Union of Municipalities calls for urgent amendments to the Law on communal services

The Union of Municipalities of Montenegro (UOM) calls on the Working Group responsible for drafting the new Law on Communal Services to intensify its efforts in order to reach a new legislative solution in this important area as soon as possible. Such a law would revise the methodology for setting water prices and create the conditions necessary for the uninterrupted operation of municipal water supply companies. 
We recall that the draft law was expected by the end of last year. However, to date, there are still no indications that it will be prepared within a reasonable timeframe.
The Union of Municipalities has consistently warned about the adverse effects that water supply companies are suffering as a result of the current water pricing model, established under the existing law, which fails to take into account a number of key factors necessary to ensure high-quality and sustainable water supply services. 
As early as March 2024, our expert working group submitted a detailed proposal for the necessary amendments to the relevant provisions of the Law on communal services.
Among other things, it is necessary to include in the pricing methodology the costs associated with expanding the operational and material capacity of water utilities for the purpose of improving business performance, staff training, and the introduction of new technologies, as well as contributions to a reserve fund aimed at reducing operational risks. In addition, the law should provide for the possibility of adjusting water prices whenever actual annual operating costs deviate by more than 10 percent from the costs originally projected by the utility company.  
Of the 24 water utility companies owned by Montenegrin municipalities, 11 operated at a loss in 2023, with total losses exceeding six million euros. According to the first reports for 2024, this trend appears to be continuing. The costs of maintaining and modernizing water supply systems have increased significantly as a result of both local and global economic developments and inflation. At the same time, revenues generated under the current water tariffs—and even those projected to apply in 2026 under the existing pricing methodology—are insufficient to cover the full operating costs of these companies. This situation is leading to the accumulation of debt and limiting the ability of utilities to invest in essential infrastructure projects. 
If we are to ensure a reliable and high-quality water supply, amendments to the regulatory framework that would allow for an increase in water tariffs are inevitable. At the same time, appropriate measures should be introduced to provide subsidies and mitigate the negative impact of higher prices on socially vulnerable groups of the population.