The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

GRAND Bahama’s monopoly water supplier must “justify” proposed average rate increases of between $2.57 and $278.60 per month, an ex-Chamber of Commerce president said yesterday, especially since this has to be approved by its owner’s affiliate.

Dillon Knowles, the immediate past head of the Grand Bahama Chamber, acknowledged to Tribune Business that “there is an inherent conflict” in the Grand Bahama Port Authority (GBPA) regulating and approving Grand Bahama Utility Company’s tariff prices because the latter is 100 percent owned by Port Group Ltd. The latter is a sister company to the GBPA, with both enjoying common shareholders and owners in the St George and Hayward families.

“Obviously there is an inherent conflict of interest,” Mr Knowles conceded, acknowledging that Grand Bahama Utility Company, the water provider, is one of the last such entities where this exists due to the GBPA and its shareholders having totally exited any interest in Grand Bahama Power Company many years ago.

“The last time the water company had to make a rate request to the GBPA was after Dorian, where it found itself in a situation of having to manufacture water, purify water, rather than pump water out of the ground and sell it,” the ex-GB Chamber president added.

Grand Bahama’s previously abundant wellfields were contaminated by the Category Five hurricane’s storm surge that drove salt water inland. “That was a bit of an understandable request,” Mr Knowles added of the previous increase, “but it still caused a bit of consternation among the general public who had been used to having water at a certain price for a number of decades.

“Any change, by human nature, results in a reaction. Whether this application is justifiable or not should be made public. If they haven’t, they should put the request in the public domain like they did with the Grand Bahama Power Company rates request.”

Grand Bahama Utility Company, in a statement announcing the proposed water rate increases that must be approved by the GBPA before they can take effect, pledged that “more than 85 percent” of its roughly 11,500 customers will see monthly bills increase by an average of less than $15 based on what it is proposing.

Large water consumers, chiefly the likes of hotels, Freeport’s industrial sector and other businesses, will see the steepest average increases of $23.36 per month and $278.60 per month, for those using between 10,001 and 20,000 gallons and over 20,000 gallons, respectively, as Grand Bahama Utility Company seeks to shift the burden to non-residential customers. It estimates that 1,459 customers will pay these highest tariff rates.

The water supplier justified the rate increases by asserting that its operations and maintenance costs, including energy, have continued to increase due to post-Dorian investments such as the $5m reverse osmosis plant and this has squeezed margins. The extra revenues generated from the rate increase, it added, will help to fund operational and infrastructure projects that will further improve resilience against future storms.

“For Grand Bahama Utility Company, the application is focused on three priorities: Maintaining reliable potable water service, replacing and modernising aging infrastructure, and building the financial and operational capacity needed to sustain the system and prepare it for Grand Bahama’s future,” the utility said in a statement.

“Since Hurricane Dorian and the last rate review, Grand Bahama Utility Company has continued to invest in necessary infrastructure to improve potable water production, water quality, reliability and system performance. Grand Bahama Utility Company currently serves approximately 11,500 customers, and the proposed adjustment has been structured so that the impact varies according to water consumption.”

The estimated 4,424 customers who consume the least water, less than 2,000 gallons per month, will see rates increase by an average of $2.57 per month. They account for 38.4 percent of total customers. Meanwhile, while the 5,628 needing between 2,001 and 10,000 gallons per month are set to see monthly bills rise by an average $7.85.

“More than 85 percent of Grand Bahama Utility Company customers would see an average monthly increase of less than $15 under the proposed rate adjustment,” the water provider added. “Customers using more than 2,000 gallons, which account for 7,087(61.6 percent) of Grand Bahama Utility Company customers, would see increases based on their level of water consumption.”

Leon Cooper, Grand Bahama Utility Company’s general manager, said: “We have structured the proposed adjustment to limit the impact on lower-usage customers while providing the revenue required to maintain and improve the water system. We recognise that affordability matters to our customers, and that has been an important consideration in how this proposal was developed.

“As Grand Bahama grows, the infrastructure that supports that growth must also be ready. Our goal is a robust water system that provides our existing customers with the quality and reliability they require, while also having the capacity to support new homes, businesses, tourism developments and industrial investment.

“Historically, the island’s freshwater aquifer provided both a primary source of water and significant natural reserve capacity. The experience of Hurricane Dorian demonstrated the importance of complementing those natural resources with additional production and above-ground reserve storage.” 

Seeking to justify the new rate proposal, Grand Bahama Utility Company added: “Since the last rate increase, Grand Bahama Utility Company has made a significant investment in a $5m reverse osmosis (RO) facility capable of producing up to two million gallons of potable water per day.

“The facility has strengthened Grand Bahama Utility Company’s water production capacity, and provides additional flexibility as the utility manages the long-term effects of saltwater intrusion on Grand Bahama’s natural freshwater resources.

“Operating and maintaining this additional infrastructure has also increased the utility’s operating costs, particularly its energy requirements. Grand Bahama Utility Company has sought to manage these and other financial pressures through cost-control measures, improvements in operating efficiency and initiatives aimed at improving energy efficiency,” it continued.

“The financial and operational pressures that remain form the basis of the rate review application now before the regulator. If approved, the application would support Grand Bahama Utility Company’s continued programme of infrastructure and operational improvements over the coming years.

“These include, among other initiatives, replacing and rehabilitating sections of the water distribution network, repairing water storage tanks, upgrading wellfields, expanding remote monitoring and automation, modernising water treatment and disinfection systems, and investing in equipment required to maintain and respond to issues across the network.

“The objective is to progressively create a water system that is more responsive and agile, allowing Grand Bahama Utility Company to better monitor conditions, respond to problems, manage its resources and deploy assets where they are most needed. The rate review is also intended to support longer-term planning for Grand Bahama.”

Mr Knowles, though, added: “Will the public be upset? Yes. The public is always upset with any rate increase. Can the Grand Bahama Utility Company justify any rate increase? That is the question to ask.”