No one, least of all the National Water Commission (NWC) and the Government, should have been surprised by the consumer and political outrage spawned by the NWC’s request for a 51 per cent increase in water rates.
Coming in the middle of a drought, when the commission’s customers endure extended periods without water, and against the backdrop of consistent complaints of poor service, the request, even for a five-year period, seems, at best, tone-deaf. Moreover, the application for a 51 per cent upward adjustment is not the whole story. The request also includes the maintenance of the so-called K-Factor, an additional charge of up to 20 per cent that the NWC is allowed to tack onto customers’ bills to fund capital projects.
There are calls for the Office of Utilities Regulation (OUR) to reject, or at least pare down, the demand. This newspaper suspects that the latter outcome is what the state-owned NWC expects, and that this may be why it pitched the tariff request at such a high level, notwithstanding its argument that the increase is necessary to generate the income required to meet its financial obligations.
Indeed, The Gleaner’s Editorial Board expects the regulator, consistent with its mandate, to robustly review the NWC’s request before arriving at a determination. The OUR’s job in this regard includes analysing the owner’s obligation to ensure that the enterprise is properly capitalised and appropriately managed, as well as canvassing consumers’ views on the matter.
SYSTEMIC FINANCIAL CRISIS
But, separate and apart from the specific tariff assessment, the Government should facilitate a full and transparent examination of the long-term, systemic financial crisis that has dogged the NWC, with the aim of arriving at a national consensus on a solution and securing broad agreement on its implementation. In this respect, the Editorial Board recommends joint hearings on the state and future of the NWC by Parliament’s Economy and Production Committee and Infrastructure and Physical Development Committee. Relevant technical experts should be invited to make submissions and give testimony before the committees.
To help keep the process honest and to ensure it is not bogged down or derailed by political theatrics, the Editorial Board also proposes that Parliament facilitate the co-option of independent financial and engineering experts to the committees, one of whom might be appointed joint chair.
With estimated production of 190 million gallons of water daily, the NWC is responsible for around 90 per cent of the country’s potable water supply. It has more than 400,000 customers and serves approximately two million people.
There are two other notable facts about the NWC:
* More than 60 per cent of the water it produces is never paid for, either because it is lost during transportation through old, leaky pipes or because it is stolen by consumers. This is what the company calls non-revenue water; and
* The NWC loses money hand over fist. Were it not a government enterprise, the NWC would likely have been insolvent and declared bankrupt long ago.
No audited accounts for the company have been published since 2021. That year, the company lost J$3.3 billion – an improvement on the J$5.6-billion loss recorded the previous year – and reported an accumulated deficit of J$47.2 billion, J$5 billion worse than in the preceding year.
Its equity stood at a deficit of more than J$17 billion, a decline of nearly J$6 billion from the previous year. Dire as that position was, it was substantially better than it might otherwise have been, because the NWC carried capital reserves of J$30.2 billion, largely the result of an asset revaluation, together with nearly J$11 billion in capital transfers from the Government.
Indeed, the company’s auditor made this observation about the NWC: “ The ability of the Group and the Commission to regain and sustain profitability and to generate the incremental cash flows to meet its significant debt service obligations and other operational costs is … dependent on its ability to successfully minimise operational costs and reduce non-revenue generating water supplied. These conditions indicate the existence of a material uncertainty that may cast doubt about the Group’s and the Commission’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.”
There have been no subsequent audited accounts from which to determine how matters might have changed, but the Government’s public bodies revenue and expenditure report for the current fiscal year projected that the company would record of a deficit of J$104.1 billion in 2026/22, against a loss of J$2.46 billion the previous year. Its accumulated deficit was estimated to have fallen to J$37.9 billion, while its capital reserves was up to $38.15 billion.
However, what appears on those spreadsheets masks the revelations in the auditor general’s performance report on the company earlier this year and the confirmation of those findings, and more, by NWC executives, when they appeared before Parliament’s Public Accounts Committee (PAC) last week.
The company had accumulated over J$30 billion in payments arrears, including more than $20 billion in unremitted general consumption tax (GCT). This, prima facie, is a failure of governance by the NWC board – but one which could only have been done with the acquiescence of the Government. In a sense, failing to pay GCT represents a tariff hike that is paid by all taxpayers – just not one verified by the OUR.
