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Can PWD water the bill?


[The Fiji Times, 5 April 1997]


Smart lot, the PWD water guys.  But are they smart enough to benefit more?


The PWD Water Department has gone over to a computerised monthly billing system for water charges.


Through large paid advertisements in the media, they have very kindly suggested that consumers might like to perhaps pay for a few months in advance.


Very kind of them. Consumers with small bills will obviously benefit by not having the nuisance of making several payments.


And of course, the monthly billing system is fairer to the PWD, since previously consumers paid months after they had actually consumed the water.


But advance payments would not be very fair to consumers, either, would it?  For there is no mention in the advertisements of any discount.



Why No Discount?


If water consumers do make advance payments, add all these small sums up, and the PWD will end up receiving a large interest-free loan for the whole year.  And PWD, or Government really, will benefit by saving on their interest payments on Government debt.


So why does not the PWD encourage everyone to pay in advance?  This is especially strange since there would seem to be mutual advantages to be gained?



Win-Win Situation?


For a Government which is deeply in debt and is probably paying around 7 to 8 percent on money borrowed in the local money market, surely, obtaining a loan from the public at any interest rate less than that would be to their advantage.


On the other side of the water bill, there are ordinary consumers, whose savings deposits currently earn a miserable 2.7 percent on their balances.  Even large fixed deposits for 6 months earn only 4.5 percent.


Consumers would surely like to earn a little bit more interest on their funds, through an appropriate discount on their water bills (via an interest credit).


This is a win-win situation for both PWD (Government) and water consumers.


All the PWD has to do is to offer, for example, a 6 percent interest rate on whatever credit balance exists on a consumers’ account at the end of every month.


Consumers could pay at the beginning of the year, whatever is roughly their annual bill, and be done for the whole year, or even maintain minimum annual credit balance by making six-monthly payments.


Consumers would earn extra interest on their savings.  Even large consumers of water might take advantage of this financial benefit, in addition to not having the nuisance of making monthly payments.


The PWD would benefit not only from the interest savings on their own debt, but they would also not have the nuisance of having to deal with large numbers of monthly payments at their offices.


The crediting of the interest would surely not be difficult, since the accounts are all computerised.


So, how about it, PWD?  Why not learn from the SCC which gives a discount to those who pay the City rates at the beginning of the year?



Who Else?


The same win-win situation exists for many other services, for example the FEA.


There are many consumers who hate the monthly, or even quarterly messing around with pieces of paper, cheques, and postal payments.


There are consuming companies who have surplus funds which earn much less than the borrowing rates in the market.  They would love to be able to pay a year in advance.


The FEA is deeply in debt to the local money market and their interest payments are not small.


Why does not the FEA also extend a discount to all consumers who pay their bill in advance, by giving them an interest on their credit balance?


Even if they received $10 millions in advance throughout the year, every percentage point they saved on their debt exposure, would net them a hundred thousand dollars, a not insignificant sum.


The FEA, like the PWD Water Department, is also well computerised, so there should be no technical difficulty.  They would also make administrative savings by having fewer payments transactions to process in their offices.


Such a scheme would probably be difficult with private companies.  If they went bankrupt, the consumers might lose their credit balances.   But well-established “blue-chip” large companies (such as super-markets), who are borrowers in the money market, could surely experiment with such “advance payment discounts” with their regular clients.



Consumer Protection?


There would need to be some protection for consumers, who would need safeguards to make sure errors in billings did not unfairly wipe out their credit balances.


With Government Departments and Statutory organisations, this should not be too difficult and the Office of Fair Trading could have a role.


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