Volume 29, Issue 3

September 2013
Special Issue on Urban Water Management: Public-private Participation and Water Pricing

Foreword »
Esteban de las Heras Balbás

Editorial »
Cecilia Tortajada, Francisco González-Gómez, Asit K. Biswas and Miguel A. García-Rubio

Policy Brief

The urban water challenge

Michael Rouse
Oxford University Centre for the Environment, University of Oxford, Oxford, UK

Contact: Michael Rouse | Email: michaeljrouse@yahoo.co.uk


There are major challenges associated with the provision of urban water services which meet acceptable standards of service for present and future generations. Unless there is significant investment in the underground networks there will be an increasing loss of access to acceptable service. There has been a mistaken belief that water resource difficulties can be solved through “hours of day” water rationing. Successful case studies help to point the way forward. In the developed world there are wake-up calls for major investment. In many parts of the developing world the most fundamental change required is the adoption of a policy of continuous (“24/7”) supply. There should be sustainable cost recovery from water charges, with subsidies being targeted to make provision for low-income groups. With rapid urbanization, water service planning has to be integrated with city planning.

Pages: 300-309


Research Article

Enhancing the performance of water prices and tariff structures in achieving socially desirable outcomes

Dennis Wichelns
Institute of Water Policy, Lee Kuan Yew School of Public Policy, National University of Singapore

Contact: Dennis Wichelns | Email: dwichelns@nus.edu.sg


Water prices can convey critical information regarding scarcity, availability, and opportunity costs. Carefully crafted water tariffs enable public officials to achieve socially desirable objectives, such as providing subsidies to poor households and discouraging inefficient water use by higher-income households and commercial customers. Yet water tariffs have not been fully successful in generating desired outcomes, particularly in urban areas of developing countries. Some of the shortcomings of water tariffs in light of the desired goals of equity, efficiency and sustainability are reviewed. Experience with increasing block-rate tariffs is highlighted, and the potential usefulness of a volume-differentiated tariff in conveying subsidies to poor households in developing countries is demonstrated.

Pages: 310-326


Research Article

A global survey of urban water tariffs: are they sustainable, efficient and fair?

David Zetlandand Christopher Gassonb
aWageningen University, Environmental and Natural Resource Economics, Wageningen, the Netherlands; bGlobal Water Intelligence, The Jam Factory, Oxford, UK

Contact: David Zetland | Email: dzetland@gmail.com


This paper examines the relations between tariffs and sustainability, efficiency and equity, using a unique data-set for 308 cities in 102 countries. Higher water tariffs are correlated with lower per capita consumption, smaller local populations, lower water availability, higher demand and a lower risk of shortage. Aggregating to the national level, higher tariffs are correlated with higher GDP and better governance. A different country-level analysis shows that a higher percentage of the population with water service is correlated with better governance, higher GDP and a greater risk of water shortage. The relation between water prices and service coverage is statistically inconsistent.

Pages: 327-342


Research Article

Glas Cymru: lessons from nine years as a not-for-profit public–private partnership

David Lloyd Owen
Envisager Limited, Ceredigion, UK

Contact: David Lloyd Owen | Email: david@envisager.co.uk


Glas Cymru Cyfyngedig has owned Dwr Cymru Welsh Water, the private provider of water and sewerage in Wales, since 2001. It is run as a not-for-profit company for the purpose of minimizing customer tariffs and improving customer service and environmental sustainability. The financial model has largely been able to deliver these objectives, while lowering the cost of financing these operations. The model looks to be replicable as long as there is suitable political and regulatory support.

Pages: 343-351


Research Article

A critical examination of models and projections of demand in water utility resource planning in England and Wales

Gareth Walker
School of Geography and Environment, University of Oxford, United Kingdom

Contact: Gareth Walker | Email: gareth.walker@keble.ox.ac.uk


Demand modelling plays a vital role in water resource management yet has rarely been critically reviewed. This paper adopts a critical realist framework for a historical analysis of demand modelling practices and their role in long-term water resource management in England and Wales from 1945 to 2010. It then focuses on recent domestic demand models in the English and Welsh private water sector. A critique of scientific realist assumptions regarding demand models is presented and the role of the current regulatory environment in encouraging a highly strategic use of demand models is discussed. Policy recommendations toward more effective modelling practices are made.

Pages: 352-372


Research Article

The dynamics of privatization and regulation of water services: a comparative study of two Spanish regions

Germa Bela, Francisco González-Gómezb and Andrés J. Picazo-Tadeoc
aDepartament de Política Económica, Universitat de Barcelona, Spain; bDepartamento de Economía Aplicada, Universidad de Granada, Spain; cDepartament d’Economia Aplicada II, Universitat de Valencia, Spain

Contact: Germa Bel | Email: gbel@ub.edu


As in other economic activities, privatization of water delivery has not resulted in the retreat of the public sector, but rather a change in the way in which the government intervenes in the water industry. This paper illustrates this situation by comparing urban water services in two Spanish regions, Andalusia and Catalonia. Water service delivery is structured very differently in these two regions with respect to private involvement, the degree of market concentration and, as a result, problems in competition. The characteristics of the two regions’ respective regulatory agencies reflect the different paths taken to privatization: in Catalonia private firms have much more tradition and operate throughout the region; in Andalusia their introduction has been much more recent and limited in scope.

Pages: 373-384


Research Article

Public choice of urban water service management: a multi-criteria approach

Alberto Ruiz-Villaverdea, Francisco González-Gómeza and Andrés J. Picazo-Tadeob
aDepartment of Applied Economics and Water Research Institute, University of Granada, Spain; bDepartment of Applied Economics II, University of Valencia, Spain

Contact: Alberto Ruiz-Villaverde | Email: albertorv@ugr.es


Local policy makers in developed countries have to make decisions in increasingly complex scenarios. Consequently, they should use all the tools available when deciding which management option is the most suitable for urban water service, given how important that service is and the variety of criteria involved in making such a decision. This article employs ‘analytic hierarchy process’ techniques to perform an ex post analysis of the decision to transfer the management of the urban water service in Granada (in southern Spain) to a public-private partnership. The main conclusion is that the decision was rational, in that it was the best possible alternative considering the hierarchy of preferences at the time. Furthermore, confronting the serious financial difficulties faced by the local government took clear precedence over other aspects when the decision was taken.

Pages: 385-399


Research Article

Adopting versus adapting: adoption of water-saving technology versus water conservation habits in Spain

Roberto Martínez-Espiñeiraa and María A. García-Valiñasb
aDepartment of Economics, Memorial University of Newfoundland, Canada; bOviedo Efficiency Group, University of Oviedo, Spain, and LERNA, Toulouse, France

Contact: Roberto Martínez-Espiñeira | Email: rmartinezesp@mun.ca


Issues of water scarcity can be ameliorated through household adoption of water-saving technologies and by adaptation of consumption behaviour. In this paper the determinants of the adoption of water-efficient devices and of water-saving habits in Spain are analyzed using data from 27,000 households. This includes information on choices about self-reported conservation habits and decisions about the adoption of water-saving equipment. The findings show that educational campaigns have a strong positive effect on both decisions to undertake investments and decisions to adapt habits. These results also allow campaigns to be aimed at certain socio-economic groups identified in the econometric analysis.

Pages: 400-414


Research Article

Assessing the impact of price and non-price policies on residential water demand: a case study in Wisconsin

Arnaud Reynaud
Toulouse School of Economics (LERNA-INRA), France

Contact: Arnaud Reynaud  | Email: areynaud@toulouse.inra.fr


This paper reports an investigation of the impact of price policies (PP) and non-price policies (NPP) on residential water demand. Using a sample of US water utilities located in Wisconsin, residential water demand was estimated by taking into account the fact that some of the characteristics of local communities that determine PP and NPP choices may also influence residential water consumption levels. It is first shown that neglecting endogeneity of PP or NPP may lead to biased parameter estimates. Second, it is demonstrated that the policy mix (PP or NPP) may be as important as the level of prices for determining water consumption. Lastly, evidence is provided that dissemination efforts made by local communities to promote NPP drive the effectiveness of those policies.

Pages: 415-433


Research Article

Water demand management: review of literature and comparison in South-East Asia

Eduardo Ararala and Yahua Wangb
aLee Kuan Yew School of Public Policy and Faculty Associate, Institute of Water Policy, National University of Singapore, Singapore; bSchool of Public Policy and Management, Tsinghua University, Beijing, China

Contact: Eduardo Araral | Email: sppaej@nus.edu.sg


The present paper reviews the literature on urban water demand management and compares practices in South-East Asia. Existing literature is mostly from developed economies and is concerned mainly with elasticity studies, which are not relevant to developing countries because their main problem is non-revenue water. Cities in South-East Asia employ both price and non-price mechanisms to regulate demand. Price mechanisms include increasing block tariffs, fixed, volumetric, raw water, and conservancy charges, rebates, cross-subsidies and periodic rebasing. Non-price mechanisms such as management, engineering and regulatory mechanisms, as well as public education and community involvement, play important roles. More studies are needed to establish their efficacy and cost-effectiveness.

Pages: 434-450


Research Article

Water service quality in Tanzania: access and management

María A. García-Valiñasa and Josepa Miquel-Florensab
aEfficiency Group, University of Oviedo, Spain, and LERNA, Toulouse, France; bToulouse School of Economics, France, and ARQADE, Toulouse, France

Contact: María A. García-Valiñas | Email: mariangv@uniovi.es


Problems related to water access and quality are significant in several countries around the world. Thus water management becomes a key issue, especially in developing countries, where the institutional and regulatory context is not always properly designed. The aim of this research is to analyze the residential water service in Tanzania, using data taken from several government reports and the survey “Views of the People 2007”. This survey includes information on perceived problems and improvements on water services, allowing identification of the key drivers of Tanzanian households’ perceptions of water services. The best-performance framework is also identified, and some policy recommendations are provided.

Pages: 451-471


State-of-the-art review

Designing urban water tariffs to recover costs and promote wise use

Sonia Ferdous Hoque, and Dennis Wichelns
Institute of Water Policy, Lee Kuan Yew School of Public Policy, National University of Singapore

Contact: Sonia Ferdous Hoque | Email: soniahoque@gmail.com


Urban water tariffs vary substantially across cities and regions, for reasons that reflect water scarcity conditions, local or regional objectives, and political considerations. Comparisons of average water prices across regions are not generally meaningful, as the prices are not weighted or adjusted to account for variation in socio-economic or political characteristics. This study endeavours to describe the observed variation in water tariffs, with the goal of highlighting key features and the degree to which some tariff programs achieve local objectives. To this end, the domestic and non-domestic water and wastewater tariffs in 60 cities across 43 countries were examined. The nonweighted average of the per unit domestic water and wastewater bills in the cities considered was USD 2.10/m3. The average per unit bills in Asia and Africa were generally lower than those in Western Europe, North America and Australia. On average, households spend about 1.5% of their monthly incomes on water and wastewater bills. In Asia and Africa, the average unit bills for the non-domestic sector were higher than those for the domestic sector, suggesting cross-subsidy. The study also analyzed the components of a metered tariff schedule with regard to the goals of cost recovery, demand management and affordability. The article also discusses the effectiveness of existing tariffs in addressing local challenges in the context of water pricing examples from Singapore, Los Angeles and Manila.

Pages: 472-491


Book Reviews

The Sound of Thirst: Why Urban Water and Sanitation for All is Essential, Achievable and Affordable »

Water and Sanitation Services: Public Policy and Management »