Charges for Sewerage Service - Malaysian Water Association.

CHARGES FOR SEWERAGE SERVICES
WATER MALAYSIA 2013 CONFERENCE
Datuk Ir. Abdul Kadir Mohd Din
23 April 2013
Private and Confidential
© 2013 Indah Water Konsortium Sdn Bhd
Content
Table of Contents
1. Sewerage Management Practices – Comparison
2. Principles of Tariff Setting
3. Volumetric-based Tariff
4. Challenges
5. Recommendations
23-25 April 2013
Water Malaysia 2013 Conference
1
Sewerage Management Practices – Comparison
2
Sewerage management structure
SOUTH KOREA
○■◊▲
JAPAN
○●■◊▲
HONG KONG
○■◊▲
SINGAPORE
○●■◊▲
NETHERLANDS
○●■◊▲
Basic of Sewerage Tariff of Various Countries
Funding of Sewerage Services Worldwide
○ Block System/Volumetric ● Basic/Min Charge ◙ Fix Rate
◊ Government ♦ Private ♦◊ Government/Private
Management Practice of Sewerage Services Worldwide
Services Provider of Sewerage Services Worldwide
■ Integrated □ Separate
▲ Government ▼Private ▲▼Government/Private
Source: KPMG - World Bank; IWK; GWI,2010; *OECD,2009; GWI,2008
3
Sanitation coverage statistic
Urban and rural proportions of people with access to sanitation in East Asian countries
Malaysia with its sewerage development plan and commitment to safeguarding health, water resources and
environment has managed to achieve a comparatively high coverage of sanitation both in urban and rural areas.
However, the cost recovery operating expenses are only partly reflected in the tariff. No cost recovery element is
available in the tariff.
4
Sewerage practices summary
Country
U.S. (Nashville)
Volumetric
Basic/Min
Charge


Property
Based
Fixed
Rate
Environmental
Tax

Canada
Billing
Integration with
Water Management
Average
Water and
Wastewater
Bill ($/m3)
Integrate
Integrate
$2.71
N/A
Integrate
$2.75
Separate
Separate
$3.27*
Integrate
Integrate
$2.19
Belgium

Japan

Australia

Integrate
Integrate
$4.18
Singapore

Integrate
Integrate
$3.40
Germany

Integrate/Separate
Integrate/Separate
$4.26
France

Separate
Separate
$3.92
U.K.
New Zealand
(Auckland)
South Korea

Integrate/Separate
Integrate/Separate
$3.76
Integrate
Integrate
$1.69*

Integrate
Separate
$0.69
Czech Republic

Integrate
Integrate
$2.75
Hungary

Integrate
Integrate
$2.93*
Chile

Poland

Brazil



(64%)








Malaysia
Integrate
Integrate
$1.20

Integrate
Integrate
$2.21
N/A
Integrate
$1.90

Separate
Separate
$0.20
N/A
Integrate
$1.00
N/A
Separate
$0.80
Integrate/Separate
Integrate/Separate
$0.70

South Africa
Indonesia

Philippines (Manila)




* Tariff Structure and Average Water and Wastewater. Bills refer to the Domestic category only.
(Source: KPMG - World Bank; IWK; GWI,2010; *OECD,2009; GWI,2008)
5
Domestic tariff comparison
Low tariff levels - Malaysians are paying amongst the lowest domestic sewerage
charges in the world – between RM24 and RM96 per year - with approximately 27% of
Domestic customers paying only RM24 per year.
Annual Average
Annual Average
(RM)
Country
Basis
Japan
Water Usage
Yen 30,774
1,107
South Korea
Water Usage
USD 50
152
Hong Kong
Water Usage
HK 260
101
Netherlands
Water Usage
USD 297
900
Singapore
Sanitary Appliances Fee +
Water Born Fee
SD144
346
Malaysia
Flat Rate
RM96
96
Sources: Pricing water resources and water and sanitation services :www.oecd-ilibrary.org, Regulation of water and wastewater services : An
International Comparison
6
Comparison with water charges
Domestic “lifeline” tariff @ 20 m3
Sewerage tariff @ RM8/month
1. The water “lifeline” is set at 20 cubic meter per domestic household per month.
2. The sewerage tariff is fixed at RM8.00 per month regardless of usage of water.
7
Principles of Tariff Setting
8
Tariff should aim to achieve…
1)
Reflect the true cost of providing the service and eliminate the need for
subsidy and/or cross-subsidy as much as possible.
2)
Tariff should commensurate with level and quality of service.
3)
Attain economic sustainability for the service provider with agreed level
of profitability.
4)
Pave the way for readiness towards integration of water and sewerage
services in line with the goals of WSIA.
In
Malaysia
In the case of sewerage service in Malaysia, there were no tariff
increase since 1997 to adjust for inflation, increased business
dimension, electricity tariff hike, etc. This pose a major challenge
as the adjustment required is expected to be too high.
9
Why Integration?
5,000
4,500
4,000
3,500
RM Million
3,000
Revenue from the water services
industry is 8.3 times higher than
of sewerage industry. In addition,
the former’s Opex is lower than
the revenue.
2,500
2,000
4,409
3,936
1,500
3,737
2,944
1,000
500
0
At least 167% increase in
revenue is need to offset the
GFS in order to cover
Opex.
150
473
793 *
IWK
2011
All State Water
Services Entities
2009
Government
Financial Support
Combination of All State Water
Services Entities and IWK
Revenue
Opex
10
Practical Principles of Tariff Setting
1
Cost
Recovery
Sewerage services in Malaysia is seen as a social service primarily focusing
on the provision of sewerage services. The new tariff structure should digress
from this and continue with the aim to achieve economic sustainability by
being a cost recovery entity and viable over a period of time. Tariff should
reflect true cost of service commensurate with the operating risk level.
Equitable
The new tariff must take into consideration to balance the increasing operating
cost, which the current tariff rate is very low to sustain the operations as to
ensure public health is maintained. Cross subsidy from Commercial maybe be
applied to Domestic to keep Domestic rate lower.
Resource
Conservation
A volumetric charge reflects “pay-per-use” principle. Inclining Block Tariff
should be used to discourage “excessive” or “wasteful” uses of water.
Rebate for
Domestic Low
Cost
In keeping with the “pay-per-use” principle, Domestic charges should be
harmonized across all customers including low cost who presently pay lower.
However, the Government can implement a rebate mechanism to assist the
low cost customers for a period of time if so desired.
2
3
4
11
Volumetric-based Tariff
12
Volumetric tariff comparison
Impact to Key Stakeholders – Only heavy water users will lose out if volumetric tariff is implemented
Key Stakeholders
Sewerage
Service
Providers
Government
Rakyat
Current Tariff Structure
(Without Tariff Increase)
Volumetric Tariff
• Unsustainable Sewerage
Service
• Sustainable sewerage services
with positive impact on the
environment
• Huge amount of compensation
• Zero subsidy
• Heavy water users enjoy low
sewerage bill (1% of average
poor household’s income)
• Heavy water users complain
of higher sewerage bill
• Light water users enjoy low
sewerage bill (1% of average
poor household’s income)
• Polluters Pay Principle
• Light water users enjoys lower
sewerage bill
• Inequitable tariff structure
13
Concept of Green tariff
A volumetric tariff rebalancing structure that includes both water and sewerage charges in
a single tariff
Water Charge
Water
Consumption
(m3)
Water Rates
(RM/m3)
Water Bill
(RM)
Tariff Rebalancing at 70%
water and 30% sewerage
(example)
Sewerage Charge
Water Bill
(RM)
30%
70%
Total Bill = Water Bill (RM)
Sewerage Bill
(RM)
Sewerage Bill (RM)
14
Challenges
15
Challenges to implement volumetric tariff
1) Huge resistance from customers who will be charged more
than current – some customers will be paying much higher.
2) Customers would complain that sewerage charges are higher
than water charges in their state.
3) Commercial customers may complain on Domestic crosssubsidy.
4) Claims by customers that not all volume of water return to
sewer.
5) To reach commercial agreement between water companies
and sewerage companies for volumetric billing.
16
Recommendations
17
Three Key Recommendations
1. Integration of Water and Sewerage Services: Achieving Holistic Water Services
• Sewerage services to be integrated with water services to enable a holistic
management of water cycle, where a phased integration could be taken in
accordance to the readiness of State water operators.
• Integration should be based on principle of ‘no-loss’ for water operators.
2. Full Cost Recovery: Achieving Financial Sustainability
• Green Tariff should be implemented upon full integration between sewerage services
and water services.
4. Ensuring the Affordability of Water and Sewerage Services
• A tariff rebate programme could be established to cater for the affected households
that are unable to afford basic water and sewerage services.
18
The Way Forward
ROADMAP
Preparatory Phase - Laying
the Foundation
• Engage key stakeholders in
relation to the proposal of a
review on existing sewerage
tariff structure.
Phase
1
–
Volumetric
Sewerage Tariff Structure with
Tariff Increase
• Engage key stakeholders.
• Implement volumetric tariff
structure.
• Employ tariff rebalancing.
• Impose increase in sewerage
tariffs.
• Allow
the possibility for
integration for states that are
ready to do so.
–
Phase 2
Increase
Sewerage
Tariff
• Engage key stakeholders.
• Review sewerage tariff rates
Phase 3 –Implementation
Green Tariff Structure
• Engage key stakeholders.
• Setting
the
mandatory
under the volumetric model.
• Impose
increase in sewerage
•
the possibility for
integration for states that are
ready to do so.
•
tariffs.
• Allow
of
requirement for the integration
of water and sewerage services.
Implement green tariff structure
and single billing system.
Collect and review feedback on
the green tariff structure.
Milestones:
• 31 December 2019:
Milestones:
Milestones:
• 1 January 2014:
• 1 January 2017 :
Second
round of increase in sewerage
tariffs
- Full integration with state water
operators
- Full implementation of
tariff
green
- Implementation of volumetric
sewerage tariff structure
Timeline
- First round of increase in
sewerage tariffs
Q3 – Q4 2013
2013 - 2016
2016 - 2019
2019 onwards
19
Supporting Documents
20
Sample of Singapore Combined Utility Bill
1) SUMMARY
2) DUE DATE/GIRO PAYMENT
3) METER READING
4) CONSUMPTION UNITS
5) TARIFF RATES
6) SANITARY APPLIANCE FEE AND WATERBORNE FEE
The Sanitary Appliance Fee (SAF) and the Waterborne Fee
(WBF) are levied to offset the cost of treating used water and
for operating and maintaining the used water network. The
Sanitary Appliance Fee is a fixed component based on the
number of sanitary fittings in each premise whereas the
Waterborne Fee is charged based on the volume of water
supplied, regardless of location and end use of the water. Both
charges are imposed as a tax contribution to Singapore's
national used water system.
7) REFUSE REMOVAL
8) WATER CONSERVATION TAX
A water conservation tax is charged for the use of water. It is
levied by the Government to reinforce the importance of
conserving water.
21
Sample of Manila Water/Sewerage Bill
22
Sample of Shanghai Water/Sewerage Bill
23
For further information, kindly contact:
Datuk Ir. Abdul Kadir Mohd Din
Chief Executive Officer
akadirmd@iwk.com.my
+603-2780 1567
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