Setting Efficient Tariffs for Wastewater Infrastructure

Mon Mar 25 16:24:38 EDT 2013
By George Anstey

Pricing in the water industry is a politically sensitive issue in many countries. Observers have long noted that tariffs for water services are often not high enough to cover the costs of the network and offer efficient signals to customers, but this is also true for wastewater services. Setting prices for all water services in a manner that reflects the utilities' costs is a key management issue for increasing efficiency in the sector. Without cost-reflective tariffs, water utilities may run into financial difficulty or suffer from a shortage of capacity and have to ration services between users. In this article, first published in Water Utility Management International, NERA Senior Consultant George Anstey discusses the results of a survey -- undertaken of five well-developed regimes from the UK, Australia, the US, and Brazil -- which found examples of good practice. However, Mr. Anstey notes, even at this level tariffs may not recover full costs of wastewater infrastructure or provide efficient signals. This article explains why tariffs reflecting costs are important for increasing efficiency, and provides a snapshot of the state of best regulatory practice.

This article was first published in the March Edition of Water Utility Management International as "Achieving Efficiency of Wastewater: A Survey of International Best Practice" (http://www.iwaponline.com/wumi/00801/wumi008010015.htm)