Opinion and Analysis
Regulator’s rejection of new water tariffs timely
Posted Wednesday, July 4 2012 at 19:16
News that the Water Services Regulatory Board (WRSB) will not approve tariff increments from providers that are inefficient and have governance issues is laudable.
Performance of water companies in Kenya is a national eyesore and the Water ministry reckons that only 22 out of 120 companies collect enough revenue to cover their operating and maintenance costs.
This poor show is based on illegal connections and rampant corruption at the water firms, which is behind perennial shortages on reduced financial muscle to upgrade their ageing supply networks to keep pace with soaring demand.
The bulk of the water firms are little worried that they lose half of their water through theft, non-payment of bills and spillage occasioned by the rickety infrastructure because the consumers have always been there to shoulder their burden.
The soft landing has emerged in the form of tariff adjustments—which are supposed to be reviewed every three years.
This is the season of tariff hikes since the bulk of the water companies last reviewed their rates in 2009.
But the regulator has set the tone for the review and is warning the water operators that they must first account and reduce the revenue losses before seeking to review costs.
We agree that water companies need additional resources to pay for the surge in the cost of treating water, labour expenses, and expensive electricity as well as to upgrade their ageing supply networks.
But raising tariffs is not the only route to strengthen the financial bases of the water operators. Let’s focus on the wastage that has the potential to generate addition resources in comparison to the tariff increases.
The Water ministry should also abandon its plans to include inflation and foreign exchange adjustments to the monthly bills, since the action will ultimately inflate bills and push water providers to a comfort zone.
The State wants develop the new billing system known as indexation that will include the monthly variation in inflation, exchange rate and the cost of energy (electricity and fuel) placing the water companies at the same level as Kenya Power.
The quest for higher water bills will usher in a period of high utility bills that began last year with high petroleum prices and the soft Kenya shilling against major currencies—which has made electricity expensive.
The combined impact of high water and power tariffs is expected to pile inflationary pressure and dampen the country’s competitiveness in a cutthroat regional market.