are urban water tariff structure designed to meet local challenges and policy goals?

Are urban water tariff structures designed to meet local challenges and policy goals?

Sonia Ferdous Hoque and Dennis WichelnsInstitute 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• Developed – Address water conservation, shift towards cost recovery,Developed Address water conservation, shift towards cost recovery,

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)

Sin

gapo

reTa

ipei

Phn

om P

enh

Ban

gkok

Man

ilaJa

karta

Han

oiJo

hor

Kua

la L

umpu

rH

ong

Kon

gTo

kyo

Sha

ngha

iB

eijin

gD

haka

Kar

achi

Col

ombo

Del

hiB

anga

lore

Che

nnai

Kat

hman

duS

ydne

yM

elbo

urne

Lond

onM

anch

este

rC

ardi

ffG

lasg

owS

tock

holm

Am

ster

dam

Rot

terd

amFr

ankf

urt

Mun

ich

Rom

eM

ilan

Hel

sink

iN

ew Y

ork

Los

Ang

eles

San

Die

goS

eattl

eC

hica

goS

an J

ose

Cities

IBTCUC

Basic ChargeVolu-metric

Environmental Tax

Water tariff

IBTCUC% of water bill

Basic Charge

Storm ater Charge

Volu-metric

Wastewater tariff

Stormwater Charge

Domestic water and wastewater bills

3 5

4.0120

nthl

y

mon

th

)

2.0

2.5

3.0

3.5

60

80

100

of h

ouse

hold

mo

%)

tew

ater

bill

per

mex

chan

ge ra

tes)

0.5

1.0

1.5

20

40

as a

per

cent

age

oin

com

e (%

c w

ater

and

was

tD

201

1 av

erag

e

0.00

Sea

ttle

Gla

sgow

Mel

bour

neC

ardi

ffSy

dney

San

Die

go

Man

ches

ter

Fran

kfur

tH

elsi

nki

Am

ster

dam

Rot

terd

amM

unic

hLo

ndon

New

Yor

kTo

kyo

San

Jos

e os

Ang

eles

S

inga

pore

Sto

ckho

lmR

ome

Chi

cago

H

ong

Kong

Taip

eiM

ilan

Bei

jing

Jaka

rtaSh

angh

aiB

angk

okC

olom

boM

anila

Ban

galo

reJo

hor

uala

Lum

pur

Che

nnai

Han

oihn

om P

ehn

Kat

hman

duD

haka

Del

hiK

arac

hi

Mon

thly

bill

a

Dom

estic

(US

D

M Lo Ku P

Domestic water and wastewater bill based on a consumption of 20m3 per month (USD 2011 average exchange rates) compared with monthly householdmonth (USD 2011 average exchange rates) compared with monthly household income (Asian cities are highlighted in green) (Source: Institute of Water Policy, 2012)

Challenges and appropriate pricing: SINGAPORESINGAPORE

Challenge – Scarcity of local water resourcesPolicy Goal – Achieve self-sufficiency in water supplyStrategy – Emphasis on water conservation through pricing, awareness campaigns, and water saving devices; no cross-subsidization

0 8

0.9

1.0

1.1

1.2

ariff (U

SD/m

3 )

30

40

50

onservation tax

water ta

riff)

0.4

0.5

0.6

0.7

0.8

0 10 20 30 40 50

Water ta

0

10

20

0 10 20 30 40 50

Water co

(% of w

0 10 20 30 40 50Water consumption (m3)

Before 1 July 1997 Effective 1 July 1997

Effective 1 July 1998 Effective 1 July 1999

0 10 20 30 40 50Water consumption (m3)

Before 1 July 1997 Effective 1 July 1997

Effective 1 July 1998 Effective 1 July 1999

Effective 1 July 2000Effective 1 July 2000

Effective 1 July 2000


Outcomes:• Domestic water consumption declined from 165 lpcd (2002) to 153 lpcdp p ( ) p

(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

and incomeand income2. Determine how to increase the effectiveness of price as a signal for

conservation3. Analyze the relative balance between the domestic and non-domestic sector


16000405%

11%6%

HDB 1 and 2 Room

HDB 3 Room

1200030

201

1 (S

GD

)

m3

per m

onth

) 20%

26%

11%

HDB 4 Room

HDB 5 Room and Executive HDB

Condominiums and Private Flats

L d d P ti

800020on

thly

inc

ome

onsu

mpt

ion

(m 32%Landed Properties

• More than 80% households consume <20m3 per

400010

Hou

seho

ld m

o

HH

Wat

er C

o

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

2 R

m H

DB

3 R

m H

DB

4 R

m H

DB

Exec

HD

B

s/ P

vt F

lats

Prop

ertie

s

purposes which tend to be more inelasticRecommendation: Boundary of first tier could be reduced to 20m3

1-2 3 4

5 R

m/

Con

dos

Land

ed P

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)

• Non-domestic consumers pay a uniform volumetric rateNon domestic consumers pay a uniform volumetric rate (SGD 1.17/m3),same as that of domestic.

Recommendation: In order to increase its revenueRecommendation: In order to increase its revenue, Singapore may opt for a different higher tariff rate for its non-domestic consumers.

Challenges and appropriate pricing: JAKARTAJAKARTA

Challenge – High NRW, low service coverage, unreliable servicePolicy Goal – Ensure revenue sufficiency, increase connections to poor, ensure affordabilityStrategy – Separate tariff structures according on consumer category, based on full cost recovery principle.

1.2

1.4

1.6

D/m

3 )

I (mosques, public hydrants)

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

0.6

0.8

1

ric c

harg

e (U

SD

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

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

0

0.2

0.4

0 5 10 15 20 25

Volu

met 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)0 5 10 15 20 25

Water Consumption (m3)


Outcomes:• Majority of connections made to 78%

41%

86426

33166

IVA

IVB

j ycategory IIIa, although most households belong to II (Bakker & Kooy, 2012) – PALYJA data contradicts 758%

98%

49%

82269

128863

80218

II

IIIA

IIIB

IVA

• Disincentive to connect the poor and increasing debt for PAM Jaya.

76%3514

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000

I

Total Number of connections

2009 19982009 1998

• Tariffs remained unchanged since 2007; however, many consumers were re-categorized - In 2009, 10,662 customers (i.e. 2.6%) were reclassified, 75% towards higher tariff category 25% towards lower onetowards higher tariff category, 25% towards lower one.

• 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 may

not effectively represent the poor households• Uniform tariff structure for all consumers, with

greater targeted subsidies for the poor

Challenges and appropriate pricing: MANILAMANILA

• Challenge – Growing urban population, continue to stretch existing supplies• Policy Goal Ensure revenue sufficiency increase connections to poor ensure• Policy Goal – Ensure revenue sufficiency, increase connections to poor, ensure

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

revenues; Special programs to reduce one-time connection fees for the poor.; p p g p

Basic charge: • Residential: PHP 101 01/ connection;

1.2

1.4

m3 ) • Residential: PHP 101.01/ connection;

PHP 60.61/ connection for low-income consumers using less than 10m3

(representing 8%)• Semi business: PHP 101 01/0 4

0.6

0.8

1.0

er T

ariff

(USD

/m

• Semi-business: PHP 101.01/ connection

• Business Group 1: 459.06/ connection

• Business Group 2: 496 71/

0.0

0.2

0.4

0 40 80 120 160 200

Wat

e

W t C ti ( 3) • Business Group 2: 496.71/ connection

Water Consumption (m3)

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 (allcustomers)

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

Residential Sewer 50% 40% 40% 20% 10% 0%Residential Sewer Charge

50% 40% 40% 20% 10% 0%

Commercial SewerCharge

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

Charge

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

reduced its water loss from 63% (1997) to 11 2% (2011) and improved itsreduced its water loss, from 63% (1997) to 11.2% (2011) and improved its 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 16% (2009)]16% (2009)]

• 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 on previous 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‐domestic!domestic!

• More focus can be given on water conservation by providing greater information to consumers in simplified form,

h f d dpromoting the use of water saving devices and raising awareness.

are urban water tariff structure designed to meet local challenges and policy goals?

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