OUR keeping tabs on costs at Rio Cobre Water Treatment Plant project
THE OFFICE of Utilities Regulation (OUR) says it will be closely monitoring the Rio Cobre Water Treatment Plant project in Content, St Catherine, to ensure that customers get the best rates possible.
Prime Minister Andrew Holness earlier this month broke ground for the $12-billion project that is expected to benefit 600,000 National Water Commission (NWC) consumers.
However, noting that “this is a necessary and vital project”, Ansord E. Hewitt, director general of the OUR, said the regulatory body is concerned that the project came up for financing at a time when interest rates are high.
As a result, he said the agency will be examining all its major cost components.
“Apart f rom finance cost, there’s the question of capital and the technology, whether you use the best combination technology,” he told The Gleaner. “The other big cost item would be chemical treatment of the water. We want to make sure that their cost of treatment is aligned with benchmark, what is reasonable for the environment.”
The Rio Cobre Water Treatment Plant is expected to be completed within two years, followed by a 23-year operation period by private partners under a publicprivate partnership arrangement.
Hewitt noted that this arrangement must provide for some degree of flexibility in costs for customers in the event that interest rates decrease.
“If you come to a point later on where interest rates are lower, you ought to be able, within reason … be able to refinance … because that’s what markets are all about,” he said.
CRUCIAL ROLE
Stating that the OUR’s “opportunity to influence the rates that go to customers starts at the point the investment is being made”, Hewitt said the utility regulator’s role in ensuring that customers are protected is crucial.
“Because, once you have entry… you’re committing customers, and these are 20 years, 25 years agreements. So what you doing when you admit a project like that is that you’re committing all of this cost recovery for the next 20 to 25 years. So it’s a big commitment,” he said.
“You also have to make sure t hat, at t he point of entry, you also have sufficient arrangements that allow you to monitor to see what is happening at the point of operating over the period so that you can regulate, and the extent to which you make provisions to avoid disruptions, and also to make sure that, having given this commitment for 25 years, that it is in fact sustainable,” he added.
Meanwhile, speaking yesterday at the OUR’s Annual Director-General Stakeholders’ Engagement held at the AC Marriott Hotel in St Andrew, Hewitt noted that the overall non-revenue water figure remains very high.
NWC has been reporting losses of 45 per cent for Kingston and St Andrew and, based on these results, the utility company has proposed the Portmore NRW project to be funded from K-Factor funds totalling $3.245 billion.
“By all indicators, access to and consistent availability of potable water is a major pain point. The problem is made worse by climate change and increasing periods of low rainfall. It also does not help that we continue to have intolerable levels of water losses,” he said.