Water Supply - Tariffs

Tariffs

Almost all service providers in the world charge tariffs to recover part of their costs. According to estimates by the World Bank the average (mean) global water tariff is US$ 0.53 per cubic meter. In developed countries the average tariff is US$ 1.04, while it is only U$ 0.11 in the poorest developing countries. The lowest tariffs in developing countries are found in South Asia (mean of US$ 0.09/m3), while the highest are found in Latin America (US$ 0.41/m3). Data for 132 cities were assessed. The tariff is estimate for a consumption level of 15 cubic meters per month. Few utilities do recover all their costs. According to the same World Bank study only 30% of utilities globally, and only 50% of utilities in developed countries, generate sufficient revenue to cover operation, maintenance and partial capital costs.

According to another study undertaken in 2006 by NUS Consulting, the average water and sewerage tariff in 14 mainly OECD countries excluding VAT varied between US$ 0.66 per cubic meter in the United States and the equivalent of US$ 2.25 per cubic meter in Denmark. However, water consumption is much higher in the US than in Europe. Therefore, residential water bills may be very similar, even if the tariff per unit of consumption tends to be higher in Europe than in the US.

A typical family on the US East Coast paid between US$30 and US$70 per month for water and sewer services in 2005.

In developing countries, tariffs are usually much further from covering costs. Residential water bills for a typical consumption of 15 cubic meters per month vary between less than US$ 1 and US$ 12 per month.

Water and sanitation tariffs, which are almost always billed together, can take many different forms. Where meters are installed, tariffs are typically volumetric (per usage), sometimes combined with a small monthly fixed charge. In the absence of meters, flat or fixed rates — which are independent of actual consumption — are being charged. In developed countries, tariffs are usually the same for different categories of users and for different levels of consumption.

In developing countries, the situation is often characterized by cross-subsidies with the intent to make water more affordable for residential low-volume users that are assumed to be poor. For example, industrial and commercial users are often charged higher tariffs than public or residential users. Also, metered users are often charged higher tariffs for higher levels of consumption (increasing-block tariffs). However, cross-subsidies between residential users do not always reach their objective. Given the overall low level of water tariffs in developing countries even at higher levels of consumption, most consumption subsidies benefit the wealthier segments of society. Also, high industrial and commercial tariffs can provide an incentive for these users to supply water from other sources than the utility (own wells, water tankers) and thus actually erode the utility's revenue base.