Under the Water Act of 2002, Wasreb is required to establish Guidelines for tariff setting by water providers. The objectives of tariff review are to:
- Ensure financial sustainability
- Foster access to Safe Water as a Human Right
- Promote efficiency in the delivery of water services
- Encourage conservation
- Ensure simplicity in the pricing structure of water.
The tariff review process is necessitated by the following by the factors:
- Dependence on subsidy which has become unsustainable.
- Tariffs that outlived their usefulness.
- Continued rise in cost of inputs.
- Increments in cost of electricity, fuel and their spiraling effect.
- Unsustainability of most WSPs and WSBs
Under the Licence, tariffs charged are meant to accommodate the need to have cost recovery, cross subsidization, and where feasible the expansion of infrastructure.
The tariff review process focuses on balancing commercial and social interests in water service provision. The fixing of tariffs considers justified costs, in order to eliminate any costs that may result from inefficiency, and which should not be borne by consumers.
Wasreb has developed Tariff Guidelines with the objective of fixing tariffs that balance commercial, social and ecological interests thus ensuring access to all while allowing WSPs and WSBs to recover justified costs. Recognizing that WSPs differ in category and size, the Guidelines address different requirements as follows:
- Setting out approaches to tariff adjustment
- Spelling out requirements that WSPs and WSBs should meet for tariff adjustment applications
- Setting out methodologies for tariff review analysis, approval and subsequent adjustments over time
Thus, tariff adjustments enable WSPs to attain cost coverage of operations and maintenance, while improving performance in specified indicators. Gradually, adjustments are made to cover full cost recovery in order to ensure long-term sustainability
Wasreb’s role in tariff setting is the surest way of ensuring sustainability in the water services sector. The Board uses tariff adjustment as an important economic instrument for improving water use efficiency, enhancing social equity and securing the financial sustainability of water service providers. Wasreb ensures that the tariffs set are fair, adequate, simple and encourage conservation of water. Cost-reflective tariffs enable Providers to maintain their operations and, at the same time, develop assets for water services provision.