Gordon Brown | OUR: Service charges apply even with no water
We write in response to the open letter from 'Unserviced Customer' of Royal Flat, a National Water Commission (NWC) customer of Mandeville, addressed to the Office of Utilities Regulation (OUR) published in this newspaper on July 21, 2018, headlined 'NWC charging for dry taps'.
The writer expressed concern about being billed by the NWC for an unrented apartment, which we take to mean unoccupied. The NWC customer detailed the current charges of his water bill as:
- Water charges: $0.00;
- Service Charge: $830.00;
- PAM 1.05%: $8.72;
- X-Factor 6.20%: $52.00;
- K-Factor 16.00%: $125.00.
It was also stated that the NWC is "... being paid by many of us for water that we are NOT getting".
The OUR expects the NWC to respond to the writer's general point regarding complaints by its customers. As the concern raised relates to charges approved by the OUR and, indeed, given that the correspondence invites a public response, the OUR is providing clarification and explanation about the regulatory principles and practices that are involved. We hope as well that the information provided will be useful to other NWC customers who may have similar experiences and complaints.
First, it is important to clarify that the service charge is separate and distinct from the sum that is actually charged for the volume of water supplied. Rather, the service charge itself is a fixed sum and is related specifically to costs associated with the water-supply infrastructure and operations, such as meter reading and bill-preparation services for the contractual supply of water. In other words, it is the charge for making the service available to the customer.
The application of a service charge is not unique to the provision of water, but is a standard charge commonly applied to other utilities as well. The logic of a service charge is that even if the volume delivered is low or non-existent, there is still a fixed charge attached to the infrastructure costs that has to be kept in place to provide the volume of service whenever it is available and in demand.
The other charges, which are described below, are calculated as a percentage of the amount being billed. In this case, the amount being billed is the service charge.
The Price Adjustment Mechanism (PAM) is the monthly adjustment to account for changes in factors of production over which the NWC has no control. These factors include the foreign-exchange rate (Jamaican dollar against the United States dollar), the cost of electricity, and the consumer price index (CPI)/inflation. The PAM is reflected on customers' monthly bills as a percentage and can be a negative or a positive adjustment.
The X-Factor is essentially a productivity-efficiency factor that is determined by the OUR at the five-year tariff review. The productivity efficiency factor is the mechanism by which the NWC shares the gains of its efficiency with its customers.
The K-Factor is an OUR-approved sum that allows the NWC to acquire funding for capital projects in order to improve the overall operational efficiency and service quality to its customers. The contribution amount for K-Factor projects appears on customers' bills as a percentage of the charges on the bill, and the actual percentage will vary from year to year.
Please do not hesitate to contact me if you have any further queries. You can also visit our website for more details: www.our.org.jm.
- Gordon Brown is public-affairs coordinator of the Office of Utilities Regulation. Email feedback to firstname.lastname@example.org.