Mon | Feb 24, 2020

NWC seeking sharp increase in some rates

Published:Friday | October 19, 2018 | 12:00 AM

The National Water Commission (NWC) is looking to pull in a further $34 billion in revenue annually by hiking the rates it charges its customers.

The NWC has applied to the Office of Utilities Regulation (OUR) for a 23 per cent average increase in water charges and a 38 per cent average increase in sewerage charges. This could result in the typical household seeing a five per cent increase on their bills.

According to the NWC, the increase is needed to support its objectives of improving and expanding potable water and sewerage services, encouraging and improving operating efficiencies, and creating the financial viability necessary to sustain its operations.

In a release yesterday, the OUR said that starting October 30, it would begin hosting public consultations with NWC customers to get their feedback on the application. The schedule of consultations will be published in the media.

The OUR has 90 to 120 days to make a determination.

The OUR last granted the NWC a rate increase in 2013. There has been no indication yet from the OUR on when it expects to issue a determination.

The NWC is also proposing the following changes to its rate structure:

- A consolidation of its residential rate blocks from six to three. The first block, which represents a typical household's consumption, would see a five per cent increase in rates.

- The introduction of a decreasing block tariff for commercial customers with consumption above two million imperial gallons/month (9.1 million liters/month).

- An increase in the first block of commercial, condominiums, and schools' rate categories by 36 per cent for water and 46 per cent for sewerage.

- The introduction of standby charges for major commercial customers who only use NWC services as back-up supply.

- The introduction of sewerage service charges to reflect NWC's fixed cost of providing customers with sewerage services.

- That the price cap tariff reset period run for three years (2019-2021) instead of the customary five-year review period.

- The K-Factor variable, which was approved in the 2013-2018 Tariff Determination to finance OUR approved capital infrastructure projects, remains at 16 per cent.

- The X-Factor, that is the productivity efficiency factor, be set to zero until 2021, when the efficiency gains are to be reviewed.

- The inclusion of a Z-Factor provision as a special adjustment to the Price Adjustment Mechanism (PAM) to account for exogenous events that affect costs not due to NWC's managerial decisions and which are not captured by the other elements of the price cap regime.