The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Water & Sewerage Corporation is facing a greater-than 60 percent revenue slump just after being rescued from an “intolerable/emergency-like situation”, it was revealed yesterday.

Desmond Bannister, minister of works, told Tribune Business that the state-owned water supplier has been plunged into another “real challenge” after the COVID-19 economic fall-out dropped April revenues from $5m to just $1.9m year-over-year.

The 62 percent decline, which was exacerbated by the loss of many Abaco customers due to Hurricane Dorian, was also driven by New Providence revenues falling from $4.4m last year to just $1.8m as persons were either unable to pay or elected to exploit the corporation’s “no disconnection” policy.

And the Water & Sewerage Corporation would likely be in an even greater financial plight if not for some $68.7m in savings generated over the six-year period to 2018 by a project that plugged multiple leaks from its pipe distribution network, a report released yesterday revealed.

The Inter-American Development Bank (IDB), in an assessment of the $83m financing it provided to address such water losses - known as non-revenue water (NRW) - and other problems undermining the corporation’s sustainability said its woes had been reduced to “a manageable problem” just before the COVID-19 pandemic struck.

The report, which has been seen by Tribune Business, discloses that water losses due to “leaks, breaks and overflows” from the corporation’s distribution systems had been slashed by 68 percent in the six years to 2018. And losses for the 2019 first half fell to 1.99m imperial gallons per day - below the target set for the year.

Describing the resulting cost savings as “significant”, the IDB said the reduction in system losses had rescued the water supplier from a financial crisis by ensuring more product reached its consumers to drive higher billings and revenues.

Drawing on estimates from the contractor that carried out the repairs, the report said: “At the end of 2018, the cost savings due to reductions in system input volumes had already amounted to $31.5m, based on marginal production costs of $8.18 per 1,000 gallons.

“The increase in revenue, compared to the baseline, amounted to $37.2m. Thus MIYA estimates that the total financial benefits added up to US$68.7m by 2018. Thus Water & Sewerage Corporation has moved from an intolerable/ emergency-like situation in 2012 to a manageable problem that requires good systems management.”

Mr Bannister, who has ministerial responsibility for the Corporation, yesterday acknowledged to this newspaper that the IDB-financed project had “made a huge difference” to the Corporation’s financial and operational sustainability. “I think then Corporation would have been in a worse position financially” without it,” the minister said.

However, he quickly conceded that “there’s still huge challenges to be faced” with the most pressing difficulty being the fact that the Water & Sewerage Corporation continues to sell water at a price below the cost of production.

The price paid by consumers has not increased for over two decades despite ever-rising production costs, and Mr Bannister said this situation was making the Corporation ever-more reliant on taxpayers to plug its financial holes while also depriving it of critical funds for capital works projects such as ensuring all Over-the-Hill residents have access to water in their homes.

He quickly pointed out, though, that an increase in consumer tariffs that have remained unchanged since 1999 is not being considered by the Government at this time given that it would further burden already-stressed Bahamians dealing with job and income losses amid the COVID-18 fall-out.

“The main challenge is looking at the tariff issue,” Mr Bannister told Tribune Business. “We have a Corporation that continues to exist off [taxpayer] subsidies. The Government subsidises Water & Sewerage Corporation to the tune of $25m a year. We continue to provide everyone with water at less than the cost of producing water.

“When you do something like that you can never advance. There are plans to bring water into area of Over-the-Hill where people don’t have running water in their homes. Can you imagine that in this day people do not have running water in their homes?

“Water & Sewerage will never be able to engage in those capital works unless we find a way to deal with the tariff situation and make the production of water pay for itself.”

The IDB report also warned that the gains from the non-revenue water loss reduction initiative could be endangered if the Corporation’s tariff pricing conundrum is not swiftly addressed, as this will continue to undermine its financial sustainability and independence.

The multilateral lender said continued government control, coupled with the absence of an independent regulator for the sector, “creates unfavourable conditions that could result in further delays in tariff adjustments, with deleterious effects on the Water & Sewerage Corporation’s revenues, and inadequate signals to customers on the real costs of drinking water provision.

“The current tariff regime has not been adjusted since 1999 in spite of the increases in the costs of production and distribution. The need for yearly Government transfers, to offset low revenues, decreases Water & Sewerage Corporation’s necessary autonomy and readiness to address operational and administrative challenges in a timely and effective manner.”

Mr Bannister, emphasising that no increase in water tariffs is imminent, said: “It’s not something that the Government is considering. It’s not a matter before us at all, but these are the kinds of serious issues that at some stage have to be addressed. They’re not being considered now.”

Confirming that the water utility is now feeling the full effects of COVID-19, the minister added: “I was just looking at some figures today. Last year April they would have collected a little over $5m. This year April, they’re at $1.9m.

“For New Providence, where last year April they collected $4.4m, this year they’re at $1.8m. It is also a huge challenge in the Family Islands. They would have collected over $600,000 last year, and this year they’ve collected $150,000. You can see when a Corporation relies on the Government to keep giving it a subsidy, and it’s income is down by that much, it’s a real challenge. They cannot exist.”