Increasing block tariffs (IBTs) are widely used as a means to charge for water services. These tariff structures have been justified based on the claim that they make piped water services more affordable for poor and disadvantaged people. The Perspectives Paper, “Beyond increasing block tariffs: Decoupling water charges from the provision of financial assistance to poor households”, finds that IBTs fail the most basic of inclusive development tests.
“Every country which uses IBTs needs to find out if this well-researched claim is true in their country. If so, they need to do something about it,” said one of the authors, Mike Young, who is a member of the GWP Technical Committee. The paper is co-authored by a former Technical Committee member, Dale Whittington.
Block tariffs are charges for water based on the amount used through a metered connection that increase as households use more water. Typical IBT pricing regimes supply the first tranche of water at a low price. Subsequent tranches are offered at successively higher prices.
“The use of IBTs to charge for piped water services assumes that the correlation between household income and water use is high. This is rarely the case,” write the authors. “Most economic studies show that the majority of the benefits from existing IBT regimes go to wealthier households.”
The paper is bound to raise questions about the fairest way to charge for water, which could lead to push-back from water utilities around the world for whom IBTs are the accepted paradigm.
In writing the foreword to the paper, GWP Technical Committee Chair Jerry Delli Priscoli notes that “it is possible that many well-intended water-pricing regimes have perverse effects on opportunities for inclusive development…. As such, it could have ramifications for how communities and countries reach the water supply objectives of Sustainable Development Goal 6 and the 2030 Agenda.”
The paper outlines steps for transitioning away from IBTs and suggests that poorer households will be better off when (i) they are provided with financial assistance using separate policy instruments; (ii) all households have metered connections to a piped water network; and (iii) all water users are required to pay the full cost of service provision.
“It may be time to transfer responsibility for ensuring that access to water is affordable to agencies that specialize in providing financial assistance to poor and disadvantaged people. Water utilities could then be assigned full responsibility for the supply of water services to all people,” conclude the authors. Full coverage then becomes possible and affordable.