Water company asks for rate hikes of up to 131 per cent

BY CAMILO THAME Business Co-ordinator

Wednesday, September 07, 2011

St Catherine-based water and sewerage company, Dynamic Environmental Management Limited (DEML) has applied to the utilities regulator for rate increases that, if granted, would result in its customers seeing their bills rise by between 32 per cent and 131 per cent.

DEML, which services four housing developments — Caribbean Estates, Portmore Country Club and Morris Meadows in Portmore as well as Vineyards Estate in Bushy Park — reasoned in its application that it hadn't applied for a rate increase since it began operations while operating costs, associated electricity and water purchase costs among others, have surged upwards.

Moreover, the utility hopes to recover a planned $22.4 million capital investment it says will not result in an increase in revenue.

The proposed water usage rates include a 55 per cent increase for Caribbean Estate and Portmore Country Club, where the rates were set in January 2008, a 32 per cent increase for Morris Meadows (set in February 2009) and a 131 per cent increase in Vineyards (set in August 2006).

The proposal also includes a tripling of the rate for connection and a 60 per cent increase in the service charge for all customers.

The Office of the Utilities Regulations (OUR) plans to meet with community members of Vineyards next Sunday and already held a public consultation in Portmore over the weekend.

DEML made moved into the black for the first time in 2009 -- its fourth year of operations -- when it posted a profit of $6.4 million.

Business Observer calculations show that DEML could earn between $137 million and $150 million in revenue annually should the new rates be approved and water consumption levels (approximately 12.7 million gallons a month) remain the same.

DEML estimates that its operating expenditure will come in at $76.4 million.

The company did not provide information on its liabilities or how the cost of debt would ultimately affect its bottom line. However, delays in completing requisit audited statements was largely blamed for a rate increase not being applied for previously.

The utility company also argues that a price adjustment mechanism that would offset increases in expenses annually was not put in place -- excepting for Morris Meadows -- which disabled DEML from covering higher operating expenses.

Electricity rates soared over the last three years as oil prices climbed while the rate of the water purchased from National Irrigation Commission (NIC) was increased by 100 per cent last year.

DEML said that water purchases from NIC represent approximately 48 per cent of the operational expenses at Caribbean Estates, and may rise considerably should the NIC apply increases already guaranteed over the next two years -- 50 per cent in 2011 and 25 per cent in 2012.

The OUR said that "DEML... is also applying for the application of a Price Adjustment Mechanism (PAM) which the company says will safeguard it from future increases in the consumer price index, foreign exchange and electricity".

"The company, in its application, also says it is planning to complete several capital projects which will not increase its revenue base and is proposing that the K- Factor be applied to compensate for this," added the OUR in its notification.

Most of the capital expenditure will be geared towards relining and tiling the sewerage ponds and purchasing generators and a water truck.

Do you feel buying into Facebook now is a good investment for the long-run?
	Yes
	No

View Results
Results published weekly in Sunday Finance

Username:
Password:

GCT to go down, white rum prices going up

Water company asks for rate hikes of up to 131 per cent