Utility regulator OfReg has rejected a request by Cayman Water Company to raise the price of water for customers in Grand Cayman, saying that there was no justification for the rate increase.
Cayman Water provides water to residents in West Bay and Seven Mile Beach. The company had requested to increase its rates in line with inflation.
Cayman Water has been unable to negotiate a new licensing deal with government for more than nine years. The company’s original retail licence was set to expire in July 2010, but has been extended multiple times since then to give government and the company time to reach a new deal. OfReg assumed the ongoing negotiations since its inception in 2017.
The water regulator said it assessed the request in good faith, even though the licensing negotiations are ongoing and, as a result, there was no legal basis for a rate hike.
Gregg Anderson, executive director of Energy and Utilities, made his decision based on regulatory principles, including fairness to both the consumer and provider, OfReg said in a press release.
Anderson said that in a competitive market, providers battle for market share, which raises standards and lowers prices. “In this instance, consumers do not have a choice of water supplier, so it is the job of the regulator to ensure that the rates are fair to the consumer, whilst also providing a sufficient return on investment for the provider,” he said.
“There was no justification for Cayman Water to be granted their request to increase the water rates. I now look forward to focusing on getting the best deal for both consumers and Cayman Water in the ongoing licence negotiations.”
The regulator said the negotiations will conclude when it is satisfied that the agreed licence conditions, which include water rates, strike the right balance between the legitimate commercial interests of Cayman Water and consumers.
The water company made a proposal to OfReg last year, but the regulator rejected that deal in November.
Cayman Water officials had not responded to a request for comment by press time.
Under its current licence regime, Cayman Water pays a 7.5% royalty to the government on its gross retail water sales revenues, excluding energy cost adjustments. The retail water sales price is dependent on the type and location of the customer and the monthly volume of water purchased.
Cayman Water has repeatedly noted in its financial statements that the resolution of the licence negotiations could materially reduce the company’s operating income and cash flows from retail operations.