Editorial

No to a tariff increase for the NWC

Friday, November 30, 2012    

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THERE are two points on which we have no quarrel with the National Water Commission (NWC). One is that water rates are relatively low in Jamaica; the second is that the cost of producing and distributing water is high.

However, we are in full agreement with the members of the Public Administration and Appropriations Committee (PAAC) of Parliament that the NWC should not be seeking to pass on the cost of its inefficiencies to consumers.

Mr Harold Minott, the NWC's vice-president for human resource and administration, in making the case for a rate increase during Wednesday's meeting of the PAAC, pointed out that the last tariff review was done in 2008, and the NWC has had to absorb increasing costs to its operations since then.

We remember quite well the disappointment expressed by the NWC over the 23 per cent adjustment made by the Office of Utilities Regulation (OUR) to the tariff that year.

The NWC, we recall, wanted an increase of 44 per cent to reflect, it said, the real cost of providing potable water and sanitation services across Jamaica.

The company also said that deteriorating infrastructure coupled with increasing demand for improvement and expansion of coverage were other issues that needed to have been taken into consideration.

It, therefore, advanced the argument that the OUR's decision would prevent it from implementing future improvement projects.

The OUR, however, explained that it rejected the 44 per cent application on the basis of a review of the NWC's revenue requirements and pointed to a failure by the water company to meet several performance targets.

But the OUR allowed what is known as the K-factor programme proposed by the NWC to rehabilitate the company's network and "thereby increase efficiency".

Essentially, the K-factor is a programme that the NWC says it will use to generate funds to finance specific types of projects, such as reducing the level of non-revenue water; rehabilitating/retiring selected waste water treatment plants; and expanding the sewer collection network in Kingston and St Andrew.

But we have been told by the NWC that it has been losing billions annually to theft and fraud. In fact, the PAAC was told that only 32 per cent of the water distributed by the NWC is paid for, as the other 68 per cent is shared between water lost to leaks and the quantity that is stolen.

Additionally, on Wednesday, PAAC member Mr Mikael Phillips scolded the NWC for wanting to increase rates while sitting on more than $8 billion in loan funds provided for service improvements islandwide.

According to Mr Phillips, the NWC has spent only $2.5 billion, or less than 20 per cent, of the $10.7 billion it has acquired to complete 11 projects in its 2012/13 capital programme.

Most appropriately, Mr Phillips criticised the NWC for seeking a tariff review when it was not doing the things that it should to bring in additional revenue, including expanding its service into more rural communities.

Based on those facts, we hold that the OUR should not sanction another tariff increase until the NWC implements serious measures to improve its efficiency. We would not be surprised that after tightening its operations, the NWC would experience some form of liquidity.

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