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Industry unhappy about imminent 100% rise in water rates

Increase would allow Prasa to issue bonds in five years

June 23, 2005

Puerto Rico Aqueduct & Sewer Authority’s (Prasa) plan to raise water rates by at least 100% by the end of the year would hurt the island’s competitiveness, said an industry official.

"The industries we are attracting, pharmaceutical companies and those that serve those companies, are coming because of water availability and water cost," said William Riefkhol, vice president of the Puerto Rico Manufacturers Association. "If we have outrageous increases in water costs, immediately, we will be losing competitiveness." Riefkhol said the island is still in the running to attract biotechnology companies to the island, but water increases would put Puerto Rico at a disadvantage, especially against its principal competitor, Ireland. Riefkhol argued that Prasa has alternatives to raising the water rates such as water conservation. "If we raised the rates as proposed it would be disastrous," he said.

Prasa Executive President Jorge Rodríguez Ruiz said water at its current price–$1.20 a cubic meter or 25 cents a gallon – is extremely low and argues that doubling the price would still keep Puerto Rico competitive. Water rates haven’t been raised in 19 years, Rodríguez said. "The water is cheap, and everyone wants the water service to continue to improve," he said. He argues for the need to increase water rates as a means to increase the agency’s productivity. Still, Prasa has perennially come under criticism for what many regard as the poor quality of its service, which is characterized by frequent outages.

Gov. Aníbal Acevedo Vilá announced the central government no longer would subsidize Prasa, which had been receiving a $400 million a year subsidy. The end of the subsidy means the authority would have to be self-sufficient in facing its $400 million debt.

Rodríguez said the authority’s goal with the rate increases is to pay off the debt in three years and be able to issue bonds in five. The Prasa executive said the company plans an $18 million cost-reduction program this year.

The authority also is planning 340 capital-improvement projects that will cost $2.5 billion. Among the most important are reservoirs on the Valencio, Blanco, and Casei rivers; water-filtration plants in Aguadilla, Yauco, Platilla, and Caguas; and improvements to water-filtration plants in El Yunque and Yauco.

"This agency is at its lowest point ever. The only way to go is up–things can’t get any worse," said Prasa’s executive. He adds that having spent 27 years in the private sector has taught him one important lesson: "Government is doing a lousy job" of managing this particular agency. "We need to raise water rates; it is the only way to keep the agency afloat. Our goal is for our income to equal our expenses, and to provide better water services," he said.