Left: E.G. Hunter, president of the National Water Commission, says high-volume consumers should pay more for connecting to water schemes in which his agency invests heavy capital. Right: J. Paul Morgan, director general of the Office of Utilities Regulation, says he is just about to review information on National Water Commission's new impact pricing policy, but has no objections to it in principle.
Three hotel developers on Jamaica's north coast have signed contracts with the National Water Commission committing to absorb bigger water charges that amount to about 40 per cent of the cost of piping potable supplies to their properties.
The NWC said it would absorb the other 60 per cent.
The contracts represent for the water agency a fundamental shift in how it bills for the commodity it produces, through what NWC president EG Hunter refers to as "impact pricing", which places the burden of the cost of water delivery on high end users.
"Our philosophy is that the benefit population should pay," said Hunter. "So we levy impact charges proportionate to the investment and individual demand."
The policy shift does not require the approval of the utility's regulator, but J. Paul Morgan said this week he would be studying figures supplied by NWC to ensure the agency does not pass on to customers charges that it should absorb as provider of the service.
"We need to do the math on the residual or incremental benefit," said Morgan, director general of the Office of Utilities Regulation.
Supply deals
NWC has inked water supply deals with the 846-room Riu Resorts for its Mammee Bay, St Ann property; Iberostar which is developing a 350-room seaside resort at Rose Hall, St James; and Lee Issa's Couples Group which plans to start construction on a US$57 million, 370-room hotel in Trelawny in or around January.
As for the value of the contracts: "It's in the millions," said NWC communications manager Charles Buchanan.
Water to other commercial properties are billed at a standard rate of $120 per litre.
The water agency is also negotiating a fourth contract with another Spanish group, Fiesta, which plans to build a near 2000-room resort in Lucea, Hanover for US$150 million, as it rides a construction boom of largely resort developments.
But the commission's biggest deal is likely to be with the Harmony Cove developers when that US$1.2 billion luxury complex goes to construction and ties into the US$40 million Martha Brae scheme under construction by Sogea Satom.
Morgan said one foreign hotel developer had protested the contribution required by his property, saying that the case was referred to the OUR for review by a government agency.
But in that case, said the regulator, OUR found the charge to be reasonable.
"The sums were negotiated in all three cases," said Buchanan, suggesting that the parties were able to iron differences over price at the table.
Impact pricing is used as an approach to water billing elsewhere in the world.
The OUR's only concern, said Morgan, would be that the parameters of the NWC policy suit the Jamaican context.
Information to the Financial Gleaner suggests that the new policy of treating water as a "private good" has its detractors, with differences over concessions that should be made to public infrastructure managers, such as airport and highway operators.
The regulator said that, for him, the drawback is the dependence on a developer to carry through on his plans.
"Here is how I think about it," he said. "If that customer does not opt in, then the investment would have been unnecessary."
Hunter was mum on the size of the water contracts sealed to date, but said NWC passes on roughly 35-40 per cent of the cost of supply to developers, who pay overtime according to the terms of individual contracts.
Those contracts are based on developers' estimates of supplies needed.
The idea is to generate the revenues of sufficient size to finance maintenance of its systems, an area that the NWC has acknowledged as a major failing over the years.
The 'impact pricing contracts' are specific to water systems that the state agency has secured commercial loans to build or expand, repayment of which are financed from water revenues generated when the system is put into operation.
The deal with Riu III, for example, followed on a US$2 million loan from National Commercial Bank, said Hunter, to effect supply to the Spanish hotel.
The shift - which sees the commission placing equal focus on expansion, rehabilitation of old schemes and 'prudent management', puts new emphasis on revenue generation for maintenance of the island's water systems.
Morgan said he could only pronounce on whether a 40 per cent charge was equitable after assessing the numbers.
