The Tribune

• Hints 3,000 free gallon days ending

• And price rises linked to use looming

• Utility must be dragged ‘into 21st century’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The deputy prime minister yesterday voiced optimism that Water & Sewerage customers are “prepared” for price increases as he hinted they will no longer receive their first 3,000 gallons for free.

Desmond Bannister, who as minister of works also has responsibility for the corporation, told Tribune Business that the government has little choice but to drag the water utility “into the 21st century” following the fiscal and economic blow-out inflicted by a combination of COVID-19 and Hurricane Dorian.

With no tariff increase for 22 years, he suggested it simply cannot continue to sell water to Bahamian businesses and households at a price below the cost incurred in purchasing it from Consolidated Water, the BISX-listed reverse osmosis plant operator, and then rely on annual $20m-plus taxpayer subsidies to cover the difference.

Besides ending the free provision of 3,000 gallons per customer every month, Mr Bannister said a price increase will also encourage water conservation and better use of a scarce essential resource. He added that consumers who used significant amounts of water will be required “to pay appropriately”.

While he would not be drawn on the timing and extent of any water price increases, the deputy prime minister indicated that more will be revealed about the reform and turnaround plans for the Water & Sewerage Corporation when the 2021-2022 Budget is unveiled in just over three months’ time in late May.

“It’s very kind of you to say it’s mixed,” he replied to Tribune Business, when questioned about the Corporation’s financial history that is stained with much ‘red ink’. “The Water & Sewerage Corporation has always lost money. It’s been a regular loser. It has never to my knowledge made any money, and has to be brought into the 21st century.”

With no tariff increase since 1999, or the 20th century, the Water & Sewerage Corporation’s prices have failed to keep up with inflation let alone rising water production costs. Asked whether consumers can handle a price increase amid the fall-out from COVID-19, Mr Bannister said: “I think we have the people to do it. I think we have the leadership to do it.

“I think the Bahamian people are prepared for it. I don’t see it being a huge increase. I think all of us, we have to appreciate that the Corporation has been essentially giving away 3,000 gallons of water for free at the start of every billing period.

“The new tariff structure is going to help them in conservation. We understand it’s [water] an important natural resource, and we need to conserve more and use it appropriately.” Mr Bannister said the free provision of 3,000 gallons, and government subsidy, had convinced many Bahamians they were getting it for nothing even though their taxes undergird the Corporation’s activities.

“We here in The Bahamas, we believe we’re getting something for free when we’re essentially paying for it out of the other pocket,” the deputy prime minister told Tribune Business. “What we are doing is going to ensure that users, especially heavy users, will pay for what you use rather than the use being subsidised by somebody else.

“I don’t see Bahamians having any challenge with it. The people who utilise a lot of water are going to pay appropriately for it.” Many observers will likely question the wisdom of imposing increased utility costs at this time on an economy, businesses and households that are still struggling to regain some stability as the COVID-19 pandemic drags on.

However, Mr Bannister indicated that the Water & Sewerage Corporation and the Government will seek to balance collecting what is due to the utility with a customer’s financial condition. “Water is a necessity, so it’s a service we have to provide and ensure everyone can get it,” he added.

Providing no details on the timing and amount of any water price increase, Mr Bannister said of the Corporation’s planned turnaround: “That’s a project for the upcoming Budget. We anticipate that in the next Budget we’ll be able to unveil any progress we have made with that.

“That process is ongoing. We know the kind of work we have to do. This is one of those issues where it’s important for us to to be able to make a difference in our country. It’s one of any number of major initiatives we have to bring to completion along with all the other matters going forward.”

The Water & Sewerage Corporation tariff increases are part of a bid by the Government “to accelerate long overdue reform of loss-making state-owned enterprises (SOEs) given the combined $408m drain they have imposed on Bahamian taxpayers this year in the form of subsidies - a figure that is expected to sharply increase due to COVID-19.

Senator Kwasi Thompson, the newly-appointed minister of state for finance, revealed before Christmas that this will likely involve price/tariff increases for Water & Sewerage Corporation consumers as the Government seeks to move them to a position where they can at least recover their costs.

Adrian Gibson, the Water & Sewerage Corporation’s executive chairman, last year said it was facing a $30.8m “backlog” on payments due to vendors at end-August 2020, a sum that continues to grow, and a $15m-plus year-over-year decline in revenue for the year to-date.

“Frankly, the Water & Sewerage Corporation is in dire straits,” he said. “Our operating cash flow cannot sustain monthly payments for vendors and payroll. “These challenges have resulted in a backlog of supplier payments that are steadily growing, and there’s concern about monthly payroll for the balance of 2020. Our vendor payments backlog as at August 27, 2020, was some $30.8m.”

Mr Gibson said this payable covered everything from monies owed to third-party contractors; vehicle and building insurance; and loans due to multilateral institutions such as the Inter-American Development Bank (IDB) and Caribbean Development Bank (CDB).

The Corporation’s subsidy was also cut to $20m in the 2020-2021 budget as opposed to $25m in the previous fiscal year.