BULK WATER TARIFFS BULK WATER TARIFFS

OFOF BUSHBUCKRIDGE WATER BUSHBUCKRIDGE WATER

Presented By: Ms. TP Nyakane Maluka - ChairpersonMr. MA Letswalo - Acting Chief

Executive

IntroductionIntroductionEstablishedEstablished in 1997 by the Minister of Water Affairs in 1997 by the Minister of Water Affairs

and Forestry in accordance with the Water Services Act.and Forestry in accordance with the Water Services Act.MandatedMandated to provide water services to other water to provide water services to other water

service institutions.service institutions.Area of operationArea of operation include the BLM and part of the include the BLM and part of the

Nsikazi area in MLM.Nsikazi area in MLM.Legislative imperativesLegislative imperatives include corporate include corporate

governance, PFMA, MFMA, WSA, NWA.governance, PFMA, MFMA, WSA, NWA.

AreaArea Ml/dayMl/day Population Population BLM Area (10 WTW)BLM Area (10 WTW) 60.660.6 1m1mMLM Area MLM Area 8080 700700

BLM: 60.6 l/ca. dayBLM: 60.6 l/ca. dayMLM: 114.3 l/ca. dayMLM: 114.3 l/ca. day

SERVICE SERVICE AREAAREA

INPUT COST OF BULK WATERINPUT COST OF BULK WATER

RAW WATER RAW WATER CHARGESCHARGES

COST OF RAW WATER SUPPLIED FROM DWAFCOST OF RAW WATER SUPPLIED FROM DWAF

DIRECT STAFF & DIRECT STAFF & LABOUR COSTLABOUR COST

ALL DIRECT COST OF STAFF WHO ARE ALL DIRECT COST OF STAFF WHO ARE RESPONSIBLE FOR O&M OF SCHEMES & PLANT RESPONSIBLE FOR O&M OF SCHEMES & PLANT

DIRECT ELECTRICITY DIRECT ELECTRICITY & ENERGY COST& ENERGY COST

ESKOM CHARGES FOR BOTH CAPACITY & ESKOM CHARGES FOR BOTH CAPACITY & USAGE FOR PUMPING, PURIFICATION & PLANT USAGE FOR PUMPING, PURIFICATION & PLANT LIGHTINGLIGHTING

CHEMICALSCHEMICALS FULL COST OF CHEMICALS USED FOR DOZING FULL COST OF CHEMICALS USED FOR DOZING OF WATEROF WATER

MAINTENANCEMAINTENANCE COST OF ROUTINE MAINTENANCE OF PLANT & COST OF ROUTINE MAINTENANCE OF PLANT & EQUIPMENTEQUIPMENT

NORMS FOR BULK POTABLE NORMS FOR BULK POTABLE WATER TARIFFSWATER TARIFFS

Water boardsWater boards May set a single tariff for its whole supply area.May set a single tariff for its whole supply area. May set a separate tariff for each scheme or each May set a separate tariff for each scheme or each

water treatment plant – motivated by differentials water treatment plant – motivated by differentials in the cost of supplying to different customers.in the cost of supplying to different customers.

The subsidization or cross subsidization of free The subsidization or cross subsidization of free basic water is a municipal concern and not within basic water is a municipal concern and not within the capability of water boards.the capability of water boards.

Tariff increases may be smoothed out over time to Tariff increases may be smoothed out over time to take into consideration projected future take into consideration projected future infrastructure development costs.infrastructure development costs.

INPUT COST OF BULK WATERINPUT COST OF BULK WATER

REFURBISHMENTREFURBISHMENT COST OF SUBSTANTIAL REPAIR OR COST OF SUBSTANTIAL REPAIR OR REPLACEMENT OF PLANT & EQUIPMENT WHICH REPLACEMENT OF PLANT & EQUIPMENT WHICH DOES NOT FORM PART OF ROUTINE DOES NOT FORM PART OF ROUTINE MAINTENANCEMAINTENANCE

OVERHEAD OVERHEAD ALLOCATIONALLOCATION

PORTION OF HEAD OFFICE AND OTHER PORTION OF HEAD OFFICE AND OTHER INDIRECT COSTS ALLOCATED TO EACH INDIRECT COSTS ALLOCATED TO EACH SCHEMESCHEME

The following financial assumptions were considered:The following financial assumptions were considered:

ASSUMPTION

Actual

Estimated

Budget

Projected

07/08 08/09 09/1010/1

111/1

212/13

13/14

CPIX 5.5% 10.1% 10.1%10.5%

10.9%

11.3%11.5%

Salaries and wages

5.7% 7.5% 13.5%18.4%

18.4%

18.5%18.5%

Interest rate12..5%

15.0% 10.5%11.2%

12.5%

13.9%14.3%

Energy cost 5.1% 8.6% 20.2%26.1%

29.1%

32.6%33.1%

TARRIF STRUCTURETARRIF STRUCTURECost structureCost structureKeys = VC: Variable costKeys = VC: Variable cost

= FC: Fixed cost= FC: Fixed cost

30 100 000m3/year30 100 000m3/year AmountAmount %% Amount p/mAmount p/m

Raw Water (vc)Raw Water (vc) 4 040 9254 040 925 4.814.81 336 744336 744

Electricity (vc)Electricity (vc) 5 600 0005 600 000 6.676.67 466 667466 667

Maintenance (vc)Maintenance (vc) 6 600 0006 600 000 7.867.86 550 000550 000

Chemicals (vc)Chemicals (vc) 8 750 0008 750 000 10.4210.42 729 167729 167

Refurbishment (vc)Refurbishment (vc) 5 450 0005 450 000 6.496.49 454 167454 167

Capex (vc)Capex (vc) 7 950 0007 950 000 9.479.47 662 500662 500

Salaries (fc)Salaries (fc) 29 900 00029 900 000 35.6035.60 2 491 6672 491 667

Administration cost (fc)Administration cost (fc) 15 700 00015 700 000 18.6918.69 1 308 3331 308 333

TOTALTOTAL 83 990 92583 990 925 100100 6 999 2446 999 244

TARRIF APPORTIONMENTTARRIF APPORTIONMENT

Variable Cost ComponentVariable Cost Component R1.40R1.40(Raw water, Electricity, Chemicals, Maintenance)(Raw water, Electricity, Chemicals, Maintenance) Fixed Cost ComponentFixed Cost Component R1.74R1.74(Salaries and Admin Cost)(Salaries and Admin Cost)

Proposed tariff for 2009/2010Proposed tariff for 2009/2010R3.07R3.07

NBNB ** = Proposed tariff review, due to upgrading = Proposed tariff review, due to upgrading of certain water worksof certain water works

Average for year ending 30 June

Estimate

Budget

Projected

08/09 09/10 10/11 11/12 12/13 13/14

Bulk Water Tariff

DWAF

0.14 1.34 1.41 1.48 1.55 1.63

Bulk Potable Water Tariff

BWB 2.94 3.07 3.69 * 3.87 * 4.06 * 4.27

TARRIF STRUCTURETARRIF STRUCTURE

Total water consumption is based on an average Total water consumption is based on an average water loss of 9% water loss of 9%

Total water consumption represent the total bulk Total water consumption represent the total bulk potable water to be supplied to the municipalitypotable water to be supplied to the municipality

M3/yearM3/year M3/dayM3/day

Total Water ConsumptionTotal Water Consumption 27 391 00027 391 000 75 04475 044

PROJECTED TARIFFPROJECTED TARIFF

2007/02007/088

2008/02008/099

2009/12009/100

% increase% increase 4.1%4.1% 5.9%5.9% 4.4%4.4%

Raw Water (R/kl)Raw Water (R/kl) 0.950.95 1.011.01 1.341.34

Bulk Potable Water Bulk Potable Water (R/kl)(R/kl)

2.782.78 2.942.94 3.073.07

For the period July 2009 to June 2010 an increase of For the period July 2009 to June 2010 an increase of 4.4% is proposed.4.4% is proposed.

This increase is below the current inflation rate.This increase is below the current inflation rate. The below inflation increase is influenced by current The below inflation increase is influenced by current

cost recovery and the poor service area of our cost recovery and the poor service area of our customer.customer.

COMMENTS FROM STAKEHOLDERSCOMMENTS FROM STAKEHOLDERS

SALGASALGA

Suggested increase seems Suggested increase seems unsustainableunsustainable..

Staff and admin cost are highStaff and admin cost are high

Operational cost and capital Operational cost and capital programmes likely to be hampered by programmes likely to be hampered by below inflation increasebelow inflation increase

COMMENTS FROM STAKEHOLDERSCOMMENTS FROM STAKEHOLDERS

NATIONAL TREASURYNATIONAL TREASURY

Proposed tariff increase is well below inflation Proposed tariff increase is well below inflation outlook – not sufficient to recoup cost.outlook – not sufficient to recoup cost.

Poor cost recovery.Poor cost recovery.

Review tariff during the year, further increase Review tariff during the year, further increase of 2% to ensure viability. (Supported by DWEA)of 2% to ensure viability. (Supported by DWEA)

COMMENTS FROM STAKEHOLDERSCOMMENTS FROM STAKEHOLDERS

BUSHBUCKRIDGE LOCAL MUNICIPALITYBUSHBUCKRIDGE LOCAL MUNICIPALITY

Basis of tariff calculation is fair and acceptable.Basis of tariff calculation is fair and acceptable.

Total water consumption is fairly acceptable.Total water consumption is fairly acceptable.

Variable and fixed cost cannot comment due to Variable and fixed cost cannot comment due to lack of audited financial statementslack of audited financial statements

CHALLENGESCHALLENGES Poor cost recovery by municipality which impacts on Poor cost recovery by municipality which impacts on

the water board’s cash flow.the water board’s cash flow.

Lack of bulk infrastructure:Lack of bulk infrastructure: Inyaka Water Works has a design capacity of 50 Inyaka Water Works has a design capacity of 50

m/l per day but only 25 m/l is produced.m/l per day but only 25 m/l is produced.

Operation of small schemes:Operation of small schemes: Provision of bulk infrastructure will result in the Provision of bulk infrastructure will result in the

small schemes being shut down.small schemes being shut down. Operational cost will be centralised in one big Operational cost will be centralised in one big

scheme which will result in the review of the scheme which will result in the review of the current tariff i.e. lower tariff.current tariff i.e. lower tariff.

Impact to the municipality:Impact to the municipality:Poor recovery of cost from the consumersPoor recovery of cost from the consumers

Raw Water TariffRaw Water TariffThe matter still outstanding between SAAWU and The matter still outstanding between SAAWU and DWEA on raw water tariffDWEA on raw water tariff

CONCLUSIONCONCLUSION

RecommendationRecommendation

- BW recommends the tariff increase by 4.42 %- BW recommends the tariff increase by 4.42 %

- Review of the raw water tariff - Review of the raw water tariff

Tariff will be reviewed during the second quarter Tariff will be reviewed during the second quarter

(2009/10)(2009/10)

- Electricity increase & inflation - Electricity increase & inflation

THANK YOUTHANK YOU