Revised Laws of Saint Lucia (2023)

1.   Citation

These Regulations may be cited as the Water and Sewerage (Tariff) Regulations.

2.   Interpretation

In these Regulations—

“Act” means the Water and Sewerage Act;

“allowed real revenue” means the total revenue that the service licensee is allowed to earn from tariffs, determined by the method outlined in paragraph 2 of Schedule 3;

“allowable rate of return” means the rate of return the service licensee may earn on its investment, as defined in paragraph 1.2 of Schedule 3;

“appeals tribunal” has the same meaning as in the Act;

“capital expenditure” means expenditure on new assets, including rehabilitation and replacement of existing assets, improvements to meet new regulatory requirements, and new infrastructure;

“Commission” has the same meaning as in the Act;

“depreciation” means annual accounting charge for wear, tear and obsolescence of fixed assets, calculated in accordance with paragraph 1.3 of Schedule 3;

“dispute” means a disagreement between a service licensee and the Commission;

“cost” means the increase in cost from producing one output or serving one group of customers in addition to another such that a service licensee, producing two services A and B, the incremental cost of B is the additional cost of producing B, given that the firm is already producing A;

“K factor” means an adjustment factor, aimed at keeping tariffs in line with the cost of service as efficiency increases and investment grows, and smoothing tariff changes over time and is determined according to the process outlined in paragraph 2 of Schedule 3;

“legacy asset value” (Deleted by S.I. 156/2020)

“net present value” means the discounted value of the expected benefits of a project, less the discounted value of the expected costs, calculated as specified in paragraph 2 of Schedule 3;

“operating and maintenance expenditure” means expenditure incurred through operations and maintenance activities in providing the services, calculated as outlined in paragraph 1.4 of Schedule 3;

“reasonable cost of service” means the total cost the utility would incur in providing the required services efficiently and is made up of the components defined in paragraph 1 of Schedule 3;

“regulatory asset value” means the value of assets utilized by the service licensee in providing the service, calculated as specified in paragraph 1.1 of Schedule 3; “rate of return” means the annual growth in the service licensee's profits, expressed as a percentage of the original investment in the service licensee, calculated as specified in paragraph 1.2 of Schedule 3;

“rising block tariffs” means some water is available at low unit prices, and additional water at progressively higher prices that are not subsidized;

“service” has the same meaning as in the Act;

“standalone cost” means the hypothetical cost of producing each output or serving each customer independently such that a service licensee producing two services A and B, the standalone cost of A is the cost that the firm would incur producing A, but not B;

“tariff revenue” means the revenue earned by a service licensee from tariffs;

“tariff review period” means the period for which a new tariff is set following a triennial or an extraordinary tariff review;

“used and useful” means that an asset is considered used and useful when it is currently used to provide service, is not oversized or clearly inefficient, and is currently contributing to the provision of the service;

“working capital” means the difference between current assets and current liabilities.

3.   Water and sewerage rates

For water and sewerage services supplied under its service licence, a service licensee shall charge the rates prescribed in Schedule 1 as adjusted, when required in accordance with Parts 1, 2 and 3 of these Regulations.

PART 2
INDEXATION

4.   Indexation adjustment

1.  

   (1)   A service licensee is entitled to adjust its water and sewerage rates annually in accordance with the indexation formula in Schedule 2 to compensate it for the impact of inflation on costs and to allow for efficiency gains and capital investment.

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   (2)   Indices specified in Schedule 2 are to be the latest index available at the time of the review.

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   (3)   The indexation formula sha1l be applied equally to all service licensees' tariff classes.

5.   Indexation procedure

1.  

   (1)   Two months prior to the start of each year, the service licensee shall apply the indexation formula to tariffs, and notify the Commission of the proposed new tariffs, the corresponding indices and the effective date.

1.  

   (2)   The Commission may amend the proposed new tariffs if it considers that an error has been made in calculating the tariffs.

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   (3)   Where the commission accepts the tariffs submitted in accordance with this regulation, it shall publish the new tariffs, the corresponding indices and the effective date in the Gazette and 2 newspapers in weekly circulation in Saint Lucia, at least one month prior to the effective date.

1.  

   (4)   The service licensee shall implement the new tariffs no earlier than the effective date.

1.  

   (5)   The service licensee may object to the new tariffs if it believes that the Commission has erred and in the event of an objection, the Commission and the service licensee shall resolve the dispute in accordance with the appeals process outlined under the Act.

1.  

   (6)   In the event of a dispute that extends beyond the effective date of the new tariffs, the service licensee's tariff shall be implemented until the dispute is resolved and if the decision is given against the service licensee, it shall immediately reduce tariffs to the agreed level and issue a customer refund.

6.   Amendment of indexation formula

1.  

   (1)   Subject to subregulation (3) pursuant to a triennial tariff review referred to in regulation 7, the Commission may amend Schedule 2 to change the indexation formula if it considers that the existing formula is no longer an accurate reflection of a service licensee's input costs.

1.  

   (2)   The input indices shall be regularly published or easily observable.

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   (3)   The new indexation formula shall be a better reflection of changes in cost than the existing formula.

PART 3
TRIENNIAL TARIFF REVIEW

7.   Triennial tariff review adjustment

In a triennial tariff review, the Commission shall set tariffs using the triennial tariff adjustment procedure in Schedule 3 so that—

1.  

   (a)     the net present value of the tariff revenue earned by the service licensee over the following 3 years is equal to the net present value of its efficiently incurred costs plus a fair and reasonable return on capital over the same period of time, in accordance with the following—

1.  

   NPV (C) = NPV (R)

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   Where:

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   NPV means net present value

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   C = reasonable cost of service for the tariff review period

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   R = Total revenue earned by the service licensee from supplying services over the tariff review period; and

   1.  

      (b)     tariff increases are smoothed by applying a K Factor.

8.   Triennial tariff review procedures

1.  

   (1)   Four months prior to the commencement of a triennial tariff review period, a service license shall submit to the Commission its proposed tariff rates, estimated revenue requirement, and sufficient supporting information to enable the Commission to verify that the proposed tariff rates reflect reasonably incurred costs of service and a reasonable return on capital.

1.  

   (2)   Supporting information shall include—

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      (a)     a business plan with planned investment and financial forecasts for at least the following 9 years;

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      (b)     a demand forecast for at least the following nine years;

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      (c)     changes to the depreciation schedule, as specified in paragraph 1.3 of Schedule 3;

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      (d)     audited accounts referred to in regulation 9.

9.   Accounting information

1.  

   (1)   For the purpose of the triennial review, a service licensee shall prepare audited accounts in accordance with International Financial Reporting Standards, or any other standards specified by the Commission but the Commission may alternatively specify additional schedules to fulfil specific requirements, once it does not override the International Financial Reporting Standards.

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   (2)   The service licensee shall appoint an external auditor to audit the accounts and shall ensure that the auditor submits the following to the Commission—

   1.  

      (a)     a note indicating that the auditor acknowledges the intended use of the accounts by the Commission;

   1.  

      (b)     a report, in respect of each of the accounting statements submitted, stating whether in the Auditor's opinion—

      1.  

         (i)     the service licensee has kept proper accounting records, in a form that enables identification of the revenues, costs, assets and liabilities of providing the services, and

      1.  

         (ii)     the set of accounting statements submitted represents a true and fair view of the revenues, costs. assets and liabilities of the service the licensee incurred in providing the services.

10.   Reviewing forecast capital expenditure

The Commission shall carry out the following steps in reviewing the service licensee's capital expenditure requirements—

1.  

   (a)     review the service licensee's demand forecast and service standards to define the service capabilities required of the network;

1.  

   (b)     assess the condition of the infrastructure, including its adequacy for service and how well it has been maintained;

1.  

   (c)     benchmark asset utilization and maintenance levels against best practices;

1.  

   (d)     identify the required system upgrades, by comparing the service licensee's actual service capabilities and the required service capabilities;

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   (e)     review the efficiency of the proposed capital expenditure programme to ensure that the projects are the least cost solution, technically sound, and reflect reasonable post estimates; and

1.  

   (f)     subject to regulation 12, make any necessary adjustments to the forecast capital expenditure.

11.   Adjustments to actual investment

1.  

   (1)   The Commission shall make adjustments to actual investment, adjusting the opening assets value on the basis of actual assets that are considered used and useful but if an asset is not considered used and useful, the Commission will exclude it from the asset value.

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   (2)   Investments are to be automatically included in the Commission's calculation if they are—

   1.  

      (a)     subject to a plan already approved by the Commission; and

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      (b)     procured on a competitive basis.

12.   Adjustments to forecast investment

1.  

   (1)   The Commission shall make adjustments to forecast investment after considering all forecast capital expenditure costs that are reasonably forecasted to be incurred by the service licensee in providing services to consumers.

1.  

   (2)   The service licensee shall provide the Commission with information on its investment plans, projected capital expenditure for the tariff review period, and such other information as the Commission reasonably requests.

1.  

   (3)   Approval of investment plans and projected cash flows by the Commission shall be in respect of a period of at least 9 years.

1.  

   (4)   In the event that a dispute arises between a service licensee and the Commission on the allowable investment, the appeals process outlined under the Act applies.

13.   Reviewing depreciation

1.  

   (1)   The Commission will consider all depreciation costs that are reasonably incurred by the service licensee while providing services to consumers.

1.  

   (2)   The service licensee shall submit an initial depreciation schedule to the Commission for approval along with the first triennial tariff review application and for future reviews, the Commission shall approve changes to the depreciation schedule only.

14.   Reviewing operations and maintenance expenses

1.  

   (1)   The Commission shall review the service licensee's forecast and historic operating and maintenance costs, as well as its forecast demand to ensure that this represents an accurate view of the state of the business and that the costs are reasonable.

1.  

   (2)   The Commission shall determine the efficiency of the operating and maintenance costs using any combination of the following methods—

   1.  

      (a)     compare the forecast operating and maintenance costs with historical costs and forecast performance;

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      (b)     review a statement of justification for the forecast operating and maintenance costs submitted by the service licensee;

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      (c)     benchmark operating and maintenance costs and performance on key service indicators against other utilities of a similar nature, operating in similar conditions;

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      (d)     review the service licensee's performance on key performance indicators and against agreed service or efficiency targets;

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      (e)     request an independent technical audit to assess service levels and associated costs.

15.   Adjustment to allowable operating and maintenance expenditure

1.  

   (1)   The Commission shall adjust the forecast operating and maintenance expenditure accordingly if the Commission finds that the service license is inefficent.

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   (2)   The Commission may make the adjustment based on immediate achievement of efficient cost levels or based on improved efficiency levels over a period of time that the Commission specifies, whichever the Commission considers reasonable.

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   (3)   In the event that a dispute arises between the service licensee and the Commission on the allowable operating and maintenance expenditure, the appeals process outlined in the Act applies.

16.   Additional parameters for setting of tariffs

In addition to the principles set out in section 78 of the Act, the tariffs shall accord with the following:

1.  

   (a)     the tariff may contain different tariff classes;

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   (b)     each customer within a tariff class should be charged the same tariff;

1.  

   (c)     a customer is not to be charged more than the standalone cost, or less than the incremental cost of providing service;

1.  

   (d)     all customers in the same class shall be charged the same tariff unless different costs apply to certain customers within this class; and

1.  

   (e)     rising block tariffs are permitted if applied equally to all customers in the same class.

17.   Publishing the results of the review

1.  

   (1)   The Commission shall review the tariff review application and publish its results not later than 60 days before the end of the triennial period for a triennial tariff review.

1.  

   (2)   In default of publication within this period, the new tariffs in the application are deemed effective.

1.  

   (3)   The Commission shall publish its report stipulating the new tariff in the Gazette and in at least 2 newspapers in general weekly circulation in Saint Lucia.

1.  

   (4)   If the service licensee's proposal is rejected by the Commission, the service licensee may submit a revised proposal within 14 days of notification of the rejection.

1.  

   (5)   If the service licensee does not submit a revised proposal, the tariff already agreed for the existing period shall continue to apply.

1.  

   (6)   In the event that a dispute arises between the service licensee and the Commission, both parties shall make an effort to resolve this through mutual consultation and negotiation.

1.  

   (7)   Any disputes that cannot be resolved through mutual consultation and negotiation shall be referred to the Appeals Tribunal.

PART 4
EXTRAORDINARY TARIFF REVIEW

18.   Extraordinary tariff review

If an extraordinary event occurs, extraordinary tariff review will compensate—

1.  

   (a)     the service licensee with a tariff increase, for any losses in revenue or increases in the cost of providing service;

1.  

   (b)     customers with a tariff decrease, for increases in revenue, or decreases in the cost of providing service.

19.   Extraordinary tariff review Process

1.  

   (1)   The service licensee may, at any time, request the Commission to consider circumstances that the service licensee believes constitute grounds for an extraordinary tariff review by submitting information on the following—

   1.  

      (a)     the event giving rise to the extraordinary tariff review;

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      (b)     the valuation of the impact of the events on the service licensee's historical and future cash flows; and

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      (c)     the calculation of the magnitude of the extraordinary tariff review requested.

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   (2)   The Commission may also, at any time, notify the service licensee of circumstances that the Commission believes constitutes grounds for an extraordinary tariff review and shall notify the service licensee of the extraordinary event, and request that the service licensee submit the information in subregulation (1).

1.  

   (3)   The Commission shall determine whether an extraordinary event has occurred or will occur, by taking into account all information available at the time, and by making reasonable projections of all factors relevant to the service licensee's future cash flow and the Commission may employ the services of technical or other experts in making this determination.

1.  

   (4)   The Commission shall—

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      (a)     calculate the change in the service licensee's cash flows as a result of the extraordinary event;

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      (b)     identify the annual changes (increases or decreases) in operating and maintenance costs and capital expenditure over the remainder of the triennial period;

   1.  

      (c)     add or subtract these costs from the reasonable cost of service calculation for the remainder of the triennial period, and adjust the allowed real revenue requirement and tariff scheme accordingly;

   1.  

      (d)     take into account in calculating the service licensee's allowed real revenue at the next triennial tariff adjustment if all additional costs extend beyond the end of the triennial period.

1.  

   (5)   If the service licensee objects to the Commission's determination, it may refer the matter to the Appeals Tribunal.

20.   Publication of results

The Commission shall publish its determination stipulating the revised tariff scheme in the Gazette and in at least 2 newspapers in general weekly circulation in Saint Lucia.