Water service providers mull a halt to subsidy programme to enhance sustainability

 

Water service providers in the country through the regulator Water Services Regulatory Board (Wasreb), are in a move to balance their production expenses against revenues while doing away with subsidies.

This is a move that could likely see a change in water pricing, as the providers will be looking to quote their tariffs minus the county governments' subsidy.

The regulator says the prevailing cost of water across various counties is characterized by the subsidies meant to cushion consumers from higher prices.

However, it now says the initiative has not been effective in recent past as county governments are reportedly making delayed payments for as longs as a year, constraining the service providers’ operations.

Wasreb’s acting CEO Julius Itunga while speaking to The Star, said some of the service providers are being forced to ride on costly loans to cater for losses made, a scenario that has prompted an outcry from several service providers.

“It is on this basis that we are preparing to do away completely with the subsidy initiative, hence price water based on the actual cost of production to ensure our service providers remain afloat to continue with provision of one of the most essential household commodities,” Itunga said.

“This is evident in the recent tariff adjustment applications by different Water Service Provider (WSPs), whom a majority have requested for an upward adjustment on the back increased general cost of doing business.”

He added that the move is key to foster service sustainability through full cost recovery.

The average cost of a single unit of household water in the country’s major cities; Nairobi and Kisumu for instance, as per the regulator now stands at Sh45 and Sh75 per M3, respectively for the first consumption block (1-6).

The pricing model has six blocks, hence different rates for different consumption levels with a steep-wise format.

The charge per unit of water stays constant up to a certain amount of consumption (the first block), then increases as water usage goes up and user enters the next block until the highest one.

Other blocks are 7-20, 21-50, 51-100, 100-300 and over 300.

Users pay a low rate of up to the first block of consumption, then a higher price up to the limit of the next block and so on up to the highest block (over 300).

At the highest block, users can use as much water as they want but for each extra unit consumed, they pay the highest price in the rate structure which averages between Sh80 – Sh190 across different WSPs.

The regulator explains that the country uses this model, the increasing block tariffs, instead of the decreasing one to encourage conservation because of the country’s water scarcity problem.

Even so, there have been concerns over the general cost of household water, consumers terming it costly amid rising inflation and the general cost of living.

A spot check by The Star across different estates in the country’s capital sought to understand the disparities in charges of a unit of water yet the understanding is, being under the watch of a licensed service provider in the same region, the rates should be at least uniform!

The spot check established that some households in Kasarani area for instance, were being charged a unit at an average of (Sh90 – 110) compared to Kariobangi South which were being charged between (Sh120 – 200) for a unit.

Some consumers being charged the highs of Sh120 and above expressed their pain saying it is too costly, as they still have to buy bottled water for drinking, terming some of the tapped water unfit for consumption based on coloration and odor.

This is a case that probably, could be prevalent in other counties countrywide.

Water Services Regulatory Board (Wasreb) acting CEO Julius Itunga.

CEO Itunga responded to the concern saying the average cost of a single unit of a household depends on the place as the cost of production varies based on cities.

“The driving differentiation is the cost structure of that utility serving that city. The systems are different, some are gravity systems, which are fairly cheaper while others are costly pumping systems adding to other operation costs such as staff salary,” he said.

However, on the differentiating charges in the same city, he objected the claims saying there are no different costs in the above highlighted regions.

“We take the case of Nairobi city. The whole service area is under Nairobi Water and they are using one uniform tariff. The only time you will get difference are small pockets run by third parties.”

He further explains that there exists cases where there are borehole owners in certain localities of the city, and they could be selling a unit at Sh120, 150 or even 200 but the major licensed WSP is Nairobi and the price is the same across the county at an average of about Sh53.

We sought to understand whether the third parties selling water at higher costs were acting within the laws and what the regulator is doing to ensure consumers are not subjected to uncensored price volatility.

Wasreb noted that the third-party players are not operating illegally since most of them have an arrangement with the licensed WSPs.

“They fall under the small-scale service providers category since we have given out the whole area to the main WSP who might not have the capacity to supply every region,” says the regulator.

“The only difference now is the price, because at the end of the day that party has to cover its own cost of operations.”

The regulator added that the normal consumer of a WSP in either of the places cannot be exploited with heightened prices because already the price is known. 

The regulator however sympathized with consumers who might feel exploited by the third party players whom are not under any regulation by the licensed WSPs.

“The challenge is the capacity of the service provider through the county government to deliver extra water. Otherwise, if the county government and the WSP has enough resources, then that complaint should not be there,” Itunga said.

The regulator however boasts of increased water coverage through licensed WSPs across the country.

Latest data contained in the annual impact report for the year 2021/22, shows water coverage recorded an increase to 62 per cent from 60 in the previous reporting period.

Drinking water quality and the hours of supply (Hrs/day) also improved from 92 to 95 per cent and 16 to 17 per cent, respectively.

by ALFRED ONYANGO