By Susan Davis, Executive Director
What leads to success or failure of water systems? Everything we read points to a complex mix of factors. In this series, we share quotes on various topics related to failure of water systems from our literature search and interviews for the report on resolution of problems with water systems as a way to highlight pieces of the puzzle.
This blog deals with a specific piece of the cost recovery challenge mentioned in an earlier blog: how water fees for users (if any) are set. The cost of operating a water system includes treatment, management, maintenance, repairs, investment in protecting water catchment areas, and funds for eventual expansion to new families. Many development organizations assume that communities will be responsible for covering these costs out of the fees that they pay. Yet this is rarely the case. (Davis, Pocosangre, & Hicks, 2014)
Although more and more people understand that water services have a cost, there are still many users who refuse to accept the actual rates. For example, in one [Global Water Initiative (GWI)] community in El Salvador, the actual water fee based on real costs should have been $3 per family per month. But the water users insisted on paying no more than $1.20 per month, so the system operates at a deficit. GWI found this a common case in Central America. Average water fees range from $1 to $3 per household per month. Figure 6 [below] shows data from 114 water systems in El Salvador. It shows most of the fees are about $2 per household per month.(Davis, Pocosangre, & Hicks, 2014)
[in Rwanda and Uganda] With the exception of people who reside in trading centres and buy water from vendors, water in rural areas is free of charge. (Golooba-Mutebi, 2012)
[The] lack of finance for operation and maintenance was further complicated by confusion over definition and purpose of capital costs. Some communities felt that because they had paid these costs, they should not have to pay more for operation and maintenance, as they did not understand the difference. In other situations, partners had taken funds away with no explanation, or local government had used them to pay the private sector for their construction services. In several communities the unusual situation of one individual paying off all of the capital costs occurred, with communities having to pay them back without knowing exactly how much was owed. All of these experiences confused community willingness to contribute payment regularly. (Jansz, 2011)
Most community water boards haven’t done reliable studies on the adequacy of their rates. Most do not take into account the increase in “production costs” of water, which climb permanently either by inflation or increase in the prices of inputs into the production of water, such as chlorine, pumps, pipes, spare parts, among others. The price per cubic meter of water charged to the community does not increase despite the increasing cost of production and this brings the imbalance between revenues and expenditures. (AVINA, 2011)
Apparently, the tariffs set for many of the GFS schemes are on the very low side (e.g. MWK 100/tap/month goes from the tap to the main branch committee in Khosolo). (Baumann & Danert, 2008)
In the majority of cases, the [water & sanitation committees (WATSANCos)] and Kebele Administrations confirmed that tariff setting had mostly been carried out in consultation with the community (household heads). …All of the Kebeles visited are using a monthly fixed price or a tariff system or both. Generally, the average water tariff is 10 cents for 45L of water (maximum 10 cents/20L; minimum 10 cents/100L) and a 2 Birr average fixed price (maximum Omolante – 5 Birr/month; minimum Ankober – 0.5 Birr/month). Most WATSANCos indicated that poor people who cannot pay for water are allowed to use water for free. Most of the user communities confirmed that the tariffs are affordable, although in Wanke Wajifo Kebele the community said that the tariff is very expensive (i.e. 10 cents/20L from the motorised scheme). Generally, the WATSANCos use a customary tariff-setting system. This does not consider, for instance, price fluctuations in consumable supplies such as fuel and motor oil. (Deneke & Abebe, 2008)
[W]ater tariffs must be set at an appropriate level based on community ability to finance operation and maintenance. Too often, inadequate levels of finance are collected which reduce the life expectancy of handpumps. (Bauman, 2006)
Most communities are unaware of the true cost of maintenance of a handpump installation and in most cases are not informed of likely annual maintenance costs prior to technology choice. Where private pump mechanics operate, the charges for their services often vary enormously despite attempts by implementing agencies to standardise. (Harvey, Ikumi, & Mutethia, 2003)
As these fees are often the only source of income to pay for operations and maintenance of rural water systems in developing countries, it is critical to get them right.