Suppliers agree to drop water rates

Mariani Dewi, The Jakarta Post, Jakarta | Sat, 12/06/2008 11:41 AM 

 

Private tap water supplier PT Pam Lyonnaise Jaya (Palyja) and state-owned water company PAM Jaya have agreed on a reduced water price as part of a new five-year contract.

 

The contract will be Palja's third with PAM.

 

"That (the cut) is the result of our negotiation. We agreed to lower the water charge PAM Jaya asked for. It will mean the tariff amendment will not be too high. We are always concerned about public welfare," Palyja commissioner Bernard Lafrogne told The Jakarta Post on Tuesday.

 

The water charge is the price PAM Jaya pays to a water contractor, in this case Palyja, for supplying water. PAM and Palyja had agreed on a fixed water charge for the 1998 to 2022 period.

 

Consumers of the tap water make their payments directly to PAM. Fees are based on a sum of the water rate and PAM's expenditures, which include debt payments.

 

The water charge will drop by 5 percent to Rp 7,020 (56 US cents) per cubic meter. Based on Palyja's current annual water sales of 134 million cubic meters, the cut will translate to Rp 53 billion in savings per year for PAM Jaya.

 

The new contract will be retroactive to July 2008, meaning Palyja will have to return the difference once the deal is signed.

 

"When the price we pay to our partner is lower, the tariff can be reduced," said Kris Tutuko, a senior official at PAM Jaya.

 

However, the tariff charged to the public must be approved by the governor. The current tariff has not changed for two years.

 

Also under the new contract, Palyja must pay PAM Rp 165 billion for falling 6 percent short of its sales target for the second half of the year.

 

Lafrogne said the repayment amount was calculated based on the cost of the amount of water not delivered as a result of the shortcoming.

 

The new contract also stipulates updated performance targets, including for water sales, water that does not generate revenue due to theft or leakages (NRW) and pipeline expansion and repairs costs.

 

The new deal will require the company to step up its yearly target for volume of water sold to 147 million cubic meters in 2012; an average rise of 2.6 million cubic meters per year.

 

Palyja must invest Rp 867 billion on improving and expanding its pipelines over the next five years, Rp 348 billion more than it spent in the last five years.

 

Some Rp 630 billion of the amount will go toward expanding and repairing its pipelines, with the majority earmarked for repairs.

 

The company will focus on expanding its coverage in North and West Jakarta, including in Jembatan Besi, Cengkareng and Cikokol.

 

However, the Jakarta Water Supply Regulatory Body said the new targets, especially for NRW, were too modest.

 

Both PAM Jaya and Palyja said the new targets were realistic. However, Palyja said it would attempt to surpass the targets.

 

Palyja's target for 40 percent of its production to be NRW by 2012 stipulate a 35.25 decrease from this year's rate.

 

It means Palyja must reduce its NRW by more than 1 percent annually.

 

Palyja's NRW rate hit 45.8 percent in September this year, meaning the rate dropped by an average of 1.5 percent per year from 2005.

 

Palyja's best NRW performance was 44.8 percent in 2003 but it increased to an all-time high of 50.5 percent in 2005.

 

PAM Jaya said that by 2022, all Jakartans would have access to drinkable pipe water, but not including those who currently had access to ground water or who were unregistered residents.