The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Water & Sewerage Corporation’s $249 million taxpayer subsidy over the 12 years to 2015 could have been slashed by $93 million if all water leakages had been eliminated.

An Inter-American Development Bank (IDB) report, highlighting the “unheard of success” achieved by an $83 million project it financed to combat the Corporation’s non-revenue water (NRW) losses, has exposed the vast drain this has imposed on the Bahamian public and the Treasury.

“The Government of the Bahamas’ total subsidy is large – $249 million since 2003,” the IDB paper disclosed. “Over the period from 2003-2015, the total value of recoverable [NRW] losses was roughly B$ 93 million, which is just over one-third of the total subsidy over the period.”

NRW refers to water supplied by the Water & Sewerage Corporation through its distribution system, but which never makes it to the end customer, as it is lost via leaks from its main pipes, customer connections, and fire hydrants and valves.

The $83 million NRW reduction strategy, implemented on the Corporation’s behalf by contractor, Miya, slashed water losses by 1.8 million imperial gallons per day per year during the project’s first two years.

“This translates into a reduction of NRW of about 40 per cent in the first 12 months, and 25 per cent more in the second 12 months. Reduction rates this high are almost unheard of in NRW projects,” the IDB paper said.

“In the mid-1990s, the mains burst rate was at about 100 bursts per 100 kilometres (km) a year. However, the mains burst rate fell considerably to about 40 bursts per 100 km a year once mains replacements reached a significant level, and pressures and pressure transients were reduced.

“Bursts have declined further under the [IDB/Miya project] to about 17 bursts per 100 km a year, which represents good performance, given that the ‘unavoidable’ rate is 13 bursts per 100 km a year.”

The IDB paper said “a more dramatic fall” had been seen in reduced leaks from direct customer connections, which had fallen from a ratio of 150 per 1,000 connections a year to 14 per 1,000 connections a year.

“There is still some room for improvement, given an unavoidable figure of 5 per 1,000 connections a year. Together with pressure control and aggressive leak detection, the replacement of service connections has been a fundamental part of the [project] strategy, and the main cause of the reduced leakage,” it said.

“This rapid reduction had huge beneficial impacts on the use of expensive desalinated water and increased revenues. Operating cost recovery rose from 0.65 to 0.82, the EBITDA fell from a loss of $19 million to a loss of $8.8 million, and the Government subsidy fell from $25 million to $9.2 million. These are impressive improvements in a short period of time.”

The IDB report added that the project had also enabled the Water & Sewerage Corporation to slash its $14 million receivables by 50 per cent, and also reduce overtime expenses associated with having to repair numerous leaks.

However, it conceded that a key aspect of the project - to ‘win back private well users and have them become Water & Sewerage Corporation customers once again - had yet to reach the targets previously set.

“WSC has been able to steadily and noticeably reduce overtime expenses, probably due to a lower number of pipe break repairs,” the report said. “Also, WSC reported in 2015 that it had cut the $14 million receivables in half, which is a significant help in its overall financial picture.

“The number of new customers or returning customers has been lower than hoped. The ‘win-back’ programme has not achieved its targets, at least so far.”

The report also warned that the benefits from the $83 million project’s investment “could be in jeopardy of dilution if proactive plans are not made soon by WSC and IDB”.

While the project was likely to hit its NRW savings target of 2 million imperial gallons of water per day, per year, and leak detection, repair and line replacement would continue, the document said preparations for future large-scale maintenance activities were required.

“The need to maintain the reduced NRW level might require undertaking some more expensive activities, such as some mains replacement, that would have benefit far beyond the several years that will be left on the contract at that point. Discussion of the plans – at least in concept – would be good to start soonest,” the IDB report added.

“In addition, conversations should begin now on the training planned for the maintenance phase, and the transfer of NRW operations on New Providence back to WSC. These activities will take more than trained staff – a consistent sufficient budget is needed to keep the losses from rising again, as they have done before.”

The IDB paper also called for regulatory issues surrounding the water sector to be addressed, given that such responsibilities were supposed to have been removed from the Water & Sewerage Corporation’s hands and transferred to the Utilities Regulation and Competition Authority (URCA).

“Future plans for longer-run water supply sustainability on New Providence also must be discussed soon – well before the maintenance phase is over, with apolitical, realistic discussions of the benefits of regulation and periodic tariff increases,” the report added.

“If these issues are not dealt with directly and objectively, WSC will not be able to provide high-quality services for its customers on a sustainable basis.”