Abstract
Fresh water is a life-sustaining but limited resource. It is this very constraint that presents the challenge of how, or even if, households should be charged for the water they consume. This study attempts to address this challenge, with specific focus on water consumption and pricing in the City of Tshwane.
The primary objectives of this study were to determine a water tariff structure that incentivised the efficient consumption of affordable water and enabled the water utility to recover the costs of supplying the water.
Secondary data on water consumption, prices, household sizes and income were collected from various sources for this study. The data were grouped into categories according to consumer categories. A correlation analysis indicated that, apart from one consumer category (residential and agricultural holdings), there was no statistically significant association between water prices and water consumption in any of the other categories.
An optimisation model was constructed to determine a tariff structure that fulfilled the objectives of this study. The objective functions to be optimised were the allocation of free water to indigent households and old age homes, the size of the first and second blocks in the inclining block structure, the recovery of fixed and variable costs and the tariffs for each category of consumer.
Approximately 90% of households in Tshwane have five or fewer household members and, therefore, the size of the first block was calculated for five people each receiving 50 litres of water a day for 30 days, i.e., 7.5 kℓ. The size of the second block was 7 kℓ, which was calculated as average water consumption in clusters and flats minus the water in the first block. Any water consumed in excess of 14.5 kℓ fell into the third and most expensive block. The inclusion of a fixed cost component in the tariff structure ensured that the utility recovers its fixed costs. Capital expenditure incurred in future is to be recovered through this fixed component.
This tariff structure meets the objective of equitable distribution of water by making basic essential water available and affordable to all households. The objective of cost recovery is met by including a fixed charge (calculated on the number of accounts) into the tariff. The introduction of the fixed charge signals to consumers that there is a cost to making water available, and that this cost increases when the demand for water grows beyond the current capacity. This realisation should promote more efficient and sustainable use of water.