Nairobi users hit hardest by planned rise in cost of water

A fresh rise in the cost of living is expected to hit Nairobi residents if the industry regulator allows a utility firm to increase consumer water tariffs by up to 100 per cent. 

A draft report seen by the Business Daily shows that the Nairobi Water and Sewerage Company (NWSCO) has asked the Water Services Regulatory Board (Wasreb) for authority to increase water tariffs.

The Nairobi water firm, which serves about 250,000 customers, says the new tariffs are necessary to improve delivery through a number of investments that will, among other things, aim to achieve uninterrupted water supply by 2016.

The utility firm, which last increased consumer tariffs in July 2009, now says that since then, the cost of electricity, water treatment chemicals, pipes, fuels, lubricants, sewers and fittings have risen significantly – necessitating the review.

The proposed doubling of water bills comes just months after City Hall more than doubled parking fees in Nairobi and about six months since electricity tariffs rose, adding impetus to the general rise in the cost of living.

The Nairobi water firm says the review is necessary because the existing water infrastructure has become “unsustainable” with rising demand.

“To improve current service levels and undertake the planned expansions, there is need to review water charges,” the draft tariff review report, dated January 29, 2014, says adding that the tariff increment will also ensure the company keeps on investing to meet perennial complaints about water shortage and low pressure.
If approved, the new prices would remain in place for three years.

READ: Life gets tougher in Nairobi as City Hall raises charges

The Nairobi water firm uses ‘increasing block tariffs’ to bill specific categories of customers (domestic, commercial, public institutions and schools). Tariff bands apply to consumers based on how many cubic metres of water they consume.

The current bands are 0-10, 11-30, 31-60 and more than 60 cubic metres that are billed at the rate of Sh18.71, Sh28.07, Sh42.89 and Sh53.80 per cubic metre consumed respectively. One cubic metre is equivalent to 1000 litres.

Customers in the lowest band (0-10 m3) pay a flat fee of Sh187 irrespective of the amount of water consumed per month. About 33 per cent (or 82,500) of Nairobi water consumers fall in this category.

Once consumption crosses to a higher band, customers pay the flat fee for the lowest band plus the total costs of water consumed in the next band.

A customer who consumes 33 cubic metres will, for instance, pay the Sh187 flat rate plus Sh561 for the 20 cubic metres of water consumed in the second band.

The customer will also pay Sh128 for the three cubic metres consumed in the third band adding up to a total monthly bill of Sh876, exclusive of sewerage charges where applicable.

But the firm is now proposing that the tariff bands be reduced to just three (6, 7-60 and above 60 cubic metres).

Each cubic metre of water consumed will attract a fee of Sh37, Sh56 and Sh90 in each of the bands respectively.

What this means is that those currently consuming up to six cubic metres of water and paying Sh187 should expect their bills to increase by 20 per cent to Sh222.

Those currently consuming eight cubic metres of water and paying Sh187 a month will see their bill jump 73 per cent to Sh324 under the proposed tariff bands.

Consumers will also pay a fixed charge for sewerage and water meters. The sewerage costs will be increased from 70 per cent of the water charge to 75 per cent while meter costs have been retained at between Sh50 and Sh2,000 depending on its size.

Philip Gichuki, the managing director for Nairobi Water company, said the intention is to ensure that the cost burden on “poor” people who fall in this category is kept as low as possible.

“The review at the lowest band is being implemented to ensure minimum impact on low-income consumers,” said Mr Gichuki, adding that the firm held a stakeholders’ meeting in Naivasha last weekend to discuss the draft report.

Service

“The outcome of the meeting is that some of these tariffs may come down while others will rise.”

The law requires the utility companies to take their proposals to the public through consultative forums at least twice before the proposals can become law.

Besides, the Nairobi water firm will have to get the County Assembly’s approval to effect the proposed changes and the process is expected to take up to five months.

Wasreb — the water services industry regulator — acknowledges that the Nairobi water firm needs higher tariffs to operate optimally but cautions the firm that it needs to tightly manage its internal expenses.

NWSCO’s total expenses — staff, finance, operating, maintenance and general expenses — last year stood at Sh6.9 billion leaving it with a Sh306 million profit.

Robert Gakubia, the Wasreb chief executive, also wants the tariff increment to be tied to a visible and improved service delivery that cuts wastages.

The Nairobi water firm says it is now planning to hold a public consultation forum in the next two weeks to win public support.

The water company is expected to argue that Nairobi’s average water tariff currently stands at Sh48.57 per cubic metre – which is too low compared with Mombasa’s Sh116, Sh111 in Ruiru and Juja’s Sh94.3.

The water firm must also convince consumers, Nairobi county representatives and the regulator that only a higher tariff will help it bridge the widening gap between demand and supply.

It is estimated that the daily demand for water will rise to about 756,322 cubic metres in the next three years while production (existing capacity) stands at 525,918m3.

The utility firm also expects the customer base to grow to 300,000 during the same period given the population growth trend.

“Thus, if the investment plans are not put in place then there shall be a deficit of more than 200,000 cubic metres per day,” the report says.

If the recommended rates sail through as they are, the Nairobi water firm would see its annual billing increase from 2013’s Sh7.2 billion to Sh14 billion this financial year before peaking at Sh15.2 billion in 2017.

The firm intends to invest about Sh80 billion in the improvement of supply infrastructure in in the next three years.

This project includes improving sewerage systems in areas like Kasarani, Kawangware and Dagoretti, pipe replacements, customer data clean-up and network mapping.

Currently, about 38 per cent of the water supplied by the firm is not billed, a problem that has mostly been caused by illegal connections in informal settlements.