THE OFFICE of Utilities Regulation (OUR) has recommended a 26.36 per cent tariff increase for the National Water Commission (NWC) to enable the state-owned agency to meet the shortfall between its projected operating expenses and its revenue for the financial year 2003 to 2004.
"The Office is compelled to make reasonable provisions for the NWC to embark on a serious programme of rehabilitation of its plant, for it to meet its obligation to its lenders as well as to provide a reasonable basis for it to finance its operations," J. Paul Morgan, Director-General of the OUR said.
The rates would become effective on January 1, 2004. The sewage rates would remain at 100 per cent of water charges.
The NWC and the public have until December 15 to request a reconsideration of the decision. After December 15, the OUR will review issues which might be raised by the NWC or the public before it can make a final determination on December 22.
According to the OUR, the operating expenses of the NWC for the test year as it is called which is the period 2003/2004 is $6.9 billion, however, the NWC had pegged its expenses at $7.9 billion.
"The OUR's estimate of the NWC's revenue requirements is $7.5 billion while the NWC has estimated this requirement at $8.6 billion. Estimated revenues based on the existing rates are computed at, in the case of the OUR $5.9 billion, while the corresponding amount by the NWC is almost the same at $6.1 billion. You will then note that the shortfall of projected revenues to requirements is respectively $1.6 billion and $2.7 billion," Mr. Morgan said.
"This is essentially the difference in position taken by the OUR to the proposal made by the NWC. The upshot is that we estimate that an across-the-board increase of 26.26 per cent is required to overcome this shortfall and this represents the level of increase that the office has approved," Mr. Morgan explained.
"But such a request would have to be based on a proffering that the OUR had included errors of fact, or that there were changed circumstances since the submission of the application," Mr. Morgan stated.
COMES WITH PROVISOS
The tariff increase comes with provisos that include a number of performance benchmarks that the NWC must attain, such as customer care parameters, plans to address the problems at the Harbour View sewage treatment plant, and an agreement by the NWC to satisfy the requirements of the environmental regulator, National Environment and Planning Agency (NEPA) by September 2004.
The Price Adjustment Mechanism (PAM) rate will also be reset to zero, and deductions made to pass on efficiency gains to the consumers.
The OUR had received an application for a tariff review from the NWC on September 5, 2003. The request included an across-the-board increase of 42 per cent, that the sewerage charge remain at 100 per cent of the water rates, and the introduction of a 'K' factor to generate revenue streams to cover additional capital works imposed by the Government or by regulatory intervention.
