Thu | Aug 22, 2019

Editorial | Empathy not enough from NWC

Published:Thursday | May 16, 2019 | 12:13 AM

If you believe the National Water Commission (NWC), the government company that has a near-monopoly on the extraction, distribution and sale of potable water in Jamaica, it is the benevolent operator who cares about its customers and wouldn’t stick them too hard. But conflating statements with action is problematic.

The NWC currently has before the Office of Utility Regulations (OUR) a submission for an average 23 per cent increase on its water tariffs for the 2019-2022 periods. That amount, it says, won’t be sufficient to deliver the amount of revenue it needs to recover its costs and turn a decent profit, thus allowing it to reinvest in the operation.

To do that, by the commission’s calculation, would require that it generates J$39.9 billion in revenue, which is J$11 billion, or approximately 41 per cent, more than the approximately J$26.9 billion for the test year used to justify its rate increase application. But to achieve the higher level of revenue, the NWC said, it would have to increase its water rates, on average, by 50 per cent, and those for sewerage by 72 per cent.

Such a jump, though, would be steep, according to the NWC, for it to contemplate. They would be “unaffordable for its customers”. It would mean, for instance, the bottom quintile of the population spending 6.3 per cent of their monthly household income for 1,650 gallons of water – the average amount for a family of five – “materially exceeding the benchmark of five per cent”.

Instead, the commission asked for the average 23 per cent increase on water, and limited that for sewerage to 38 per cent. This would gross the commission’s revenue of J$$33.9 billion. In going this route the commission, theoretically, decided to forgo a return on equity. Which, though, isn’t the entire story.

The company requested that it be allowed to maintain the so-called K-Factor charge, an additional 16 per cent, applied to consumers’ bills, to be used to finance capital projects. That would offset a large chunk of the forgone 23 per cent return on equity, which would be buttressed by the efficiency gains over the four-year life of the tariff regime.

While we applaud the NWC’s concern for the economic welfare of its customers, the company’s governors and managers seem incompetent in translating that empathy to concrete policy action and decent service delivery.

Take the case of the current shortage of water in the island, in particular in the Kingston Metropolitan Area (KMA) that include large swathes of the parish of St Catherine, where more than half of Jamaica’s 2.8 million people live, including the bulk of NWC’s more than 400,000 customers. The crisis, in part, is the result of damage to water mains caused by ongoing major roadworks in the KMA, as well as the NWC’s own infrastructure projects. These are now being exacerbated by drought.

Rationing water

The NWC, in managing the crisis, turned to rationing water. Ostensibly, there are schedules for when communities should have water in their taps, or suffer lock-offs. The problem is that these schedules are, generally, not adhered to – and more tellingly so in poor areas. It is a common sight in inner-city communities of armies of residents, mainly women, pails in tow, on the march in search of water. In some cases, their taps have been dry for months.

We appreciate the larger issue of Jamaica’s skewed distribution of water and the planned billion-dollar projects to divert the commodity from the water-rich north to the deficit south. But the immediate issue is one of management. They can’t seem to get it right.

The crisis also poses questions about the efficacy of the US$42.5-million contract the NWC signed in 2015, to half the commission’s non-revenue water in the KMA over five years. At the time, the NWC earned no money on over 70 per cent of all the water it produced, which, based on figures in its submission to the OUR, appears still to be the case. Most of the unpaid-for water doesn’t reach consumers, but is lost in transmission.

The commission’s empathy with poor people is great, but they would prefer management that delivers water in their taps when promised, and not being asked to pay agreed rates for a commodity whose supply is patchy to non-existent.