The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Consolidated Water allegedly gained “significant” financial benefits after a change to its Blue Hills water plant contract, which was agreed by the Water & Sewerage Corporation, allowed it to supply poorer quality water.

A consultant’s report, which has been obtained by Tribune Business, alleges that the lower quality supply from Blue Hills - Nassau’s largest reverse osmosis plant, which supplies some 50,000-plus Water & Sewerage Corporation customers - “is certainly a primary reason” for the increase in red water complaints by customers.

The report, by Ian Watson of Tampa-based RosTek Associates, found that the contract to facilitate the Blue Hills plant’s 2011 expansion, from 6 million gallons of water per day to 10 million gallons, had resulted in the Water & Sewerage Corporation incurring “high” ‘red water ‘mitigation costs.

RosTek, which was hired to perform a forensic review of the Blue Hills contract, has now been retained by the Water & Sewerage Corporation to help renegotiate the terms with BISX-listed Consolidated Water.

Tribune Business understands that the priority is to insert language stipulating the minimum water quality standards Consolidated Water must meet, plus penalties that will be applied when the Blue Hills plant operator fall short.

And Mr Watson’s report suggests that the Water & Sewerage Corporation also seek a legal opinion on whether Article 19 of the Blue Hills contract, which requires Consolidated Water to “assume full responsibility” for any damage to the Corporation’s property arising from Blue Hills’ operation, could be used to recover its ‘red water’ mitigation costs.

“This brief article could be construed as providing a mechanism by which the Water & Sewerage Corporation could recover the costs it has incurred as a result of the flushing programme to mitigate the red water problems, and the costs of providing mitigating measures to its customers,” the report said.

“It is suggested that Water & Sewerage Corporation may wish to consult with outside counsel concerning this matter.”

And RosTek added: “There are also no penalties, financial or otherwise, included in the contract language for failure to meet the minimum water quality requirements.

“For example, the finished water LSI is required to be positive at all times for the original plant. Our preliminary evaluation of the water quality data indicates that, for the most part, this requirement has not been met, and it is our belief that this condition has led directly to the red water problems that have been plaguing Water & Sewerage Corporation for many years.

“The cost of mitigation to Water & Sewerage Corporation has been high, both in remediation measures such as the supply and maintenance of filters for the consumers, but also in staff time, and water lost during the flushing operations.

“Other examples of water quality parameters that have not been met from time to time are the finished water chlorine residual, and the chloride content of the finished water.”

The RosTek report, which was formally presented to the Water & Sewerage Corporation Board on December 17, identifies the modified paragraph 10e) in the Blue Hills expansion contract as being the root cause of the problems.

The original contract required Consolidated Water to supply water with a “minimum total hardness and a positive LSI”, but the revised version for the 2011 expansion - which was required to eliminate the barging of water from Andros to Arawak Cay - removed these stipulations.

The report said the Water & Sewerage Corporation knew of these changes, but was unable to say whether management realised the implications when it came to water quality and ‘red water’.

“At the time of signing of the expansion contract, this difference to Blue Hills 1 was known to Water & Sewerage Corporation,” the report said.

“Whether or not the implications of this difference in terms of water quality (red water) in the distribution system were recognised by Water & Sewerage Corporation is not known............

“[It] means that the expansion plant product has a significantly negative LSI, which when mixed with the original plants’ effluent, the LSI of which is barely positive, results in a blend going to Water & Sewerage Corporation, storage that is very aggressive, and is certainly a primary reason for the increased number of red water complaints and events subsequent to the start-up of the expansion plant.”

In unveiling the report’s findings, Bradley Roberts, the Water & Sewerage Corporation’s departing chairman, was effectively pointing the ‘finger of blame’ for New Providence’s ‘red water’ issues at his management team - many of whom were in the same positions when the revised Blue Hills contract was signed - and the former FNM administration and the Board.

The RosTek findings will also likely be seized upon by Consolidated Water’s rivals for the contract to operate Nassau’s second reverse osmosis plant, Windsor, which is presently ‘up for grabs’.

Apart from the water quality/’red water’ issues, the RosTek report also identified other deficiencies with the Blue Hills contract. These include:

• Consolidated Water has “no mechanical provisions” in place to ensure that water below the necessary quality does not pass through the tariff meter - something the report acknowledges is difficult to do.

• The required weekly report on total water supplied by Blue Hills to the Water & Sewerage Corporation, and costs incurred in doing so, is not being provided.

“While some of the information is provided on the monthly invoice, these weekly reports have not been received by Water & Sewerage Corporation on a regular basis,” RosTek said.

“The requirement for a monthly report summarising the weekly reports cannot be in compliance.”

• The RosTek report also questions whether the performance guarantees for Blue Hills, either a performance bond or bank guarantee, were being provided by Consolidated Water to the Water & Sewerage Corporation on an annual basis.

The RosTek report also expressed concern that the Blue Hills expansion contract resulted in diesel fuel and power consumption costs increasing by 5.3 per cent and 2.2 per cent, respectively.

These increases, it implied, would be passed on to the Water & Sewerage Corporation and its customers through higher water costs, and the reasons for the increase were unknown.

RosTek described this as “a significant change which impacts adversely the cost of water which Water & Sewerage Corporation must pay”.