Which tariff for metered water supplies?
Posted on 26 February 1998
The UK debate on how to reform water charging systems has received new information from a review of tariffs of public water supply produced by the University of York. In all but a tiny minority of industrialised countries, almost all domestic water users are metered. By contrast, the vast majority of British households are not metered. Many believe that widespread domestic water metering in Britain is only a matter of time.
The Government has invited views on this development as part of its wider consultation exercise on water charging. The Environment Agency's National Water Demand Management Centre in Worthing commissioned this report to answer a separate, but related, question: if metering becomes more widespread, what pricing structures (tariffs) could and should be used?
The report by Jack Pezzey and Greig Mill, two economists in the Environment Department at the University of York, begins by noting that tariff systems can have a number of different aims which sometimes conflict. These include:
- preventing too much water being wasted on low-value uses
- the raising of the revenue needed to cover the costs of supply
- equity to consumers
- the reduction of the environmental costs of water abstraction
- the reduction of pollution from used water discharges
- being easily understood by customer
- being cheap to administer
The report reviews the various tariff systems that different countrues use, and discusses how well different tariffs achieve these aims. Charging by volume used (that is, metering) generally does have an important role in reducing water use, but the full effect does not emerge until more efficient domestic appliances are installed in the long run in response to price changes.
The report shows that there is a huge variety in the types of metered tariffs used worldwide. "A key finding of our report is that many tariffs used are quite complex," said Dr Pezzey. "This can be for good reasons. If tariffs are expected all at once to prevent waste, raise enough revenue and be fair, then they have to be more complicated, and are thus harder to understand immediately. But customers in many countries seem to cope with extra features not seen in Britain, such as higher charge rates for higher or summertime use to prevent waste, or basic allowances of free or low-price use for reasons of fairness."
"Another interesting trend which we noted was a general shift of opinion and practice away from viewing water supply as a public service, and towards seeing it as a commodity to be used efficiently by means of appropriate pricing. This seems an inevitable consequence of steadily rising demand coming up against a finite water supply."