Nairobi City Water and Sewerage Company (NCWSC) on Tuesday shelved its plans to increase the cost of water, pending a tariff study that would establish the rationale for the price review. Below are five objectives that guide tariff setting for water supply and sanitation. The tariff objectives have been sourced from section 3.1 of the Water Services Regulatory Board (WASREB) Tariff Guidelines.
Financial sustainability: As per the Tariff Guidelines, ‘full cost recovery’ means that the total cost of providing services, including operating costs, capital costs, and administrative/regulatory costs are met. Water tariffs are reviewed once every three years with NCWSC having last reviewed its rates in 2009. Electricity and labour costs have since continued to weigh down on its earnings. Water tariffs will be reviewed in such a manner that the water service provider is able to recover its operation costs or else systems will deteriorate and service delivery decline.
Access to safe water as a human right: As per the tariff guideline, human access to water entitles everyone to access to sufficient, safe, physically accessible and an affordable water and sanitation. This means that the tariff should be set in a way that is equitable and does not unfairly impose costs on certain classes of customers. Included in the tariff structure is cross subsidization which allows provision of affordable services to the poor while covering costs to the entire system.
Efficiency: As per the Water Act, water service providers should ensure that water services are provided efficiently and that service levels are improved over time. Tariffs will be linked to the achievement of key performance indicators and service levels such as water quality, security of supply, reductions of unaccounted for water, collection efficiency. While speaking with Business Daily, WASREB board’s chief executive, Robert Gakubia said, “It is only proper that water companies that cannot account for a certain percentage of their revenue do something first before applying to review costs.”
Conservation: Water is a scarce resource in Kenya thus water tariffs should reflect the true cost of water and send correct signals to consumers about the volume of water they can consume, this being evident in progressive tariffs. As per the Tariff Guide, when tariffs are below costs, consumers over utilize water resources rather than conserving water. By reflecting the economic value of raw water and costs of abstraction, treatment and distribution, tariffs can encourage conservation.
Simplicity: The emphasis here is on the importance of customers to understand the tariff structure and be able to check their monthly payments based on consumption levels. The tariff guide states that a tariff structure that is hard to understand can increase customer resistance and possibly affect customers’ willingness to pay water bills. A simple tariff on the other hand reduces administrative burden on the utility and reduces the chance of billing errors.
NCWSC will have to factor in all the above as it reviews its water tariff.