City explains the elevated water tariffs
THE City notes the concerns of Mr Adiel Ismail in his letter, “Ratepayers flooded with water tariffs” (Cape Argus, October 26).
1) The City is not budgeting for a profit from water and sanitation services, and seeks to keep service delivery costs as low as possible.
2) The average price of water is largely determined by how much residents use. The cost of operating and maintaining a network is similar, no matter how much water residents use, so a decline in the consumption patterns requires an increase in the tariff to still recover the cost of delivering the service.
The City is a public utility, with a responsibility to administer and operate shared infrastructure responsibly. Decisions are taken with this in mind, rather than because of any profit motive.
Current no-restriction/water wise tariffs are similar to level 3 tariffs in 2017/18, because it is based on the effect the drought had on our consumption. Each year, the City must pass several different tariff levels, which align with possible consumption scenarios for the year. There will therefore be a less expensive tariff that aligns with anticipated maximum water consumption for the year, and there will be a more expensive tariff that aligns with minimum expected water consumption for the year.
In 2017/18, the City’s tariff levels were still aligned with pre-drought consumption scenarios. Trends indicated, however, that the drought had likely permanently suppressed water consumption in the city, likely because residents were much more aware of leaks, water wastage and water efficiency.
The tariff levels were therefore realigned to new, “post-drought” maximum/minimum consumption levels. In short, post-drought level 1 consumption is much lower than pre-drought level 1 consumption, so level 1 tariffs today are higher than level 1 tariffs before the drought (with due cognisance that increases in cost over this period will further escalate the post-drought tariffs). This was not intended as an act of deceit. The realignment of the tariff levels formed part of the communications for the City’s 2019/20 budget process.
The revision of the free basic allocation and the introduction of the fixed basic charge into the tariff structure also did not generate additional revenue. The tariff at the various steps are set to recover the cost of providing the service. Although the City is generating more income from the lower steps of the tariff, the City has also lost income because residents are not entering higher tariff steps.
In fact, water consumption has reduced so drastically that despite the big increases to tariffs at this level, the water and sanitation service still requires subsidy from the rates account to fully cover costs.