of Business Plans for Water Districts
Guide and Model for the Preparation of Business Plans for Water Districts 44
 6 10

Organizational Structure and Staffing Level

T
his section of the Planning Guide ad- unique skills of the senior managers and first
dresses the importance of organiza- line supervisors to assume particular respon-
tional structure in a water supply and sibilities. There are some basic principles that
wastewater utility. Once the management of every utility must keep in mind when working
the utility has decided what it wants to achieve to improve its organizational structure, so that
by way of its Strategic Goals, it must start to it can respond to operational, maintenance
consider how it is going to achieve those Stra- and customer service needs. These principles
tegic Goals. are shown graphically in Figure 10-1 and ex-
plained below.
Organizational structure and staffing levels
are both critical elements in this Figure 10-1
process. The senior management
must be prepared to break away
from historical organizational
structures and staffing policies
Span of
and re-structure the utility to im- Work Specialization
Control
prove its performance.
Chain of Organization Simple, flexible,
Importance of Organizational Command Principals realistic

Structure for Effective Utility

Performance Delegation of Delegation of
Responsiblity Authority
A sound, practical organizational
structure is vital for a utility to
respond to the needs of its cus-
tomers, and to perform efficiently
and effectively. This is increas-
ingly true with smaller utilities or utilities that Chain of Command
are over-staffed and are working to reduce the The chain of command is the line of author-
size of their work force. ity that connects all people in the utility and
passes vertically down through various
Organizational structures of utilities will vary branches of the utility. In the chain of com-
based on utility size, technical complexity of mand, it is important that there be unity of
the systems, size and nature of the geographic command, such that any given person in the
Franchise Area covered by the utility, and the chain of command reports to only one manag-

45
er/supervisor above that person. In this way, Figure 10-2 for the typical functions of a utility.
each person is clear as to who provides him On the other hand, the staff functions support
direction and to whom he must report. the execution of the mission of the utility. This
can be seen in Figure 10-3 for the typical func-
Span of Control tions of a utility.
Span of control is the number of subordinates
that report to a given supervisor or manager. This distinction between line and staff, and the
It is inefficient, for example, to have a super- emphasis placed on execution versus support
visor with just one subordinate. Likewise, it of execution, is not meant to make one more
is probably ineffective to have, for example, important than the other, but rather to simply
10 people reporting directly to one supervi- clarify the functions and their purposes.
sor. What is generally accepted, as a realistic
span of control, is in the order of 3 to 7 people For instance, if the utility is reduced to just
reporting to a supervisor. one person and that one person is the General
Manager, then the line functions are the hands
Factors to consider as regards span of control and feet of the General Manager and the staff
of a particular manager or supervisor include functions are the eyes, ears, and brain of the
the following: General Manager. The General Manager can-
not exist and accomplish the mission of the
• Capabilities of the manager; utility without both the line and staff functions.
• Capabilities of the subordinate;
Delegation of Responsibility and Authority
• Similarities of work activities supervised by Effective, modern utilities actively and ag-
the manager; gressively delegate responsibility and author-
• Other responsibilities of the manager; ity within the organizational structure. It is
• External pressures on the manager; and important that these two delegations are made
in parallel. This is to say, if a person is made
• External help available to the manager.
responsible for an action, but does not have
sufficient authority related to that action, this
Line and Staff Authority will merely lead to ineffective and inefficient
Well-managed utilities have a clear distinction performance.
between line and staff functions and authority
within the organization of the utility. Generally, Too often, management has a tendency to
it can be stated that the line functions execute make individuals in the organization respon-
the mission of the utility. This is illustrated in sible for many actions, but at the same time,

Figure 10-2

Supply
Treatment Metering

Line Authority

Distribution Commercial

Guide and Model for the Preparation of Business Plans for Water Districts 46
Figure 10-3

Public Relations

Legal
Engineering Staff Authority

Personnel
Accounting

concentrates all authority for those actions at Current Structure and Lines of Reporting
the top of the organization. This results in an of the Utility
organization that is not responsive to changing It is critical to have an accurate representa-
conditions or unforeseen events. tion of the current organizational structure of
the utility. This requires the utility to prepare
It should be kept in mind that the delegation of and maintain a graphic representation of the
authority and responsibility takes place along organizational structure of the utility, respect-
the chain of command. The right to grant or ing the principles described above.
delegate authority comes from a person who is
above in the chain of command, and who has In this regard, the graphic representation
the authority to grant (delegate) that authority. should make it clear “who reports to whom”
in the chain of command. It should also
Work Specialization and Cross-Training clearly reflect the span of control at each
The work of a water supply and wastewater level in the management structure. Lastly, it
utility is more than likely the most techni- should be clear from the graphic representa-
cally complex work performed in the public tion as to which elements of the organization-
sector at the local level. In that regard, it will al structure are considered line, and which
require a work staff that has specialized skills are considered staff.
in defined areas of activity of the utility. These
skills, and the functions they perform, should The preparation of a graphic representation of
be documented in individual job descriptions. the organizational structure can be efficiently
done with simple computer software programs
At the same time, particularly in smaller that are generally available, such as Pow-
utilities, the staff cannot be so specialized erPoint presentation program by Microsoft.
that they can do one and only one thing. This However, the lack of a computer or a support-
means that it is important for management to ing program is no excuse for the failure to
invest in cross-training of staff, so that they come up with a similar kind of graphic repre-
have a wider range of competencies and skills. sentation.
This allows for a smaller, more efficient staff,
which has a direct impact on overall opera- Typical Organization Structures of Well
tions, maintenance and management costs. Performing Utilities
There are commonalities in structures used
today by well-performing water supply and
wastewater utilities that senior management

47
 should consider in assessing the effectiveness production, treatment, transmission and stor-
of its utility’s organizational structure. age with those of water distribution. The same
observation can be made for the wastewater
Figures 10-4a through 10-4f present an orga- elements of the system.
nizational structure for a relatively large water
supply and wastewater utility that has a size- As wastewater treatment, transmission of
able, urban population in its Franchise Area, treated effluent and discharge become more
and must operate and maintain fairly complex common for water supply and wastewater
systems to include water production and utilities, these new activities would be added
treatment, transmission and storage, water as a separate unit of the utility reporting to the
distribution, wastewater collection, transmis- Head of the Technical Section.
sion, treatment and final discharge.
Alternatively, the water supply and wastewater
Note the clear distinction between line and activities could be separated into individual
staff positions in this structure. Also, note the sections reporting directly to the General
clear distinction between the bulk activities of Manager of the utility.

Figure 10-4a

PROPOSED ORGANIZATIONAL STRUCTURE FOR A LARGE WATER DISTRICT CATEGORY

BOARD OF DIRECTORS

GENERAL MANAGER

COMMERCIAL
FINANCE ADMINISTRATIVE PRODUCTION ENGINEERING
SERVICE
DEPARTMENT DEPARTMENT DEPARTMENT DEPARTMENT
DEPARTMENT

Guide and Model for the Preparation of Business Plans for Water Districts 48
 Figure 10-4b

PROPOSED ORGANIZATIONAL STRUCTURE FOR A LARGE WATER DISTRICT CATEGORY

FINANCE DEPARTMENT

DEPARTMENT MANAGER C

ACCOUNTING & PROPERTY DIVISION BUDGET CASH DIVISION

DIVISION MANAGER C DIVISION MANAGER C

ACCOUNTING & PROPERTY DIVISION PROPERTY MANAGEMENT SECTION BUDGET SECTION CASH MANAGEMENT SECTION

49
SUPERVISING PROPERTY/ CHIEF CORPORATE BUDGET
FINANCE OFFICER D HEAD/SUPERVISING CASHIER
SUPPLY OFFICER OFFICER

CORPORATE BUDGET
SUPERVISING PROPERTY/ CASHIER B
CORPORATE ACCOUNTANT SPECIALIST
SUPPLY OFFICER A

SENIOR ACCOUNTING
STOREKEEPER A
PROCESSOR A

STOREKEEPER B
CASHIERING ASSISTANT

Guide and Model for the Preparation of Business Plans for Water Districts
STOREKEEPER B
ACCOUNTING PROCESSOR A

ADMINISTRATIVE ASSISTANT/
SECRETARY B
 Figure 10-4c

PROPOSED ORGANIZATIONAL STRUCTURE FOR A LARGE WATER DISTRICT CATEGORY

ADMINISTRATIVE DEPARTMENT

DEPARTMENT MANAGER C

ACCOUNTING & PROPERTY DIVISION GENERAL SERVICES DIVISION

ADMINISTRATIVE ASSISTANT 1
DIVISION MANAGER C DIVISION MANAGER C
(SECRETARY B)

ADMINISTRATIVE/GENERAL
SERVICES CHIEF C

RECORDS/COMPENSATION/BENEFITS PROCUREMENT SECTION PROCUREMENT SECTION

APPOINTMENT SECTION
SECTION
PLANNING PROCUREMENT ADMINISTRATIVE GENERAL CLERK
SENIOR ADMINISTRATIVE SENIOR ADMINISTRATIVE OFFICER OFFICER B
ASSISTANT V ASSISTANT V

Guide and Model for the Preparation of Business Plans for Water Districts
PROCUREMENT ANALYST A SENIOR BUILDING ELECTICIAN B
SENIOR ADMINISTRATIVE

50
SENIOR ADMINISTRATIVE
ASSISTANT I ASSISTANT I
ADMINISTRATIVE SERVICES
PROCUREMENT ANALYST B
ASSISTANT C

CLERK PROCESSOR A ADMINISTATIVE ASSISTANT IV MATERIALS/SUPPLY OFFICE EQUIPMENT

INSPECTOR TECHNICIAN/MECHANIC A

BUILDING ELECTRICIAN B

TRANSPORT MAINTENANCE SECTION

CARPENTER A
TRANSPORT OFFICER
ADMINISTRATIVE SERVICES AIDE

AUTO MECHANIC A
ADMINISTRATIVE AIDE
(UTILITY WORKER)
DRIVER MECHANIC B

TRANSPORT ELECTRICIAN

ADMINISTRATIVE AIDE IV
(DRIVER)
 Figure 10-4d

PROPOSED ORGANIZATIONAL STRUCTURE FOR A LARGE WATER DISTRICT

PRODUCTION DEPARTMENT

DEPARTMENT MANAGER

PROCESSOR A

DIVISION MANAGER C DIVISION MANAGER C DIVISION MANAGER C

PRODUCTION OPERATION PRODUCTION MAINTENANCE QUALITY CONTROL

51
DIVISION DIVISION DIVISION

ENVIRONMENTAL ANALYST

ADMINISTRATIVE AIDE IV (DRIVER)

SENIOR WATER UTILITIES WATER/SEWERAGE MAINTENANCE

QUALITY CONTROL OFFICER
MANAGEMENT OFFICER GENERAL FOREMAN

WATER UTILITIES
MANAGEMENT
OFFICER

WATER/SEWERAGE
ENGINEER A MAINTENANCE SENIOR CHEMIST
HEAD

WATER/SEWERAGE
ENGINEER A WATER MAINTENANCE
RESOURCES ENGINEER
FACILITIES
OPERATOR A

Guide and Model for the Preparation of Business Plans for Water Districts
WATER SENIOR WATER
RESOURCES SEWERAGE
FACILITIES OPTR. MAINTENANCE CHEMIST A
FOREMAN MAN A

WATER WATER
WATER
RESOURCES SEWERAGE
SEWERAGE
FACILITIES MAINTENANCE
MAINTENANCE
OPERATOR A MAN A
MAN A
 Figure 10-4e

PROPOSED ORGANIZATIONAL STRUCTURE FOR A LARGE WATER DISTRICT

ENGINEERING DEPARTMENT

DEPARTMENT MANAGER

SECRETARY B

PLANNING AND DESIGN DIVISION CONSTRUCTION DIVISION MAINTENANCE DIVISION

DIVISION MANAGER C DIVISION MANAGER C DIVISION MANAGER C

Guide and Model for the Preparation of Business Plans for Water Districts
SUPERVISINGENGINEER A SUPERVISING ENGINEER A SUPERVISING ENGINEER A SUPERVISING SUPERVISING

52
WATER WATER
Mechanical Works Civil Works Electro-Mechanical Works ENGINEER A ENGINEER A MAINTENANCE MAINTENANCE
GENERAL FOREMAN GENERAL FOREMAN

PRINCIPAL WATER WATER

DRAFTSMAN B ENGINEER A ENGINEER A MAINTENANCE MAINTENANCE
(CAD OPERATOR) GENERAL FOREMAN GENERAL FOREMAN

DRAFTSMAN A

SUPERVISING SUPERVISING SENIOR WATER SENIOR WATER

INSTRUMENT INSTRUMENT MAINTENANCE MAINTENANCE
TECHNICIAN TECHNICIAN MAN A MAN A
ENGINEERING ASSISTANT A
(SURVEYOR)

INSTRUMENT WATER WATER

PLUMBER A PLUMBER A TECHNICIAN A MAINTENANCE MAINTENANCE
MAN A MAN A

ENGINEERING ASSISTANT A
(SURVEYING AIDE)
 Figure 10-4f

PROPOSED ORGANIZATIONAL STRUCTURE FOR A LARGE WATER DISTRICT CATEGORY

COMMERCIAL SERVICE DEPARTMENT

DEPARTMENT MANAGER C

Administrative
Assistant
Division Manager C Division Manager C
(Customer Service) (Customer Accounts)

53
Senior Customer Service Senior Customer Senior Customer Service Senior Customer Senior Customer
Officer Investment Service Officer Officer (Service & Service Officer Service Officer
(Application Section) (Meter Reading Section) Computer Section) (Billing Section) (Collection Section)

Customer Service Customer Service

Officer B Officer B

Utility/Customer Utility/Customer
Utility/Customer
Service Assistant A Service Assistant A
Service Assistant A

Guide and Model for the Preparation of Business Plans for Water Districts
Utility/Customer Utility/Customer Utility/Customer
Service Assistant C Service Assistant C Service Assistant C
 Figure 10-5

PROPOSED ORGANIZATIONAL STUCTURE FOR A MEDIUM WATER DISTRICT

BOARD OF DIRECTORS

INTERNAL AUDITOR LEGAL COUNSEL

GENERAL MANAGER

SECRETARY A
Since not all utilities in the Philippines are

they have very complex operating systems,

such as wastewater treatment, Figure 10-5

DIVISION MANAGER C DIVISION MANAGER C DIVISION MANAGER C

large or at a stage in their development where

Guide and Model for the Preparation of Business Plans for Water Districts
CORPORATE ADMINISTRATIVE GENERAL UTILITIES/COST SERVICE UTILITIES/COST SERVICE. WATER/SEWERAGE

54
CASHIER A SERVICES OFFICER A
CLERK PROCESSOR B WATER UTILITIES CLERK PROCESSOR B
ANALYST A ASSISTANT A ASSISTANT A MAINTENANCE HEAD

CORPORATE BUDGET PUBLIC RELATIONS UTILITIES/COST SERVICE. UTILITIES/COST SERVICE WATER RESOUCES WATER/SEWERAGE
ANALYST A CASHIERING ASSISTANT OFFICER C ASSISTANT B ASSISTANT B FACILITIES OPERATOR A MAINTENANCE MAN A

SENIOR ACCOUNTING ADMINISTRATION SERVICES UTILITIES/COST SERVICE UTILITIES/COST SERVICE WATER RESOUCES WATER/SEWERAGE
PROCESSOR A ASSISTANT B ASSISTANT B ASSISTANT B FACILITIES OPERATOR A MAINTENANCE MAN A

PROPERTY SUPPLIES INDUSTRIAL SECURITY COMPUTER WATER RESOUCES WATER/SEWERAGE

DRIVER
OFFICER B GUARD B OPERATOR FACILITIES OPERATOR A MAINTENANCE MAN B

WATER RESOUCES WATER/SEWERAGE

PROPERTY ASSISTANT A DRIVER
FACILITIES OPERATOR A MAINTENANCE MAN B

ACCOUNTING WATER RESOUCES WATER/SEWERAGE

UTILITY WORKER A
PROCESSOR A FACILITIES OPERATOR A MAINTENANCE MAN B

PLANT MECHANIC / WATER/SEWERAGE

ELECTRICIAN C MAINTENANCE MAN B

WATER/SEWERAGE
MAINTENANCE MAN B

WATER/SEWERAGE
MAINTENANCE MAN B
is offered as an alternative that reflects the

same objectives in a reduced level of staffing.

need to seek to combine skills in achieving the
What Is an Optimal Staffing Level for a Changing Organizational Structure
Utility? The business planning process is the optimal
Staffing costs (including salary and personal time to consider changing the organizational
benefits) are normally the highest cost com- structure of the utility to better address the
ponent of the budget of a typical, well run mission and the stated strategic goals that the
utility. In light of this, it can then be stated that management has developed. In this process
controlling this cost is essential to the overall of changing the organizational structure, it is
financial performance of the utility. possible to identify where the utility may not be
staffing positions to execute its mission state-
The size of a utility’s staff will vary from case ment or achieve its strategic goals.
to case. The answer is largely based on the
level of technology to be operated and main- A commonly overlooked unit in utilities is the
tained, the degree of automation installed, the Engineering Section or Department. This unit
skill level of the staff, and the geographic size performs an essential staff function in all utili-
and distribution of the Franchise Area. ties; it should directly report to the General
Manager of the utility. Similarly, if it has not
Despite this variance, when considering utili- done so yet, the management should con-
ties of the same approximate size, there is a sider bringing billing and collection activities
commonly accepted performance indicator into a line function, and to broaden the role of
used in the water supply and wastewater util- the responsible unit to a Customer Services
ity industry to monitor what is termed staff- Department.
ing efficiency. This indicator is defined as the
number of staff per 1000 water supply plus Additionally, the management should consider
wastewater connections served by the util- how to organizationally structure around bulk
ity, where a connection is defined as a billed (production, treatment, transmission) services,
customer. and retail (water distribution and wastewater
collection) services. In smaller utilities, it may
For well-performing utilities, this performance be wise, through the use of cross-training, to
indicator is between 2.5 and 4.0 per 1000 wa- have the same network crews perform both
ter connections, for water supply services only, water supply distribution system and waste-
and 3.5 and 5.0 per 1000 water and sewer con- water collection system maintenance and
nections, for both water supply and sewerage repairs.
services. The smaller utilities that perform
well tend to be at the higher end of this range, Transitioning to a New Staffing Level
and the larger utilities that perform well tend Once the management decides to change its
to be at the lower end of this range, simply due organizational structure and to bring its staff-
to their economies of scale. ing level closer to the norms of well-perform-
ing water supply and wastewater utilities, they
When assessing the current situation in the will have to face some difficult decisions which
utility, the management needs to calculate this will have impacts on specific personnel in the
performance indicator for its own utility, and utility.
ask what can be done to move the value they
have calculated such that it is closer to the The management should start this process of
ranges presented above. This is an important transitioning to a new staffing level by clearly
consideration in the business planning process. documenting the current staffing of the util-
ity. This can be done by inputting the required
data into the Business Planning Workbook

55 Guide and Model for the Preparation of Business Plans for Water Districts
 as illustrated in Figure 10-6, where it asks for
information on each employee by name, date
of birth, date of original employment, profes- It is the efficient
sion, education and current rate of pay. Figure operation and
10-6 matches the Staff List worksheet of the
maintenance, financial
workbook, and provides information on the
“salary grades”, which are part of the work- performance, and
sheet in the workbook. These salary grades sustainability of the
allow grouping of employees, on the Staff List, utility in meeting
into common categories so that management
the needs of the
can more easily reduce/increase staff levels,
by category, as well as increase salaries by the
customers that should
same categories. The Staff List worksheet is be the sole objective of
designed to allow the use of a maximum of 29 the management.
salary grades and 1,500 Employee Information
line entries.

Figure 10-6

In all likelihood, the transition to a new staff- tions or retraining of staff for new positions or
ing level will have to be implemented over an vacancies. If severance or termination of staff
extended period of time; possibly over the five- is a necessary action, any additional costs of
year business plan horizon. The management such terminations should be factored in the
will need to consider such options as normal Business Plan budget forecast.
attrition of staff due to retirement or resigna-

Guide and Model for the Preparation of Business Plans for Water Districts 56
 6
11

Performance Improvement Program

T
his section of the Business Plan Guide stated performance standards. Standards of
describes the need to establish the performance describe how the utility should
imperative for change. The utility’s ap- be performing. It is management's respon-
proach to implementing the change process is sibility to define these standards. A wise
critical to achieving long-term lasting im- management knows and understands the
provements based on the Strategic Goals. standards and level of performance expected
for all aspects of the utility.
This section also provides a structure of a Per-
formance Improvement Program that has to Management needs to know what skills and
be designed by the senior management team level of performance are needed for the suc-
of the utility, to translate the Strategic Goals cess of a team. Management of the utility can
into a set of concrete and measurable actions. determine appropriate standards by assess-
ing the following: services required in order
Finally, a system of performance measures to satisfy the customer; considering lessons
will be put in place to help document the learned from past experiences; observing the
success of each strategy, and when viewed performance of other, well-performing utili-
together, provide a comprehensive measure of ties; and researching the trends in the water
success for the overall Performance Improve- sector as a whole.
ment Program.
It is essential that performance standards be
Moving from Strategic Goals to Improved expressed in a quantitative unit of measure-
Performance ment. Remember, the next step after setting
Performance improvement efforts are inex- a performance standard is to monitor perfor-
tricable to the utility's Mission Statement and mance against that standard. Performance
Strategic Goals. In order to accomplish the standards can be described in terms of
strategic goal, the utility needs to know where deadlines, cost, quality, quantity, or any other
it is and where it aims to be. This difference relevant and verifiable measurements.
between the current situation and the desired
future condition is known as the performance A performance standard is a model, criterion,
gap. This is where the utility has the opportu- or level of performance expectation required
nity to improve the systems and procedures. to achieve a strategic goal. The key to a suc-
cessful performance standard is that it is clear
The first step in improving performance based and understood by all employees. However,
on the current situation is to establish clearly

57
identifying standards takes the utility only part useful information that indicates where cor-
way towards the ultimate goal of improving rective measures should be made. Manage-
performance. ment must use their decision-making skills
to determine what and where changes are
The next step is to measure performance. needed. Managers may request a change in
Once the senior management has identified worker's behavior, policies, procedures, etc.
the performance standards, the next question The standards and plans themselves may have
is "How will those standards be achieved?" to be modified.
This requires knowing what to measure, how
to measure, and when to measure it. The important thing to note is that corrective
action becomes part of the daily work. The
The first step is to identify what you want to long process of setting standards, measuring
measure. Based on the performance stan- and evaluating performance will go to waste
dard, you may want to measure quantity (how if corrective actions do not take place. Both
many?), quality (how effective?), schedule (how management and all employees must be held
timely?), or cost (how much?). If performance accountable for performing at the expected
standards have been carefully developed, it level. They should be expected to meet the
will be relatively easy to identify what needs to requirements and recognize that there are
be measured. consequences for the entire utility, if these
standards are not met.
Once the utility management decides what
to measure, it is imperative to determine the Performance Improvement Program (PIP)
method of data collection. Since measuring Once the utility has clearly stated Strategic
performance takes time and money, the track- Goals, a Capital Investment Program, and
ing should focus on those key areas that have an Organizational and Staffing Structure, it
the most impact on the goal that needs to be needs to prepare a Performance Improve-
obtained. Furthermore, the availability of data ment Program to achieve the stated Strategic
as well as who will be collecting the informa- Goals. This will include specific Performance
tion must also be considered. Improvement Action Plans (Pips) that are fairly
detailed to provide a clear direction and expla-
Data should be collected in a consistent man- nation to the utility management and staff as
ner at intervals frequent enough to allow an to what must be done to achieve each stated
accurate understanding of what is happen- Strategic Goal, with clear implementation
ing in terms of the performance of the util- schedules and interim milestones.
ity. Schedules and procedures will need to be
developed to identify when and how the data Obviously, the management will prepare more
will be collected, and how the performance detailed work plans on a weekly and monthly
will be measured. basis to make work assignments. However,
these detailed work plans draw their direction
Once performance standards have been identi- from the PIAPs.
fied and performance has been measured, the
next step is to evaluate the actual performance The format and content of a Performance Im-
against the expected performance level. When provement Action Plan is fairly straightforward
performance deviates from the standard, man- and simple. A suggested Performance Im-
agers must interpret the deviation and identify provement Action Plan is included at the end
the problem with the current action plan. of this section of the Guide. The Performance
The result of analyzing actual performance Improvement Action Plan addresses the fol-
against the performance standard produces lowing issues:

Guide and Model for the Preparation of Business Plans for Water Districts 58
Statement of Specific Action Schedule of Tasks and Key Milestones
This field of the PIAP briefly describes the This field of the PIAP illustrates the utility’s
specific action intended to support the Strate- planned schedule for the actions needed to
gic Goal addressed. achieve the stated Strategic Objective.

Example: Example:
Increase Amount of Billed Water as Percent-
age of Total Water Produced. Task 2008 2009 2010 2011 2012
Install Production Meters
Strategic Goal Addressed Install Zone Meters
This field of the PIAP is the quantified state- Install Meters at Household Con-
ment of the Strategic Goal being addressed nections

decided by the Senior Management at the Identify Illegal or Unbilled Con-

nections
beginning of the business planning process.

Example: Application of Investment Capital

Increase the amount of billed water, such that This field of PIAP details the capital cost
the utility is billing 70% of its water produc- estimate for each capital investment to be
tion, as measured at the sources, by the end of made by the utility from its capital investment
2009, with interim goals of 40% by the end of sources to implement the stated PIAP, and
2007, and 55% by the end of 2008. when those investments will be made during
the planning period.
Responsible Department / Key Manager
This field of PIAP describes the department (s) Example:
and key manager (s) responsible for imple-
menting these primary actions described Total
Unit
Quan- Cost
below. Item
tity
Cost
(Million
2009 2010 2011 2012 2013
(PhP)
PhP)
Description of Primary Actions New
This field of the PIAP describes the primary Customer
Meters
actions that will be undertaken to achieve the
House-
stated Strategic Goal. hold
5,000 7,400 37.0 18.5 18.5
(install
Example: only)

• Install production meters at each of the Additional

House- 2,300 18,500 42.6 14.2 14.2 14.2
sources of supply, at the discharge of all holds
pump stations, and at the inlet and outlet of Total by
79.6 18.5 32.7 14.2 14.2
each of the storage reservoirs. Utility

• Install zone meters to record the volume

of water entering each of the water supply
pressure zones of the system.
• Install meters at all customer connections
throughout the system.
• Identify and eliminate all illegal connec-
tions and unregistered connections, based
on the findings of the inventory and routine
field investigations.

59 Guide and Model for the Preparation of Business Plans for Water Districts
Measurable Improvement in Performance tion process, the Performance Improvement
This field of the PIAP lists the measurable Program must be reviewed with the Board of
interim milestones of the overall strategic goal Directors before the business plan is finalized.
to be achieved within the planning period of This is usually done in the form of a detailed
the business plan. These interim milestones briefing, with all appropriate management
also provide the basis for monitoring the prog- staff present, to be able to respond to con-
ress toward the achievement of the strategic cerns and comments by the Board. The objec-
goal during the years of implementation. tive is to demonstrate that the Performance
Improvement Program for bridging the Perfor-
Example: mance Gap is sound, practical and timely.
1. Bill 40% of water production by the end of
2007. If a specific Performance Improvement Action
2. Bill 55% of water production by the end of Plan is not convincing to the Board of Direc-
2008. tors, the senior management and relevant
3. Bill 70% of water production by the end of staff supervisors need to consider the com-
2009. ments made and engage in a process to iden-
tify alternative approaches that will respond
Board of Directors Approval of to these concerns. Such a process tends to
Performance Improvement Program create “buy-in” at all levels and improves the
If the Board of Directors of the utility is not chances for a successful implementation.
directly involved in the business plan prepara-

Sample Format for Performance Improvement Plan

NAME OF UTILITY
PERFORMANCE IMPROVEMENT PLAN TITLE OF STRATEGIC GOAL
Statement of Strategic Goal Addressed

Department (s) and Key Manager (s) Responsible:

Description of Actions to be Taken:

Schedule of Tasks, Key Milestones, Performance Indicator:

Action Item Year 1 Year 2 Year 3 Year 4 Year 5

Use of Capital, Amount and Timing:

Capital Expenditure (million LL) Year 1 Year 2 Year 3 Year 4 Year 5 Total

Total

Measurable Improvement in Performance:

Guide and Model for the Preparation of Business Plans for Water Districts 60
 6
12

Operations and Maintenance Budget Forecast

T
his section of the Planning Guide ad- the quantities of materials, supplies, and labor
dresses Operations and Maintenance required, are the individuals doing the work
Budget Forecasting as an effective and their managers. They will also determine
control tool to compare actual performance what maintenance will be required to keep the
needs with planned (budgeted) performance. system in reliable operation. Although engi-
The Operations and Maintenance Budget is the neers and technicians will have a fair idea of
detailed expenditure plan of labor, material, what the costs will be, they will need to work
energy and other expenses needed to produce with the accounting and finance staff to help
and sell water for a specified period of time determine those costs.
in the future, and to collect, treat and dis-
pose wastewater. Before starting the budget The accounting records of the organization
forecasting process, the utility should consult contain a wealth of valuable financial data.
and evaluate the past and present financial The past and present accounting records help
and technical data to identify factors that will track the expenditures of the utility and serve
impact future expenditures. to provide the management with a thorough
understanding of what will constitute, finan-
Documentation of Recent Financial cially, the Base Year for the utility. It is the
Performance departure going forward from the Base Year
To forecast a budget effectively, management which will constitute the forecast.
needs to understand how expenditures have
been made over the last several years, the Managers should analyze previous budgets
current and future needs of the utility, and how and accounting reports for at least the past
these needs should be prioritized. Historical three years, and consider trends by analyzing
cost data gathered from the operations and where previous expenditures were over or un-
financial/accounting areas of the utility form der the established budgets and by how much.
the basis for developing the forecast for the After evaluating expenditure trends, managers
operations and maintenance budget. should project expected costs for each of the
five years in the business planning process
Department managers should collect the starting from the Base Year.
factual information necessary for an informed
analysis of past performance and future pos- Factors Impacting Future Expenditures
sibilities. The people best suited to provide In forecasting the operations and maintenance
input to the estimated costs and determine budget, it is important to both learn from

61
 history, but to project based on management od of the Business Plan, the Guide has defined
decisions and external factors that will have an some specific line items that should appear in
impact on costs in the future. To simply accept the operations and maintenance budget of any
the historical rate of increase for a particular typical water supply and wastewater utility in
line item in the budget, and project it into the the Philippines.
future, is to believe that tomorrow will be just
like yesterday, and this can be a major mistake An illustration of how to work and forecast in
in business planning. the Operations and Maintenance Budget work-
sheet have been added and shown in Figures
To help the senior management team in mak- 12-1, 12-2, 12-3 and 12-4.
ing its forecasted budget for the five-year peri-

Figure 12-1

Guide and Model for the Preparation of Business Plans for Water Districts 62
Figure 12-2

Norms Year 2008 Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
GSIS % on Base Salary 7.69%
Philhealth (% on Base Salary 1.79%
Pag-ibig (% on Base Sala ~) 1.79%
Employee Compensation (% on Base Salary) 7.91%
Overtime % on Base Salary) 1.81%
The calculated Norms shown on the
13-th Month Paycheck % on Base Salary 9.15%
left for the Base Year are each
Bonuses % on Base Salal"/ 0.00% calculated on the basis shown in the
Other Com ensations % on Base Salary 0.00% ~ parenthesis for each Norm.
Training % on Base Salary 0% ~
Public Relations (PhP/year/connection) 518
Chemicals (Ph P/m3 Produced 0.08
Electrical Energy PhP/m 3 Produced 0.04 ~
Purchased Water Rate(PhP/m 3
Increasing/Decreasing Rates
Board of Directors' Compensation
Other Board Members' Compensation
Maintenance
Materials
Security Services
Other Contracted Services
Transport (fuel, oil, vehicle insurance)

Figure 12-3

Norms Year 2008 Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
GSIS % on Base Sala 7.69% 7.00% 1'00%
STEP2 Input in the
Philhealth % on Base Sala 1.79% 1.80% 1' 80%
yellow highlighted cells
Pag-ibi % on Base Sala 1.79% 1.80% 8 ['80%
the forecasted
Employee Compensation % on Base Sala 7.91% 0.20% 1'20%
assumption (Norm) for
Overtime % on Base Sala 1.81% 2.00% 1'00%
each year of the
13th Month Pay % on Base Sala 9.15% 8.33% 8.33% I+- 1' 33%
Business Plan by
Bonuses % on Base Sala 0.00% 0.00% 4.00% I+- ['00%
considering the
Other Compensations % on Base Salary: 0.00% 0.00% 0.00% I+- ['00%
automatically calculated
Training % on Base Salary 0% 1% 2% I+- I 2%
Norm in the Base Year.
518 40 I+-
Public Relations PhP/vear/connection
Chemicals (PhP/m 3 Produced 0.08
30
0.04 0.04 I+-
~
0.04
Electrical Energy(PhP/m 3 Produced 0.04 0.97 0.97 0.971 0.971 0.97

~
Purchased Water Rate PhP/m 3 ) 0 0 0
Increasing/Decreasing Rates STEP3 Input in the
Board of Directors Compensation 4% yellow highlighted cells I 5%
Other Board Members' Compensation 4% the forecasted I 5%
Maintenance 8% assumption (Annual I 8%
Materials 8% Increasingl Decreasing I 8%
Security Services 24% 8% ~ Rate) for each Line Item I 4%
Other Contracted Services 5% 5% I"-- for the 5 future years of I 5%
Transport (fuel, oil , vehicle insurance 15% 7% the Business Plan. I 3%
Office and Administrative 4% 4% I"-- 4% 4% 4%
Taxes Premiums and other fees 1% 1% 1% 1% 1%
Other Expenditures 3% 3% 3% 3% 3%

63 Guide and Model for the Preparation of Business Plans for Water Districts
Figure 12-4

The Operations and Maintenance Budget in making a forecast for each of the five years
Forecast format consists of an initial column of the business planning period.
for the Base Year data and five columns for
forecasted budgeted costs. This table is one of Salaries
the worksheets (O&M Budget) in the spread- The Salaries category includes all of the forms
sheet Workbook to be used by the manage- of compensation that the utility intends to
ment in preparing its Business Plan. When make, including the following: the annual base
using the O&M Budget worksheet, the user salary for all full-time permanent employees;
will input data only in the yellow highlighted salary of temporary employees of the utility;
cells. Formulas have been designed into the added compensation for overtime work; cost
spreadsheet program to calculate all forecasts for bonus and incentive programs; and cost of
based on assumptions made by the user of the Board of Directors compensations, if any.
Workbook.
Factors that affect the costs under the line
A utility may wish to have an even more items Annual Base Salary, Overtime, 13th
detailed budget, but these details should ap- Month Pay, Bonuses and Board of Directors
pear under one of the line items shown in the Compensation are planned reductions or
sample format and discussed in more detail increases over the five year planning pe-
below. The following presents each of the riod in the overall staffing level of the utility;
budget line items to be included in the opera- planned annual wage increases of staff per
tions and maintenance budget of a utility with each employment category, as a percent of the
an explanation of the factors to be considered annual base salary; planned level of overtime

Guide and Model for the Preparation of Business Plans for Water Districts 64
as a percent of average annual base salary; this expenditures compared with Annual Base
planned bonus/incentive program for good Salaries and the commitments made by the
performance as a percent of average annual management for training.
base salary; and any annual increase rate of
the Board of Directors annual compensation. If for some reason, the management feels that
there may be changes in law within the plan-
The planned reduction or increases in staff- ning period of the Business Plan that would
ing level over the five-year planning period of affect the expenditures for GSIS, Philhealth,
the business plan will have been determined Pag-ibig and employee compensation, then
under Section 10 of the Guide, Organizational they should reflect their opinion by adjusting
Structure and Staffing Level. The decisions for the assumed percentages for this line item in
planned reductions over the five-year planning the years when they feel that those changes
period in the overall staffing level of the utility, might occur.
and made in Section 10, will be recorded in
the Workbook on the Worksheets titled Staff Each of these annual percentage rates (GSIS,
Analysis. The annual wage increases, by cat- Philhealth, Pag-ibig and Employee Compensa-
egory, by year, expressed as a percent annual tion) should be reflected in the Norms Table on
increase will be entered in the Workbook on the O&M Budget Worksheet of the Workbook.
the Worksheet titled Staff Analysis.
Expenditures
Similarly, the planned level of overtime, as a The Expenditures category includes the
percent of average annual base salary, as well various line items of consumables used for
as the planned level of bonus/incentive pro- operations and maintenance to include fuels,
gram as a percent of base salary will be en- lubricants, spare/replacement parts, small
tered in Norms Table, illustrated in Table 12-2, tools, chemicals, energy, and other supply
later in this Section, as it would appear on the related items, as well as services purchased
O&M Budget Worksheet of the Workbook. (contracted) to support operations and main-
tenance, such as security services, special
Lastly, the planned annual increase in com- repair services, and equipment rentals.
pensation, expressed as percent of the current
base compensation, to be paid to the Board of When forecasting these costs, the manage-
Directors will be entered in Norms Table on ment should first consider the line items ad-
the O&M Budget Worksheet of the Workbook. dressing Maintenance and Materials, and the
quantitative variance that the utility can expect
Personnel Costs to experience over the next five years. This is
The Personnel Costs category includes costs a particularly important consideration where
for GSIS, Philhealth, Pag-ibig, employee materials are concerned.
compensation and training costs. The GSIS,
Philhealth, Pag-ibig, Employee Compensation Since Chemicals are strongly related with the
and the Training line items will be affected by water production, they have been presented
the GSIS, Philhealth, Pag-ibig and employee as a separate line item in the budget. When
compensation calculation table as defined by budgeting for chemicals, the management
the laws in effect in the Philippines, and the will consider its quantitative variance (strongly
level of expenditures planned for staff train- related with the produced water) and its cost
ing. Each of these expenditures are forecasted per cubic meter produced.
based on the automatically calculated norms
for the base year showing the percentage of

65 Guide and Model for the Preparation of Business Plans for Water Districts
Historically in the Philippines, utilities have heating fuels, etc), Transport and Vehicle In-
not performed the level of routine and pre- surance (transportation fuels, insurances, per
ventive maintenance necessary for a water diems, etc) and Taxes (license, permit, etc).
supply and wastewater utility. Therefore, the
management may consider more aggressive The Purchased Water line item of the budget
expenditure increases under these line items shows the cost that the utility might incur from
to bring the utility to a more realistic standard the purchase of bulk water from other sup-
of annual expenditures. pliers to meet the total water demand of the
system. This line item is directly related to the
Since electrical energy can be a major cost decisions regarding Purchased Water made
factor for a utility, it is important to budget in Section 9 of the Guide (Analyzing Water
separately for electrical energy used for Demand). The price per cubic meter for the
operating equipment (pumps, motors, treat- purchased water should be reflected in the
ment equipment), from that used for lighting norms table on the O&M Budget Worksheet of
and office support, which will be recognized the Workbook.
under utility services. In addition, consider-
ing the decisions and assumptions made Once the management feels that it has care-
in performing the water balance and water fully assessed the definable expenditures to be
demand analysis under Section 8 of the Guide, made a part of the budget forecast, it will need
the management will need to budget electri- to make an assumption regarding the line item
cal energy cost through considering its quan- Other Expenditures based on historical experi-
titative variance and its cost per cubic meter ences. Such a line item should be relatively
produced. This cost is strongly related with any small as a percent of the overall budget.
reduction in non-revenue water, and therefore
any reduction in water production, will impact Management will need to create an allowance
the quantity of electrical energy needed to for Public Relations. This line item, histori-
meet the needs of its customers. cally, is not specifically budgeted by water
supply and wastewater utilities. However, as
Largely, water supply and wastewater utilities utilities develop more sophisticated Customer
in the Philippines avail of security services, Service activities, they begin to focus more
janitorial and messenger services. Clearly, the on public outreach to communicate with their
contracting for professional services such as customers and the local public at-large. If a
expert accountants for annual audits, engi- communications program has been developed,
neering services for studies and designs, com- then the annual cost to implement that pro-
puter services, and legal services by lawyers, gram should be presented under this line item
will all be itemized under the line item Other for the base year. If not, then the management
Contracted Services. The management has to may wish to initially start by simply setting a
decide on the need for these services, as well targeted expenditure for public relations/cus-
as the amount they propose to budget for these tomer relations as a set amount per registered
services for each year of the five-year plan. customer for the forecasted year. The amount
of money planned to be spent for a registered
The management also needs to consider other customer in a year should be reflected in the
line items such as Office and Administrative Norms Table on the O&M Budget Worksheet of
(computer supplies, paper, printer cartridges, the Workbook.
office support utilities telephone, electricity,

Guide and Model for the Preparation of Business Plans for Water Districts 66
The last Expenditure item is an allowance for or Decreasing Rates Table contained in the
O&M Contingency. This line item shows the O&M Budget Worksheet of the Workbook.
amount budgeted for any unintended occur-
rence. After having selected and approved all Norms,
and Increasing or Decreasing Rates affecting
With an established Base Year of expenditures, the budget, the user must reflect them on the
the management will now have to consider Table of Norms and Increasing or Decreasing
how it anticipates that each of these expendi- Rates located on the O&M Budget worksheet
tures will change over the course of the five- of the Workbook. Table 12-2 illustrates the
year Business Plan. This is done by referring above mentioned Norms, and Increasing or
to Table 12-2 which illustrates the Increasing Decreasing Rates, which affect the O&M Bud-
get Forecast of the utility.

Table 12-2

67 Guide and Model for the Preparation of Business Plans for Water Districts
Guide and Model for the Preparation of Business Plans for Water Districts 68
 6
13

Capital Expenditure and Investment Forecast

T
his section of the Planning Guide will The issue of capital renewal and capital repair
address the issue of planned capital ex- and replacement (capital maintenance) is a
penditures and capital investments, and serious consideration worldwide in the water
their impact on the operational and financial and wastewater utility sector, due to historical
performance of the utility. under investment in capital maintenance.

When the management of the utility considers In considering this situation in the Business
its capital expenditure and capital investment Planning process, the management should ad-
needs, it should clearly distinguish between dress its existing assets as two separate groups
capital expenditures that are made to preserve of assets; underground assets, which need to
the operational integrity and capacity of the be considered when planning the capital re-
existing systems (capital renewal and capi- newal expenditures, and above ground assets,
tal repair and replacement), versus capital which need to be considered when budgeting
expenditures made to upgrade technology or the capital repair and replacement reserves.
services, or to increase the served population
within the Franchise Area (new capital invest- Capital Renewal (Underground Assets)
ment). Each of these types of capital expen- Although all assets are amortized based
ditures, and how they should be considered by on national standards of accounting, for a
the management, will be discussed in greater utility, such amortization may not reflect a
detail below. practical reality. The fact is that particularly
for underground assets (transmission lines
Likewise, this section of the Planning Guide and networks), their useful life is somewhat
will present the need to identify the sources of indeterminate. Some pipelines may fail at any
capital investments. To simply plan for a capi- time due to conditions both inside and out-
tal investment is insufficient for sound util- side the pipeline, where as others will be fully
ity management. The Business Plan should functional for periods of time well beyond their
express a degree of certainty on the source “accounting” useful life.
of the investment funds, the terms of those
funds to be offered, and the timing as to when In light of this, management needs to consider
those funds might come available, such that capital renewal expenditures for underground
their beneficial use can be realistically re- assets on an expense basis. Management,
flected in the Business Plan and their impact based on its knowledge of the condition of
on performance improvement. these assets, must determine to put in its bud-

69
get and forecast, a defined level of expenditure these debts becomes an annual budget item in
per year to make capital renewal to these the following years, for the term of the repay-
underground assets. ment period.

Capital Repair and Replacement (Above However, the utility may also choose to budget
Ground Assets) for an annual expenditure under its Budgeted
When considering operating equipment and Capital Expenditures to allow for a New Capi-
structures (above ground assets), the man- tal Investment Reserve to be created for the
agement will need to consider individual purpose of making new capital investments
amortization rates for each piece or groups of without having to take on new debt to the bal-
equipment or structures, and determine an ance sheet of the utility.
“aggregate” average contribution per year that
will be made a part of the revenue needs and In the various individual Performance Im-
reflected in the final tariff. These contribu- provement Actions Plans explained and devel-
tions will go to a capital repair and replace- oped under Section 11, the management will
ment reserve for above ground assets and will have identified specific capital investments,
be used as the needs dictate. which will need to be funded from various
sources of capital, and then made a part of a
In a utility that is operating normally, capital debt repayment schedule, when taken as a
renewal and capital repair and replacement loan. These capital investments need to be
expenditures are largely funded from the cash summarized by management, so that deci-
flow of the utility’s tariff structure, and not sions can be made on sources of capital and
from the creation of debt. This may not be the debt service requirements resulting from
a practical reality in some water utilities in those decisions. This same summary and
the Philippines, if there is a backlog of under decision-making process will find its way into
investment in capital maintenance. However, the text of the Business Plan under the section
the management should strive to achieve on Capital Investments.
this approach, as much as possible, over the
longer term. Building the Capital Investment/
Expenditure Plan
New Capital Investments A simple worksheet has been provided in
New capital investments are made to perma- the Business Planning Workbook to help the
nently enhance service levels in the existing management record a summary of each of the
systems (such as investments: to achieve capital investments identified in the individual
24-hour pressurized water supply service; to Performance Improvement Action Plans.
treat water or wastewater to higher standards;
to make more water available for sale; to Figure 13-1 illustrates how the Capital Invest-
improve metering of flows, etc.), or to extend ment Program worksheet in the Workbook
the system to currently unserved areas of the addresses Capital Expenditures. The manage-
population within the defined Franchise Area ment is first asked to determine the level of
(service coverage). annual capital expenditure under the renew-
als budget it deems it can or must spend for
Such capital expenditures are commonly done buried or underground assets. These expendi-
with grants (central government or donors), or tures can start out rather small and increase
with debt (credits/loans) from international fi- to the ideal level over time.
nancing institutions, or short-term loans from
commercial sources. Later, the repayment of

Guide and Model for the Preparation of Business Plans for Water Districts 70
Figure 13-1

The worksheet then asks the management to from grants or credits (loans). Initially, and for
determine the level of annual contribution to some time, this expense could be zero, with the
be applied to the capital repair and replace- management relying on grants and/or loans to
ment reserve for above ground assets. Here meet all of its new capital investment needs.
again, this contribution can start out small and
increase to a more realistically calculated level As the Business Planning process continues
over time. into the Revenue Needs stage in Section 14,
where the totals for Capital Renewal Expendi-
Next, the spreadsheet asks the management ture, Capital Repair and Replacement Reserve
to determine the annual amounts for future and New Capital Investment Reserve are
new capital investments. After determining the automatically reflected, the management will
annual amounts, the management must decide find that it will need to more than likely revisit
on financing sources to meet all of its new this capital investment/expenditure plan, and
capital investment needs. This will be a combi- make modifications to better fit the financial
nation of capital from the New Capital Invest- realities of the overall Business Plan.
ment Reserve, as well as capital to be raised

71 Guide and Model for the Preparation of Business Plans for Water Districts
Identifying Sources of Capital Investment consider going to the capital market through a
As stated at the beginning of this Section, the bond issuance.
management of the utility is responsible to not
only develop a capital investment plan, but to As stated previously, the timing as to when
do everything possible to implement plan and those funds might come available, such that
corollary thereto, identify sources of invest- their beneficial use can be realistically reflect-
ment capital from grants and loans. This will ed in the Business Plan, must be practically
require extensive discussions between the determined.
utility management and its Board of Directors,
and with financing institutions. The Business Planning Workbook has been
designed to include an extra worksheet for
LWUA has traditionally been the source of debt service obligations. In this worksheet,
credit for water districts. With the new financ- the management staff needs to incorporate
ing policy of the government, government- the terms and conditions of the applicable
financing institutions such as the Development loans, to identify as a minimum the duration
Bank of the Philippines and Land Bank of the of the loans or maturity, grace period and
Philippines have opened lending windows interest rate.. The Debt Service Worksheet
catering to water projects. In addition, private asks the management to aggregate line items
commercial banks have also been made aware by interest payment and principal repayment
of investment opportunities in the water sec- Existing Loans, New Capital Investment Loans
tor, and are now a real option for water dis- and Other Loans. These loans are usually well
tricts, especially those with robust cash flow documented, both in amount and date due to
and who can afford shorter tenors. Worthy of be paid, as described in the loan agreement.
note is the co-financing being promoted by Total interest payment and principal repay-
government between LWUA/GFIs and PFIs ment amounts for debt services will then be
that allows leveraging of public with private automatically reflected in the Revenue Needs
resources (e.g., the Philippine Water Revolv- Workbook presented in Section 14. Figure
ing Fund in DBP). Creditworthy water districts 13-2 illustrates how the Debt Service Work-
with huge capital requirements may also sheet summarizes interest payments and
principal repayments.
Figure 13-2

Guide and Model for the Preparation of Business Plans for Water Districts 72
 6
14

Revenue Needs

B
usiness planning supports the pro- in these routine operations and maintenance
cess of improving short-term financial expenditures are: all compensation to the
management of the utility, as well as staff plus their social benefits, all consumable
longer-term financial planning to achieve supplies and materials like lubricants, fuels,
financial sustainability. Effective business plan- water and wastewater treatment chemicals,
ning helps senior management employ good small tools, replacement parts, etc., plus,
management practices that reduce long-term subcontracted services and energy costs. Also
financial risks in planning for future service im- included with the operations and maintenance
provement, expansion and upgrade of the water expenditures would be such things as public
supply and wastewater system. It also opens and customer relations expenditures, and
an opportunity for the utility to benefit from legal and expert accounting services.
commercial financing and to engage the private
sector, if that is regarded as the best way to The revenue needs of a water supply and
improve performance and service delivery. wastewater utility exceed the need to meet
operations and maintenance expenditures,
Considerations on financial sustainability since revenue needs also include allowances
revolve around the utility’s ability to predict- for interest payments on loans and principal
ably generate sufficient revenues to meet all repayments of loans, planned capital expen-
of its payment obligations in a timely manner ditures for renewal of buried infrastructure;
through the course of the year. This quantity contributions to capital repair and replace-
of sufficient revenues is what is commonly ment reserves, and contributions to new
referred to as revenue needs. capital investment reserves.

Difference between Revenue Needs and Determining Revenue Needs

O&M Expenditures In providing adequate water supply and
Revenue needs represent a sum greater than wastewater services to its customers, every
the routine operations and maintenance (O&M) utility must receive sufficient total revenue to
expenditures of the utility. support the process of improving short-term
financial management and long-term financial
Operations and maintenance expenditures re- planning to achieve financial sustainability.
fer to the amount of routine daily expenditures Having said that the management team of the
to meet the operational needs of the utility and utility should consider the following elements
routine maintenance expenditures; these do in developing a revenue needs analysis:
not qualify as capital expenditures. Included

73
• Interest on Outstanding or Near-Term Debt; Capital Repair and Replacement Reserve and
• Principal Repayments on Outstanding or New Capital Investment Reserve line items
Near-Term Debt; show the annual contributions deposited for
each one of these reserves. These reserves
• Debt Repayment Reserve;
are used when an above ground capital repair
• Allowances for Annual Planned Capital or replacement or a new investment must
Renewals; be made. The capital expenditures decisions
• Contributions to Capital Repair and Replace- that affect the revenue needs are treated in
ment Reserve; more detail in Section 13, Capital Investment
Forecast, of the Guide. Amounts for Capital
• Contributions to New Capital Investment
Renewal Expenditures, Capital Repair and
Reserve; and
Replacement Reserve and New Capital Invest-
• Subsidy from Central/Local Governments. ment Reserve come directly from the Capital
Investment Program Worksheet.
A worksheet titled Revenue Needs is provided
in the workbook to help management calcu- The fourth component affecting the revenue
late and forecast the revenue needs of the needs is Subsidies (from Central or Local
utility. The revenue needs table shown in this Governments). Subsidies in the calculation of
worksheet starts with the Total Operations and the revenue needs are treated like a credit, in
Maintenance Expenditures coming directly from that for the period that subsidies are expected
the O&M Budget Worksheet of the Workbook. to be received, they work to reduce the overall
revenue needs for the year.
The second component affecting the revenue
needs is the Debt Service, which is composed of As mentioned above, the revenue needs must
the Loan Interest Payments, Principal Repay- generate sufficient funds to cover all the costs
ments and Debt Repayment Reserve line items. of the utility. In order to accumulate all the
The Loan Interest and the Principal Repayment funds, the revenue needs must be adjusted
line items show a year by year summation of the with the annual Collection Efficiency Rate.
total interest repayments on outstanding and
near-term debt, and the total principal repay- The last two lines of the Revenue Needs
ments on outstanding and near-term debt. As Worksheet present two reporting lines show-
described in Section 13, the amounts for Interest ing the Total Debt Service Reserve (O&M
Payment and Principal Repayment come directly Contingency, Debt Repayment Reserve, Capital
from the Debt Service Worksheet. The Manage- Expenditures) expressed as total amounts, and
ment should reflect and insert the Debt Repay- as a percentage of the Adjusted Total Rev-
ment Reserve an assumed amount for the period enue Needs. These two lines of Debt Service
of the Business Plan. Reserve are designed to make it easier for a
water district, with existing loans with LWUA,
The third component affecting the revenue to prove that the obligations to LWUA are met.
needs is the Capital Expenditures, which is
composed of Capital Renewal Expenditures, Figure 14-1 illustrates that aspect of the
Capital Repair and Replacement Reserve and calculation of the forecasted revenue needs of
New Capital Investment Reserve line items. the utility. Reference should be made to the
Capital Renewal Expenditures shows the Revenue Needs worksheet of the Workbook
amount of money to be expensed in the year attached to the Business Planning Guide.
to undertake capital renewals of buried infra-
structure.

Guide and Model for the Preparation of Business Plans for Water Districts 74
 Figure 14-1

Input the total annual amounts for

Debt Repayment Reserve in the
yellow highlighted cells.
75
Guide and Model for the Preparation of Business Plans for Water Districts

The line items reflecting Interest Payments,

Input the forecasted annual Collection
Principal Repayment and Capital
Efficiency Rate by first setting the Strategic
Expenditures are automatically calculated
Goal for the fifth year of the Business Plan.
after completing the Capital Investment Input the total annual amounts for
Program and Debt Service worksheets. anticipated Subsidies.
Guide and Model for the Preparation of Business Plans for Water Districts 76
 6
15

Tariff Policy and Strategy

O
nce Revenue Needs have been 15-1, the user should first look at the “specific
determined by following the Guideline conditions” in the left column to identify ones
under Section 14, and forecasted Water that are particularly relevant in the utility’s
Sales have been determined by following the Franchise Area. There may actually be several
Guideline under Section 9, management can that are relevant. The right column states a
then determine how the tariffs and fees will be desired “behavior or reaction” once the utility
structured to ensure that the needed revenues implements the pricing strategy, in support of
will actually be generated so that the utility is the tariff policy.
financially and commercially self-sustaining.
Once the utility management has selected the
Addressing the Tariff Policy Issue policy or combination of policies it wants to
Before proceeding directly to the calculation implement, it can then proceed to determine
or determination of a tariff or tariff schedule, the tariff strategy and structure that best
it is important to take some time to consider a meets the policy objective.
tariff policy that is supported by the Board of
Directors. Depending on the specific condi- Addressing the Tariff Strategy and
tions within the Franchise Area of the utility, Structure Issue
the senior management may formulate differ- The tariff strategy addresses a variety of is-
ent policies for implementation. sues that need consideration in arriving at
a tariff structure, consistent with the tariff
Table 15-1 illustrates how local conditions policy. There are many options for tariff struc-
influence tariff policy. In considering Table tures, which can be applied in various combi-

Table 15-1

Specific Local Condition Corresponding Tariff Policy

Abundant water supply. Encourage water consumption and sales.
Limited water supply. Encourage water use conservation.
Conserve usage in high season and encourage consumption in
Largely variable seasonal demand.
low season.
High fixed cost element in revenue needs. Consider both a fixed and variable elements to price structure.
Customer group with low affordability to pay. Off-set rates to subsidize initial “life-line” quantities.
Customer categories have similar usage patterns. Apply a uniform pricing policy.

77
nations. These can differ according to the cat- • Will tariffs vary for citizens at different
egory of the customer, when cross-subsidies income levels?
between customer categories are used. • How many and what customer categories
will exist in the tariff structure?
Ultimately, the aim of any water supply and
wastewater utility that applies commercializa- • What has been the tariff trend over the past
tion principles in its operations is to improve five years, and how does this compare with
its financial performance to achieve full cost the cost trend?
recovery. For some selected utilities, it may be • What are the main problems associated
necessary to establish interim objectives that with the collection of tariffs?
ensure a gradual progression to full cost re-
covery over the years and as the performance When diverse and competing objectives are
of the utility improves. well-understood, a water utility is in a better
position to establish a tariff structure that will
In the process of determining the tariff strat- achieve its cost coverage objectives.
egy and structure, senior management should
make a careful assessment of all the other Selecting the Desired Tariff Structure
conditions affecting the utility and take into full A tariff structure is the way that a fee, or
account, all the interim performance improve- schedule of fees, will be applied to the sale of
ment objectives, so that the tariff structure is water supply and wastewater services to re-
coherent with all the other assumptions made cover the utility’s costs. The design of the final
in the Business Plan. tariff structure is the result of many diverse
and sometimes competing objectives. Figure
In formulating the tariff strategy and structure, 15-1 has been prepared to illustrate some of
the following questions may be helpful guides the key factors that affect the selection of a
to senior management: tariff structure.

• What is the current tariff structure of the Generally, the selection process of a tariff
utility? structure involves three steps:
• Does the utility have a separate tariff for
wastewater? 1. Defining the goals and objectives of the
tariff structure.
• How political are decisions regarding tariff
2. Evaluating the available alternatives in
setting within the Franchise Area?
meeting these goals and objectives.
• Are there problems with the legislation that 3. Understanding and communicating the
reduces the capacity of the utility to reduce potential effects to customers.
its losses, regenerate its assets, write off
bad debts, or other revenue generation The tariff setting methodology in the Philip-
activities? pines is very specifically defined by the LWUA
• What are the established tariff method- for Water Districts and LGU utilities, and by
ologies and how flexible are they in their the National Water Regulatory Board (NWRB)
application? for private water utilities. It is not the intent of
• How is the tariff approval procedure ap- this Business Planning Guide to comment on
plied? or suggest anything different from the cur-
rent regulatory standards, methodologies and
• Is the tariff going to cover all costs, or part procedures in the Philippines for water supply
of them? services.

Guide and Model for the Preparation of Business Plans for Water Districts 78
Figure 15-1
Infrastructure Water Demand
Legal Framework
Improvements Growth

Water Utility Costs

• Capital
•O&M

Tariff Development
Financial Strategies
Strategies

Water Utility
Revenue Requirements

Utility Tariff
Structure

This Guide, however, does present some con- • Cost and usage data by customer are un-
cepts that may be considered when address- available or costly to develop.
ing the challenging issue of tariff strategy and
structure. Declining Block Rates
A declining block rate is a rate structure in
To assist the utility management in consid- which the unit price of each succeeding block
ering how it might like to develop its tariff (volume) of usage is charged at a lower unit
structure, several tariff structures, which have rate than the previous block(s) (volume). Utili-
the broadest application, and which can be ties may consider using a declining block rate
either applied directly or in combination with structure when:
one-other, are presented and briefly described
below. The users of this Guide are advised • Water supplies are plentiful.
to pursue other information on the subject of
• Production costs respond favorably to
tariff structures as issued by LWUA and the
economies of scale.
NWRB from time to time.
• A single rate structure is used for all cus-
Uniform Rates tomer classes of service.
A uniform rate is a constant unit price for all • System has an array of customers with
metered volumetric units on water consumed varying usage and demand requirements.
on a year-round basis. Utilities may consider
using a uniform rate structure when:
Since the average cost of a unit of supplied
water tends to decline with increasing wa-
• Customer groups have similar usage (de-
ter production (i.e. economies of scale); this
mand) patterns.
type of rate structure can be used as a price
• Varying rates are undesirable from equity incentive to encourage specific, large-volume
or other perspective. customers to remain on the system.
• Other rate structures are not justifiable.

79 Guide and Model for the Preparation of Business Plans for Water Districts
Increasing Block Rates more uniform cash flow to meet its average
Increasing block rates charge increasing revenue needs; and
volumetric rates for increasing consumption. • Certain fixed charges (e.g. service charges
Utilities may consider using an increasing or meter charges) are customer related
block rate structure when the utility: and not volume related.

• Is able to distinguish separate customer

categories for billing; It should be kept in mind that even with this
form of tariff structure, the commodity charge
• Has the analytical capability to design block (volumetric rate) can also be an increasing
rate structures, including the amount of block rate, thereby combining a third strategy
water sold per block and potential demand in the tariff structure.
responses to differential rate impacts;
• Is confronting system capacity constraints Non-Metered Tariffs
or potential system expansion; and For consumers without water meters or with
• Decides to send a stronger price signal. malfunctioning water meters, the utility may
establish tariffs based on the number of us-
ers (inhabitants) per household, and apply a
Seasonal Rates standard norm of water consumption on a per
A seasonal rate is a type of time-differentiated capita (cubic meters per month per inhabitant,
rate, or a rate that varies by time period.
for example). This may also be based on the
Utilities may consider using a seasonal rate area of the living space in the household, with
structure when: a standard norm of cubic meters per square
meter per month.
• There is substantial variation in water de-
mand across different seasons; Calculation of Average Tariff
• A utility is capacity-constrained as a result The calculation of the average tariff for a cubic
of peak-period demands; and meter of water is important since it functions
• Systems experience seasonal fluctuations as a benchmark for present and future consid-
in the number or types of customers served. eration in developing the tariff structure and in
assessing the utility’s progress in managing or
reducing costs.
Combined Fixed and Volumetric Rates
The tariff structures of water supply and
Based on this Guide, the calculation of the
wastewater utilities have changed in recent
average tariff is a direct function of the fore-
years. Most urban utilities in western coun-
casted Revenue Needs, determined under
tries use a combination of a monthly minimum
Section 14, being divided by the forecasted
charge (fixed rate per billing period) to cover
annual water sales (cubic meters), which was
overhead and capital costs (fixed costs), and a
established under Section 9, Analyzing Water
commodity charge (volumetric rate based on
Demand. The result of this calculation is per-
water consumption) to cover defined operating
formed automatically by the Workbook and it
costs. Utilities may consider using a fixed and
appears on the worksheet titled Pricing, which
volumetric rate structure when:
is shown in Figure 15-2.

• Consumption patterns vary greatly through

The calculations applied in the Pricing Work-
the year and the utility wants to have a
sheet are:

Guide and Model for the Preparation of Business Plans for Water Districts 80
Figure15-2

81 Guide and Model for the Preparation of Business Plans for Water Districts
• Annual Water Revenues from base rate • Annual Revenues from Bulk Water Sales
(PhP/Conn./Month), which are based on are calculated based on the annual bulk
the number of connections per category water demand and the bulk water tariff
and the monthly minimum charge ap- (PhP/m³).
plied to each category for the use of the • In addition, the Pricing Workbook reflects
first consumption level (first 10m³/month) total revenues from specific fees and
expressed in yearly basis. The Annual charges. Annual Revenues from Specific
Revenues from base rate will be automati- Fees and Charges are designed as input
cally calculated for the base years and the cells, for the base and future years of the
future years after completing the base rate business plan. The management is di-
assumptions for the future years. rected to reflect these revenues for the
• The calculation of Annual Water Revenues base year and make assumptions based on
from unit cost (PhP/m³), is based on the the streamlining of these revenues in the
total annual water demand of the customer future.
category, after subtracting the annual
volume consumed in the first level (first Since the collection efficiency of the utility
10m³/month) from each customer category (percent collection of the value of bills issued)
and billed as fixed. The Pricing Worksheet has already been considered and factored into
automatically calculates the average tariff the overall Revenue Needs, the calculation
per cubic meter in the Base Year from the of the average tariff reflects the typically less
current revenues generated by the variable than 100% collection efficiency and need not
fee (unit cost). In the future years the rev- be adjusted further.
enues from variable fee will be automati-
cally calculated after completing the future Specific Fees and Charge
structure of the variable fee. The water supply and wastewater utility sector
• Annual Sewer Revenues are calculated is expected to employ commercial principles in
only for costumers with a sewer connection managing its activities, and to progress toward
and are based on the total annual water full cost recovery in delivering its services to
revenues of each customer category, Sewer its registered customers. In this regard, it
Coverage by costumer category (number should act like any other business in charging
of sewer connections divided by the num- for all of the services that it performs for its
ber of water connections), and the Sewer customers.
Calculation norm (%).The Annual Sewer
Revenues are designed to be automatically Utilities in developed countries, along with the
calculated for the base years and the future tariff for water supplied, will also apply special
years based on Sewer Calculation norm charges for services (sometimes referred to as
(%). user fees) to recover the cost of specific other
• Annual Environmental Revenues are cal- goods or services that they provide, or for the
culated for all costumers and are based on use of public facilities.
the total annual water revenues from each
customer category and the Environmental As general water rates increase because of
Fee Calculation norm (%). Annual Envi- water resource limitations, development costs,
ronmental Revenues are designed to be new plant requirements, more stringent water
automatically calculated for the base and quality standards, and general inflation, poli-
future years. cymakers and utility management view user

Guide and Model for the Preparation of Business Plans for Water Districts 82
fees and charges as a way to slow increases cal goods and services that are provided by a
in the overall water tariff. Table 15-2 has utility, for which a separate fee or charge, can
been prepared to illustrate a number of typi- be applied by the utility.

Table 15-2

Service Application,
Contract Work and
Field Service Charges Office Service Charges Engineering, and Inspec-
Merchandise Sales
tion Fees

• Turn off/ turn on fees • New account or transfer • Main inspection, filing and • Service line repairs
• Field collection charge charge contract fees • Leak detection
• Repair of damaged facilities • Collection related charges • Administrative fee for • Service tap installation
• Special meter readings and • Account status at property service connection inspec- • Meter installation
final readings sale tion • Meter size change
• Meter resetting fee • Public documents • Cross-connection inspec- • Main location services
• Appointment charge • Construction plans, draw- tion • Main relocation services
• Meter-testing charge ings and maps • Engineering design fee • Backflow prevention
• Backflow-prevention testing • Consulting services device installation
• Pressure testing
• Fire-flow test
• Water audits
• Temporary hydrant meters

83 Guide and Model for the Preparation of Business Plans for Water Districts
Guide and Model for the Preparation of Business Plans for Water Districts 84
 6 16

Business Plan Update Process

A
s stated initially in Section 2, business stated strategic goals. It is very important that
planning is a continual process, with the management team be totally objective in
the business plan being reviewed and considering the performance of the prior year,
updated annually, such that the utility always and any changes in action plans to assure the
has a current five-year business plan as a achievement of the strategic goals.
reference. In this regard, the senior manage-
ment of the utility must set a date each year to Scheduling to Conduct the Business Plan
update the business plan. Update
The business plan update is best conducted
The updating process allows the management during the first month of the fourth quarter of
to seriously and objectively review its accom- the fiscal year of the utility. In the Philippines,
plishments over the course of the year, relative the fiscal year of water utilities coincide with
to the strategic goals and measurable targets in the calendar year; hence, the business plan
the business plan, and assess how effective the update should be conducted in October. Man-
Performance Improvement Action Plans were agement should target completing and getting
in achieving the targeted goal for that year. Board of Directors approval by the middle of
November.
Every element of the business planning model
should be reconsidered. Of particular value An indicative schedule for the business plan
is a comparison of the performance indica- update is shown in Table 16-1.
tors from year-to-year, as well as with the

Table 16-1

Timing of Planning Action Planning Action

Finance Department closes financial reports for 3rd quarter and issues reports to manage-
End of second week of October
ment for four preceding quarters.
End of second week of October Engineering or Operations Department issues operating reports for four preceding quarters.
Management team, facilitated by Finance Department, meets to review and comment on
Third week of October
performance; and make preliminary modifications to Action Plans.
Management team meets to finalize modifications to Action Plans and provide input to
Fourth week of October
Finance Department on budget adjustments and forecast assumptions.
Finance Department issues new first year budget forecast, revenue needs and recommenda-
First week of November
tions for tariff and fee adjustments, for agreement by management team.
General Manager presents updated Business Plan to the Board of Directors with the recom-
Second week of November
mendation for any tariff adjustments.

85
Preparing for Business Plan Updating Conducting the Business Plan Update
Process Process
As is presented in Table 16-1, the common The discipline applied by management in
practice is having the Chief Financial Officer of preparing the business plan should be the
the utility facilitate the business plan updat- same in the updating process. In that regard,
ing process. The CFO sets the schedule and it should consider making changes to the
generates the necessary historical financial performance improvement action plans, if they
reports needed to assess the past perfor- are not producing the expected results.
mance against the previous business plan.
This is done in cooperation with the Engineer- Likewise, the computer based spreadsheet
ing or Operations Department (the source of workbook should also be used to assist the
operating performance data) and the Custom- management in quantifying the impact of
er Services Department (which is the source of its assumptions and expected results. This
water sales and collection efficiency data). includes the water demand analysis and the
budget forecasting.
It is important for the CFO to not see the updat-
ing process merely as a financial exercise, since It is best to undertake this updating process
technical operations and customer service will in large work installments, instead of trying to
ultimately have the greatest impact on overall fit it into small time allocations. Three or four,
utility performance and customer satisfaction. half-day meetings are all that it should take,
once the historical data is available. To expe-
To get performance data for an entire year, dite decision-making on various issues in the
when the updating process is started in the planning process, the General Manager should
fourth quarter of the year: be present in all of the half-day meetings.

• Use data from the preceding four quarters Approval of Board of Directors
to establish one year (i.e. the last quarter Once the business plan has been updated for
of the preceding year and the first three another five-year period, it should be present-
quarters of the current year). ed to the Board of Directors for their approval.
• Or, as the financial management staff and The General Manager, along with the Board of
systems become more accustomed to Directors, should meet with the chief execu-
the planning process, use the first three tives and other key officials of the local gov-
quarters of the calendar year and a forecast ernments in the Franchise Area of the utility to
of the performance in the fourth quarter, communicate the results of the business plan
which would be developed by the Finance update, share any major operational decisions
Department. that would impact them, and state whether the
utility will be filing for a tariff adjustment with
the regulator based on the results of the busi-
Since the management team will be partici- ness plan update.
pating in monthly management meetings it
will have reviewed reports for each preceding
month and compared performance improve-
ments to planned targets. As such, the updat-
ing process should not be viewed as a major
undertaking, but merely a chance to reassess
both the Action Plans and the budgets in light
of performance.

Guide and Model for the Preparation of Business Plans for Water Districts 86
 6
17

Monitoring Business Plan Implementation

Importance of a Monitoring Process Having made deci-
Monitoring plays an essential role in imple- sions on the activities
menting a successful Business Plan and in and investments that Monitoring the
assessing the progress made to improve and will be implemented, implementation of
sustain utility performance. A properly de- and having finalized
the business plan
signed monitoring system provides stakehold- the action plans, it
ers, at all levels, a way to assess the imple- will be important to must be continuous,
mentation of the Business Plan in achieving its ensure that initiatives disciplined, consistent,
performance objectives. The Business Plan, and investments are and focused.
as prepared, describes a series of stated Stra- done according to
tegic Goals and Performance Improvement the time scales and
Action Plans that will achieve the operational, budgets specified in
customer service and commercial objectives the Business Plan.
required by the utility to sustain its operations.
It is important to understand that as the utility
However, the senior management should rec- implements the Business Plan, it will gain
ognize that the success of the Business Plan more information and knowledge that can
will be the result of regular monitoring/updat- be used to improve the certainty of assump-
ing of progress against the Plan, and correc- tions used in the previous planning stages.
tive actions, when the desired performance is Senior Management has to monitor costs, as
not being achieved. To ensure that the utility, these may change in ways not foreseen in the
through its staff, is progressing as expected, Business Plan. Thus, management must be
the senior management team needs to moni- prepared to make adjustments to the plan.
tor the financial, operational, and customer
service data. This data should be reflected What Should Be Monitored?
in formal monthly reports. The data review Senior management should monitor the prog-
is with the endview of comparing the utility's ress of the implementation of the Business
actual performance with the Strategic Goals of Plan, by monitoring the interim targets for
the Business Plan. each of the Performance Improvement Action
Plans. These interim targets are expressed
The monitoring process applied to the Busi- in quantifiable terms, and can be monitored
ness Plan implementation must be continu- through assessing both data and performance
ous, disciplined, consistent, and focused. indicators.

87
Table 17-1 Key Performance Indicators the nature of the reporting and monitoring
required.
Water Service Connection Ratio (Franchise
1
Area) (%)
Sewer Service Connection Ration (Franchise
Utility
2
Area) (%) The key monitoring entity is the Utility, which
3 Percent Non-Revenue Water (%) concerns itself with routine internal reporting
4 Percent Metered Connections (%) as a part of its standard management proce-
Water Consumption-Household Use (liters/
dures, plus its interactions with its customers
5 through communications and notifications,
capita/day)
Water Consumption-Total Use (liters/capita/ and with its Board of Directors, which perform
6
day) a corporate oversight role.
7 Bill Collection Efficiency (%)
8 Operating Ratio (Expense/Revenue) (%) The utility will have a service agreement
Staff Efficiency (No. of staff/1000 customer signed with every customer formally con-
9
connections) nected to the system. This Customer Ser-
Continuity of Service (hours/day of pressurized vice Agreement (CSA) will define the mutual
10
water supply) responsibilities between the utility and its
Water Quality Compliance - E-coli (% negative customers for the provision of services. It
11
tests)
will also detail when the utility is required to
Water Quality Compliance – Chlorine Residual
12 notify its customers of certain conditions that
(% negative tests)
might impact the quality of service, and how
the customer should contact the utility with
There is a limited number of key performance any concerns or complaints about the service
indicators considered as fairly typical for any being received.
utility; although some larger utilities with
more sophisticated technology, use more in- Senior Management Reporting/Monitoring
dicators. As a minimum, the key performance Methodology
indicators, which should be be monitored The senior management must provide for
regularly or routinely by the senior manage- a regular and continuous monitoring of the
ment, are those presented in Table 17-1. implementation process of the business plan.
The monitoring process happens at all man-
Reporting and Monitoring Performance agement levels of the utility, with the senior
The monitoring of the Business Plan is only a management being ultimately responsible for
portion of the overall reporting and monitoring the coordination and decision-making, based
that is essential for the effective management upon the information obtained through the
of a water supply and sewerage utility, as well monitoring process. The standard approach
as for ensuring compliance with established and methodology of the monitoring process is
Philippine laws and regulations on a utility’s based on the following:
operation and performance.
• Establishment of reporting scheme from all
It is therefore helpful to take a broader per- departments of the utility.
spective of this reporting and monitoring • Establishment of reporting standards and
structure to fully appreciate how the elements formats.
interact, their respective roles and interests,
• Senior management review and analysis of
and how they need to be addressed by the util-
reports.
ity. Figure 17-1 illustrates the key stakeholder
interests in the performance of the utility and • Undertaking of corrective actions.

Guide and Model for the Preparation of Business Plans for Water Districts 88
The ultimate goal of monitoring the busi- of any anomaly in the trend of the data, which
ness plan is to ensure the implementation, might occur as a result of any unusual condi-
as planned, of the performance improvement tions at the utility.
action plans. If any difficulty arises, then the
senior management decides on appropriate Senior management review and analysis of
corrective actions. reports.
The monthly department’s reports should be
It is important to make a distinction between collected and analyzed by the senior manage-
corrective actions and the update of the busi- ment also on a monthly basis. In the analysis,
ness plan, which is discussed in Section 16 senior management should look at the big
of the Guide. The corrective actions are not picture of the utility’s situation, so that the
intended to change any of the strategic goals information coming from each of the depart-
of the business plan, but merely modify the ments tells one coherent story. Upon review
performance improvement action plans while of the various reports, the senior management
still retaining the same strategic goals. will prepare a list of questions and issues that
need to be clarified.
Establishment of reporting scheme from all
departments of the utility. Subsequently, the senior management will
It is crucial to establish the reporting scheme hold a regular monthly meeting with all sec-
of each department as information review is ond level managers where the issues are dis-
the starting point of the monitoring process. cussed together and all the issues are clari-
The department reports should be in written fied, in order for senior management to fully
form and prepared monthly. These reports understand the overall situation of the utility.
are submitted to the senior management at
the beginning of each month for the preceding Undertaking of corrective actions.
operational month. After the meeting with the second level of
management, the General Manager of the util-
As suggested, the reporting process should ity will prepare a Summary Report of the pre-
originate below the senior management level vious month’s performance compared with the
so that a sense of responsibility is established objectives of the performance improvement
in the lower manager/supervisor levels of the action plans. If at all necessary, he will then
utility. determine what corrective actions that should
be taken to respond to problems and issues.
Meetings must be conducted to review and
summarize the reports within 7-10 days after Upon making final decisions on changes that
the end of an operational month. A sample should be applied to the Performance Im-
monthly summary report outline for a utility is provement Action Plans and instructions given
provided at the end of this section, as a refer- to the department concerned, the General
ence. Manager and senior management will com-
municate these decisions and instructions to
Data recording and reporting standards. all the departments in writing.
The establishment of clear standards for data
recording and reporting is critical to the suc- Board of Directors Monitoring Methodology
cess of the reporting and monitoring process. Since the Board of Directors has oversight
These reports will include both numeric data responsibility on the implementation of the
and narrative accounts. The narrative part of Business Plan, senior management should
the report should be limited to the explanation give it periodic updates.

89 Guide and Model for the Preparation of Business Plans for Water Districts
Figure 17-1

LOCAL GOVERNMENT UTILITY CENTRAL GOVERNMENT

MAYOR
LOCAL WATER UTILITIES
BOARD OF DIRECTORS ADMINISTRATION
(LWUA)
LOCAL GOVERNMENT

GENERAL MANAGER
NATIONAL WATER
RESOURCES BOARD
WATER SUPPLY AND
(NWRB)
WASTEWATER UTILITY

Customer Service
Agreement

CUSTOMERS

In light of the fact that the corrective actions pare it with the interim objectives stated in the
are not intended to change any of the strategic Performance Improvement Action Plans. In
objectives of the business plan, rather modify addition, the reports explain what corrective
the performance improvement programs only, measures have been undertaken during the
the Board of Directors does not have to be relevant period and assess the effectiveness of
involved in the decision-making on the correc- such measures.
tive actions. However, it must be informed of
such actions. The Board of Directors will review the reports
and discuss them with senior management
In performing its monitoring function, the at regularly scheduled formal meetings. The
Board of Directors shall be supported by the schedule of such formal meetings will occur
senior management reporting, specifically, the at a frequency determined by the Board of
monthly Summary Reports, which serve as Directors and the General Manager but should
evidence of any corrective actions undertaken at least be on a quarterly basis.
in the course of the preceding month.
Local Government
More specifically, the Board of Directors will The local government group in Figure 17-1 is
perform a thorough review and monitoring of represented by the Mayor or Governor, who
the utility’s performance on monthly, quarterly, serves as the chief executive of the local gov-
semi-annual and annual basis. These reviews ernment. The Mayor or Governor appoints the
shall be supported by reports prepared by the members of the Board of Directors.
senior management at the abovementioned
periods. Such reports contain an analysis of The Mayor will report to the local council on
current performance of the utility and com- all matters related to the delivery of water

Guide and Model for the Preparation of Business Plans for Water Districts 90
supply and wastewater services in the munici- ments for updating creditworthiness clas-
pality. The Board of Directors then report to sification. It also requires data to update the
the Mayor and the Planning Coordination Unit industry performance indicators—this may be
within the Municipality on all matters related replaced later by a benchmarking data capture
to policy development and financial perfor- form.
mance of the utility.
National Water Resources Board
Central Government The NWRB is the lead government agency in
The final group in Figure 17-1 is Central the Philippine water sector, conferred with
Government, which requires reports from the policy-making, regulatory and quasi-judicial
utility. The key central government stakehold- functions. The NWRB is responsible for en-
ers that have a direct interest in the perfor- suring the optimum exploitation, utilization,
mance and monitoring of the water supply and development, conservation and protection of
wastewater utilities are as follows: the country's water resources, consistent with
the principles of Integrated Water Resource
Local Water Utilities Administration Management; formulation and coordination of
In its role as primary lender of capital funds policies, programs and standards relating to
to water districts, LWUA monitors the per- the Philippine Water Sector. It also deals with
formance of water districts. LWUA exercises management and regulation all water-related
its monitoring role by requiring the Utility to activities, as well as the economic regulation
submit a report titled, “Monthly Data Sheet”. of water utilities.
In addition, it requires annual financial state

91 Guide and Model for the Preparation of Business Plans for Water Districts
Sample monthly summary report outline

REPORT FOR THE MONTH OF _____________, 200____

GENERAL MANAGEMENT REPORT (by the General Manager)

• Narrative Summary of Monthly Report
• Progress in Addressing Strategic Goals
- Increase % of Billed Water
- Increase % Collection Efficiency of Billed Water
- Increase Revenues to Cover Costs
- Others
• Status of Investments

CUSTOMER SERVICE REPORT (by Customer Service Department)

Customer Report
• New Customers by Category
• Terminated Customers by Category
• Total Customers by Category
• Customer Analysis

Water Sales Report

• Water Sales by Category (m3)
• Water Sales by Category (PhP)

Collections Report
• Collection by Category (PhP)
• Collection Efficiency Rate by Category

Customer Complaints Report

Activities under Customer Communications Program

FINANCIAL REPORT (by Finance/Accounting Department)

• Operations and Maintenance Costs for the Month
• Operations and Maintenance Cost Analysis versus Budget
• Cost Coverage Analysis

TECHNICAL REPORT (by Technical Department)

• System Operations Report
- Hours of Water Supply by Zone
- Number of Pipe Breaks Needing Repair by Zone
- Number of Sewerage Blockages by Zone
• Non-Revenue Water Report
- Total Water Produced
- Water Supplied to Zones
- NRW Water by Zone
- Status of Meter Installation Program
- Status of Construction Projects
• Progress and Status of Construction Projects

Guide and Model for the Preparation of Business Plans for Water Districts 92
6Annexes
 Annex 1 - Staff List
Position Code No. Name Last Name Date of Date of Gender Profession Education Monthly Salary Code
Birth Employment (PhP)
1
2
3
4
5
6
7
8
9
10
11
12
13

Guide and Model for the Preparation of Business Plans for Water Districts
14

94
15
16
17
18
19
20
21
22
23
24
25

Total -
 Annex 2 - Staff Analysis
Year 2008 Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
No. Position Monthly Annual Monthly Base Annual Monthly Annual Monthly Monthly Annual Monthly Annual
No No No No Annual Cost No No
Base Pay Cost Pay Cost Base Pay Cost Base Pay Base Pay Cost Base Pay Cost
1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
10 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
11 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
12 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
13 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
14 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
15 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
16 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
17 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
18 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
19 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
20 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
21 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
22 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
23 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
24 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

95
25 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Staff Cost/ Year (PhP) 0 0 0 0 0 0 0 0 0 0 0 0
Annual % Increase in Labor Cost 0.0% 0.0% 0.0% 0.0% 0.0%
No of connections (Water+Sewer) 0 0 0 0 0 0
Staff/1000 conn. 0.00 0.00 0.00 0.00 0.00 0.00

No. Salaries Index 2009 2010 2011 2012 2013

1 0% 0% 0% 0% 0%
2 0% 0% 0% 0% 0%
3 0% 0% 0% 0% 0%
4 0% 0% 0% 0% 0%
5 0% 0% 0% 0% 0%
6 0% 0% 0% 0% 0%
7 0% 0% 0% 0% 0%
8 0% 0% 0% 0% 0%
9 0% 0% 0% 0% 0%
10 0% 0% 0% 0% 0%
11 0% 0% 0% 0% 0%
12 0% 0% 0% 0% 0%
13 0% 0% 0% 0% 0%
14 0% 0% 0% 0% 0%
15 0% 0% 0% 0% 0%
16 0% 0% 0% 0% 0%
17 0% 0% 0% 0% 0%
18 0% 0% 0% 0% 0%
19 0% 0% 0% 0% 0%
20 0% 0% 0% 0% 0%
21 0% 0% 0% 0% 0%
22 0% 0% 0% 0% 0%

Guide and Model for the Preparation of Business Plans for Water Districts
23 0% 0% 0% 0% 0%
24 0% 0% 0% 0% 0%
25 0% 0% 0% 0% 0%
Annex 3 - Water Demand Analysis and Sales Forecast
Year 2008 Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
Base Year
Population/Customer Profile
Population in the Franchise Area 0 0 0 0 0 0
Population Served by Others 0 0 0 0 0 0
Serviceable Population 0 0 0 0 0 0
Population Served by Registered Connections 0 0 0 0 0 0
Unserved Population 0 0 0 0 0 0
% of Population Provided Water Service 0% 0% 0% 0% 0% 0%
Registered Water Connections
Registered Household Connections 0 0 0 0 0 0
Metered HH Connections 0 0 0 0 0 0
Non-metered HH Connections 0 0 0 0 0 0
% Metered HH Connections 0% 100% 100% 100% 100% 100%
Number of New Metered HH Connections per Year 0 0 0 0 0

Registered Active Commercial Connections 0 0 0 0 0 0

Metered Connections 0 0 0 0 0 0
Non-metered Connections 0 0 0 0 0 0
% Metered Connections 0% 100% 100% 100% 100% 100%
Number of New Metered CE Connections per Year 0 0 0 0 0

Registered Active Institutional Connections 0 0 0 0 0 0

Metered Connections 0 0 0 0 0 0
Non-metered Connections 0 0 0 0 0 0
% Metered Connections 0% 100% 100% 100% 100% 100%
Number of New Metered PI Connections per Year 0 0 0 0 0

Registered Active Industrial Connections 0 0 0 0 0 0

Metered Connections 0 0 0 0 0 0
Non-meteredConnections 0 0 0 0 0 0
% Metered Connections 0% 100% 100% 100% 100% 100%
Number of New Metered Connections per Year 0 0 0 0 0

Registered Sewer Connections

Household 0 0 0 0 0 0
Sewer Coverage HH (%) 0% 0% 0% 0% 0% 0%
Commercial 0 0 0 0 0 0
Sewer Coverage Commercial (%) 0% 0% 0% 0% 0% 0%
Institutional 0 0 0 0 0 0
Sewer Coverage Institutional (%) 0% 0% 0% 0% 0% 0%
Industrial 0 0 0 0 0 0
Sewer Coverage Industrial (%) 0% 0% 0% 0% 0% 0%

Total Water Sales - Volume

Total Household Consumption (m³/year) 0 0 0 0 0 0

Metered HH Water Sales 0
Non-metered HH Water Sales 0

Total Commercial Consumption (m³/year) 0 0 0 0 0 0

Metered Water Sales 0
Non-metered Water Sales 0

Total Institutional Consumption (m³/year) 0 0 0 0 0 0

Metered Water Sales 0
Non-metered Water Sales 0

Total Industrial Consumption (m³/year) 0 0 0 0 0 0

Metered Water Sales 0
Non-metered Water Sales 0

Per Capita Demand for Business Plan (l/c/d) (145-210) 0 0 0 0 0 0

Household (100-120) 0 0 0 0 0 0
Commercial (15-25) 0 0 0 0 0 0
Institutional (15-30) 0 0 0 0 0 0
Industrial (15-35) 0 0 0 0 0 0

Per Connection Demand (m³/month)

Household 0 0 0 0 0 0
Commercial 0 0 0 0 0 0
Institutional 0 0 0 0 0 0
Industrial 0 0 0 0 0 0

Retail Water Demand (m³/day) 0 0 0 0 0 0

Bulk Water Sales (m³/day) 0 0 0 0 0 0
Total Water Demand (Avg m³/day) 0 0 0 0 0 0

Produced Water (m³/day) 0 0 0 0 0 0

Purchased Water (m³/day) 0 0 0 0 0 0
Total Water to System (m³/day) 0 0 0 0 0 0

Allowance for % NRW 0% 0% 0% 0% 0% 0%

Projected Population Increase (%) 0.50%

Projected Commercial Connection Increase (%) 3.00%
Projected Institutional Connection Increase (%) 0.00%
Projected Industrial Connection Increase (%) 0.00%
Number of People per Connection 6.00

Guide and Model for the Preparation of Business Plans for Water Districts 96
Annex 4 - Operation and Maintenance Budget Forecast
Expenses Year 2008 Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
Base Year
Salaries (PhP) (PhP) (PhP) (PhP) (PhP) (PhP)
Annual Base Salary 0 0 0 0 0 0
Overtime 0 0 0 0 0 0
13th Month Pay 0 0 0 0 0 0
Bonuses 0 0 0 0 0 0
Other Compensation 0 0 0 0 0 0
Board of Directors' Compensation 0 0 0 0 0 0
Other Board Members' Compensation 0 0 0 0 0 0
Sub Total (1) 0 0 0 0 0 0
Personnel Costs
GSIS 0 0 0 0 0 0
Philhealth 0 0 0 0 0 0
Pag-ibig 0 0 0 0 0 0
Employee Compensation 0 0 0 0 0 0
Training 0 0 0 0 0 0
Sub Total (2) 0 0 0 0 0 0
Expenditures
Maintenance 0 0 0 0 0 0
Materials 0 0 0 0 0 0
Chemicals 0 0 0 0 0 0
Electrical Energy 0 0 0 0 0 0
Security Services 0 0 0 0 0 0
Other Contracted Services 0 0 0 0 0 0
Transport (fuel, oil, vehicle insurance) 0 0 0 0 0 0
Office and Administrative 0 0 0 0 0 0
Taxes (Premiums and other fees) 0 0 0 0 0 0
Purchased Water 0 0 0 0 0 0
Other Expenditures 0 0 0 0 0 0
Public Relations 0 0 0 0 0 0
O&M Contingency 0 0 0 0 0 0
Sub Total (3) 0 0 0 0 0 0
Total Operation and Maintenance (1+2+3) 0 0 0 0 0 0

Norms Year 2008 Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
GSIS (% on Base Salary) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Philhealth (% on Base Salary) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Pag-ibig (% on Base Salary) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Employee Compensation (% on Base Salary) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Overtime (% on Base Salary) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
13th Month Pay (% on Base Salary) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Bonuses (% on Base Salary) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other Compensations (% on Base Salary) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Training (% on Base Salary) 0% 0% 0% 0% 0% 0%
Public Relations (PhP/year/connection) 0 0 0 0 0 0
Chemicals (PhP/m³ Produced) 0.00 0.00 0.00 0.00 0.00 0.00
Electrical Energy (PhP/m³ Produced) 0.00 0.00 0.00 0.00 0.00 0.00
Purchased Water Rate (PhP/m³) 0 0 0 0 0 0
Increasing/Decreasing Rates
Board of Directors' Compensation 0% 0% 0% 0% 0%
Other Board Members' Compensation 0% 0% 0% 0% 0%
Maintenance 0% 0% 0% 0% 0%
Materials 0% 0% 0% 0% 0%
Security Services 0% 0% 0% 0% 0%
Other Contracted Services 0% 0% 0% 0% 0%
Transport (fuel, oil, vehicle insurance) 0% 0% 0% 0% 0%
Office and Administrative 0% 0% 0% 0% 0%
Taxes (Premiums and other fees) 0% 0% 0% 0% 0%
Other Expenditures 0% 0% 0% 0% 0%

97 Guide and Model for the Preparation of Business Plans for Water Districts
Annex 5 - Capital Investment Program
Total 2008 2009 2010 2011 2012 2013
Cost Base
Unit 2009-13 Year
Item Qty. Cost PhP ('000)
Capital Renewal
Source Facilities 1 LS 0 0 0 0 0 0 0
Treatment Facilities 1 LS 0 0 0 0 0 0 0
Main Transmission 1 LS 0 0 0 0 0 0 0
Distribution Network 1 LS 0 0 0 0 0 0 0
Valves 1 LS 0 0 0 0 0 0 0
0
0
0
Total Capital Renewal Expenditures 0 0 0 0 0 0 0
Capital Repair and Replacement
Fixed Operating Equipments 1 LS 0 0 0 0 0 0 0
Movable Operating Equipments 1 LS 0 0 0 0 0 0 0
Office and Laboratory Equipments 1 LS 0 0 0 0 0 0 0
Buildings 1 LS 0 0 0 0 0 0 0
Structures (tanks) 1 LS 0 0 0 0 0 0 0
0
0
Total Capital Repair and Replacement Reserve 0 0 0 0 0 0 0
New Capital Investments
New Project No. 1 1 LS 0 0 0 0 0 0 0
New Project No. 2 1 LS 0 0 0 0 0 0 0
New Project No. 3 1 LS 0 0 0 0 0 0 0
New Project No. 4 1 LS 0 0 0 0 0 0 0
0
0
Total New Capital Investments 0 0 0 0 0 0 0
Contribution to New Capital Investment Reserve 25% LS 0 0 0 0 0 0 0
New Capital Investment Loans 75% LS 0 0 0 0 0 0 0
Total Capital Investments from Free Cash Flow 0 0 0 0 0 0 0

Capital Investments from Grants

Grant #1 (Installation of new reservoirs) 1 LS 0 0 0 0 0 0 0
Grant #2 (Rehabilitation of existing pumping stations) 1 LS 0 0 0 0 0 0 0
0
0
Total Capital Investments from Grants 0 0 0 0 0 0 0

Guide and Model for the Preparation of Business Plans for Water Districts 98
 Annex 6 - Debt Service
Description Year 2008 Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
Base Year
(PhP) (PhP) (PhP) (PhP) (PhP) (PhP)
DEBT SERVICE
Existing Loans
Interest Payments 0 0 0 0 0 0
Principal Repayments 0 0 0 0 0 0
Total Payments Loan #1 0 0 0 0 0 0
New Capital Investments Loans
Interest Payments 0 0 0 0 0 0
Principal Repayments 0 0 0 0 0 0
Total Payments Loan #2 0 0 0 0 0 0
Other Loans
Interest Payments 0 0 0 0 0 0
Principal Repayments 0 0 0 0 0 0
Total Payments Loan #3 0 0 0 0 0 0

99
TOTAL LOANS
Total Interest Payments 0 0 0 0 0 0
Total Principal Repayments 0 0 0 0 0 0
Total Loan Payments 0 0 0 0 0 0

Guide and Model for the Preparation of Business Plans for Water Districts
 Annex 7 - Revenue Needs
Description Year 2008 Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
Base Year
(PhP) (PhP) (PhP) (PhP) (PhP) (PhP)
Total Operation and Maintenance (1+2+3) 0 0 0 0 0 0
Debt Service
Interest Payments from Revenues 0 0 0 0 0 0
Principal Repayment from Revenues 0 0 0 0 0 0
Debt Repayment Reserve 0 0 0 0 0 0
Sub Total (4) 0 0 0 0 0 0
Capital Expenditures
Capital Renewal Expenditures 0 0 0 0 0 0
Capital Repair and Replacement Reserve 0 0 0 0 0 0
New Capital Investment Reserve 0 0 0 0 0 0
Sub Total (5) 0 0 0 0 0 0
Subsidies
Subsidies from Central/Local Government 0 0 0 0 0 0
Sub Total (6) 0 0 0 0 0 0

Guide and Model for the Preparation of Business Plans for Water Districts
Total Revenue Needs (1+2+3+4+5-6) 0 0 0 0 0 0

100
Collection Efficiency (% per Year) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Adjusted Total Revenue Needs with the Collection Efficiency 0 0 0 0 0 0

Debt Service Reserve

(O&M Contingency+Debt Repayment Reserve+Capital Expenditures) 0 0 0 0 0 0
Total Debt Service Reserve (as % on Adjusted Total Revenue Needs) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Annex 8 - Pricing
Description Year 2008 Year 2009 Year 2010 Year 2011 Year 2012 Year 2013
Base Year
Water Connections
Household 0 0 0 0 0 0
Commercial 0 0 0 0 0 0
Institutional 0 0 0 0 0 0
Industrial 0 0 0 0 0 0
Sewer Connections
Household 0 0 0 0 0 0
Commercial 0 0 0 0 0 0
Institutional 0 0 0 0 0 0
Industrial 0 0 0 0 0 0
Water Sales
Retail (m³/day) 0 0 0 0 0 0
Bulk (m³/day) 0 0 0 0 0 0
Per Capita Water Demand
Household (l/c/d) 0 0 0 0 0 0
Commercial (l/c/d) 0 0 0 0 0 0
Institutional (l/c/d) 0 0 0 0 0 0
Industrial (l/c/d) 0 0 0 0 0 0
Tariff and Fees
Monthly Minimum Charge per Service Connection
Household 0 0 0 0 0 0
Commercial 0 0 0 0 0 0
Institutional 0 0 0 0 0 0
Industrial 0 0 0 0 0 0
Commodity Charges (PhP/m³)
Household 0.0 0.0 0.0 0.0 0.0 0.0
Commercial 0.0 0.0 0.0 0.0 0.0 0.0
Institutional 0.0 0.0 0.0 0.0 0.0 0.0
Industrial 0.0 0.0 0.0 0.0 0.0 0.0

Bulk Water Tariff (PhP/m³) 0.0 0.0 0.0 0.0 0.0 0.0
Revenues
Minimum Charge (PhP)
Household 0 0 0 0 0 0
Commercial 0 0 0 0 0 0
Institutional 0 0 0 0 0 0
Industrial 0 0 0 0 0 0
Commodity Charges (PhP)
Household 0 0 0 0 0 0
Commercial 0 0 0 0 0 0
Institutional 0 0 0 0 0 0
Industrial 0 0 0 0 0 0
Sewerage (PhP)
Household 0 0 0 0 0 0
Commercial 0 0 0 0 0 0
Institutional 0 0 0 0 0 0
Industrial 0 0 0 0 0 0
Environmental (PhP)
Household 0 0 0 0 0 0
Commercial 0 0 0 0 0 0
Institutional 0 0 0 0 0 0
Industrial 0 0 0 0 0 0
Revenues by Customer Category (PhP)
Household 0 0 0 0 0 0
Commercial 0 0 0 0 0 0
Institutional 0 0 0 0 0 0
Industrial 0 0 0 0 0 0

Revenues from Bulk Water Sales 0 0 0 0 0 0

Revenues from Specific Fees and Charges 0 0 0 0 0 0

Total Revenues (from Price Strategy) 0 0 0 0 0 0

Adjusted Total Revenue Needs with the Collection Rate 0 0 0 0 0 0
Annual Cash Flow Surplus 0 0 0 0 0 0
Accumulative Cash Flow Surplus 0 0 0 0 0 0

Sewerage Calculation (%) 15%

Environmental Calculation (%) 10%

101 Guide and Model for the Preparation of Business Plans for Water Districts
Guide and Model for the Preparation of Business Plans for Water Districts 102
BACK COVER