Looking to the future of urban water pricing
23 July 2008
At their meeting yesterday in Canberra, Australia's National Water Commissioners agreed to release a report on Approaches to urban water pricing, which assesses urban water pricing options and suggests there is scope to improve current arrangements.
National Water Commissioner, Chloe Munro said, 'This Waterlines report prepared by Frontier Economics, together with the Commission's accompanying Position Statement, shows that new approaches to water pricing have the potential to deliver better outcomes for water users, reducing the reliance on costly water restrictions.
'One of the options is to move away from the "inclining block" tariffs currently in use, towards a single volumetric price. Inclining block tariffs disadvantage households with large numbers, and are difficult for customers to understand and respond to.
'There is also scope to introduce metering and billing arrangements that send clearer usage-based pricing signals to water users. The Commission encourages consideration of scarcity pricing for urban water.
'Just like prices for other goods and services, under a scarcity pricing approach, the variable component of the water charge would vary relative to available supply. Scarcity pricing may be a more efficient way of balancing supply and demand and could significantly reduce the need for water restrictions.
Other options worth considering include the merits of locational or peak pricing on a case-by-case basis, and allowing greater price differentiation, including for different levels of supply security.
Ms Munro said, 'Getting our water prices right will encourage wiser water use, ensure that new sources of water supply are brought on line in a timely fashion, and ensure water service providers have sufficient revenue to allow the efficient delivery of the required water services and to plan for the future.
'The prospect of rising water demands in urban areas due to population growth, coupled with declining water availability in many of our cites, highlights the need for a well planned, efficient, sustainable and responsive water sector', said Ms Munro.
The Commission's position statement on urban water pricing identifies additional areas that may warrant policy reform. These areas extend beyond the actions originally specified under the National Water Initiative.
They include stronger independent pricing oversight, improved pricing for new water sources, an end to inclining block tariffs, improved metering and billing, continued structural reform and more competition, for example in sourcing water at the wholesale level.
Media contact: Lynne Griffiths, NWC Communications Manager
02 6102 6023 / 0412 786 945