BULK WATER TARIFFS OF BUSH by fdl11314

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									                    BULK WATER TARIFFS
                         OF
                 BUSHBUCKRIDGE WATER




Presented By:
         Ms. TP Nyakane Maluka - Chairperson
         Mr. MA Letswalo - Acting Chief Executive
                         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
SERVICE AREA
            INPUT COST OF BULK WATER

RAW WATER CHARGES COST OF RAW WATER SUPPLIED FROM DWAF


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

DIRECT ELECTRICITY & ESKOM CHARGES FOR BOTH CAPACITY & USAGE
ENERGY COST          FOR PUMPING, PURIFICATION & PLANT LIGHTING


CHEMICALS           FULL COST OF CHEMICALS USED FOR DOZING OF
                    WATER

MAINTENANCE         COST OF ROUTINE MAINTENANCE OF PLANT &
                    EQUIPMENT
                  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.
              INPUT COST OF BULK WATER

  REFURBISHMENT          COST OF SUBSTANTIAL REPAIR OR REPLACEMENT
                         OF PLANT & EQUIPMENT WHICH DOES NOT
                         FORM PART OF ROUTINE MAINTENANCE
  OVERHEAD               PORTION OF HEAD OFFICE AND OTHER INDIRECT
  ALLOCATION             COSTS ALLOCATED TO EACH SCHEME


 The following financial assumptions were considered:
                    Actual   Estimated   Budget               Projected
ASSUMPTION
                    07/08      08/09      09/10    10/11    11/12 12/13    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 rate      12..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 STRUCTURE
          Cost structure
          Keys = VC: Variable cost
                = FC: Fixed cost
           30 100 000m3/year         Amount     %     Amount p/m
Raw Water (vc)                   4 040 925    4.81    336 744
Electricity (vc)                 5 600 000    6.67    466 667
Maintenance (vc)                 6 600 000    7.86    550 000
Chemicals (vc)                   8 750 000    10.42   729 167
Refurbishment (vc)               5 450 000    6.49    454 167
Capex (vc)                       7 950 000    9.47    662 500
Salaries (fc)                    29 900 000   35.60   2 491 667
Administration cost (fc)         15 700 000   18.69   1 308 333
                        TOTAL 83 990 925      100     6 999 244
           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

   Average for year  Estimate   Budget              Projected
    ending 30 June    08/09     09/10    10/11   11/12     12/13   13/14
Bulk Water
                DWAF   0.14      1.34    1.41     1.48     1.55     1.63
Tariff
Bulk Potable
                 BWB   2.94      3.07    3.69    * 3.87   * 4.06   * 4.27
Water Tariff
    NB * = Proposed tariff review, due to upgrading of
       certain water works
                    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
                                M3/year      M3/day
    Total Water Consumption     27 391 000   75 044
                   PROJECTED TARIFF

                                2007/0 2008/09 2009/10
                                8
% increase                      4.1%        5.9%        4.4%
Raw Water (R/kl)                0.95        1.01        1.34
Bulk Potable Water (R/kl)       2.78        2.94        3.07
    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.
       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
          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)
          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
                             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
              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
THANK YOU

								
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