Amendment

This Order may be amended at any time during an Annual Tariff Period (ATP) withing the Full Tariff Period (FTP) to include Tariffs for any water distribution system or sewerage collection and disposal system that may be commissioned by the Belize Water Services Limited (BWSL) during such ATP, subject to the following– (a) The characteristics of the water distribution system or sewerage collection and disposal system that may be commissioned warrant that specific Tariffs be determined for such system; (b) Any such amendments shall be made in accordance with Section 13 of the Water 184 Water Industry Industry Act and Section 32 of the Public Utilities Commission Act. MADE by the Public Utilities Commission this 30th day of March, 2010. (JOHN P AVERY) Chairman, Public Utilities Commission Water Industry 185 FIRST SCHEDULE PUBLIC UTILITIES COMISSION (PUC) Rate Setting Methodology (RSM) for water Sector General The Rate Setting Methodology (RSM) scripted herein and currently employed by the Public Utilities Commission (PUC the Commission) for the Full Tariff Period (FTP) of April 1, 2010, to March 31, 2015, is a hybrid model made up of Revenue-capped and price-capped items. The RSM determines the Tariff Basket Revenue (TBR – the total revenue to be derived by a Licensee from water and sewer rates, tariffs, fees, and charges) and the subsequent rates, tariffs, fees and charges for the provision of water and sewer services to be applied for each Annual Tariff Period (ATP) of the FTP and which are expected to give rise to the approved TBR for each ATP of the FTP. The TBR is intended to provide for the full recovery of the reasonable costs incurred by a Licensee in the water and sewer services for each ATP of the FTP. The Tariff Basket Revenue (TBR) is represented arithmetically as follows: OPEX $ Return $ Depreciation $ Taxes/Licence Fees $ Annual Correction (AC) $ RSA Recovery $ Less: Other Income $ Tariff Basket Revenue (TBR) $ 186 Water Industry Based on prescribed percentage allocation of cost/revenue components and forecast sales (demand) for each class of customers (type of service), a Tariff Schedule is approved. The approved Tariffs are set to realize the cost/revenue components of the TBR allocated to each class of customers, based on all allocations approved by the Commission. Cost/Revenue Components of TBR and Approved Rates/Tariffs The different cost/revenue components of the TBR are described and determined as follows: OPEX: OPEX is price-capped; therefore, no Annual Correction (AC) is applied to this item. OPEX includes, but is not limited to, the following cost items– (a) Customer Care/Billing/Collections Meter reading, bill preparation and delivery, collections, disconnections, reconnections, complaints, inspections, applications, etc. (b) Transmission and Distribution Operations, maintenance, project planning & design, dispatch/control, emergency servicing, etc. (c) Sewerage Collection and Disposal Operations, maintenance, project planning & design, dispatch/control, emergency servicing, etc. Water Industry 187 (d) Purchase of Water from independent producers (e) Finance/Administration Executive, general expenses, public relations, management fees, finance & accounting, purchasing and stores, etc. Return: Return is revenue – capped; therefore, an Annual Correction (AC) is applied to this item. Return for any given Annual Tariff Period (ATP) is calculated as follows: -ReturnATP = RAVATP X RORATP Where: Return ATP = Return for an ATP of the FTP RAV ATP = approved Regulated Asset Value for an ATP of the FTP ROR ATP = approved Rate of Return (%) for an ATP of FTP Return is determined and approved for each Annual Tariff Period (ATP) of the corresponding Full Tariff Period (FTP) during a Full Tariff Review Proceeding (FTRP) and may be reviewed and revised in any Annual Review Proceeding (ARP) during the FTP. A Rate of Return (ROR ATP) is determined and approved for each Annual Tariff Period (ATP) of the Corresponding Full Tariff Period (FTP) during a Full Tariff Review Proceeding 188 Water Industry (FTRP) and may be reviewed and revised in any Annual Review Proceeding (ARP) during the FTP. A lower limit for Rate of Return (RORLL) is determined and approved for the corresponding Full Tariff Period (FTP) during a Full Tariff Review Proceeding (FTRP) and may be not reviewed and revised in any Annual Review Proceeding (ARP) during the FTP. The Rate of Return (RORATP) to be applied during any FTRP or ARP in the determination of Return for any ATP of the FTP shall not be lower than RORLL. The lower limit for Rate of Return (RORLL) shall not be less that the Weighted Average Cost of Debt (WACD) of the Licensee, based on debt procured by such Licensee in accordance with the Licence granted to such Licensee or based on prevailing market interest rates, provided that the Licensee shall use its best efforts to procure debt on the most favourable available terms. Depreciation: Depreciation is revenue-capped; therefore, an Annual Correction (AC) is applied to this item. Depreciation is calculated as the sum of the annual depreciation of assets represented in the Regulated Asset Value (RAV), based on approved depreciation schedules for such assets. Depreciation is determined and approved for each Annual Tariff Period (ATP) of the Corresponding Full Tariff Period (FTP) during a Full Tariff Review Proceeding (FTRP) and may be reviewed and revised in any Annual Review Proceeding (ARP) during the FTP. Annual Correction (AC) Annual Correction (AC) is neither revenue-capped nor price capped, but is applied to revenue-capped items where there are any previous surpluses or deficits in revenues for revenue- capped items. Water Industry 189 Annual Correction (AC) is calculated as the sum of the surpluses or deficits in approved revenues for revenue-capped items for the immediately previous Annual Tariff Period (ATP). Annual Correction (AC) is determined and approved for each Annual Tariff Period (ATP) of the corresponding Full Tariff Period (FTP) during a Full Tariff Review Proceeding (FTRP) and any Annual Review Proceeding (ARP) during the FTP. Taxes/Licence Fees: Taxes License Fees is revenue-capped; therefore, an Annual Correction (AC) is applied to this item. Taxes/Licence Fees for any given Annual Tariff Period (ATP) is calculated as follows: Taxes/Licence Fees ATP = (TBRATP + OIATP) X (TR + LFR) Where: Taxes/Licence Fees = Taxes/Licence Fees for an ATP of the FTP TBRATP = Tariff Basket Revenue for an ATP of the FTP OIATP = Other Income for an ATP of the FTP TR = The legal tax rate, being 1.75% LFR = The legal annual licence fee rate, being 0.5% Taxes/Licence Fees is determined and approved for each Annual Tariff Period (ATP) of the corresponding Full Tariff Period (FTP) during a Full Tariff Review Proceeding (FTRP) and may be reviewed and revised in any Annual Review Proceeding (ARP) during the FTP. 190 Water Industry RSA Recovery RSA Recovery may be considered revenue-capped since it usually seeks to recover a fixed cost over a reasonable period of time, but there is no Annual Correction (AC) applied to this item. RSA Recovery is determined and approved by the Commission for any relevant Annual Tariff Period (ATP) during which there exists any outstanding balance in any approved Rate Stabilization Account (RSA) operated or maintained by a Licensee. There is no formula for RSA Recovery. Other Income Other Income represents other sources of revenue for a licensee, provided by charging various approved fees and charges for water and sewer services. Regulated Asset Value (RAV) The Regulated Asset Value (RAV) is the approved book value of assets owned and operated by the Licensee and are directly utilized in the provision of water and sewer services, less any contributed capital. The RAV is used to determine the revenue requirements for the Depreciation and Return components of the Tariff Basket Revenue (TBR). In determining the Regulated Asset Value (RAV), the following general rules are applied: (a) Assets are not allowed in the Regulated Asset Value (RAV) until commissioned and put in service. For ease of calculation for simplicity, only 50% of the book value of assets commissioned and put in service during a calendar year is included in the approved Regulated Asset Value (RAV) for the said year. Water Industry 191 (b) The Licensee is allowed to capitalize interest during construction (IDC) and all costs directly associated with construction work in progress (WIP). (c) Assets that are acquired as a result of contributed capital are not allowed in the Regulated Asset Value (RAV). (d) General Expenses Capitalized (GEC), an accounting treatment whereby a portion of general expenses is routinely capitalized and included in assets, are not allowed in the Regulated Asset Value (RAV). (e) Routine maintenance to maintain an asset’s capacity and asset life is not allowed in the Regulated Asset Value (RAV). Such expenses are covered in the OPEX component of the TBR. (f) Contributed Capital is any funding received by a Licensee from any developer of other legal source, and which is intended as a contribution to the full cost of any investment in assets made by a Licensee. (g) The gross value of a fixed asset may only be modified to reflect subsequent expenditure intended to enhance the asset, and where that expenditure in one of the following: (i) A significant extension of the life of the asset, beyond the life assumed in the depreciation rate that is applied to the asset, in which case the appropriate adjustment should also be made to the asset life of the asset. 192 Water Industry (ii) A significant improvement in the capacity of the asset, beyond the recorded rated capacity of the asset at the time that it was acquired. SECOND SCHEDULE BELIZE WATER SERVICES LIMITED (BWS) 45 of 2011. Approved Regulated Asset Value (RAV) for Full Tariff Period (FTP) April 1, 2010, to March 31, 2015 Regulated Asset Value (RAV) as a March 31/April 1 of each year - $’000 All Branches except Caye Caulker Year 2011 2012 2013 2014 2015 Ttotal - FTP Starting RAV 126,793 124,937 131,066 140,116 143,611 Depreciation 3,170 3,123 3,277 3,503 3,590 16,663 Work in Progress 17,670 8,165 7,016 3,686 3,916 40,453 Additions 5,725 11,333 12,918 7,591 5,351 42,916 Contributed Capital 4,410 2,081 591 593 597 8,272 Ending RAV 124,937 131,066 140,116 143,611 144,774 Water Industry 193 Regulated Asset Value (RAV) as at March 31/April 1 of each year - $ Caye Caulker Branch Year 2011 2012 2013 2014 2015 Ttotal - FTP Starting RAV 1300,000 1240,200 1209,195 1178,965 1149,491 Depreciation 59,800 31,005 30,230 29,474 28,737 179,246 0 0 0 0 0 0 Additions 0 0 0 0 0 0 Contributed Capital 0 0 0 0 0 0 Ending RAV 1240,200 1209,195 1178,965 1149,491 1120,754 194 Water Industry THIRD SCHEDULE Belize Water Service Limited (BWS) Approved Tariff Basket Revenue (TBR) and Components for Full Tariff Period (FTP) April 1, 2010, to March 31, 2015 Approved Tariff Basket Revenue (TBR), Revenue, Components and Forecast Consumption for each ATP of the FTP - $’000. All Branches except Caye Caulker Year 2011 2012 2013 2014 2015 Total - FTP Revenue Components of TBR OPEX 20,573 20,710 20,074 20,923 21,799 104,078 Return 12,587 12,800 13,559 14,186 14,419 67,551 Depreciation 3,170 3,123 3,277 3,503 3,590 16,663 Annual Corrections 0 0 0 0 0 0 RSA Recovery 0 0 0 0 0 0 Taxes/Licence Fees 836 843 850 889 916 4,334 Less: Other Income 1,050 1,097 1,146 1,198 1,252 5,743 Tariff Basket Revenue 36,116 36,380 36,613 38,303 39,473 186,884 Forecast Consumption (‘000 gallons) 1975,601 2048,349 2125,798 2208,388 2294,220 10652,356 Average Tariff ($/1000 gallons) 18.28 17.76 17.22 17.34 17.21 17.54 Water Industry 195 Approved Tariff Basket Revenue (TBR), Revenue Components and Forecast Consumption for each (ATP) of the FTP - $ Caye Caulker Branch Year 2011 2012 2013 2014 2015 Total - FTP Revenue Components of TBR OPEX 726,356 744,515 763,128 782,206 801,761 3817,966 Return 127,010 122,470 119,408 116,423 113,512 598,823 Depreciation 59,800 31,005 30,230 29,474 28,737 179,246 Annual Corrections 0 0 0 0 0 0 RSA Recovery 0 0 0 0 0 0 Taxes/Licence Fees 21,019 20,670 21,020 21,363 21,729 105,791 Less: Other Income 52,000 19,245 10,499 10,866 11,246 103,856 Tariff Basket Revenue 882,185 899,414 923,277 938,600 954,493 4597,970 Forecast Consumption (‘000 gallons) 22353,812 22912,657 23485,474 24072,611 24674,426 117498,979 Average Tariff ($/1000 gallons) 39.46 39.25 39.31 38.99 38.68 39.13 196 Water Industry FOURTH SCHEDULE 45 of 2011. Belize Water Services Limited (BWS) Approved Water and Sewer Tariffs, Fees and Charges for Full Tariff Period (FTP) April 1, 2010, to March 31, 2015 Approved Tariffs for each ATP of FTP - $/1000 US. Gallons. Service Classification Water Only Water Sewer Water Sewer Water only Branches Mainland Belize, Belmopan San Pedro Caye Caulker Consumption Blocks: 0 – 1,000 8.62 10.34 25.77 23.00 1,001 – 2,000 13.79 17.81 29.87 26.45 2,001 – 3,000 14.94 19.54 32.17 29.03 3,001 – 4,000 15.51 20.68 34.46 31.86 4,001 – 5,000 16.08 21.83 36.76 34.97 5001 – 6,000 17.24 22.98 43.66 38.37 6,001 – 7,000 18.38 23.55 51.70 42.12 7,001 – 8,000 18.95 24.13 57.44 46.22 >8,000 19.54 24.70 63.19 50.73 Minimum bills for Consumption less than 1,000 US Gallons 8.62 10.34 25.27 23.00