Private and Confidential © 2013 Indah Water Konsortium Sdn Bhd
CHARGES FOR SEWERAGE SERVICES
WATER MALAYSIA 2013 CONFERENCE
Datuk Ir. Abdul Kadir Mohd Din
23 April 2013
Table of Contents Content
1. Sewerage Management Practices – Comparison
2. Principles of Tariff Setting
3. Volumetric-based Tariff
4. Challenges
5. Recommendations
1 23-25 April 2013 Water Malaysia 2013 Conference
Sewerage Management Practices – Comparison
2
Sewerage management structure
SOUTH KOREA
○ ■ ◊ ▲
JAPAN
○ ● ■ ◊ ▲
HONG KONG
○ ■ ◊ ▲
SINGAPORE
○ ● ■ ◊ ▲ NETHERLANDS
○ ● ■ ◊ ▲
Basic of Sewerage Tariff of Various Countries
○ Block System/Volumetric ● Basic/Min Charge ◙ Fix Rate
Management Practice of Sewerage Services Worldwide
■ Integrated □ Separate
Funding of Sewerage Services Worldwide
◊ Government ♦ Private ♦◊ Government/Private
Services Provider of Sewerage Services Worldwide
▲ 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 Volumetric Basic/Min
Charge
Property
Based
Fixed
Rate
Environmental
Tax Billing
Integration with
Water Management
Average
Water and
Wastewater
Bill ($/m3)
U.S. (Nashville) Integrate Integrate $2.71
Canada N/A Integrate $2.75
Belgium Separate Separate $3.27*
Japan Integrate Integrate $2.19
Australia (64%) Integrate Integrate $4.18
Singapore Integrate Integrate $3.40
Germany Integrate/Separate Integrate/Separate $4.26
France Separate Separate $3.92
U.K. Integrate/Separate Integrate/Separate $3.76
New Zealand
(Auckland) Integrate Integrate $1.69*
South Korea Integrate Separate $0.69
Czech Republic Integrate Integrate $2.75
Hungary Integrate Integrate $2.93*
Chile Integrate Integrate $1.20
Poland Integrate Integrate $2.21
Brazil N/A Integrate $1.90
Malaysia Separate Separate $0.20
South Africa N/A Integrate $1.00
Indonesia N/A Separate $0.80
Philippines (Manila) Integrate/Separate Integrate/Separate $0.70
* 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
Country Basis Annual Average Annual Average
(RM)
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
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.
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
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.
Domestic “lifeline” tariff @ 20 m3
Sewerage tariff @ RM8/month
7
Principles of Tariff Setting
8
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.
Tariff should aim to achieve…
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
473793
3,936
2,944
4,4093,737
150
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
RM
Mil
lio
n
Government
Financial SupportRevenue Opex
IWK
2011
All State Water
Services Entities2009
Combination of All State Water
Services Entities and IWK
*
Why Integration?
At least 167% increase in
revenue is need to offset the
GFS in order to cover
Opex.
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.
10
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.
Practical Principles of Tariff Setting
Cost
Recovery
Equitable
Resource
Conservation
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.
A volumetric charge reflects “pay-per-use” principle. Inclining Block Tariff
should be used to discourage “excessive” or “wasteful” uses of water.
1
2
3
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.
4
11
Volumetric-based Tariff
12
Key Stakeholders Current Tariff Structure
(Without Tariff Increase) Volumetric Tariff
• Unsustainable Sewerage
Service
• Sustainable sewerage services
with positive impact on the
environment
Government • 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
• Polluters Pay Principle
• Light water users enjoy low
sewerage bill (1% of average
poor household’s income)
• Inequitable tariff structure
• Light water users enjoys lower
sewerage bill
Impact to Key Stakeholders – Only heavy water users will lose out if volumetric tariff is implemented
Volumetric tariff comparison
Sewerage
Service
Providers
Rakyat
13
Concept of Green tariff
Water
Consumption
(m3)
Water Rates
(RM/m3) Water Bill
(RM)
Tariff Rebalancing at 70%
water and 30% sewerage (example)
Water Charge
Sewerage Charge
Water Bill
(RM)
30%
70%
Sewerage Bill
(RM)
Total Bill = Water Bill (RM) Sewerage Bill (RM)
A volumetric tariff rebalancing structure that includes both water and sewerage charges in
a single tariff
14
Challenges
15
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 cross-
subsidy.
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.
Challenges to implement volumetric tariff
16
Recommendations
17
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.
Three Key Recommendations
18
Milestones:
• 1 January 2014:
- Implementation of volumetric
sewerage tariff structure
- First round of increase in
sewerage tariffs
Milestones:
• 1 January 2017 : Second
round of increase in sewerage
tariffs
Milestones:
• 31 December 2019:
- Full integration with state water
operators
- Full implementation of green
tariff
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 – Sewerage Tariff
Increase
• Engage key stakeholders.
• Review sewerage tariff rates
under the volumetric model.
• Impose increase in sewerage
tariffs.
• Allow the possibility for
integration for states that are
ready to do so.
Phase 3 –Implementation of
Green Tariff Structure
• Engage key stakeholders.
• Setting the mandatory
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.
Q3 – Q4 2013 2013 - 2016 2016 - 2019 2019 onwards
Tim
elin
e
The Way Forward
ROADMAP
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
+603-2780 1567
24
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