Introducting wastewater/sanitation tariffs for the first time

For a project on a small island state of 160,000 people , where they are considering introducing sewerage tariffs for the first time, I am investigating the following:  

- Generic (flat rate) tariff or tariff based on quantity

- How to set up a tariff for septic tank discharges (pay per time or other option? )

- What the timeline would be to set up and implement  – i.e how long does it take to implement this and;

- How long does it take to start seeing a return after introducing tariffs?

Has anyone here worked on something similar? Your feedback is much appreciated.   w

Taxonomy

• Water Charging & Pricing
• wastewater

3 Answers

1. I agree with Peter. To recover the total infrastructure costs from the users in what appears a very much developing island is not appropriate. Only the actual use based on the yearly operating costs should be recovered (if realistic in the particular case) from the users who are connected to the water and waste system. The presumably "soft" loan should be part of the infrastructure costs to develop the island as determined by island's Government.

2. Dear Megan, I agree with what Raymond has said. However I'm going to add more questions than answers here, but these are relevant to how sewerage tariffs could be implemented and controlled.

   Is it the intention of the tariff to recover operating costs only, and if so how are those costs measured and are they independently assessed? Are you looking to recover cost of depreciation of the asset base? Are you looking to recover the cost of capital which finances the building of assets? The government needs to decide what it wants costs it wants to recover. A good point of reference is the England and Wales regulator Ofwat. There are many publicly available document which describe how costs are recovered and for what purpose. In the case of UK, some water undertakers are government owned and some are plc's. They are all regulated the same way and required to provide the same level of service.

   Once you've agreed what the tariff is required to finance, how will you charge customers? The fairest system is generally acknowledged as paying for the service you use based upon the volume of wastewater you generate. It is not common to measure sewage generated directly. You can assume (as is done in the UK) that sewerage charges are based on 95% of water consumed. Are all properties metered? Are they all connected to the sewerage network? Do you want to apply a similar charge to properties not on mains drainage but receive the same service by septic tanker. If customers are not metered you could look at a tariff based on existing local taxation, house size, number of occupants etc. Anything which makes a sensible, measurable and logical assessment of water consumption and therefore sewage generation. Agree with Raymond that where appropriate, the sale of treated sewage for industrial and/or irrigation purposes can generate an additional stream for the sewerage undertaker.

   With knowledge of the volume of wastewater treated you can back calculate what percentage of water consumed is discharged as sewage.

   Whilst people don't like new taxes or charges, and in many countries believe that central government should provide sewerage services free or charge, or financed by general taxation, they need to believe that if a charge is to be imposed on them, it should at the very least be fair and controlled.

   A dedicated independent government regulator, which I personally advocate, can look at driving efficiencies out of the company/public agency to ensure that customers receive value for money, that the assets are being maintained, that the service is being improved (via an agreed and deliverable capital programme) and that costs are transparent and fair.

   Depending on government will, you could phase tariffs in over a number of years, so that customers are not hit with a large bill on day one and you potentially end up with public discontent.

   Hope that helps.

3. Dear Megan, I am keen to assist as I have had some years of experience in setting tariffs for sewage systems, water supply and industrial wastewater collection. The Victorian (Aust.) experience since 2005 was to establish Water Plans scrutinised by an independent government body to ensure true cost recovery was the objective of the charges. The most equitable method for your circumstance would be a user pays system based on per number of visits/eduction of septic solids initially. In the event that the island is deemed to warrant a sewage treatment facility and potentially re-use the treated effluent then the charging model will need to take into account the infrastructure and treatment costs. This can be spread across the sewage influent volume/load and the saleable re-use treated effluent. Happy to advise further and you are welcome to contact me via email initially ray@sustainableideas.com.au