Montenegro communal utilities press for financing safeguards as wage costs rise

Montenegro’s communal utility companies are warning that upcoming wage increases will test their finances unless policymakers pair higher labour costs with sustainable financing and a better-matched regulatory framework. The concern matters for residents and businesses because utilities deliver services of public interest, where disruptions or delayed investment can quickly translate into weaker service quality.

Regulation and pricing limit cost pass-through

At a meeting of the Board of the Association of Communal Economy—operating within the Chamber of Economy of Montenegro (PKCG)—participants said companies’ ability to raise revenue is constrained by existing regulation and prices already set for some services. That limits how much additional costs can be passed on to users.

Representatives cautioned that if utilities and other firms respond to higher labour expenses by raising prices, small and micro enterprises could face added pressure and lose competitiveness. They said this risk would be amplified in a context where residents may not accept higher tariffs if it comes at the expense of service standards.

Water pricing methodology under scrutiny

The group highlighted a specific vulnerability for water companies tied to the methodology used to set service prices. Participants argued that using cost data from the previous year prevents timely adjustment when operating costs rise, potentially worsening water utilities’ financial position under the announced Euromodel.

They called for urgent review and amendments to the legal framework and pricing methodology so water providers can remain sustainable as costs evolve.

Energy, fuel and maintenance pressures add to the strain

Beyond wages, participants pointed to higher energy and fuel costs as well as spending needs for infrastructure maintenance, equipment and materials. They said these pressures could reduce investment capacity and affect service quality—outcomes they described as unacceptable alternatives if tariffs are increased or obligations are shifted onto users.

Wage growth must be matched by sustainable financing

Sector representatives supported improving employees’ material position but stressed that labour cost growth must be accompanied by appropriate and sustainable financing mechanisms. They said the effects of proposed increases extend beyond minimum wages to the broader wage structure, statutory increases and other employee rights.

Companies with larger numbers of unskilled workers—whose pay is generally at minimum wage levels—were identified as particularly exposed. Participants also noted that financial impacts would vary depending on workforce composition and existing wage levels, with some companies in northern Montenegro potentially facing more pronounced effects.

The board also recalled that during a previous wage increase under the Europe Now 2 programme, some utility companies recorded significant financial losses. Looking ahead, participants flagged further potential obligations linked to negotiations on the General Collective Agreement, followed by sectoral collective agreements and employer-level agreements—processes that could bring additional wage increases and employee rights.

Local government support and cost analysis for future obligations

The board concluded that implementing Euromodel successfully requires balancing wage improvements with protection of financial stability. Representatives argued for a comprehensive analysis of future costs so utilities do not take on obligations they cannot finance from existing revenue.

They said founders—local governments that own utility companies—should consider additional financial support while accounting for differences in municipal budget capacity. The emphasis was on ensuring that efforts to improve living standards do not undermine services, investment or long-term sustainability across the system.

Eco Fund outlines 2027 support plans tied to efficiency goals

After discussing sector sustainability, Eco Fund representatives joined the meeting to present planned support activities for 2027. Eco Fund Director Draško Boljević said programmes should connect funding with utility sector needs aimed at improving efficiency, service quality and business sustainability.

Boljević called for stronger cooperation among the fund, utility companies and local governments, including better identification of each company’s specific needs and problems. He also suggested considering new forms of assistance rather than relying only on existing application calls.

Possible support areas mentioned included purchasing utility equipment and machinery, preparing project documentation, and developing joint projects eligible for European funding. Boljević urged utilities to apply actively so available resources can be fully used to address users’ actual needs.

Utility company representatives said they were satisfied with Eco Fund cooperation so far—particularly financial assistance for projects and essential equipment—and agreed to send an overview of their needs and priorities. They also highlighted the importance of applying jointly for European funding while developing sustainable solutions for waste management.