Tariff Study and Business Plan for National Water Commission, Jamaica

The problem

More than a quarter of Jamaicans did not have piped water supply. Sewage collection and treatment systems needed upgrading to protect public health and Jamaica’s beautiful beaches and reefs. The National Water Commission needed US$8 billion in capital investments to expand and improve service, but revenues could not cover reasonable costs and finance investments. With a debt to GDP ratio of over 140 percent, the Government could not fund these investments either.

How we helped

Castalia prepared a submission to the regulator making the case for a tariff increase that would allow the utility to cover its costs, while ensuring affordable service for low income households, and sending efficient price signals to encourage water conservation. To do this, we forecast demand for water and sewerage services across the island, prepared a capital expenditure plan, and benchmarked the utility’s performance against comparable utilities to identify potential efficiency gains. Castalia built a financial model that showed the revenue requirement for cost recovery. We also prepared a strategic business plan that proposed a new organizational structure, several improvements in operational processes, and recommended a performance management system.

Impact

Our tariff recommendations were submitted to the regulator, which approved a tariff increase of 19 percent for water services and eight percent for sewerage services, that enabled the utility to sustain operations and remain financially viable.

Some recommendations on performance-based management were adopted. Annual performance appraisals are conducted for all staff based on agreed performance targets and senior executives are hired on performance contracts.