Water pricing

A water tariff is the price assigned to water supplied by a public utility generally for both freshwater supply and wastewater treatment. The term is also often applied to wastewater tariffs. Water and wastewater tariffs determine the conditions of service and the monthly bills for water users in various categories and classes. Tariffs are often set by a regulatory agency for the appropriate catchment, purification and distribution of freshwater, and the subsequent collection, treatment and discharge of wastewater. (Ricato 2012)

Why is it important?

Often, consumers pay too little for the water and sanitation services they get. People are not aware of the real costs of providing water and sanitation services because historically, these have been heavily subsidized by governments. This is because water is a social good and it was considered a cheap and abundant resource. However, with population growth and much larger communities requiring access to water services, the availability of freshwater is decreasing dramatically in many regions of the world. Water tariffs are economic instruments that help tackling both challenges of providing water and sanitation services to all citizens at an affordable price and the conservation of water resources. Proper water tariffs provide incentives to improve sustainable water and sanitation services and to use water resources more efficiently:

  • Tariffs generate revenues to recover specific costs (e.g. operation and maintenance costs)
  • Tariffs generate funds for necessary infrastructure development and expansion as well as for wastewater treatment, hence assuring water quality protection.
  • Charges send appropriate price signals to users about the relationship between water use and water scarcity
  • Having to pay for water can encourage people to reduce wasting water
  • Subsidizing tariffs for low-income groups ensure that poor households also have sufficient and affordable water services.

(Rogers et al. 2001)