Back in November, I visited Navan Tai village on the Xe Bang Fai River in Laos. The morning sun shone down on a bustle of activity. The surface was scattered with small fishing boats as people cast nets into the sparkling waters. Women and children were bathing, while a couple of young boys showed off daring dives.

Last month I returned, but the morning scene had completely changed. There were no fishing boats to be seen. The riverbank was underwater and nobody was bathing.

Locals told me the water level had increased by 2.5 metres over the past two days. Why? Because on March 15, the Nam Theun 2 Hydropower Project began full operations for the first time.

The power-generation scheme has been launched in violation of legal obligations to provide compensation and livelihood support to affected communities. The Xe Bang Fai River is particularly impacted because the project is diverting six Olympic swimming pools of water per minute into the river.

More than 120,000 people living along the river will be affected by Nam Theun 2. Already it is blocking villagers' access to clean water and destroying essential food sources, including fisheries and riverbank vegetable gardens, without appropriate compensation. The villagers are also concerned about more severe flooding and riverbank erosion caused by water released from the dam.

The Nam Theun 2 Power Company has warned communities not to drink the river water because it is contaminated. Yet replacement wells are not functioning, nor is the groundwater suitable for domestic consumption. The water colour has changed to brown and many villagers have little choice but to continue using water from the river.

"The company promised to find a solution for drinking water years ago, but there is no solution yet," a resident of Boeung Xe village told me.

NO COMPENSATION

Riverbank gardens are a major source of income and food for most of the riparian villagers. In March, I could not find one person in the four villages I visited who had been compensated yet for their flooded riverbank gardens, although the World Bank's resettlement policy says no land should be taken before compensation is paid.

What's more, serious erosion has been occurring downstream along the Xe Bang Fai River as a result of the fluctuating water levels since December, when the power company began test operations. Once again, no compensation has been paid for the riverbank gardens that were washed away.

The villagers - many of whom rely on fishing for food and income - also told me fish had disappeared from the river since the dam started operating. In the peak season in May and June, a fisherman in Navan Tai Village can expect to catch about 40-50 kg of fish per day, earning $100-$150. But each household is entitled to only $100-$250 in compensation for fishery and other losses that may last a lifetime.

Villagers are also worried about more frequent, deeper and longer-lasting floods. One resident of Boeung Xe told me: "We are seriously concerned that water released from the dam will cause more severe flooding of our rice fields and tobacco gardens. In the beginning, the company said they would build the infrastructure to avoid floods. But now they have said they don't have money to protect the river banks."

The World Bank stated on March 24 that a comprehensive compensation and mitigation program has been under implementation for several years, and the project has robust monitoring through which its impacts and progress are being tracked.

But if that is true, why do the villagers say they have not been compensated, and why are they so concerned about the future?

The World Bank, Asian Development Bank and other project funders promised that the Lao people would be better off as a result of Nam Theun 2. The results to date are not encouraging.

If the project's backers are serious about ensuring its success, funding needs to be increased dramatically for the downstream compensation programme and support to develop alternative livelihoods must be rapidly scaled up.

Construction on Nam Theun 2 may have been completed, but the work of rebuilding local people's lives has only just begun.