- From: Vol 12, Issue 9 (September 2011)
- Category: Market Profile
- Region: Unspecified
Australia, Canada, China, Czech Republic, Denmark, France, Germany, India, Italy, Japan, Korea (South), Mexico, Poland, Portugal, Russian Federation, Spain, Turkey, United Kingdom and United States
A 6.8% rise in global water tariffs masks significant
changes in the way local authorities calculate their rates. David
Zetland gets behind the numbers.
Global water tariffs rose by an average of 6.8% between July
2010 and July 2011 at constant exchange rates. The average combined
water and wastewater tariff in the 308 major cities represented in GWI’s
2011 Water Tariff Survey is $2.03/m3. This sum is calculated by taking
the bill for a household using 15m3 a month, and then dividing the total
by 15 to enable a comparison between different charging structures.
Among the 271 cities for which we have data for both 2010 and 2011,
the city with the biggest increase in water prices is Memphis, USA (up
80% due to the costs of complying with clean water regulations).
At the other end of the scale, prices fell by the most in Tbilisi,
Georgia (down 76% due to a move to volumetric metering that lowered
prices for average users).
Tbilisi is the latest in a series of Eastern European cities to
move from a system where no one has a meter to universal metering. The
new metered rate for our benchmark 15m3/month household is significantly
below the old non-metered rate, although the nonmetered rate had been
subject to a large hike to incentivise people to sign up for a meter.
On the wastewater side, the price of collection and treatment
increased by 115% per cubic metre in Memphis (see above). Meanwhile in
Houston, USA, wastewater tariffs fell by 42% for our “average user”.
Although most blocks went up slightly in the latter city, the one
applicable to our “average user” has fallen considerably owing to the
differing data capture parameters.
Auckland, New Zealand, is the city with the biggest decrease in
water tariffs (down 36.3%) that is not due to a change in the tariff
structure affecting our “average user”. The change ref lects the fact
that Watercare Services took over the region’s water and wastewater
services on 1st November 2010, and subsequently introduced a
standardised metropolitan water tariff with effect from 1st July 2011. A
new schedule of wastewater charges will take much longer to implement,
Watercare has warned.
There are also signs that sub-Saharan Africa is taking tariff
reform seriously: Addis Ababa implemented its first rate hike since May
2007. Although it was a relatively major rise (24%), the city still has
one of the lowest water prices in the survey in US dollar terms.
Residential water is free in Cork, Dublin, Belfast, and Ashgabat.
The fact that water is free in Cork and Dublin increases pressure on
government finances, and the ongoing financial crisis in Ireland may
have the effect of forcing those prices to rise above zero sooner rather
Dollarised wastewater collection and treatment tariffs in the 248
cities for which we have data range from a high of $5.68/m3 in Aarhus
(Denmark) to zero.
An examination of combined tariffs reveals that the most expensive
city for turning on the tap or f lushing the toilet is Aarhus, at just
over $10.00/m3. Of the 29 cities with a combined tariff of more than
$5.00/m3, two are in the Caribbean, three are in the US, four are in
Australia, and 25 are in northern and western Europe.
Several cities have split out wastewater charges more explicitly
than before this year (e.g. Oslo, Nantes, Aarhus and Nice). This gives
the appearance of a big fall in water tariffs (which dropped by 59% in
Oslo, for example), although the overall combined tariff remains
The countries with the most cities in the survey (USA with 27,
China with 25 and India with 17) show significant domestic variation.
The minimum, median and maximum prices per cubic metre of water are
$0.53, $1.13 and $3.14 in the US, $0.17, $0.35 and $0.59 in China, and
$0.05, $0.11 and $0.28 in India, respectively. There may be many reasons
why prices vary within one country, but the lesson is clear: no country
has “average” water prices.
We have water tariff data for 308 cities and wastewater tariffs for
248 cities. The most common rate structure in the survey is increasing
block rates (151 cities), followed by linear rates (141 cities),
decreasing block rates (9 cities) and fixed charges (7 cities). The
correlation within water-wastewater price pairs is 67% (a 100%
correlation would mean that water and wastewater prices moved in the
same direction and at the same rate).
Correlation is more likely to be low when water and wastewater
services are provided by different organisations, when one system or the
other is subject to costly expansion or renovation, or when tariffs are
fixed for one system but volumetric in the other. It’s not uncommon to
see wastewater costs recovered through water tariffs, but that structure
is excluded from the 248 tariff pairs we have used to calculate this
In addition, tariff structure methodologies often ref lect unique
local conditions. While many Latin American cities set tariffs based on
household income, for example, prices in Israel depend on the water
provider and block limits on the number of people in each household. In
the French cities of Toulouse and Nice, meanwhile, the tariffs are
calculated on the basis of postcodes.
The Turkish cities of Istanbul and Adana have a system whereby the
tariff changes every month in line with inf lation. This methodology was
implemented in the last year; previous rate adjustments had been less
frequent. Additionally, Istanbul restructured its block limits in
January 2011, leading to an above-inf lation year-on-year rise for our
Tariffs vary for three main reasons. First, the cost of supplying
water services varies with local labour rates, the age and condition of
infrastructure, the rate of infrastructure maintenance and replacement,
local policies on water pricing, and water scarcity. Labour costs
generally rise with GDP, but they are also affected by over- or
under-staffing, public versus private operation, union or civil servant
status, and other factors. Infrastructure conditions vary with system
age and size, service mandates, management changes, and the ebb and f
low of financing.
Local policies often keep water prices below the cost of service;
the resulting financing gap is sometimes made up by cash transfers or
increasing debt, but they can also result in future reductions in
operation and maintenance expenditures.
Water scarcity can affect prices by forcing a utility to spend more
money on expensive marginal sources of drinking water (including
desalination and wastewater reuse) or by reducing the volume of water
available to customers, which means that the price per unit of water
sold has to rise so that total revenues cover (mostly fixed) total
costs. It is difficult to know if or how these factors affect water and
wastewater prices, but their variety suggests that policies create a
range of effects.
We have continued our reporting of social tariffs this year,
although these do not represent the only way to help poorer people buy
water: some governments give direct income support that is used to pay
for water that is sold at its normal price. The social tariff data thus
represent our best shot at a complex topic.
The full survey spreadsheet, complete with details of tariff
structures and social tariffs, will be available to download from the
GWI website at www.globalwaterintel. com within the next month. GWI
subscribers will receive an email advising them when the spreadsheet has
been uploaded; they will then be able to access the data via their
usual GWI login.
David Zetland is a senior water economist at Wageningen
University in the Netherlands. His personal blog is regularly updated at