aww2013: are urban water tariff structures designed to meet local challenges and policy goals by...

7/29/2019 AWW2013: Are Urban Water Tariff Structures Designed to Meet Local Challenges and Policy Goals by Sonia Ferdous Hoque and Dennis Wichelns

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Are urban

water

tariff

structures

designed

to meet local challenges and policy goals?

Sonia Ferdous Hoque and Dennis Wichelns

Institute of Water Policy, National University of Singapore



Key issues and challenges

Water and wastewater tariff structures may not always be designed to meet

local priorities

• Goals may be different for developed and developing cities, depending on local context

• Developing – Lower NRW, increase service coverage & reliability, ensure affordability of the poor, revenue sufficiency to meet O&M costs

• – , , ensure environmental sustainability, maintain financial health.



Water and wastewater tariff structures

Components of water and wastewater tariff structures implemented in 40 selected cities in

Asia, North America, Australia and Europe (Institute of Water Policy, 2012)

S i n g a p o r e

T a i p e i

P h n o m P

e n h

B a n g k o k

M a n i l a

J a k a r t a

H a n o i

J o h o r

K u a l a L u m p u

r

H o n g K o n g

T o k y o

S h a n g h a i

B e i j i n g

D h a k a

K a r a c h i

C o l o m b o

D e l h i

B a n g a l o r e

C h e n n a i

K a t h m a n d u

S y d n e y

M e l b o u r n e

L o n d o n

M a n c h e s t e r

C a r d i f f

G l a s g o w

S t o c k h o l m

A m s t e r d a m

R o t t e r d a m

F r a n k f u r t

M u n i c h

R o m e

M i l a n

H e l s i n k i

N e w Y o r k

L o s A n g e l e s

S a n D i e g o

S e a t t l e

C h i c a g o

S a n J o s e

Cities

IBT

CUC

Basic Charge

Volu-

metricEnvironmental Tax

Water tariff

IBT

CUC

% of water bill

Basic Charge

Volu-

metric

Wastewater tariff

w



Domestic water and wastewater bills

4.0120

n t h l y

o n t h

)

2.0

2.5

3.0

.

60

80

100

o f h o u s e h o l d m o

) e w a t e r b i l l p e r

e x c h a n g e r

a t e s

0.5

1.0

1.5

20

40

s a p

e r c e n t a g e

i n c o m e (

w a t e

r a n d w a s t

2 0 1

1 a v e r a g e

0.00

S e a t t l e

G l a s g o w

M e l b o u r n e

C a r d i f f

S y d n e y

S a n D i e g o

M a n c h e s t e r

F r a n k f u r t

H e l s i n k i

A m s t e r d a m

R o t t e r d a m

M u n i c h

L o n d o n

N e w Y o r k

T o k y o

S a n J o s e

o s A n g e l e s

S i n g a p o r e

S t o c k h o l m

R o m e

C h i c a g o

H o n g K o n g

T a i p e i

M i l a n

B e i j i n g

J a k a r t a

S h a n g h a i

B a n g k o k

C o l o m b o

M a n i l a

B a n g a l o r e

J o h o r

a l a L u m p u r

C h e n n a i

H a n o i

h n o m P e h n

K a t h m a n d u

D h a k a

D e l h i

K a r a c h i

M o n t h l y b i l l

D o m e s t i c

( U S

L K

P

Domestic water and wastewater bill based on a consumption of 20m3 per

income (Asian cities are highlighted in green) (Source: Institute of Water

Policy, 2012)



Challenges and appropriate pricing:

Challenge – Scarcity of local water resources

Policy Goal – Achieve self-sufficiency in water supply

Strategy – Emphasis on water conservation through pricing, awareness campaigns, and

water saving devices; no cross-subsidization

0.9

1.0

1.1

1.2

r i f f ( U

S D / m 3 )

30

40

50

n s e r v a t i o n t a x

w a t e r

t a r i f f )

0.4

0.5

0.6

0.7

.

W a t e r t

0

10

20

W a t e r c

( % o f

0 10 20 30 40 50

Water consumption (m3)

Before 1 July 1997 Effective 1 July 1997

Effective 1 July 1998 Effective 1 July 1999

Water consumption

(m3)

Before 1 July 1997 Effective 1 July 1997

Effective 1 July 1998 Effective 1 July 1999

Effective 1 July 2000

ec ve u y




Outcomes:

• Domestic water consumption declined from 165 lpcd (2002) to 153 lpcd

(2011) (PUB, 2012).

• For the first time in last two decades, PUB has incurred a net loss (before

government grant) in FY 2010 and 2011 (PUB, 2012).

How to increase revenues and ensure conservation

without affecting affordability of general population?

Three considerations:

1. Analyze the household water consumption disaggregated by dwelling type

2. Determine how to increase the effectiveness of price as a signal for

conservation

3. Analyze the relative balance between the domestic and non-domestic sector




1600040

5%

11%

6%HDB 1 and 2 Room

HDB 3 Room

1200030

2 0 1 1 ( S G

D )

3 p e r m o n t h ) 20%

26%

HDB 4 Room

HDB 5 Room and Executive HDB

Condominiums and Private Flats

800020

n t h l y i n c o m e

o n s u

m p t i o n ( m 32%

an e roper es

• More than 80% households consume <20m3 per

400010

H o u s e h o l d m

H H

W a t e r C month

• HDB 1-2 room flats pay 2% of their incomes as

water bills, while condominiums pay only 0.5%.

• Almost all domestic water use occur for indoor

00

R m H D B

R m H D B

R m H D B

E x e c H D B

/ P v t F l a t s

r o p e r t i e s

purposes which tend to be more inelasticRecommendation: Boundary of first tier could be

reduced to 20m3

1 -

5 R m /

C

o n d o s

L a

n d e d



Challenges and appropriate pricing: SINGAPORE

Recommendation: Separate

bills for water, so that

consumers are more aware of

changes in bill




• A large proportion of PUB’s connections are non –

domestic (55% in 2010, projected to become 70% in

2060) (PUB, 2012)

• -

(SGD 1.17/m3),same as that of domestic.

,

Singapore may opt for a different higher tariff rate for its

non-domestic consumers.




Challenge – High NRW, low service coverage, unreliable service

Policy Goal – Ensure revenue sufficiency, increase connections to poor, ensure

affordability

Strategy – Separate tariff structures according on consumer category, based on full cost

recovery principle.

1.2

1.4

1.6

/ m 3 )

I (mosques, public hydrants)

II (public hospitals, very poor / poor HHs: <28.8 m²)

0.6

0.8

1

r i c c h a r g e ( U S

IIIA (Low-middle class HHs, simple apts: 28.8 – 70m²)

IIIB(middle class HHs, medium apt, small businesses:70 - 120 m²)

0

0.2

0.4

V o l u m e t IVA(upper-middle class HHs, medium hotels, govt.

offices, pvt hosps:>120m²)

IVB (high-rise bdgs, large hotels, banks, factories)

V (Tanjung Priok Harbour, other special groups)

Water Consumption (m3)




Outcomes:

• Ma orit of connections made to 78%

41%

86426

33166IVB

category IIIa, although most

households belong to II (Bakker &Kooy, 2012) – PALYJA data

contradicts 758%

98%

49%

82269

128863

80218

II

IIIA

IIIB

• Disincentive to connect the poor and

increasing debt for PAM Jaya.

76%3514

0 20,000 40,000 60,000 80,000 100,000 1 20,000 1 40,000

I

Total Number of connections

• Tariffs remained unchanged since 2007; however, many consumers were re-

categorized - In 2009, 10,662 customers (i.e. 2.6%) were reclassified, 75%

, .

• Highly subsidized as more than 71% of customers, consuming ≈ 51% of the

water is paying less than the cost of the service

• Cross-subsidization not effective as comparatively fewer high-tariff consumers

to compensate for large proportion of low-tariff consumers.




Recommendations

• Tariff structure based on floor area of house maynot effectively represent the poor households

• Uniform tariff structure for all consumers, with

greater targeted subsidies for the poor




• Challenge – Growing urban population, continue to stretch existing supplies

– , ,

affordability• Strategy – Connect the poor first to reduce NRW through pilferage and generate

revenues; S ecial ro rams to reduce one-time connection fees for the oor.

Basic charge:1.2

1.4

3 )

.

PHP 60.61/ connection for low-income

consumers using less than 10m3

(representing 8%)0.6

0.8

1.0

r T a r i f f ( U S D /

- .

connection

• Business Group 1: 459.06/

connection0.0

0.2

0.4

0 40 80 120 160 200

W a

t

.

connectiona er onsump on m

Residential Semi-business

Business Group 1 Business Group 2




Year 2007 2008 2009 2010 2011 2012

Changes in Environmental and Sewerage Charges (Rivera, 2009)

Environmental

Charge (all

customers)

10% 12% 12% 16% 18% 20%

Charge

Commercial

Sewer

50% 45% 45% 35% 30% 30%

Outcomes:• Manila Water is known as one of the successful PPPs in the water sector;

, .

reliability, in terms of 24-hour availability, from 26% of customers (1997)

to 99% (2011) (Manila Water, 2011).

• Sewerage service coverage is still very low; but growing [3% (1997) to

• Effective cross-subsidization may not be achieved as the proportion of

non-domestic consumers are very low (90.66% residential, 4.7% semi-business, 4.33% business group 1 and 0.31% business group 2)




On-site bill printing system, launched since Sept. 2012, provides more information onprevious water consumption and different billing components




Recommendations:

• The tariff structure can be simplified by reducing the number of tiers – currently, 9 tiers for domestic and 33 tiers for non‐

• More focus can be given on water conservation by providing greater information to consumers in simplified form, promoting the use of water saving devices and raising awareness.

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