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/m 3 )  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 ) 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. US Residential Public Water Supply Rate Structures ( )

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)

10 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 residents PHOENIX (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