8.5.6 Options for Charges

Categories: 8.5 Cost Recovery
Time of issue: 2022-04-28 11:01:17
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In many instances, a sanitation tariff is tied to metered water use, since it is easier, less expensive and more practical to meter domestic water. In this case, wastewater tariffs are usually calculated as a percentage of the actual water use. There are five tariff structures commonly used:

non-metered flat rates;
non-metered graded rates;
block rates,
metered rates, and
mixed rates.

Non-metered Flat Rates

In a non-metered flat rate system, each user pays a fixed amount of money, regardless of the volume of water used or sewage generated. In its simplest form, the total amount of money needed for the upkeep of the improved water supply system is divided equally over the number of households using the system. Payments may be per month, per season, or per year, depending on what is most convenient for the users of the service. Flat rates are generally easy to set up. Major disadvantages of non-metered flat rates are: (a) they are not equitable in the sense that low-income households pay the same amount as higher income household that may have higher water usage; and (b) they do not discourage waste of water or incentives for rational water use. They are, however, easy to administer.

Non-metered Graded Rates

Under a graded rate system users and households are classified into several categories based on estimated differences in water use and sewage generation and income. The advantage of a non-metered graded rate structure is that it takes into account the consumption/wastewater volume and payment capacity of users, and therefore could reach a more equitable tariff structure. It is also a way to account for rough estimations of consumption/wastewater generation without investing in a metering system. The introduction of graded rates is easiest when clear and valid indicators of water use and wastewater generation can be identified, such as the number of water and sanitation fixtures in a household (plumbed sinks, showers/baths, and flush toilets). A graded rate tariff system is a more equitable system that allows for cost recovery in proportion to the service provided. It may require, however, more in-depth review and acceptance from the community at-large to avoid potential conflicts or disputes. It also does not encourage water conservation.

Block Rates

Block rates set tariffs based on incremental or tier water usage. A baseline rate is set according to the volume of water consumed, e.g. 0-10 m³, and higher or incremental rate increase are set for higher consumption. Sanitation or wastewater tariffs would parallel this structure.

Metered Rates

While graded rates based on social and financial indicators have the advantage that they avoid the introduction of complex metered connections, water meters enable the charges to be made according to the actual volume consumed. If properly enforced, metering induces users to avoid wasting water, which may help to reduce long-term costs or unaccounted-for water losses. Individual household meters are not only expensive to install, they also need to be read regularly, which adds to the work of the administration. The administrative staff also needs to process the data to generate water bills, which can be a time-intensive process. The added cost of installing and operating meters, as well as billing and collection, may outweigh the benefits of the system, notably in rural communities (WHO, 2002). Another factor is the high connection cost associated with metered service to individual households. One way to alleviate this problem is to spread the connection fee over a period of time, which can be included with monthly bills.

Mixed System

In some instances there may be advantages to adopt both a graded flat rate structure for households and metered services for large consumers, such as hotels, institutions (schools), and small industries. The expense for the meters can be absorbed by the enterprise and lead to lower waste and to adoption of a realistic tariff proportioned to the actual usage.