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OOCUR 11 TH ANNUAL CONFERENCE, 6 th – 8 th November 2013, RADISSON FORT GEORGE HOTEL

RECONFIGURATION OPTIONS FOR WATER OPERATIONS IN RURAL AREAS OF BELIZE Rudolph S. Williams Jr. PUBLIC UTILITIES COMMISSION - BELIZE. OOCUR 11 TH ANNUAL CONFERENCE, 6 th – 8 th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize

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OOCUR 11 TH ANNUAL CONFERENCE, 6 th – 8 th November 2013, RADISSON FORT GEORGE HOTEL

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  1. RECONFIGURATION OPTIONS FOR WATER OPERATIONS IN RURAL AREAS OF BELIZERudolph S. Williams Jr.PUBLIC UTILITIES COMMISSION - BELIZE OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES.

  2. OUTLINE • Belize’s Water Industry – major stakeholders • Legal and Regulatory frameworks, • The general operations of Village Water Boards, • The need for reconfiguration or reorganization, • Reconfiguration options, • Evaluation of Reconfiguration options, • Implementation challenges • Conclusions OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  3. Introduction – Belize’s Water Industry • WATER INDUSTRY STAKEHOLDERS • The Public Utilities Commission of Belize (PUC) • National Regulator for Water Utilities in Belize. • Belize Water Services Limited • The National Water Utility Provider, • Regulated by the PUC, • PUC’s authority • Public Utilities Commission Act, • Water Industry Act, • Bye-Laws and Regulations. • 101 Village Water Boards (VWBs) or Rural Water Systems;(101 Based on available data) • Regulated by the Ministry of Rural Development, • Ministry’s authority – The Village Councils Act, • Private water operations fill gaps where there are no VWBs. • 52 Bottled Water or “Purified Water” Operations • Unregulated, • Oversight is by the Ministry of Health OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  4. Legal Framework • The PUC’s legal mandate with respect to rural areas; • “…to secure the provision of water and sewerage services, satisfy all reasonable demands, and to protect the interests of consumers of water in rural areas” Water Industry Act (WIA) • Ministry of Rural Development Legal mandate for Rural Areas • The Village Councils Act - PART VII:01: Village Water Boards 43:01 Establishment of VWBs 43:02 Composition of Village Water Boards 43:03 VWB is a body corporate 43:04 Members and staff of a Board are not personally liable 43:05 General powers of Boards 43:06 Laying of water supply pipes 43:07 Notice of discontinuance 43:08 Staff of a Board 43:09 Rates of Water Supply 43.10 Rates to be credited to the account of the Board 43:11 Boards to open accounts 43:12 Application of revenues 43:13 Accounts and audits 43:14 District Association of Water Boards 43:15 Regulations S. I. No. 190 of 2004 specifies the VWBs accounting procedures and reporting protocols. Similar to provisions for Utilities licenced and regulated by the PUC under WIA OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  5. Regulation of Village Water Boards • The VWBs operations and infrastructure are entrusted to the community, • Contrary to popular opinion remains the property of the GoB • The water works and infrastructure are in effect State Owned Enterprises (SOEs) managed by VWBs. • VWBs members are recommendedby the Area Representative and appointed by the Minister of Rural Development, • The Ministry of Rural Development is the de facto regulator for the VWBs, • The Minister sets the VWBs rates and charges for water supply & other services, • The approved rates are predominantly monthly flat rates, • VWBs are required to report monthly to the Ministry of Rural Development (S.I. 190 of 2004), • VWBs poor performances are not penalized, but are rewarded. OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  6. Village Water Boards • Nationally • 60% of the villages have VWBs ( pop. 95,676) • Serves 30% of Belize's Population (SIB 2010) • 91% of the Village households are connected • 74% of VWBs funded Social Investment Fund • 26% funded by the GoB & Donors • 34% of VWBs are have no chlorinators, • 66% have installed chlorinators, • 33% of installed chlorinators operational. • Most tariffs are not linked to consumption (flat rate) • VWBs are prone to excessive political involvement • Many VWBs are distressed. Annual collection $4,088,592.00 Collection ratio 59% Annual arrears $1,140,581 VWBs annual expenses $2,187,189 % Annual collections 54.% % Electricity 35.2% % staff costs 29.4% OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  7. The Need for Reconfiguration/Reorganization Oct 3, 2001 E. coli bacteria in Blackman Eddy’s water The people of Blackman Eddy began noticing severe cases of skin rashes in their children since September, but never believed the cause was the water. Jul 29, 2009 Water problems in Valley of Peace, Cotton Tree Villages “…, two rural communities water is a scarce commodity and there seems to be no solution on the horizon for either of them.” Apr 17, 2012 Not a drop of potable water in Hopkins But since Sunday, Hopkins has been without potable water. It has created a crisis and things are at a standstill. • Jan 22, 2013 • Mahogany Heights without potable water • Jan 21, 2013 • No water in Santa Martha Village; villagers up in arms Jun 1, 2012 Cristo Rey villagers dependent on truck for water Oct 23, 2009 Residents of San Pablo and San Jose without water Hard times are hitting villages in the north. Residents have been unable to pay their water bills and B.E.L. pulled the plug on October nineteenth for arrears of eight thousand dollars May 31, 2005 Cayo villagers battle over water “…it seems that there are two Water Boards in Santa Familia: one elected by residents, the other appointed by government….” Stories: channel5belize.com OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  8. Option1.MAINTAIN THE STATUS QUO – DO NOTHING • New Rural Water Systems continue to be funded by: • Social Investment Fund • Government of Belize • Donor Agencies • VWBs continue to manage/mismanage Rural Water Systems • Political Involvement in the day-to-day operations continues • Government of Belize continue to fund: • Network Expansion and upgrades • Replace broken Chlorinators • Supply Chlorine • Pay Electricity Bills • Replace burnt out pumps • Etc. • More distressed Rural Water Systems OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  9. Option 2:ESTABLISH DISTRICT WATER BOARDS The Ministerintends to implement the provisions of the Village Council Act for the establishment of the District Association of Water Boards (DAWB) Proposes to commission a National Association of Water Boards (NAWB). The members of the NAWB will be the six District Associations of Village Water Board. The Minister may make regulations for the composition of, and procedures to be followed by, the DAWB VWBs are legally required to pay DAWB membership fee of 15% of monthly revenues OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  10. Option 2:ESTABLISH DISTRICT WATER BOARDS VWBs continue to manage operations individually 20% to 58 % VWBs continue to lose, 12 to 43% earn < 10% profit,20% to 80% earn > 10% profit. DAWB has no regulatory function, is an umbrella organization that may represent all or any Board in its District at any forum, especially where such Board lacks financial, technical or other resources to adequately and meaningfully represent itself thereat and to make loans to any Board which is a member of the Association for the purposes of developing the water supply system for that Board (Village Council Act 43:14(3))

  11. Option 3:The PUC Regulates Qualified Water Operations VWBs with annual gross revenue equal or greater than $85000., that is, 25% of the annual gross revenue of the smallest regulated BWS Service Area, should be declared a public utility provider • Some VWBs • Water operations annual collections are proportional to that of the smallest regulated BWS Service Area, • Customer base require large transmission and distribution networks, • Require expert technical and managerial assistance (additional costs), • PUC Regulation can provide a means for VWBs to generate adequate funds for expansion of networks and to contract technical and managerial assistance. OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  12. Option 4: ESTABLISH REGIONAL WATER UTILITIES • Privatize all VWBs and establish privately owned and operated Regional Water Utilities that are regulated by the PUC, • Consolidates revenue and distributes costs over all water operations • The Regional Water Utilities will have the same legal standing as that of BWS, • The value of the assets to be transferred will be determined by the state, • The regional groupings of VWBs is the responsibility of state, • To be in conformity with the Constitution of Belize the current value of the VWBs assetstransferred to the Regional Water Companies should be in the form of shares belonging to the State, • Eight (8) Regional Water Utilities is proposed OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  13. Option 4: ESTABLISH REGIONAL WATER UTILITIES (Proposed Configuration) Conceptual configuration is based on geography. Note the names of Rural Water Companies are not proposals. OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  14. Option 4: ESTABLISH REGIONAL WATER UTILITIES OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  15. Option 4: ESTABLISH REGIONAL WATER UTILITIES Current Collection ratio 59% => 10% to 60% operational margin (Orange Walk is Distressed and losing 35%) 100% collection ratio =>19% to 69% profit margin. NO DISTRESSED WATER UTILITY OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  16. Evaluation of OptionsOption1: MAINTAIN THE STATUS QUO – DO NOTHING “In any moment of decision, …the worst thing you can do is nothing.” US President: Theodore Roosevelt VWBs still distressed - Number may increase New Rural Water Systems continue to be funded by: Social Investment Fund Government of Belize Donor Agencies VWBs continue to manage/mismanage Rural Water Systems Political Involvement in the day-today operations continues More Rural Water Systems become distressed Government of Belize continues to fund: Network Expansion and upgrades Replace broken Chlorinators Supply Chlorine Pay Electricity Bills Replace burnt out pumps Etc. OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  17. Evaluation of OptionsOption2:ESTABLISH DISTRICT ASSOCIATION OF WATER BOARDS • Some VWBs will continue to • Be unable to cover their operational and maintenance costs, • Have low cash flow • Earn less than the PUC approved 10% return for BWS, • Not repay capital costs, • Not pay taxes, • Must pay 15% membership fee to the DAWBs, • VWBs continue to manage/mismanage Rural Water Systems (no penalty for poor performance) • Political Involvement in the day-to-day operations continues • More Rural Water Systems become distressed • Government of Belize continue to fund: (poor performance rewarded) • Network Expansion and upgrades • Replace broken Chlorinators • Supply Chlorine • Pay Electricity Bills • Replace burnt out pumps • Etc. • BWS assume responsibilities for more distressed VWBs – under PUC regulation “In any moment of decision, …, the next best thing is the wrong thing, …” US President: Theodore Roosevelt OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  18. Evaluation of OptionsOption 3:THE PUC REGULATES QUALIFIED WATER OPERATIONS • Regulation by the PUC can • Removethe communities’ emotions and the political hesitancy about the implementation of full cost-recovery tariffs. • Reduce political involvement in the day-to-day operations • Removal of inadequate flat rate, • Network expansion funded by VWBs, • Replacement costs funded by VWBs. • Unattractive to successfully operating VWBs, • 1% regulatory fee is viewed as penalty for good performance. • Threshold • Excludes VWBs that may really need the technical and managerial assistance, • Regulatory fee insufficient to cover PUC cost. “In any moment of decision, …, the next best thing is the wrong thing, …” US President: Theodore Roosevelt OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  19. Evaluation of OptionsOption 4: Establish Regional water utilities • Transformation of VWBs into self-sustaining viable regional water utilities, • No distressed VWB or water utility • Improvedtransparency, accountability, efficiency of the water utilities’ operations, • Insulate the water utilities’ from day-to-day political pressures • With 100% collections all companies, including Orange Walk, can cover their expenses without increasing the current rates. • Additional costs will be 1% fee to the PUC vs.of 15% to the DAWB, • Increases in tariff if necessary will be through a PUC Order ;not VWBs Decision (VWB members are from the village), • Remove villagers emotions and the politicians from the decisions on rates, • BWS • No longer be required to provide support to VWBs, • Focus on improving the quality of service it provides to its customers in its 13 service areas, • Focus on debt servicing. OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  20. Implementation Challenges • Option 1 • Chairmen and members unwillingness to relinquish control over VWBs finances, • The Ministers, Area Representatives, Village Council members unwillingness to relinquish control over the selection of the VWBs members – Lower political visibility, • Option 2 • Unwillingness of distressed VWBs to increase their tariffs, • Additional cost – 15% membership fee for the DAWBs. • Option 3 • Implementation of full cost- recovery tariffs by after the prolonged existence of an inadequate flat rate, will be most unpopular, • In 2012 only 5 VWBs met the qualifying threshold of $85,000., • PUC will need to increase staff to meet the additional work load, • Ministry refusal to relinquish control of VWBs to PUC regulation, • Requires Cabinet’s (politicians) approval for the declaration of VWBs as a Public Utility Provider • Option 4 • Requires amendments to the Village Council Act – political will • Relinquish their influence over the selection of the Board members – Lower Political Visibility, • BWS is the national water utility - No need to establish new water utilities, • The state has always provided subsidies – No need to remove subsidies. OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  21. Conclusions • Option 1 is the easiest to implement however it is the “…worst thing”. The continued poor financial performance and quality of service will be retained. • Option 2 only requires the Minister of Rural Development to implement the existing legal provisions in the Village Council Act. Quite Easily Done. VWBs continue to operate individually and inefficiently with 15% of monthly revenues as DAWBs membership fee. “…the next best thing is the wrong thing,” • Option 3 does not provide any relief for the distressed VWBs and is unattractive to successfully operating VWBs. However regulatory fee is 1% to PUC vs. 15% DAWBs membership fee“…the next best thing is the wrong thing,” OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  22. Conclusions • “In any moment of decision, the best thing you can do is the right thing, ….” US President: Theodore Roosevelt Option 4 provides all the requirements for the transformation of the VWBs into self-sustaining viable regional water utilities with likely outcomes such as transparency, accountability, and efficiency, as well as, insulation from day-to-day political pressures. The challenges for the implementation of option 4 are great, if not insurmountable. Nevertheless Option 4 is the “…best thing (and) is the right thing” and is my recommendation OOCUR 11TH ANNUAL CONFERENCE, 6th – 8th November 2013, RADISSON FORT GEORGE HOTEL Belize City, Belize. CHALLENGES TO REGULATORY POWER IN BORDERLESS SOCIETIES

  23. THANK YOU!!! QUESTIONS

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