4. Water Pricing and Metering 2 Water use responds to changes in price An effective water pricing is an important mechanism of water demand management.

4. Water Pricing and Metering

2

Water use responds to changes in price

An effective water pricing is an important mechanism

of water demand management.

Water rate structure should be such that it

- generates sufficient revenue to cover costs,

- allocates costs to different types of water uses, and

- provides incentive for conservation.

In principle, there are many different rate structures

that could generate the same total revenue for a

water utility.

Water Pricing (1)

3

Water pricing levels should be such that the associated

costs are recovered to ensure a sustainable operation and

that it guards against water wastage.

So long as the water price remains low, there is no

incentive for the consumers to install water-saving devices or

technologies.

A pricing solely based on a flat rate regardless of volume

used or a system based on property value would not be

effective in water conservation.

Progressive block rates encourage conservation and

reduce waste. A proper well maintained metering

system is a pre-requisite condition for that.

Water Pricing (2)

4

Fixed monthly charge ($ x/month)

Uniform ($ y/m3)

Uniform but adjusted seasonally

Block rate

- Increasing (progressive) block rate

- decreasing block

Seasonally adjusted block rates

Water Tariff Structures

5

Pricing Structures for Water Services Source: (Prasifka, 1994)

6

Domestic Water Tariff Structures (Examples)

0

0.2

0.4

0.6

0.8

1

0 10 20 30 40 50 60

Monthly Household consumption (m3)

Tari

ff (

US

$ p

er m

3)

Hong Kong

Seoul

Taipei

Singapore

Shanghai

Source: Second Water Utilities Data Book 1997 (ADB)

7

Water Tariff Structures (as share of utilities)

Source: Water Tariffs and Subsidies in South Asia Paper 1 World Bank – UNDP Water Supply Program, December 2002

8

Source: Cavanagh et al., (2001) Muffed Price Signals: Household Water Demand Under Increasing-Block Prices.

Percent of sample utility Rate structure

1982 1987 1991 1997

Flat fee for service regardless

of volume

1 0 3 2

Uniform volumetric charge 35 32 35 33

Decreasing block 60 51 45 34

Increasing block 4 17 17 31

Total 100 100 100 100

Number of utilities in sample 90 112 145 151

US Residential Public Water Supply Rate Structures (1982-1997)

9

A universal (complete) and appropriate metering is a

basic and essential tool for successful water demand

management.

Water metering is the basis for the link between

consumption and price. It puts the burden for water

conservation to the consumers, which is the most

effective means of ensuring water conservation.

The costs of meter installation, maintenance, and

regular reading and billing need to be weighed against the

benefits in choosing pricing options to conserve water.

Water Metering (1)

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Source: (Coe, 1978)

Economics of Meter Exchange Periods

11

Water metering can be implemented in stages

starting from the large water consumers like industry,

commercial users, high income domestic users and

others.

Well-maintained and working meters, read accurately

and regularly, followed up by efficient billing

procedures ensure that consumers do not abuse

municipal water supplies.

It has been demonstrated that regulations combined

with pricing and tariff policies have resulted in

savings ranging between 20%-30% or more.

Water Metering (2)

12

Meters that have been tampered with or are faulty

or broken are a major cause of commercial water

losses. Meters may break from excessive network

pressure, freezing temperatures or malicious

damage.

Meters may under-register consumption if water

pressure is unusually low or over-register it

because air has infiltrated the system.

Other major causes of commercial losses are

incompetence, inadequate training or corruption of

water meter readers.

Water Metering (3)

13

Outrageous water bills shock Phoenix residentsPHOENIX (USA) — Water officials said that for the last 12 years homeowners in areas around Phoenix have been underbilled, reported The Arizona Republic, a situation water officials initially tried to correct last week by sending residents large bills to make up the difference.

Hundreds of county residents should have been charged 50 percent more than Phoenix residents, according to city code. Instead, they were charged the same rate for basic water services until adjusted bills for the past three years were sent to 335 homes last week, the newspaper said.

Some bills sent to residents soared as high as $3,000, according to the paper.

Water Technology Online 4/30/2003