Christopher Burgess | Drought resilience by fixing NWC’s finances

The recent light rains may bring marginal relief, but they should not lull us into believing Jamaica is drought-resilient.

Jamaica’s water security and the National Water Commission’s (NWC’s) finances share some of the same weaknesses. NWC loses too much water and the revenue it could generate. It also lacks sufficient storage and backup power supply to preserve both water supply and revenue through droughts.

Two weeks ago, the Private Sector Organisaiton of Jamaica (PSOJ) correctly called for a “national reset”, arguing that predictable droughts should not become a crisis and that water security was fundamental to competitiveness. According to a World Bank and the Planning Institute of Jamaica’s (PIOJ’s) State of the Jamaican Climate report, Jamaica has experienced more than 15 severe droughts since 1980. A drought every three years exposes decades of inadequate investment.

Progress has been made. Non-revenue water (NRW) is reducing in the Corporate Area, and inter-basin transfers to Kingston and St Andrew (KSA) are expanding. But there is much more work to be done.

Improving financial and operational management, reducing NRW across the rest of the island, and increasing storage could improve drought resilience, and potentially transform NWC’s finances.

FINANCIAL DISCIPLINE

Last week at Parliament’s Public Accounts Committee (PAC), concerns centred on NWC’s J$24 billion in receivables, the extraordinarily high level of NRW of 72%, and the need for approximately J$25 billion in annual investment. Yet, the Auditor General found that NWC spent an average of just J$6.5 billion annually on capital work between 2019 and 2024, raising concerns about its capacity to deliver the infrastructure investment needed to build operational and financial resilience.

More concerning is NWC’s deteriorating liquidity. Despite returning to marginal profitability, payables almost tripled from J$10.7 billion in 2017 to over J$31 billion in 2024, and its working-capital deficit has widened to almost J$15 billion. Accounting profitability has not translated into sufficient liquidity to meet obligations or finance infrastructure investment.

The Auditor General’s findings for 2019 to 2024 point to the need for greater financial discipline, the need to convert capital into completed projects and improved collections. Otherwise, NWC will struggle to reduce water losses and build drought resilience.

NWC’s profitability has improved from a J$5.7 billion loss in 2020 to a small profit of J$0.2 billion in 2024. But islandwide NRW remains a drag on profitability.

NRW is a longstanding problem, with potable water lost through leaks, poor metering, theft and unbilled consumption. NRW reduction is hardly new. By 2013, NWC was procuring a five-year Kingston and St Andrew (KSA) programme covering leak detection and repairs, pressure management and metering, based on 2011 parish plans.

The bright spot is the KSA that demonstrates what consistent investment can achieve between 2015 and 2024, with NRW falling from approximately 70% to 38%. Yet, the Office of Utilities Regulation (OUR) reported islandwide NRW of 74.2% in 2025.

Government estimates that reducing NRW to 30% by 2035 could generate J$10.7 billion in annual benefits, requiring a total investment of US$340 million over 11 years. This is a worthwhile consideration to further improve NWC’s marginal profitability.

The estimated J$10.7 billion in annual benefits is not necessarily additional profit, because programme financing and operating costs must also be considered. With an estimated economic return exceeding 15% and a potential reduction in NRW equivalent to 60 million gallons per day, the programme could improve both water supply resilience and NWC’s finances.

Against NWC’s working-capital deficit of J$15 billion, an NRW programme eventually generating J$10.7 billion in annual benefit could strengthen cash flow considerably but cannot repair NWC’s finances alone.

Likewise, reducing losses islandwide cannot physically substitute for storage in the KSA during a prolonged drought. Recovered NRW water provides maximum resilience and cash flow when there is storage to redistribute it.

HERMITAGE DAM II?

Water Resources Authority (WRA) flow records dating back to 1955 reveal Hermitage’s fundamental weakness: adequate average annual inflows, but insufficient storage to bridge prolonged droughts. The catchment usually delivers 55 million cubic metres in an average year, more than twice NWC’s normal requirement annually. Yet, Hermitage stores only about 1.8 million cubic metres, less than one month of demand. In wet months, enormous volumes pass downstream. And, when inflows dry up, there is insufficient storage to bridge the deficit.

During several severe drought years, annual inflows fell 50% to 80% below the long-term average, demonstrating Hermitage’s vulnerability to prolonged low-flow conditions.

Not all our vulnerabilities are the result of climate change; some issues reflect underdevelopment. Severe droughts and low flows occur under both El Niño and non-El Niño conditions, exposing the limitations in storage. During severe drought years, the shortfall between available inflows and NWC’s normal requirements can reach seven to 12 million cubic metres. This provides an indicative measure of the additional storage needed through prolonged dry periods.

Some will say that there are significant data gaps to draw these conclusions, but these are the usual challenges in data-scarce countries where governments do not prioritise meteorological data collection. Others will say there is a declining trend in Hermitage inflows and argue for reverse osmosis. Nonetheless, the evidence supports investigating substantially greater storage before committing to energy-intensive treatment.

Desilting Hermitage Dam cannot resolve the shortage of regulation storage. A new dam with up to six times the existing capacity should be investigated.

Such a dam could cost tens of billions of dollars and require detailed climate, engineering and environmental studies. Planning and designing Hermitage II could take more than two years but should not delay the urgent reconstruction of schools and housing in western Jamaica.

At prevailing tariffs, 12 million cubic metres of strategically available water downstream of Hermitage could have a gross tariff-equivalent value of roughly J$2 billion during a severe drought. That alone would not justify the estimated cost. More importantly, a new dam could protect NWC’s revenue, reduce water restrictions and avoid substantial economic losses to households, businesses and the Jamaican economy during droughts.

The route to water security and a financially stronger NWC may well be the same. National NRW reduction could strengthen water supply and cash flow, while strategic storage in KSA could reduce vulnerability and revenue shocks during droughts. Together, these investments could transform NWC’s finances and Jamaica’s drought resilience. This could very well be the kind of transformative resilience investment NaRRA was established to advance.

Dr Christopher Burgess is a member of JAMRROC. He is a registered civil engineer, vice-president of the Jamaica Institution of Engineers, climate scientist, land developer and managing director of CEAC Solutions. Send feedback to columns@gleanerjm.com