By Sashana Miller Marsha Minott

Establishing an Optimal Regulatory Framework for Small Privately Owned and Community Based Water and Sewerage Service Providers in Jamaica By Sashana Miller Marsha Minott

Outline • Part 1 • Introduction • Overview of the Water and Sewerage Sector • Framework for Small Privately Owned System Operators • Part 2 • Framework for Community Based Providers • Conclusion S.Miller & M. Minott

AIM • To recommend and/or outline equitable economic and environmental techniques that will standardize the regulatory process, improve efficiency and foster sustainability. S.Miller& M. Minott

Introduction • Jamaica’s Water Sector Policy 2004, encourages private investment and operation of both water and wastewater services. • In 2008 the Office of Utilities Regulation (OUR) engaged the services of Castalia Strategic Advisors to develop a Regulatory and Monitoring Framework for small providers to allow for a uniform means of regulation. • It is based on Castalia’s findings and additional research conducted by the OUR, but not sanctioned by the Office, that this paper was developed. S.Miller& M. Minott

Overview of the Sector • The Water Sector Policy Strategies and Action Plan of 2004 is the main policy document that guides the sector, along with various Acts that governs other regulatory agencies. • The Ministry of Water and Housing (formulates and implements policies) along with agencies such as: • The Ministry of Health and the Environment (MOHE) • The National Environmental and Planning Agency, (NEPA) • The Water Resources Authority (WRA) • Office of Utilities Regulation (OUR) S.Miller& M. Minott

Overview cont’dDefinitions • Private Investor-owned system operators— These consist of private suppliers who customer base is 0.1% or less of the population. The ownership and management of assets fully lies with the private owner of the system. (6 existing providers, 8 awaiting licensing) • Community Providers -These are very small providers who are developed by government ministries with the intention of transferring the operations of the system to community groups. These very small community providers are mostly situated in rural Jamaica. ( eleven existing providers) • Parish Council systems—These systems consist of standpipes, Wayside tanks and catchment. S.Miller& M. Minott

Current Regulatory Situation S.Miller& M. Minott

The Framework for Private Investor Owned System Operators • Policy and Legislation • Water Resources Management • Economic Regulation • Tariff Setting • Service Area Specification • Service Standard • Transfer of Ownership • Bulk Water Provisioning • Environmental Regulation • Drinking Water Quality • Effluent Standard Regulation • Licensing • Reporting and Monitoring requirements S.Miller& M. Minott

The Framework for Private Investor Owned System Operators • Policy and Legislation • It is important that policies and legislations developed be done in compliment with the governance structure of a country. • All private providers must, operate their systems in accordance with the Acts, Legislations and agencies which have been instituted to oversee the sector. S.Miller& M. Minott

Water Resources Management • It is important that our country’s water resources are utilized in an efficient and effective manner. • The WRA has developed standards geared towards source protection, sustainable abstraction, rational and equitable allocation, as well as standards to reduce conflicts among water users. http://www.wra.gov.jm/ • All privately owned system operators must request a license from the WRA so that their water abstraction techniques can be monitored and their water source can be properly tested. S.Miller& M. Minott

Economic Regulation • The OUR regulates the economic aspect of utility companies across Jamaica by : • determining and monitoring tariffs. • encouraging competition in the provision of prescribed utility services. • developing customer service and other operating standards for utilities. S.Miller& M. Minott

Economic Regulation • Tariff Setting • The many objectives of water pricing are: to ensure cost recovery, raise revenue and manage demand. • Private providers view water as a normal good not as a social good, so their main intention is to raise revenue. • Thus, their tariff must be regulated and monitored S.Miller& M. Minott

Economic Regulation • Tariff Setting • For small privately owned utilities if their rates are lower than or equal to the National Water Commission (NWC) then the OUR should give its no-objection to these rates. (Castalia Strategic Advisors). • notwithstanding the foregoing, the rates must be submitted to the OUR for approval. • If the rates proposed are above the NWC they must apply to the OUR for a formal Tariff Review. • The rates approved for privately owned providers should be made available to the public. S.Miller& M. Minott

Economic Regulation • Service Area Regulation • Designative geographical service area boundaries ought to be outlined in the licence of a particular provider. • The operator will be responsible to provide services to anyone that is located within its specified service area. • Proper planning should be undertaken when approving a designative service area. This will allow for one structured system to be established instead of having many different providers located in a small geographic area. S.Miller& M. Minott

Economic Regulation • Service Standards • To ensure that small private investor –owned providers’ focus is not only to maximize profit. • Quality parameters such as service reliability, metering and billing, and general customer service issues, should be developed. • The service standards that we have developed are more stringent than those of the NWC given that private providers customer base is relatively small and are located in a specific geographical area. S.Miller& M. Minott

Economic Regulation These service standards should be revisited whenever the OUR is required to approve a rate. where necessary, existing standards should be modified and new standards introduced. S.Miller& M. Minott

Economic Regulation • Bulk Water Provisioning • The main supplier of bulk water should have a reliable and sustainable source. • Private provider should be given the option to purchase bulk water from a Licensed third party, and tariff rates will be left to be negotiated between the parties. • However, if an agreement cannot be reached by both parties then the OUR should determine the rates to be charged. S.Miller& M. Minott

Economic Regulation • Transfer of Ownership • In order to prolong the reliability of supply of water and sewerage services, water and sewerage infrastructure should be transferable to any existing provider that the Minister sees fit. • The process of transferring water and/or sewerage infrastructure should be outlined in Jamaica’s Water Sector Policy, as well as outlined in the providers Licence. S.Miller& M. Minott

Environmental Regulation • Drinking Water Quality • Water quality issues have a potential impact on public health and therefore must be thoroughly regulated. • Small providers are encouraged to develop and implement a Water Safety Plan to consistently guarantee the safety of the drinking water supply. • IJAM, WRA and MOHE standards must at all times be achieved. • The Public Health department located in the various parishes should assist the ministry with the monitoring of drinking water quality. S.Miller& M. Minott

Environmental Regulation • Effluent Standards • This framework appreciates the current standards that have been developed by NEPA in regards to treating sewage to the tertiary level before it is release into the natural environment. • However, if private providers propose to re-use treated wastewater, it is recommended that separate guidelines be prepared by NEPA through consultation with the MOHE. • NEPA should issue a license to the provider stating the purpose of the re- used water. S.Miller& M. Minott

Licensing • Private providers must apply to the OUR for a license if it is their intention to operate a water and/or sewerage service company. • Before the OUR recommends licenses to the Minister the provider must satisfy the requirement of the MOHE & WRA(water licenses) and MOHE & NEPA in the case of sewerage licenses. S.Miller& M. Minott

Licensing • A service provider license should specifically contain : • the geographical boundaries within which those activities are to be carried out. • The purpose for which non- potable water may be used should also be specified. • A comprehensive statement outlining the type of infrastructure to be built and how to convey, treat and disposal of sewerage effluent. • A stepping right outlining how to Transfer ownership of system. S.Miller& M. Minott

Monitoring • In order to effectively and efficiently control a sector, regulators must monitor performance against targets. • Thus providers must present the following information to their applicable regulators on an annual and/or quarterly basis. 1. Financial reports 2. Quality of service standards reports 3. Water Quality Test Results 4. Effluent quality test results. S.Miller& M. Minott

PART 2 Framework for Very Small/ Community Based Water Providers

Framework for Very small/ Community based water providers • The Jamaica Water Sector Policy – Strategic and Action Plans 2004, stipulates that: “…Potable water should be available to all citizens in such quantity and quality to sustain life, irrespective of the citizen’s ability to pay”. S.Miller& M. Minott

Framework for Very small/ Community based water providers • Up to the late 90s most rural households relied heavily on standpipes, rivers, ponds and streams as the main water sources • The need to address the social situation of limited access and affordability issues gave rise to 11 community based water providers. S.Miller& M. Minott

Framework for Very small/ Community based water providers S.Miller& M. Minott

Framework for Very small/ Community based water providers • A key objective of the Water Sector Policy: ability to upgrade small community systems to increase water access. • Achieving this objective will require appropriate regulatory functions to enable the operators to cover the efficient costs of operating and maintaining the network S.Miller& M. Minott

Framework for Very small/ Community based water providers Important Assessments: • Where is regulation needed? • What actions are to be taken? • Which institutions/boards are best suited to execute these functions? S.Miller& M. Minott

Framework for Very small/ Community based water providers The framework covers: • Policy and Legislation • Environmental Regulation • Sewerage disposal • Drinking Water Quality • Economic Regulation • Tariff • Service Standards • Licensing S.Miller& M. Minott

Framework for Very small/ Community based water providers Policy and Legislation • Community providers should adhere to the provisions of the Water Sector Policy. • Adequate consultative process with agencies in the sector should be afforded to enable them to fully comprehend the mandate of the various policies. S.Miller& M. Minott

Framework for Very small/ Community based water providers Environmental Regulation Sewerage Disposal • Community providers lack the financial resources and expertise to operate and manage highly efficient sewerage facilities. • Only approximately 3% of rural households are connected to a sewerage system S.Miller& M. Minott

Framework for Very small/ Community based water providers Environmental Regulation Sewerage Disposal Cont’d • The main methods of sewerage disposal are pit latrines and septic tanks • MOH and NEPA should conduct extensive public education campaigns to sensitize these communities on the proper construction and maintenance of pit latrines and septic tanks. S.Miller& M. Minott

Framework for Very small/ Community based water providers Environmental Regulation Cont’d Drinking Water Quality • Drinking water quality standards must consistently apply to all providers irrespective of size • Community providers may lack the necessary expertise required for quality testing • Sponsor agencies should lend support S.Miller& M. Minott

Framework for Very small/ Community based water providers Framework for Water Quality and Service Plan S.Miller& M. Minott

Framework for Very small/ Community based water providers Economic Regulation • Tariff • Traditionally, the tariff of community based systems are set below costs in an effort to address the affordability issues. • Usually results in heavy reliance on Govt subsidies to cover costs S.Miller& M. Minott

Framework for Very small/ Community based water providers Economic Regulation Tariff Cont’d • The Govt’s policy is to recover at least the operating costs of these systems through user fees. • Govt covers capital costs through grants or other funds internally generated. S.Miller& M. Minott

Framework for Very small/ Community based water providers Economic Regulation Tariff Cont’d • the Governance structure in place for tariff setting should not be replaced by regulation • Regulation should be used to compliment to the existing structure • the OUR should provide guidance on rate setting only when solicited. • At that time an economic rate will be set. S.Miller& M. Minott

Framework for Very small/ Community based water providers Economic Regulation Cont’d Service Standards • Water users group has a vested interest in implementing appropriate service standards • This group mayhowever not have a basis on which to developthese standards • OUR to provide minimum service guidelines S.Miller& M. Minott

Framework for Very small/ Community based water providers Licensing • The requirement is for all operators to be licensed • Quality parameters and reporting requirements are normally specified in the licence • A licensing regime places scrutiny on the provider’s operations and helps to foster efficiencies. S.Miller& M. Minott

CONCLUSION • In Jamaica, the need to have access to adequate water and wastewater services requires the inclusion of private and community based providers. • Thus sectoral reform is necessary and appropriate regulations must be instituted. S.Miller& M. Minott

CONCLUSION Cont’d • A good regulatory framework should address clearly defined regulatory functions. • The framework should also include legal instruments as well as the norms and practices of the country and the selection of organizations best suited to carry out these mandates. S.Miller& M. Minott

THANK YOU S.Miller& M. Minott

By Sashana Miller Marsha Minott