The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Water & Sewerage Corporation (WSC) is exploring “ways and means” to bridge a $17m funding shortfall on works critical to bringing its waste systems “in line with the first world”.

Adrian Gibson, pictured, the state-owned water supplier’s executive chairman, told Tribune Business there was “no doubt” that the cash-strapped Corporation will have to seek government support to finance its Wastewater Master Plan for New Providence.

He spoke out after an Inter-American Development Bank (IDB) report revealed the financing gap’s existence, warning that its original $81m to upgrade Nassau’s water and sanitation systems is insufficient to cover the total cost.

The IDB, in an evaluation of Bahamas-based projects it is financing, warned: “There are also financial risks related to the rehabilitation of sanitation infrastructure in New Providence.

“Available funds fall about $17m short of what is needed to cover the works prioritised by the Wastewater Master Plan, and new financial sources will be needed for completion. WSC also needs to further strengthen maintenance practices for all its physical assets to guarantee their long-term sustainability.”

Mr Gibson, in response, described the comprehensive overhaul of the WSC’s sanitation and wastewater treatment infrastructure as “a much-needed component” of its wider modernisation strategy.

He added that the Master Plan was undergoing an internal review by the Corporation, with Mr Gibson having previously told Tribune Business that a project to connect two-thirds of Over-the-Hill residential dwellings to a centralised sewerage system will cost it almost $75 million alone.

“We are reviewing that plan, and we’re also reviewing ways and means to fund it,” Mr Gibson said of the Wastewater Master Plan and funding shortfall. “No doubt we’ll be approaching government with respect to funding and/or getting a loan.

“This is a much-needed component of the plan. This would modernise Water & Sewerage Corporation’s waste water treatment in the country. It would put us in line with the first world, upgrading sewerage, waste water and their treatment.”

Much of the WSC’s existing wastewater treatment infrastructure is in a state of decay and disrepair, with just 13 per cent of households in New Providence and Abaco serviced by it.

“According to WSC, sewer coverage has remained steady at 13 percent since 2011, with 16 percent of coverage in New Providence and 4 percent in Abaco,” the IDB report revealed.

Mr Gibson, meanwhile, suggested that the long-awaited overhaul of the water sector’s legal and regulatory regime may transfer oversight responsibilities to a newly-created environmental agency rather than the Utilities Regulation and Competition Authority (URCA) as originally planned.

The WSC executive chairman said it had sought input on draft legislation from UK water suppliers and regulators when the Corporation’s senior Board members and executives visited recently, and the example set by other Caribbean nations will also be considered.

“We have some draft legislation we are reviewing and likely revamping,” Mr Gibson told Tribune Business. “We’ve been getting assistance from international partners. We took the draft with us and showed it to different environmental agencies in the UK, leaving it with various companies who will be making recommendations to us.

“We are going to go to Jamaica and St Lucia to review the systems there, and see what parts of their legislation and best practices we can adopt.”

He added that it was imperative that the Bahamas move away from the current water industry regulatory model, where the Government - through the WSC - plays the role of regulator, operator and provider via one entity.

“We want to move away from being regulator and provider,” Mr Gibson told Tribune Business. “It’s either going to be URCA or a new environmental agency; one or the other. Either URCA develops that arm and it’s regulated under URCA, or we create a new environmental agency.”

He pointed to the example of the UK, where the water industry has its own regulator, Ofwat, along with environmental overseers. Each utility has its own regulator, and Mr Gibson added: “Some countries put it under one umbrella, others divide it into departments.

“We’ll certainly be moving in that direction. That’s the way of the first world. You don’t want to regulate yourself and, at the same time, be provider.”

Draft legislation to revamp the water industry’s regulatory structure has been contemplated as part of the IDB-financed project since 2011, but is now into its third administration with little sign of it coming forward on to the Parliamentary agenda.

The IDB expressed concern that regulatory reform could be “completely abandoned” once its loan project closes, even though this was vital to the sector’s “long-term sustainability”.

“Legislation reform is key to ensuring the long-term sustainability of interventions in the sector,” the IDB warned. “As the legislation prepared under the project has yet to be approved by Parliament, there is a risk that - considering the time elapsed since its preparation - it will need to be updated or, more important, that this effort will be completely abandoned after the project’s closure.

“The country’s legal framework does not define an independent entity for economic and environmental regulation of the water and sewerage sector. In the absence of an independent regulator, WSC makes decisions more on a political than a commercial basis.

“The WSC is assigned regulatory functions for service provision and water resources, but these functions exceed its capacity. Tariffs are not linked to WSC’s financial sustainability. Because there are no rules for groundwater abstraction, the sustainability of groundwater resources is threatened.”

The IDB report referred to “political challenges”, with the former Christie administration said to have been unwilling to increase WSC’s consumer tariffs and restructure the Corporation - elements that also delayed legislative reform.

“The legislation developed under the bank’s programme, including the establishment of the needed economic and environmental regulators, has been presented to the Cabinet but is not yet approved,” the IDB added.

“Lack of stakeholder commitment and ownership, particularly related to the strengthening of the legal and regulatory framework in the sector, was recognised as an important risk... This risk materialised during project implementation, as the changed priorities of the new administration and unwillingness to implement new tariff structures and restructure the WSC led to delays in Parliament’s approval of new legislation for the sector.

“Despite the implementation of mitigating measures, and IDB’s continued engagement with the Government and key stakeholders, political realities in the country proved a challenge.”