presented by Sonia Ferdous Hoquein Asia Water Week 2013, Manila 11-15 March 2013

1. 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

2. 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.

3. 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)
Singapore
Taipei
PhnomPenh
Bangkok
Manila
Jakarta
Hanoi
Johor
KualaLumpur
HongKong
Tokyo
Shanghai
Beijing
Dhaka
Karachi
Colombo
Delhi
Bangalore
Chennai
Kathmandu
Sydney
Melbourne
London
Manchester
Cardiff
Glasgow
Stockholm
Amsterdam
Rotterdam
Frankfurt
Munich
Rome
Milan
Helsinki
NewYork
LosAngeles
SanDiego
Seattle
Chicago
SanJose
Cities
IBT
CUC
Basic Charge
Volu-
metric
Environmental Tax
Water tariff
IBT
CUC
% of water bill
Basic Charge
Storm ater Charge
Volu-
metric
Wastewater tariff
Stormwater Charge

4. Domestic water and wastewater bills
3 5
4.0120
nthly
month
)
2.0
2.5
3.0
3.5
60
80
100
ofhouseholdmo
%)
tewaterbillperm
exchangerates)
0.5
1.0
1.5
20
40
asapercentageo
income(%
cwaterandwast
D2011average
0.00
Seattle
Glasgow
Melbourne
Cardiff
Sydney
SanDiego
Manchester
Frankfurt
Helsinki
Amsterdam
Rotterdam
Munich
London
NewYork
Tokyo
SanJose
osAngeles
Singapore
Stockholm
Rome
Chicago
HongKong
Taipei
Milan
Beijing
Jakarta
Shanghai
Bangkok
Colombo
Manila
Bangalore
Johor
ualaLumpur
Chennai
Hanoi
hnomPehn
Kathmandu
Dhaka
Delhi
Karachi
Monthlybilla
Domestic
(USD
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)

5. Challenges and appropriate pricing:
SINGAPORESINGAPORE
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 8
0.9
1.0
1.1
1.2
ariff (USD/m3)
30
40
50
onservation tax
water tariff)
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 50
Water consumption (m3)
Before 1 July 1997 Effective 1 July 1997
Effective 1 July 1998 Effective 1 July 1999
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
Effective 1 July 2000
Effective 1 July 2000
Effective 1 July 2000

6. Challenges and appropriate pricing:
SINGAPORESINGAPORE
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 income
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

7. Challenges and appropriate pricing:
SINGAPORESINGAPORE
1600040
5%
11%
6%
HDB 1 and 2 Room
HDB 3 Room
1200030
2011(SGD)
m3permonth)
20%
26%
11%
HDB 4 Room
HDB 5 Room and Executive HDB
Condominiums and Private Flats
L d d P ti
800020
onthlyincome
onsumption(m
32%
Landed Properties
• More than 80% households consume <20m3 per
400010
Householdmo
HHWaterCo
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
2RmHDB
3RmHDB
4RmHDB
ExecHDB
s/PvtFlats
Properties
purposes which tend to be more inelastic
Recommendation: Boundary of first tier could be
reduced to 20m3
1-2
3
4
5Rm/
Condos
LandedP

8. Challenges and appropriate pricing: SINGAPORE
Recommendation: Separate
bills for water, so that
consumers are more aware of
changes in bill

9. Challenges and appropriate pricing:
SINGAPORESINGAPORE
• 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.

10. Challenges and appropriate pricing:
JAKARTAJAKARTA
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
D/m3)
I (mosques, public hydrants)
II (public hospitals, very poor / poor HHs: <28.8 m²)
0.6
0.8
1
riccharge(USD
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
Volumet
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)

11. Challenges and appropriate pricing:
JAKARTAJAKARTA
Outcomes:
• Majority of connections made to 78%
41%
86426
33166
IVA
IVB
j y
category 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.

12. Challenges and appropriate pricing:
JAKARTAJAKARTA
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

13. 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
erTariff(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
Wate
W t C ti ( 3) • Business Group 2: 496.71/
connection
Water Consumption (m3)
Residential Semi-business
Business Group 1 Business Group 2

14. Challenges and appropriate pricing:
MANILAMANILA
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%
Residential Sewer 50% 40% 40% 20% 10% 0%Residential Sewer
Charge
50% 40% 40% 20% 10% 0%
Commercial
Sewer
Charge
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)

15. Challenges and appropriate pricing:
MANILAMANILA
On-site bill printing system, launched since Sept. 2012, provides more information on
previous water consumption and different billing components

16. Challenges and appropriate pricing:
MANILAMANILA
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.