Singapore

Water pricing based on household size, usage a better system: Expert

Water pricing based on household size, usage a better system: Expert
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Published: 4:00 AM, March 21, 2017
Updated: 3:07 PM, March 21, 2017

SINGAPORE — To change water consumption habits, banking on high prices alone might not cut it. Instead, the pricing structure should be pegged to the number of people in the household and entail discounts for households which manage to cut back on their water usage.

This was the view of Dr Jochen Krauss, a pricing consultant who has more than nine years’ experience in consulting national and international clients.

“A fair system needs to differentiate users. And a way to differentiate users is by introducing tiers,” he said, ahead of World Water Day tomorrow.

Since the Government announced last month that water prices would go up by 30 per cent in two phases, varying opinions on how the pricing structure here should change have been floated: For instance, charging the well-to-do higher rates, and differentiating prices by household type.

In Singapore, the tiering is based on volume. Households pay S$1.17 per cubic metre of water if they use less than 40 cubic metres each month, a threshold introduced during the last price revision in 2000. Those who use more than that pay S$1.40 per cubic metre.

Dr Krauss disagreed that pricing should be tied to income levels or the size of a house, given that water is a universal resource. But it is the Government’s responsibility to ensure the lower-income can afford and have access to water, he added.

While someone living in a bigger house could use more water, he noted that this “does not constitute basic usage anymore”.

“We’re talking about water, not the number of air-conditioning units. If you have a larger house, then you have more rooms to cool down ... but still, you are the same person. If you think you want to have a pool (in a bigger house), there (should be) a cost to pay for it,” he added.

A carrot-and-stick approach would help nudge people to conserve the scarce resource, said the managing partner at Simon-Kucher & Partners. This means penalising those who use water excessively and incentivising others who make the effort to cut back on their water usage by giving a discount on their water bill.

The authorities could set a basic water-consumption threshold for an average household size before adjusting it according to more or fewer people living under one roof. This means that a two-person household will have a lower threshold than a five-person household given that two people will use less water.

“Household members are a huge driver of water consumption, not the number of toilet bowls. It’s the number of people using these bowls and the faucets ... and that is a function of variable consumption,” he added.

This has been the pricing approach taken by Barcelona, for instance, one of the European cities that has managed to reduce its per capita water consumption to less than 100 litres a day. Last year, Singapore households used 148 litres of water per capita per day.

In Europe, water prices have led to varying consumption patterns. For instance, high water prices have forced countries such as Germany and Finland to save water and reduce their consumption. Countries such as Belgium and Spain, on the other hand, have similarly low consumption rates despite their relatively lower water prices.

But Denmark continued to have a high water consumption rate despite its higher water prices.

There are limitations even with Dr Krauss’ suggested system: At some point, households will not be able to reduce their water consumption any further. Citing Germany as an example, Dr Krauss noted that the authorities “have incentivised water usage so much” that not enough water flows through its infrastructure, making it more costly to maintain.

While it is hard to determine how often water prices should be adjusted, he noted the authorities might not want to wait for another 17 years before doing so. And with changes in prices, “everyone somehow logically assumes it’s an increase”, he said, adding that water prices can go down with breakthroughs in technology.

“If you have not changed it for 17 years, chances are, it will be an increase ... But revisiting the topic of water on a more regular basis, a recalibration (of prices) could have different forms,” he said.