Mark Barnett | The case for a reasonable water rate

On Monday, December 9, 2019, the Office of Utilities Regulation (OUR), which is the economic regulator for the National Water Commission (NWC), announced increases in the rates to be paid by NWC customers based on an application submitted to them back in October 2018.

As a result, customers will see various levels of increases in their water bills for service provided as of Monday, December 9, 2019. In effect, this will begin to manifest itself only on customer bills being sent out during January 2020 and beyond.

While the OUR has correctly indicated that the majority of customers will see an overall average increase of between 3.7 per cent and 4.4 per cent in water-only rates, it is also important to indicate that the exact percentage impact that an individual customer will experience is dependent on a number of variables.

On average, approximately 140,000 of our 500,000 customers who are provided with both water and sewerage services will see an overall average increase of between 15.5 per cent and 17.8 per cent. The vast majority of our customers are residential, water service only customers, and will therefore see the lower average increase of about four per cent.

Commercial customers represent just under eight per cent of all NWC customer accounts but are very important to NWC, as they consume more and also pay more for the water they consume as part of the cross-subsidization pricing policy.

It is to be noted that the OUR has accepted the NWC’s request for a new decreasing block structure for the commercial tariff, hence commercial customers using more than two million imperial gallons of water per month will not see an increase in their water bills, but instead, a reduction averaging -37 per cent for water only commercial high users to -20.4 per cent for water and sewerage commercial high users.

The OUR has also provisionally approved our request to increase the K-Factor from 16 per cent to 20 per cent while awaiting a revised set of details on projects that may qualify for K-Factor support for the OUR’s approval in the next three months.

WRONG TIME

While the rate changes are much below what was requested, we know that there are some persons who argue that this is the wrong time for a water rate increase. We, too, wish that there was no need to increase the rates. However, the reality is that providing water and sewerage service to Jamaica’s variously distributed population over hilly terrain with many communities far removed from adequate, reliable sources are difficult and costly, with the average full cost recovery tariff required being just under $1,400 to provide each 1,000 gallons of water.

Through the application of a generous subsidy, the NWC – even with this increase – will still provide the first 3,000 gallons of water to every residential customer at a mere $495.06 per 1,000 gallons. In fact, all three of the first residential customer consumption bands are subsidised!

Historically, the NWC has never had a rate structure that fully covers the cost of service, resulting in underfunding of routine operations and improvement initiatives. With rare exceptions – such as the water infrastructure upgradings being done under the Government of Jamaica Major Infrastructure Development Programme (MIDP), the NWC does not usually receive money from taxes or the Budget for providing water service. Water services are expected to be paid for by the customers who receive the service.

This situation has often made it impossible for the enterprise to do the investment and projects that will radically improve its efficiencies and service levels.

We also make the case that even with the marginal increases granted, the rates for water services remain the cheapest average utility cost in Jamaica by far; that NWC is supplying water at about 1,000 times cheaper than the average bottled water cost; and that with conservation and efficient use of water, many customers can actually see a reduction in their water bill come January instead of an increase.

The NWC is committed to using this tariff to continue the many transformative projects now under way such as the Kingston and St Andrew Non-Revenue Water Reduction (NRW) Programme, which is already reaping tremendous results, or a soon-to-be-launched major energy-efficiency project at Mona Reservoir, to the maximum benefit of our valued, paying customers.

- Mark Barnett is president of the National Water Commission. Email feedback to columns@gleanerjm.com.