Municipal Network for Energy Efficiency

The City of Cherepovets, in Northwest Russia, has implemented a wide-ranging tariff reform and water efficiency program that has proven to be a model for Russia. The city took two very innovative steps that make this a case study for MUNEE.

1. The city rationalized subsidies based on income. As a result, the poorest people pay no more than 10% of their income to utility payments and those who can afford to pay 100% receive no subsidies from the municipality,
2. With the additional revenue, the city implemented a major program to invest in water efficiency both in the water supply system and in end-user buildings.

The results of this effort are impressive:

• With no outside money, the Cherepovets raised water tariffs enough not only to cover costs (which in Russia would be a success in itself) but enough to generate revenues for investment. Some of these investments include:

1. A new water treatment facility (Investment of 40.5 million rubles)
2. Three new and modern pumping stations (1.5 million rubles)
3. Twenty-four kilometers of old, leaking pipes replaced with new pipes (1.6 million rubles)
4. More than 1,100 water meters installed in buildings all over the city so water can be billed on the basis of consumption (6.4 million ruble investment). Studies have shown that simply metering buildings can have an effect on behavior, reducing water and heat consumption by up to 10 percent. All public and residential buildings in Cherepovets now have water meters, a major accomplishment for a Russian city.

• The city reduced leakages in the supply network from 25 percent to 10 percent in four years.

• In terms of efficiency, the amount of electricity required to pump one cubic meter of water through the system was reduced by 12 percent.

• Before the initiative, 75 percent of the network's pipes were more than 25 years old (intended lifetime is 20 years). Today, only 25 percent of the pipes are more than 25 years old - a major achievement.

• The city now has a rational tariff policy that subsidizes only those who are really needy. The change in tariff structure has greatly improved the financial situation of the municipal water utility, enabling it to invest in improving its deteriorating system. The tariff redesign was done in a way that built consensus within the city government and educated the population on the need to increase prices (thus reducing public opposition). Part of this effort was a public awareness campaign, including educating children on water conservation through games in schools (see attachments).

Why Cherepovets? There is a feeling in Russia that to get anything done requires money - mostly from the donor community. The project in Cherepovets has shown that this is not the case - that with innovative ideas and creative leadership, cities can make a difference without a huge amount of outside money. What made Cherepovets unique is simply leadership - an ability of senior city leaders to identify problems and come up with solutions.

For these reasons and for the results already obtained through this program means that Cherepovets is a model for the rest of Russia, a program that most cities could duplicate for the precise reason that success does not require millions of dollars in grants or loans. Success of this residential heat and water efficiency initiative is primarily due to:

• A sound and rational tariff policy, including the introduction of a dual tariff (network charge plus actual consumption payments) that improved and stabilized the financial situation of municipal utilities;
• Restructuring of public subsidies that eliminated subsidies for all citizens (as is the case for most Russian cities) and designed a system that only gives subsidies to truly needy people;
• Gradual improvement of market environment in the municipal housing and public utility services sector through tenders for renovation of public buildings and for technical maintenance of residential buildings;
• Development of private contractors, who are expanding their activities in heat waste reduction in area schools....

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Russia - Cherepovets Residential Heat and Water Efficiency Program