BULK WATER TARIFFS OF BUSHBUCKRIDGE WATER

1. BULK WATER TARIFFS OFBUSHBUCKRIDGE WATER Presented By: Ms. TP Nyakane Maluka - Chairperson Mr. MA Letswalo - Acting Chief Executive

2. Introduction • Established in 1997 by the Minister of Water Affairs and Forestry in accordance with the Water Services Act. • Mandated to provide water services to other water service institutions. • Area of operation include the BLM and part of the Nsikazi area in MLM. • Legislative imperatives include corporate governance, PFMA, MFMA, WSA, NWA. • Area Ml/day Population • BLM Area (10 WTW) 60.6 1m • MLM Area 80 700 • BLM: 60.6 l/ca. day • MLM: 114.3 l/ca. day

3. SERVICE AREA

4. INPUT COST OF BULK WATER

5. NORMS FOR BULK POTABLE WATER TARIFFS • Water boards • May set a single tariff for its whole supply area. • May set a separate tariff for each scheme or each water treatment plant – motivated by differentials in the cost of supplying to different customers. • The subsidization or cross subsidization of free basic water is a municipal concern and not within the capability of water boards. • Tariff increases may be smoothed out over time to take into consideration projected future infrastructure development costs.

6. INPUT COST OF BULK WATER The following financial assumptions were considered:

7. TARRIF STRUCTURE Cost structure Keys = VC: Variable cost = FC: Fixed cost

8. TARRIF APPORTIONMENT • Variable Cost Component R1.40 (Raw water, Electricity, Chemicals, Maintenance) • Fixed Cost Component R1.74 (Salaries and Admin Cost) Proposed tariff for 2009/2010 R3.07 NB * = Proposed tariff review, due to upgrading of certain water works

9. TARRIF STRUCTURE • Total water consumption is based on an average water loss of 9% • Total water consumption represent the total bulk potable water to be supplied to the municipality

10. PROJECTED TARIFF • For the period July 2009 to June 2010 an increase of 4.4% is proposed. • This increase is below the current inflation rate. • The below inflation increase is influenced by current cost recovery and the poor service area of our customer.

11. COMMENTS FROM STAKEHOLDERS • SALGA • Suggested increase seems unsustainable. • Staff and admin cost are high • Operational cost and capital programmes likely to be hampered by below inflation increase

12. COMMENTS FROM STAKEHOLDERS • NATIONAL TREASURY • Proposed tariff increase is well below inflation outlook – not sufficient to recoup cost. • Poor cost recovery. • Review tariff during the year, further increase of 2% to ensure viability. (Supported by DWEA)

13. COMMENTS FROM STAKEHOLDERS • BUSHBUCKRIDGE LOCAL MUNICIPALITY • Basis of tariff calculation is fair and acceptable. • Total water consumption is fairly acceptable. • Variable and fixed cost cannot comment due to lack of audited financial statements

14. CHALLENGES • Poor cost recovery by municipality which impacts on the water board’s cash flow. • Lack of bulk infrastructure: • Inyaka Water Works has a design capacity of 50 m/l per day but only 25 m/l is produced. • Operation of small schemes: • Provision of bulk infrastructure will result in the small schemes being shut down. • Operational cost will be centralised in one big scheme which will result in the review of the current tariff i.e. lower tariff. • Impact to the municipality: • Poor recovery of cost from the consumers • Raw Water Tariff • The matter still outstanding between SAAWU and DWEA on raw water tariff

15. CONCLUSION Recommendation - BW recommends the tariff increase by 4.42 % - Review of the raw water tariff Tariff will be reviewed during the second quarter (2009/10) - Electricity increase & inflation

16. THANK YOU