THE state-owned National Water Commission (NWC) says a struggle to meet its ever-increasing operating costs, demanding expectations of customers and stringent new regulatory requirements, are reasons it is seeking a 44 per cent rate increase.

“.The present water rates do not cover the true cost of providing the service and is among the cheapest in the region, about half the water cost in an average US municipality, less than half the average telephone or electricity bill and 1,000 per cent cheaper than the price paid for bottled water.

“The new rates are expected to take effect in January 2008 and to remain in force for the year, replacing the existing tariff which came into effect as far back as February 2004,” the NWC said yesterday.

The commission, which has applied to the Office of Utilities Regulation (OUR) for the rate hike, will, however, have to tell its consumers at several public consultations why it should be granted higher rates.

In its submission to the OUR, the NWC said the objectives of its application include:

. Improvement in the availability, reliability and quality of services provided, while ensuring that potable water and sewerage costs are kept at the minimum levels that would allow for this.

. Ensuring the sustainability of its operations by allowing the utility to earn a reasonable return on investment, which would allow it to source and service the required financing for capital projects.

According to the NWC president, E G Hunter, the commission has been grappling with the challenges of deteriorating infrastructure that has been in place for many decades and was in dire need of major rehabilitation or replacement.

“At the same time, the utility is also constantly being challenged to expand and improve its services to facilitate new developments and to curtail environmental degradation due to untreated wastewater,” Hunter said.

“In order to fulfil these objectives, major investments will be required over the next decade and we, therefore, need to not only recover operating and maintenance costs but we also need to be sufficiently viable to attract the necessary financing for our critical improvements projects,” he added.

Said Hunter: “The stark reality is that we can only provide the service, maintain the operations and effect the improvements that our tariff allows us to. The NWC has recently completed a host of major projects, has a number of other projects under construction and a number of others which are planned to address real needs, but these can only be paid for with an adequate tariff base. The extent and speed with which we will be able to implement the many proposed improvement projects is very heavily dependent on the tariff we receive.”

The 44 per cent request, he said, was arrived at using the internationally accepted Price Cap Methodology which essentially calculates the revenue requirements of a utility by enabling the recovery of all its reasonable costs, including capital costs.