By NEIL HARTNELL
and YOURI KEMP
Tribune Business Reporters
TAXPAYER subsidies to the Water & Sewerage Corporation in 2022 hit $84m, more than three times the sum budgeted, as the state-owned utility seeks to develop a plan that makes it financially viable.
The state-owned enterprise (SOE), in a statement, said government subsidies had increased more than eight-fold over the past two decades with the Ministry of Finance now seeking to minimise the burden this imposes on the Public Treasury.
It wants the Water & Sewerage Corporation to obtain financing for capital works projects from multilateral lenders, such as the Inter-American Development Bank (IDB) or Caribbean Development Bank (CDB), to reduce taxpayer support it views as unsustainable given the fiscal crisis facing the cash-strapped government. However, to access such funding, the Corporation must first develop a sound corporate business plan.
A strategy meeting to develop such a plan was held pre-Christmas on December 15, 2022, at Baha Mar’s convention centre. Alfred Sears KC, minister of public works and utilities, who has responsibility for the Water & Sewerage Corporation, told the meeting that this strategy would define reforms such as tariff adjustments, structural adjustments, and changes to the water sector’s legislative and regulatory framework.
The tariff/prices charged to consumers has not increased since 1999 despite multiple cost and inflation-driven increases, which has left the Water & Sewerage Corporation selling water below cost. Its statement said it is “paramount that we move to adjust the tariffs to reflect the major changes that the Water & Sewerage Corporation has undergone in recent years.
“The Water & Sewerage Corporation has steadily increased its supply of high quality desalinated water over the last two decades with desalinated water now accounting for over 97 percent of the Water & Sewerage Corporation’s New Providence water supply and over 60 percent of the Water & Sewerage Corporation’s Family Island water supply.”
The Water & Sewerage Corporation added that desalinated water, purchased from privately-owned reverse osmosis operators, had replaced groundwater sources that had become “increasingly brackish” yet was more expensive. Prices charged to consumers have not been adjusted to reflect increased costs, and any increase will have to be approved by both Cabinet and Parliament as water is not yet regulated by the Utilities Regulation and Competition Authority (URCA).
And the state-owned water supplier also called for legislation to regulate the installation and use of private wells, and abstraction of private water. “The use of groundwater by residents and businesses utilising unregulated private wells remains a serious risk to the health and welfare of our citizens, and is a direct competition to Water & Sewerage Corporation in areas where extensive investments were made to provide piped potable water,” it added.
“Extensive capital investments were made to provide piped potable water, but the residents have decided, with no authorisation from any licensing authority or government agency, to extract and utilise groundwater, which is a natural resource, for their private personal purposes with no payment of any fees to anyone, and which poses serious issues for the growth and development of the Corporation as a viable and fiscally sustainable entity.”
The Water and Sewerage Corporation (WSC) added that it received $84m in taxpayer subsidies in 2022, a more than eight-fold increase from the $10m extended some 20 years ago. The former figure is also more than three times’ higher than the $26m allocated for capital projects in the 2021-2022 Budget.
Robert Deal, the Water & Sewerage Corporation’s general manager, told Tribune Business in reply to e-mailed that almost 50 percent or half of the “particularly high” $84m in subsidies represents “many past due payments to various Water & Sewerage Corporation suppliers dating back to 2021 and before last year”.
He continued: “The Corporation has commenced work on a corporate business plan, and we anticipate that it will be substantially complete by the end of May 2023. This corporate business plan, once approved by our Board and Cabinet, is expected to guide the strategic direction of the Corporation inclusive of the necessary reforms required to drive transformational changes within the Corporation and the water and sanitation sector in The Bahamas.”
Mr Deal said the $84m is divided between $40.2m to cover current and past due bills to Consolidated Water for water supplied to New Providence; $9.8m for Family Island water purchases; $5.2m for debt service; $8m for continued post-Hurricane Dorian restoration work in the Abacos; $3.3m for new potable water storage tanks for North and Central Eleuthera; and $17.5m for Mira for work on New Providence’s non-revenue water reduction project.
Mr Sears said a corporate business plan must be developed if the Water & Sewerage Corporation is to access IDB and Caribbean Development Bank financing. It also has to be shared with the Ministry of Finance. K&M Advisors has been selected as the consultants to help develop the plan as its managing director, Nils Janson, was previously involved with the company that came up with the 2016 version, Castalia Strategic Advisors.
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